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, 2022 and 2021 F-2 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021 F-3 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021 F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 F-5 Notes to Consolidated Financial Statements F-6 44 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, 2022 and 2021, 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, 2022 and 2021, 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 April 17, 2023 F- 1 Blue Star Foods Corp. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2022 DECEMBER 31, 2021 ASSETS CURRENT ASSETS Cash and cash equivalents $ 9,262 $ 1,155,513 Accounts receivable, net 813,416 1,231,181 Inventory, net 4,808,152 2,119,441 Advances to related parties 218,525 1,422,750 Other current assets 671,933 3,702,661 Total Current Assets 6,521,288 9,631,546 RELATED PARTY LONG-TERM RECEIVABLE 435,545 455,545 FIXED ASSETS, net 120,400 1,904,403 RIGHT OF USE ASSET 197,540 71,128 INTANGIBLE ASSETS, net Trademarks - 1,125,074 Customer relationships - 2,082,757 Non-compete agreements - 104,927 Total Intangible Assets - 3,312,758 GOODWILL - 445,395 ADVANCES TO RELATED PARTY 1,299,984 - OTHER ASSETS 103,720 124,634 TOTAL ASSETS $ 8,678,477 $ 15,945,409 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable and accruals $ 2,401,243 $ 1,794,223 Working capital line of credit 1,776,068 2,368,200 Deferred income 47,078 109,414 Current maturities of long-term debt, net of discounts 3,439,557 - Current maturities of lease liabilities 57,329 30,583 Current maturities of related party long-term notes 100,000 475,000 Loan payable 29,413 - Related party notes payable - subordinated 893,000 960,000 Other current liabilities 790,881 1,054,649 Total Current Liabilities 9,534,569 6,792,069 LONG-TERM LIABILITIES Lease liability, net of current portion 139,631 40,109 Debt, net of current portion and discounts - 31,263 Related party notes, net of current portion 250,000 175,000 TOTAL LIABILITIES 9,924,200 7,038,441 STOCKHOLDERS’ EQUITY Series A 8 % cumulative convertible preferred stock, $ 0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of December 31, 2022, and 0 shares issued and outstanding as of December 31, 2021 - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 26,766,425 shares issued and outstanding as of December 31, 2022, and 24,671,318 shares issued and outstanding as of December 31, 2021 2,704 2,480 Additional paid-in capital 28,326,546 25,102,879 Accumulated other comprehensive loss ( 235,853 ) ( 54,240 ) Accumulated deficit ( 29,339,120 ) ( 16,144,151 ) TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY ( 1,245,723 ) 8,906,968 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 8,678,477 $ 15,945,409 The accompanying notes are an integral part of these audited consolidated financial statements F- 2 Blue Star Foods Corp. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2022 2021 Year Ended December 31 2022 2021 REVENUE, NET $ 12,767,145 $ 9,973,264 COST OF REVENUE 13,419,133 7,979,830 GROSS (LOSS) PROFIT ( 651,988 ) 1,993,434 COMMISSIONS 24,482 42,332 SALARIES AND WAGES 2,032,457 1,827,607 DEPRECIATION AND AMORTIZATION 584,386 384,963 IMPAIRMENT LOSS 5,797,906 374,300 OTHER OPERATING EXPENSES 2,522,764 2,147,873 LOSS FROM OPERATIONS ( 11,613,983 ) ( 2,783,641 ) OTHER INCOME 154,196 498,791 LOSS ON CONVERSION OF DEBT ( 57,085 ) - INTEREST EXPENSE ( 1,678,097 ) ( 320,524 ) NET LOSS ( 13,194,969 ) ( 2,605,374 ) DIVIDEND ON PREFERRED STOCK - 28,260 NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ ( 13,194,969 ) $ ( 2,633,634 ) COMPREHENSIVE LOSS: CHANGE IN FOREIGN CURRENCY TRANSLATION ADJUSTMENT ( 181,613 ) ( 54,240 ) COMPREHENSIVE LOSS ( 181,613 ) ( 54,240 ) COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. $ ( 13,376,582 ) $ ( 2,659,614 ) Loss per common share: Net loss per common share - basic and diluted $ ( 0.52 ) $ ( 0.12 ) Weighted average common shares outstanding - basic and diluted 25,158,555 21,708,576 The accompanying notes are an integral part of these audited consolidated financial statements F- 3 Blue Star Foods Corp. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY YEAR ENDED DECEMBER 31, 2022 Shares Amount Shares Amount Capital Deficit Income (Deficit) Series A Preferred Stock $.0001 par value Common Stock $.0001 par value Additional Paid-in Accumulated Accumulated Other Comprehensive Total Stockholder’s Equity Shares Amount Shares Amount Capital Deficit Income (Deficit) December 31, 2020 1,413 - 19,580,721 1,958 13,488,836 ( 13,510,517 ) - ( 19,723 ) Stock based compensation - - - - 530,506 - - 530,506 Common stock issued to settle related party interest - - 122,217 13 266,869 - - 266,882 Common stock issued for cash - - 2,300,000 230 6,596,270 - - 6,596,500 Common stock issued for service - - 246,457 37 644,183 - - 644,220 Common stock issued for Taste of BC acquisition held in escrow - - 344,957 34 689,880 - - 689,914 Common stock issued for Taste of BC Acquisition - - 987,741 99 1,975,384 - - 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 Net Loss - - - - - ( 2,605,374 ) - ( 2,605,374 ) Comprehensive loss - - - - - - ( 54,240 ) ( 54,240 ) December 31, 2021 - - 24,671,318 2,480 25,102,879 ( 16,144,151 ) ( 54,240 ) 8,906,968 Stock based compensation - - - - 187,385 - - 187,385 Warrants issued on long-term debt - - - - 1,035,253 - - 1,035,253 Common stock issued for service - - 695,776 81 667,917 - - 667,998 Common stock issued for asset acquisition - - 167,093 17 359,233 - - 359,250 Common stock issued from exercise of warrants - - 125,000 13 249,987 - - 250,000 Common stock issued for note payment - - 666,666 69 547,708 - - 547,777 Common stock issued to settle related party notes payable and accrued interest - - 440,572 44 176,184 - - 176,228 Net Loss - - - - - ( 13,194,969 ) - ( 13,194,969 ) Cumulative translation adjustment - - - - - - ( 181,613 ) ( 181,613 ) December 31, 2022 - - 26,766,425 2,704 28,326,546 ( 29,339,120 ) ( 235,853 ) ( 1,245,723 ) The accompanying notes are an integral part of these audited consolidated financial statements F- 4 Blue Star Foods Corp. CONSOLIDATED STATEMENTS OF CASH FLOWS 2022 2021 Year Ended December 31 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ ( 13,194,969 ) $ ( 2,605,374 ) Adjustments to reconcile net loss to net cash (used in) operating activities: Stock based compensation 187,385 530,506 Common stock issued for service 667,998 644,220 PPP loan forgiveness - ( 371,944 ) Impairment of goodwill 1,244,309 - Impairment of intangible assets 2,679,978 374,300 Impairment of fixed assets 1,873,619 - Depreciation of fixed assets 231,465 104,619 Amortization of intangible assets 315,420 244,879 Amortization of debt discounts 1,416,120 37,500 Lease expense 58,723 28,344 Write down of inventory 743,218 - Bad debt expense 405 4,689 Changes in operating assets and liabilities: Accounts receivables 417,360 ( 133,043 ) Inventories ( 3,431,929 ) ( 213,328 ) Advances to related parties ( 95,759 ) ( 122,766 ) Other current assets 3,030,728 ( 3,512,928 ) Right of use liability ( 58,867 ) ( 28,489 ) Other assets 1,922 ( 61,205 ) Accounts payable and accruals 620,167 453,615 Deferred income ( 62,336 ) 109,414 Other current liabilities ( 263,768 ) ( 316,038 ) Net Cash (Used in) Operating Activities ( 3,618,811 ) ( 4,833,029 ) CASH FLOWS FROM INVESTING ACTIVITIES: Net cash paid for acquisition ( 398,482 ) ( 790,593 ) Proceeds from sale of fixed assets - 17,183 Purchases of fixed assets ( 296,793 ) - Net Cash (Used in) Investing Activities ( 695,275 ) ( 773,410 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from common stock offering - 6,596,500 Proceeds from common stock warrants exercised 250,000 882,800 Proceeds from working capital line of credit 12,552,008 10,993,584 Proceeds from PPP loan - 371,944 Proceeds from convertible debt 4,762,855 - Repayments of working capital line of credit ( 13,144,141 ) ( 10,431,291 ) Principal payments of convertible debt ( 1,118,888 ) - Repayments of related party notes payable ( 201,434 ) ( 1,534,612 ) Principal payments of long-term debt - ( 398,385 ) Payment of loan costs ( 25,000 ) - Net Cash Provided by Financing Activities 3,075,400 6,480,540 Effect of Exchange Rate Changes on Cash 92,435 ( 56,275 ) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 1,146,251 ) 817,826 CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD 1,155,513 337,687 CASH AND CASH EQUIVALENTS – END OF PERIOD $ 9,262 $ 1,155,513 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Common stock issued to settle payable and accrued interest 176,228 - Operating lease assets recognized in exchange for operating lease liabilities 185,135 - Warrants issued for convertible debt 1,035,253 - Common stock issued for asset acquisition 359,250 - Common stock issued for partial settlement of note payable 547,777 - Series A preferred 8% dividend issued in common stock - 28,260 Preferred shares conversion to common stock - 71 Common stock issued for interest payment - 266,882 Common stock issued for acquisition - 2,665,397 Related party notes recognized from business acquisition - 162,400 Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 306,045 $ 537,533 The accompanying notes are an integral part of these audited consolidated financial statements F- 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 and 2021 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 and rainbow trout fingerlings produced under the brand name Little Cedar Farms for distribution in Canada. On November 26, 2019, Keeler & Co., a 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” or “Coastal Pride”), 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. 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 and rainbow trout fingerlings to distributors in Canada. F- 6 On February 3, 2022, Coastal Pride entered into an asset purchase agreement with Gault Seafood, LLC, a South Carolina limited liability company (“Gault Seafood”), and Robert J. Gault II, President of Gault Seafood (“Gault”) pursuant to which Coastal Pride acquired all of the Seller’s right, title and interest in and to assets relating to Gault Seafood’s soft-shell crab operations, including intellectual property, equipment, vehicles and other assets used in connection with the soft-shell crab business. Coastal Pride did not assume any liabilities in connection with the acquisition. The purchase price for the assets consisted of a cash payment in the amount of $ 359,250 and the issuance of 167,093 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 Gault Seafood may not sell or otherwise transfer the shares until February 3, 2023. 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, Keeler & Co, Inc. a wholly owned subsidiary, Coastal Pride Seafood, LLC (“Coastal Pride”), a wholly owned subsidiary of 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 net assets recorded in connection with an acquisition. Other intangible assets include customer relationships, non-compete agreements, and trademarks. The Company reviews its long-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, an annual impairment analysis for goodwill was completed for Coastal Pride and TOBC due to the lower forecasted revenues and gross losses recognized for the year ended December 31, 2022 as a result of the effect of the COVID-19 pandemic on the Company’s business, and the Company recognized an impairment loss on goodwill of $ 1,244,309 related to Coastal Pride and TOBC for the year ended December 31, 2022. No impairment was recognized for the year ended December 31, 2021. Long-lived Assets Management reviews long-lived assets, including finite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life on an undiscounted basis. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Fair value estimates are completed using a discounted cash flow analysis. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. 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, an annual impairment analysis for long-lived assets was completed for Coastal Pride and TOBC due to the lower forecasted revenues and gross losses recognized for the year ended December 31, 2022 as a result of the effect of the COVID-19 pandemic on the Company’s business, and the Company recognized an impairment on customer relationships, trademarks and non-compete agreements of $ 1,595,677 , $ 1,006,185 and $ 78,116 , respectively, and an impairment on fixed assets of $ 1,873,619 for the year ended December 31, 2022. An impairment loss on customer relationships intangible asset of $ 374,300 was recognized for the year ended December 31, 2021. F- 7 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, 2022 and 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. 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, 2022, and 2021, the Company recorded sales return, allowances, discounts and refund liability of approximately $ 94,000 and $ 66,000 , respectively. There was no allowance for bad debt recorded during the years ended December 31, 2022 and 2021. 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. 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. The Company’s inventory as of December 31, 2022 and December 31, 2021 consists of: Schedule of Inventory December 31, 2022 December 31, 2021 Inventory purchased for resale $ 3,052,518 $ 863,967 Feeds and eggs processed 156,984 72,733 In-transit inventory 1,598,650 1,182,741 Inventory allowance - - Inventory, net $ 4,808,152 $ 2,119,441 F- 8 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, 2022, and December 31, 2021, the balance due from Bacolod for future shipments was approximately $ 1,300,000 . No new purchases have been made from Bacolod since November 2020. There was no cost of revenue related to inventories purchased from Bacolod recorded for the years ended December 31, 2022 and 2021. 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. 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. For the year ended December 31, 2022, an impairment was recorded related to Coastal Pride and TOBC fixed assets of $ 1,873,619 . 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 have a functional currency other than the U.S. Dollar. The TOBC results were translated into U.S. Dollars at exchange rates in effect at the end of each reporting period. TOBC’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 for TOBC as presented for December 31, 2022 was 0.80 Canadian Dollars to U.S. Dollars and for December 31, 2021 was 0.79 Canadian Dollars to U.S. Dollars . 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 $ 60,100 and $ 54,200 for the years ended December 31, 2022 and December 31, 2021, respectively. F- 9 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 and rainbow trout fingerlings produced by TOBC under the brand name Little Cedar Farms for distribution in Canada. We sell primarily to food service distributors. The Company also sells its products to wholesalers, retail establishments and seafood distributors. To determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company which includes a required line of credit approval process, (2) identify the performance obligations in the contract which includes shipment of goods to the customer 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. Deferred Income The Company recognizes deferred income for advance payments received from customers for which sales have not yet occurred. Leases The Company accounts for its leases under ASC 842, Leases , which requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. The Company elected the practical expedients permitted under the transition guidance that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. The Company did not have any finance leases as of December 31, 2022. The Company’s leases generally have terms that range from three years for equipment and six to seven years for real property. The Company elected the accounting policy to include both the lease and non-lease components of its agreements as a single component and accounts for them as a lease. Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the 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. F- 10 When the Company has 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 the Company will exercise the option, it considers 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, 2022 Assets Operating lease assets $ 197,540 Liabilities Current $ 57,329 Operating lease liabilities Noncurrent Operating lease liabilities $ 139,631 Supplemental cash flow information related to leases were as follows: Schedule of Supplemental Cash Flow Information Related to Leases Year Ended December 31, 2022 Cash used in operating activities: Operating leases $ 58,723 ROU assets recognized in exchange for lease obligations: Operating leases $ 185,135 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, 2022 Weighted-average remaining lease term Operating leases 3.70 years Weighted-average discount rate Operating leases 6.7 % Maturities of lease liabilities as of December 31, 2022, were as follows: Schedule of Maturities of Lease Liabilities Operating Leases 2023 $ 70,241 2024 58,827 2025 43,767 2026 43,767 2027 10,942 Total lease payments $ 227,544 Less: amount of lease payments representing interest ( 30,584 ) Present value of future minimum lease payments $ 196,960 Less: current obligations under leases $ ( 57,329 ) Non-current obligations $ 139,631 F- 11 Advertising The Company expenses the costs of advertising as incurred. Advertising expenses which are included in Other Operating Expenses were approximately $ 5,400 and $ 5,700 , for the years ended December 31, 2022 and 2021, respectively. Use of Estimates The preparation of financial statements in conformity with U.S. 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 nine customers which accounted for approximately 59 % of revenue during the year ended December 31, 2022. One customer accounted for 36 % of revenue during the year ended December 31, 2022. 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 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 five major suppliers located in the United States, Indonesia, Vietnam and China and which accounted for approximately 76 % of the Company’s total purchases during the year ended December 31, 2022. The Company’s largest supplier is located in Indonesia and accounted for 29 % of the Company’s total purchases in the year ended December 31, 2022. 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. 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 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. F- 12 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. The Company’s financial instruments include cash, accounts receivable, accounts payable, accrued expenses, and debt obligations. The Company believes the carrying values of cash, accounts receivable, accounts payable and accrued expenses approximate their fair values because they are short term in nature or payable on demand. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. 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, 2022 and 2021. 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, 2022 and 2021, 4,121,633 and 3,431,250 options may be exercised, respectively, and 2,413,500 and 1,538,500 warrants are exercisable, respectively. As there was a net loss for the years ended December 31, 2022 and December 31, 2021, 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 accounts 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. As of December 31, 2022, and 2021, there was approximately $ 67,000 and $ 143,300 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. F- 13 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, 2022 or 2021. Recent Accounting Pronouncements 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). In 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 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. The 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. ASU 2016-13 Financ ial 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 Securities and Exchange Commission 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. 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 statements. 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 $ 13,194,969 , has an accumulated deficit of $ 29,339,120 and working capital deficit of $ 3,013,281 , inclusive of $ 893,000 in subordinated stockholder debt. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, execute on its business plan to acquire complimentary companies, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. F- 14 Note 4. Other Current Assets Other current assets totaled $ 671,933 and $ 3,702,661 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, approximately $ 441,000 of the balance was related to prepaid inventory to the Company’s suppliers. The remainder of the balance was 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 2022 2021 Computer equipment $ 97,624 $ 90,707 RAS system 2,089,909 1,963,734 Automobiles 122,715 23,188 Leasehold improvements 89,055 4,919 Total 2,399,303 2,082,548 Less: Accumulated depreciation and impairment ( 2,278,903 ) ( 178,145 ) Fixed assets, net $ 120,400 $ 1,904,403 For the years ended December 31, 2022 and 2021, depreciation expense totaled approximately $ 231,000 and $ 104,000 , respectively. Note 6. Goodwill and Intangible Assets, Net The following table sets forth the changes in the carrying amount of the Company’s goodwill for the years ended December 31, 2022 and 2021. Schedule of Goodwill 2022 2021 Balance, January 1 $ 445,395 $ 445,395 Acquisition of TOBC 836,669 - Impairment ( 1,282,064 ) - Balance, December 31 $ - $ 445,395 The following table sets forth the components of the Company’s intangible assets at December 31, 2022: Schedule of Intangible Assets Amortization Period (Years) Cost Accumulated Amortization and Impairment Net Book Value Intangible Assets Subject to amortization Trademarks – Coastal Pride 14 $ 850,000 $ ( 850,000 ) $ - Trademarks – TOBC 15 406,150 ( 406,150 ) - Customer Relationships – Coastal Pride 12 1,486,832 ( 1,486,832 ) - Customer Relationships – TOBC 15 592,979 ( 592,979 ) - Non-Compete Agreements – Coastal Pride 3 40,000 ( 40,000 ) - Non-Compete Agreements – TOBC 4 121,845 ( 121,845 ) - Total $ 3,497,806 $ ( 3,497,806 ) $ - The following table sets forth the components of the Company’s intangible assets at December 31, 2021: Amortization Period (Years) Cost Accumulated Amortization and Impairment 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 For the years ended December 31, 2022 and 2021, amortization expense of intangible assets totaled approximately $ 315,000 and $ 245,000 , respectively. F- 15 Note 7. Debt Working Capital Line of Credit On March 31, 2021, Keeler & Co. and Coastal Pride entered into a loan and security agreement (“Loan Agreement”) with Lighthouse Financial Corp., a North Carolina corporation (“Lighthouse”). Pursuant to the terms of the Loan Agreement, Lighthouse made available to Keeler & Co. and Coastal Pride (together, the “Borrowers”) a $ 5,000,000 revolving line of credit for a term of thirty-six months, renewable annually for one-year periods thereafter. Amounts due under the line of credit are represented by a revolving credit note issued to Lighthouse by the Borrowers. The advance rate of the revolving line of credit is 85% with respect to eligible accounts receivable and the lower of 60% of the Borrowers’ eligible inventory, or 80% of the net orderly liquidation value, subject to an inventory sublimit of $2,500,000. The inventory portion of the loan will never exceed 50% of the outstanding balance. Interest on the line of credit is the prime rate (with a floor of 3.25%), plus 3.75%. 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 . F- 16 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, 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. 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. Cash proceeds from the working capital line of credit totaled $ 12,552,008 and cash payments to the working capital line of credit totaled $ 13,144,141 . The outstanding balance owed to Lighthouse as of December 31, 2022 was $ 1,776,068 . John Keeler Promissory Notes – Subordinated The Company had unsecured promissory notes outstanding to its stockholder of approximately $ 893,000 and $ 960,000 as of December 31, 2022 and 2021, 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, 2022, and 2021 of $ 67,000 and $ 339,712 , respectively. Lind Global Fund II LP investment On January 24, 2022, the Company entered into a securities purchase agreement with Lind Global Fund II LP, a Delaware limited partnership (“Lind”), pursuant to which the Company issued 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. The Company recorded a total of $ 2,022,397 debt discount at issuance of the debt, including original issuance discount of $ 750,000 , commitment fee of $ 150,000 , $ 87,144 debt issuance cost, and $ 1,035,253 related to the fair value of warrants issued. Amortization expense recorded in interest expense totaled $ 1,378,620 during the year ended December 31, 2022. The unamortized discount on the note totaled $ 643,777 as of December 31, 2022. 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. The Company also agreed not to issue or sell any securities with a conversion, exercise or other price based on a discount to the trading prices of the Company’s stock or to grant the right to receive additional securities based on future transactions of the Company on terms more favorable than those granted to Lind, with certain exceptions. If the Company 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. F- 17 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. During 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. First West Credit Union CEBA Loan On June 24, 2021, the Company assumed a commercial term loan with First West Credit Union Canada Emergency Business Account (“CEBA”) in the principal amount of CAD$ 60,000 in connection with the acquisition of TOBC. The loan initially bears no interest and is due on December 31, 2025. The borrower may prepay all or part of the loan commencing November 1, 2022 and, if by December 31, 2022 the Company had paid 75% of the loan amount, the remaining 25% will be forgiven as per the loan agreement. If less than 75% of the loan amount is outstanding by December 31, 2022 , the then outstanding balance will be converted to interest only monthly payments at 5.0 %. On October 19, 2022, the loan was amended to extend the loan forgiveness date and interest-free period from December 31, 2022 to December 31, 2023. 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 Pride 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. Interest expense for the Walter Lubkin Jr. note totaled approximately $ 18,000 and $ 19,700 during the years ended December 31, 2022, and 2021, respectively. On October 8, 2021, $ 34,205 of the outstanding principal and accrued interest to date was paid on the note by the Company. For the year ended December 31, 2022, $ 38,799 of the outstanding principal and accrued interest was paid in cash and $ 104,640 of the outstanding principal and accrued interest was paid in shares of common stock of 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. Interest expense for the Walter Lubkin III note totaled approximately $ 1,700 and $ 3,300 during the years ended December 31, 2022, and 2021, respectively. On October 8, 2021, $ 16,257 of the outstanding principal and accrued interest to date was paid on the note by the Company. For the year ended December 31, 2022, all of the outstanding principal and accrued interest to date was paid through a combination of cash and shares of common stock issued on the note by the Company totaling $ 75,707 . 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. Interest expense for the Tracy Greco note totaled approximately $ 1,400 and $ 2,700 during the years ended December 31, 2022, and 2021, respectively. On October 8, 2021, $ 13,209 of the outstanding principal and accrued interest to date was paid on the note by the Company. For the year ended December 31, 2022, all of the outstanding principal and accrued interest to date was paid through a combination of cash and shares of common stock issued on the note by the Company totaling $ 61,511 . 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. Interest expense for the John Lubkin note totaled approximately $ 1,000 and $ 1,900 during the years ended December 31, 2022, and 2021, respectively. On October 8, 2021, $ 9,399 of the outstanding principal and accrued interest to date was paid on the note by the Company. For the year ended December 31, 2022, all of the outstanding principal and accrued interest to date was paid through a combination of cash and shares of common stock issued on the note by the Company totaling $ 43,771 . F- 19 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 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 will be 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. 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. 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. F- 20 Payroll Protection Program Loans 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. Acquisitions 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, including goodwill. 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 592,979 Non-compete agreements 121,845 Goodwill 836,669 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. F- 21 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. Pro Forma Information The following pro forma information assumes the TOBC acquisition occurred on January 1, 2021. For the TOBC acquisition, depreciation and amortization has 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 Revenue $ 12,029,325 Net loss attributable to common shareholders $ ( 3,102,683 ) Basic and diluted loss per share $ ( 0.14 ) The information included in the pro forma amounts is derived from historical information obtained from the Sellers of TOBC. Acquisition of Gault Seafood On February 3, 2022, Coastal Pride entered into an asset purchase agreement with Gault Seafood and Robert J. Gault II pursuant to which Coastal Pride acquired all of Gault Seafood’s right, title and interest in and to assets relating to Gault Seafood’s soft-shell crab operations, including intellectual property, equipment, vehicles and other assets used in connection with the soft-shell crab operations. Coastal Pride did not assume any liabilities in connection with the acquisition. The purchase price for the assets consisted of a cash payment in the amount of $ 359,250 and the issuance of 167,093 shares of common stock of the Company with a fair value of $ 359,250 . The acquisition was accounted for as an asset acquisition. Fair Value of Consideration Transferred and Recording of Assets Acquired The following table summarizes the acquisition date fair value of the consideration paid and identifiable assets acquired. Schedule of Fair Value of Assets Acquired and Liabilities Assumed Consideration Paid: Cash $ 359,250 Common stock, 167,093 shares of common stock of the Company 359,250 Transaction costs 39,231 Fair value of total consideration $ 757,731 Purchase Price Allocation: Fixed assets acquired $ 146,600 Customer relationships 611,131 Fair market value of net assets acquired $ 757,731 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, 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. F- 22 Common Stock The Company is authorized to issue 100,000,000 shares of common stock at a par value of $ 0.0001 and had 26,766,425 and 24,671,318 shares of common stock issued and outstanding as of December 31, 2022 and 2021, respectively. 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 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 ended 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. 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 July 21, 2021, the Company entered into a consulting agreement as amended on November 10, 2021, with Intelligent Investments I, LLC (“Intelligent”). In consideration for consulting services, the Company agreed to issue Intelligent a total of 52,326 shares of common stock with a fair value of $ 171,106 which is amortized to expense over the term of the agreement. The Company recognized stock compensation expense of $ 136,885 for the year ended December 31, 2022 in connection with these shares. F- 23 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 December 31, 2021, the Company issued 18,405 shares of common stock 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. On January 24, 2022, the Company issued 125,000 shares of common stock to an investor upon the exercise of warrants for total proceeds of $ 250,000 . On February 3, 2022, the Company issued 167,093 shares of common stock with a fair value of $ 359,250 to Gault Seafood as partial consideration for the purchase of certain of its assets. On March 31, 2022, the Company issued 15,385 shares of common stock to Intelligent Investments I LLC, with a fair value of $ 30,000 , for legal services provided to the Company. On March 31, 2022, the Company issued 5,000 shares of common stock with a fair value of $ 9,750 to TraDigital Marketing Group for consulting services provided to the Company. On April 1, 2022, the Company issued 2,871 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital LLC (“Clear Think Capital”) for consulting services provided to the Company. On April 4, 2022, the Company issued 9,569 shares of common stock with a fair value of $ 20,000 to SRAX, Inc. for consulting services provided to the Company which is amortized to expense over the term of the agreement. The Company recognized stock compensation expense of $ 15,000 for the year ended December 31, 2022 in connection with these shares. On April 5, 2022, the Company issued an aggregate of 24,816 shares of common stock with a fair value of $ 156,341 to Newbridge Securities Corporation and its affiliates for consulting services provided to the Company. On May 1, 2022, the Company issued 3,922 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. On June 1, 2022, the Company issued 4,444 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. F- 24 On June 3, 2022, the Company issued 10,000 shares of common stock with a fair value of $ 13,800 to TraDigital Marketing Group for consulting services provided to the Company. On June 30, 2022, the Company issued 24,194 shares of common stock to Intelligent Investments I LLC, with a fair value of $ 30,000 , for legal services provided to the Company. On July 1, 2022, the Company issued 4,839 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. On August 1, 2022, the Company issued 4,615 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. On August 25, 2022, the Company issued 222,222 shares of common stock to Lind, with a fair value of $ 271,111 , in satisfaction of the convertible promissory note. On September 1, 2022, the Company issued 5,217 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. On September 26, 2022, the Company issued 222,222 shares of common stock to Lind, with a fair value of $ 176,666 , in satisfaction of the convertible promissory note. On October 1, 2022, the Company issued 9,524 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. On November 1, 2022, the Company issued 6,593 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. On December 1, 2022, the Company issued 9,231 shares of common stock with a fair value of $ 6,000 to the designee of Clear Think Capital for consulting services provided to the Company. On December 21, 2022, the Company issued 222,222 shares of common stock to Lind with a fair value of $ 100,000 , in satisfaction of the convertible promissory note. On December 31, 2022, the Company issued 62,500 shares of common stock to each of Nubar Herian and John Keeler, 100,000 shares of common stock to each of Timothy McLellan and Trond Ringstad, 43,403 shares of common stock to each of Juan Carlos Dalto and Silvia Alana and 143,750 shares of common stock to Jeffrey Guzy with a total fair value of $ 222,222 for serving as directors of the Company. On December 31, 2022, the Company issued an aggregate of 440,572 shares of common stock to Walter Lubkin Jr., Walter Lubkin III, Tracy Greco and John Lubkin in lieu of $ 176,228 of outstanding principal and interest under promissory notes issued by the Company to them in connection with the Coastal Pride acquisition. Note 10. Options During the years ended December 31, 2022 and December 31, 2021, $ 187,385 and $ 549,231 , 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. F- 25 2. Ten -year options to purchase 351,250 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. Three -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. 7. 8. 9. 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. Five -year options to purchase an aggregate of 175,000 shares of common stock at an exercise price of $ 2.00 , which vest in equal monthly installments during the term of the option, were issued to the Company’s directors during the year ended December 31, 2022. Three -year options to purchase 27,552 shares of common stock at an exercise price of $ 0.86 , which vest in equal monthly installments during the term of the option, were issued to an employee during the year ended December 31, 2022. Three -year options to purchase 5,696 shares of common stock at an exercise price of $ 0.79 , which vest in equal monthly installments during the term of the option, were issued to an employee during the year ended December 31, 2022. The following table summarizes the assumptions used to estimate the fair value of the stock options granted for the years ended December 31, 2022 and 2021: Schedule of Fair Value of Stock Options 2022 2021 Expected Volatility 39 % – 48 % 39 % – 48 % Risk Free Interest Rate 2.87 % – 4.27 % 0.90 % – 1.69 % Expected life of options 3.0 – 5.0 1.99 – 5.0 Under the Black-Scholes option pricing model, the fair value of the options to purchase an aggregate of 683,430 shares of common stock granted during the year ended December 31, 2021 was estimated at $ 1,251,598 on the date of grant. For the year ended December 31, 2021, the unrecognized portion of the expense remaining outstanding was $ 823,670 . 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 . On April 20, 2022, the Company’s existing directors and two newly appointed directors each entered into a one-year director service agreement with the Company, which will automatically renew for successive one-year terms unless either party notifies the other of its desire not to renew the agreement at least 30 days prior to the end of the then current term, or unless earlier terminated in accordance with the terms of the agreement. As compensation for serving on the Board of Directors, each director will be entitled to a $ 25,000 annual stock grant and for serving on a Committee of the Board, an additional $ 5,000 annual stock grant, both based upon the closing sales price of the common stock on the last trading day of the calendar year. Each director who serves as chairman of the Audit Committee, Compensation Committee and Nominating and Governance Committee will be entitled to an additional $ 15,000 , $ 10,000 and $ 7,500 annual stock grant, respectively. As additional consideration for such Board service, on April 20, 2022, each director was granted a five-year option to purchase 25,000 shares of the Company’s common stock at an exercise price of $ 2.00 per share, which shares will vest in equal quarterly installments of 1,250 shares during the term of the option. The agreement also includes customary confidentiality provisions and one-year non-competition and non-solicitation provisions. F- 26 On September 16, 2022, the Company granted an employee a three -year option to purchase 27,552 shares of common stock at an exercise price of $ 0.86 which vests in equal monthly installments during the term of the option. On November 22, 2022, the Company granted an employee a three -year option to purchase 5,696 shares of common stock at an exercise price of $ 0.79 which vests in equal monthly installments during the term of the option. Under the Black-Scholes option pricing model, the fair value of the 175,000 options, 27,552 options and 2,696 options granted during the year ended December 31, 2022 is estimated at $ 84,334 , $ 8,409 and $ 1,615 , respectively, on the date of grant using the following assumptions: stock price of $ 1.57 , $ 0.86 and $ 0.79 at the grant date, exercise price of the option, option term, volatility rate of 39.23 %, 46.72 % and 46.72 % and risk-free interest rate of 2.87 %, 3.81 % and 4.27 %, respectively. The unrecognized portion of the expense remaining at December 31, 2022 is $ 72,620 , $ 7,600 and $ 1,558 , respectively, which is expected to be recognized to expense over a period of three years . The following table represents option activity for the years ended December 31, 2022 and 2021: Schedule of Option Activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value 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 $ - Granted 208,248 $ 1.82 Forfeited ( 176,417 ) $ 2.30 Vested 4,121,633 - Outstanding - December 31, 2022 4,461,511 $ 2.00 5.25 Exercisable - December 31, 2022 4,121,633 $ 2.00 5.28 $ - For the year ended December 31, 2022, the Company determined that the five -year option to purchase 176,417 shares of common stock at an exercise price of $ 2.30 granted to an employee of TOBC in 2021 does not meet the vesting requirements pursuant to the terms of the option grant and accordingly, reversed the expense recorded of approximately $ 76,400 and $ 79,023 for the years ended December 31, 2022 and 2021, respectively. The non-vested options outstanding are 339,878 and 998,431 for the years ended December 31, 2022 and 2021, respectively. F- 27 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, 2021 1,538,500 $ 2.11 2.50 Exercisable – December 31, 2021 1,538,500 $ 2.11 2.50 $ - Granted 1,000,000 $ - Exercised ( 125,000 ) $ 2.00 Forfeited or Expired - $ - Outstanding – December 31, 2022 2,413,500 $ 3.11 1.32 Exercisable – December 31, 2022 2,413,500 $ 3.11 1.32 $ - 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. On January 24, 2022, in connection with the issuance of the $ 5,750,000 promissory note to Lind pursuant to a securities purchase agreement, the Company issued Lind a five -year warrant to purchase 1,000,000 shares of common stock at an exercise price of $ 4.50 per share. The warrant provides for cashless exercise and full ratchet anti-dilution if the Company issues securities at less than $ 4.50 per share. Under the Black-Scholes pricing model, the fair value of the warrant issued to purchase 1,000,000 shares of common stock was estimated at $ 1,412,213 on the date of issuance using the following assumptions: stock price of $ 3.97 at the date of the agreement, exercise price of the warrant, warrant term, volatility rate of 43.21 % and risk-free interest rate of 1.53 % from the Department of Treasury. The relative fair value of $ 1,035,253 was calculated using the net proceeds of the convertible note and accounted for as paid in capital. For the year ended December 31, 2022, the Company issued 125,000 shares of common stock at an exercise price of $ 2.00 to an investor upon exercise of a warrant. Note 12. Income taxes Federal income tax expense differs from the statutory federal rates of 21% for the years ended December 31, 2022 and 2021 due to the following: Schedule of Rate Reconciliation Rate Reconciliation December 31, 2022 December 31, 2021 Provision/(Benefit) at Statutory Rate $ ( 2,770,944 ) 21.00 % $ ( 557,193 ) 21.00 % State Tax Provision/(Benefit) net of federal benefit ( 309,886 ) 2.35 % ( 94,610 ) 3.72 % Permanent Book/Tax Differences 10,621 ( 0.08 )% 10,791 ( 0.04 )% Change in valuation allowance 2,751,592 ( 20.85 )% 969,497 ( 36.54 )% Other 318,617 ( 2.42 )% ( 326,385 ) 12.30 % Income Tax Provision/(Benefit) - - 2,100 0.07 % F- 28 The components of the net deferred tax asset at December 31, 2022 and 2021, are as follows: Schedule of Deferred Income Tax Asset December 31, 2022 December 31, 2021 Deferred Tax Assets Business Interest Limitation $ 627,930 $ 713,822 Fixed Assets 140,494 ( 437,993 ) Stock based compensation 1,017,629 817,012 Net Operating loss carryovers 2,089,409 741,742 Non-Capital Losses 365,053 - Other 46,385 ( 299,273 ) Net Deferred Tax Asset/(Liability) 4,286,900 1,535,310 Valuation Allowance ( 4,286,900 ) ( 1,535,310 ) Net Deferred Tax Asset/(Liability) $ - $ - 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, 2022, the Company has cumulative net federal and state operating losses of $ 8,984,664 and $ 4,668,349 , respectively. 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, 2022. As of December 31, 2022, and 2021, 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, 2022, and 2021. 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 to an unrelated third-party. 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 $ 63,800 to date under this lease. Coastal Pride leases approximately 1,100 square feet of office space in Beaufort, South Carolina. 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. On February 3, 2023, the lease with Gault was renewed for $ 1,500 per month until February 2024. The offices and facility of TOBC are located in Nanaimo, British Columbia, Canada and are on land which was leased to TOBC for approximately $ 2,500 per month plus taxes, from Steve and Janet Atkinson, the former TOBC owners, under a lease that expired December 1, 2021. On April 1, 2022, TOBC entered into a new five-year lease with Steve and Janet Atkinson for CAD$ 2,590 per month plus taxes and paid CAD$ 23,310 for rent for the year ended December 31, 2022 and an additional five-year lease with Kathryn Atkinson, spouse of TOBC’s President, for CAD$ 2,370 per month plus taxes and paid CAD$ 21,330 for rent for the year ended December 31, 2022. Both leases are renewable for two additional five-year terms. F- 29 Rental and equipment lease expenses were approximately $ 168,000 and $ 63,500 for the years ended December 31, 2022 and 2021, 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 were adversely affected due to COVID-19, during 2021 and 2022. The Company recognized impairment losses on goodwill and long-lived assets 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. Note 15. Employee Benefit Plan The Company provides and sponsors a 401(k) plan for its employees. For the years ended December 31, 2022 and 2021, no contributions were made to the plan by the Company. Note 16. Subsequent Events In January 2023, the Company sold an aggregate of 474,106 shares of common stock for net proceeds of $ 182,982 in an “at the market” offering pursuant to a sales agreement between the Company and Roth Capital Partners, LLC. On January 31, 2023, 151,284 of shares were repurchased back from Roth for $ 76,463 . The offering was terminated on February 2, 2023. On January 31, 2023, the Company issued 1,273,408 shares of common stock to Lind with a fair value of $ 662,172 as payment of $ 340,000 of note principal due on the convertible promissory note. On February 10, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter, 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 the Underwriter an over-allotment option to purchase up to 1,350,000 shares of common stock. 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. The 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 a 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). In March 2023, the Company issued an aggregate of 6,197,240 shares of common stock to Lind with a fair value of $ 1,081,058 as payment of $ 754,800 of note principal due on the convertible promissory note. F- 30 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.