Item 7. Management’s Discussion and Analysis
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
Reverse
Split
On
May 7, 2024, the Company’s board of directors approved, and on April 30, 2024, at a special meeting of the stockholders, holders
of approximately 62.9% of the Company’s voting power, approved the granting of authority to the Board to amend the Company’s
Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of the Company’s common stock,
by a ratio of not less than 1-for-2 and not more than 1-for-50, with the exact ratio to be determined by the Board in its sole discretion.
The
Board determined to effectuate a 1:50 reverse stock split (the “Reverse Stock Split”) and on May 20, 2024 the Company amended
its Certificate of Incorporation to effect the Reverse Stock Split. All shares and per share amounts in the financial statements have
been retrospectively adjusted for all periods presented to reflect the Reverse Stock Split.
Agile
Loan
On
January 28, 2025, the Company entered into a subordinated business loan and security agreement with Agile and Agile Capital as collateral
agent, which provides for a term loan to the Company in the amount of $420,000 which principal and interest (of $176,400) and has 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.
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Vendor
Agreement
On
November 12, 2024 the Company entered into a vendor agreement with Low Tide LLC (“LT”). The term of the agreement is 180
days, with will be automatically renewed for additional successive 180 day terms unless either party gives 90 days written notice to
terminate to the other.
LT
has developed products, including but not limited to seafood, under the Wicked Tuna brand using its licensing rights from Pilgrim and
the Toby Keith brand, (collectively the “Products”). We will, with LT, promote and sell the Products.
The
Company may, at its discretion, provide funding for the inventory to fulfill a purchase order (each a “PO”) for the Products
sold, and the parties will each receive the following:
(i)
As
relates to Wicked Tuna, if the Company obtains a PO of a Product from its customers, we will pay LT a five percent (5%) margin on
the Net Sales Amount. Net Sales Amount shall mean gross sales less returns and promotions and freight allowance.
(ii)
As
relates to the Toby Keith brand, if LT obtains a PO for the Products from its customers and the Company funds the purchase of the
inventory to fulfill the PO, the Company shall receive a fee of one percent (1%) of the amount funded per month from LT from the
first day of each month that the amount remains outstanding plus an allocation expense which shall be a direct pass through of cost
which shall be calculated to include the cost of the product as well expenses associated with transportation, storage and miscellaneous
expenses. The Company will be paid directly by LT’s customers. Thereafter, the Company will pay LT its portion within 48 hours
of receiving funds for each PO.
The
parties agreed to certain customary covenants, including those relating to confidentiality and litigation. The parties also agreed
to certain mutual indemnification provisions for breaches or inaccuracies in their respective representations and warranties or
covenants. There were no transactions with LT during the year ended December 31, 2024.
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NASDAQ
Delisting
On
December 18, 2024, the Company received formal notice from The Nasdaq Stock Market LLC (“Nasdaq”)
that the Nasdaq Hearings Panel (the “Panel”) had determined to delist the Company’s securities from Nasdaq based upon
the Company’s violation of Listing Rule 5550(a)(2), the “ Minimum Bid Price Requirement ”.
As a result of the Panel’s decision, Nasdaq suspended trading in the Company’s Common Stock effectively with the open of
business on Friday, December 20, 2024.
The
Company’s Common Stock was traded on the OTC Markets’ OTC Pink Current Information tier at the end of December 2024. In February
2025, the Company was upgraded to the OTCQB tier.
British
Columbia Civil Claim
On July 16, 2024, the Company, through TOBC, filed a lawsuit in the Supreme Court of British Columbia (the “Court”)
against their landlords Steven Atkinson, Kathryn Atkinson and Janet Atkinson (the “Landlords”) requesting a declaration that
their commercial lease located at 2904 and 2934 Jameson Road, Nanaimo, B.C. V9R 6W8 dated April 1, 2022 by and between TOBC and their
Landlords is a valid lease and remains in full force and effect. The Company cannot provide any assurance as to the timing of resolution
or outcome of this matter.
On
January 10, 2025 a notice of civil claim filed by a former employee of TOBC., in the British Columbia Supreme Court. The claim relates
to the termination of Mr. Atkinson’s employment with TOBC in February 2024 as well as a separate claim of defamation against the
Company. A response to the civil claim was filed by the Company and TOBC. The discovery process in this matter has recently begun and
it is difficult at this stage to assess the merits of the claim and the likelihood of a favorable or unfavorable result. The Company
cannot provide any assurance as to the timing of resolution or outcome of this matter.
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, 2024 compared to the Year Ended December 31, 2023
Net
Sales. Revenue for the year ended December 31, 2024 decreased 41.3% to $3,593,881 as compared to $6,124,529 for the year ended December
31, 2023 as a result of a decrease in poundage sold during the year ended December 31, 2024.
Cost
of Goods Sold. Cost of goods sold for the year ended December 31, 2024 decreased to $4,882,871 as compared to $5,966,452 for the
year ended December 31, 2023. This decrease is attributable to the decrease in poundage sold in the cost of goods.
Gross
Profit (Loss) . Gross loss for the year ended December 31, 2024 is $1,288,990 as compared to gross profit of $158,077 for the year
ended December 31, 2023. This decrease is attributable to higher market prices and higher inventory reserve in comparison to the year
ended December 31, 2023.
Gross
Profit (Loss) Margin. Gross loss margin for the year ended December 31, 2024 is 35.9% as compared to gross profit margin of 2.6%
for the year ended December 31, 2023. This decrease is attributable to higher market prices and higher inventory reserve in comparison
to the year ended December 31, 2023.
Commissions
Expenses. Commissions expenses increased to $4,490 for the year ended December 31, 2024 from $2,169 for the year ended December 31,
2023. The increase is attributable to higher commissionable revenues.
32
Salaries
and Wages Expense . Salaries and wages decreased to $1,668,585 for the year ended December 31, 2024 as compared to $1,858,004 for
the year ended December 31, 2023. This decrease is primarily attributable to a reduction in the number of employees and the absence
of stock-based compensation expense for the year ended December 31, 2024.
Depreciation
and Amortization . Depreciation and amortization expense increased to $5,866 for the year ended December 31, 2024 as compared to
$4,521 for the year ended December 31, 2023. This increase is attributable to higher depreciation due to purchase of new fixed
assets in the year ended December 31, 2024.
Other
Operating Expense. Other operating expenses increased 177% to $7,147,468 for the year ended December 31, 2024 as compared to
$2,525,661 for the year ended December 31, 2023. This increase is mainly attributable to an increase in legal and professional fees
related to our business operations, 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 $51,926 for the year ended December 31, 2024 from $12,708 for the year ended December 31, 2023.
This increase is primarily attributable to higher collections received by Keeler & Co. from previously written off receivables.
Loss
on Conversion of Debt. Loss on conversion of debt decreased to $0 for the year ended December 31, 2024 from $977,188 for the year
ended December 31, 2023. This decrease is attributable to the decrease on conversion of principal in the Lind note.
Change
in Fair Value of Derivatives and Warrants Liabilities . Change in fair value of derivatives and warrants liabilities decreased to
a loss of $354,296 for the year ended December 31, 2024 from a gain of $2,497,088 for the year ended December 31, 2023. This decrease
is attributable to fair value measurement for the derivative liability and warrant liability as of December 31, 2024.
Interest
Expense. Interest expense increased to $2,060,718 for the year ended December 31, 2024 as compared to $1,771,942 for the year ended
December 31, 2023. This increase is mainly attributable to the amortization of convertible debt discount along with interest expense
paid for various note payables.
Net
Loss. The Company had a net loss of $12,478,487 for the year ended December 31, 2024 as compared to a net loss of $4,471,612 for
the year ended December 31, 2023. The increase in net loss is primarily attributable to 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 $326,854 as of December 31, 2024. At December 31, 2024, the Company had a working capital deficit of $411,225, as
compared to a working capital surplus of $899,215 at December 31, 2023, including $165,620 in stockholder loans. The Company’s
primary sources of liquidity consisted of inventory of $447,760 and accounts receivable of $349,641 at December 31, 2024. The decrease
in working capital was due primarily to decreases of inventory of $2,160,761 and accounts receivable of $184,554 netted against the decreases
in the stockholder loans of $165,620 and increase of short-term debt of $472,760.
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, 2024 was $6,195,893 as compared
to cash used in operating activities of $3,530,662 for the year ended December 31, 2023, representing an increase of $2,665,231. The
increase is primarily attributable to a decrease in inventory of $1,104,175 netted against the decreases in customer refunds of $323,051,
accounts receivable netted against other current assets of $488,612 and increase in payables netted against allowance for advances to
affiliated suppliers of $2,059,616 for the year ended December 31, 2024.
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Cash
(Used in) Investing Activities. Cash used in investing activities for the year ended December 31, 2024 was $101,736 as compared
to $159,609 cash used in investing activities for the year ended December 31, 2023. The decrease was a result of less fixed asset
purchases during the year ended December 31, 2024 compared to the year ended December 31, 2023.
Cash
Provided by Financing Activities. Cash provided by financing activities for the year ended December 31, 2024 was $6,417,872 as compared
to cash provided by financing activities of $3,676,355 for the year ended December 31, 2023. This increase is mainly attributable to
proceeds from common stock offerings and proceeds from short-term loans.
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 Company and Lind previously entered into that certain Securities Purchase
Agreement, dated as of May 20, 2023, as amended on July 27, 2023 pursuant to which the Company issued Lind a senior convertible promissory
note in the principal amount of $300,000. Each of the Company and Lind acknowledge that the amounts owing under the convertible promissory
note as of the filing of the Waiver Agreement is equal to $355,500.
During the year ended December 31, 2024, the Company made aggregate principal payments on the Lind Note of $1,500,000
through the issuance of an aggregate of 1,891,622 shares of common stock. As of December 31, 2024, the outstanding balance on the Lind
Note was $55,500, net of debt discount of $27,656.
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Agile
Loan
On March 1, 2024, the Company, through its subsidiary Keeler & Co. (“Borrowers”)
entered into a subordinated business loan and security agreement with Agile and Agile Capital as collateral agent, which provides for
a term loan to the Company in the amount of $210,000 which principal and interest (of $79,800) is due on August 29, 2024. Commencing March
7, 2024, the Company is required to make weekly payments of $11,146 until the due date. The loan may be prepaid subject to a prepayment
fee. An administrative agent fee of $10,000 was paid on the loan which was recognized as a debt discount and amortized over the term of
the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated March 1, 2024, in the principal
amount of $210,000 which note is secured by all of the Borrowers’ assets, including receivables.
On May 9, 2024, the Borrowers
entered into a subordinated business loan and security agreement with Agile and Agile Capital as collateral agent, which provides for
a term loan to the Company in the amount of $210,000 which principal and interest (of $84,000) is due on November 22, 2024. Commencing
May 17, 2024, the Company is required to make weekly payments of $10,500 until the due date. The loan may be prepaid subject to a prepayment
fee. An administrative agent fee of $10,000 was paid on the loan which was recognized as a debt discount and amortized over the term of
the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated May 9, 2024, in the principal amount
of $210,000 which note is secured by all of the Borrowers’ assets, including receivables.
On July 25, 2024, the Borrowers entered into a subordinated business loan
and security agreement with Agile and Agile Capital as collateral agent, which provides for a term loan to the Company in the amount of
$210,000 which principal and interest (of $84,000) is due on January 31, 2025. Commencing August 2, 2024, the Company is required to make
weekly payments of $10,889 until the due date. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $10,000
was paid on the loan which was recognized as a debt discount and amortized over the term of the loan. In connection with the loan, Agile
was issued a subordinated secured promissory note, dated July 25, 2024, in the principal amount of $210,000 which note is secured by all
of the Borrowers’ assets, including receivables.
On January 28, 2025, the Company entered into a subordinated
business loan and security agreement with Agile and Agile Capital as collateral agent, which provides for a term loan to the Company in
the amount of $420,000 which principal and interest (of $176,400) and has 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.
Administrative agent fee of $20,000 was paid on the loan which was recognized as a debt discount and amortized over the term of the loan.
In connection with the loan, Agile was issued a subordinated secured promissory note, dated January 28, 2025, in the principal amount
of $420,000 which note is secured by all of the Borrowers’ assets, including receivables.
1800 Diagonal Notes
On April 16, 2024, pursuant to a securities
purchase agreement, the Company issued to 1800 Diagonal Lending LLC, a Virginia limited liability company (“Diagonal”) a
convertible promissory note in the principal amount of $138,000 with an original issue discount of $23,000 (the “April
Diagonal Note”). The April Diagonal Note has a one-time interest payment of $26,220 paid upon issuance and a maturity date of
January 15, 2025. The proceeds from the sale of the April Diagonal Note are for general working capital. Upon the occurrence of an
event of default as described in the April Diagonal Note, the note will become immediately due and payable at a default interest
rate of 22% of the then outstanding principal amount of the note. Additionally, Diagonal will have the right to convert all or any part of the outstanding and unpaid amount of the
note into shares of the Company’s common stock at a conversion price of 61% of the market price as described in the First Diagonal
Note. The Company may not, without Diagonal’s written consent, sell, lease, or otherwise dispose of any significant portion of its
assets except in the ordinary course of business. The Company will reserve a sufficient number of shares to provide for the issuance of
shares upon the full conversion of the First Diagonal Note. During the year ended December 31, 2024, the Company made principal payments
on the loan totaling $138,000 and interest payments of $26,220. The outstanding balance on the loan was $0 as of December 31, 2024.
On September 9, 2024, pursuant to a securities
purchase agreement, the Company issued a convertible promissory note in the principal amount of $179,400 with an original issue
discount of $23,400 (the “September Diagonal Note”). The September Diagonal Note has a one-time interest payment of
$23,322 paid upon issuance and a maturity date of June 15, 2025. The proceeds from the September Diagonal Note are for general
working capital. Upon the occurrence of an event of default as described in the September Diagonal Note, the note will become
immediately due and payable at a default interest rate of 22% of the then outstanding principal amount of the note. The September
Diagonal Note has an initial payment of $131,769 due on March 15, 2025, with monthly payments of $23,651 due on the 15th of every
month thereafter until June 15, 2025.
On October 1, 2024, pursuant to a securities purchase
agreement, the Company issued to Diagonal a convertible promissory note in the principal amount of $121,900 with an original issue discount
of $15,900 (the “October Diagonal Note”). The October Diagonal Note has a one-time interest payment of $14,628 paid upon issuance
and a maturity date of June 30, 2025. The proceeds from the sale of the October Diagonal Note are for general working capital. Upon the
occurrence of an event of default as described in the October Diagonal Note, the note will become immediately due and payable at a default
interest rate of 22% of the then outstanding principal amount of the note. The October Diagonal Note has mandatory monthly payments of
$15,170 beginning on October 30, 2024, and due on the 30th of every month thereafter until February 28, 2025.
On December 16, 2024, pursuant to a securities purchase
agreement, the Company issued to Diagonal a convertible promissory note in the principal amount of $90,850 with an original issue discount
of $11,850 (the “December Diagonal Note”). The December Diagonal Note has a one-time interest payment of $10,902 paid upon
issuance and a maturity date of September 15, 2025. Upon the occurrence of an event of default as described in the December Diagonal Note,
the note will become immediately due and payable at a default interest rate of 22% of the then outstanding principal amount of the note.
The December Diagonal Note has mandatory monthly payments of $11,306 beginning on January 15, 2025, and due on the 15th of every month
thereafter until September 15, 2025.
35
On
January 28, 2025, pursuant to a securities purchase agreem ent, the Company issued to Diagonal a convertible promissory note in
the principal amount of $149,650 with an original issue discount of $19,650 (the “January Diagonal Note”). The January Diagonal
Note has a one-time interest payment of $19,454 paid upon issuance and a maturity date of October 30, 2025. Upon the occurrence of an
event of default as described in the January Diagonal Note, the note will become immediately due and payable at a default interest rate
of 22% of the then outstanding principal amount of the note. The January Diagonal Note has an initial payment of $109,918 due on July
30, 2025, with monthly payments of $19,728 due on the 30th of every month thereafter until October 30, 2025.
The Hart Note
On April 16, 2024, the Company entered into a securities
purchase agreement (the “Purchase Agreement”) with Hart Associates, LLC, a Delaware limited liability company (the “Hart”),
pursuant to which the Company issued a promissory note in the principal amount of $300,000 and will issue 10,000 shares of its common
stock to Hart (the “Hart Note”). The Hart Note has a one-time interest payment of $50,000 payable on the maturity date of
May 15, 2024, which was extended to August 15, 2024. The proceeds from the sale of the Hart Note are for general working capital. The
Company may prepay the Hart Note at any time without penalty. The Company’s failure to comply with the material terms of the Hart
Note will be considered an event of default and the principal sum of the Hart Note will increase by 20% of the outstanding balance for
each subsequent 30 days it remains in default.
The FirstFire Note
On May 17, 2024, the Company entered into a promissory note with FirstFire
Global Opportunities Fund, LLC, a Delaware limited liability company (the “FirstFire”), pursuant to which the Company issued
a promissory note in the principal amount of $240,000 with an original discount of $40,000 (the “FirstFire Note”). The FirstFire
Note accrues interest at a rate of 19% per annum and has a maturity date of April 17, 2025. The proceeds from the sale of the FirstFire
Note are for general corporate purposes. The FirstFire Note has mandatory monthly payments due the 17th of each month. The initial payment
on August 17, 2024 is $185,600. Monthly payments from September 2024 – December 2024 are $22,000. Monthly payments from January
2025 - April 2025 are $3,000. The Company may prepay the FirstFire Note at any time without penalty. The Company’s failure to comply
with the material terms of the FirstFire Note will be considered an event of default and the principal sum of the FirstFire Note will
become immediately due and payable at an amount equal to 150% times the sum of (i) the then outstanding principal amount of the note plus
(ii) accrued and unpaid interest on the unpaid principal amount of the note to the date of payment plus (iii) default interest, (iv) plus
any other amounts owed to FirstFire. After the occurrence of an event of default, at any time, the FirstFire shall have the right, to
convert all or any part of the outstanding and unpaid amount of the FirstFire Note into fully paid and non-assessable shares of our common
stock. The conversion price shall be 61% multiplied by the Market Price (as defined in the FirstFire Note) (representing a discount rate
of 39%). While the FirstFire Note remains outstanding, we will reserve 40,000 shares of our common stock free from preemptive rights,
to provide for the issuance upon the full conversion of the FirstFire Note. While the FirstFire Note remains outstanding, we shall not,
without the FirstFire’s written consent, sell, lease, or otherwise dispose of any significant portion of our assets outside the
ordinary course of business.
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”).
36
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 are 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.
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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.
Reverse
Stock Split
On
May 7, 2024, the Company’s board of directors approved, and on April 30, 2024, at a special meeting of the stockholders, holders
of approximately 62.9% of the Company’s voting power, approved the granting of authority to the Board to amend the Company’s
Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of the Company’s common stock,
by a ratio of not less than 1-for-2 and not more than 1-for-50, with the exact ratio to be determined by the Board in its sole discretion.
The
Board determined to effectuate a 1:50 reverse stock split (the “Reverse Stock Split”) and on May 20, 2024 the Company amended
its Certificate of Incorporation to effect the Reverse Stock Split. All shares and per share amounts in the financial statements have
been retrospectively adjusted for all periods presented to reflect the Reverse Stock Split.
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.
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