What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-04-17 compared with 2022-03-31 · 267 added, 294 removed, 172 unchanged (77% of the section changed)

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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

The crab meat which we import is processed in 13 plants throughout Southeast Asia.

Our suppliers are primarily via co-packing

relationships, including two affiliated suppliers.

We sell primarily to food service distributors.

We also sell our products to wholesalers,

retail establishments and seafood distributors.

Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon and rainbow trout fingerlings produced under the brand name Little Cedar

Farms for distribution in Canada.

The crab meat which we import is processed in six out of the ten plants available throughout Southeast

Our suppliers are primarily via co-packing relationships, including two affiliated suppliers.

We sell primarily to food service

distributors.

We also sell our products to wholesalers, retail establishments and seafood distributors.

current COVID-19 pandemic has adversely affected our business operations, including disruptions and restrictions on our ability to travel

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markets of many other countries.

As a result of COVID-19, the Company has experienced decreases in revenue for the year ended December

a result of the business interruption experienced to date, management has taken steps to reduce expenses across all areas of its operations,

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of the pandemic on our business.

Company’s common stock was approved to list on the NASDAQ Capital Market under the symbol “BSFC” and began trading

on November 3, 2021.

connection with the NASDAQ uplisting, on November 2, 2021, the Company consummated an underwritten public offering of 800,000 shares

of common stock at a public offering price of $5.00 per share for total gross proceeds of $4 million, before deducting underwriting discounts,

commissions and other expenses.

The over-allotment option to purchase up to an additional 120,000 shares of common stock at the public

offering price was not exercised by the underwriters.

Supply Agreement

On December 3, 2021, TOBC enter into a 30-month agreement supply agreement

with West Coast Fishculture (Lois Lake) Ltd.

(“West Coast”) pursuant to which TOBC will supply rainbow trout fingerlings to

West Coast on an exclusive basis to meet all of West Coast’s stocking requirements with the initial shipments currently scheduled

to begin in June 2022.

West Coast paid $140,000 upon execution of the agreement and TOBC currently estimates supplying a total $1 million

of fingerlings under the agreement.

Asset Acquisition

February 3, 2022, Coastal Pride acquired certain assets relating to Gault’s soft shell crab operations, including intellectual

property, equipment and vehicles used in connection with its soft shell crab operations.

Coastal Pride did not assume any liabilities

in connection with the acquisition.

The purchase price for the assets consisted of $359,250 in cash 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.

audited financial statements included in this annual report for our fiscal year ended December 31, 2021 include a summary of our significant

Notice Letter

Company received a notice letter (the “Notice”) from The NASDAQ Stock Market LLC (“NASDAQ”) notifying the Company

that, based upon the closing bid price of the Company’s common stock for the last 30 consecutive business days, the Company was

not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The NASDAQ

Capital Market (the “Minimum Bid Requirement”).

The Notice has no immediate effect on the continued listing status of the

Company’s common stock on The NASDAQ Capital Market, and, therefore, the Company’s listing remains fully effective.

has until May 16, 2023, to regain compliance.

If the Company does not regain compliance with the Minimum Bid Requirement during the initial

180 calendar day period, the Company may be eligible for an additional 180 calendar day compliance period.

To qualify, the Company would

be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards

for The NASDAQ Capital Market, with the exception of the Minimum Bid Requirement, and would need to provide written notice of its intention

to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

The Company will continue

to actively monitor the closing bid price of its common stock and will seek to regain compliance with all applicable NASDAQ requirements

within the allotted compliance periods.

If the Company does not regain compliance within the allotted compliance periods, including any

extensions that may be granted by NASDAQ, NASDAQ will provide notice that the Company’s common stock will be subject to delisting.

The Company would then be entitled to appeal that determination to a NASDAQ hearings panel.

Company is currently seeking approval from stockholders of an amendment to the Company’s Amended and Restated Certificate of Incorporation

to effect a reverse stock split of its common stock, by a ratio of no less than 1-for-2 and no more than 1-for-50, with the exact ratio

to be determined by its Board of Directors.

There can be no assurance that such approval will be obtained.

Registration Statement

Company filed a registration statement on Form S-3 which was declared effective by the SEC on December 6, 2022 containing a

prospectus registering the offering, issuance and sale of up to $25,000,000 of common stock, preferred stock, debt securities,

warrants, subscription rights and/or units and a sales agreement prospectus covering the offering, issuance and sale of up to

$3,000,000 of common stock that may be issued and sold in an “at the market” offering pursuant to a sales agreement

between the Company and Roth Capital Partners, LLC, as placement agent (“Roth”).

The Company sold an aggregate of

474,106 shares in the offering for net proceeds of $182,982 and 151,284 shares were repurchased from Roth for $76,463.

The offering was terminated on February 2, 2023.

February 10, 2023, the Company entered into an underwriting agreement with Aegis, pursuant to which the Company agreed to sell to

Aegis, in a firm commitment public offering, (i) 8,200,000 shares of common stock for a public offering price of $0.20 per share and

(ii) pre-funded warrants (the “Pre-funded Warrants”) to purchase 800,000 shares of common stock (the “Warrant

Shares”), for a public offering price of $0.199 per Pre-funded Warrant to those purchasers whose purchase of common stock in

the offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning

more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding common stock immediately following the

consummation of the offering.

The Company also granted Aegis an over-allotment option to purchase up to 1,250,000 shares of common

The Pre-funded Warrants have an exercise price of $0.001 per share.

The Pre-funded Warrants were issued in registered form

under a warrant agent agreement between the Company and VStock Transfer, LLC as the warrant agent.

offering closed on February 14, 2023 with gross proceeds to the Company of approximately $1.8 million, before deducting underwriting

discounts and other estimated expenses payable by the Company.

The offering consisted of 9,000,000 shares of common stock and Pre-funded

Warrants to purchase common stock at an exercise price of $0.20 per share (or $0.199 per Pre-funded Warrant after reducing $0.001 attributable

to the exercise price of the Pre-funded Warrants) and was made pursuant to an effective shelf registration statement on Form S-3 (No.

333-268564) previously filed with the SEC on November 25, 2022 and declared effective by the SEC on December 6, 2022, as supplemented

by a preliminary prospectus supplement dated February 9, 2023 and filed with the SEC on February 9, 2023 and a final prospectus supplement

dated February 10, 2023.

January 28, 2023, the Company entered into a one-year supply agreement with Just Food For Dogs, LLC, a California limited liability company

(“JFFD”), and manufacturer of dog food and related products, for the purchase of certain seafood products from the Company.

Under the agreement, JFFD will provide quarterly forecasts of its supply requirements to be filled by the Company.

There is no minimum

order requirement and JFFD can cancel the agreement at any time upon notice to the Company.

JFFD is also entitled to most favored pricing.

The agreement will automatically renew for one-year terms unless terminated by either party within 45 days of the end of the then current

of Operations

audited financial statements included in this Annual Report for the year ended December 31, 2022 include a summary of our significant

accounting policies and should be read in conjunction with the discussion below.

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such adjustments are of a normal recurring nature.

of Operations

following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in

1 unchanged sentence

Ended December 31, 2022 compared to the Year Ended December 31, 2021

Revenue for the year ended December 31, 2021 decreased 29.3% to $9,973,264 as compared to $14,111,368 for the year

ended December 31, 2020 as a result of a decrease in poundage sold due to the impact of the COVID-19 pandemic during the year ended December

Revenue for the year ended December 31, 2022 increased 28.0% to $12,767,145 as compared to $9,973,264 for the year ended December

31, 2021 as a result of an increase in poundage sold during the year ended December 31, 2022.

of Goods Sold.

Cost of goods sold for the year ended December 31, 2021 decreased to $7,979,830 as compared to $12,623,576

for the year ended December 31, 2020.

The decrease is primarily attributable to the revenue decline.

Gross profit for the year ended December 31, 2021 increased to $1,993,434 as compared to gross profit of $1,487,792

for the year ended December 31, 2020.

This increase is attributable to higher market prices and lower cost of goods sold in comparison

to the year ended December 31, 2020.

Profit Margin.

Gross profit margin for the year ended December 31, 2021 increased to 20.0% as compared to 10.5% for the year ended

December 31, 2020.

This increase is attributable to the price increases of our products.

Cost of goods sold for the year ended December 31, 2022 increased to $13,419,133 as compared to $7,979,830 for the

year ended December 31, 2021.

This increase is attributable to price increases in inventory affecting its related cost of goods.

(Loss) Profit .

Gross loss for the year ended December 31, 2022 is $651,988 as compared to gross profit of $1,993,434 for

the year ended December 31, 2021.

This increase is attributable to higher cost of goods sold compared to the cost of goods sold in the

year ended December 31, 2021.

(Loss) Profit Margin.

Gross loss margin for the year ended December 31, 2022 is 5.1% as compared to gross profit margin

of 20.0% for the year ended December 31, 2021.

This decrease is attributable to sales price decreases of our product and higher cost

of inventory purchased.

Commissions expenses decreased to $24,482 for the year ended December 31, 2022 from $42,332 for the year ended December

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and Wages Expense .

Salaries and wages increased to $1,827,607 for the year ended December 31, 2021 as compared to $1,286,879

for the year ended December 31, 2020.

This increase is primarily attributable to the acquisition of TOBC.

Salaries and wages increased to $2,032,457 for the year ended December 31, 2022 as compared to $1,827,607 for

the year ended December 31, 2021.

This increase is primarily attributable to the full year of salaries for TOBC and new employees.

and Amortization .

Depreciation and amortization expense increased to $384,963 for the year ended December 31, 2021 as compared

to $268,341 for the year ended December 31, 2020.

The increase is attributable to an increase in depreciation and amortization as a result

of the TOBC acquisition.

Impairment Loss.

loss increased to $374,300 for the year ended December 31, 2021 as compared to $0 for the year ended December 31, 2020.

increase is attributable to the effects of the COVID-19 pandemic on our business.

Depreciation and amortization expense increased to $584,386 for the year ended December 31, 2022 as compared to

$384,963 for the year ended December 31, 2021.

The increase is attributable to higher depreciation and amortization due to the acquisition

of TOBC and soft-shell crab operations.

Impairment loss increased to $5,797,906 for the year ended December 31, 2022 as compared to $374,300 for the year ended

December 31, 2021.

This increase is attributable to the impairments recognized on TOBC and Coastal Pride for goodwill and long-lived

Operating Expense.

Other operating expenses increased 31.0% to $2,147,873 for the year ended December 31, 2021 as compared

to $1,639,484 for the year ended December 31, 2020.

This increase is primarily attributable to legal and professional fees and stock

compensation expense associated with the TOBC acquisition and NASDAQ uplisting application.

Other operating expenses increased 17.5% to $2,522,764 for the year ended December 31, 2022 as compared to $2,147,873

for the year ended December 31, 2021.

This increase is primarily attributable to legal and professional fees and stock compensation expense

associated with the acquisition of the soft-shell crab operations.

Other income decreased to $154,196 for the year ended December 31, 2022 from $498,791 for the year ended December 31, 2021.

This decrease is primarily attributable to fixed assets sold in 2020 and lower collections received by Coastal Pride from previously

written off receivables.

Fee Expense (Non-Cash) .

Forbearance fee expense decreased to $0 for the year ended December 31, 2021 from $2,655,292 for the year

ended December 31, 2020.

This decrease is the result of a one-time, non-cash expense related to the issuance of common stock for a forbearance

fee in connection with the Kenar Note in 2020.

Interest expense decreased to $320,524 for the year ended December 31, 2021 as compared to $870,303 for the year

This decrease is primarily attributable to the payroll protection program loan forgiveness granted in 2021.

on Conversion of Debt.

Loss on conversion of debt increased to $57,085 for the year ended December 31, 2022 from $0 for the year

ended December 31, 2021.

This decrease is attributable to a decrease in the aggregate principal amount of loans outstanding to $4,009,463

as of December 31, 2021 from $4,788,118 as of December 31, 2020.

The Company had a net loss of $2,605,374 for the year ended December 31, 2021 as compared to the net loss of $4,437,434

for the year ended December 31, 2020.

The decrease in net loss is primarily attributable to reduction in interest and other operating

This increase is attributable to the additional payments made to Lind by the issuance of common stock due to

a decrease in the Repayment Share Price.

Interest expense increased to $1,678,097 for the year ended December 31, 2022 as compared to $320,524 for the year ended

December 31, 2021.

This increase is attributable to the amortization of the Lind convertible debt discount.

The Company had a net loss of $13,194,969 for the year ended December 31, 2022 as compared to a net loss of $2,605,374 for

the year ended December 31, 2021.

The increase in net loss is primarily attributable to an increase in salaries and wages, increases

in depreciation and amortization, recognition of impairment losses for TOBC and Coastal Pride and other expenses in connection with

the acquisition of the soft-shell crab operations and amortization of the Lind convertible debt discount.

and Capital Resources

Company had cash of $1,155,513 as of December 31, 2021, of which $0 was restricted cash.

At December 31, 2021, the Company had a working

capital surplus of $2,831,718 including $960,000 in stockholder loans that were subordinated to its working capital line of credit

as compared to a working capital deficit of $2,527,059 at December 31, 2020, including $1,299,712 in stockholder loans.

The Company’s

primary sources of liquidity consisted of inventory of $2,119,441 and accounts receivable of $1,231,181 at December 31, 2021.

in working capital was due primarily to an increase of inventory of $286,780, accounts receivable of $148,713 and other current

assets of $3,525,736 and the decrease of related party notes payable of $1,534,612.

Company had cash of $9,262 as of December 31, 2022.

At December 31, 2022, the Company had a working capital deficit of $3,013,281, including

$893,000 in stockholder loans that were subordinated to its working capital line of credit, as compared to a working capital surplus

of $2,839,477 at December 31, 2021, including $960,000 in stockholder loans.

The Company’s primary sources of liquidity consisted

of inventory of $4,808,152 and accounts receivable of $813,416 at December 31, 2022.

The decrease in working capital was due primarily

to an increase of inventory of $2,688,711 netted against decreases in accounts receivable of $417,765 and the increase in the maturities

of long-term debt of $3,439,557.

Company has historically financed its operations through the cash flow generated from operations, loans from stockholders and other related

parties as well as a working capital line of credit and the sale of equity in private offerings.

COVID-19 pandemic has caused significant disruptions to the global financial markets.

The full impact of the COVID-19 outbreak continues

to evolve, is highly uncertain and subject to change.

The Company continues to estimate the effects of the COVID-19 outbreak on its operations

or financial condition in the next year.

However, while significant uncertainty remains, the Company believes that the COVID-19 outbreak

will have a negative impact the ability to raise financing and access capital.

(Used in) Provided by Operating Activities.

Cash used in operating activities during the year ended December 31, 2021 was $4,833,029

as compared to cash provided of $4,575,575 for the year ended December 31, 2020, representing a decrease of $9,408,604.

is primarily attributable to a decrease in the net loss of $1,832,060 for the year ended December 31, 2021 as well as a decrease in the

changes in inventory of $6,236,801, receivables of $1,075,699, other current assets of $3,576,243 and other assets of $76,057 netted

against the increase in changes in lease liability of $128,093 and payables of $2,326,839 for the year ended December 31, 2021 compared

with the year ended December 31, 2020.

Cash (Used in) Provided by Investing Activities.

Cash used in investing activities for the year ended December 31, 2021 was $775,445 as compared to $343,237 cash provided by investing

activities for the year ended December 31, 2020.

The increase was attributable to the acquisition of TOBC in the year ended December 31,

Provided by (Used in) Financing Activities.

Cash provided by financing activities for the year ended December 31, 2021 was $6,480,540

as compared to cash used in financing activities of $4,800,635 for the year ended December 31, 2020.

Repayments in the Company’s

related party notes of $1,534,612 and principal payments of long-term debt of $398,385 were partially offset by the proceeds

from the PPP loan of $371,944 for the year ended December 31, 2021, compared to loan payment and loan costs paid on the working capital

line of credit of $5,112,061 for the year ended December 31, 2020.

As of December 31, 2021, the Company had $6,596,500 of net

proceeds from common stock private offerings and $882,800 proceeds from common stock warrants exercised.

of January 27, 2023, the Company issued an aggregate of 322,822 shares of common stock to Roth for the “at the market” offering

pursuant to its sales agreement with Roth.

(Used in) Operating Activities.

Cash used in operating activities during the year ended December 31, 2022 was $3,618,811 as

compared to cash used in operating activities of $4,833,029 for the year ended December 31, 2021, representing a decrease of

The decrease is primarily attributable to an increase in inventory of $3,431,929 netted against the decreases in

deferred income of $62,336, accounts receivable netted against other current assets of $3,448,088 and increase in payables netted

against other current liabilities of $356,399 for the year ended December 31, 2022.

(Used in) Investing Activities.

Cash used in investing activities for the year ended December 31, 2022 was $695,275 as compared

to $773,410 cash used in investing activities for the year ended December 31, 2021.

The decrease was attributable to the smaller

acquisition of the soft-shell crab operations by Coastal Pride for the year ended December 31, 2022 compared to the TOBC acquisition

in the year ended December 31, 2021.

Provided by Financing Activities.

Cash provided by financing activities for the year ended December 31, 2022 was $3,075,400 as compared

to cash provided by financing activities of $6,480,540 for the year ended December 31, 2021.

This decrease is mainly attributable to

private placement offerings in 2021 compared to no such offerings in 2022.

Capital Line of Credit

entered into a $14,000,000 revolving line of credit with ACF on August 31, 2016, the proceeds of which were used to pay off

the prior line of credit, pay new loan costs of approximately $309,000 and provide additional working capital to the Company.

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 and was secured by all of the assets of Keeler & Co.

and Coastal Pride.

The interest rate under the line of

credit was equal to the greater of (i) the 3-month LIBOR rate plus 9.25%, (ii) the prime rate plus 6.0%, and (iii) a fixed rate of 6.5%.

As of December 31, 2021, the interest rate was 0%.

March 31, 2021, Keeler & Co.

and Coastal Pride entered into a loan and security agreement (“Loan Agreement”) with 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.

under the line of credit are represented by a revolving credit note issued to Lighthouse by the Borrowers.

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.

Financial Corp., a North Carolina corporation (“Lighthouse”).

Pursuant to the terms of the Loan Agreement, Lighthouse made

available to Keeler & Co.

and Coastal Pride (together, the “Borrowers”) a $5,000,000 revolving line of credit for a term

of thirty-six months, renewable annually for one-year periods thereafter.

Amounts due under the line of credit are represented by a revolving

credit note issued to Lighthouse by the Borrowers.

As of December 31, 2022, the Company was in compliance with all financial covenants

under the Loan Agreement, except for the requirement to maintain a greater than $50,000 cash flow in the months of July, August, September,

October, November and December.

Lighthouse has notified the Borrowers as to this default but has elected not to exercise its rights and

remedies under the loan documents.

advance rate of the revolving line of credit is 85% with respect to eligible accounts receivable and the lower of 60% of the Borrowers’

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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

As of December 31, 2021, the interest rate was 7.0%.

paid an additional facility fee of $25,000 on March 31, 2022.

In an effort to increase imports to meet customer demand, on January 14,

2022, the maximum inventory advance under the line of credit was adjusted from 50% to 70% until June 30, 2022, 65% until July 31, 2022,

60% until August 31, 2022, 55% until September 30, 2022, at a monthly fee of 0.25% on the portion of the loan in excess of the 50% advance.

On July 29, 2022, the Loan Agreement was further amended to set the annual interest rate on the outstanding principal amount at 4.75%

above the prime rate and to reduce the monthly required cash flow requirements beginning July 31, 2022.

The amendment also updated the

maximum inventory advance under the line of credit to 60% from August 1, 2022 through December 31, 2022 and 50% thereafter.

As of December

31, 2022, the interest rate was 15.25% which includes a default rate of 3%.

line of credit is secured by a first priority security interest on all the assets of each Borrower.

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Keeler, our Chief Executive Officer and Executive Chairman.

As of December 31, 2021, $960,000 of principal remains outstanding and approximately

$75,900 of interest was paid under the notes.

These notes are subordinated to the Lighthouse note.

After satisfaction of the terms of

the subordination, the Company may prepay the notes at any time first against interest due thereunder.

If an event of default occurs

under the notes, interest will accrue at 18% per annum and if not paid within 10 days of payment becoming due, the holder of the note

is entitled to a late fee of 5% of the amount of payment not timely made.

The Company made principal payments during the year ended December

31, 2021 of $339,712.

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 note bears interest at the rate of 18% per annum during

the initial four months which rate will increase to 24% during any extension thereof.

The note may be prepaid in whole or in part without

John Keeler, the Company’s Chief Executive Officer and Executive Chairman pledged 5,000,000 shares of common stock to

secure the Company’s obligations under the note.

The Kenar Note matured on July 26, 2019 and was extended on a month-to-month basis

and on November 19, 2019, the Kenar Note was extended to March 31, 2020 on the same terms and conditions.

May 21, 2020, the Kenar Note was amended to (i) extend the maturity date to 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 therefor, the Company issued 1,021,266 shares of Common Stock to Kenar on May 27, 2020.

The outstanding principal amount

of the note at December 31, 2020 was $872,500.

On April 28, 2021, the Kenar Note was further amended to extend the maturity date to May

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.

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.

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.

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

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.

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.

Protection Program Loan

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.

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 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

loan forgiveness by the SBA through US Century Bank for the full amount which was granted in October 2021.

As of December 31, 2022, approximately $893,000 of principal remains outstanding

and approximately $55,350 of interest was paid under the notes during the year ended December 31, 2022.

These notes are subordinated

to the Lighthouse note.

After satisfaction of the terms of the subordination, the Company may prepay the notes at any time first against

interest due thereunder.

If an event of default occurs under the notes, interest will accrue at 18% per annum and if not paid within

ten days of payment becoming due, the holder of the note is entitled to a late fee of 5% of the amount of payment not timely made.

Company made principal payments of $67,000 during the year ended December 31, 2022.

November 2, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Newbridge Securities

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the Company’s estimated Offering expenses, were approximately $3,600,000.

The Company is using the net proceeds from the

Offering for general corporate purposes, including working capital, operating expenses, and capital expenditures.

The Company may also

use a portion of the net proceeds to acquire or make investments in businesses, products, and offerings, although the Company does not

have agreements or commitments for any material acquisitions or investments at this time.

The Company is using the net proceeds from the Offering

for general corporate purposes, including working capital, operating expenses, and capital expenditures.

The Company may also use a portion

of the net proceeds to acquire or make investments in businesses, products, and offerings, although the Company does not have agreements

or commitments for any material acquisitions or investments at this time.

addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, each director, executive

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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 and expires on November 11, 2024.

Such warrant expires on November 11, 2024.

Global Fund II LP investment

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

January 24, 2022, the Company entered into a securities purchase agreement with Lind Global Fund II LP, a Delaware limited partnership

(“Lind”), pursuant to which the Company issued 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 and approximately $87,000 of debt issuance costs.

outstanding principal under the note is payable commencing July 24, 2022, in 18 consecutive monthly installments of $333,333, at the

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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

the Company will pay Lind an additional amount in cash as determined pursuant to a formula contained in the note.

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.

connection with the issuance of the note, the Company granted Lind a first priority security interest and lien on all of its assets,

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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.

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.

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.

The Company also agreed not to issue or sell any securities with a conversion, exercise or other price based on a discount

to the trading prices of the Company’s stock or to grant the right to receive additional securities based on future transactions

of the Company on terms more favorable than those granted to Lind, with certain exceptions.

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.

the Company engages in capital raising transactions, Lind has the right to purchase up to 10% of the new securities.

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principal amount of the note.

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 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.

Note contains certain negative covenants, including restricting the Company from certain distributions, stock repurchases, borrowing,

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of common stock by Lind at the lower of the conversion price and 80% of the average of the three lowest daily VWAPs.

the year ended December 31, 2022, the Company made principal payments on the note totaling $1,666,666 through the issuance of an

aggregate of 666,666 shares of common stock and cash payments of $1,175,973 which included $899,999 principal payments and

additional payments requested by Lind pursuant to the terms of the note.

Accounting Policies and Estimates

of Goodwill and Other Intangible Assets

and other intangible assets include the cost of the acquired business in excess of the fair value of the tangible net assets recorded

of Goodwill and Long-Lived Assets

and long-lived assets include the cost of the acquired business in excess of the fair value of the net assets recorded

in connection with an acquisition.

Other intangible assets include customer relationships, non-compete agreements, and trademarks.

goodwill, our policy is to assess for impairment at year-end.

For other intangible assets with definite lives, we assess for impairment

Long-lived assets include customer relationships, non-compete agreements, trademarks and fixed assets.

goodwill, our policy is to assess for impairment at year-end or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

For long-lived assets, we assess for impairment

only if events occur that indicate that the carrying amount of an asset may not be recoverable.

we assess the recoverability of goodwill and indefinite-lived intangibles by determining whether the fair values exceed the carrying

values of these assets.

Our testing may be performed utilizing either a qualitative or quantitative assessment;

however, if a qualitative

assessment is performed and we determine that the fair value of a reporting unit is more likely than not (i.e., a likelihood of more

than 50 percent) to be less than its carrying amount, a quantitative test is performed.

we assess the recoverability of goodwill and long-lived assets by determining whether the fair values exceed the carrying values of

these assets.

For long-lived assets, we use the income method, which uses a forecast of the expected future net cash flows

associated with each asset.

These cash flows are then adjusted to present value by applying an appropriate discount rate that

reflects the risk factors associated with the cash flow streams.

Our goodwill testing may be performed utilizing either a

qualitative or quantitative assessment;

however, if a qualitative assessment is performed and we determine that the fair value of a

reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, a

quantitative test is performed.

using a quantitative test, we arrive at our estimates of fair value using a discounted cash flow analysis.

Our assessment for impairment

of goodwill and indefinite-lived intangible assets compared the fair value of the reporting unit to the corresponding carrying

If the carrying value of the asset exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.

Based on our year-end 2021 annual impairment analysis for goodwill, trademarks and non-compete agreements, we concluded that it is more

likely than not that the fair value of goodwill, trademarks and non-compete agreements exceeded its carrying value.

No impairment was

recorded for goodwill, trademarks and non-compete agreements.

For customer relationships, the analysis concluded an impairment of $374,300

as a result of the COVID-19 pandemic during year-end December 31, 2021.

Our assessment for

impairment of goodwill and long-lived assets compared the fair value of the reporting unit to the corresponding carrying value.

the carrying value of the asset exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.

impairment analysis for goodwill and long-lived assets was completed for Coastal Pride and TOBC due to the lower forecasted revenues

and gross losses recognized in the year ended December 31, 2022 as a result of the effect of the COVID-19 pandemic on the Company’s business.

year-end 2022 annual impairment analysis for goodwill and long-lived assets, we recorded an impairment loss on customer

relationships, trademarks, non-compete agreements and fixed assets of $1,595,677, $1,006,185, $78,116 and $1,873,619, respectively,

related to Coastal Pride and TOBC.

For goodwill, the analysis concluded an impairment of $1,244,309 related to Coastal Pride and

TOBC for year ended December 31, 2022.

fair value conclusions as of December 31, 2022 are highly sensitive to changes in the assumptions used in the income approach, which

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and geo-political conditions, and the timing and success of the implementation of current strategic initiatives.

The impact of the COVID-19

pandemic on estimated future cash flows is uncertain and will largely depend on the outcome of future events, which could result in goodwill

impairments going forward.

Substantially

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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 market based on its assessment of market conditions, inventory turnover and current stock levels.

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 recorded an inventory allowance of $0 for the year ended December 31, 2021 as compared

to approximately $71,400 for the year ended December 31, 2020.

For the year ended December 31, 2022, the Company recorded an inventory adjustment to reduce the carrying value of inventory to the lower

of cost or net realizable value in the amount of $743,218 which was charged to cost of goods sold.

Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as

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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.

Fresh and steelhead salmon and rainbow trout fingerlings produced by TOBC under the brand name Little Cedar Farms for distribution in

We sell primarily to food service distributors.

We also sell our products to wholesalers, retail establishments and seafood distributors.

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unless the payment is for distinct goods or services received from the customer.

Adopted Accounting Pronouncements

2019-12 Income Taxes (Topic 740)

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.

Company determined that the standard has no impact on its consolidated financial statements and related disclosures.

Accounting Pronouncements

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s

Own Equity (Subtopic 815-40).

August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40).

The ASU simplifies the accounting for certain financial instruments with characteristics

of liabilities and equity.

The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments

and made certain disclosure amendments to improve the information provided to users.

In addition, the FASB amended the derivative guidance

for the “own stock” scope exception and certain aspects of the earnings per share (“EPS”) guidance.

The guidance is effective for smaller reporting

companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is

permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

Company adopted the ASU effective January 1, 2022 and applied the provisions of the ASU to the convertible note issued during the

year ended December 31, 2022.

2016-13 Financial Instruments – Credit Losses (Topic 326)

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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.

Measurement of Credit Losses on

Financial Instruments, which requires entities to use a forward-looking, expected loss model to estimate credit losses.

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.

“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 years 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.

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.

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 years 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.

As this ASU became effective on January 1, 2023,

the Company continues to evaluate the impact of these amendments to the Company’s financial position and results of operations

and currently expects no material impact of the adoption of the amendments on the Company’s consolidated financial

Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis