Blue Star Foods Corp. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements appearing in this Annual Report. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this prospectus. Overview We are an international seafood company that imports, packages and sells refrigerated pasteurized crab meat, and other premium seafood products. Our current source of revenue is from importing blue and red swimming crab meat primarily from South East Asia 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, as well as soft shell crab in the United States and steelhead salmon and rainbow trout fingerlings produced under the brand name Little Cedar Farms for distribution in Canada. The crab meat which we import is processed in six out of the ten plants available throughout Southeast Asia. Our suppliers are primarily via co-packing relationships, including two affiliated suppliers. We sell primarily to food service distributors. We also sell our products to wholesalers, retail establishments and seafood distributors. Recent Developments British Columbia Civil Claim On March 4, 2026, the Company, through TOBC, filed a Notice of Application in the Supreme Court of British Columbia (the “Court”) in connection with a dispute with their landlords Steven Atkinson and Janet Atkinson (the “Landlords”) of the property located at 2930 Jameson Road, Nanaimo, B.C. V9R 6W8. The application seeks, among other things, reconsideration and setting aside of a February 23, 2026 order that terminated the Company’s lease and granted the landlords immediate possession of the property. The Company also seeks relief from forfeiture and reinstatement of the lease, or alternatively other interim and related relief. The Company’s application asserts that the order was made following a hearing at which the Company did not appear and that certain relevant facts were not before the Court, including that basic rent payments had been made within the time permitted under the lease and that the parties were engaged in mediation regarding a dispute over alleged additional rent & operational contradicting views under the lease. A hearing on the application was held on March 9, 2026. The presiding judge reserved judgment, and a decision has not yet been issued. The Company cannot predict the outcome of the proceeding or whether the requested relief will be granted. Indonesian Supplier Civil Claim The Company, together with its subsidiaries, has initiated legal proceedings against an Indonesian seafood supplier, in the U.S. District Court for the Southern District of Florida. The complaint alleges breach of contract, violation of the Florida Deceptive and Unfair Trade Practices Act, and unjust enrichment arising from shipments delivered in 2022. According to the complaint, certain product lots supplied were determined to be rancid and unmarketable following customer complaints and third-party laboratory testing. The Company asserts that it incurred approximately $0.250 million in direct product losses, in addition to other related costs. The Company is seeking monetary damages, including consequential damages, as well as other relief. The outcome of this matter is currently uncertain, and no assurance can be given regarding the timing or ultimate resolution. Results of Operations The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, the audited financial statements and related notes elsewhere in this Annual Report. Year Ended December 31, 2025 compared to the Year Ended December 31, 2024 Net Sales. Revenue for the year ended December 31, 2025 decreased 19.5% to $2,891,428 as compared to $3,593,881 for the year ended December 31, 2024 as a result of a decrease in poundage sold during the year ended December 31, 2025. Cost of Goods Sold. Cost of goods sold for the year ended December 31, 2025 decreased to $1,720,730 as compared to $4,882,871 for the year ended December 31, 2024. This decrease is attributable to the decrease in poundage sold in the cost of goods. Gross Profit (Loss) . Gross profit for the year ended December 31, 2025 is $1,170,698 as compared to gross loss of $1,288,990 for the year ended December 31, 2024. This increase is attributable to lower market prices and lower inventory reserve of $516,619 in comparison to $1,417,305 in the year ended December 31, 2024. Gross Profit (Loss) Margin. Gross profit margin for the year ended December 31, 2025 is 40.5% as compared to gross loss margin of 35.9% for the year ended December 31, 2024. This increase is attributable to lower market prices and lower inventory reserve in comparison to the year ended December 31, 2024. Commissions Expenses. Commissions expenses decreased to $885 for the year ended December 31, 2025 from $4,490 for the year ended December 31, 2024. The decrease is attributable to lower commissionable revenues. 30 Salaries and Wages Expense . Salaries and wages decreased to $1,074,800 for the year ended December 31, 2025 as compared to $1,132,211 for the year ended December 31, 2024. This decrease is primarily attributable to a reduction in the number of employees for the year ended December 31, 2025. Director Compensation. Director compensation increased to $552,048 for the year end December 31, 2025 as compared to $536,374 for the year ended December 31, 2024. This increase is attributable to stock-based compensation expense in comparison to the year ended December 31, 2024. Depreciation and Amortization . Depreciation and amortization expense increased to $26,988 for the year ended December 31, 2025 as compared to $5,866 for the year ended December 31, 2024. This increase is attributable to higher depreciation due to purchase of new fixed assets in the year ended December 31, 2025. Other Operating Expense. Other operating expenses decreased 76.4% to $1,854,527 for the year ended December 31, 2025 as compared to $7,147,468 for the year ended December 31, 2024. This decrease is mainly attributable to higher expenses recorded in 2024 that did not recur in 2025, including the valuation allowances recorded for advances and receivables with related parties and the $1.5 million losses sustained from the service agreement that we entered into with Afritex Texas which expired in August 2024. Other Income . Other income increased to $890,883 for the year ended December 31, 2025 from $51,926 for the year ended December 31, 2024. This increase is primarily attributable to the recognition of funds received under the Employee Retention Tax Credit (“ERTC”) program during 2025 and the write-off of other current liabilities. The ERTC represents a refundable payroll tax credit established under the CARES Act to assist businesses that retained employees during the COVID-19 pandemic. Loss on Settlement of Debt. Loss on settlement of debt increased to $414,082 for the year ended December 31, 2025 from $0 for the year ended December 31, 2024. This increase is attributable to the increase on conversion of principal in the Diagonal and Quick Capital notes. Change in Fair Value of Derivatives and Warrants Liabilities . Change in fair value of derivatives and warrants liabilities increased to a gain of $49,565 for the year ended December 31, 2025 from a loss of $354,296 for the year ended December 31, 2024. This increase is attributable to fair value measurement for the derivative liability and warrant liability as of December 31, 2025. Change in Fair Value of Convertible Notes . Change in fair value of convertible notes increased to a loss of $1,323,039 for the year ended December 31, 2025 from $0 for the year ended December 31, 2024. This increase is attributable to fair value measurement for convertible notes as of December 31, 2025. Interest Expense. Interest expense decreased to $447,289 for the year ended December 31, 2025 as compared to $2,060,718 for the year ended December 31, 2024. This decrease is mainly attributable to the amortization of convertible debt discount along with interest expense paid for various note payables, as well as the conversion of certain outstanding convertible notes in comparison to the year ended December 31, 2024. Net Loss. The Company had a net loss of $3,582,512 for the year ended December 31, 2025 as compared to a net loss of $12,478,487 for the year ended December 31, 2024. The decrease in net loss is primarily attributable higher expenses recorded in 2024 that did not recur in 2025, including the valuation allowance recorded for the related party long-term receivable, the valuation allowance for advances to related parties, the loss within AFVFL and the loss from change in fair values of derivative and warrant liabilities. Liquidity and Capital Resources The Company had cash of $14,436 as of December 31, 2025. At December 31, 2025, the Company had a working capital deficit of $2,528,067, as compared to a working capital deficit of $411,225 at December 31, 2024. The Company’s primary sources of liquidity consisted of inventory of $404,979 and accounts receivable of $55,091 at December 31, 2025. The decrease in working capital was due primarily to decreases of inventory of $42,781 and accounts receivable of $294,550 netted against the change in fair value of convertible notes of $1,273,474 and increase of accrued compensation for $480,000. The Company has historically financed its operations through the cash flow generated from operations, loans from stockholders and other related parties as well as a working capital line of credit and the sale of equity in private offerings. Cash (Used in) Operating Activities. Cash used in operating activities during the year ended December 31, 2025 was $674,560 as compared to cash used in operating activities of $6,195,893 for the year ended December 31, 2024, representing a decrease of $5,521,332. The decrease is primarily attributable to an increase in inventory of $24,012 netted against the increases in customer refunds of $76,177, accounts receivable netted against other current assets of $863,593, increase in payables netted against allowance for advances to affiliated suppliers of $130,056, decrease in inventory obsolescence of $2,141,991, and increase in loss of revaluation of fair value of convertible notes of $1,323,039 for the year ended December 31, 2025. 31 Cash (Used in) Investing Activities. Cash used in investing activities for the year ended December 31, 2025 was $9,914 as compared to $101,736 cash used in investing activities for the year ended December 31, 2024. The decrease was a result of less fixed asset purchases during the year ended December 31, 2025 compared to the year ended December 31, 2024. Cash Provided by Financing Activities. Cash provided by financing activities for the year ended December 31, 2025 was $443,334 as compared to cash provided by financing activities of $6,417,872 for the year ended December 31, 2024. This decrease is mainly attributable to proceeds from common stock offerings and proceeds from short-term loans. Debt with Third-Party Investors Lind Global Fund II LP investment On May 30, 2023, the Company entered into a securities purchase agreement with Lind pursuant to which the Company issued to Lind a secured, two-year, interest free convertible promissory note in the principal amount of $1,200,000 (the “Lind Note”) and a warrant (the “Lind Warrant”) to purchase 8,701 shares of common stock of the Company commencing six months after issuance and exercisable for five years at an exercise price of $122.50 per share, for the aggregate funding amount of $1,000,000. The Lind Warrant includes cashless exercise and full ratchet anti-dilution provisions. In connection with the issuance of the Lind Note and the Lind Warrant, the Company paid Lind a $50,000 commitment fee. The proceeds from the sale of the Note and Warrant are for general working capital purposes. On July 27, 2023, the Company, entered into a First Amendment to the securities purchase agreement (the “Purchase Agreement Amendment”) with Lind, pursuant to which the Company amended the securities purchase agreement, entered into with Lind as of May 30, 2023 in order to permit the issuance of further senior convertible promissory notes in the aggregate principal amount of up to $1,800,000 and warrants in such aggregate amount as the Company and Lind shall mutually agree. Pursuant to the Purchase Agreement Amendment, the Company issued to Lind a two-year, interest free convertible promissory note in the principal amount of $300,000 and a warrant to purchase 3,505 shares of common stock of the Company commencing six months after issuance and exercisable for five years at an exercise price of $67.00 per share, for the aggregate amount of $250,000. In connection with the issuance of the note and the warrant, the Company paid a $12,500 commitment fee. The proceeds from the sale of the note and warrant are for general working capital purposes. On August 3, 2024, the Company and Lind entered into a waiver and acknowledgement agreement (the “Waiver Agreement”). Under the Waiver Agreement, the Company and Lind acknowledged that the amounts owing under the convertible promissory note totalled $355,500 as of the date of the agreement. As of December 31, 2025, the remaining outstanding balance under the Waiver Agreement was $55,500. On January 28, 2025, the Company entered into a subordinated business loan with a third-party lender and collateral agent providing for a term loan in the principal amount of $420,000, with total repayment of principal and interest of $596,400 and a maturity date of August 15, 2025. Commencing February 7, 2025, the Company is required to make weekly payments of $21,300 until the maturity date. The loan may be prepaid subject to a prepayment fee. In connection with the loan, the Company paid an administrative agent fee of $20,000, which was recorded as a debt discount and is being amortized over the term of the loan. The loan is evidenced by a subordinated secured promissory note dated January 28, 2025 and is secured by substantially all of the Company’s assets, including receivables. 32 On September 9, 2024, the Company issued a convertible promissory note to a third-party investor in the principal amount of $179,400 with an original issue discount of $23,400 (the “September 2024 Convertible Note”). The note included a one-time interest payment of $23,322 paid upon issuance and had a maturity date of June 15, 2025. The proceeds from the issuance were used for general working capital purposes. The note required an initial payment of $131,769 due on March 15, 2025, followed by monthly payments of $23,651 due on the 15th of each month thereafter through June 15, 2025. Upon the occurrence of an event of default, the note accrues default interest at a rate of 22% of the outstanding principal balance. On October 1, 2024, the Company issued a convertible promissory note to a third-party investor in the principal amount of $121,900 with an original issue discount of $15,900 (the “October 2024 Convertible Note”). The note included a one-time interest payment of $14,628 paid upon issuance and had a maturity date of June 30, 2025. The proceeds from the issuance were used for general working capital purposes. The note requires mandatory monthly payments of $15,170 beginning on October 30, 2024, and continuing on the 30th of each month thereafter through February 28, 2025. Upon the occurrence of an event of default, the note accrues default interest at a rate of 22% of the outstanding principal balance. On December 16, 2024, the Company issued a convertible promissory note to a third-party investor in the principal amount of $90,850 with an original issue discount of $11,850 (the “December 2024 Convertible Note”). The note included a one-time interest payment of $10,902 paid upon issuance and had a maturity date of September 15, 2025. The proceeds from the issuance were used for general working capital purposes. The note requires mandatory monthly payments of $11,306 beginning on January 15, 2025, and continuing on the 15th of each month thereafter through September 15, 2025. Upon the occurrence of an event of default, the note accrues default interest at a rate of 22% of the outstanding principal balance. On January 28, 2025, the Company issued a convertible promissory note to a third-party investor in the principal amount of $149,650 with an original issue discount of $19,650 (the “January 2025 Convertible Note”). The note included a one-time interest payment of $19,454 paid upon issuance and had a maturity date of October 30, 2025. The proceeds from the issuance were used for general working capital purposes. The note required an initial payment of $109,918 due on July 30, 2025, followed by monthly payments of $19,728 due on the 30th of each month thereafter through October 30, 2025. Upon the occurrence of an event of default, the note accrues default interest at a rate of 22% of the outstanding principal balance. On August 25, 2025, the Company issued a convertible promissory note to a third-party investor in the principal amount of $169,500 with an original issue discount of $25,425 (the “August 2025 Convertible Note”). The note included a one-time interest payment of $22,035 paid upon issuance and has a maturity date of August 25, 2026. The proceeds from the issuance were used for general working capital purposes. The note requires an initial payment of $95,768 due on February 25, 2026, followed by monthly payments of $15,961 due on the 25th of each month thereafter through August 25, 2026. Upon the occurrence of an event of default, the note accrues default interest at a rate of 22% of the outstanding principal balance. On December 5, 2025, the Company issued a convertible promissory note to a third-party investor in the principal amount of $73,025 with an original issue discount of $9,525 (the “December 2025 Convertible Note”). The note included a one-time interest payment of $9,493 paid upon issuance and has a maturity date of December 5, 2026. The proceeds from the issuance were used for general working capital purposes. Upon the occurrence of an event of default, the note accrues default interest at a rate of 22% of the outstanding principal balance. The holder may convert all or any portion of the outstanding balance of the note into shares of the Company’s common stock at a conversion price equal to 75% of the market price, as defined in the note. 33 On September 16, 2025, the Company issued a convertible promissory note to a third-party investor in the principal amount of $47,059 with an original issue discount of $7,059 (the “September 16, 2025 Convertible Note”). The note bears interest at a rate of 13% and included a one-time interest payment of $6,118 paid upon issuance. The note has a maturity date of June 16, 2026. The proceeds from the issuance were used for general working capital purposes. Upon the occurrence of an event of default, the note accrues default interest at a rate of 24% of the outstanding principal balance. The holder may convert all or any portion of the outstanding balance of the note into shares of the Company’s common stock at a conversion price equal to 65% of the market price, as defined in the note. On November 13, 2025, the Company issued a convertible promissory note to a third-party investor in the principal amount of $40,000 with an original issue discount of $6,000 (the “November 2025 Convertible Note”). The note bears interest at a rate of 13% and included a one-time interest payment of $5,200 paid upon issuance. The note has a maturity date of August 13, 2026. The proceeds from the issuance were used for general working capital purposes. Upon the occurrence of an event of default, the note accrues default interest at a rate of 24% of the outstanding principal balance. The holder may convert all or any portion of the outstanding balance of the note into shares of the Company’s common stock at a conversion price equal to 65% of the market price, as defined in the note. On September 18, 2025, the Company issued a convertible promissory note to a third-party investor in the principal amount of $47,059 with an original issue discount of $7,059 (the “September 18, 2025 Convertible Note”). The note bears interest at a rate of 13% and included a one-time interest payment of $6,118 paid upon issuance. The note has a maturity date of June 16, 2026. The proceeds from the issuance were used for general working capital purposes. Upon the occurrence of an event of default, the note accrues default interest at a rate of 24% of the outstanding principal balance. The holder may convert all or any portion of the outstanding balance of the note into shares of the Company’s common stock at a conversion price equal to 65% of the market price, as defined in the note. On October 29, 2025, the Company entered into a promissory note agreement with an unaffiliated third-party lender for aggregate principal of $50,000. The note bears interest at a rate of 32% per annum and matures on July 29, 2026. The proceeds are for general working capital. Upon the occurrence of an event of default as described in the note, the note will become immediately due and payable at a default interest rate of 25% of the then outstanding principal amount of the note. On March 10, 2026, the Company issued a convertible promissory note to a third-party investor in the principal amount of $57,500 with an original issue discount of $7,500 (the “March 2026 Convertible Note”). The note included a one-time interest payment of $7,475 paid upon issuance and has a maturity date of December 10, 2026. The proceeds from the issuance were used for general working capital purposes. Upon the occurrence of an event of default, the note accrues default interest at a rate of up to 24% of the outstanding principal balance. Following an event of default, the holder may convert all or any portion of the outstanding balance of the note into shares of the Company’s common stock at a conversion price equal to 65% of the lowest trading price of the Company’s common stock during the ten trading days preceding conversion, as defined in the note. August 2024 Private Placement Offering In August, 2024, the Company entered into securities purchase agreements (each a “Securities Purchase Agreement”) with each of Quick Capital, LLC, a Wyoming limited liability company (“Quick Capital”) and Jefferson Street Capital, LLC a New Jersey limited liability company (“Jefferson”) whereby it will issue promissory notes in the aggregate principal amount of $550,000 (the “August Private Placement Offering”). 34 The Company agreed to issue to each of Quick Capital and Jefferson up to 19,650 shares of our common stock as a “Commitment Fee” As part of the August Private Placement Offering, the Company issued two promissory notes each in the principal amount of $275,000 with an original issue discount of $25,000 (the “Private Placement Notes”). The Private Placement Notes have a one-time interest payment of $27,500. Thereafter, any principal amount of interest which is not paid upon maturity will accrue at a rate of the lesser of (i) sixteen percent (16%) per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid. The Private Placement Notes have a maturity date of 10 months after issuance and the proceeds from the notes are for general corporate purposes. The Company agreed to issue to each of Quick Capital and Jefferson 19,650 shares of common stock as additional consideration for entering into Private Placement Notes. The investors have the right, at any time on or following the earlier of (i) the date that any of the shares are registered for resale under a registration statement of the Company or (ii) the date that is six (6) months after the issue date, to convert all or any portion of the then outstanding and unpaid principal and interest into fully paid and non-assessable shares of our common stock. The conversion price shall be $1.50, subject to adjustments. We have agreed to reserve a sufficient number of common stock (initially, 2,000,000 shares) for issuance upon conversion of the Private Placement Notes in accordance with their terms. The Company may prepay the Private Placement Notes at any time with fifteen (15) trading days prior written notice (the “Prepayment Notice Period”). During the Prepayment Notice Period, the investor shall have the right to convert all or any portion of the Private Placement Notes pursuant to the terms of the note, including the amount of the Private Placement Notes to be prepaid. If the Company exercises its right to prepay the notes in accordance with their terms, the Company shall make payment to the investor of an amount in cash equal to the sum of: (i) 100% multiplied by the principal amount then outstanding plus (ii) accrued and unpaid interest on the principal amount to the prepayment notice date, and (iii) $750 to reimburse the investor for administrative fees. If the Company delivers a prepayment notice and fails to pay the applicable prepayment amount, the Company shall forever forfeit its right to prepay any part of the Private Placement Notes. The Private Placement Notes have mandatory monthly payments of $43,200. The initial payments were due on November 9, 2024 and November 12, 2024, respectively. The Company’s failure to comply with the material terms of the Private Placement Notes will be considered an event of default and the principal sum of the Private Placement Notes will become immediately due and payable at an amount equal to the principal amount then outstanding plus accrued interest (including any default interest) through the date of full repayment multiplied by 135%, as well as all costs, all without demand, presentment or notice, unless expressly waived by the investor. The investor may assign its rights to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from Quick Capital or to any of its affiliates without the consent of the Company. While the Private Placement Notes remain outstanding, we shall not, without the investor’s written consent (i) (a) pay, declare or set apart for such payment, any dividend or other distribution on shares of capital stock other than dividends on shares of common stock solely in the form of additional shares of common stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Company’s disinterested directors, (ii) redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Company or any warrants, rights or options to purchase or acquire any such shares, or repay any indebtedness of Quick Capital, (iii) advance any loans made in the ordinary course of business in excess of $100,000, (iv) sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business, and (v) enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) or Section 3(a)(10) of the Securities Act. In conjunction with the August Private Placement Offering, the Company entered into a registration rights agreement (each a “Registration Rights Agreement”) with each of Quick Capital and Jefferson. The Company agreed to file a registration statement with the Securities and Exchange Commission to register the re-sale of the maximum number of shares of common stock covered in the August Private Placement Offering within sixty (60) calendar days from the date of execution. Critical Accounting Policies and Estimates Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The notes to the consolidated financial statements contained in this Annual Report describe our accounting policies used in the preparation of the consolidated financial statements. None of those policies are deemed to be critical accounting policies nor critical accounting estimates. The preparation of these financial statements requires us 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 periods. Actual results could differ from those estimates. We continually evaluate our critical accounting policies and estimates. 35 Recent Accounting Pronouncements ASU 2023-07 – Segment Reporting (Topic 280) In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU enhances existing segment reporting requirements by requiring public entities to disclose more detailed information about a reportable segment’s expenses. Specifically, it introduces a new requirement to disclose significant segment expense categories and amounts that are regularly provided to the chief operating decision maker (“CODM”) and included in the reported measure of segment profit or loss. The ASU also extends certain annual segment disclosures to interim periods and clarifies that public entities with a single reportable segment must apply all existing and new segment disclosure requirements. The amendments in ASU 2023-07 are effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard for the year ended December 31, 2024 on a retrospective basis. The Company’s business consists of one operating segment, which is also its one reportable segment. The Company derives revenues by providing sales of primarily seafood products to customers. The Company’s CODM is its chief executive officer, who reviews financial information presented on a consolidated basis. The CODM reviews total assets in the consolidated balance sheets and net loss and its components in the consolidated statements of operations such as, cost of goods sold and other operating expenses, to assess financial performance and allocate resources. ASU 2023-09 – Income Taxes (Topic 740) In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU aims to enhance the transparency and usefulness of income tax disclosures by requiring public business entities to provide more disaggregated information in the effective tax rate reconciliation and for income taxes paid. Key provisions include a requirement for tabular reconciliation using both percentages and amounts, broken out into specific categories, with certain reconciling items at or above a 5% quantitative threshold further disaggregated by nature and/or jurisdiction. Additionally, the ASU requires disclosure of income taxes paid (net of refunds received), disaggregated by federal, state/local, and foreign jurisdictions, and amounts paid to individual jurisdictions that comprise 5% or more of total income taxes paid. The ASU also eliminates certain existing disclosure requirements related to unrecognized tax benefits and cumulative unrecognized deferred tax liabilities. For public business entities, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. The Company does not expect this adoption to have a material impact on its consolidated financial statements. ASU 2024-03 – Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public business entities to disclose more detailed information about certain costs and expenses in the notes to their financial statements, both in annual and interim filings. The objective is to provide investors with greater transparency into a company’s expense structure, enabling a better understanding of performance, assessment of future cash flows, and comparison with other entities. Key provisions include the disaggregation, in a tabular format, of specific natural expense categories such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization, within each relevant expense caption on the income statement. The ASU also requires disclosure of the total amount of selling expenses and a qualitative description of expenses remaining in the “other” category. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting this ASU on its financial statements and disclosures. ASU 2025-01 – Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies the effective date guidance in ASU 2024-03, which requires public business entities to disclose, in the notes to the financial statements, the disaggregation of certain income statement expense line items. The amendments do not change the disclosure requirements established by ASU 2024-03 but clarify when entities are required to apply them. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting this ASU on its financial statements and disclosures. ASU 2025-05 — Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU introduces a practical expedient to simplify the estimation of expected credit losses for current trade accounts receivable and current contract assets arising from revenue transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under the expedient, entities may assume that current conditions as of the balance sheet date will persist for the remaining life of those short-term assets when measuring expected credit losses. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within annual reporting periods beginning after December 15, 2025. The Company is currently evaluating the impact of adopting this ASU on its financial statements and disclosures. ASU 2025-07 — Leases (Topic 842) In December 2024, the FASB issued ASU 2025-07, Leases (Topic 842). This ASU provides targeted improvements to the guidance in Topic 842 intended to enhance clarity and operability, including updates related to lease classification, presentation, and disclosure requirements. The amendments are intended to simplify application and improve consistency in the accounting for lease transactions. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within annual reporting periods beginning after December 15, 2025. The Company is currently evaluating the impact of adopting this ASU on its financial statements and disclosures. ASU 2025-11 — Interim Reporting (Topic 270) In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270). This ASU enhances interim reporting requirements by improving the consistency and transparency of disclosures provided in interim financial statements. The amendments are designed to provide users with more decision-useful information about changes in financial position and results of operations during interim periods. For public business entities, the amendments are effective for interim reporting periods beginning after December 15, 2025. The Company is currently evaluating the impact of adopting this ASU on its interim financial statement disclosures. ASU 2025-12 — Accounting Standards Codification Improvements In December 2025, the FASB issued ASU 2025-12, Accounting Standards Codification Improvements. This ASU includes various amendments to the Accounting Standards Codification intended to clarify, correct, or improve existing guidance. The amendments generally do not change current accounting practice and are not expected to have a material impact on the Company’s financial statements. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2025. The Company is currently evaluating the impact of adopting this ASU on its financial statements and disclosures. Off Balance Sheet Arrangements We currently have no off-balance sheet arrangements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this Item. 36