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EX-32.2 - Blue Star Foods Corp.ex32-2.htm
EX-32.1 - Blue Star Foods Corp.ex32-1.htm
EX-31.2 - Blue Star Foods Corp.ex31-2.htm
EX-31.1 - Blue Star Foods Corp.ex31-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended: June 30, 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 August 12, 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 JUNE 30, 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 17
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
     
Item 4. Controls and Procedures 22
     
PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 23
     
Item 1A. Risk Factors 23
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
     
Item 3. Defaults Upon Senior Securities 24
     
Item 4. Mine Safety Disclosures 24
     
Item 5. Other Information 24
     
Item 6. Exhibits 24
     
SIGNATURES 25

 

2
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

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

 

   JUNE 30, 2020   DECEMBER 31, 2019 
   Unaudited     
ASSETS          
           
CURRENT ASSETS          
Cash (including VIE $8,421 and $8,725, respectively)  $14,398   $153,904 
Restricted Cash   38,315    41,906 
Accounts receivable, net (including VIE $32,946 and $20,321, respectively)   1,331,022    2,071,363 
Inventory, net (including VIE $56,871 and $95,441, respectively)   3,467,086    7,984,492 
Advances to related party   1,304,873    1,285,935 
Other current assets (including VIE $2,460 and $3,679, respectively)   217,147    242,700 
Total current assets   6,372,841    11,780,300 
FIXED ASSETS, net   90,840    61,908 
RIGHT OF USE ASSET   1,146,927    1,206,931 
INTANGIBLE ASSETS, net          
Trademarks   816,946    845,278 
Customer Relationships   1,193,909    1,241,667 
Non-Compete Agreements   34,169    39,167 
Goodwill   445,395    445,395 
Total Intangible Assets   2,490,419    2,571,507 
OTHER ASSETS   135,080    125,418 
TOTAL ASSETS  $10,236,107   $15,746,064 
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES          
Accounts payable and accruals (including VIE ($71,885) and $30,649, respectively)  $2,820,693   $3,528,466 
Working capital line of credit   3,364,014    6,917,968 
Current Maturities of Long Term Debt (including VIE $777 and $0, respectively)   155,993    - 
Current maturities of Lease Liabilities   165,971    136,952 
Current maturities of Related Party Long Term Notes   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   10,489,307    14,566,386 
LONG -TERM LIABILITY          
Long-Term Lease Liability   1,009,851    1,089,390 
Long-Term Debt (including VIE $43,011 and $0, respectively)   232,557    - 
Related Party Long-Term Notes   610,000    610,000 
TOTAL LIABILITIES   12,341,715    16,265,776 
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 June 30, 2020 and December 31, 2019   -    - 
Common stock, $0.0001 par value, 100,000,000 shares authorized; 18,642,388 shares issued and outstanding (including 14,130 shares declared as stock dividend on March 31, 2020 and 12,287 shares declared as a stock dividend on June 30, 2020) as of June 30,2020 and 17,589,705 shares issued and outstanding (including 14,130 shares declared as stock dividend on September 30, 2019 and 14,130 shares declared as a stock dividend on December 31, 2019) as of December 31, 2019   1,866    1,761 
Additional paid-in capital   11,580,420    8,789,021 
Accumulated deficit   (13,361,143)   (8,952,466)
Total Blue Star Foods Corp. Stockholders’ deficit   (1,778,857)   (161,684)
Non-controlling interest   (468,673)   (476,250)
Accumulated other comprehensive income (VIE)   141,922    118,222 
Total VIE’s deficit   (326,751)   (358,028)
TOTAL STOCKHOLDERS’ DEFICIT   (2,105,608)   (519,712)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $10,236,107   $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 INCOME (LOSS)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

 

   Three months ended   Six months ended 
   (unaudited)   (unaudited) 
   2020   2019   2020   2019 
REVENUE, NET  $2,865,103   $7,532,474   $7,436,717   $14,043,248 
COST OF REVENUE   2,882,541    6,421,144    7,030,939    12,022,058 
GROSS PROFIT   (17,438)   1,111,330    405,778    2,021,190 
                     
COMMISSIONS   25,534    19,851    92,363    38,661 
SALARIES & WAGES   241,072    1,121,792    650,253    2,238,540 
OTHER OPERATING EXPENSES   311,944    665,206    836,142    1,440,612 
LOSS FROM OPERATIONS   (595,988)   (695,519)   (1,172,980)   (1,696,623)
                     
OTHER EXPENSE   (2,655,292)   -    (2,655,292)   - 
INTEREST EXPENSE   (239,653)   (257,277)   (516,308)   (495,470)
NET LOSS   (3,490,933)   (952,796)   (4,344,580)   (2,192,093)
LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST   10,817    42,499    7,577    23,231 
NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(3,501,750)  $(995,295)  $(4,352,157)  $(2,215,324)
DIVIDEND ON PREFERRED STOCK   28,261    28,260    56,520    56,520 
NET LOSS ATTRIBUABLE TO BLUE STAR FOODS CORP COMMON SHAREHOLDERS  $(3,530,011)   (1,023,555)  $(4,408,677)  $(2,271,844)
COMPREHENSIVE INCOME (LOSS):                    
TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST   9,094    6,965    23,700    (46,855)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST  $19,911   $49,464   $31,277   $(23,654)
COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(3,501,750)  $(995,295)  $(4,352,157)  $(2,215,324)
Loss per basic and diluted common share:                    
Basic net loss per common share   $ (0.20 )   $ (0.06 )   $ (0.24 )   $ (0.14 )
Basic weighted average common shares outstanding     17,822,158       16,045,616       18,054,611       16,045,616  
Fully diluted net loss per common share   $ (0.20 )   $ (0.06 )   $ (0.24 )   $ (0.14 )
Fully diluted weighted average common shares outstanding     17,822,158       16,045,616       18,054,611       16,045,616  

 

The accompanying notes are an integral part of these financial statements

 

5
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

 

  

Series A

Pref Stock $.0001 par value

   Common Stock $.0001 par value   Additional Paid-in   Accumulated   Total Blue Star Foods Corp. Stockholders’   Non-Controlling   Total Stockholders’ 
   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)   -    -    - 
Net Loss             -    -    -    (850,407)   (850,407)   (3,240)   (853,647)
Comprehensive income             -    -    -    -    -    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)
Stock Based Compensation             -    -    34,846    -    34,846    -    34,846 
Common stock issued for Cash             5,000    1    9,999    -    10,000    -    10,000 
Common stock issued to a related party lender             1,021,266    102    2,655,190    -    2,655,292    -    2,655,292 
Series A Preferred 8% dividend issued in common stock             12,287    1    28,260    (28,261)   -    -    - 
Net Income (Loss)             -    -    -    (3,501,750)   (3,501,750)   10,817    (3,490,933)
Comprehensive Income             -    -    -    -    -    9,094    9,094 
June 30, 2020   1,413   $-    18,642,388   $1,866   $11,580,420   $(13,361,143)  $(1,778,857)  $(326,751)  $(2,105,608)

 

   Series A Pref Stock $.0001 par value   Common Stock $.0001 par value   Additional Paid-in   Accumulated   Total Blue Star Foods Corp. Stockholders’   Non-Controlling   Total Stockholders’  
   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)
Common stock issued for Service             22,500    3    44,997    -    45,000    -    45,000 
Common stock issued for Cash             11,000    1    21,999    -    22,000    -    22,000 
Common Stock Incentive Issued to Employees             5,500    1    10,999    -    11,000    -    11,000 
Option Expense             -    -    670,966    -    670,966    -    670,966 
Dividends to preferred stockholders             14,130    1    28,259    (28,260)   -    -    - 
Net Loss             -    -    -    (995,295)   (995,295)   42,499    (952,796)
Comprehensive Income             -    -    -    -    -    6,965    6,965 
June 30, 2019   1,413   $-    16,095,424   $1,612   $4,885,279   $(6,124,983)  $(1,238,092)  $(396,406)  $(1,634,498)

 

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

 

6
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30,

 

   Unaudited 
   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(4,344,580)  $(2,192,093)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock based compensation   69,692    1,346,994 
Common stock issued for service   -    45,000 
Common stock issued for forbearance fee   2,655,292    - 
Depreciation of fixed assets   18,247    34,010 
Amortization of Right of use asset   87,308    74,935 
Amortization of intangible assets   81,088    - 
Amortization of loan costs   51,977    72,325 
Deferred Taxes   8,361    - 
Bad debt expense   13,474    - 
Allowance for inventory obsolescence   370,203    - 
Changes in operating assets and liabilities:          
Receivables   726,867    516,279 
Inventories   4,147,203    2,830,850 
Advances to affiliated supplier   (18,938)   30,604 
Other current assets   25,553    (9,499)
Change in Right of use Liability   (77,824)   (65,231)
Accounts payable and accruals   (708,137)   (1,374,434)
Net cash provided by operating activities   3,105,786    1,309,740 
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of fixed assets   (47,179)   (8,786)
Net cash used in investing activities   (47,179)   (8,786)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from Common Stock Offering   10,000    32,000 
Proceeds from working capital lines of credit   3,223,081    11,571,080 
Repayments of working capital lines of credit   (6,777,035)   (14,138,324)
Proceeds from Related Party Notes Payable   -    1,100,000 
Proceeds from Notes Payable   388,550    - 
Principal payments of long-term debt   -    (15,630)
Payments of Loan costs   (70,000)   (10,000)
Net cash used in financing activities   (3,225,404)   (1,460,874)
Effect of exchange rate changes on cash   23,700    (46,885)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   (143,097)   (206,805)
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD   195,810    347,226 
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD  $52,713   $140,421 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY          
Series A 8% Dividend issued in Common Stock   56,520    56,520 
Valuation of Right of Use asset/liability   28,137    1,257,751 
           
Supplemental Disclosure of Cash Flow Information          
Cash paid for interest  $516,308   $494,596 

 

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”).

 

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.

 

   Six Months Ending
June 30, 2019
 
Revenue  $19,577,658 
Net loss attributable to common shareholders  $(2,641,503)
Basic and diluted loss per share  $(0.13)
Basic and diluted weighted average common shares outstanding   16,045,616 

 

8
 

 

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

 

Basis of Presentation

 

The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The 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 June 30, 2020 and December 31, 2019, the balance due from the related party for future shipments was approximately $1,304,900 and $1,285,900, respectively. The 2020 balances represent approximately seven months of purchases from the supplier. Cost of revenue related to inventories purchased from Bacolod represented approximately $530,100 and $4,818,000 of total cost of revenue for the six months ending June 30, 2020 and 2019, respectively.

 

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 June 30, 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.

 

10
 

 

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

 

  

June 30,

2020

 
Assets     
Operating lease assets  $1,146,927 
      
Liabilities     
Current   
Operating lease liabilities  $

165,971

 
Noncurrent     
Operating lease liabilities  $1,009,851 

 

Supplemental cash flow information related to leases were as follows:

 

  

Six Months Ended

June 30, 2020

 
     
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows from operating leases  $77,824 
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.

 

    June 30, 2020  
Weighted-average remaining lease term     
Operating leases   5.57 years 
Weighted-average discount rate     
Operating leases   5.4 %

 

Maturities of lease liabilities as of June 30, 2020, were as follows:

 

   Operating Leases 
     
2020 (six months remaining)   111,651 
2021   235,227 
2022   247,152 
2023   243,321 
2024   235,203 
Thereafter   336,932 
Total lease payments   1,409,486 
Less: amount of lease payments representing interest   (233,664)
Present value of future minimum lease payments  $1,175,822 
Less: current obligations under leases  $(165,971)
Non-current obligations  $1,009,851 

 

11
 

 

Note 3. Going Concern

 

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the six months ended June 30, 2020, the Company incurred a net loss of $4,344,580, has an accumulated deficit of $13,361,143 and working capital deficit of $4,116,466, with the current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the working capital facility, and $165,971 in the current portion of the lease liability recognition. These circumstances raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, execute on its business plan to acquire complimentary companies, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Note 4. Consolidation of Variable Interest Entities

 

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

 

The information below represents the assets, liabilities and non-controlling interest related to Strike as of June 30, 2020 and December 31, 2019.

 

   June 30, 2020 
Assets  $100,698 
Liabilities   (28,097)
Non-controlling interest   (468,673)

 

   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, November 26, 2019 and May 7, 2020.

 

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.

 

12
 

 

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.

 

On May 7, 2020, the Company entered into an eighth amendment to the loan and security agreement with ACF which amendment acknowledged the execution of a Payroll Protection Program loan, provided a reservation of rights related to a default of the minimum EBITDA covenant, and triggered the default interest rate of an additional 3% in accordance with the loan and security agreement dated August 31, 2016.

 

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

 

As of June 30, 2020, the line of credit bears interest rate of 12.60%.

 

As of June 30, 2020 and December 31, 2019, the line of credit had an outstanding balance of approximately $3,364,014 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 June 30, 2020 and December 31, 2019. These notes are payable on demand, bear an annual interest rate of 6% and are subordinated to the ACF working capital line of credit. Principal payments are not allowed under the subordination agreement with ACF that was effective August 31, 2016. No principal payments were made by the Company during the six months ended June 30, 2020 or the twelve months ended December 31, 2019.

 

Kenar Note

 

On March 26, 2019, the Company issued a four-month unsecured 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 for Kenar’s agreement to amend the note, on May 27, 2020, the Company issued 1,021,266 shares of its common stock to Kenar. As of the amendment date the common stock had a value of $2,655,292. The principal amount of the note at June 30, 2020 was $872,500.

 

The amendment to the Kenar note was analyzed under ASC470-50 and was determined that it will be accounted for as an extinguishment of the old debt and the new debt recorded at fair value with the new effective interest rate of 18%. Additionally, this treatment resulted in the cost of the modification paid in common stock with a value of $2,655,292 will be charged to other expense as of the date of the amendment.

 

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 six-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. This note matures on October 1, 2020.

 

13
 

 

Walter Lubkin Jr. Note - Subordinated

 

On November 26, 2019, the Company issued a five year unsecured promissory note in the principal amount of $500,000 to Walter Lubkin Jr. as part of the purchase price for the Coastal Pride acquisition. The note bears interest at the rate of 4% per annum and is payable quarterly in an amount equal to the lesser of (i) $25,000 or (ii) 25% of the EBITDA of Coastal Pride, as determined on the first day of each quarter. The first payment was scheduled for February 26, 2020, however, the EBITDA generated for Coastal 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 six months ending June 30, 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 six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 2020.

 

Payroll Protection Program Loan

 

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

 

The amortization of the note is as follows:

 

   Note Payments 
2020 (6 months remaining)  $38,802 
2021   232,812 
2022   73,148 
Total Loan payments  $344,762 
Current portion of note payable   (155,216)
Non-current portion of note payable  $189,546 

 

HSBC Loan

 

On May 13, 2020, the Company through Strike the Gold Foods issued an unsecured promissory note to HSBC Bank plc in the principal amount of $43,788 related to the Bounce Back Loan Scheme, managed by the British Business Bank. This note is fully guaranteed by the UK Secretary of State for Business, Energy and Industrial Strategy. The note has a six year maturity and accrues interest at 2.5% per annum. The Company is required to make payments on the note of $778 per month for 59 months beginning June 13, 2021.

 

The amortization of the note is as follows:

 

   Note payments 
2020 (6 months remaining)  $- 
2021   5,446 
2022   9,336 
2023   9,336 
2024   9,336 
Thereafter   10,334 
Total Loan payments  $43,788 
Current portion of note payable   (777)
Non-current portion of note payable  $43,011 

 

Note 6. Common Stock

 

On May 27, 2020 the Company sold 5,000 shares at $2.00 per share to one investor in a private offering.

 

On May 27, 2020 the Company issued 1,021,266 shares issued to Kenar Holdings at $2.60 per share as payment of a forbearance fee.

 

A dividend of common stock was authorized to the shareholders per the preferred shares designation on March 31, 2020. The dividend of 14,130 shares of stock with a value of $28,261 was declared but not yet issued.

 

A dividend of common stock was authorized to the shareholders per the preferred shares designation on June 30, 2020. The dividend of 12,287 shares of stock with a value of $28,260 was declared but not yet issued.

 

14
 

 

Note 7. Options

 

The following Table represents option activity for the six months ended June 30, 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    8.90      
Exercisable - December 31, 2019   3,120,000   $2.00    8.90   $- 
Granted   -   $-           
Forfeited   -   $-           
Vested   3,280,000                
Outstanding – June 30, 2020   3,810,000   $2.00    8.40      
Exercisable – June 30, 2020   3,280,000   $2.00    8.40   $984,000 

 

There was no option activity for the six months ending June 30, 2020.

 

Note 8. Warrants

 

The following table represents warrant activity for the six month period ended June 30, 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 – June 30, 2020   353,250   $2.40    1.36      
Exercisable – June 30, 2020   353,250   $2.40    1.36   $- 

 

There was no warrant activity for the six months ending June 30, 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 $1,253,138 at June 30, 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.

 

15
 

 

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 $125,000 and $117,800 for the six months ended June 30, 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 effect 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.

 

 16 
   

 

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 filed with the SEC on May 29, 2020, 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.”);

 

(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.

 

17
 

 

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 has adversely effected our business operations, including disruptions and restrictions on our ability to travel or to distribute our seafood products, as well as temporary closures of our facilities. Any such disruption or delay may impact our sales and operating results. In addition, COVID-19 has resulted in a widespread health crisis that 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 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.

 

Results of Operations

 

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

 

Three months ended June 30, 2020 and 2019

 

Net Revenue. Revenue for the three months ended June 30, 2020 decreased 62.0% to $2,865,103 as compared to $7,532,474 for the three months ended June 30, 2019 as a result of a decrease in poundage sold due to the impact of the COVID-19 pandemic, a reduction in the average selling price of product due to competitive pricing pressures and the Company’s decision to phase out private label business during the second half of 2019.

 

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Cost of Goods Sold. Cost of goods sold for the three months ended June 30, 2020 decreased to $2,882,541 as compared to $6,421,144 for the three months ended June 30, 2019. The decrease is attributable to the revenue decline.

 

Gross Profit. Gross profit margin for the three months ended June 30, 2020 decreased $1,128,768 as compared to the three months ended June 30, 2019. This decrease is directly attributable to a reduction in overall revenue due to the COVID-19 pandemic as well as 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 Expense. Commissions expense increased from $19,851 for the three months ended June 30, 2019 to $25,534 for the three months ended June 30, 2020. This increase is directly attributable to the acquisition of Coastal Pride and its reliance on commissioned sales. Coastal Pride commissions accounted for $23,266 of the total expense for the three months ended June 30, 2020.

 

Salaries and Wages Expense. Salaries and wages expense decreased $880,720, or 78.5% for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. This decrease can be attributed to a decrease in the non-cash expenses related to stock-based compensation of $636,120 as well as a strategic reduction in salaries of $250,560 for the three months ended June 30, 2020.

 

Other Operating Expense. Other operating expense decreased by 53.1% from $665,206 for the three months ended June 30, 2019 to $311,944 for the three months ended June 30, 2020. The decrease is attributable the Company’s overhead reduction efforts in all fixed expenses related to its operations to adjust for the reduction in sales due to COVID.

 

Other Expenses. Other expenses increased by $2,655,292 for the three months ended June 30, 2020 from $0 for the three months ending June 30, 2019. This is a one-time, non-cash expense related to the issuance of common stock for a forbearance fee.

 

Interest Expense. Interest expense decreased from $257,277 for the three months ended June 30, 2019 to $239,653 for the three months ended June 30, 2020. The reduction is attributable to a decrease in the average loans outstanding decreasing from $11,155,228 for the three months ending June 30, 2019 to $9,994,866 for the three months ending June 30, 2020.

 

Net Loss: The Company had a net loss of $3,490,933 for the three months ended June 30, 2020 as compared to a net loss of $952,796 for the three months ended June 30, 2019. The increase in net loss is primarily attributable to non-cash other expense related to the forbearance fee of $2,655,292 during the three months ending June 30 2020.

 

Six months ended June 30, 2020 and 2019

 

Net Revenue. Revenue for the six months ended June 30, 2020 decreased 47.0% to $7,436,717 as compared to $14,043,248 for the six months ended June 30, 2019 as a result of a decrease in poundage sold due to the impact of the COVID-19 pandemic during the three months ending June 30, 2020. This is combined with a reduction in the average selling price per unit and the company’s decision to phase out private label business which began in earnest during the second half of 2019.

 

Cost of Goods Sold. Cost of goods sold for the six months ended June 30, 2020 decreased to $7,030,939 as compared to $12,022,058 for the six months ended June 30, 2020. The decrease is attributable to the revenue decline.

 

Gross Profit. Gross profit margin for the six months ended June 30, 2020 decreased $1,615,412 as compared to the six months ended June 30, 2019. This decrease is directly attributable to a reduction in pounds sold due to the COVID-19 pandemic, the reduction in average 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 Expense. Commissions expense increased from $38,661 for the six months ended June 30, 2019 to $92,363 for the six months ended June 30, 2020. This increase is directly attributable to the acquisition of Coastal Pride and its reliance on commissioned sales. Coastal Pride commissions accounted for $83,901 of the total expense for the six months ended June 30, 2020.

 

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Salaries and Wages Expense. Salaries and wages expense decreased $1,588,287, or 71.0% for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. This decrease is be attributable to a decrease in the non-cash expenses related to stock-based compensation of $1,277,302 as well as a strategic reduction in salaries of $310,985 for the six months ended June 30, 2020.

 

Other Operating Expense. Other operating expense decreased by 42.0% from $1,440,612 for the six months ended June 30, 2019 to $836,142 for the six months ended June 30, 2020. The decrease is attributable to a reduction in professional fees, Trade show expenses and marketing expenses as well as the Company’s overhead reduction efforts in all fixed expenses related to its operations.

 

Other Expenses. Other expenses increased by $2,655,292 for the six months ending June 30, 2020 from $0 for the six months ending June 30, 2019. This is a one-time, non-cash expense related to the issuance of common stock for a forbearance fee.

 

Interest Expense. Interest expense increased from $495,470 for the six months ended June 30, 2019 to $516,308 for the six months ended June 30, 2020. This increase is solely attributable to the average cost of borrowed funds increasing from 9.48% for the six months ended June 30, 2019 to 10.40% for the six months ended June 30, 2020. Average funds borrowed for six months ended June 30, 2020 were $9,928,084 as compared to $10,403,654 for the six months ended June 30, 2019.

 

Net Loss: The Company had a net loss of $4,344,580 for the six months ended June 30, 2020 as compared to a net loss of $2,192,093 for the six months ended June 30, 2019. The increase in net loss is primarily attributable to non-cash other expense related to the forbearance fee of $2,655,292 during the six months ending June 30 2020. Not considering this expense the net loss would have decreased from $2,192,093 for the six months ending June 30, 2019 to $1,689,288 for the six months ended June 30, 2020. This decrease in net loss is attributable to a decrease in non-cash stock compensation expense from $1,346,994 for the six months ended June 30, 2019 to $69,692 for the six months ended June 30, 2020.

 

Liquidity and Capital Resources

 

The Company had cash of $52,713 as of June 30, 2020, of which $38,315 was restricted cash. At June 30, 2020, the Company had a working capital deficit of $4,116,466 including $2,910,136 in stockholder loans that are subordinated to ACF. The Company’s primary sources of liquidity consisted of inventory of $3,467,086 and accounts receivable of $1,331,022.

 

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 June 30, 2020, the line of credit bears interest at the rate of 12.60%.

 

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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 June 30, 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%, 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 issued an unsecured promissory note to US Century Bank in the principal amount of $344,762 related to the CARES Act Payroll Protection Program (“PPP Loan”). The note accrues interest at 1% per annum, matures two years from the date of issuance and is fully guaranteed by the Small Business Administration and may be forgiven provided certain criteria are met. The Company is required to make monthly payments of approximately $19,401 beginning November 17, 2020.

 

HSBC Loan

 

On May 13, 2020, the Company, through its VIE, Strike the Gold Foods Ltd. issued an unsecured promissory note to HSBC Bank plc in the principal amount of $43,788 related to the Bounce Back Loan Scheme, managed by the British Business Bank. The note is fully guaranteed by the UK Secretary of State for Business, Energy and Industrial Strategy, has a six year maturity and accrues interest at the rate of 2.5% per annum. The Company is required to make payments on the note of $778 per month for 59 months beginning June 13, 2021.

 

Cash Provided by Operating Activities. Cash provided by operating activities during the six months ended June 30, 2020 was $3,105,786 as compared to cash provided by operating activities of $1,309,740 for the six months ended June 30, 2019. The increase is attributable to a reduction in inventory of $4,147,203 for the six months ended June 30, 2020 which was offset by decreased accounts payable balances of $708,137 for the six months ended June 30, 2020.

 

Cash Utilized for Investing Activities. Cash used for investing activities for the six months ended June 30, 2020 was $47,179 as compared to $8,786 used for investing activities for the six months ended June 30, 2019.

 

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Cash utilized in Financing Activities. Cash utilized in financing activities for the six months ended June 30, 2020 was $3,225,404 as compared to cash utilized from financing activities of $1,460,874 for the six months ended June 30, 2019. Reduction of the Company’s revolving working capital line of credit utilized $3,553,954 and was partially offset by the funding of the PPP and HSBC loans of $388,550 for the six ending June 30, 2020. This is compared to cash utilized by the working capital line of credit of $2,567,244 offset by $1,100,000 generated from related party notes for the six months ended June 30, 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 June 30, 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.

 

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:

 

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● 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.

 

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

 

● We plan to 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.

 

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 May 27, 2020, as consideration for Kenar agreement to amend the Kenar Note, the Company issued 1,021,266 shares of common stock to Kenar.

 

On May 27, 2020, an aggregate of 28,260 shares of common stock were issued to Series A Preferred stockholders as a common stock dividend for the quarters ending September 30, 2019 and December 31, 2019.

 

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

 

On May 27, 2020, the Company issued 18,000 shares of common stock to Luis Matos Arreaza for professional services provided to the Company. This issuance was accounted for during the twelve months ending December 31, 2019.

 

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

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

Exhibit

No.

 

SEC Report

Reference No.

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

 

* Filed herewith

 

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SIGNATURES

 

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

 

  BLUE STAR FOODS CORP.
     
Dated: August 12, 2020 By: /s/ John Keeler
  Name: John Keeler
  Title:

Executive Chairman and Chief Executive Officer

(Principal Executive Officer)

     
Dated: August 12, 2020 By: /s/ John Keeler
  Name: John Keeler
  Title: Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

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