0001493152-20-012604.txt : 20200706 0001493152-20-012604.hdr.sgml : 20200706 20200706130143 ACCESSION NUMBER: 0001493152-20-012604 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 58 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200706 DATE AS OF CHANGE: 20200706 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Blue Star Foods Corp. CENTRAL INDEX KEY: 0001730773 STANDARD INDUSTRIAL CLASSIFICATION: PREPARED FRESH OR FROZEN FISH & SEAFOODS [2092] IRS NUMBER: 824270040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55903 FILM NUMBER: 201012807 BUSINESS ADDRESS: STREET 1: 3330 CLEMATIS STREET STREET 2: SUITE 217 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: 800-341-2684 MAIL ADDRESS: STREET 1: 3330 CLEMATIS STREET STREET 2: SUITE 217 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 FORMER COMPANY: FORMER CONFORMED NAME: AG ACQUISITION GROUP II, INC. DATE OF NAME CHANGE: 20180207 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended: March 31, 2020

 

or

 

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

 

For the transition period from ________________ to ________________

 

Commission file number: 000-55903

 

BLUE STAR FOODS CORP.

 

(Exact name of registrant as specified in its charter)

 

Delaware   82-4270040

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

3000 NW 109th Avenue

Miami, Florida 33172

(Address of principal executive offices)

 

(860) 633-5565

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class  

Trading Symbol(s)

 

Name of each exchange on which registered

None   N/A   N/A

 

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

 

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

 

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

 

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

 

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

 

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

 

As of July 2, 2020, there were 18,615,971 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 MARCH 31, 2020

 

TABLE OF CONTENTS

 

    PAGE
     
PART I - FINANCIAL INFORMATION  
     
Item 1. Financial Statements (Unaudited) 4
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
     
Item 4. Controls and Procedures 22
     
PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 23
     
Item 1A. Risk Factors 24
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
     
Item 3. Defaults Upon Senior Securities 24
     
Item 4. Mine Safety Disclosures 24
     
Item 5. Other Information 24
     
Item 6. Exhibits 24
     
SIGNATURES 25

 

2
 

 

EXPLANTORY NOTE

 

On May 13, 2020, Blue Star Foods Corp. (the “Company”) filed a Current Report on Form 8-K, and is filing this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”), in reliance on the Securities and Exchange Commission’s March 4, 2020 Order (Release No. 34-88318), as modified on March 25, 2020 (Release No. 34-88465) pursuant to Section 36 of the Securities Exchange Act of 1934.

 

As result of the global outbreak of the COVID-19 virus, certain “stay at home” orders and other restrictions imposed as a result of the COVID-19 pandemic, Company management as well as professional staff and consultants have been hindered and delayed in conducting the work required to prepare the financial statements for the Quarterly Report. This has, in turn, impacted the Company’s ability to compile and review certain information required to complete, review and file this Quarterly Report by its original due date, March 31, 2020.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

  Our ability to raise capital when needed and on acceptable terms and conditions;
     
  Our ability to make acquisitions and integrate acquired businesses into our company;
     
  Our ability to attract and retain management with experience in the business of importing, packaging and selling of seafood;
     
  Our ability to negotiate, finalize and maintain economically feasible agreements with suppliers and customers;
     
  The availability of crab meat and other premium seafood products we sell;
     
  The intensity of competition;
     
  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 fiscal year ended December 31, 2019 which we filed with the Securities and Exchange Commission (“SEC”) on May 29, 2020 (the “Annual Report”). The risks and uncertainties described under “Risk Factors” are not exhaustive.

 

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

 

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

 

3
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

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

 

Blue Star Foods Corp.

CONSOLIDATED BALANCE SHEETS

 

   MARCH 31,
2020
   DECEMBER 31, 2019 
  Unaudited     
ASSETS        
CURRENT ASSETS          
Cash (including VIE $9,196 and $8,725, respectively)  $22,959   $153,904 
Restricted Cash   33,486    41,906 
Accounts receivable, net (including VIE $23,818 and $20,321, respectively)   1,921,761    2,071,363 
Inventory, net (including VIE $77,419 and $95,441, respectively)   4,784,499    7,984,492 
Advances to related party   1,301,934    1,285,935 
Other current assets (including VIE $3,299 and $3,679, respectively)   219,291    242,700 
Total current assets   8,283,930    11,780,300 
FIXED ASSETS, net   65,993    61,908 
RIGHT OF USE ASSET   1,190,706    1,206,931 
INTANGIBLE ASSETS, net          
Trademarks   831,112    845,278 
Customer Relationships   1,217,948    1,241,667 
Non-Compete Agreements   36,668    39,167 
Goodwill   445,395    445,395 
Total Intangible Assets   2,531,123    2,571,507 
OTHER ASSETS   161,068    125,418 
TOTAL ASSETS  $12,232,820   $15,746,064 
LIABILITIES AND STOCKHOLDERS DEFICIT          
CURRENT LIABILITIES          
Accounts payable and accruals (including VIE $4,849 and $30,649, respectively)  $2,759,934   $3,528,466 
Working capital line of credit   4,989,374    6,917,968 
Current maturities of Lease Liabilities   162,112    136,952 
Current maturities of Related Party Long-Term Note   100,000    100,364 
Related Party Notes Payable   972,500    972,500 
Related Party Notes Payable - Subordinated   2,910,136    2,910,136 
Total current liabilities   11,894,056    14,566,386 
LONG -TERM LIABILITY          
Long-Term Lease Liability   1,052,671    1,089,390 
Related Party Long-Term Note   610,000    610,000 
TOTAL LIABILITIES   13,556,727    16,265,776 
STOCKHOLDERS DEFICIT          
Blue Star Foods Corp. Stockholders Deficit          
Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 1,413 shares issued and outstanding as of March 31, 2020 and December 31, 2019   -    - 
Common stock, $0.0001 par value, 100,000,000 shares authorized; 17,603,835 shares issued and outstanding (including 14,130 shares declared as a stock dividend on December 31, 2019 and 14,130 shares declared as a stock dividend on March 31, 2020) as of March 31, 2020 and 17,289,705 shares issued and outstanding (including 14,130 shares declared as a stock dividend on September 30, 2019 and 14,130 shares declared as a stock dividend on December 31, 2019) as of December 31, 2019   1,762    1,761 
Additional paid-in capital   8,852,125    8,789,021 
Accumulated deficit   (9,831,132)   (8,952,466)
Total Blue Star Foods Corp. stockholders deficit   (977,245)   (161,684)
Non-controlling interest   (479,490)   (476,250)
Accumulated other comprehensive income (VIE)   132,828    118,222 
Total VIE’s deficit   (346,662)   (358,028)
TOTAL STOCKHOLDERS DEFICIT   (1,323,907)   (519,712)
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT  $12,232,820   $15,746,064 

 

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

 

4
 

 

Blue Star Foods Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31,
 
   Unaudited 
   2020   2019 
REVENUE, NET  $4,571,614   $6,510,774 
COST OF REVENUE (including approximately $110,298 and $2,114,500 respectively, purchased from related party)   4,148,398    5,600,914 
GROSS PROFIT   423,216    909,860 
COMMISSIONS   66,829    18,810 
SALARIES & WAGES   409,181    1,116,748 
OTHER OPERATING EXPENSES   524,198    775,406 
LOSS FROM OPERATIONS   (576,992)   (1,001,104)
INTEREST EXPENSE   (276,655)   (238,193)
NET LOSS   (853,647)   (1,239,297)
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST   (3,240)   (19,268)
NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(850,407)  $(1,220,029)
DIVIDEND ON PREFERRED STOCK   28,259    28,260 
NET LOSS ATTRIBUABLE TO BLUE STAR FOODS CORP. COMMON STOCKHOLDERS  $(878,666)  $(1,248,289)
COMPREHENSIVE LOSS:          
TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST   14,606    (53,850)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST  $11,366   $(73,118)
COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(850,407)  $(1,220,029)
Loss per basic and diluted common share:          
Basic net loss per common share  $(0.05)  $(0.08)
Basic weighted average common shares outstanding   17,589,705    16,026,386 
Fully diluted net loss per common share  $(0.05)  $(0.08)
Fully diluted weighted average common shares outstanding   17,589,705    16,026,386 

 

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

 

5
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2020

 

   Series A Preferred Stock $.0001 par value   Common Stock $.0001 par value   Additional Paid-in   Accumulated   Total Blue Star Foods Corp. Stockholder’s   Non-Controlling   Total Stockholder’s 
   Shares   Amount   Shares   Amount   Capital   Deficit)   Deficit   Interest   Deficit 
December 31, 2019   1,413        -    17,589,705    1,761    8,789,021    (8,952,466)   (161,684)   (358,028)   (519,712)
Stock Based Compensation                       34,846         34,846         34,846 
Series A Preferred 8% dividend issued in common stock             14,130    1    28,258    (28,259)   -    -    0 
Net Loss                  -         (850,407)   (850,407)   (3,240)   (853,647)
Comprehensive loss             -    -    -    -    -    14,606    14,606 
March 31, 2020   1,413    -    17,603,835    1,762    8,852,125    (9,831,132)   (977,245)   (346,662)   (1,323,907)

 

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

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2019

 

   Series A Pref Stock $.0001 par value   Common Stock $.0001 par value   Additional Paid-in   Accumulated   Total Blue Star Foods Corp. Stockholder’s   Non-Controlling   Total Stockholder’s 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit   Interest   Deficit 
December 31, 2018   1,413    -    16,023,164    1,603    3,404,774    (3,853,139)   (446,762)   (372,752)   (819,514)
Common stock issued for Cash                  5,000    1    9,999         10,000         10,000 
Stock Based Compensation                       665,028         665,028         665,028 
Series A Preferred 8% dividend issued in common stock             14,130    2    28,258    (28,260)   -         - 
Net Loss                  -         (1,220,029)   (1,220,029)   (19,268)   (1,239,297)
Comprehensive loss             -    -    -    -    -    (53,850)   (53,850)
March 31, 2019   1,413    -    16,042,294    1,606    4,108,059    (5,101,428)   (991,763)   (445,870)   (1,437,633)

 

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

 

6
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,

 

   Unaudited 
   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(853,647)  $(1,239,297)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock based compensation   34,846    665,028 
Depreciation of fixed assets   9,145    17,005 
Amortization of right of use asset   43,730    37,468 
Amortization of intangible assets   40,384    - 
Amortization of loan costs   25,988    35,998 
Deferred Taxes   8,362    - 
Allowance for inventory obsolescence   146,853    - 
Changes in operating assets and liabilities:          
Receivables   149,602    174,170 
Inventories   3,053,140    (491,548)
Advances to affiliated supplier   (15,999)   (121,849)
Other current assets   23,409    (4,237)
Change in right of use liability   (39,064)   (32,615)
Accounts payable and accruals   (768,896)   (728,590)
Net cash provided by (used) in operating activities   1,857,853    (1,688,467)
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of fixed assets   (13,230)   (3,670)
Net cash used in investing activities   (13,230)   (3,670)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from common stock offering   -    10,000 
Proceeds from working capital lines of credit   2,407,538    7,215,843 
Repayments of working capital lines of credit   (4,336,132)   (6,706,623)
Proceeds from Related Party Notes Payable   -    1,000,000 
Principal payments of long-term debt   -    (6,072)
Payments of Loan costs   (70,000)   (10,000)
Net provided by (used in) financing activities   (1,998,594)   1,503,148 
Effect of exchange rate changes on cash   14,606    (53,850)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   (139,365)   (242,839)
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH- BEGINNING OF PERIOD   195,810    347,226 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD  $56,445   $104,387 
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY          
Series A 8% Dividend issued in Common Stock   28,259    28,260 
Valuation of Right of Use asset/liability   28,137    1,257,751 
Supplemental Disclosure of Cash Flow Information          
Cash paid for interest  $276,655   $238,367 

 

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

 

7
 

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1. Company Overview

 

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

 

On November 26, 2019, John Keeler & Co., Inc., a Florida corporation (the “Purchaser”), and 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”), 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), 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 immediately prior to the Coastal Merger (collectively, the “Sellers”). Pursuant to the terms of the Coastal Merger Agreement, Coastal Pride merged with and into the Acquisition Subsidiary, with the Acquisition Subsidiary being the surviving company (the “Coastal Merger”).

 

8
 

 

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.

 

Pro Forma Information

 

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2019. For all of the business acquisitions depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs.

 

   Three Months Ending
March 31, 2019
 
Revenue  $9,178,661 
Net Loss  $(1,596,396)
Basic and Diluted Loss per Share  $(0.10)
Basic and Diluted Weighted Average Common Shares Outstanding   16,026,386 

 

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 balance sheet as of December 31, 2019 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ending December 31, 2019 filed with the SEC on May 29, 2020 for a broader discussion of our business and the risks inherent in such business.

 

Advances to Suppliers and Related Party

 

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

 

As of March 31, 2020 and December 31, 2019, the balance due from the related party for future shipments was approximately $1,301,900 and $1,285,900, respectively. The 2020 balances represent approximately six months of purchases from the supplier.

 

Employee Stock-Based Compensation:

 

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. The Company has elected to adopt ASU 2016-09 and has a policy to account for forfeitures as they occur.

 

Non-Employee Stock-Based Compensation:

 

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

 

The Company accounts for stock-based compensation awards to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

 

9
 

 

All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity-based payments are recorded as an expense over the service period, as if the Company had paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services, the fair value of the equity-based payments will be re-measured and the non-cash expense recognized during the period will be adjusted accordingly. Since the fair value of equity-based payments granted to non-employees is subject to change in the future, the amount of the future expense will include fair value re-measurements until the equity-based payments are fully vested or the service completed.

 

Revenue Recognition

 

Effective with the January 1, 2018 adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and the associated ASUs (collectively, “Topic 606”), the Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. 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, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

 

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.

 

Lease Accounting

 

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

 

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

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of March 31, 2020. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

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

 

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

 

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

 

  

March 31,

2020

 
Assets     
Operating lease assets  $1,190,706 
      
Liabilities     
Current  $162,112 
Operating lease liabilities     
Noncurrent     
Operating lease liabilities  $1,052,671 

 

Supplemental cash flow information related to leases were as follows:

 

  

Three Months Ended

March 31, 2020

 
     
Cash used in operating activities:     
Operating leases  $39,064 
ROU assets recognized in exchange for lease obligations:     
Operating leases  $28,137 

 

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

 

  

March 31,

2020

 
Weighted-average remaining lease term     
Operating leases   5.81 years 
Weighted-average discount rate     
Operating leases   5.4%

 

Maturities of lease liabilities as of March 31, 2020, were as follows:

 

   Operating Leases 
     
2020   167,477 
2021   235,227 
2022   247,152 
2023   243,321 
2024   235,203 
Thereafter   336,932 
Total lease payments   1,465,312 
Less: amount of lease payments representing interest   (250,529)
Present value of future minimum lease payments  $1,214,783 
Less: current obligations under leases  $(162,112)
Non-current obligations  $1,052,671 

 

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Note 3. Going Concern

 

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2020, the Company incurred a net loss of $853,647, has an accumulated deficit of $9,831,132 and working capital deficit of $3,610,126, with the current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the working capital facility, and $162,112 in the current portion of the lease liability recognition. These circumstances raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, execute on its business plan to acquire complimentary companies, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Note 4. Consolidation of Variable Interest Entities

 

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

 

The information below represents the assets, liabilities and non-controlling interest related to Strike as of March 31, 2020 and December 31, 2019.

 

   March 31, 2020 
Assets  $113,732 
Liabilities   4,849 
Non-controlling interest   (479,490)

 

    December 31, 2019  
Assets   $ 128,166  
Liabilities     30,649  
Non-controlling interest     (476,250 )

 

Note 5. Debt

 

Working Capital Line of Credit

 

The Company entered into a $14,000,000 revolving line of credit, pursuant to a loan and security agreement with ACF Finco I, LP (“ACF”) on August 31, 2016, the proceeds of which were used to pay off the prior line of credit, pay new loan costs of approximately $309,000, and provide additional working capital to the Company, this facility is secured by all assets of John Keeler & Co., Inc. This facility was amended on November 18, 2016, June 19, 2017, October 16, 2017, September 19, 2018, November 8, 2018, July 29, 2019, and November 26, 2019.

 

The line of credit bears an interest rate equal to the greater of 3 Month LIBOR rate plus 9.25%, the Prime rate plus 6.0% or a fixed rate of 6.5%.

 

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

 

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

 

On November 26, 2019, Inc. the Company entered into the seventh amendment to the loan and security agreement with ACF. This amendment memorialized the acquisition of Coastal Pride Seafood, LLC, made Coastal Pride Seafood, LLC a co-borrower to the facility. Additionally, the seventh amendment waived and reset the covenant default that occurred during 2019, extended the term of the facility to 5 years and is subject to early termination by the lender upon defined events of default. During the three months ended March 31, 2020 the Company was in violation of its minimum EBITDA covenant as well as exceeding the covenant related to monies advanced to Bacolod by approximately $102,000.

 

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

 

As of March 31, 2020, the line of credit bears interest rate of 10.83%

 

As of March 31, 2020 and December 31, 2019, the line of credit had an outstanding balance of approximately $4,989,400 and $6,918,000, respectively.

 

John Keeler Promissory Notes - Subordinated

 

The Company had unsecured promissory notes outstanding to its stockholder of approximately $2,910,000 as of March 31, 2020 and December 31, 2019. These notes are payable on demand, bear an annual interest rate of 6% and are subordinated to the AFS working capital line of credit. Principle payments are not allowed under the subordination agreement with AFS that was effective August 31, 2016. No principal payments were made by the Company during the three months ended March 31, 2020 or the twelve months ended December 31, 2019.

 

Kenar Note

 

On March 26, 2019, the Company issued a four-month promissory note in the principal amount of $1,000,000 (the “Kenar Note”) to a company controlled by a shareholder, Kenar Overseas Corp., a company registered in Panama (the “Lender”) the term of which was previously extended to March 31, 2020 after which time, on May 21, 2020, the Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender’s sole option), (ii) provide that the Company use one-third of any capital raise from the sale of its equity to reduce the outstanding principal under the Kenar Note, (iii) set the interest rate at 18% per annum, payable monthly commencing October 1, 2020, and (iv) to reduce the number of pledged shares by Mr. Keeler to 4,000,000. As consideration therefor, the Company has agreed to issue 1,021,266 shares of its Common Stock to Kenar. The outstanding principal amount of the note at March 31, 2020 was $872,500.

 

Lobo Note

 

On April 2, 2019, the Company issued a four-month unsecured promissory note in the principal amount of $100,000 (the “Lobo Note”) to Lobo Holdings, LLC, a stockholder in the Company (“Lobo”). The Lobo Note bears interest at the rate of 18% per annum. The Lobo Note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman and Chief Executive Officer, pledged 1,000,000 shares of common stock of the Company to secure the Company’s obligations under the Lobo Note. The Lobo Note matured on August 2, 2019 and was extended through December 2, 2019 on the same terms and conditions. On November 15, 2019, the Company paid off the Lobo Note with the issuance to Lobo of an unsecured promissory note in the principal amount of $100,000 which bears interest at the rate of 15%, which may be prepaid in whole or in part without penalty, and matures on March 31, 2020. On April 1, 2020 the Company paid off the November 15, 2019 Lobo Note with the issuance of a 6 month unsecured promissory note with a principal amount of $100,000, bearing an interest rate of 10%. This note may be prepaid in whole or in part without penalty.

 

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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. 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. The first payment was scheduled for February 26, 2020, however, the EBITDA generated for Coastal during the three months did not warrant a principal payment. This note is subordinate to the ACF working capital line of credit. Principal payments are allowed under the subordination agreement with ACF that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ending March 31, 2020.

 

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 ACF working capital line of credit. Principle payments are allowed under the subordination agreement with ACF that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ended March 31, 2020.

 

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 ACF working capital line of credit. Principle payments are allowed under the subordination agreement with ACF that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ended March 31, 2020.

 

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 ACF working capital line of credit. Principle payments are allowed under the subordination agreement that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ended March 31, 2020.

 

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Note 6. Common Stock

 

On January 23, 2020, an aggregate of 14,130 shares of common stock were issued to the Series A Preferred stockholders as a common stock dividend with an aggregate value of $28,259.

 

Note 7. Options

 

The following Table represents option activity for the three months ended March 31, 2020:

 

    Number of Options   Weighted
Average
Exercise
Price
   Weighted Average Remaining Contractual
Life in
Years
   Aggregate Intrinsic
Value
 
Outstanding - December 31, 2019    3,810,000   $2.00    8.86                           
Exercisable - December 31, 2019    3,120,000   $2.00    8.86   $- 
Granted    -   $-           
Forfeited    -   $-           
Vested    3,280,000                
Outstanding - March 31, 2020    3,810,000   $2.00    8.65      
Exercisable - March 31, 2020    3,280,000   $2.00    8.62   $- 

 

There was no option activity for the three months ending March 31,2020.

 

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Note 8. Warrants

 

The following table represents warrant activity for the three month period ended March 31, 2020:

 

   Number of Warrants   Weighted
Average
Exercise
Price
   Weighted Average Remaining Contractual
Life in
Years
   Aggregate Intrinsic
Value
 
Outstanding - December 31, 2019   353,250   $2.40    1.85                     
Exercisable - December 31, 2019   353,250   $2.40    1.85   $- 
Granted   -   $-           
Forfeited or Expired   -                
Outstanding - March 31, 2020   353,250   $2.40    1.61      
Exercisable - March 31, 2020   353,250   $2.40    1.61   $- 

 

There was no warrant activity for the three months ending March 31, 2020.

 

Note 9. Commitment and Contingencies

 

Office lease

 

The Company leases its Miami office and warehouse facility from JK Real Estate, a related party through common family beneficial ownership. The lease has a 20 year term, expiring in July 2021. The Company is a guarantor of the mortgage on the facility which had a balance of approximately $1,259,300 at March 31, 2020; the Company’s maximum exposure. Rental income on this lease is sufficient to cover the loan payments under this mortgage. Therefore, the Company did not record any liability related to the mortgage in the consolidated financial statements as the Company does not believe it will be called upon to perform under this guarantee, in accordance with ASC 460, Guarantees.

 

The Company leases approximately 3,000 square feet in Beaufort, South Carolina for the offices of Coastal Pride Seafood, LLC. This office space consists of two leases with related parties with approximately 6 years remaining on the leases.

 

Rental and equipment lease expenses amounted to approximately $63,500 and $58,500 for the three months ended March 31, 2020 and 2019, respectively.

 

Legal

 

The Company has reached a settlement agreement with a former employee. Although the agreement is not finalized the Company has reserved for the entire amount of the settlement.

 

Note 10. 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 began instituting preventative shut down measures in order to combat the novel coronavirus pandemic. The coronavirus and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of the geographical area in which the Company operates. We do not currently know the full affect of COVID-19 on our operations. Our sales and supply may continue to be adversely affected due to, among other things, decreased demand and ability to source adequate product. The Company has enacted measures to reduce expenses to coincide with the potential reduction in demand.

 

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Note 11. Subsequent Events

 

On April 17, 2020, the Company entered into an unsecured promissory note with US Century Bank in the principal amount of $344,762 related to the CARES Act Payroll Protection Program. This note is fully guaranteed by the Small Business Administration and may be forgivable provided that certain criteria are met. The interest rate on the loan is 1%, and the note has a two year maturity. The Company is required to make payments on the remaining principal of the note net of any loan forgiveness beginning November 17, 2020.

 

On May 7, 2020, the Company entered into an eighth amendment to the loan and security agreement with ACF. This amendment acknowledged the execution of the Payroll Protection Program loan, provided a reservation of rights related to a default of the minimum EBITDA covenant, and increased the default interest rate an additional 3%.

 

On May 21, 2020, the Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender’s sole option), (ii) provide that the Company use one-third of any capital raise from the sale of its equity to reduce the outstanding principal under the Kenar Note, (iii) set the interest rate at 18% per annum, payable monthly commencing October 1, 2020, and (iv) to reduce the number of pledged shares by Mr. Keeler to 4,000,000. As consideration therefor, on May 27, 2020, the Company issued 1,021,266 shares of its common stock to Kenar.

 

On April 1, 2020, the Company issued a six-month promissory note in the principal amount of $100,000 to Lobo Holdings, LLC., a stockholder in the Company. The note bears interest at the rate of 10% per annum. The note may be prepaid in whole or in part without penalty. This note paid in full $100,000 which was outstanding under a promissory note with Lobo Holdings, LLC,. dated November 15, 2019.

 

On May 27, 2020, an aggregate of 14,130 shares of common stock with a value of $28,261 were issued to Series A Preferred stockholders as a common stock dividend related to the December 31, 2019 dividends payable.

 

On May 27, 2020, the Company issued 5,000 shares of common stock to an accredited investor in a private offering for $10,000.

 

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

 

Forward-Looking Statements

 

The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. The management’s discussion and analysis 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, as updated in subsequent filings we have made with the SEC that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

 

Basis of Presentation

 

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

 

Overview

 

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

 

Merger with Keeler & Co.

 

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

 

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

 

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

 

Coastal Pride Acquisition

 

On November 26, 2019, Keeler & Co. 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”), Coastal Pride Seafood, LLC, a Florida limited liability company and newly-formed, wholly-owned subsidiary of Keeler & Co., and The Walter F. Lubkin, Jr. Irrevocable Trust dated January 8, 2003, Walter F. Lubkin III (“Lubkin III”), Tracy Lubkin Greco (“Greco”) and John C. Lubkin (“Lubkin”), constituting all of the shareholders of Coastal Pride immediately prior to the Coastal Merger (collectively, the “Sellers”). Pursuant to the terms of the Coastal Merger Agreement, Coastal Pride merged with and into Coastal Pride Seafood, LLC, which was 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.

 

Pursuant to the terms of the Coastal Merger Agreement, the following consideration was paid by Keeler & Co.:

 

(i) an aggregate of $394,622 in cash;

 

(ii) a five-year 4% promissory note in the principal amount of $500,000 (the “Lubkin Note), issued by Keeler & Co. to Walter Lubkin Jr. (“Walter Jr.”);

 

18
 

 

(iii) three-year 4% convertible promissory notes in the aggregate principal amount of $210,000 (collectively, the “Sellers Notes” and together with the Lubkin Note, the “Notes”), issued by Keeler & Co. to Greco, Lubkin III and Lubkin, pro rata to their ownership of Coastal Pride immediately prior to the Merger;

 

(iv) 500,000 shares of common stock of the Company, issued to Walter Jr. (the “Walter Jr. Shares”); and

 

(v) an aggregate of 795,000 shares of common stock of the Company, issued to Greco, Walter III and Lubkin, pro rata to their ownership of Coastal Pride immediately prior to the Coastal Merger (together with the Walter Jr. Shares, the “Consideration Shares”).

 

The Notes are subject to a right of offset against the Sellers’ indemnification obligations as described in the Coastal Merger Agreement and are subordinate and subject to prior payment of all indebtedness of John Keeler under the Loan Agreement with ACF Finco I LP (“ACF”), as described below.

 

Principal and interest under the Lubkin Note are payable quarterly, commencing February 26, 2020, in an amount equal to the lesser of (i) $25,000 and (i) 25% of the Surviving Company’s quarterly earnings before interest, tax, depreciation and amortization.

 

One-sixth of the principal and interest under the Sellers Notes are payable quarterly commencing on August 26, 2021. The Sellers Notes are convertible into shares of common stock of the Company at the Seller’s option, at any time after the first anniversary of the date of the Note, at the rate of one share for each $2.00 of principal and/or interest so converted (the “Conversion Shares”).

 

Keeler & Co. has the right to prepay the Notes in whole or in part at any time without penalty or premium.

 

At the effective time of the Coastal Merger, the Sellers entered into leak-out agreements (each, a “Leak-Out Agreement”) pursuant to which the Sellers and Walter Jr. may not directly or indirectly pledge, sell, or transfer any of the Consideration Shares or Conversion Shares, or enter into any swap or other arrangement that transfers any of the economic consequences of ownership of any such shares for one year from the date of the Coastal Merger. Thereafter, each Seller and Walter Jr. may transfer up to 25% of the aggregate of the Consideration Shares and the Conversion Shares held by such person, in each successive six-month period.

 

As a condition to the waiver by ACF Finco I, LP (“ACF”) of certain events of default under the Loan Agreement and Security Agreement, dated August 31, 2016, as amended, between ACF and Keeler & Co. (the “Loan Agreement”), and consent to the formation of Coastal Pride Seafood, LLC and the Coastal Merger, Coastal Pride Seafood, LLC and Keeler & Co. entered into a Joinder and Seventh Amendment to the Loan Agreement which resulted in, among other things, Coastal Pride Seafood, LLC becoming an additional borrower under the Loan Agreement.

 

COVID- 19

 

The current outbreak of COVID-19 could have a material and adverse effect on our business operations, including disruptions or 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 would likely impact our sales and operating results. In addition, COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets of many other countries, resulting in an economic downturn that could affect demand for our products and significantly impact our operating results. As a result of COVID-19, in the current year to date, the Company has experienced a significant decrease in revenue as compared to the prior period in 2019. In an effort to contain costs, the Company has taken steps to reduce its overhead, including by a reduction of personnel and warehousing expenses.

 

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. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects could continue to have a material adverse effect on our business, financial condition, results of operations, or cash flows.

 

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Results of Operations

 

The selected historical financial information presented below is derived from our unaudited consolidated financial statements for the three months ended March 31, 2020 and 2019.

 

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

 

Three months ended March 31, 2020 and 2019

 

Net Revenue. Revenue for the three months ended March 31, 2020 decreased 29.8% to $4,571,614 as compared to $6,510,774 for the three months ended March 31, 2019 as a result of a decrease in poundage related to the phase out of private label business during the second half of 2019. Additionally, the average selling price per pound for the Company’s product decreased 20.8% to $13.01 for the three months ended March 31, 2020 from $16.43 for the three months ended March 31, 2019.

 

Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2020 decreased to $4,148,398 as compared to $5,600,914 for the three months ended March 31, 2019. The decrease is attributable to the revenue decline.

 

Gross Profit. Gross profit margin for the three months ended March 31, 2020 decreased $486,644 as compared to the three months ended March 31, 2019. This decrease is directly attributable to a reduction in the selling price of the Company’s product, while the Company’s inventory cost on product sold during the period did not fully reflect the drop in value of the commodity.

 

Commissions Expenses. Commissions expenses increased from $18,810 for the three months ended March 31, 2019 to $66,829 for the three months ended March 31, 2020. This increase is directly attributable to the acquisition of Coastal Pride and its reliance on commissioned sales. Coastal Pride commissions accounted for $60,635 of the total expense for the three months ended March 31, 2020.

 

Salaries and Wages Expense. Salaries and wages expense decreased $707,567, or 63.4% for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019. This decrease can be attributed to a decrease in the non-cash expenses related to stock-based compensation of $630,182 as well as a strategic reduction in salaries of $77,385 for the three months ended March 31, 2020.

 

Other Operating Expense. Other operating expense decreased by 32.4% from $775,406 for the three months ended March 31, 2019 to $524,198 for the three months ended March 31, 2020. The decrease is attributable the Company’s overhead reduction efforts in all fixed expenses related to its operations.

 

Interest Expense. Interest expense increased from $238,193 for the three months ended March 31, 2019 to $276,655 for the three months ended March 31, 2020. This is solely attributable to the average cost of borrowed funds increasing from 12.0% for the three months ended March 31, 2019 to 15.7% for the three months ended March 31, 2020. Average funds borrowed for the three months ended March 31, 2020 were $7,030,993 as compared to $8,458,335 for the three months ended March 31, 2019.

 

Net Loss: The Company had a net loss of $853,647 for the three months ended March 31, 2020 as compared to a net loss of $1,239,297 for the three months ended March 31, 2019. The decrease in net loss is primarily attributable to the reduction in non-cash operating expenses related to stock compensation of $630,182 during the first three months of 2020 as compared to the first three months of 2019.

 

20
 

 

Liquidity and Capital Resources

 

The Company had cash of $56,455 as of March 31, 2020, of which $33,486 was restricted cash. At March 31, 2020, the Company had a working capital deficit of $3,610,126 including $2,910,136 in stockholder loans that are subordinated to ACF. The Company’s primary sources of liquidity consisted of inventory of $4,784,499 and accounts receivable of $1,921,761.

 

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 is not able to estimate the effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. However, while significant uncertainty remains, the Company believes that the COVID-19 outbreak may have a negative impact the ability to raise financing and access capital.

 

Working Capital Line of Credit

 

The Company entered into the Loan Agreement for a $14,000,000 revolving line of credit with ACF on August 31, 2016, the proceeds of which were used to pay off the prior line of credit, pay new loan costs of approximately $309,000 and provide additional working capital. The Loan Agreement was amended on November 18, 2016, June 19, 2017, October 16, 2017, September 19, 2018, November 8, 2018, July 29, 2019, and November 26, 2019 and May 7, 2020 and is secured by all of the assets of Keeler & Co. The line of credit bears interest at a rate equal to the greater of (i) the 3-month LIBOR rate plus 9.25%, (ii) the prime rate plus 6.0%, and (iii) a fixed rate of 6.5%. As of March 31, 2020, the line of credit bears interest rate of 10.830%. On May 7, 2020 the Company entered into the eighth amendment to the Loan Agreement, which contained an acknowledgement of the Payroll Protection Program Loan, reserved certain rights due to the event of a default of the minimum EBITDA covenant and set a default interest rate of an additional 3%.

 

John Keeler Promissory Notes

 

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 March 31, 2020, approximately $2,910,000 of principal remains outstanding and approximately $43,700 of interest was paid under the notes. These notes have been subordinated to ACF and are subject to certain restrictions pursuant to a subordination agreement with ACF. After satisfaction of the terms of the subordination, the Company can prepay the notes at any time first against interest due thereunder. If an event of default occurs under the notes, interest will accrue at 18% per annum and if not paid within 10 days of payment becoming due, the holder of the note is entitled to a late fee of 5% of the amount of payment not timely made.

 

Kenar Note

 

On March 26, 2019, the Company issued a four-month promissory note in the principal amount of $1,000,000 (the “Kenar Note”) to Kenar Overseas Corp., a company registered in Panama and controlled by a stockholder (the “Lender”). The note bears interest at the rate of 18% per annum during the initial four months which rate will increase to 24% during any extension thereof. The note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Chief Executive Officer and Executive Chairman pledged 5,000,000 shares of common stock to secure the Company’s obligations under the note. The Kenar Note matured on July 26, 2019 and was extended on a month-to-month basis and on November 19, 2019, the Kenar Note was extended to March 31, 2020 on the same terms and conditions.

 

On May 21, 2020, the Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender’s sole option), (ii) provide that the Company use one-third of any capital raise from the sale of its equity to reduce the outstanding principal under the Kenar Note, (iii) set the interest rate at 18% per annum, payable monthly commencing October 1, 2020, and (iv) to reduce the number of pledged shares by Mr. Keeler to 4,000,000. As consideration therefor, the Company issued 1,021,266 shares of its common stock to Kenar on May 27, 2020. The outstanding principal amount of the Kenar Note at March 31, 2020 was $872,500.

 

21
 

 

Lobo Note

 

On April 2, 2019, the Company issued a four-month unsecured promissory note in the principal amount of $100,000 (the “Lobo Note”) to Lobo Holdings, LLC, a stockholder in the Company (“Lobo”). The Lobo Note bears interest at the rate of 18% per annum. The Lobo Note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman and Chief Executive Officer, pledged 1,000,000 shares of common stock of the Company to secure the Company’s obligations under the Lobo Note. The Lobo Note matured on August 2, 2019 and was extended through December 2, 2019 on the same terms and conditions. On November 15, 2019, the Company paid off the Lobo Note with the issuance to Lobo of an unsecured promissory note in the principal amount of $100,000 which bears interest at the rate of 15%, may be prepaid in whole or in part without penalty, and matures on March 31, 2020. On April 1, 2020 the Company paid off the November 15, 2019 Lobo Note with the issuance to Lobo of a six-month unsecured promissory note in the principal amount of $100,000, which accrues interest at the rate of 10% per annum and may be prepaid in whole or in part without penalty.

 

Paycheck Protection Program Loan

 

On April 17, 2020, the Company was granted a loan in the principal amount of $344,762 from U.S. Century Bank under the Paycheck Protection Program. The loan accrues interest at 1% and matures two years from the date of issuance. Monthly payments are $19,401.96 commencing seven months from the date of issuance. The loan may be prepaid under certain conditions.

 

Cash Provided by Operating Activities. Cash provided by operating activities during the three months ended March 31, 2020 was $1,857,853 as compared to cash used in operating activities of $1,688,467 for the three months ended March 31, 2019. The increase is attributable to a reduction in inventory of $3,053,140 for the three months ended March 31, 2020 which was offset by decreased Accounts Payable balances of $768,896 for the three months ended March 31, 2020.

 

Cash Used for Investing Activities. Cash used for investing activities for the three months ended March 31, 2020 was $13,230 as compared to $3,670 used for investing activities for the three months ended March 31, 2019.

 

Cash utilized in Financing Activities. Cash utilized in financing activities for the three months ended March 31, 2020 was $1,998,594 as compared to cash generated from financing activities of $1,503,148 for the three months ended March 31, 2019. Reduction of the Company’s revolving working capital line of credit utilized $1,928,594 and the payment of loan costs utilized the balance of $70,000 for the three months ending March 31, 2020. This is compared to cash generated from the working capital line of credit of $509,220 and $1,000,000 generated from related party notes for the three months ending March 31, 2019.

 

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 March 31, 2020, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

22
 

 

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

 

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

 

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

 

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

 

Management’s Remediation Initiatives

 

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to further initiate, the following measures, subject to the availability of required resources:

 

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

 

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

 

● We plan to hire a chief financial officer as currently the Company’s chief executive officer fills the role of the Company’s principal executive officer and principal financial officer. Until such time, we have engaged an outside accounting consultant with significant experience in the preparation of the financial statements in conformity with GAAP to assist us in the preparation of our financial statements.

 

Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective internal controls over financial reporting.

 

Changes in Internal Control over Financial Reporting

 

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

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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

 

23
 

 

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 January 23, 2020, the Company issued 87,700 shares of common stock to Newbridge Securities Corporation for professional fees provided in connection with the Coastal Merger and 40,000 shares of common stock for professional fees and 30,321 shares of common stock to MEC Consulting, Inc. for legal fees. These issuances were accounted for during the twelve months ending December 31, 2020

 

On March 31, 2020, an aggregate of 14,130 shares of common stock were issued to the Company’s Series A convertible preferred stockholders as quarterly dividends for the quarter ending September 30, 2019.

 

The above issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe is exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

Exhibit
No.
 

SEC Report

Reference No.

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

 

* Filed herewith

 

24
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  BLUE STAR FOODS CORP.
     
Dated: July 6, 2020 By: /s/ John Keeler
  Name: John Keeler
  Title:

Executive Chairman and Chief Executive Officer

(Principal Executive Officer)

     
Dated: July 6, 2020 By: /s/ John Keeler
  Name:  John Keeler
  Title: Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

25

EX-31.1 2 ex31-1.htm

 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

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

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

 

I, 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: July 6, 2020 /s/ John Keeler
  John Keeler
 

Executive Chairman and Chief Executive Officer

(Principal Executive Officer)

 

 

 

EX-31.2 3 ex31-2.htm

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

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

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

 

I, 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: July 6, 2020 /s/ John Keeler
  John Keeler
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 
EX-32.1 4 ex32-1.htm

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Blue Star Foods Corp. (the “Company”), for the quarter ended March 31, 2020, 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: July 6, 2020 By: /s/ John Keeler
  Name: John Keeler
  Title: Executive Chairman and Chief Executive Officer
    (Principal Executive Officer)

 

 
EX-32.2 5 ex32-2.htm

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Blue Star Foods Corp. (the “Company”), for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher Constable, Chief Financial Officer, Secretary and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

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

 

Date: July 6, 2020 By: /s/ John Keeler
  Name: John Keeler
  Title: Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

 
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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
Jul. 02, 2020
Document And Entity Information    
Entity Registrant Name Blue Star Foods Corp.  
Entity Central Index Key 0001730773  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   18,615,971
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2020  
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Consolidated Balance Sheets - USD ($)
Mar. 31, 2020
Dec. 31, 2019
CURRENT ASSETS    
Cash (including VIE $9,196 and $8,725, respectively) $ 22,959 $ 153,904
Restricted Cash 33,486 41,906
Accounts receivable, net (including VIE $23,818 and $20,321, respectively) 1,921,761 2,071,363
Inventory, net (including VIE $77,419 and $95,441, respectively) 4,784,499 7,984,492
Advances to related party 1,301,934 1,285,935
Other current assets (including VIE $3,299 and $3,679, respectively) 219,291 242,700
Total current assets 8,283,930 11,780,300
FIXED ASSETS, net 65,993 61,908
RIGHT OF USE ASSET 1,190,706 1,206,931
INTANGIBLE ASSETS, net    
Trademarks 831,112 845,278
Customer Relationships 1,217,948 1,241,667
Non-Compete Agreements 36,668 39,167
Goodwill 445,395 445,395
Total Intangible Assets 2,531,123 2,571,507
OTHER ASSETS 161,068 125,418
TOTAL ASSETS 12,232,820 15,746,064
CURRENT LIABILITIES    
Accounts payable and accruals (including VIE $4,849 and $30,649, respectively) 2,759,934 3,528,466
Working capital line of credit 4,989,374 6,917,968
Current maturities of Lease Liabilities 162,112 136,952
Current maturities of Related Party Long-Term Note 100,000 100,364
Related Party Notes Payable 972,500 972,500
Related Party Notes Payable - Subordinated 2,910,136 2,910,136
Total current liabilities 11,894,056 14,566,386
LONG -TERM LIABILITY    
Long-Term Lease Liability 1,052,671 1,089,390
Related Party Long-Term Note 610,000 610,000
TOTAL LIABILITIES 13,556,727 16,265,776
Blue Star Foods Corp. Stockholders Deficit    
Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 1,413 shares issued and outstanding as of March 31, 2020 and December 31, 2019
Common stock, $0.0001 par value, 100,000,000 shares authorized; 17,603,835 shares issued and outstanding (including 14,130 shares declared as a stock dividend on December 31, 2019 and 14,130 shares declared as a stock dividend on March 31, 2020) as of March 31, 2020 and 17,289,705 shares issued and outstanding (including 14,130 shares declared as a stock dividend on September 30, 2019 and 14,130 shares declared as a stock dividend on December 31, 2019) as of December 31, 2019 1,762 1,761
Additional paid-in capital 8,852,125 8,789,021
Accumulated deficit (9,831,132) (8,952,466)
Total Blue Star Foods Corp. stockholders deficit (977,245) (161,684)
Non-controlling interest (479,490) (476,250)
Accumulated other comprehensive income (VIE) 132,828 118,222
Total VIE's deficit (346,662) (358,028)
TOTAL STOCKHOLDERS DEFICIT (1,323,907) (519,712)
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT $ 12,232,820 $ 15,746,064
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Mar. 31, 2020
Sep. 30, 2019
Dec. 31, 2019
Preferred stock dividend percentage 8.00%    
Common stock, par value $ 0.0001   $ 0.0001
Common stock, shares authorized 100,000,000   100,000,000
Common stock, shares issued 17,603,835   17,289,705
Common stock, shares outstanding 17,603,835   17,289,705
Common stock dividend shares 14,130 14,130 14,130
Series A 8% Cumulative Convertible Preferred Stock [Member]      
Preferred stock, par value $ 0.0001   $ 0.0001
Preferred stock, shares authorized 10,000   10,000
Preferred stock, shares issued 1,413   1,413
Preferred stock, shares outstanding 1,413   1,413
Preferred stock dividend percentage 8.00%   8.00%
Accounts Payable and Accruals [Member]      
Current liabilities of VIE $ 4,849   $ 30,649
Other Current Assets [Member]      
Current assets attributable to VIE 3,299   3,679
Inventory [Member]      
Current assets attributable to VIE 77,419   95,441
Accounts Receivable [Member]      
Current assets attributable to VIE 23,818   20,321
Cash [Member]      
Current assets attributable to VIE $ 9,196   $ 8,725
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Statement [Abstract]    
REVENUE, NET $ 4,571,614 $ 6,510,774
COST OF REVENUE (including approximately $110,298 and $2,114,500 respectively, purchased from related party) 4,148,398 5,600,914
GROSS PROFIT 423,216 909,860
COMMISSIONS 66,829 18,810
SALARIES & WAGES 409,181 1,116,748
OTHER OPERATING EXPENSES 524,198 775,406
LOSS FROM OPERATIONS (576,992) (1,001,104)
INTEREST EXPENSE (276,655) (238,193)
NET LOSS (853,647) (1,239,297)
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST (3,240) (19,268)
NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. (850,407) (1,220,029)
DIVIDEND ON PREFERRED STOCK 28,259 28,260
NET LOSS ATTRIBUABLE TO BLUE STAR FOODS CORP. COMMON STOCKHOLDERS (878,666) (1,248,289)
COMPREHENSIVE LOSS:    
TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST 14,606 (53,850)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST 11,366 (73,118)
COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. $ (850,407) $ (1,220,029)
Loss per basic and diluted common share:    
Basic net loss per common share $ (0.05) $ (0.08)
Basic weighted average common shares outstanding 17,589,705 16,026,386
Fully diluted net loss per common share $ (0.05) $ (0.08)
Fully diluted weighted average common shares outstanding 17,589,705 16,026,386
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parenthetical) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cost of revenue $ 4,148,398 $ 5,600,914
Related Party [Member]    
Cost of revenue $ 110,298 $ 2,114,500
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidated Statements of Changes in Stockholders Deficit (Unaudited) - USD ($)
Series A Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Total Blue Star Foods Corp. Stockholder's Deficit [Member]
Non-Controlling Interest [Member]
Total
Balance at Dec. 31, 2018 $ 1,603 $ 3,404,774 $ (3,853,139) $ (446,762) $ (372,752) $ (819,514)
Balance, shares at Dec. 31, 2018 1,413 16,023,164          
Common stock issued for cash $ 1 9,999 10,000 10,000
Common stock issued for cash, shares 5,000          
Stock Based Compensation 665,028 665,028 665,028
Series A Preferred 8% dividend issued in common stock $ 2 28,258 (28,260)
Series A Preferred 8% dividend issued in common stock, shares 14,130          
Net Loss (1,220,029) (1,220,029) (19,268) (1,239,297)
Comprehensive loss (53,850) (53,850)
Balance at Mar. 31, 2019 $ 1,606 4,108,059 (5,101,428) (991,763) (445,870) (1,437,633)
Balance, shares at Mar. 31, 2019 1,413 16,042,294          
Balance at Dec. 31, 2019 $ 1,761 8,789,021 (8,952,466) (161,684) (358,028) (519,712)
Balance, shares at Dec. 31, 2019 1,413 17,589,705          
Stock Based Compensation 34,846 34,846 34,846
Series A Preferred 8% dividend issued in common stock $ 1 28,258 (28,259) 0
Series A Preferred 8% dividend issued in common stock, shares 14,130          
Net Loss (850,407) (850,407) (3,240) (853,647)
Comprehensive loss 14,606 14,606
Balance at Mar. 31, 2020 $ 1,762 $ 8,852,125 $ (9,831,132) $ (977,245) $ (346,662) $ (1,323,907)
Balance, shares at Mar. 31, 2020 1,413 17,603,835          
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidated Statements of Changes in Stockholders Deficit (Parenthetical) - $ / shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Common stock, par value $ 0.0001 $ 0.0001
Preferred stock dividend percentage 8.00%  
Series A Preferred Stock [Member]    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock dividend percentage 8.00% 8.00%
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net Loss $ (853,647) $ (1,239,297)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock based compensation 34,846 665,028
Depreciation of fixed assets 9,145 17,005
Amortization of right of use asset 43,730 37,468
Amortization of intangible assets 40,384
Amortization of loan costs 25,988 35,998
Deferred Taxes 8,362
Allowance for inventory obsolescence 146,853
Changes in operating assets and liabilities:    
Receivables 149,602 174,170
Inventories 3,053,140 (491,548)
Advances to affiliated supplier (15,999) (121,849)
Other current assets 23,409 (4,237)
Change in right of use liability (39,064) (32,615)
Accounts payable and accruals (768,896) (728,590)
Net cash provided by (used) in operating activities 1,857,853 (1,688,467)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of fixed assets (13,230) (3,670)
Net cash used in investing activities (13,230) (3,670)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from common stock offering 10,000
Proceeds from working capital lines of credit 2,407,538 7,215,843
Repayments of working capital lines of credit (4,336,132) (6,706,623)
Proceeds from Related Party Notes Payable 1,000,000
Principal payments of long-term debt (6,072)
Payments of Loan costs (70,000) (10,000)
Net provided by (used in) financing activities (1,998,594) 1,503,148
Effect of exchange rate changes on cash 14,606 (53,850)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (139,365) (242,839)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH- BEGINNING OF PERIOD 195,810 347,226
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD 56,445 104,387
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY    
Series A 8% Dividend issued in Common Stock 28,259 28,260
Valuation of Right of Use asset/liability 28,137 1,257,751
Supplemental Disclosure of Cash Flow Information    
Cash paid for interest $ 276,655 $ 238,367
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidated Statements of Cash Flows (Unaudited) (Parenthetical)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Preferred stock, dividend percentage 8.00%  
Series A Common Stock [Member]    
Preferred stock, dividend percentage 8.00% 8.00%
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.20.2
Company Overview
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Company Overview

Note 1. Company Overview

 

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

 

On November 26, 2019, John Keeler & Co., Inc., a Florida corporation (the “Purchaser”), and 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”), 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), 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 immediately prior to the Coastal Merger (collectively, the “Sellers”). Pursuant to the terms of the Coastal Merger Agreement, Coastal Pride 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.

 

Pro Forma Information

 

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2019. For all of the business acquisitions depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs.

 

    Three Months Ending
March 31, 2019
 
Revenue   $ 9,178,661  
Net Loss   $ (1,596,396 )
Basic and Diluted Loss per Share   $ (0.10 )
Basic and Diluted Weighted Average Common Shares Outstanding     16,026,386  
XML 22 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
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 balance sheet as of December 31, 2019 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ending December 31, 2019 filed with the SEC on May 29, 2020 for a broader discussion of our business and the risks inherent in such business.

 

Advances to Suppliers and Related Party

 

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

 

As of March 31, 2020 and December 31, 2019, the balance due from the related party for future shipments was approximately $1,301,900 and $1,285,900, respectively. The 2020 balances represent approximately six months of purchases from the supplier.

 

Employee Stock-Based Compensation:

 

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. The Company has elected to adopt ASU 2016-09 and has a policy to account for forfeitures as they occur.

 

Non-Employee Stock-Based Compensation:

 

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

 

The Company accounts for stock-based compensation awards to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

 

All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity-based payments are recorded as an expense over the service period, as if the Company had paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services, the fair value of the equity-based payments will be re-measured and the non-cash expense recognized during the period will be adjusted accordingly. Since the fair value of equity-based payments granted to non-employees is subject to change in the future, the amount of the future expense will include fair value re-measurements until the equity-based payments are fully vested or the service completed.

 

Revenue Recognition

 

Effective with the January 1, 2018 adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and the associated ASUs (collectively, “Topic 606”), the Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. 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, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

 

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.

 

Lease Accounting

 

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

 

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

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of March 31, 2020. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

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

 

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

 

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

 

   

March 31,

2020

 
Assets        
Operating lease assets   $ 1,190,706  
         
Liabilities        
Current   $ 162,112  
Operating lease liabilities        
Noncurrent        
Operating lease liabilities   $ 1,052,671  

 

Supplemental cash flow information related to leases were as follows:

 

   

Three Months Ended

March 31, 2020

 
       
Cash used in operating activities:        
Operating leases   $ 39,064  
ROU assets recognized in exchange for lease obligations:        
Operating leases   $ 28,137  

 

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

 

   

March 31,

2020

 
Weighted-average remaining lease term        
Operating leases     5.81 years  
Weighted-average discount rate        
Operating leases     5.4 %

 

Maturities of lease liabilities as of March 31, 2020, were as follows:

 

    Operating Leases  
       
2020     167,477  
2021     235,227  
2022     247,152  
2023     243,321  
2024     235,203  
Thereafter     336,932  
Total lease payments     1,465,312  
Less: amount of lease payments representing interest     (250,529 )
Present value of future minimum lease payments   $ 1,214,783  
Less: current obligations under leases   $ (162,112 )
Non-current obligations   $ 1,052,671  
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.20.2
Going Concern
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern

Note 3. Going Concern

 

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2020, the Company incurred a net loss of $853,647, has an accumulated deficit of $9,831,132 and working capital deficit of $3,610,126, with the current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the working capital facility, and $162,112 in the current portion of the lease liability recognition. These circumstances raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, execute on its business plan to acquire complimentary companies, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidation of Variable Interest Entities
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Consolidation of Variable Interest Entities

Note 4. Consolidation of Variable Interest Entities

 

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

 

The information below represents the assets, liabilities and non-controlling interest related to Strike as of March 31, 2020 and December 31, 2019.

 

    March 31, 2020  
Assets   $ 113,732  
Liabilities     4,849  
Non-controlling interest     (479,490 )

 

    December 31, 2019  
Assets   $ 128,166  
Liabilities     30,649  
Non-controlling interest     (476,250 )
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.20.2
Debt
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Debt

Note 5. Debt

 

Working Capital Line of Credit

 

The Company entered into a $14,000,000 revolving line of credit, pursuant to a loan and security agreement with ACF Finco I, LP (“ACF”) on August 31, 2016, the proceeds of which were used to pay off the prior line of credit, pay new loan costs of approximately $309,000, and provide additional working capital to the Company, this facility is secured by all assets of John Keeler & Co., Inc. This facility was amended on November 18, 2016, June 19, 2017, October 16, 2017, September 19, 2018, November 8, 2018, July 29, 2019, and November 26, 2019.

 

The line of credit bears an interest rate equal to the greater of 3 Month LIBOR rate plus 9.25%, the Prime rate plus 6.0% or a fixed rate of 6.5%.

 

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

 

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

 

On November 26, 2019, Inc. the Company entered into the seventh amendment to the loan and security agreement with ACF. This amendment memorialized the acquisition of Coastal Pride Seafood, LLC, made Coastal Pride Seafood, LLC a co-borrower to the facility. Additionally, the seventh amendment waived and reset the covenant default that occurred during 2019, extended the term of the facility to 5 years and is subject to early termination by the lender upon defined events of default. During the three months ended March 31, 2020 the Company was in violation of its minimum EBITDA covenant as well as exceeding the covenant related to monies advanced to Bacolod by approximately $102,000.

 

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

 

As of March 31, 2020, the line of credit bears interest rate of 10.83%

 

As of March 31, 2020 and December 31, 2019, the line of credit had an outstanding balance of approximately $4,989,400 and $6,918,000, respectively.

 

John Keeler Promissory Notes - Subordinated

 

The Company had unsecured promissory notes outstanding to its stockholder of approximately $2,910,000 as of March 31, 2020 and December 31, 2019. These notes are payable on demand, bear an annual interest rate of 6% and are subordinated to the AFS working capital line of credit. Principle payments are not allowed under the subordination agreement with AFS that was effective August 31, 2016. No principal payments were made by the Company during the three months ended March 31, 2020 or the twelve months ended December 31, 2019.

 

Kenar Note

 

On March 26, 2019, the Company issued a four-month promissory note in the principal amount of $1,000,000 (the “Kenar Note”) to a company controlled by a shareholder, Kenar Overseas Corp., a company registered in Panama (the “Lender”) the term of which was previously extended to March 31, 2020 after which time, on May 21, 2020, the Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender’s sole option), (ii) provide that the Company use one-third of any capital raise from the sale of its equity to reduce the outstanding principal under the Kenar Note, (iii) set the interest rate at 18% per annum, payable monthly commencing October 1, 2020, and (iv) to reduce the number of pledged shares by Mr. Keeler to 4,000,000. As consideration therefor, the Company has agreed to issue 1,021,266 shares of its Common Stock to Kenar. The outstanding principal amount of the note at March 31, 2020 was $872,500.

 

Lobo Note

 

On April 2, 2019, the Company issued a four-month unsecured promissory note in the principal amount of $100,000 (the “Lobo Note”) to Lobo Holdings, LLC, a stockholder in the Company (“Lobo”). The Lobo Note bears interest at the rate of 18% per annum. The Lobo Note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman and Chief Executive Officer, pledged 1,000,000 shares of common stock of the Company to secure the Company’s obligations under the Lobo Note. The Lobo Note matured on August 2, 2019 and was extended through December 2, 2019 on the same terms and conditions. On November 15, 2019, the Company paid off the Lobo Note with the issuance to Lobo of an unsecured promissory note in the principal amount of $100,000 which bears interest at the rate of 15%, which may be prepaid in whole or in part without penalty, and matures on March 31, 2020. On April 1, 2020 the Company paid off the November 15, 2019 Lobo Note with the issuance of a 6 month unsecured promissory note with a principal amount of $100,000, bearing an interest rate of 10%. This note may be prepaid in whole or in part without penalty.

 

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. 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. The first payment was scheduled for February 26, 2020, however, the EBITDA generated for Coastal during the three months did not warrant a principal payment. This note is subordinate to the ACF working capital line of credit. Principal payments are allowed under the subordination agreement with ACF that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ending March 31, 2020.

 

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 ACF working capital line of credit. Principle payments are allowed under the subordination agreement with ACF that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ended March 31, 2020.

 

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 ACF working capital line of credit. Principle payments are allowed under the subordination agreement with ACF that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ended March 31, 2020.

 

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 ACF working capital line of credit. Principle payments are allowed under the subordination agreement that was effective November 26, 2019 so long as the borrower is not in default under the loan and security agreement with ACF. No principal payments were made by the Company during the three months ended March 31, 2020.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.20.2
Common Stock
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Common Stock

Note 6. Common Stock

 

On January 23, 2020, an aggregate of 14,130 shares of common stock were issued to the Series A Preferred stockholders as a common stock dividend with an aggregate value of $28,259.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.20.2
Options
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Options

Note 7. Options

 

The following Table represents option activity for the three months ended March 31, 2020:

 

      Number of Options     Weighted
Average
Exercise
Price
    Weighted Average Remaining Contractual
Life in
Years
    Aggregate Intrinsic
Value
 
Outstanding - December 31, 2019       3,810,000     $ 2.00       8.86          
Exercisable - December 31, 2019       3,120,000     $ 2.00       8.86     $ -  
Granted       -     $ -                  
Forfeited       -     $ -                  
Vested       3,280,000                          
Outstanding - March 31, 2020       3,810,000     $ 2.00       8.65          
Exercisable - March 31, 2020       3,280,000     $ 2.00       8.62     $ -  

 

There was no option activity for the three months ending March 31,2020.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.20.2
Warrants
3 Months Ended
Mar. 31, 2020
Warrants and Rights Note Disclosure [Abstract]  
Warrants

Note 8. Warrants

 

The following table represents warrant activity for the three month period ended March 31, 2020:

 

    Number of Warrants     Weighted
Average
Exercise
Price
    Weighted Average Remaining Contractual
Life in
Years
    Aggregate Intrinsic
Value
 
Outstanding - December 31, 2019     353,250     $ 2.40       1.85          
Exercisable - December 31, 2019     353,250     $ 2.40       1.85     $ -  
Granted     -     $ -                  
Forfeited or Expired     -                          
Outstanding - March 31, 2020     353,250     $ 2.40       1.61          
Exercisable - March 31, 2020     353,250     $ 2.40       1.61     $ -  

 

There was no warrant activity for the three months ending March 31, 2020.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.20.2
Commitment and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitment and Contingencies

Note 9. Commitment and Contingencies

 

Office lease

 

The Company leases its Miami office and warehouse facility from JK Real Estate, a related party through common family beneficial ownership. The lease has a 20 year term, expiring in July 2021. The Company is a guarantor of the mortgage on the facility which had a balance of approximately $1,259,300 at March 31, 2020; the Company’s maximum exposure. Rental income on this lease is sufficient to cover the loan payments under this mortgage. Therefore, the Company did not record any liability related to the mortgage in the consolidated financial statements as the Company does not believe it will be called upon to perform under this guarantee, in accordance with ASC 460, Guarantees.

 

The Company leases approximately 3,000 square feet in Beaufort, South Carolina for the offices of Coastal Pride Seafood, LLC. This office space consists of two leases with related parties with approximately 6 years remaining on the leases.

 

Rental and equipment lease expenses amounted to approximately $63,500 and $58,500 for the three months ended March 31, 2020 and 2019, respectively.

 

Legal

 

The Company has reached a settlement agreement with a former employee. Although the agreement is not finalized the Company has reserved for the entire amount of the settlement.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.20.2
COVID-19 Pandemic
3 Months Ended
Mar. 31, 2020
Covid-19 Pandemic  
COVID-19 Pandemic

Note 10. 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 began instituting preventative shut down measures in order to combat the novel coronavirus pandemic. The coronavirus and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of the geographical area in which the Company operates. We do not currently know the full affect of COVID-19 on our operations. Our sales and supply may continue to be adversely affected due to, among other things, decreased demand and ability to source adequate product. The Company has enacted measures to reduce expenses to coincide with the potential reduction in demand.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

Note 11. Subsequent Events

 

On April 17, 2020, the Company entered into an unsecured promissory note with US Century Bank in the principal amount of $344,762 related to the CARES Act Payroll Protection Program. This note is fully guaranteed by the Small Business Administration and may be forgivable provided that certain criteria are met. The interest rate on the loan is 1%, and the note has a two year maturity. The Company is required to make payments on the remaining principal of the note net of any loan forgiveness beginning November 17, 2020.

 

On May 7, 2020, the Company entered into an eighth amendment to the loan and security agreement with ACF. This amendment acknowledged the execution of the Payroll Protection Program loan, provided a reservation of rights related to a default of the minimum EBITDA covenant, and increased the default interest rate an additional 3%.

 

On May 21, 2020, the Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender’s sole option), (ii) provide that the Company use one-third of any capital raise from the sale of its equity to reduce the outstanding principal under the Kenar Note, (iii) set the interest rate at 18% per annum, payable monthly commencing October 1, 2020, and (iv) to reduce the number of pledged shares by Mr. Keeler to 4,000,000. As consideration therefor, on May 27, 2020, the Company issued 1,021,266 shares of its common stock to Kenar.

 

On April 1, 2020, the Company issued a six-month promissory note in the principal amount of $100,000 to Lobo Holdings, LLC., a stockholder in the Company. The note bears interest at the rate of 10% per annum. The note may be prepaid in whole or in part without penalty. This note paid in full $100,000 which was outstanding under a promissory note with Lobo Holdings, LLC,. dated November 15, 2019.

 

On May 27, 2020, an aggregate of 14,130 shares of common stock with a value of $28,261 were issued to Series A Preferred stockholders as a common stock dividend related to the December 31, 2019 dividends payable.

 

On May 27, 2020, the Company issued 5,000 shares of common stock to an accredited investor in a private offering for $10,000.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“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 balance sheet as of December 31, 2019 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ending December 31, 2019 filed with the SEC on May 29, 2020 for a broader discussion of our business and the risks inherent in such business.

Advances to Suppliers and Related Party

Advances to Suppliers and Related Party

 

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

 

As of March 31, 2020 and December 31, 2019, the balance due from the related party for future shipments was approximately $1,301,900 and $1,285,900, respectively. The 2020 balances represent approximately six months of purchases from the supplier.

Employee Stock-Based Compensation

Employee Stock-Based Compensation:

 

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. The Company has elected to adopt ASU 2016-09 and has a policy to account for forfeitures as they occur.

Non-Employee Stock-Based Compensation

Non-Employee Stock-Based Compensation:

 

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

 

The Company accounts for stock-based compensation awards to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

 

All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity-based payments are recorded as an expense over the service period, as if the Company had paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services, the fair value of the equity-based payments will be re-measured and the non-cash expense recognized during the period will be adjusted accordingly. Since the fair value of equity-based payments granted to non-employees is subject to change in the future, the amount of the future expense will include fair value re-measurements until the equity-based payments are fully vested or the service completed.

Revenue Recognition

Revenue Recognition

 

Effective with the January 1, 2018 adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and the associated ASUs (collectively, “Topic 606”), the Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. 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, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

 

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.

Lease Accounting

Lease Accounting

 

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

 

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

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of March 31, 2020. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

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

 

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

 

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

 

   

March 31,

2020

 
Assets        
Operating lease assets   $ 1,190,706  
         
Liabilities        
Current   $ 162,112  
Operating lease liabilities        
Noncurrent        
Operating lease liabilities   $ 1,052,671  

 

Supplemental cash flow information related to leases were as follows:

 

   

Three Months Ended

March 31, 2020

 
       
Cash used in operating activities:        
Operating leases   $ 39,064  
ROU assets recognized in exchange for lease obligations:        
Operating leases   $ 28,137  

 

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

 

   

March 31,

2020

 
Weighted-average remaining lease term        
Operating leases     5.81 years  
Weighted-average discount rate        
Operating leases     5.4 %

 

Maturities of lease liabilities as of March 31, 2020, were as follows:

 

    Operating Leases  
       
2020     167,477  
2021     235,227  
2022     247,152  
2023     243,321  
2024     235,203  
Thereafter     336,932  
Total lease payments     1,465,312  
Less: amount of lease payments representing interest     (250,529 )
Present value of future minimum lease payments   $ 1,214,783  
Less: current obligations under leases   $ (162,112 )
Non-current obligations   $ 1,052,671  
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.20.2
Company Overview (Tables)
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Unaudited Pro Forma Information
    Three Months Ending
March 31, 2019
 
Revenue   $ 9,178,661  
Net Loss   $ (1,596,396 )
Basic and Diluted Loss per Share   $ (0.10 )
Basic and Diluted Weighted Average Common Shares Outstanding     16,026,386  
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Schedule of Lease-related Assets and Liabilities

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

 

   

March 31,

2020

 
Assets        
Operating lease assets   $ 1,190,706  
         
Liabilities        
Current   $ 162,112  
Operating lease liabilities        
Noncurrent        
Operating lease liabilities   $ 1,052,671  
Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases were as follows:

 

   

Three Months Ended

March 31, 2020

 
       
Cash used in operating activities:        
Operating leases   $ 39,064  
ROU assets recognized in exchange for lease obligations:        
Operating leases   $ 28,137  
Schedule of Remaining Lease Term and Discount Rates for Operating Leases

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

 

   

March 31,

2020

 
Weighted-average remaining lease term        
Operating leases     5.81 years  
Weighted-average discount rate        
Operating leases     5.4 %
Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities as of March 31, 2020, were as follows:

 

    Operating Leases  
       
2020     167,477  
2021     235,227  
2022     247,152  
2023     243,321  
2024     235,203  
Thereafter     336,932  
Total lease payments     1,465,312  
Less: amount of lease payments representing interest     (250,529 )
Present value of future minimum lease payments   $ 1,214,783  
Less: current obligations under leases   $ (162,112 )
Non-current obligations   $ 1,052,671  
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidation of Variable Interest Entities (Tables)
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Assets, Liabilities and Non-controlling Interest Related to Strike

The information below represents the assets, liabilities and non-controlling interest related to Strike as of March 31, 2020 and December 31, 2019.

 

    March 31, 2020  
Assets   $ 113,732  
Liabilities     4,849  
Non-controlling interest     (479,490 )

 

    December 31, 2019  
Assets   $ 128,166  
Liabilities     30,649  
Non-controlling interest     (476,250 )
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.20.2
Options (Tables)
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Schedule of Stock Option Activity

The following Table represents option activity for the three months ended March 31, 2020:

 

      Number of Options     Weighted
Average
Exercise
Price
    Weighted Average Remaining Contractual
Life in
Years
    Aggregate Intrinsic
Value
 
Outstanding - December 31, 2019       3,810,000     $ 2.00       8.86          
Exercisable - December 31, 2019       3,120,000     $ 2.00       8.86     $ -  
Granted       -     $ -                  
Forfeited       -     $ -                  
Vested       3,280,000                          
Outstanding - March 31, 2020       3,810,000     $ 2.00       8.65          
Exercisable - March 31, 2020       3,280,000     $ 2.00       8.62     $ -  
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.20.2
Warrants (Tables)
3 Months Ended
Mar. 31, 2020
Warrants and Rights Note Disclosure [Abstract]  
Schedule of Warrant Activity

The following table represents warrant activity for the three month period ended March 31, 2020:

 

    Number of Warrants     Weighted
Average
Exercise
Price
    Weighted Average Remaining Contractual
Life in
Years
    Aggregate Intrinsic
Value
 
Outstanding - December 31, 2019     353,250     $ 2.40       1.85          
Exercisable - December 31, 2019     353,250     $ 2.40       1.85     $ -  
Granted     -     $ -                  
Forfeited or Expired     -                          
Outstanding - March 31, 2020     353,250     $ 2.40       1.61          
Exercisable - March 31, 2020     353,250     $ 2.40       1.61     $ -  
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.20.2
Company Overview - Schedule of Unaudited Pro Forma Information (Details) - John Keeler & Co., Inc. [Member] - Shareholder [Member]
3 Months Ended
Mar. 31, 2019
USD ($)
$ / shares
shares
Revenue $ 9,178,661
Net Loss $ (1,596,396)
Basic and Diluted Loss per Share | $ / shares $ (0.10)
Basic and Diluted Weighted Average Common Shares Outstanding | shares 16,026,386
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Due from related party for future shipments $ 1,301,900 $ 1,285,900
Equipment [Member]    
Finance lease term 3 years  
Property [Member] | Minimum [Member]    
Finance lease term 5 years  
Property [Member] | Maximum [Member]    
Finance lease term 20 years  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Lease-related Assets and Liabilities (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Accounting Policies [Abstract]    
Operating lease assets $ 1,190,706 $ 1,206,931
Operating lease liabilities - Current 162,112 136,952
Operating lease liabilities - Noncurrent $ 1,052,671 $ 1,089,390
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Supplemental Cash Flow Information Related to Leases (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
Accounting Policies [Abstract]  
Cash used in operating activities, Operating leases $ 39,064
ROU assets recognized in exchange for lease obligations, Operating leases $ 28,137
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Remaining Lease Term and Discount Rates for Operating Leases (Details)
Mar. 31, 2020
Accounting Policies [Abstract]  
Weighted-average remaining lease term, Operating leases 5 years 9 months 22 days
Weighted-average discount rate, Operating leases 5.40%
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Maturities of Lease Liabilities (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Accounting Policies [Abstract]    
2020 $ 167,477  
2021 235,227  
2022 247,152  
2023 243,321  
2024 235,203  
Thereafter 336,932  
Total lease payments 1,465,312  
Less: amount of lease payments representing interest (250,529)  
Present value of future minimum lease payments 1,214,783  
Less: current obligations under leases (162,112) $ (136,952)
Non-current obligations $ 1,052,671 $ 1,089,390
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.20.2
Going Concern (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]      
Net income (loss) $ (853,647) $ (1,239,297)  
Accumulated deficit (9,831,132)   $ (8,952,466)
Working capital deficit 3,610,126    
Subordinated stockholder debt 2,910,136   2,910,136
Current portion of lease liability recognition $ 162,112   $ 136,952
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.20.2
Consolidation of Variable Interest Entities - Schedule of Assets, Liabilities and Non-controlling Interest Related to Strike (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Assets $ 113,732 $ 128,166
Liabilities 4,849 30,649
Non-controlling interest $ (479,490) $ (476,250)
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.20.2
Debt (Details Narrative) - USD ($)
3 Months Ended
May 27, 2020
May 21, 2020
Nov. 26, 2019
Nov. 15, 2019
Apr. 02, 2019
Mar. 26, 2019
Mar. 26, 2019
Mar. 31, 2020
Mar. 31, 2019
Apr. 02, 2020
Dec. 31, 2019
Aug. 31, 2016
Revolving line of credit               $ 4,989,400     $ 6,918,000  
Repayment of new loan               $ 4,336,132 $ 6,706,623      
Line of credit, interest rate               10.83%        
Line of credit, description               Borrowing is based on up to 85% of eligible accounts receivable plus the net orderly liquidation value of eligible inventory at the same rate, subject to certain defined limitations.        
Line of credit, term     5 years                  
Debt EBITDA covenant     $ 102,000                  
EBITDA covenant, description     During the three months ended March 31, 2020 the Company was in violation of its minimum EBITDA covenant as well as exceeding the covenant related to monies advanced to Bacolod by approximately $102,000.                  
Kenar Overseas Corp [Member] | Subsequent Event [Member]                        
Debt instrument, interest rate   18.00%                    
Debt maturity date   Mar. 31, 2021                    
Description on maturity date   The Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender's sole option)                    
Extended maturity date   Sep. 30, 2021                    
Issuance of common stock, shares 1,021,266                      
Debt instrument, description   The Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender's sole option), (ii) provide that the Company use one-third of any capital raise from the sale of its equity to reduce the outstanding principal under the Kenar Note, (iii) set the interest rate at 18% per annum, payable monthly commencing October 1, 2020, and (iv) to reduce the number of pledged shares by Mr. Keeler to 4,000,000.                    
6% Demand Promissory Notes [Member] | John Keeler [Member]                        
Debt instrument, principal amount               $ 2,910,000     $ 2,910,000  
Debt instrument, interest rate               6.00%     6.00%  
Kenar Note [Member] | Kenar Overseas Corp [Member]                        
Debt instrument, principal amount           $ 1,000,000 $ 1,000,000 $ 872,500        
Debt instrument, interest rate           18.00% 18.00%          
Debt maturity date           Mar. 31, 2021            
Description on maturity date           The term of which was previously extended to March 31, 2020 after which time, on May 21, 2020, the Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender's sole option),            
Extended maturity date           Sep. 30, 2021            
Number of shares pledged to secure company's obligation           4,000,000            
Issuance of common stock, shares           1,021,266            
Lobo Note [Member] | Lobo Holdings, LLC [Member]                        
Debt instrument, principal amount       $ 100,000 $ 100,000              
Debt instrument, interest rate       15.00% 18.00%              
Debt maturity date       Mar. 31, 2020 Aug. 02, 2019              
Description on maturity date         The Lobo Note matured on August 2, 2019 and was extended through December 2, 2019 on the same terms and conditions.              
Extended maturity date         Dec. 02, 2019              
Number of shares pledged to secure company's obligation         1,000,000              
Four Month Unsecured Promissory Notes [Member] | Lobo Holdings, LLC [Member] | Subsequent Event [Member]                        
Debt instrument, principal amount                   $ 100,000    
Debt instrument, interest rate                   10.00%    
Four Month Unsecured Promissory Notes [Member] | John Keeler [Member]                        
Number of shares pledged to secure company's obligation             4,000,000          
Five Year Unsecured Promissory Note [Member] | Walter Lubkin Jr [Member]                        
Debt EBITDA covenant     $ 25,000                  
EBITDA covenant, description     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.                  
Debt instrument, principal amount     $ 500,000                
Debt instrument, interest rate     4.00%                  
Thirty-Nine Month Unsecured Promissory Note [Member] | Walter Lubkin III [Member]                        
Debt instrument, principal amount     $ 87,842                
Debt instrument, interest rate     4.00%                  
Debt instrument, description     The note is payable in equal quarterly payments over six quarters beginning August 26, 2021.                  
Conversion rate     200.00%                  
Thirty-Nine Month Unsecured Promissory Note [Member] | Tracy Greco [Member]                        
Debt instrument, principal amount     $ 71,372                
Debt instrument, interest rate     4.00%                  
Debt instrument, description     The note is payable in equal quarterly payments over six quarters beginning August 26, 2021.                  
Conversion rate     200.00%                  
Thirty-Nine Month Unsecured Promissory Note [Member] | John Lubkin [Member]                        
Debt instrument, principal amount     $ 50,786                
Debt instrument, interest rate     4.00%                  
Debt instrument, description     The note is payable in equal quarterly payments over six quarters beginning August 26, 2021.                  
Conversion rate     200.00%                  
ACF Finco I, LP [Member]                        
Revolving line of credit                       $ 14,000,000
Repayment of new loan               $ 309,000        
ACF Finco I, LP [Member] | London Interbank Offered Rate (LIBOR) [Member]                        
Line of credit, interest rate               9.25%        
ACF Finco I, LP [Member] | Prime Rate [Member]                        
Line of credit, interest rate               6.00%        
ACF Finco I, LP [Member] | Fixed Rate [Member]                        
Line of credit, interest rate               6.50%        
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.20.2
Common Stock (Details Narrative) - USD ($)
3 Months Ended
Jan. 23, 2020
Mar. 31, 2020
Mar. 31, 2019
Issuance of dividend   $ 0
Series A Preferred Stock [Member]      
Issuance of dividend shares 14,130
Issuance of dividend $ 28,259
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.20.2
Options (Details Narrative)
3 Months Ended
Mar. 31, 2020
shares
Share-based Payment Arrangement [Abstract]  
Number of stock option granted
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.20.2
Options - Schedule of Stock Option Activity (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
shares
Share-based Payment Arrangement [Abstract]  
Number of Option, Outstanding beginning 3,810,000
Number of Option, Exercisable beginning 3,120,000
Number of Option, Granted
Number of Option, Forfeited
Number of Option, Vested 3,280,000
Number of Option, Outstanding ending 3,810,000
Number of Option, Exercisable ending 3,280,000
Weighted Average Exercise Price, Outstanding beginning | $ / shares $ 2.00
Weighted Average Exercise Price, Exercisable beginning | $ / shares 2.00
Weighted Average Exercise Price, Granted | $ / shares
Weighted Average Exercise Price, Forfeited | $ / shares
Weighted Average Exercise Price, Outstanding ending | $ / shares 2.00
Weighted Average Exercise Price, Exercisable ending | $ / shares $ 2.00
Weighted Average Remaining Contractual Life in Years, Outstanding beginning 8 years 10 months 10 days
Weighted Average Remaining Contractual Life in Years, Exercisable beginning 8 years 10 months 10 days
Weighted Average Remaining Contractual Life in Years, Outstanding ending 8 years 7 months 24 days
Weighted Average Remaining Contractual Life in Years, Exercisable ending 8 years 7 months 13 days
Aggregate Intrinsic value, Exercisable beginning | $
Aggregate Intrinsic value, Exercisable ending | $
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.20.2
Warrants (Details Narrative)
3 Months Ended
Mar. 31, 2020
shares
Warrants and Rights Note Disclosure [Abstract]  
Number of warrants granted
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.20.2
Warrants - Schedule of Warrant Activity (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
shares
Warrants and Rights Note Disclosure [Abstract]  
Number of Shares, Warrants Outstanding Beginning | shares 353,250
Number of Shares, Warrants Exercisable Beginning | shares 353,250
Number of Shares, Warrants Granted | shares
Number of Shares, Warrants Forfeited or Expired | shares
Number of Shares, Warrants Outstanding Ending | shares 353,250
Number of Shares, Warrants Exercisable Ending | shares 353,250
Weighted Average Exercise Price Outstanding Beginning | $ / shares $ 2.40
Weighted Average Exercise Price Exercisable Beginning | $ / shares 2.40
Weighted Average Exercise Price Granted | $ / shares
Weighted Average Exercise Price Forfeited or Expired | $ / shares
Weighted Average Exercise Price Outstanding Ending | $ / shares 2.40
Weighted Average Exercise Price Exercisable Ending | $ / shares $ 2.40
Weighted Average Remaining Contractual Life Warrants Outstanding, Beginning 1 year 10 months 6 days
Weighted Average Remaining Contractual Life Warrants Exercisable, Beginning 1 year 10 months 6 days
Weighted Average Remaining Contractual Life Warrants Outstanding, Ending 1 year 7 months 10 days
Aggregate Intrinsic Value Exercisable, Beginning | $
Aggregate Intrinsic Value Exercisable, Ending | $
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.20.2
Commitment and Contingencies (Details Narrative)
3 Months Ended
Mar. 31, 2020
USD ($)
ft²
Mar. 31, 2019
USD ($)
Lease term 20 years  
Lease expiration Jul. 31, 2021  
Mortgage amount $ 1,259,300  
Rental and equipment lease expenses $ 63,500 $ 58,500
Coastal Pride Seafood, LLC. [Member]    
Lease term 6 years  
Area of land | ft² 3,000  
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events (Details Narrative) - USD ($)
3 Months Ended
May 27, 2020
May 21, 2020
May 07, 2020
Apr. 17, 2020
Jan. 23, 2020
Mar. 26, 2019
Mar. 31, 2020
Mar. 31, 2019
Apr. 02, 2020
Apr. 01, 2020
Nov. 15, 2019
Loan interest rate             10.83%        
Issuance of dividend             $ 0      
Series A Preferred Stock [Member]                      
Issuance of common stock, shares                    
Issuance of dividend shares         14,130        
Issuance of dividend         $ 28,259        
Four Month Unsecured Promissory Notes [Member] | John Keeler [Member]                      
Number of shares pledged to secure company's obligation           4,000,000          
Lobo Holdings, LLC [Member] | Six-Month Promissory Note [Member]                      
Notes payable                     $ 100,000
Subsequent Event [Member] | Series A Preferred Stock [Member]                      
Issuance of dividend shares 14,130                    
Issuance of dividend $ 28,261                    
Subsequent Event [Member] | Accredited Investors [Member]                      
Number of shares sold, shares 5,000                    
Number of shares sold $ 10,000                    
Subsequent Event [Member] | Kenar Overseas Corp [Member]                      
Description on maturity date   The Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender's sole option)                  
Debt maturity date   Mar. 31, 2021                  
Extended maturity date   Sep. 30, 2021                  
Debt instrument description   The Kenar Note was amended to (i) set the maturity date at March 31, 2021 (unless extended to September 30, 2021 at the Lender's sole option), (ii) provide that the Company use one-third of any capital raise from the sale of its equity to reduce the outstanding principal under the Kenar Note, (iii) set the interest rate at 18% per annum, payable monthly commencing October 1, 2020, and (iv) to reduce the number of pledged shares by Mr. Keeler to 4,000,000.                  
Debt instrument, interest rate   18.00%                  
Issuance of common stock, shares 1,021,266                    
Subsequent Event [Member] | Lobo Holdings, LLC [Member] | Four Month Unsecured Promissory Notes [Member]                      
Debt instrument, interest rate                 10.00%    
Debt instrument, principal amount                 $ 100,000    
Subsequent Event [Member] | Lobo Holdings, LLC [Member] | Six-Month Promissory Note [Member]                      
Debt instrument, interest rate                   10.00%  
Debt instrument, principal amount                   $ 100,000  
Subsequent Event [Member] | Eighth Amendment to the Ares Loan and Security Agreement [Member]                      
Advance rate     3.00%                
Subsequent Event [Member] | US Century Bank [Member]                      
Unsecured note       $ 344,762              
Loan interest rate       1.00%              
Maturity terms       2 years              
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