Blue Star(BSFC) - 2024 Q4 - Annual Report

Part I Business The company is an international seafood importer and packager shifting its focus towards its land-based salmon farming subsidiary and away from certain legacy operations - The company's core business involves importing crab meat from Southeast Asia and Latin America and distributing it in the U.S. and Canada under various brand names[22] - A strategic shift is underway to focus more on the Coastal Pride and Taste of BC Aquafarms (TOBC) subsidiaries, with plans to phase out the Keeler & Co. operations by Q2 2025[25][40] - The company operates a land-based recirculating aquaculture system (RAS) salmon farming operation (TOBC) in Canada, with plans to scale production significantly to 21,000 metric tons by 2028, contingent on securing funding[29][53] - Growth strategy includes organic expansion, strategic acquisitions of complementary companies, and scaling the RAS salmon business[27][51][52] - The company emphasizes sustainability and traceability, utilizing a proprietary QR code-enabled application to track products through the supply chain and patented eco-friendly packaging[39][49][50] Risk Factors The company faces significant operational, financial, and market risks, including a "going concern" warning, dependency on a volatile crab market, and challenges in scaling its new aquaculture venture - The company's independent accounting firm has issued a "going concern" warning due to recurring losses and a net capital deficiency, indicating substantial doubt about its ability to continue operations without raising additional capital[111] - Business operations are highly dependent on the sale of crab meat, a commodity subject to significant price fluctuations and supply risks related to natural population declines[90][91][93] - The company is involved in litigation regarding its Fisheries and Oceans Canada license for its TOBC aquaculture farm, which is critical for its operations and expansion plans[96] - Significant risks are associated with the expansion of the TOBC RAS business, including the ability to produce salmon cost-effectively at a large commercial scale, operational challenges, and maintaining product quality[101][107] - The company's common stock, which trades on the OTCQB Market, is considered a "penny stock," making it subject to rules that can limit liquidity and depress the market price[148][151] Unresolved Staff Comments As a smaller reporting company, Blue Star Foods Corp is not required to provide information regarding unresolved staff comments - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[162] Cybersecurity Cybersecurity is managed by a third-party provider with board oversight, and no material incidents have affected the company to date - Cybersecurity is managed by a third-party provider with oversight from the company's Board and management[163][164] - The company has not experienced any material cybersecurity incidents[165] Properties The company conducts all operations from leased facilities in Florida, South Carolina, and British Columbia, Canada, and does not own any real estate - The main executive offices are in Miami, FL, under a month-to-month lease for 4,756 sq ft at $5,800/month[166] - Coastal Pride leases a 9,050 sq ft facility in Beaufort, SC, on a month-to-month basis for $1,500/month for its soft-shell crab operations[168] - TOBC's facility in Nanaimo, British Columbia, is on land leased from the former owners under two five-year leases entered into on April 1, 2022, which are renewable for two additional five-year terms[169] Legal Proceedings The company's subsidiary is engaged in two lawsuits in British Columbia concerning a commercial lease and control of a critical aquaculture license - On July 16, 2024, TOBC filed a lawsuit against its landlords to declare its commercial lease valid and in full effect[171] - On January 17, 2025, TOBC filed a lawsuit against its former owners, alleging they improperly transferred the essential Fisheries and Oceans Canada aquaculture license into their personal names instead of TOBC's[172] Mine Safety Disclosures This item is not applicable to the company's operations Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the OTCQB, it has never paid dividends, and it has recently issued numerous unregistered shares to settle debt and pay for services - The company's common stock trades on the OTCQB under the symbol "BSFC" with the last reported sale price on June 18, 2025, at $0.051[176][177] - The company has a policy of retaining earnings for business development and does not anticipate paying cash dividends[179] - During 2024 and early 2025, the company issued a significant number of unregistered shares to settle convertible notes with Lind, for consulting services with ClearThink Capital and others, and as commitment fees for various financing agreements[184][185][186] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal year 2024 saw a significant revenue decline, a shift from gross profit to gross loss, a widening net loss, and a weakened financial position necessitating numerous debt financing activities | Financial Metric | FY 2024 | FY 2023 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $3,593,881 | $6,124,529 | -41.3% | Decrease in poundage sold | | Gross (Loss) Profit | ($1,288,990) | $158,077 | -915.4% | Higher market prices and higher inventory reserve | | Gross Margin | -35.9% | 2.6% | -38.5 pts | Same as above | | Other Operating Expenses | $7,147,468 | $2,525,661 | +177% | Increase in legal/professional fees, valuation allowances, and a $1.5M loss from the Afritex service agreement | | Net Loss | ($12,478,487) | ($4,471,612) | +179.1% | Increased gross loss, higher operating expenses, and loss from change in fair value of derivative liabilities | | Liquidity & Cash Flow | As of Dec 31, 2024 | As of Dec 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Cash | $326,854 | $24,163 | +$302,691 | | Working Capital | ($411,225) | $899,215 | -$1,310,440 | | Cash Used in Operations | ($6,195,893) | ($3,530,662) | +$2,665,231 (increase in use) | | Cash Provided by Financing | $6,417,872 | $3,676,355 | +$2,741,517 | - The company executed a 1-for-50 reverse stock split effective May 20, 2024[194][257] - The company's stock was delisted from Nasdaq in December 2024 for failing to meet the minimum bid price requirement and now trades on the OTCQB[199][200] - The company entered into numerous debt and financing agreements throughout 2024 and early 2025 with lenders including Agile, 1800 Diagonal, Hart Associates, FirstFire, Quick Capital, and Jefferson Street Capital to sustain operations[228][232][238][239][240] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Blue Star Foods Corp is not required to provide this information - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[259] Financial Statements and Supplementary Data The audited financial statements include a "going concern" warning from the auditor, reflect restatements for interim 2024 periods, and detail significant debt and equity transactions - The Report of Independent Registered Public Accounting Firm contains a "Going Concern Matter" paragraph, citing recurring losses and a net capital deficiency as factors that raise substantial doubt about the company's ability to continue as a going concern[265][353] - Previously issued unaudited financial statements for the interim periods of 2024 were restated due to the incorrect application of ASC 606 revenue recognition standards related to a service agreement with Afritex Texas, resulting in significant downward adjustments to previously reported revenue[286] | Balance Sheet Item | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $2,554,599 | $6,362,498 | | Total Liabilities | $2,746,296 | $3,767,576 | | Total Stockholders' Equity | ($191,697) | $2,594,922 | - Subsequent to year-end, in early 2025, the company continued to issue shares to convert debt and for consulting services, and entered into new convertible promissory note and loan agreements to raise capital[458][462][464] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of year-end 2024 due to several material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024[467] - Several material weaknesses were identified, including: - Inadequate monitoring of inventory at third-party warehouses - Ineffective controls over the financial close and reporting process - Inadequate segregation of duties and lack of technical accounting expertise - Poorly designed controls over related-party transactions[470][471] - Remediation plans include developing an internal control framework and hiring additional accounting personnel, contingent on available resources[471] Part III Directors, Executive Officers and Corporate Governance The company is led by a five-member Board of Directors and executive officers with experience in the seafood and public company sectors, featuring established governance committees - The Board of Directors consists of five members: John Keeler (Executive Chairman & CEO), Nubar Herian, Jeffrey J Guzy, Timothy McLellan, and Trond Ringstad[476] - The company has three board committees: Audit, Compensation, and Nominating and Corporate Governance, all chaired by Jeffrey Guzy and composed of directors determined to be independent[483][484][485][487] - The board of directors oversees risk assessment as an integral part of its governance process[492] Executive Compensation CEO John Keeler's total compensation was $186,608 in 2024, with no employment agreements in place for executives, and director compensation consisted solely of stock awards | Name and Principal Position | Year | Salary ($) | Stock awards ($) | Option awards ($) | All other compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | John Keeler - CEO | 2024 | 76,878 | 60,000 | - | 49,730 | 186,608 | | John Keeler - CEO | 2023 | 76,878 | 500 | - | 43,831 | 121,209 | | Silvia Alana - Former CFO | 2024 | 66,000 | - | - | 2,500 | 68,500 | | Silvia Alana - Former CFO | 2023 | 147,000 | 25,000 | 12,261 | 5,700 | 189,961 | | Miozotis Ponce - COO | 2024 | 155,925 | - | - | 6,000 | 161,925 | | Miozotis Ponce - COO | 2023 | 166,000 | - | - | 5,700 | 171,700 | - The company does not have employment agreements with its executive officers[508] - Equity compensation is managed under the 2018 Equity Incentive Award Plan, which reserves 7,500,000 shares for various awards like stock options, RSUs, and performance awards[513][515] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of June 20, 2025, directors and executive officers as a group beneficially owned 26.7% of the company's common stock | Name | Number of Shares Beneficially Owned | Percentage of Beneficial Ownership | | :--- | :--- | :--- | | Jeffrey Guzy (Director) | 1,448,176 | 8.9% | | Timothy McLellan (Director) | 965,684 | 5.9% | | Trond Ringstad (Director) | 965,689 | 5.9% | | John Keeler (CEO) | 498,489 | 3.0% | | Nubar Herian (Director) | 484,508 | 3.0% | | All current directors and executive officers as a group (6 persons) | 4,362,796 | 26.7% | Certain Relationships and Related Transactions, and Director Independence The company engaged in significant transactions with entities controlled by CEO John Keeler, including inventory prepayments and receivables for which full valuation allowances were recorded in 2024 - CEO John Keeler owns 95% of Bacolod, a key supplier; as of year-end 2024, the company had a receivable of $1,299,984 for future shipments from Bacolod, for which a full allowance was recorded[546][547] - The company has a long-term receivable from Strike the Gold Foods, Ltd, an entity 80% owned by CEO John Keeler; in 2024, the company recorded a full valuation allowance against the entire balance due to uncertainty of collection[548][552] - Promissory notes previously issued to CEO John Keeler were fully paid off during 2024[545] - All directors are considered independent except for John Keeler (Executive Chairman and CEO)[553] Principal Accountant Fees and Services Total fees billed by the principal accountant, MaloneBailey, LLP, were $299,260 in fiscal year 2024, consisting entirely of audit fees | Fee Category | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Audit fees | $299,260 | $221,800 | | Audit-related fees | - | $53,560 | | Tax fees | - | - | | All other fees | - | - | | Total fees | $299,260 | $275,360 | Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including corporate governance documents, financing agreements, and required officer certifications Form 10-K Summary No summary is provided under this item - 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