Blue Star Foods Corp. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Blue Star Foods Corp. Index to Audited Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 206 ) F-1 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-2 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020 F-3 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and 2020 F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 F-5 Notes to Consolidated Financial Statements F-6 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Blue Star Foods Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Blue Star Foods Corp. and its subsidiaries (collectively, the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern Matter The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ MaloneBailey, LLP www.malonebailey.com We have served as the Company’s auditor since 2014. Houston, Texas March 31, 2022 F- 1 Blue Star Foods Corp. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2021 DECEMBER 31, 2020 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,155,513 $ 55,644 Restricted cash - 282,043 Accounts receivable, net 1,231,181 1,082,468 Inventory, net 2,119,441 1,832,661 Advances to related party 1,422,750 1,299,984 Other current assets 3,702,661 176,925 Total Current Assets 9,631,546 4,729,725 RELATED PARTY LONG-TERM RECEIVABLE 455,545 455,545 FIXED ASSETS, net 1,904,403 20,064 RIGHT OF USE ASSET 71,128 99,472 INTANGIBLE ASSETS, net Trademarks 1,125,074 788,614 Customer relationships 2,082,757 1,145,831 Non-compete agreements 104,927 29,171 Total Intangible Assets 3,312,758 1,963,616 GOODWILL 445,395 445,395 OTHER ASSETS 124,634 108,088 TOTAL ASSETS $ 15,945,409 $ 7,821,905 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable and accruals $ 1,794,223 $ 1,607,490 Working capital line of credit 2,368,200 1,805,907 Deferred income 109,414 - Current maturities of lease liabilities 30,583 29,337 Current maturities of related party long-term notes 475,000 195,000 Related party notes payable - 972,500 Related party notes payable - subordinated 960,000 1,299,712 Other current liabilities 1,054,649 1,346,838 Total Current Liabilities 6,792,069 7,256,784 LONG-TERM LIABILITIES Long-term lease liability 40,109 69,844 Long-term debt 31,263 - Related party long-term notes 175,000 515,000 TOTAL LIABILITIES 7,038,441 7,841,628 STOCKHOLDERS’ EQUITY (DEFICIT) Series A 8 % cumulative convertible preferred stock, $ 0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of December 31, 2021, and 1,413 shares issued and outstanding as of December 31, 2020 - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 24,671,318 shares issued and outstanding as of December 31, 2021, and 19,580,721 shares issued and outstanding as of December 31, 2020 2,480 1,958 Additional paid-in capital 25,102,879 13,488,836 Accumulated other comprehensive loss ( 54,240 ) - Accumulated deficit ( 16,144,151 ) ( 13,510,517 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 8,906,968 ( 19,723 ) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 15,945,409 $ 7,821,905 The accompanying notes are an integral part of these consolidated financial statements F- 2 Blue Star Foods Corp. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS YEARS ENDED DECEMBER 31, 2021 2020 REVENUE, NET $ 9,973,264 $ 14,111,368 COST OF REVENUE 7,979,830 12,623,576 GROSS PROFIT 1,993,434 1,487,792 COMMISSIONS 42,332 96,594 SALARIES AND WAGES 1,827,607 1,286,879 DEPRECIATION AND AMORTIZATION 384,963 268,341 IMPAIRMENT LOSS 374,300 - OTHER OPERATING EXPENSES 2,147,873 1,639,484 LOSS FROM OPERATIONS ( 2,783,641 ) ( 1,803,506 ) OTHER INCOME 498,791 891,667 FORBEARANCE FEE EXPENSE (NON-CASH) - ( 2,655,292 ) INTEREST EXPENSE ( 320,524 ) ( 870,303 ) NET LOSS ( 2,605,374 ) ( 4,437,434 ) LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST - 7,577 NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. $ ( 2,605,374 ) $ ( 4,445,011 ) DIVIDEND ON PREFERRED STOCK 28,260 113,040 NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. COMMON STOCKHOLDERS $ ( 2,633,634 ) $ ( 4,558,051 ) COMPREHENSIVE LOSS: CHANGE IN FOREIGN CURRENCY TRANSLATION ADJUSTMENT ( 54,240 ) - TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST - 23,700 COMPREHENSIVE (LOSS) INCOME ( 54,240 ) 31,277 COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. $ ( 2,659,614 ) $ ( 4,445,011 ) Loss per common share: Net loss per common share - basic and diluted $ ( 0.12 ) $ ( 0.25 ) Weighted average common shares outstanding - basic and diluted 21,708,576 18,257,491 The accompanying notes are an integral part of these consolidated financial statements F- 3 Blue Star Foods Corp. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) YEAR ENDED DECEMBER 31, 2021 Shares Amount Shares Amount in Capital Deficit Income (Deficit) Interest (Deficit) Series A Preferred Stock $.0001 par value Common Stock $.0001 par value Additional Paid- Accumulated Accumulated Other Comprehensive Total Blue Star Foods Corp. Stockholder’s Equity Non-Controlling Total Stockholder’s Equity Shares Amount Shares Amount in Capital Deficit Income (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 - - - - 139,380 - 139,380 - 139,380 Common stock issued to settle related party interest Common stock issued to settle related party interest, shares Common stock issued for cash - - 5,000 - 10,000 - 10,000 - 10,000 Common stock issued for service - - 115,814 12 188,988 - 189,000 - 189,000 Common stock issued to related party lender for forbearance - - 1,021,266 100 2,655,192 - 2,655,292 - 2,655,292 Common stock issued to settle related party notes - - 796,650 80 1,593,220 - 1,593,300 - 1,593,300 Common stock issued for Taste of BC acquisition held in escrow Common stock issued for Taste of BC acquisition held in escrow, shares Common stock issued for Taste of BC Acquisition Common stock issued for Taste of BC Acquisition, shares Series A preferred 8% dividend issued in common stock - - 52,286 5 113,035 ( 113,040 ) - - - Preferred Stock conversion to Common Stock Preferred Stock conversion to Common Stock, shares Common stock issued from exercise of warrants Common stock issued from exercise of warrants, shares 3,280,000 Net Loss - - - - - ( 4,445,011 ) - ( 4,445,011 ) 7,577 ( 4,437,434 ) Deconsolidation of Strike the Gold Foods, Ltd. - - - - - - - 326,751 326,751 Comprehensive loss - - - - - - - 23,700 23,700 December 31, 2020 1,413 - 19,580,721 1,958 13,488,836 ( 13,510,517 ) - ( 19,723 ) - ( 19,723 ) Beginning balance, value 1,413 - 19,580,721 1,958 13,488,836 ( 13,510,517 ) - ( 19,723 ) - ( 19,723 ) Stock based compensation - - - - 530,506 - - 530,506 - 530,506 Common stock issued to settle related party interest - - 122,217 13 266,869 - - 266,882 - 266,882 Common stock issued for cash - - 2,300,000 230 6,596,270 - - 6,596,500 - 6,596,500 Common stock issued for service - - 246,457 37 644,183 - - 644,220 - 644,220 Common stock issued for TOBC acquisition held in escrow - - 344,957 34 689,880 - - 689,914 - 689,914 Common stock issued for TOBC Acquisition - - 987,741 99 1,975,384 - - 1,975,483 - 1,975,483 Series A preferred 8% dividend issued in common stock - - 11,975 1 28,259 ( 28,260 ) - - - - Preferred Stock conversion to Common Stock ( 1,413 ) - 706,500 71 ( 71 ) - - - - - Common stock issued from exercise of warrants - - 370,750 37 882,763 - - 882,800 - 882,800 Net Loss - - - - - ( 2,605,374 ) - ( 2,605,374 ) - ( 2,605,374 ) Comprehensive loss - - - - - - ( 54,240 ) ( 54,240 ) - ( 54,240 ) December 31, 2021 - - 24,671,318 2,480 25,102,879 ( 16,144,151 ) ( 54,240 ) 8,906,968 - 8,906,968 Ending balance, value - - 24,671,318 2,480 25,102,879 ( 16,144,151 ) ( 54,240 ) 8,906,968 - 8,906,968 The accompanying notes are an integral part of these consolidated financial statements F- 4 Blue Star Foods Corp. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ ( 2,605,374 ) $ ( 4,437,434 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Stock based compensation 530,506 139,380 Common stock issued for service 644,220 69,000 Common stock issued for forbearance fee - 2,655,292 Depreciation of fixed assets 104,619 33,367 Amortization of intangible assets 244,879 162,496 Amortization of loan costs 37,500 72,478 Gain on PPP loan forgiveness ( 371,944 ) ( 344,762 ) Gain on termination of lease - ( 38,819 ) Gain on sale of equipment - ( 343,181 ) Impairment of intangible asset 374,300 - Lease expense 28,344 175,699 Bad debt expense 4,689 13,293 Allowance for inventory obsolescence - 71,487 Changes in operating assets and liabilities: Accounts receivables ( 133,043 ) 942,656 Inventories ( 213,328 ) 6,023,473 Advances to related parties ( 122,766 ) ( 14,049 ) Other current assets ( 3,512,928 ) 63,315 Lease liability ( 28,489 ) ( 156,582 ) Other assets ( 61,205 ) 14,852 Accounts payable and accruals 453,615 ( 1,873,224 ) Deferred income 109,414 - Other current liabilities ( 316,038 ) 1,346,838 Net Cash (Used in) Provided by Operating Activities ( 4,833,029 ) 4,575,575 CASH FLOWS FROM INVESTING ACTIVITIES: Deconsolidation of variable interest entity - ( 8,421 ) Net cash paid for acquisition of TOBC ( 790,593 ) - Proceeds from sale of fixed assets 17,183 407,198 Purchases of fixed assets - ( 55,540 ) Net Cash (Used in) Provided by Investing Activities ( 773,410 ) 343,237 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from common stock offering 6,596,500 10,000 Proceeds from common stock warrants exercised 882,800 - Proceeds from working capital line of credit 10,993,584 6,775,660 Proceeds from HSBC loan - 43,788 Proceeds from PPP loan 371,944 344,762 Repayments of working capital line of credit ( 10,431,291 ) ( 11,887,721 ) Repayments of related party notes payable ( 1,534,612 ) ( 17,124 ) Principal payments of long-term debt ( 398,385 ) - Payments of loan costs - ( 70,000 ) Net Cash Provided by (Used in) Financing Activities 6,480,540 ( 4,800,635 ) Effect of Exchange Rate Changes on Cash ( 54,240 ) 23,700 NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 817,826 141,877 CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD 337,687 195,810 CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD $ 1,155,513 $ 337,687 Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 537,533 $ 725,693 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY Series A preferred 8 % dividend issued in common stock 28,260 113,040 Operating lease assets recognized in exchange for operating lease liabilities - 28,137 Shares issued for partial payment of accounts payable - 120,000 Shares issued for partial payment of notes payable - related party - 1,593,300 Preferred shares conversion to common stock 71 - Common stock issued for interest payment 266,882 - Shares issued for acquisition 2,665,397 - Related party notes recognized from business acquisition 162,400 - The accompanying notes are an integral part of these consolidated financial statements F- 5 Blue Star Foods Corp . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020 Note 1. Company Overview Blue Star Foods Corp., a Delaware corporation (“we”, “our”, the “Company”), is an international sustainable marine protein company based in Miami, Florida that imports, packages and sells refrigerated pasteurized crab meat, and other premium seafood products. The Company’s main operating business, John Keeler & Co., Inc. (“Keeler & Co.”) was incorporated in the State of Florida in May 1995. The Company’s current source of revenue is importing blue and red swimming crab meat primarily from Indonesia, Philippines and China and distributing it in the United States and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon produced under the brand name Little Cedar Farms for distribution in Canada. On November 26, 2019, 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 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 1/8/03 (the “Trust”), Walter F. Lubkin III (“Lubkin III”), Tracy Lubkin Greco (“Greco”) and John C. Lubkin (“Lubkin”), constituting all of the shareholders of Coastal Pride Company, Inc. immediately prior to the Coastal Merger (collectively, the “Sellers”). Pursuant to the terms of the Coastal Merger Agreement, Coastal Pride Company, Inc. merged with and into the Acquisition Subsidiary, with the Acquisition Subsidiary being the surviving company (the “Coastal Pride Merger”). Coastal Pride is a seafood company, based in Beaufort, South Carolina, that imports pasteurized and fresh crabmeat sourced primarily from Mexico and Latin America and sells premium branded label crabmeat throughout North America. On April 27, 2021, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with TOBC, and Steve Atkinson and Janet Atkinson (the “Sellers”), the owners of all of the capital stock of TOBC (the “TOBC Shares”), pursuant to which the Company acquired all of the TOBC Shares from the Sellers for an aggregate purchase price of CAD$ 4,000,000 consisting of: (i) an aggregate of CAD$ 1,000,000 in cash (with each Seller receiving a pro rata amount based upon the total number of TOBC Shares held by such Seller); (ii) promissory notes in the aggregate principal amount of CAD$ 200,000 (the “Notes”) with the principal amount of each Seller’s Note based on such Seller’s pro rata portion of the TOBC Shares); and (iii) 987,741 shares of the Company’s common stock (representing CAD$ 2,800,000 of shares based on USD$ 2.30 per share) with each Seller receiving a pro rata portion of such shares based upon the total number of TOBC Shares held by such Seller. F- 6 On June 24, 2021, the Purchase Agreement was amended (the “Amendment”), to increase the Purchase Price to an aggregate of CAD$ 5,000,000 and the acquisition closed. As a result of the acquisition, TOBC became a wholly owned subsidiary of the Company. Pursuant to the Amendment, on August 3, 2021, an aggregate of 344,957 shares of the Company’s common stock (representing CAD$ 1,000,000 of additional shares calculated at USD$ 2.30 per share) was put in escrow until the 24-month anniversary of the closing. If within 24 months of the closing TOBC has cumulative revenue of at least CAD$ 1,300,000 , the Sellers will receive all of the escrowed shares. If as of the 24-month anniversary of the closing, TOBC has cumulative revenue of less than CAD$ 1,300,000 , the Sellers will receive a prorated number of the escrowed shares based on the actual cumulative revenue of TOBC as of such date. TOBC is a land-based recirculating aquaculture systems salmon farming operation, based in Nanaimo, British Columbia, Canada, which sells its steelhead salmon to distributors in Canada. Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Principles of Consolidation The consolidated financial statements include the accounts of the Company, John Keeler & Co, Inc. a wholly owned subsidiary, Coastal Pride Seafood, LLC (“Coastal Pride”), a wholly owned subsidiary of John Keeler & Co., Inc. and Taste of BC Aquafarms, Inc. (“TOBC”), a wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. Goodwill and Other Intangible Assets Goodwill and other intangible assets include the cost of the acquired business in excess of the fair value of the tangible net assets recorded in connection with an acquisition. Other intangible assets include customer relationships, non-compete agreements, and trademarks. The Company reviews its indefinite-lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. Impairments are recorded as impairment charges in the Company’s Consolidated Statements of Operations and Comprehensive Loss, and a reduction of the asset’s carrying value in the Company’s Consolidated Balance Sheets when they occur. In accordance with its policies, the Company performed an assessment of its indefinite-lived intangibles and goodwill and determined there was no impairment for the years ended December 31, 2021 and 2020. F- 7 Long-lived Assets Management reviews long-lived assets, including finite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life on an undiscounted basis. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. Impairments are recorded as impairment charges in the Company’s Consolidated Statements of Operations and Comprehensive Loss, and a reduction of the asset’s carrying value in the Company’s Consolidated Balance Sheets when they occur. In accordance with its policies, the Company performed an assessment of its finite-lived intangibles and recognized an impairment loss on customer relationships intangible asset of $ 374,300 for the year ended December 31, 2021. Cash, Restricted Cash and Cash Equivalents The Company maintains cash balances with financial institutions in excess of Federal Deposit Insurance Company (“FDIC”) insured limits. The Company has not experienced any losses on such accounts and believes it does not have a significant exposure. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2021, the Company had no cash equivalents. The Company considers any cash balance in the lender designated cash collateral account as restricted cash. All cash proceeds must be deposited into the cash collateral account, and will be cleared and applied to the line of credit. The Company has no access to this account, and the purpose of the funds is restricted to repayment of the line of credit. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statements of cash flows: Schedule Reconciliation of Cash, Cash Equivalents and Restricted Cash December 31, 2020 December 31, 2019 Cash and cash equivalents $ 1,155,513 $ 55,644 Restricted cash - 282,043 Total cash, cash equivalents, and restricted cash shown in the cash flow statement $ 1,155,513 $ 337,687 Accounts Receivable Accounts receivable consist of unsecured obligations due from customers under normal trade terms, usually net 30 days. The Company grants credit to its customers based on the Company’s evaluation of a particular customer’s credit worthiness. Allowances for doubtful accounts are maintained for potential credit losses based on the age of the accounts receivable and the results of the Company’s periodic credit evaluations of its customers’ financial condition. Receivables are written off as uncollectible and deducted from the allowance for doubtful accounts after collection efforts have been deemed to be unsuccessful. Subsequent recoveries are netted against the provision for doubtful accounts expense. The Company generally does not charge interest on receivables. Receivables are net of estimated allowances for doubtful accounts and sales return, allowances and discounts. They are stated at estimated net realizable value. As of December 31, 2021, and 2020, the Company recorded sales return, allowances, discounts and refund liability of approximately $ 66,000 and $ 62,800 , respectively. There was no allowance for bad debt recorded during the years ended December 31, 2021 and 2020. F- 8 Inventories Substantially all of the Company’s inventory consists of packaged crab meat located at a public cold storage facility and merchandise in transit from suppliers. The Company also has eggs and fish in process inventory from TOBC. The cost of inventory is primarily determined using the specific identification method for crab meat. Fish in process inventory is measured based on the estimated biomass of fish on hand. The Company has established a standard procedure to estimate the biomass of fish on hand using counting and sampling techniques. Inventory is valued at the lower of cost or net realizable value, cost being determined using the first-in, first-out method for crab meat and using various estimates and assumptions in regard to the calculation of the biomass, including expected yield, market value of the biomass, and estimated costs of completion. Merchandise is purchased cost and freight shipping point and becomes the Company’s asset and liability upon leaving the suppliers’ warehouse. The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current stock levels. Inventory write-downs are charged to cost of goods sold. The Company’s inventory as of December 31 2021 and 2020 consists of: Schedule of Inventory December 31, 2021 December 31, 2020 Inventory purchased for resale $ 863,967 $ 1,382,068 Feeds and eggs processed 72,733 - In-transit inventory 1,182,741 522,080 Inventory allowance - ( 71,487 ) Inventory, net $ 2,119,441 $ 1,832,661 Advances to Suppliers and Related Party In the normal course of business, the Company may advance payments to its suppliers, including 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 December 31, 2021, and December 31, 2020, the balance due from Bacolod for future shipments was approximately $ 1,300,000 . No new purchases have been made from Bacolod since November 2020. Cost of revenue related to inventories purchased from Bacolod represented approximately $ 0 and $ 1,280,000 of total cost of revenue for the years ended December 31, 2021 and 2020, respectively. Fixed Assets Fixed assets are stated at cost less accumulated depreciation and are being depreciated using the straight-line method over the estimated useful life of the asset as follows: Schedule of Estimated Usefule Life of Assets RAS System 10 years Furniture and fixtures 7 to 10 years Computer equipment 5 years Warehouse and refrigeration equipment 10 years Leasehold improvements 7 years Automobile 5 years Trade show booth 7 years The RAS system is comprised of tanks, plumbing, pumps, controls, hatchery, tools and other equipment all working together for the TOBC facility. Leasehold improvements are amortized using the straight-line method over the shorter of the expected life of the improvement or the remaining lease term. F- 9 The Company capitalizes expenditures for major improvements and additions and expenses those items which do not improve or extend the useful life of the fixed assets. The Company reviews fixed assets for recoverability if events or changes in circumstances indicate the assets may be impaired. At December 31, 2021 and 2020, the Company believes the carrying values of its long-lived assets are recoverable and as such, the Company did not record any impairment. Other Comprehensive (loss) Income The Company reports its comprehensive (loss) income in accordance with ASC 220, Comprehensive Income , which establishes standards for reporting and presenting comprehensive (loss) income and its components in a full set of financial statements. Other comprehensive (loss) income consists of net income (loss) and cumulative foreign currency translation adjustments. Foreign Currency Translation The Company’s functional and reporting currency is the U.S. Dollars. The assets and liabilities held by TOBC and the previous VIE from 2020 have a functional currency other than the U.S. Dollar. The TOBC results and the 2020 VIE results were translated into U.S. Dollars at exchange rates in effect at the end of each reporting period. TOBC and the 2020 VIE’s revenue and expenses were translated into U.S. Dollars at the average rates that prevailed during the period. The rate used in the financial statements as presented for December 31, 2021 for TOBC was 0.79 Canadian Dollars to U.S. Dollars and for December 31, 2020 for the previous VIE was 1.260 U.S. Dollar to UK pound sterling . The resulting net translation gains and losses are reported as foreign currency translation adjustments in stockholders’ equity as a component of comprehensive (loss) income. The Company recorded foreign currency translation adjustment of approximately $ 54,200 and $ 23,700 for the years ended December 31, 2021 and December 31, 2020, respectively. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as such, we record revenue when our customer obtains control of the promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company’s source of revenue is from importing blue and red swimming crab meat primarily from Mexico, Indonesia, the Philippines and China and distributing it in the United States and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh and steelhead salmon produced by TOBC under the brand name Little Cedar Farms for distribution in Canada. We sell primarily to food service distributors. We also sell our products to wholesalers, retail establishments and seafood distributors. To determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company which includes a required line of credit approval process, (2) identify the performance obligations in the contract which includes shipment of goods to the customer at FOB shipping point or destination, (3) determine the transaction price which initiates with the purchase order received from the customer and confirmation sent by the Company and will include discounts and allowances by customer if any, (4) allocate the transaction price to the performance obligations in the contract which is the shipment of the goods to the customer and transaction price determined in step 3 above and (5) recognize revenue when (or as) the entity satisfies a performance obligation which is when the Company transfers control of the goods to the customers by shipment or delivery of the products. The Company elected an accounting policy to treat shipping and handling activities as fulfillment activities. Consideration payable to a customer is recorded as a reduction of the arrangement’s transaction price, thereby reducing the amount of revenue recognized, unless the payment is for distinct goods or services received from the customer. F- 10 Deferred Income The Company recognizes deferred income for advance payments received from customers for which sales have not yet occurred. Leases We account for our leases under ASC 842, Leases , which requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of December 31, 2021. Our leases generally have terms that range from three years for equipment and six to seven years for real 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. Schedule of Lease-related Assets and Liabilities December 31, 2021 Assets Operating lease assets $ 71,128 Liabilities Current $ 30,583 Operating lease liabilities Noncurrent Operating lease liabilities $ 40,109 Supplemental cash flow information related to leases were as follows: Schedule of Supplemental Cash Flow Information Related to Leases Year Ended December 31, 2021 Cash used in operating activities: Operating leases $ 28,344 ROU assets recognized in exchange for lease obligations: Operating leases $ - F- 11 The table below presents the remaining lease term and discount rates for operating leases. Schedule of Remaining Lease Term and Discount Rates for Operating Leases December 31, 2021 Weighted-average remaining lease term Operating leases 2.47 years Weighted-average discount rate Operating leases 4.3 % Maturities of lease liabilities as of December 31, 2021, were as follows: Schedule of Maturities of Lease Liabilities Operating Leases 2022 $ 33,552 2023 26,474 2024 15,060 2025 - 2026 - Thereafter - Total lease payments $ 75,086 Less: amount of lease payments representing interest ( 4,394 ) Present value of future minimum lease payments $ 70,692 Less: current obligations under leases $ ( 30,583 ) Non-current obligations $ 40,109 Advertising The Company expenses the costs of advertising as incurred. Advertising expenses which are included in Other Operating Expenses were approximately $ 5,700 and 7,200 , for the years ended December 31, 2021 and 2020, respectively. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Customer Concentration The Company had ten customers which accounted for approximately 52 % of revenue during the year ended December 31, 2021. One customer accounted for 24 % of revenue during the year ended December 31, 2021. Outstanding receivables from these customers accounted for approximately 59 % of the total accounts receivable as of December 31, 2021. The Company had three customers which accounted for approximately 26 % of revenue in the year ended December 31, 2020. Outstanding receivables from these customers accounted for approximately 19 % of the total accounts receivable as of December 31, 2020. The loss of any major customer could have a material adverse impact on the Company’s results of operations, cash flows and financial position. Supplier Concentration The Company had four suppliers which accounted for approximately 70 % of the Company’s total purchases during the year ended December 31, 2021. These four suppliers are located in the United States, Indonesia, Mexico and China, which accounted for approximately 80 % of the Company’s total purchases during the year. During 2021, the Company purchased inventory from one non-affiliated Mexican supplier that made up the balance of 42 % of the supply concentration. F- 12 The Company had five suppliers which accounted for approximately 65 % of the Company’s total purchases during the year ended December 31, 2020. These five suppliers are located in the United States, Indonesia, Sri Lanka, Mexico and the Philippines, which accounted for approximately 93 % of the Company’s total purchases during the year. During 2020, the Company purchased inventory from two non-affiliated Indonesian suppliers that made up the balance of 25 % of the supply concentration. The loss of any major supplier could have a material adverse impact on the Company’s results of operations, cash flows and financial position. Fair Value Measurements and Financial Instruments Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured using inputs in one of the following three categories: Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we judgment. have the ability to access. Valuation of these items does not entail a significant amount of judgment. Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities. Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Our financial instruments include cash, accounts receivable, accounts payable, accrued expenses, and debt obligations. We believe the carrying values of our financial instruments approximate their fair values because they are short term in nature or payable on demand. The Company does not have any assets or liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2021 and 2020. Earnings or Loss per Share The Company accounts for earnings per share pursuant to ASC 260, Earnings per Share, which requires disclosure on the financial statements of “basic” and “diluted” earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. As further described in Note 9 - Series A Convertible Preferred Stock, as of December 31, 2021, 1,413 shares of preferred stock were converted into 706,500 shares of common stock. As further described in Notes 10 and 11 – Options and Warrants, as of December 31, 2021 and 2020, 3,431,250 and 3,280,000 options may be exercised, respectively, and 1,538,500 warrants are exercisable. As there was a net loss for the years ended December 31, 2021 and December 31, 2020, basic and diluted losses per share each year are the same. 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 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 individual 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. Related Parties The Company accounts for related party transactions in accordance with ASC 850 (“Related Party Disclosures”). A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. F- 13 As of December 31, 2021, and 2020, there was approximately $ 143,300 and $ 392,000 in interest paid to related parties notes payable. See Note 7 Debt for further information. Income Taxes The Company accounts for income taxes utilizing the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes, using enacted statutory tax rates in effect for the year in which the differences are expected to reverse. The effects of future changes in tax laws or rates are not included in the measurement. Income tax expense is the total of the current year income tax due and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company’s policy is to recognize interest and penalties on uncertain tax positions in “Income tax expense” in the Consolidated Statements of Operations. There were no amounts related to interest and penalties recognized for the years ended December 31, 2021 or 2020. Recently Adopted Accounting Pronouncements ASU 2019-12 Income Taxes (Topic 740) In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company determined that the standard has no impact on its consolidated financial statements and related disclosures. ASU 2016-13 Financial Instruments – Credit Losses (Topic 326) In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires entities to use a forward-looking, expected loss model to estimate credit losses. It also requires entities to consider additional disclosures related to credit quality of trade and other receivables, including information related to management’s estimate of credit allowances. ASU 2016-13 was further amended in November 2018 by ASU 2018-19, Codification Improvements to Topic 236, Financial Instrument-Credit Losses. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers excluding smaller reporting companies, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. On October 16, 2019, FASB voted to delay implementation of ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” For all other entities, the amendments are now effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. On November 15, 2019, FASB issued an Accounting Standard Update No. 2019-10 to amend the implementation date to fiscal year beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company continues to evaluate the impact of these amendments to the Company’s financial position and results of operations and currently expect no material impact of the adoption of the amendments on the Company’s consolidated financial statements. F- 14 Note 3. Going Concern The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. The Company incurred a net loss of $ 2,605,374 , has an accumulated deficit of $ 16,144,151 and working capital surplus of $ 2,831,718 , inclusive of $ 960,000 in subordinated stockholder debt. 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. Other Current Assets Other current assets totaled $ 3,702,661 and $ 176,925 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, approximately $ 3.2 million of the balance was related to prepaid inventory to our suppliers. The remainder of the balance is related to prepaid insurance and other prepaid expenses. Note 5. Fixed Assets, Net Fixed assets comprised the following at December 31: Schedule of Fixed Assets 2021 2020 Computer equipment $ 90,707 $ 90,707 RAS system 1,963,734 - Automobiles 23,188 - Leasehold improvements 4,919 4,919 Total 2,082,548 95,626 Less: Accumulated depreciation ( 178,145 ) ( 75,562 ) Fixed assets, net $ 1,904,403 $ 20,064 For the years ended December 31, 2021 and 2020, depreciation expense totaled approximately $ 104,000 and $ 33,000 , respectively. On December 2020, our warehouse and refrigeration equipment was sold to an unrelated party for $ 407,198 and the Company recorded a gain on the sale of the equipment of $ 343,181 . Note 6. Goodwill and Intangible Assets, Net The following table sets for the changes in the carrying amount of the Company’s goodwill for the years ended December 31, 2021 and 2020. Schedule of Goodwill 2021 2020 Balance, January 1 $ 445,395 $ 445,395 Acquisition of TOBC - - Balance, December 31 $ 445,395 $ 445,395 The following table sets for the components of the Company’s intangible assets at December 31, 2021: Schedule of Intangible Assets Amortization Period (Years) Cost Accumulated Amortization Net Book Value Intangible Assets Subject to amortization Trademarks – Coastal Pride 14 $ 850,000 $ ( 118,050 ) $ 731,950 Trademarks – TOBC 15 406,150 ( 13,027 ) 393,123 Customer Relationships – Coastal Pride 12 1,250,000 ( 574,625 ) 675,375 Customer Relationships – TOBC 15 1,454,017 ( 46,634 ) 1,407,383 Non-Compete Agreements – Coastal Pride 3 40,000 ( 20,825 ) 19,175 Non-Compete Agreements – TOBC 4 97,476 ( 11,724 ) 85,752 Total $ 4,097,643 $ ( 784,885 ) $ 3,312,758 F- 15 The aggregate amortization remaining on the intangible assets as of December 31, 2021 is as follows: Schedule of Amortization of Intangible Assets Intangible Amortization 2022 $ 234,201 2023 $ 234,201 2024 $ 234,201 2025 $ 234,201 2026 $ 230,528 Thereafter $ 2,145,426 Note 7. Debt Working Capital Line of Credit Keeler & Co 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 was secured by all assets of Keeler & Co. 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 accrued interest at a 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 was 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, Keeler & Co. entered into the seventh amendment to the loan and security agreement with ACF. This amendment memorialized the acquisition of Coastal Pride and made Coastal Pride a co-borrower to the facility. Additionally, the seventh amendment waived and reset the covenant default that occurred during 2019 and 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 year ended December 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 $ 105,000 . The default interest rate increase of 3 % was implemented in April 2020. On May 7, 2020, Keeler & Co. and Coastal Pride entered into an eighth amendment to the loan and security agreement with ACF which acknowledged the execution of a Payroll Protection Program loan and provided a reservation of rights related to a default of the minimum EBITDA covenant. 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 remain unchanged. As of December 31, 2021, and 2020, the interest rate was 0 % and 12.48 %, respectively. As of December 31, 2021, and 2020, the line of credit had an outstanding balance of $ 0 and approximately $ 1,805,000 , respectively. F- 16 The Company amortized loan costs on a straight-line basis, which approximates the interest method, over the term of the credit facility. The Company added loan costs associated with the working capital lines of credit of approximately $ 70,000 for the year ended December 31, 2020, leaving balances in the asset of $ 2,992 , net of approximately $ 585,000 of accumulated amortization as of December 31, 2020. The Company recorded amortization expense of approximately $ 72,000 for the year ended December 31, 2020. On March 31, 2021, Keeler & Co. and Coastal Pride entered into a loan and security agreement (“Loan Agreement”) with Lighthouse Financial Corp., a North Carolina corporation (“Lighthouse”) pursuant to the terms of the Loan Agreement, Lighthouse made available to Keeler & Co. and Coastal Pride (together, the “Borrowers”) a $ 5,000,000 revolving line of credit for a term of thirty-six months, renewable annually for one-year periods thereafter. Amounts due under the line of credit are represented by a revolving credit note issued to Lighthouse by the Borrowers. The advance rate of the revolving line of credit is 85% with respect to eligible accounts receivable and the lower of 60% of the Borrowers’ eligible inventory, or 80% of the net orderly liquidation value, subject to an inventory sublimit of $2,500,000. The inventory portion of the loan will never exceed 50% of the outstanding balance. Interest on the line of credit is the prime rate (with a floor of 3.25%), plus 3.75%. The Borrowers paid Lighthouse a facility fee of $50,000 in three instalments of $16,667 in March, April and May 2021 and will pay an additional facility fee of $25,000 on each anniversary of March 31, 2021. On January 14, 2022, the maximum inventory advance under the line of credit was adjusted from 50% to 70% until June 30, 2022, 65% to July 31, 2022, 60% to August 31, 2022 and 55% to September 30, 2022 at a monthly fee of 0.25% on the portion of the loan in excess of the 50% advance, in order to increase imports to meet customer demand . The line of credit is secured by a first priority security interest on all the assets of each Borrower. Pursuant to the terms of a guaranty agreement, the Company guaranteed the obligations of the Borrowers under the note and John Keeler, Executive Chairman and Chief Executive Officer of the Company, provided a personal guaranty of up to $ 1,000,000 to Lighthouse. As of December 31, 2021, the Company was in compliance with all financial covenants under the Loan Agreement, except for the requirement to maintain a greater than $ 50,000 cash flow for the fourth quarter of 2021 which was accepted by Lighthouse. The Borrowers utilized $ 784,450 of the Lighthouse revolving line of credit to repay the outstanding indebtedness owed to ACF as of March 31, 2021. As a result, all obligations owed to ACF were satisfied and the loan agreement with ACF was terminated. The outstanding balance owed to Lighthouse as of December 31, 2021 was $ 2,368,200 . John Keeler Promissory Notes – Subordinated The Company had unsecured promissory notes outstanding to its stockholder of approximately $ 960,000 and $ 1,299,700 as of December 31, 2021 and 2020, respectively. These notes are payable on demand, bear an annual interest rate of 6 % and were subordinated to the ACF working capital line of credit until March 31, 2021. Since March 31, 2021, these notes are subordinated to the Lighthouse note. The Company made principal payments during the year ended December 31, 2021, and 2020 of $ 339,712 and approximately $ 17,000 , respectively. An additional principal settlement of $ 1,593,300 was made in December 2020 by the issuance of 796,650 shares of common stock to the noteholder. 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 (“Kenar”), 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 , (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) 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 common stock to Kenar. The outstanding principal amount of the note at December 31, 2020 was $ 872,500 . The amendment to the Kenar Note was analyzed under ASC 470-50 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 charged to other expense as of the date of the amendment as a non-cash forbearance fee. F- 17 Interest expense for the Kenar Note totaled approximately $ 177,700 during the year ended December 31, 2020. On April 28, 2021, the Kenar Note was further amended to extend the maturity date to May 31, 2021. On July 6, 2021, the Company entered into a note payoff indemnity agreement with Kenar pursuant to which the Company paid Kenar $ 918,539 of principal and accrued interest in full satisfaction of the amounts due to Kenar under the Second Loan Amendment, dated April 26, 2021, between the Company and Kenar, and the Kenar Note was extinguished, and the shares pledged by Mr. Keeler were released. Interest expense for the Kenar Note totaled approximately $ 79,100 during the year ended December 31, 2021. 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, LLLP, a stockholder of 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 accrued interest at the rate of 15 % per annum and matured 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 accrued interest at the rate of 10 % per annum and matured on October 1, 2020. On October 1, 2020, the Company paid off the April 1, 2020 note with the issuance of a three-month unsecured promissory note in the principal amount of $ 100,000 , which bears interest at the rate of 10 % per annum and matured on December 31, 2020. Interest expense for the Lobo Note totaled approximately $ 11,200 during the year ended December 31, 2020. On January 1, 2021, the Company paid off the October 1, 2020 note with the issuance of a six-month unsecured promissory note in the principal amount of $ 100,000 , which bears interest at the rate of 10 % per annum and matures on June 30, 2021. On July 1, 2021, the Company paid off the January 1, 2021 Lobo note with the issuance of a three-month unsecured promissory note in the principal amount of $ 100,000 which accrued interest at the rate of 10 % per annum and matured on September 30, 2021. On October 1, 2021, the Company paid off the July 1, 2021 Lobo Note with the issuance of a one-month unsecured promissory note in the principal amount of $ 100,000 , which accrued interest at the rate of 10 % per annum and matured on November 1, 2021. On November 1, 2021, the Company paid Lobo $ 100,877 of principal and accrued interest in full satisfaction of the amounts due to Lobo under the one-month unsecured promissory note dated October 1, 2021, between the Company and Lobo, and the Lobo Note was extinguished. Interest expense for the Lobo Note totaled approximately $ 8,300 during the year ended December 31, 2021. 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 and interest rate of 4 % per annum. The note is payable quarterly based on 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 3 months did not warrant a principal payment. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit. No principal payments were made by the Company during 2020. Interest expense for the Walter Lubkin Jr. note totaled approximately $ 19,700 and $ 20,100 during the years ended December 31, 2021, and 2020, respectively. On October 8, 2021, a portion of the outstanding principal and accrued interest to date totaling $ 34,205 were paid on the note by the Company. F- 18 Walter Lubkin III Convertible Note – Subordinated On November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $ 87,842 to Walter Lubkin III as part the purchase price for the Coastal Pride acquisition. The note bears interest at the rate of 4 % per annum. The note is payable in equal quarterly payments over six quarters beginning August 26, 2021 . At the election of the holder, at any time after the first anniversary of the issuance of the note, the then outstanding principal and accrued interest may be converted into the Company’s common stock at a rate of $ 2.00 per share. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit. No principal payments were made by the Company during 2020. Interest expense for the Walter Lubkin III note totaled approximately $ 3,300 and $ 3,500 during the years ended December 31, 2021, and 2020, respectively. On October 8, 2021, a portion of the outstanding principal and accrued interest to date totaling $ 16,257 were paid on the note by the Company. Tracy Greco Convertible Note – Subordinated On November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $ 71,372 to Tracy Greco as part of the purchase price for the Coastal Pride acquisition. The note bears interest at the rate of 4 % per annum. The note is payable in equal quarterly payments over six quarters beginning August 26, 2021 . At the election of the holder, at any time after the first anniversary of the issuance of the note, the then outstanding principal and accrued interest may be converted into the Company’s common stock at a rate of $ 2.00 per share. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit. No principal payments were made by the Company during 2020. Interest expense for the Tracy Greco note totaled approximately $ 2,700 and $ 2,800 during the years ended December 31, 2021, and 2020, respectively. On October 8, 2021, a portion of the outstanding principal and accrued interest to date totaling $ 13,209 were paid on the note by the Company. John Lubkin Convertible Note – Subordinated On November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $ 50,786 to John Lubkin as part the Coastal Pride acquisition. The note bears interest at the rate of 4 % per annum. The note is payable in equal quarterly payments over six quarters beginning August 26, 2021 . At the election of the holder, at any time after the first anniversary of the issuance of the note, the then outstanding principal and accrued interest may be converted into the Company’s common stock at a rate of $ 2.00 per share. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit. No principal payments were made by the Company during 2020. Interest expense for the John Lubkin note totaled approximately $ 1,900 and $ 2,000 during the years ended December 31, 2021, and 2020, respectively. On October 8, 2021, a portion of the outstanding principal and accrued interest to date totaling $ 9,399 were paid on the note by the Company. Payroll Protection Program Loans On April 17, 2020, the Company received proceeds of $ 344,762 and issued an unsecured promissory note to US Century Bank in the principal amount of $ 344,762 in connection with the Payroll Protection Program of the CARES Act (“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 (“SBA”) 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. In September 2020, the Company applied for the loan forgiveness by SBA through US Century Bank for the full amount which was granted on November 16, 2020. F- 19 On March 2, 2021, the Company received proceeds of $ 371,944 and issued an unsecured promissory note to US Century in the principal amount of $ 371,944 in connection with a CARES Act Payroll Protection Program (“PPP Loan”). The note accrues interest at 1.0 % per annum, matures five years from the date of issuance and is fully guaranteed by the SBA and may be forgiven provided certain criteria are met. In September 2021, the Company applied for the loan forgiveness by the SBA through US Century Bank for the full amount which was granted in October 2021 and was recognized as other income in the consolidated statement of operations for the year ended December 31, 2021. Note 8. Business Combination Acquisition of Taste of BC Aquafarms On June 24, 2021, the Company consummated the acquisition of TOBC and TOBC became a wholly owned subsidiary of the Company. The acquisition was accounted for as a business combination under the provisions of ASC 805. The aggregate purchase price of CAD$ 5,000,000 was paid as follows: (i) an aggregate of CAD$ 1,000,000 in cash to the Sellers; (ii) promissory notes in the aggregate principal amount of CAD$ 200,000 to the Sellers; (iii) 987,741 shares of the Company’s common stock and an aggregate of 344,957 shares of the Company’s common stock were issued on August 3, 2021 and put in escrow until June 24, 2023. If, within 24 months of the closing, TOBC has cumulative revenue of at least CAD$ 1,300,000 , the Sellers will receive all of the escrowed shares. If, as of the 24-month anniversary of the closing, TOBC has cumulative revenue of less than CAD$ 1,300,000 , the Sellers will receive a prorated number of the escrowed shares based on the actual cumulative revenue of TOBC as of such date. The transaction costs incurred in connection with the acquisition of TOBC amounted to $ 31,000 which were expensed as incurred. Fair Value of Consideration Transferred and Recording of Assets Acquired The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed. The business combination accounting is not yet complete and the amounts assigned to assets acquired and liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as information is obtained about facts and circumstances that existed at the acquisition date. Schedule of Fair Value of Assets Acquired and Liabilities Assumed Consideration Paid: Cash $ 814,000 Common stock, 987,741 shares of common stock of the Company 1,975,483 Promissory notes to Sellers 162,400 Contingent consideration - Common stock, 344,957 shares of common stock of the Company in escrow 689,914 Fair value of total consideration $ 3,641,797 Purchase Price Allocation: Tangible assets acquired $ 2,137,650 Trademarks 406,150 Customer relationships 1,454,017 Non-compete agreements 97,476 Liabilities assumed ( 453,496 ) Fair market value of net assets acquired $ 3,641,797 In determining the fair value of the common stock issued, the Company considered the value of the stock as estimated by the Company at the time of closing which was determined to be $ 2.00 , based on the Company’s private placement offering price. Liabilities assumed included three mortgage loans of approximately CAD$ 490,000 which were paid off by the Company on July 9, 2021. The Company has one commercial loan outstanding for CAD$ 60,000 which is due on December 31, 2025. F- 20 Pro Forma Information The following pro forma information assumes the business acquisition occurred on January 1, 2020. 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. Schedule of Proforma Information For the year ended December 31, 2021 For the year ended December 31, 2020 Revenue $ 12,029,325 $ 14,490,379 Net loss attributable to common shareholders $ ( 3,102,683 ) $ ( 4,721,865 ) Basic and diluted loss per share $ ( 0.14 ) $ ( 0.27 ) The information included in the pro forma amounts is derived from historical information obtained from the Sellers of the business. Note 9. Stockholders’ Equity Preferred Stock Our Board of Directors has designated 10,000 shares of preferred stock as “ 8 % Series A Convertible Preferred Stock”. The Series A Convertible Preferred Stock (“Series A Stock”) has no maturity and is not subject to any sinking fund or redemption and will remain outstanding indefinitely unless and until converted by the holder or the Company redeems or otherwise repurchases the Series A Stock. Dividends. Cumulative dividends accrue on each share of Series A Stock at the rate of 8 % (the “Dividend Rate”) of the purchase price of $ 1,000.00 per share, commencing on the date of issuance. Dividends are payable quarterly, when and if declared by the Board, beginning on September 30, 2018 (each a “Dividend Payment Date”) and are payable in shares of Common Stock (a “PIK Dividend”) with such shares being valued at the daily volume weighted average price (“VWAP”) of the Common Stock for the thirty trading days immediately prior to each Dividend Payment Date or if not traded or quoted as determined by an independent appraiser selected in good faith by the Company. Any fractional shares of a PIK Dividend will be rounded to the nearest one-hundredth of a share. All shares of Common Stock issued in payment of a PIK Dividend will be duly authorized, validly issued, fully paid and non-assessable. Dividends will accumulate whether or not the Company has earnings, there are funds legally available for the payment of those dividends and whether or not those dividends are declared by the Board. Dividends of common stock were authorized for issuance to the stockholders in accordance with the terms of the Certificate of Designation for the Series A Stock on March 31, 2020, June 30, 2020, September 29, 2020, and December 31, 2020. The dividends resulted in the issuance of an aggregate of 52,286 shares of common stock with a value of $ 113,040 . On March 31, 2021, the Company issued 11,975 shares of common stock to Series A preferred stockholders as a common stock dividend for the quarter ended March 31, 2021. Conversion. Each share of Series A Stock is convertible at any time and in the sole discretion of the holder, into shares of common stock at a conversion rate of 500 shares of common stock for each share of Series A Stock (the “Conversion Rate”) The Company analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option should be classified as equity. On June 30 2021, all preferred shares were converted to common shares and the Company issued an aggregate of 706,500 shares of common stock to Series A preferred shareholders upon conversion of an aggregate 1,413 shares of Series A Stock. Common Stock The Company is authorized to issue 100,000,000 shares of common stock at a par value of $ .0001 and had 24,671,318 and 19,580,721 shares of common stock issued and outstanding as of December 31, 2021 and 2020, respectively. F- 21 On May 27, 2020, the Company issued 5,000 shares of common stock at $ 2.00 per share in a private placement offering. On May 27, 2020, the Company issued 1,021,266 shares of common stock to Kenar at $ 2.60 per share as a forbearance fee.in connection with Kenar’s agreement to amend its outstanding promissory note. On July 1, 2020, the Company entered into an investment banking engagement agreement, as amended on October 30, 2020, with Newbridge Securities Corporation. In consideration for advisory services, the Company agreed to issue Newbridge a total of 60,000 shares of common stock with a fair value of $ 138,000 which is amortized to expense over the term of the agreement. The Company recognized stock compensation expense of $ 69,000 for the year ended December 31, 2021 in connection with these shares. On December 30, 2020, the Company issued 796,650 shares of common stock to John Keeler’s designee as partial payment of outstanding notes payable totaling to $ 1,593,300 . Dividends of common stock were issued to the Series A preferred stockholders in accordance with the terms of the Certificate of Designation for the Series A Stock on March 31, 2020, June 30, 2020, September 29, 2020 and December 31, 2020. The dividends resulted in the issuances of an aggregate of 52,286 shares of common stock with a value of $ 113,040 during 2020. During the year ended December 31, 2020, the Company issued 115,814 shares of common stock valued at $ 189,000 for legal and consulting fees. On February 8, 2021, the Company issued 25,000 shares of common stock with a fair value of $ 25,250 to an investor relations firm for services provided to the Company under an investor relations consulting agreement. On March 30, 2021, the Company issued 10,465 shares of common stock with a fair value of $ 24,697 to the designee of a law firm for services provided to the Company. On March 31, 2021, the Company issued 5,000 shares of common stock with a fair value of $ 11,800 to an investor relations firm for services provided to the Company under an investor relations consulting agreement. On March 31, 2021, the Company issued 11,975 shares of common stock to Series A preferred stockholders as a common stock dividend with an aggregate fair value of $ 28,260 for the three months e nd ed March 31, 2021. On April 15, 2021, the Company issued an aggregate of 16,460 shares of common stock to Walter Lubkin Jr., Walter Lubkin III, Tracy Greco and John Lubkin (collectively, the “Coastal Sellers”) in lieu of $ 39,504 of outstanding interest under promissory notes issued by the Company to the Coastal Sellers in connection with the Coastal Pride acquisition. On April 19, 2021, the Company issued 12,500 shares of common stock with a fair value of $ 25,000 to the designee of a law firm for services provided to the Company. On April 29, 2021, the Company issued 105,757 shares of common stock to Kenar in lieu of $ 227,378 of outstanding interest under the Kenar Note. On April 30, 2021, the Company issued 5,000 shares of common stock with a fair value of $ 28,500 to an investor relations firm for services provided to the Company under an investor relations consulting agreement. On May 31, 2021, the Company issued 5,000 shares of common stock with a fair value of $ 31,500 to an investor relations firm for services provided to the Company under an investor relations consulting agreement. On June 24, 2021, the Company issued 987,741 shares to the sellers of TOBC as partial consideration for the sale of TOBC to the Company. On June 30, 2021, the Company issued 5,000 shares of common stock with a fair value of $ 36,250 to an investor relations firm for services provided to the Company under an investor relations consulting agreement. On June 30, 2021, the Company issued 10,465 shares of common stock with a fair value of $ 75,871 to the designee of a law firm for services provided to the Company. F- 22 On June 30, 2021, the Company issued an aggregate of 706,500 shares of common stock to Series A preferred stockholders upon conversion of an aggregate 1,413 shares of Series A preferred stock. On August 3, 2021, the Company issued 5,000 shares of common stock with a fair value of $ 30,000 to an investor relations firm for services provided to the Company under an investor relations consulting agreement. On November 5, 2021, we issued 800,000 shares of common stock to Newbridge Securities Corporation (“Newbridge”), as underwriters’ representative, in connection with our underwritten public offering for gross proceeds of $ 4 million. On November 5, 2021 we issued a warrant to purchase an aggregate of 56,000 shares of common stock at an exercise price of $ 5.00 per share to Newbridge. Such warrant is exercisable on a date which is 180 days from the closing of the underwritten offering and expires on November 11, 2024. On November 10, 2021 and December 31, 2021, the Company issued 52,326 and 18,405 shares of common stock, respectively, to Intelligent Investments I LLC for legal services provided to the Company. On December 31, 2021, the Company issued 5,000 shares of common stock to TraDigital Marketing Group for consulting services provided to the Company. On December 31, 2021, we issued 10,992 shares of common stock to each of Nubar Herian and John Keeler, 15,107 shares of common stock to each of Timothy McLellan and Trond Ringstad and 19,909 shares of common stock to Jeffrey Guzy for serving as directors of the Company. During the year ended December 31, 2021, we issued an aggregate of 370,750 shares of common stock to investors upon the exercise of warrants for total proceeds of $ 882,800 . During the year ended December 31, 2021, the Company sold pursuant to subscription agreements an aggregate of 1,500,000 shares of common stock at $ 2.00 per share and issued warrants to purchase an aggregate of 1,500,000 shares at an exercise price of $ 2.00 to various accredited investors in private offerings for gross proceeds of $ 3 million. Note 10. Options During the year ended December 31, 2021 and December 31, 2020, $ 549,231 and $ 139,380 , respectively, in compensation expense was recognized on the following: 1. Ten -year options to purchase 3,120,000 shares of common stock at an exercise price of $ 2.00 , which vest one year from the date of grant, were issued to Christopher Constable, the Company’s former Chief Financial Officer, under the 2018 Plan during the year ended December 31, 2018 and have vested during the year ended December 31, 2019. In connection with our underwritten public offering, such shares underlying the option are subject to a lock-up and may not be sold or otherwise transferred until May 3, 2022. 2. Ten -year options to purchase 430,000 shares of common stock at an exercise price of $ 2.00 , which vest as to 25 % of the shares subject to the option each year from the date of grant, were issued to various long-term employees under the 2018 Plan during the year ended December 31, 2019. 3. Ten -year options to purchase 250,000 shares of common stock at an exercise price of $ 2.00 , which vest as to 20 % of the shares subject to the option each year from the date of grant, were issued to an employee under the 2018 Plan during the year ended December 31, 2019. 4. Ten -year options to purchase 25,000 shares of common stock at an exercise price of $ 2.00 , which vest as to 25 % of the shares subject to the option each year from the date of grant, were issued to various contractors during the year ended December 31, 2019. 5. Four -year options to purchase an aggregate of 500,000 shares of common stock at an exercise price of $ 2.00 , which vest in equal monthly installments during the first year from the date of grant, were issued to the Company’s directors during the year ended December 31, 2021. 6. Five -year options to purchase an aggregate of 176,417 shares of common stock at an exercise price of $ 2.30 , which vest in equal quarterly installments starting on the 48th month through the 60th month upon meeting certain performance conditions, were issued to an employee of TOBC during the year ended December 31, 2021. 7. Three -year options to purchase an aggregate of 7,013 shares of common stock at an exercise price of $ 6.00 , which vest in equal monthly installments during the term of the option, were issued to an officer of the Company during the year ended December 31, 2021. F- 23 The following table summarizes the assumptions used to estimate the fair value of the stock options granted for the year ended December 31, 2021 since no options were granted for the year ended December 31, 2020: Schedule of Fair Value of Stock Options 2021 Expected Volatility 39 % – 48 % Risk Free Interest Rate 0.90 % – 1.69 % Expected life of options 1.99 – 5.0 Under the Black-Scholes option pricing model, the fair value of the 683,430 options granted during the year ended December 31, 2021 was estimated at $ 1,251,598 on the date of grant. For the years ended December 31, 2021 and 2020, the unrecognized portion of the expense remaining outstanding was $ 823,670 and $ 327,852 , respectively. The weighted average period of unrecognized stock options compensation that is expected to be recognized as expense is approximately 7 years. During the year ended December 31, 2021, an aggregate of 85,000 shares subject to options were forfeited, 12,500 shares were vested, which resulted in a reversal of the expense of $ 13,580 . The following table represents option activity for the years ended December 31, 2021 and 2020: Schedule of Option Activity 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 $ 984,000 Granted - $ - Forfeited - $ - Vested 3,280,000 Outstanding - December 31, 2020 3,810,000 $ 2.00 7.87 Exercisable - December 31, 2020 3,280,000 $ 2.00 7.87 $ 721,600 Granted 683,430 $ 2.12 Forfeited ( 63,750 ) $ 2.00 Vested 3,807,127 - Outstanding - December 31, 2021 4,429,680 $ 2.00 6.23 Exercisable - December 31, 2021 3,807,127 $ 2.00 6.83 $ - The non-vested options outstanding are 998,431 and 530,000 for the years ended December 31, 2021 and 2020, respectively. Note 11. Warrants Schedule of Warrant Activity Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Outstanding – December 31, 2020 353,250 $ 2.40 0.85 Exercisable – December 31, 2020 353,250 $ 2.40 0.85 $ - Granted 1,556,000 $ - Exercised ( 370,750 ) $ 2.20 Forfeited or Expired - $ - Outstanding – December 31, 2021 1,538,500 $ 2.11 2.50 Exercisable – December 31, 2021 1,538,500 $ 2.11 2.50 $ - F- 24 As of December 31, 2021, the Company issued warrants to purchase an aggregate of 1,500,000 shares at an exercise price of $ 2.00 per share in a private offering to seventy-seven accredited investors that expire in June 2024. The Company also issued a warrant to purchase an aggregate of 56,000 shares of common stock at an exercise price of $ 5.00 per share to Newbridge. Such warrant is exercisable on a date which is 180 days from the closing of the offering November 5, 2021 and expires on November 5, 2024. The Company issued 353,250 shares at an exercise price of $ 2.40 and 17,500 shares at an exercise price of $ 2.00 to investors upon the exercise of warrants. During the year ended December 31, 2020, the Company did not have any warrant activity. Note 12. Income taxes Federal income tax expense differs from the statutory federal rates of 21% for the years ended December 31, 2021 and 2020 due to the following: Schedule of Rate Reconciliation Rate Reconciliation December 31, 2021 December 31, 2020 Provision/(Benefit) at Statutory Rate $ ( 557,193 ) 21.00 % $ ( 931,861 ) 21.00 % State Tax Provision/(Benefit) net of federal benefit ( 94,610 ) 3.72 % ( 169,277 ) 3.85 % Permanent Book/Tax Differences 10,791 ( 0.04 )% 1,283 ( 0.03 )% Change in valuation allowance 969,497 ( 36.54 )% 992,311 ( 22.36 )% Other ( 326,385 ) 12.30 % 108,667 ( 2.45 )% The components of the net deferred tax asset at December 31, 2021 and 2020, are as follows: Schedule of Deferred Income Tax Assets December 31, 2021 December 31, 2020 Deferred Tax Assets 263A Unicap $ 21,105 $ 26,923 Fixed Assets ( 437,993 ) 31,830 Charitable Contribution Carryforward 806 269 Intangibles ( 338,853 ) 70,173 Inventory Reserve 17,669 17,761 Business Interest Limitation 713,822 637,897 Stock based compensation 817,012 684,800 Federal Net Operating loss 641,394 879,150 State Net Operating Loss 100,348 156,004 Net Deferred Tax Asset/(Liability) 1,535,310 2,504,807 Valuation Allowance ( 1,535,310 ) ( 2,504,807 ) Net Deferred Tax Asset/(Liability) $ - $ - F- 25 Tax periods for all fiscal years after 2018 remain open to examination by the federal and state taxing jurisdictions to which the Company is subject. As of December 31, 2021, the Company has federal net operating loss of $ 3,054,257 to carry forward indefinitely. ASC 740, “Income Taxes” requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be recognized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2021. As of December 31, 2021, and 2020, the Company has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements. The Company’s policy is to classify assessments, if any, for tax related interest as income tax expenses. No interest or penalties were recorded during the years ended December 31, 2021, and 2020. Note 13. Commitment and Contingencies Office lease The Company leased its Miami office and warehouse facility from JK Real Estate, a related party through common family beneficial ownership. The lease which had a 20 -year term, expiring in July 2021 was terminated on December 31, 2020, upon the sale of the facility. The Company was a guarantor of the mortgage on the facility which had a zero balance at December 31, 2020. Therefore, the Company did not record any liability related to the mortgage in the consolidated financial statements as the Company will not be called upon to perform under any guarantee, in accordance with ASC 460, Guarantees . In connection with the sale, the Company retained approximately 4,756 square feet of such space, rent-free for 12 months. On January 1, 2022, the Company entered into a verbal month-to-month lease agreement for its executive offices with an unrelated third party. The Company has paid $ 11,600 to date under this lease. The Company leases approximately 1,100 square feet in Beaufort South Carolina for the offices of Coastal Pride. This office space consists of two leases with related parties that expire 2024. On February 3, 2022, in connection with the acquisition of certain assets of Gault, the Company entered into a one -year lease agreement for 9,050 square feet from Gault in Beaufort, South Carolina for $ 1,000 per month until a new facility is completed. TOBC’s facilities are on land leased to TOBC for approximately $ 2,500 per month plus taxes from Steve and Janet Atkinson, the former TOBC owners that expired in December 2021. As of March 31, 2022, renewal of this lease has not been finalized and no rent payments have been made. Rental and equipment lease expenses were approximately $ 63,500 and $ 239,600 for the years ended December 31, 2021 and 2020, respectively. Legal The Company has reached a settlement agreement with a former employee. Although the agreement is not finalized the Company has reserved $ 70,000 , representing the entire amount of the settlement. Note 14. COVID-19 Pandemic On March 11, 2020, the World Health Organization declared that the novel coronavirus (COVID-19) had become a pandemic, and on March 13, 2020, the U.S. President declared a National Emergency concerning the disease. Additionally, in March 2020, state governments in the Company’s geographic operating area began instituting preventative shut down measures in order to combat the novel coronavirus pandemic. The coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of the geographical areas in which the Company operates. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to amongst other provisions, provide emergency assistance for individuals, families and businesses affected by the novel coronavirus pandemic for 2020 and into 2021. The Company’s business not being deemed essential resulted in decreased financial performance that may not be indicative of future financial results. Government-mandated closures of businesses and shipping delays have affected our sales and inventory purchases. The Company continues to face uncertainty and increased risks concerning its employees, customers, supply chain and government regulation. In April 2021, the U.S. government has made available the COVID-19 vaccine to most of its population to aid with the pandemic but the long-term effects of this development are yet to be seen. By the end of 2021, the U.S. government has made available a booster of the COVID-19 vaccine to continue the fight against the pandemic. The Company’s sales and supply continue to be adversely affected due to COVID-19 and plans continue to be developed to ensure a prompt response is given to address the effects of the pandemic. F- 26 Note 15. Employee Benefit Plan The Company provides and sponsors a 401(k) plan for its employees. For the years ended December 31, 2021 and 2020, no contributions were made to the plan by the Company. Note 16. Subsequent Events Common Stock On January 24, 2022, the Company issued a total of 125,000 shares of common stock to investors upon the exercise of warrants for total proceeds of $ 250,000 . Gault Seafood Asset Acquisition On February 3, 2022, Coastal Pride entered into an asset purchase agreement with Gault Seafood, LLC, a South Carolina limited liability company (the “Seller”), and Robert J. Gault II, President of the Seller (“Gault”) pursuant to which Coastal Pride acquired all of the Seller’s right, title and interest in and to assets relating to the Seller’s soft shell crab operations, including intellectual property, equipment, vehicles and other assets used in connection with the Business. Coastal Pride did not assume any liabilities in connection with the acquisition. The purchase price for the assets consisted of cash in the amount of $ 359,250 and the issuance of 167,093 shares of common stock of the Company with a fair value of $ 359,250 . Such shares are subject to a leak-out agreement pursuant to which the Seller may not sell or otherwise transfer the shares until February 3, 2023. Coastal Pride also entered into a consulting agreement with Gault under the terms of which Gault will provide consulting services to Coastal Pride at the rate of $ 100 per hour, however, the first 45 days of services will be provided at no cost. Gault also agreed not to compete with Coastal Pride and its affiliates for a period of five years in any market in which Coastal Pride is operating or is considering operating or solicit employees, consultants, customers or suppliers or in any way interfere with Coastal Pride’s business relationships for a five-year period, Gault is also bound by customary confidentiality provisions. The consulting agreement may be terminated by either party upon five days written notice and by Costal Pride immediately for cause. In connection with the asset acquisition, Coastal Pride will lease 9,050 square feet from Gault for $ 1,000 per month under a one-year lease agreement and will continue to operate the acquired soft shell crab operations at such location in Beaufort, South Carolina unless a new facility is earlier completed. Leases On January 1, 2022, the Company entered into a verbal month-to-month lease agreement for its executive offices with an unrelated third party. The Company has paid $ 11,600 to date on this lease. Lubkin and Greco Notes – Subordinated On February 1, 2022, principal outstanding amounts and accrued interest of up to $ 66,553 under the subordinated note with Walter Lubkin Jr., and the subordinated convertible notes with Walter Lubkin III, Tracy Greco and John Lubkin were paid off by the Company. Lind Global Fund II LP investment On January 24, 2022, we entered into a securities purchase agreement with Lind Global Fund II LP, a Delaware limited partnership (“Lind”), pursuant to which the Company issued to Lind a secured, two-year, interest free convertible promissory note in the principal amount of $ 5,750,000 and a five-year warrant to purchase 1,000,000 shares of common stock of the Company at an exercise price of $ 4.50 per share, subject to customary adjustments. The warrant provides for cashless exercise and for full ratchet anti-dilution if the Company issues securities at less than $ 4.50 per share. In connection with the issuance of the note and the warrant, the Company paid a $ 150,000 commitment fee to Lind. F- 27 The outstanding principal under the note is payable commencing July 24, 2022, in 18 consecutive monthly installments of $ 333,333 , at the Company’s option, in cash or shares of common stock at a price (the “Repayment Share Price”) based on 90% of the five lowest volume weighted average prices (“VWAP”) during the 20-days prior to the payment date with a floor price of $ 1.50 per share (the “Floor Price”), or a combination of cash and stock provided that if at any time the Repayment Share Price is deemed to be the Floor Price, then in addition to shares, the Company will pay Lind an additional amount in cash as determined pursuant to a formula contained in the note. In connection with the issuance of the note, the Company granted Lind a first priority security interest and lien on all of its assets, including a pledge on its shares in John Keeler & Co. Inc., its wholly-owned subsidiary, pursuant to a security agreement and a stock pledge agreement with Lind, dated January 24, 2022. Each subsidiary of the Company also granted a second priority security interest in all of its respective assets. The note is mandatorily payable prior to maturity if the Company issues any preferred stock (with certain exceptions described in the note) or, if the Company or its subsidiaries issues any indebtedness other than certain amounts under the current line of credit facility with Lighthouse Financial Corp. The Company also agreed not to issue or sell any securities with a conversion, exercise or other price based on a discount to the trading prices of the Company’s stock or to grant an investor the right to receive additional securities based on future transactions of the Company on terms more favorable than those granted to Lind, with certain exceptions. Commencing on the earlier of July 24, 2022 or the effectiveness of the registration statement covering Lind’s shares, if the Company fails to maintain the listing and trading of its common stock, the note will become due and payable and Lind may convert all or a portion of the outstanding principal at the lower of the then current conversion price and 80 % of the average of the 3-day VWAP during the 20 days prior to delivery of the conversion notice. If a resale registration statement is not effective covering the shares of common stock issuable to Lind in 180 days following January 24, 2022, the note will be in default. Lind was also granted piggyback registration rights. If the Company engages in capital raising transactions, Lind has the right to purchase up to 10 % of the new securities. The note is convertible into common stock at $ 5.00 per share, subject to certain adjustments, at any time after the earlier of six months from issuance or the date the registration statement is effective; provided that no such conversion may be made that would result in beneficial ownership by Lind and its affiliates of more than 4.99 % of the Company’s outstanding shares of common stock. If shares are issued by the Company at less than the conversion price, the conversion price will be reduced to such price. Upon a change of control of the Company, as defined in the note, Lind has the right to require the Company to prepay 10 % of the outstanding principal amount of the note. The Company may prepay the outstanding principal amount of the note, provided Lind may convert up to 25 % of the principal amount of the note at a price per share equal to the lesser of the Repayment Share Price or the conversion price. The Note contains certain negative covenants, including restricting the Company from certain distributions, stock repurchases, borrowing, sale of assets, loans and exchange offers. Upon an event of default as described in the note, the note will become immediately due and payable at a default interest rate of 125 % of the then outstanding principal amount. Upon a default, all or a portion of the outstanding principal amount may be converted into shares of common stock by Lind at the lower of the conversion price and 80 % of the average of the three lowest daily VWAPs. F- 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.