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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended: June 30, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ________________ to ________________
Commission
file number: 001-40991
BLUE
STAR FOODS CORP.
(Exact
name of registrant as specified in its charter)
Delaware |
|
82-4270040 |
(State
or other jurisdiction of
incorporation
or organization) |
|
(IRS
Employer
Identification
No.) |
3000 NW 109th
Avenue |
Miami,
Florida 33172 |
(Address of principal executive
offices) |
(305)
836-6858 |
(Registrant’s
telephone number, including area code) |
N/A |
(Former name, former address
and former fiscal year, if changed since last report) |
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common
Stock, $0.0001 par value |
|
BSFC |
|
The
NASDAQ Stock Market LLC
(NASDAQ
Capital Market) |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
Filer |
☒ |
Smaller
reporting company |
☒ |
|
|
Emerging
growth company |
☐ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As
of August 14, 2024, there were 2,511,458 shares of the registrant’s common stock, par value $0.0001
per share, outstanding.
BLUE
STAR FOODS CORP.
FORM
10-Q
FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2024
TABLE
OF CONTENTS
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, 2023 which we filed with the Securities and Exchange Commission (“SEC”)
on April 1, 2024. 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”, “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 (“Keeler & Co.”), and its wholly-owned subsidiary, Coastal Pride Seafood, LLC, a Florida limited liability
company (“Coastal Pride”), Taste of BC Aquafarms, Inc., a corporation formed under the laws of the Province of British Columbia,
Canada (“TOBC”) and Afritex Ventures, Inc., a Florida corporation (“AFVFL”).
All
references to shares of common stock of the Company in this Quarterly Report have been adjusted to reflect the Company’s 1:50 reverse
stock split effective as of May 20, 2024 (the “Reverse Stock Split”).
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, 2023. 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
(UNAUDITED)
| |
JUNE 30, 2024 | | |
DECEMBER 31, 2023 | |
| |
| | |
| |
ASSETS | |
| | | |
| | |
CURRENT ASSETS | |
| | | |
| | |
Cash and cash equivalents | |
$ | 73,110 | | |
$ | 24,163 | |
Accounts receivable, net of allowances and credit losses of $30,605 and $31,064 | |
| 600,478 | | |
| 534,195 | |
Inventory, net | |
| 2,638,108 | | |
| 2,608,521 | |
Advances to related party | |
| - | | |
| 95,525 | |
Other current assets | |
| 2,455,069 | | |
| 833,472 | |
Total Current Assets | |
| 5,766,765 | | |
| 4,095,876 | |
RELATED PARTY LONG-TERM RECEIVABLE | |
| 435,545 | | |
| 435,545 | |
FIXED ASSETS, net | |
| 358,978 | | |
| 303,857 | |
RIGHT OF USE ASSET | |
| 104,788 | | |
| 125,014 | |
ADVANCES TO RELATED PARTY | |
| 1,299,984 | | |
| 1,299,984 | |
OTHER ASSETS | |
| 138,736 | | |
| 102,222 | |
TOTAL ASSETS | |
$ | 8,104,796 | | |
$ | 6,362,498 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable and accruals | |
$ | 839,494 | | |
$ | 661,377 | |
Customer refunds | |
| 107,587 | | |
| 189,975 | |
Deferred income | |
| - | | |
| 47,819 | |
Current maturities of lease liabilities | |
| 35,852 | | |
| 35,428 | |
Current maturities of related party long-term notes | |
| 100,000 | | |
| 100,000 | |
Loan payable | |
| 829,754 | | |
| 156,938 | |
Related party notes payable - subordinated | |
| 44,038 | | |
| 165,620 | |
Derivative liability | |
| 484,350 | | |
| 1,047,049 | |
Warrants liability | |
| 550 | | |
| 1,574 | |
Other current liabilities | |
| 790,881 | | |
| 790,881 | |
Total Current Liabilities | |
| 3,232,506 | | |
| 3,196,661 | |
LONG-TERM LIABILITIES | |
| | | |
| | |
Lease liability, net of current portion | |
| 68,936 | | |
| 89,586 | |
Debt, net of current portion and discounts | |
| 188,509 | | |
| 481,329 | |
TOTAL LIABILITIES | |
| 3,489,951 | | |
| 3,767,576 | |
STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of June 30, 2024, and 0 shares issued and outstanding as of December 31, 2023 | |
| - | | |
| - | |
Common stock, $0.0001 par value, 100,000,000 shares authorized; 2,271,858 shares issued and outstanding as of June 30, 2024, and 461,722 shares issued and outstanding as of December 31, 2023 | |
| 233 | | |
| 46 | |
Additional paid-in capital | |
| 41,519,902 | | |
| 36,661,926 | |
Accumulated other comprehensive loss | |
| (83,173 | ) | |
| (179,995 | ) |
Accumulated deficit | |
| (36,745,794 | ) | |
| (33,810,732 | ) |
Treasury stock, 151 shares as of June 30, 2024 and 151 shares as of December 31, 2023 | |
| (76,323 | ) | |
| (76,323 | ) |
TOTAL STOCKHOLDERS’ EQUITY | |
| 4,614,845 | | |
| 2,594,922 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 8,104,796 | | |
$ | 6,362,498 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements
Blue
Star Foods Corp.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
Three months ended June 30 | | |
Six months ended June 30 | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
REVENUE, NET | |
$ | 1,776,558 | | |
$ | 1,655,562 | | |
$ | 4,036,887 | | |
$ | 3,554,001 | |
| |
| | | |
| | | |
| | | |
| | |
COST OF REVENUE | |
| 1,482,041 | | |
| 1,574,547 | | |
| 3,571,608 | | |
| 3,188,624 | |
| |
| | | |
| | | |
| | | |
| | |
GROSS PROFIT | |
| 294,517 | | |
| 81,015 | | |
| 465,279 | | |
| 365,377 | |
| |
| | | |
| | | |
| | | |
| | |
COMMISSIONS | |
| - | | |
| 773 | | |
| 4,221 | | |
| 1,746 | |
SALARIES AND WAGES | |
| 295,449 | | |
| 466,127 | | |
| 597,239 | | |
| 996,965 | |
DEPRECIATION AND AMORTIZATION | |
| 1,377 | | |
| 27,668 | | |
| 2,676 | | |
| 30,337 | |
OTHER OPERATING EXPENSES | |
| 689,414 | | |
| 662,699 | | |
| 1,395,065 | | |
| 1,362,789 | |
| |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (691,723 | ) | |
| (1,076,252 | ) | |
| (1,533,922 | ) | |
| (2,026,460 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME | |
| 48,127 | | |
| 25,292 | | |
| 49,662 | | |
| 27,194 | |
INTEREST INCOME | |
| - | | |
| 24 | | |
| - | | |
| 24 | |
LOSS ON SETTLEMENT OF DEBT | |
| - | | |
| (184,589 | ) | |
| - | | |
| (833,019 | ) |
CHANGE IN FAIR VALUE OF DERIVATIVE AND WARRANT LIABILITIES | |
| (327,122 | ) | |
| 99,577 | | |
| (244,486 | ) | |
| 99,577 | |
INTEREST EXPENSE | |
| (871,249 | ) | |
| (315,787 | ) | |
| (1,206,316 | ) | |
| (670,453 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
| (1,841,967 | ) | |
| (1,451,735 | ) | |
| (2,935,062 | ) | |
| (3,403,137 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | |
$ | (1,841,967 | ) | |
$ | (1,451,735 | ) | |
$ | (2,935,062 | ) | |
$ | (3,403,137 | ) |
| |
| | | |
| | | |
| | | |
| | |
COMPREHENSIVE LOSS: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
CHANGE IN FOREIGN CURRENCY TRANSLATION ADJUSTMENT | |
| 18,789 | | |
| (36,744 | ) | |
| 96,822 | | |
| 48,830 | |
| |
| | | |
| | | |
| | | |
| | |
COMPREHENSIVE LOSS | |
$ | (1,823,178 | ) | |
$ | (1,488,479 | ) | |
$ | (2,838,240 | ) | |
$ | (3,354,307 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss per common share: | |
| | | |
| | | |
| | | |
| | |
Net loss per common share - basis and diluted | |
$ | (1.52 | ) | |
$ | (30.68 | ) | |
$ | (3.39 | ) | |
$ | (83.85 | ) |
Weighted average common shares outstanding - basic and diluted | |
| 1,209,792 | | |
| 47,316 | | |
| 866,510 | | |
| 40,584 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements
Blue
Star Foods Corp.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
SIX
MONTHS ENDED JUNE 30, 2024 AND 2023
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Income (Loss) | | |
Stock | | |
Equity | |
| |
Series
A | | |
| | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
Preferred Stock | | |
Common Stock
| | |
Additional | | |
| | |
Other | | |
| | |
Total | |
| |
$.0001 par value | | |
$.0001 par value | | |
Paid-in | | |
Accumulated | | |
Comprehensive
| | |
Treasury | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Income (Loss) | | |
Stock | | |
Equity | |
December
31, 2023 | |
| - | | |
$ | - | | |
| 461,722 | | |
$ | 46 | | |
$ | 36,661,926 | | |
$ | (33,810,732 | ) | |
$ | (179,995 | ) | |
$ | (76,323 | ) | |
$ | 2,594,922 | |
Common stock issued for service | |
| - | | |
| - | | |
| 5,238 | | |
| 1 | | |
| 32,999 | | |
| - | | |
| - | | |
| - | | |
| 33,000 | |
Common stock issued for note
payment | |
| - | | |
| - | | |
| 15,000 | | |
| 2 | | |
| 68,318 | | |
| - | | |
| - | | |
| - | | |
| 68,320 | |
Common stock issued for cash | |
| | | |
| | | |
| 226,656 | | |
| 23 | | |
| 836,337 | | |
| - | | |
| - | | |
| - | | |
| 836,360 | |
Common stock issued for loan
commitment fees | |
| - | | |
| - | | |
| 7,092 | | |
| 1 | | |
| 49,999 | | |
| - | | |
| - | | |
| - | | |
| 50,000 | |
Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,093,095 | ) | |
| - | | |
| - | | |
| (1,093,095 | ) |
Cumulative translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 78,033 | | |
| - | | |
| 78,033 | |
March 31, 2024 | |
| - | | |
$ | - | | |
| 715,708 | | |
$ | 73 | | |
$ | 37,658,379 | | |
$ | (34,903,827 | ) | |
$ | (101,962 | ) | |
$ | (76,323 | ) | |
$ | 2,576,340 | |
Stock based compensation, net of forfeitures | |
| - | | |
| - | | |
| - | | |
| - | | |
| (14,423 | ) | |
| - | | |
| - | | |
| - | | |
| (14,423 | ) |
Common stock issued for service | |
| - | | |
| - | | |
| 6,319 | | |
| 2 | | |
| 21,998 | | |
| - | | |
| - | | |
| - | | |
| 22,000 | |
Common stock issued for note
payment | |
| - | | |
| - | | |
| 426,831 | | |
| 44 | | |
| 1,684,707 | | |
| - | | |
| - | | |
| - | | |
| 1,684,751 | |
Common stock issued for cash | |
| - | | |
| - | | |
| 1,113,000 | | |
| 113 | | |
| 2,145,942 | | |
| - | | |
| - | | |
| - | | |
| 2,146,055 | |
Common stock issued for loan
commitment fees | |
| - | | |
| - | | |
| 10,000 | | |
| 1 | | |
| 23,299 | | |
| - | | |
| - | | |
| - | | |
| 23,300 | |
Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,841,967 | ) | |
| - | | |
| - | | |
| (1,841,967 | ) |
Cumulative translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 18,789 | | |
| - | | |
| 18,789 | |
June 30, 2024 | |
| - | | |
$ | - | | |
| 2,271,858 | | |
$ | 233 | | |
$ | 41,519,902 | | |
$ | (36,745,794 | ) | |
$ | (83,173 | ) | |
$ | (76,323 | ) | |
$ | 4,614,845 | |
| |
Series A | | |
| | |
| | |
| | |
Accumulated | | |
| | |
Total | |
| |
Preferred Stock | | |
Common Stock | | |
Additional | | |
| | |
Other | | |
| | |
Stockholders’ | |
| |
$.0001
par value | | |
$.0001
par value | | |
Paid-in | | |
Accumulated | | |
Comprehensive | | |
Treasury | | |
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Income
(Loss) | | |
Stock | | |
(Deficit) | |
December 31, 2022 | |
| - | | |
$ | - | | |
| 26,766 | | |
$ | 2 | | |
$ | 28,329,248 | | |
$ | (29,339,120 | ) | |
$ | (235,853 | ) | |
$ | - | | |
$ | (1,245,723 | ) |
Stock based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 20,190 | | |
| - | | |
| - | | |
| - | | |
| 20,190 | |
Common stock issued for service | |
| - | | |
| - | | |
| 66 | | |
| 0 | | |
| 23,000 | | |
| - | | |
| - | | |
| - | | |
| 23,000 | |
Common stock issued for note
payment | |
| - | | |
| - | | |
| 7,471 | | |
| 1 | | |
| 1,743,229 | | |
| - | | |
| - | | |
| - | | |
| 1,743,230 | |
Common stock issued for cash | |
| - | | |
| - | | |
| 9,474 | | |
| 1 | | |
| 1,880,691 | | |
| - | | |
| - | | |
| - | | |
| 1,880,692 | |
Repurchase of common stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (76,323 | ) | |
| (76,323 | ) |
Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,951,402 | ) | |
| - | | |
| - | | |
| (1,951,402 | ) |
Cumulative translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 85,574 | | |
| - | | |
| 85,574 | |
March 31, 2023 | |
| - | | |
$ | - | | |
| 43,777 | | |
$ | 4 | | |
$ | 31,996,358 | | |
$ | (31,290,522 | ) | |
| (150,279 | ) | |
$ | (76,323 | ) | |
$ | 479,238 | |
Balance | |
| - | | |
$ | - | | |
| 43,777 | | |
$ | 4 | | |
$ | 31,996,358 | | |
$ | (31,290,522 | ) | |
| (150,279 | ) | |
$ | (76,323 | ) | |
$ | 479,238 | |
Stock based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 16,940 | | |
| - | | |
| | | |
| - | | |
| 16,940 | |
Common stock issued for service | |
| - | | |
| - | | |
| 1,406 | | |
| 0 | | |
| 18,000 | | |
| - | | |
| | | |
| - | | |
| 18,000 | |
Common stock issued for note
payment | |
| - | | |
| - | | |
| 8,142 | | |
| 0 | | |
| 758,588 | | |
| - | | |
| | | |
| - | | |
| 758,588 | |
Common stock issued for cash | |
| - | | |
| - | | |
| 1,000 | | |
| 0 | | |
| 200,000 | | |
| - | | |
| | | |
| - | | |
| 200,000 | |
Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,451,735 | ) | |
| - | | |
| - | | |
| (1,451,735 | ) |
Cumulative translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (36,744 | ) | |
| - | | |
| (36,744 | ) |
June 30, 2023 | |
| - | | |
$ | - | | |
| 54,325 | | |
$ | 4 | | |
$ | 32,989,886 | | |
$ | (32,742,257 | ) | |
$ | (187,023 | ) | |
$ | (76,323 | ) | |
$ | (15,713 | ) |
Balance | |
| - | | |
$ | - | | |
| 54,325 | | |
$ | 4 | | |
$ | 32,989,886 | | |
$ | (32,742,257 | ) | |
$ | (187,023 | ) | |
$ | (76,323 | ) | |
$ | (15,713 | ) |
The
accompanying notes are an integral part of these unaudited consolidated financial statements
Blue
Star Foods Corp.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
2024 | | |
2023 | |
| |
Six Months Ended June 30 | |
| |
2024 | | |
2023 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
| |
| | | |
| | |
Net Loss | |
$ | (2,935,062 | ) | |
$ | (3,403,137 | ) |
Adjustments to reconcile net loss to net cash (used in) operating activities: | |
| | | |
| | |
Stock based compensation, net of forfeitures | |
| (5,623 | ) | |
| 37,130 | |
Common stock issued for service | |
| 55,000 | | |
| 41,000 | |
Depreciation of fixed assets | |
| 2,676 | | |
| 2,092 | |
Amortization of intangible assets | |
| - | | |
| 28,245 | |
Amortization of debt discounts | |
| 777,663 | | |
| 497,961 | |
Allowance for inventory obsolescence | |
| 370,923 | | |
| - | |
Loss on settlement of debt | |
| - | | |
| 833,019 | |
Lease expense | |
| 20,226 | | |
| 23,653 | |
Credit loss expense | |
| - | | |
| 6,068 | |
Loss on revaluation of fair value of derivative and warrant liabilities | |
| 244,486 | | |
| (99,577 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivables | |
| (66,283 | ) | |
| 545,772 | |
Inventories | |
| (400,510 | ) | |
| 1,658,097 | |
Advances to related parties | |
| 95,525 | | |
| - | |
Other current assets | |
| (799,947 | ) | |
| (540,070 | ) |
Right of use liability | |
| (20,226 | ) | |
| (23,692 | ) |
Other assets | |
| (25,835 | ) | |
| (25,000 | ) |
Accounts payable and accruals | |
| 130,298 | | |
| | |
Customer refunds | |
| (82,388 | ) | |
| (1,154,778 | ) |
Net Cash (Used in) Operating Activities | |
| (2,639,077 | ) | |
| (1,573,217 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchases of fixed assets | |
| (57,797 | ) | |
| (15,351 | ) |
Net Cash (Used in) Investing Activities | |
| (57,797 | ) | |
| (15,351 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from common stock offering | |
| 2,160,765 | | |
| 2,080,692 | |
Proceeds from working capital line of credit | |
| - | | |
| 2,405,034 | |
Proceeds from short-term loan | |
| 1,357,491 | | |
| 500,000 | |
Proceeds from convertible debt | |
| - | | |
| 915,000 | |
Repayments of working capital line of credit | |
| - | | |
| (4,182,971 | ) |
Repayments of short-term loan | |
| (746,626 | ) | |
| (40,385 | ) |
Repayments of related party notes payable | |
| (121,582 | ) | |
| (62,661 | ) |
Purchase of treasury stock | |
| - | | |
| (76,323 | ) |
Net Cash Provided by Financing Activities | |
| 2,650,048 | | |
| 1,538,386 | |
| |
| | | |
| | |
Effect of Exchange Rate Changes on Cash | |
| 95,773 | | |
| 48,012 | |
| |
| | | |
| | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | |
| 48,947 | | |
| (2,170 | ) |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD | |
| 24,163 | | |
| 9,262 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS – END OF PERIOD | |
$ | 73,110 | | |
$ | 7,092 | |
| |
| | | |
| | |
Supplemental Disclosure of Cash Flow Information | |
| | | |
| | |
Cash paid for interest | |
$ | 307,502 | | |
$ | 174,677 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES | |
| | | |
| | |
Common stock issued for partial settlement of note payable | |
$ | 1,753,071 | | |
$ | 2,501,819 | |
Common stock issued for loan commitment fees | |
| 73,300 | | |
| - | |
Receivable for equity proceeds | |
| 821,650 | | |
| - | |
Derivative liability recognized on issuance of convertible note | |
| - | | |
| 264,688 | |
Warrant liability recognized on issuance of convertible note | |
| - | | |
| 381,538 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements
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 has three other subsidiaries, Coastal Pride, TOBC and AFVFL which maintain the Company’s
fresh crab meat, steelhead salmon and packaged seafood and other inventory businesses, respectively. The Company’s current source
of revenue is purchasing blue and red swimming crab meat primarily from our largest supplier in Miami 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, steelhead salmon and rainbow trout produced under the brand name Little Cedar Farms for distribution in Canada and
purchasing raw materials for packaged seafood and other inventory under AFVFL to be sold to various customers in the United States.
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 167 shares of common stock of the Company with a fair value of $359,250. Such shares
were subject to a leak-out agreement pursuant to which Gault Seafood could not sell or otherwise transfer the shares until February 3,
2023.
On
February 1, 2024, the Company entered into a ninety-day Master Services Agreement (the “Services Agreement”) with Afritex
Ventures, Inc. a Texas corporation (“Afritex”), pursuant to which the Company will be responsible for all of Afritex’s
operations and finance functions. The Company will provide Afritex with working capital in order to sustain operations and will purchase
certain inventory listed in the Services Agreement. In consideration for its services, during the term of the Services Agreement, the
Company will earn all of the revenue and profits by the purchase and sale of Afritex’s inventory. Under the Services Agreement,
Afritex may not sell or otherwise use as consideration any of its intellectual property without the Company’s consent. The Company
must maintain certain commercial liability insurance during the term of the Services Agreement. The Services Agreement also provides
that the Company may not solicit Afritex employees for 24 months nor circumvent existing business relationships of Afritex for three
years, after the term of the Services Agreement. The term of the Services Agreement will automatically extend for three thirty-day periods,
if Afritex’s outstanding debt is no greater than $325,000. To date, the Company has automatically extended the Services Agreement
to August 31, 2024.
In
connection with the Services Agreement, on February 12, 2024, the Company entered into an Intangibles Assets and Machinery Option To
Purchase Agreement with Afritex (the “Option Agreement”). Pursuant to the Option Agreement, the Company has the option to
purchase Afritex’s intangible assets, machinery and equipment set forth in the Option Agreement for a purchase price of $554,714
for machinery and equipment and 100,000 shares of the Company’s common stock were issued on February 12, 2024 to be held in escrow,
for intangible assets. In addition, for one year from the date of the Option Agreement, Afritex has an option to purchase up to $1,000,000
shares of the Company’s common stock at a 10% discount to the lowest volume-weighted average price in the immediately prior five
days. The sale of any shares acquired by Afritex under the Option Agreement are subject to a “leak-out” provision as set
forth in the Option Agreement. The closing of the Option Agreement is subject to, among other things, the successful restructuring of
Afritex’s accounts payable debts so that no individual debt of $85,000 or aggregate debt of more than $325,000 is outstanding.
The Option Agreement may be terminated if, among others, the closing has not occurred within 90 days, unless extended for two
additional 30-day periods at the Company’s sole discretion. To date, the Company has extended the Option Agreement for the first
additional 30-day period and has not exercised its option to purchase such intangibles assets, machinery and equipment.
In
connection with the Services Agreement, on February 1, 2024, AFVFL, a wholly-owned subsidiary of the Company, was incorporated in the
State of Florida for the purpose of purchasing raw materials from Afritex for the preparation of packaged seafood and other inventory
to be sold to various customers in the United States.
On
May 20, 2024, the Company amended its Certificate of Incorporation to affect a one-for-fifty reverse stock split (“Reverse Stock
Split”), which became effective the same day. All share and per share amounts have been restated for all periods presented to reflect
the Reverse Stock Split.
Note
2. 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, 2023 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, 2023 filed with the SEC on April 1, 2024 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, including 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 June 30, 2024, and December 31, 2023, the balance due from the related party for future shipments was approximately $1,300,000. No
new purchases have been made from Bacolod since November 2020. There was no cost of revenue related to inventories purchased from Bacolod
recorded for the six months ended June 30, 2024 and 2023.
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 purchasing
blue and red swimming crab meat primarily from our largest supplier in Miami 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, steelhead salmon and rainbow trout fingerlings produced by TOBC under the brand name Little Cedar Farms for distribution in Canada
and purchasing raw materials for packaged seafood and other inventory under AFVFL. 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.
Accounts
Receivable
Accounts
receivable consist of unsecured obligations due from customers under normal trade terms, usually net 30 days. The Company grants credit
to its customers based on the Company’s evaluation of a particular customer’s credit worthiness.
Allowances
for credit losses are maintained for potential credit losses based on the age of the accounts receivable and the results of the Company’s
periodic credit evaluations of its customers’ financial condition. Receivables are written off as uncollectible and deducted from
the allowance for doubtful accounts after collection efforts have been deemed to be unsuccessful. Subsequent recoveries are netted against
the allowance for credit losses. The Company generally does not charge interest on receivables.
Receivables
are net of estimated allowances for doubtful accounts and sales return, allowances and discounts. They are stated at estimated net realizable
value. As of June 30, 2024, the Company recorded allowances for sales returns, allowances and discounts of $30,605 and refund liability
of $107,587. There was no allowance for bad debt recorded for the six months ended June 30, 2024. As of December 31, 2023, the Company
recorded sales return, allowances and discounts of $31,064 and refund liability of $189,975. There was no allowance for bad debt recorded
for the year ended December 31, 2023.
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 and raw materials for packaged seafood and other inventory
from AFVFL. The cost of inventory is primarily determined using the specific identification method for crab meat and raw materials for
packaged seafood inventory. 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 raw materials for packaged
seafood inventory 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. For
the six months ended June 30, 2024, the Company recorded an inventory allowance of $546,923. For the year ended December 31, 2023, the
Company recorded an inventory allowance in the amount of $176,000 which was charged to cost of goods sold.
The
Company’s inventory as of June 30, 2024 and December 31, 2023 consists of:
Schedule
of Inventory
| |
June 30, 2024 | | |
December 31, 2023 | |
| |
| | |
| |
Inventory purchased for resale | |
$ | 1,955,424 | | |
$ | 1,708,311 | |
Feeds and eggs processed | |
| 50,979 | | |
| 102,373 | |
Raw materials for packaged seafood | |
| 248,186 | | |
| - | |
Packaged seafood inventory | |
| 897,388 | | |
| - | |
Inventory other | |
| 33,054 | | |
| - | |
In-transit inventory | |
| - | | |
| 973,837 | |
Less: Inventory allowance | |
| (546,923 | ) | |
| (176,000 | ) |
Inventory, net | |
$ | 2,638,108 | | |
$ | 2,608,521 | |
Inventory
other is comprised of packaged inventory involving other protein items such as poultry, beef and pork.
Lease
Accounting
The
Company accounts for its leases under ASC 842, Leases, which requires all leases to be reported on the balance sheet as right-of-use
assets and lease obligations. The Company 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.
The
Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally
those leases that would allow the Company 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. The Company did
not have any finance leases as of June 30, 2024. The Company’s leases generally have terms that range from three years for equipment
and six to seven years for real property. The Company elected the accounting policy to include both the lease and non-lease components
of its agreements as a single component and accounts 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 balance sheet as of June 30, 2024.
Schedule of Lease-related Assets and Liabilities
| |
June 30, 2024 | |
Assets | |
| | |
Operating lease assets | |
$ | 104,788 | |
| |
| | |
Liabilities | |
| | |
Current | |
| | |
Operating lease liabilities | |
$ | 35,852 | |
Noncurrent | |
| | |
Operating lease liabilities | |
$ | 68,936 | |
Supplemental
cash flow information related to leases were as follows:
Schedule of Supplemental Cash Flow Information Related to Leases
| |
Six Months Ended June 30, 2024 | |
| |
| |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | |
Operating cash flows from operating leases | |
$ | 20,226 | |
ROU assets recognized in exchange for lease obligations: | |
| | |
Operating leases | |
$ | - | |
The
table below presents the remaining lease term and discount rates for operating leases.
Schedule of Remaining Lease Term and Discount Rates for Operating Leases
| |
June 30, 2024 | |
Weighted-average remaining lease term | |
| | |
Operating leases | |
| 2.75 years | |
Weighted-average discount rate | |
| | |
Operating leases | |
| 7.3 | % |
Maturities
of lease liabilities as of June 30, 2024 were as follows:
Schedule of Maturities of Lease Liabilities
| |
Operating Leases | |
| |
| |
2024 (six months remaining) | |
| 21,708 | |
2025 | |
| 43,415 | |
2026 | |
| 43,415 | |
2027 | |
| 10,854 | |
Total lease payments | |
| 119,392 | |
Less: amount of lease payments representing interest | |
| (14,604 | ) |
Present value of future minimum lease payments | |
$ | 104,788 | |
Less: current obligations under leases | |
$ | (35,852 | ) |
Non-current obligations | |
$ | 68,936 | |
Long-lived
Assets
Management
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. Fair value estimates are completed using a discounted cash flow analysis. Impairment
losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. No impairment
was recognized for the six months ended June 30, 2024 and for the year ended December 31, 2023.
Foreign
Currency Exchange Rates Risk
The
Company manages its exposure to fluctuations in foreign currency exchange rates through its normal operating activities. Its primary
focus is to monitor exposure to, and manage, the economic foreign currency exchange risks faced by, its operations and realized when
the Company exchanges one currency for another. The Company’s operations primarily utilize the U.S. dollar and Canadian dollar
as its functional currencies. Movements in foreign currency exchange rates affect its financial statements.
Fair
Value Measurements and Financial Instruments
Fair
value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date and is measured using inputs in one of the following three categories:
Level
1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to
access. Valuation of these items does not entail a significant amount of judgment.
Level
2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities.
Level
3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value
of the assets or liabilities.
Our
financial instruments include cash, accounts receivable, accounts payable, accrued expenses, debt obligations, derivative liabilities
and warrant liabilities. We believe the carrying values of our cash, accounts receivable, accounts payable, and accrued expenses approximate
their fair values because they are short term in nature or payable on demand. The derivative liability is the embedded conversion feature
on the 2023 Lind convertible note. All derivatives and warrant liabilities are recorded at fair value. The change in fair value for derivatives
and warrants liabilities is recognized in earnings. The Company’s derivative and warrant liabilities are measured at fair value
on a recurring basis using the Black Scholes Pricing model as of June 30, 2024 and December 31, 2023. There were no financial assets
and liabilities that were measured at fair value on a recurring basis under Levels 1 and 2.
Schedule of Derivative and Warrant Liabilities Measured at Fair Value
| |
Level 3 Fair Value | |
| |
As of June 30, 2024 | | |
As of December 31, 2023 | |
Liabilities | |
| | |
| |
Derivative liability on convertible debt | |
$ | 484,350 | | |
$ | 1,047,049 | |
Warrant liability | |
| 550 | | |
| 1,574 | |
Total | |
$ | 484,900 | | |
$ | 1,048,623 | |
The
table below presents the change in the fair value of the derivative liability convertible debt and warrant liability during the six months
ended June 30, 2024:
Schedule
of Change in Fair Value of Derivative Liability Convertible Debt and Warrant Liability
Derivative liability balance, January 1, 2024 | |
$ | 1,047,049 | |
Issuance of derivative liability during the period | |
| - | |
Settlement of derivative liability | |
| (808,209 | ) |
Change in fair value of derivative liability during the period | |
| 245,510 | |
Derivative liability balance, June 30, 2024 | |
$ | 484,350 | |
| |
| | |
Warrant liability balance, January 1, 2024 | |
$ | 1,574 | |
Issuance of warrant liability during the period | |
| - | |
Change in fair value of warrant liability during the period | |
| (1,024 | ) |
Warrant liability balance, June 30, 2024 | |
$ | 550 | |
The
fair market value of all derivatives and warrant liability as of December 31, 2023 was determined using the Black-Scholes option pricing
model which used the following assumptions:
Schedule of Fair Market Value
of Derivatives
Stock price | |
$ | 7.00 | |
Expected dividend yield | |
| 0.00 | % |
Expected stock price volatility | |
| 45.51% - 150.46 | % |
Risk-free interest rate | |
| 3.81% - 4.91 | % |
Expected term | |
| 1.42 – 5.00 years | |
The
fair market value of all derivatives and warrant liability as of June 30, 2024 was determined using the Black-Scholes option pricing
model which used the following assumptions:
Stock price | |
$ | 2.00 | |
Expected dividend yield | |
| 0.00 | % |
Expected stock price volatility | |
| 39.54% - 191.24 | % |
Risk-free interest rate | |
| 4.33% - 5.09 | % |
Expected term | |
| 0.92 – 1.08years | |
Recent
Accounting Pronouncements
There
are various updates recently issued to the accounting literature and these are not expected to have a material impact on the Company’s
financial position, results of operations or cash flows.
Note
3. Going Concern
The
accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For
the six months ended June 30, 2024, the Company incurred a net loss of $2,935,062, had an accumulated deficit of $36,745,794 and a working
capital surplus of $2,534,259, inclusive of $44,038 in stockholder debt. These factors raise substantial doubt as to the Company’s
ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s
ability to increase revenues, execute on its business plan to acquire complimentary companies, raise capital, and to continue to sustain
adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would
be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Note
4. Other Current Assets
Other
current assets totaled $2,455,069
as of June 30, 2024 and $833,472
as of December 31, 2023. As of June 30, 2024, approximately $551,800,
$234,200 and $821,650
of the balance was related to prepaid inventory to the Company’s suppliers, prepaid legal and accounting fees and receivables
for shares issuance per the securities purchase agreement with ClearThink, respectively. The remainder of the balance was related to
prepaid insurance and other prepaid expenses.
Note
5. Fixed Assets, Net
Fixed
assets comprised the following:
Schedule of Fixed Assets
| |
June 30, 2024 | | |
December 31, 2023 | |
Computer equipment | |
$ | 52,625 | | |
$ | 47,908 | |
RAS system | |
| 150,424 | | |
| 140,214 | |
Leasehold improvements | |
| 17,904 | | |
| 17,904 | |
Building Improvements | |
| 179,523 | | |
| 136,653 | |
Total | |
| 400,476 | | |
| 342,679 | |
Fixed assets, gross | |
| 400,476 | | |
| 342,679 | |
Less: Accumulated depreciation | |
| (41,498 | ) | |
| (38,822 | ) |
Fixed assets, net | |
$ | 358,978 | | |
$ | 303,857 | |
For
the six months ended June 30, 2024 and 2023, depreciation expense totaled approximately $2,600 and $2,000, respectively.
Note
6. 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% which increased to 4.75% in 2022. The Borrowers paid Lighthouse a facility fee of $50,000 in three instalments of $16,667
in March, April and May 2021 and paid 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.
The
line of credit was 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. During the six months ended June 30, 2023, cash
proceeds from the working capital line of credit totaled $2,405,034 and cash payments to the working capital line of credit totaled $4,182,971.
On
June 16, 2023, the Company terminated the Loan Agreement and paid a total of approximately $108,400 to Lighthouse which included, as
of June 16, 2023, an outstanding principal balance of approximately $93,400, accrued interest of approximately $9,900, and other fees
incurred in connection with the line of credit of approximately $4,900. Upon the repayment of the total outstanding indebtedness owing
to Lighthouse, the Loan Agreement and all other related financing agreements and documents entered into in connection with the Loan Agreement
were deemed terminated.
John
Keeler Promissory Notes
The
Company had unsecured promissory notes outstanding to John Keeler of approximately $44,000
of principal at June 30, 2024 and interest expense of $3,775 and
$26,535
during the six months ended June 30, 2024 and 2023, respectively. These notes are payable on demand and accrue interest at an annual
rate of 6%.
The Company made principal payments of $121,582
and $62,661
during the six months ended June 30, 2024 and 2023, respectively.
Walter
Lubkin Jr. Note
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. The note 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.
For
the year ended December 31, 2023, $250,000 of the outstanding principal was paid in shares of common stock of the Company.
As
of June 30, 2024, $2,083 of the outstanding interest to date was accrued on the note by the Company.
Interest
expense for the note totaled approximately $2,000 and $7,000 during the six months ended June 30, 2024 and 2023, respectively.
As
of June 30, 2024 and December 31, 2023, the outstanding principal balance on the note totaled $100,000.
Lind
Global Fund II LP notes
2022
Note
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 (the “2022 Lind Note) 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 (1,000 shares of common stock at an exercise price of $4,500 per
share after taking into account the Company’s Reverse Stock Split). The warrant provides for cashless exercise and for full ratchet
anti-dilution if the Company issues securities at less than $4.50 per share (exercise price of $4,500 per share after taking into account
the Company’s Reverse Stock Split). In connection with the issuance of the 2022 Lind 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 $2,022,397 debt discount at issuance of the
debt, including original issuance discount of $750,000, commitment fee of $150,000, $87,144 debt issuance cost, and $1,035,253 related
to the fair value of warrants issued. Amortization expense recorded in interest expense totaled $0 and $479,585 for the six months ended
June 30, 2024 and 2023, respectively.
The
outstanding principal under the 2022 Lind Note was 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”) (floor price of $1,500 per share after taking into account the Company’s Reverse
Stock Split), 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 would pay Lind an additional amount in cash as determined pursuant to a formula contained in
the 2022 Lind Note.
In
connection with the issuance of the 2022 Lind Note, the Company granted Lind a first priority security interest and lien on all of its
assets, including a pledge of its shares in Keeler & Co., pursuant to a security agreement and a stock pledge agreement with Lind,
dated January 24, 2022 (the “2022 Security Agreement). Each subsidiary of the Company also granted a second priority security interest
in all of its respective assets.
The
2022 Lind Note was mandatorily payable prior to maturity if the Company issued any preferred stock (with certain exceptions described
in the note) or, if the Company or its subsidiaries issued any debt. 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 failed to maintain the listing and trading of its common stock, the note would 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 engaged in capital raising transactions, Lind had the right to purchase up to 10% of the new securities.
The
2022 Lind Note was convertible into common stock at $5.00 per share ($5,000 per share after taking into account the Company’s Reverse
Stock Split), subject to certain adjustments, on April 22, 2022; 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 2022 Lind Note, Lind had the right to require the Company to prepay 10% of the
outstanding principal amount of the 2022 Lind 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 2022 Lind Note at a price per share equal to the lesser of the Repayment Share Price
or the conversion price. The 2022 Lind Note contained 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 2022 Lind Note, the 2022 Lind Note would 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 year ended December 31, 2023, the Company made aggregate principal payments on the 2022 Lind Note of $2,075,900 through the issuance
of an aggregate of 27,584 shares of common stock, including a principal payment of $1,094,800 through the issuance of an aggregate
of 7,471 shares of common stock during the six months ended June 30, 2023. On September 15, 2023, the Company paid $2,573,142 to Lind
and the 2022 Lind Note was extinguished.
2023
Note
On
May 30, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Lind pursuant to which
the Company issued to Lind a secured, two-year, interest free convertible promissory note in the principal amount of $1,200,000 (the
“2023 Lind Note”) and a warrant (the “Lind Warrant”) to purchase 8,701 shares of common stock of the Company
commencing six months after issuance and exercisable for five years at an exercise price of $122.50 per share. The Lind Warrant includes
cashless exercise and full ratchet anti-dilution provisions. In connection with the issuance of the Lind Note and the Lind Warrant, the
Company paid Lind a $50,000 commitment fee. The proceeds from the sale of the Note and Warrant are for general working capital purposes.
In
connection with the issuance of the 2022 Lind Note, the Company and Lind amended the 2022 Security Agreement to include the new 2023
Lind Note, pursuant to an amended and restated security agreement, dated May 30, 2023, between the Company and Lind.
The
Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common
stock issuable pursuant to the 2023 Lind Note and Lind Warrant. Lind was also granted piggyback registration rights.
If
the Company engages in capital raising transactions, Lind has the right to purchase up to 20% of the new securities for 24 months.
The
2023 Lind Note is convertible into common stock of the Company after the earlier of 90 days 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. The conversion price of the 2023 Lind Note is equal to
the lesser of: (i) $120.00; or (ii) 90% of the lowest single volume-weighted average price during the twenty-trading day period ending
on the last trading day immediately preceding the applicable conversion date, subject to customary adjustments. The maximum number of
shares of common stock to be issued in connection with the conversion of the 2023 Lind Note and the exercise of the Lind Warrant, in
the aggregate, will not, exceed 19.9% of the outstanding shares of common stock of the Company immediately prior to the date of the 2023
Lind Note, in accordance with NASDAQ rules and guidance. Due to the variable conversion price of the 2023 Lind Note, the embedded conversion
feature was accounted as a derivative liability. The fair value of the derivative liability at issuance amounting to $264,687 was recorded
as debt discount and amortized over the term of the note.
The
2023 Lind Note contains certain negative covenants, including restricting the Company from certain distributions, stock repurchases,
borrowing, sale of assets, loans and exchange offers.
Upon
the occurrence of an event of default as described in the 2023 Lind Note, the 2023 Lind Note will become immediately due and payable
at a default interest rate of 120% of the then outstanding principal amount of the Lind Note.
The
Warrant entitles the Investor to purchase up to 8,701 shares of common stock of the Company during the exercise period commencing on
the date that is six months after the issue date (“Exercise Period Commencement”) and ending on the date that is sixty months
from the Exercise Period Commencement at an exercise price of $122.50 per share, subject to customary adjustments. The Warrant includes
cashless exercise and full ratchet anti-dilution provisions.
On
July 27, 2023, the Company, entered into a First Amendment to the Purchase Agreement (the “Purchase Agreement Amendment”)
with Lind, which provided for the issuance of further senior convertible promissory notes up to an aggregate principal amount of up to
$1,800,000 and the issuance of additional warrants in such amounts as the Company and Lind shall mutually agree.
Pursuant
to the Purchase Agreement Amendment, the Company issued to Lind a two-year, interest free convertible promissory note in the principal
amount of $300,000 and a warrant to purchase 3,505 shares of common stock of the Company at an exercise price of $67.00 per share for
$250,000. In connection with the issuance of the note and the warrant, the Company paid a $12,500 commitment fee. The proceeds from the
sale of the note and warrant are for general working capital purposes.
Due
to the variable conversion price of the convertible promissory note, pursuant to the Purchase Agreement Amendment, the embedded conversion
feature was accounted for as a derivative liability. The fair value of the derivative liability at issuance amounting to $118,984 was
recorded as debt discount and amortized over the term of the note.
During
the six months ended June 30, 2024, $944,900
of note principal was converted to 441,831
shares of common stock. As of June 30, 2024,
the outstanding balance on the notes was $555,100,
net of debt discount of $315,434,
and totaling $239,666.
For the six months ended June 30, 2024 and 2023, amortization of debt discounts totaled $703,236
and $287,149,
respectively.
Agile
Lending, LLC Loans
On
June 14, 2023, the Company, and Keeler & Co. (each a “Borrower”) entered into a subordinated business loan and security
agreement with Agile Lending, LLC as lead lender (“Agile”) and Agile Capital Funding, LLC as collateral agent, which provides
for a term loan to the Company in the amount of $525,000 which principal and interest (of $231,000) is due on December 15, 2023. Commencing
June 23, 2023, the Company is required to make weekly payments of $29,077 until the due date. The loan may be prepaid subject to a prepayment
fee. An administrative agent fee of $25,000 was paid on the loan which was recognized as a debt discount and amortized over the term
of the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated June 14, 2023, in the principal
amount of $525,000 which note is secured by all of the Borrower’s assets, including receivables. For the year ended December 31,
2023, the Company made principal and interest payments on the loan totaling $525,000 and $116,658, respectively, and the outstanding
interest balance was refinanced in the January 2, 2024 loan.
On
October 19, 2023, the Borrowers entered into a subordinated business loan and security agreement with Agile and Agile Capital as collateral
agent, which provides for a term loan to the Company in the amount of $210,000 which principal and interest (of $84,000) is due on April
1, 2024. Commencing October 19, 2023, the Company is required to make weekly payments of $12,250 until the due date. The loan may be
prepaid subject to a prepayment fee. An administrative agent fee of $10,000 was paid on the loan which was recognized as a debt discount
and amortized over the term of the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated
October 19, 2023, in the principal amount of $210,000 which note is secured by all of the Borrowers’ assets, including receivables.
For the six months ended June 30, 2024, the Company made principal payments on the loan totaling $112,000 and interest payments of $84,000.
The outstanding balance on the loan was $0 as of June 30, 2024.
On
January 2, 2024, the Company, and Keeler & Co. entered into a subordinated business loan and security agreement with Agile and Agile
Capital as collateral agent, which provides for a term loan to the Company in the amount of $122,491 which principal and interest (of
$48,996) is due on May 31, 2024. Commencing January 5, 2024, the Company is required to make weekly payments of $7,795 until the due
date. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $5,833 was paid on the loan. A default interest
rate of 5% will become effective upon the occurrence of an event of default. In connection with the loan, Agile was issued a subordinated
secured promissory note, dated January 2, 2024, in the principal amount of $122,491 which note is secured by all of the Borrower’s
assets, including receivables. For the six months ended June 30, 2024, the Company made principal payments on the loan totaling $122,491
and interest payments of $48,996. The outstanding balance on the loan was $0 as of June 30, 2024.
On
March 1, 2024, the Borrowers entered into a subordinated business loan and security agreement with Agile and Agile Capital as collateral
agent, which provides for a term loan to the Company in the amount of $210,000 which principal and interest (of $79,800) is due on August
29, 2024. Commencing March 7, 2024, the Company is required to make weekly payments of $11,146 until the due date. The loan may be prepaid
subject to a prepayment fee. An administrative agent fee of $10,000 was paid on the loan which was recognized as a debt discount and
amortized over the term of the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated March
1, 2024, in the principal amount of $210,000 which note is secured by all of the Borrowers’ assets, including receivables. For
the six months ended June 30, 2024, the Company made principal payments on the loan totaling $178,338 and no interest payments were made.
The outstanding balance on the loan was $31,662 as of June 30, 2024.
On
May 9, 2024, the Borrowers entered into a subordinated business loan and security agreement with Agile and Agile Capital as collateral
agent, which provides for a term loan to the Company in the amount of $210,000 which principal and interest (of $84,000) is due on November
22, 2024. Commencing May 17, 2024, the Company is required to make weekly payments of $10,500 until the due date. The loan may be prepaid
subject to a prepayment fee. An administrative agent fee of $10,000 was paid on the loan which was recognized as a debt discount and
amortized over the term of the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated May
9, 2024, in the principal amount of $210,000 which note is secured by all of the Borrowers’ assets, including receivables. For
the six months ended June 30, 2024, the Company made principal payments on the loan totaling $73,500 and no interest payments were made.
The outstanding balance on the loan was $136,500 as of June 30, 2024.
ClearThink
Term Loan
On
January 18, 2024, the Company entered into the Revenue-Based Factoring MCA Plus Agreement with ClearThink Capital LLC (“ClearThink”)
which provides, among other things, for a 33-week term loan in the principal amount of $200,000 (with an additional one-time commitment
fee of $50,000). Interest accrues at the rate of 25% per annum with an additional 5% default interest rate or $50,000 will be added to
the principal amount and accrue after principal is paid. The Company is required to make biweekly payments of $14,706, commencing February
1, 2024 for the term of the agreement. On January 25, 2024, the Company issued 7,092 shares of common stock to ClearThink as a commitment
fee, with a fair value of $50,000. For the six months ended June 30, 2024, the Company made principal payments on the loan totaling $161,765
and no interest payments were made. The outstanding balance on the loan was $38,325 as of June 30, 2024.
1800
Diagonal Note
On
April 16, 2024, the Company issued to 1800 Diagonal Lending LLC, a Virginia limited liability company (“Diagonal”), a
convertible promissory note in the principal amount of $138,000 with
an original issue discount of $23,000 (the
“Diagonal Note”). The Diagonal Note has a one-time interest payment of $26,220 paid
upon issuance and a maturity date of January
15, 2025. The proceeds from the sale of the
Diagonal Note are for general working capital. Upon the occurrence of an event of default as described in the Diagonal Note, the
Diagonal Note will become immediately due and payable at a default interest rate of 22% of the then outstanding principal amount of the Diagonal Note. Additionally, Diagonal will have the right to convert all or any part of the outstanding and unpaid amount of the Diagonal Note into shares of the Company’s
common stock at a conversion price of 61% of the market price as described in the Diagonal Note. The Company may not, without Diagonal’s written
consent, sell, lease, or otherwise dispose of any significant portion of its assets except in the ordinary course of business. The Company will reserve a sufficient number of shares to provide for the issuance of shares upon the full conversion
of the Diagonal Note. For the
six months ended June 30, 2024, the Company made principal payments on the loan totaling $98,532 and no interest
payments were made. The outstanding balance on the loan was $39,468, net of debt discount of $16,611, and totaling $22,857 as
of June 30, 2024.
The
Hart Note
On
April 16, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Hart
Associates, LLC, a Delaware limited liability company (the “Hart”), pursuant to which the Company issued a promissory
note in the principal amount of $300,000
and will issue 10,000 shares
of its common stock to Hart (the “Hart Note”). The Hart Note has a one-time interest payment of $50,000 payable
on the maturity date of May
15, 2024,
which was extended to August 15, 2024. The proceeds from the sale of the Hart Note are for general working capital. The Company may
prepay the Hart Note at any time without penalty. The Company’s failure to comply with the material terms of the Hart Note
will be considered an event of default and the principal sum of the Hart Note will increase by 20% of the outstanding balance for
each subsequent 30 days it remains in default. For the six months ended June 30, 2024, no principal
and interest payments were made.
The
FirstFire Note
On
May 17, 2024, the Company entered into a promissory note with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability
company (the “FirstFire”), pursuant to which the Company issued a promissory note in the principal amount of $240,000
with an original discount of $40,000
(the “FirstFire Note”). The FirstFire
Note accrues interest at a rate of 19%
per annum and has a maturity date of April
17, 2025. The proceeds from the sale of the FirstFire
Note are for general corporate purposes. The FirstFire Note has mandatory monthly payments due the 17th of each month. The initial payment
on August 17, 2024 is $185,600.
Monthly payments from September 2024 – December 2024 are $22,000.
Monthly payments from January 2025 - April 2025 are $3,000.
The Company may prepay the FirstFire Note at any time without penalty. The
Company’s failure to comply with the material terms of the FirstFire Note will be considered an event of default and the principal
sum of the FirstFire Note will become immediately due and payable at an amount equal to 150% times the sum of (i) the then outstanding
principal amount of the note plus (ii) accrued and unpaid interest on the unpaid principal amount of the note to the date of payment
plus (iii) default interest, (iv) plus (v) any other amounts owed to FirstFire. After the occurrence of an event of default, at any time,
the FirstFire shall have the right, to convert all or any part of the outstanding and unpaid amount of the FirstFire Note into fully
paid and non-assessable shares of our common stock. The conversion price shall be 61% multiplied by the Market Price (as defined in the
FirstFire Note) (representing a discount rate of 39%). While
the FirstFire Note remains outstanding, we will reserve 40,000
shares of our common stock free from preemptive
rights, to provide for the issuance upon the full conversion of the FirstFire Note. While the FirstFire Note remains outstanding, we
shall not, without the FirstFire’s written consent, sell, lease, or otherwise dispose of any significant portion of our assets
outside the ordinary course of business.
Interest expense totaled $1,206,316 as of June 30, 2024 and $670,453 as
of June 30, 2023. As of June 30, 2024, approximately $777,600, $307,500 and $121,000 of the balance was related to amortization on debt
discount, cash paid interest, and accrued interest. The remainder of the balance was related to amortization of loan costs.
Note
7. Stockholders’ Equity
In
January 2023, the Company sold an aggregate of 474 shares of common stock for net proceeds of $182,982 in an “at the market”
offering pursuant to a sales agreement between the Company and Roth Capital Partners, LLC (“Roth”). On January 31, 2023,
151 of shares were repurchased from Roth for $76,323. The offering was terminated on February 2, 2023.
On
February 14, 2023, the Company issued 8,200 shares of common stock and 800 pre-funded warrants to purchase common stock to Aegis Capital
Corp. (“Aegis”) for net proceeds of $1,692,000 in connection with an underwritten offering.
During
the six months ended June 30, 2023, between May 2023 and June 2023, the Company issued an aggregate of 1,000 shares of common stock for
cash proceeds of $200,000 pursuant to a securities purchase agreement, dated May 16, 2023 with ClearThink. In connection with such agreement,
the Company also issued 1,250 shares of common stock to ClearThink as commitment fees, with a fair value of $141,250, which was recorded
as stock issuance costs.
During
the six months ended June 30, 2023, the Company issued an aggregate of 15,613
shares of common stock to Lind with a fair value
of $2,501,820
as payment of $1,668,800
of note principal due on the convertible promissory
note, and recorded a loss of $833,019.
During
the six months ended June 30, 2023, the Company issued an aggregate of 222 shares of common stock to the designee of ClearThink for consulting
services provided to the Company.
On
January 25, 2024, the Company issued 7,092 shares of common stock to ClearThink, with a fair value of $50,000, as a commitment fee on
the term loan.
On
February 12, 2024, the Company issued 100,000 shares of common stock to be held by The Crone Law Group as Escrow Agent with a fair value
of $630,000 in connection with the Option Agreement with Afritex Texas.
On
May 22, 2024, the Company issued 10,000 shares of common stock to Hart, with a fair value of $23,300, as a commitment fee on the promissory
note.
During
the six months ended June 30, 2024, the Company issued an aggregate of 1,339,656
shares of common stock in consideration of proceeds of $2,982,415
pursuant to a securities purchase agreement, dated May 16, 2023 with ClearThink. Cash proceeds received as of June 30, 2024 were
$2,160,765
and the balance of $821,650
was received in July 2024.
During
the six months ended June 30, 2024, the Company issued an aggregate of 441,831 shares of common stock to Lind as partial conversion of
$944,900 principal pursuant to the May 2023 convertible promissory note.
During
the six months ended June 30, 2024, the Company issued an aggregate of 11,557
shares of common stock to the designee of ClearThink with a fair value of $55,000 for consulting services provided to the
Company.
Note
8. Options
The
following table represents option activity for the six months ended June 30, 2024:
Schedule
of Option Activity
| | |
Number of Options | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life in Years | | |
Aggregate Intrinsic Value | |
Outstanding – December 31, 2023 | | |
| 6,331 | | |
$ | 1,555.52 | | |
| 3.80 | | |
$ | - | |
Exercisable – December 31, 2023 | | |
| 4,398 | | |
$ | 1,555.52 | | |
| 4.27 | | |
$ | - | |
Granted | | |
| - | | |
$ | - | | |
| | | |
| | |
Forfeited | | |
| 896 | | |
$ | - | | |
| | | |
| | |
Expired | | |
| 500 | | |
$ | - | | |
| | | |
| | |
Vested | | |
| 4,078 | | |
$ | - | | |
| | | |
| | |
Outstanding – June 30, 2024 | | |
| 4,935 | | |
$ | 1,537.86 | | |
| 3.88 | | |
$ | - | |
Exercisable – June 30, 2024 | | |
| 4,078 | | |
$ | 1,537.86 | | |
| 4.22 | | |
$ | - | |
For
the six months ended June 30, 2024, the Company recognized a net credit to stock compensation expense of $5,623 due to options forfeitures.
Note
9. Warrants
The
following table represents warrant activity for the six months ended June 30, 2024:
Schedule of Warrant Activity
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life in Years | | |
Aggregate Intrinsic Value | |
Outstanding – December 31, 2023 | |
| 14,619 | | |
$ | 601.78 | | |
| 4.20 | | |
| | |
Exercisable – December 31, 2023 | |
| 11,114 | | |
$ | 770.50 | | |
| 5.52 | | |
$ | - | |
Granted | |
| - | | |
$ | - | | |
| | | |
| | |
Exercised | |
| - | | |
$ | - | | |
| | | |
| | |
Forfeited or Expired | |
| (2,144 | ) | |
$ | - | | |
| | | |
| | |
Outstanding – June 30, 2024 | |
| 12,475 | | |
$ | 161.07 | | |
| 4.30 | | |
| | |
Exercisable – June 30, 2024 | |
| 12,475 | | |
$ | 161.07 | | |
| 4.30 | | |
$ | - | |
On
May 30, 2023, in connection with the issuance of the $1,200,000 promissory note to Lind pursuant to a securities purchase agreement,
the Company issued Lind a five-year warrant exercisable six months from the date of issuance to purchase 8,701 shares of common stock
at an exercise price of $122.50 per share. The warrant provides for cashless exercise and full ratchet anti-dilution provisions. The
fair value of the warrants of $381,538 was recorded as a discount to the 2023 Lind Note and classified as liabilities.
On
July 27, 2023, in connection with the issuance of the $300,000 promissory note to Lind pursuant to the Purchase Agreement Amendment,
the Company issued Lind a five-year warrant exercisable six months from the date of issuance to purchase 3,505 shares of common stock
at an exercise price of $67.00 per share. The warrant provides for cashless exercise and full ratchet anti-dilution provisions. The fair
value of the warrants of $72,208 was recorded as a discount to the 2023 Purchase Agreement Amendment and classified as a liability.
On
September 11, 2023, in connection with the underwritten public offering, the Company issued five-year
Series A-1 warrants to purchase up to 214,823 shares
of common stock which warrants are exercisable upon stockholder approval at an exercise price of $23.28 per
share. Since the exercise of these warrants is contingent upon stockholder approval, which stockholder approval has not been
obtained, such warrants were not considered as outstanding as of June 30, 2024.
On
September 11, 2023, in connection with the underwritten public offering, the Company issued eighteen-month Series A-2 warrants to purchase
up to 214,823 shares of common stock which warrants are exercisable upon stockholder approval at an exercise price of $23.28 per share.
Since the exercise of these warrants is contingent upon stockholder approval, which stockholder approval has not been obtained, such
warrants were not considered as outstanding as of June 30, 2024.
There
was no warrant activity for the six months ended June 30, 2024.
Note
10. Commitment and Contingencies
Office
lease
On
January 1, 2022, the Company entered into a verbal month-to-month lease agreement for its executive offices with an unrelated third party
and paid $17,400 on the lease for the six months ended June 30, 2023. For the six months ended June 30, 2024, the Company paid $34,800
under this lease.
Coastal
Pride leases approximately 1,100 square feet of office space in Beaufort, South Carolina which consists of a lease with a related party
for $1,000 per month that expires in October 2024. For the six months ended June 30, 2024, Coastal Pride paid $6,000 on the lease.
Coastal
Pride also leased a 9,050 square foot facility for $1,000 per month from Gault for its soft-shell crab operations in Beaufort, South
Carolina under a one-year lease that expired in February 2023. On February 3, 2023, the lease was renewed for $1,500 per month until
February 2024. On February 3, 2024, Coastal Pride entered into a verbal month-to-month lease agreement with Gault for $1,500 per month.
For the six months ended June 30, 2024, Coastal Pride paid $9,000 on the lease.
The
offices and facility of TOBC are located in Nanaimo, British Columbia, Canada and are on land which was leased to TOBC for approximately
$2,500 per month plus taxes, from Steve and Janet Atkinson, the former TOBC owners. On April 1, 2022, TOBC entered into a new five-year
lease with Steve and Janet Atkinson for CAD$2,590 per month plus taxes, and an additional five-year lease with Kathryn Atkinson for CAD$2,370
per month plus taxes. Both leases are renewable for two additional five-year terms.
Rental
and equipment lease expenses were approximately $76,957 and $92,705 for the six months ended June 30, 2024 and 2023, respectively.
Note
11. Subsequent Events
Shares
issuances
In July
2024, the Company issued 129,700 shares
of common stock to Lind as partial conversion of $200,000 principal
pursuant to the May 2023 convertible promissory note.
During
July 2024, the Company issued an aggregate of 9,900
shares of common stock to the designee of ClearThink for $11,000 consulting services provided to the Company.
Note issuances
On July 25, 2024, the Company entered
into a second subordinated business loan and security agreement with Agile and Agile Capital as collateral agent whereby the Company
issued a promissory note for a term loan in the amount of $210,000
which principal and interest (of $84,000)
is due on January
31, 2025. Commencing August 2, 2024, the Company is required to make weekly payments of $10,889
until the due date. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $10,000
was paid on the loan.
In August 2024 the
Company entered into securities purchase agreements (each a “Securities Purchase Agreement”) with each of Quick Capital,
LLC, a Wyoming limited liability company (“Quick Capital”) and Jefferson Street Capital, LLC a New Jersey limited
liability company (“Jefferson”) whereby it will issue promissory notes in the aggregate principal amount of $550,000
(the “August Private Placement Offering”). The Company agreed to issue to Quick Capital and Jefferson up to