| Basis of Presentation and Summary of Significant Accounting Policies | Note
2. Basis of Presentation and Summary of Significant Accounting Policies Basis
of Presentation The
following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes
required by accounting principles generally accepted in the United States (“GAAP”) for complete annual financial statements.
The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management,
necessary in order to make the financial statements not misleading. The consolidated balance sheet as of December 31, 2020 has been derived
from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not
include all of the information and footnotes required for complete annual financial statements. These financial statements should be
read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form
10-K for the year ended December 31, 2020 filed with the SEC on April 15, 2021 for a broader discussion of our business and the risks
inherent in such business. Reclassifications Certain
prior period amounts have been reclassified to conform to the current period presentation. Advances
to Suppliers and Related Party In
the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod Blue Star Export Corp. (“Bacolod”),
a related party based in the Philippines. These advances are in the form of prepayments for products that will ship within a short window
of time. In the event that it becomes necessary for the Company to return products or adjust for quality issues, the Company is issued
a credit by the vendor in the normal course of business and these credits are also reflected against future shipments. As
of June 30, 2021, and December 31, 2020, the balance due from the related party for future shipments was approximately $ 1,300,000 .
No new purchases have been made from Bacolod during the six months ended June 30, 2021. A permits renewal payment of $ 8,000
was made to Bacolod during the three months ended
June 30, 2021. Cost of revenue related to inventories purchased from Bacolod represented approximately $ 126
and $ 238,000
of total cost of revenue for the six months ended
June 30, 2021 and 2020, respectively. Revenue
Recognition The
Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as
such, we record revenue when our customer obtains control of the promised goods or services in an amount that reflects the consideration
which the Company expects to receive in exchange for those goods or services. The Company’s source of revenue is from importing
blue and red swimming crab meat primarily from Indonesia, the Philippines and China and distributing it in the United States and Canada
under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh,
and steelhead salmon produced under the brand name Little Cedar Farms for distribution in Canada. The Company sells primarily to
food service distributors. The Company also sells its products to wholesalers, retail establishments and seafood distributors. To
determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs
the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company
which includes a required line of credit approval process, (2) identify the performance obligations in the contract which includes shipment
of goods to the customer FOB shipping point or destination, (3) determine the transaction price which initiates with the purchase order
received from the customer and confirmation sent by the Company and will include discounts and allowances by customer if any, (4) allocate
the transaction price to the performance obligations in the contract which is the shipment of the goods to the customer and transaction
price determined in step 3 above and (5) recognize revenue when (or as) the entity satisfies a performance obligation which is when the
Company transfers control of the goods to the customers by shipment or delivery of the products. The
Company elected an accounting policy to treat shipping and handling activities as fulfillment activities. Consideration payable to a
customer is recorded as a reduction of the arrangement’s transaction price, thereby reducing the amount of revenue recognized,
unless the payment is for distinct goods or services received from the customer. Lease
Accounting We
account for our leases under ASC 842, Leases We
categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those
leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance
leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance
leases as of June 30, 2021. Our leases generally have terms that range from three years for equipment and five to twenty years for property.
We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account
for them as a lease. Lease
liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings
available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives,
plus any direct costs from executing the lease. Lease assets are tested for impairment in the same manner as long-lived assets used in
operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. When
we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset,
and it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement
of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the
term of the lease. The
table below presents the lease-related assets and liabilities recorded on the balance sheets. Schedule of Lease-related Assets and Liabilities
June
30, 2021
Assets
Operating lease assets $ 85,300
Liabilities
Current
Operating lease liabilities $ 29,960
Noncurrent
Operating lease liabilities $ 54,976 Supplemental
cash flow information related to leases were as follows: Schedule of Supplemental Cash Flow Information Related to Leases
Six
Months Ended June
30, 2021
Cash paid for amounts included in the measurement
of lease liabilities:
Operating cash
flows from operating leases $ 14,245
ROU assets recognized in exchange for lease
obligations:
Operating leases $ - The
table below presents the remaining lease term and discount rates for operating leases. Schedule of Remaining Lease Term and Discount Rates for Operating Leases
June
30, 2021
Weighted-average remaining
lease term
Operating leases 2.92
Weighted-average discount
rate
Operating leases 4.3 % Maturities
of lease liabilities as of June 30, 2021, were as follows: Schedule of Maturities of Lease Liabilities
Operating
Leases
2021 (six months remaining) 16,776
2022 33,552
2023 26,474
2024 15,060
2025 -
Thereafter -
Total lease payments 91,862
Less: amount of lease
payments representing interest (6,926 )
Present value of future
minimum lease payments $ 84,936
Less: current obligations
under leases $ (29,960 )
Non-current obligations $ 54,976 Intangible
Assets and Goodwill The
Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,”
where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on
their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one
year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed, and
revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired
less liabilities assumed is recognized as goodwill. The
Company reviews its indefinite lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that
the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed
an assessment of indefinite lived intangibles and goodwill and determined there was no impairment for the six months ended June 30, 2021
and 2020. Foreign
Currency Exchange Rates Risk We
manage our exposure to fluctuations in foreign currency exchange rates through our normal operating activities. Our primary focus is
to monitor our exposure to, and manage, the economic foreign currency exchange risks faced by our operations and realized when we exchange
one currency for another. Our operations primarily utilize the U.S. dollar and Canadian dollar as their functional currencies. Movements
in foreign currency exchange rates affect our financial statements. | Note
2. Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant
Accounting Policies Basis
of Presentation The
accompanying financial statements of the Company were prepared in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”). Principles
of Consolidation The
consolidated financial statements include the accounts of the Company, John Keeler & Co, Inc. a wholly owned subsidiary, and
Coastal Pride Seafood, LLC (“Coastal Pride”), a wholly owned subsidiary of John Keeler & Co., Inc. All
intercompany balances and transactions have been eliminated in consolidation. Goodwill
and Other Intangible Assets Goodwill
and other intangible assets include the cost of the acquired business in excess of the fair value of the tangible net assets recorded
in connection with an acquisition. Other intangible assets include customer relationships, non-compete agreements, and trademarks.
The Company reviews its finite-lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate
that the carrying amount of the asset exceeds its fair value and may not be recoverable. Impairments
are recorded as impairment charges in the Company’s Consolidated Statements of Operations and Comprehensive Loss, and a
reduction of the asset’s carrying value in the Company’s Consolidated Balance Sheets when they occur. In accordance
with its policies, the Company performed an assessment of its finite-lived intangibles and goodwill and determined there was no Variable
Interest Entity Under
Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810, Consolidation The
Company evaluates its interests in VIE’s on an ongoing basis and consolidates any VIE in which it has a controlling financial
interest and is deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics:
(i) the power to direct the activities of the VIE that most significantly impact its economic performance; and (ii) the obligation
to absorb losses of the VIE that could potentially be significant to it or the right to receive benefits from the VIE that could
be significant to the VIE. Effective
April 1, 2014, the Company’s stockholder was transferred the controlling interest of Strike the Gold Foods, Ltd. (“Strike”),
a related party entity which holds the Company’s inventory on consignment in United Kingdom (see Note 3). The Company evaluated
its interest in Strike and determined that Strike is a VIE due to the Company’s implicit interest in Strike and the fact
that Strike and the Company were under common control after the transfer of the controlling interest. Moreover, the Company determined
that it is the primary beneficiary of Strike due to the fact that the Company had both the power to direct the activities that
most significantly impact Strike and the obligation to absorb losses or the right to receive benefits from Strike. Therefore,
the Company consolidated Strike in its financial statements starting as of April 1, 2014, the effective date of the controlling
interest transfer. During
the third quarter of 2020, the Company determined that Strike was no longer a VIE because there was a verbal agreement with Strike
that terminated the original agreement to hold the inventory on consignment and Strike has not engaged in transactions with the
Company or its subsidiaries in 2020. The
Company also evaluated its interest in three related party entities that are under common control with the Company, Bacolod Blue
Star Export Corp. (“Bacolod”), Bicol Blue Star Export Co. (“Bicol”) and John Keeler Real Estate Holding
(“JK Real Estate”), in light of ASC 810. The Company purchases inventory from Bacolod, an exporter of pasteurized
crab meat out of the Philippines. The Company purchased inventory, via Bacolod, from Bicol. The Company leased its office and
warehouse facility from JK Real Estate, a landlord that is a related party through common family beneficial ownership until December
31, 2020. (see Note 7) The
Company determined that Bacolod and Bicol are not VIE’s as they do not meet the criteria to be considered a VIE per ASC
810. The Company does not directly or indirectly absorb any variability of Bacolod or Bicol. The relationship between the Company
and Bacolod and Bicol is strictly a supplier/customer relationship (see Advances to Suppliers and Related Party The
Company no longer leases its office and warehouse facility from JK Real Estate and no longer guarantees the mortgage on the facility
and therefore is no longer considered a VIE. On December 31, 2020, this facility was sold to an unrelated third-party purchaser
and the lease was terminated. Cash,
Restricted Cash and Cash Equivalents The
Company maintains cash balances with financial institutions in excess of Federal Deposit Insurance Company (“FDIC”)
insured limits. The Company has not experienced any losses on such accounts and believes it does not have a significant exposure. The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The
Company considers any cash balance in the lender designated cash collateral account as restricted cash. All cash proceeds must
be deposited into cash collateral account, and will be cleared and applied to the line of credit. The Company has no access to
this account, and the purpose of the funds is restricted to repayment of the line of credit. The following table provides a reconciliation
of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same
such amounts in the consolidated statements of cash flows: Schedule Reconciliation of Cash, Cash Equivalents and Restricted Cash
December
31, December
31,
Cash and cash equivalents $ 55,644 $ 153,904
Restricted
cash 282,043 41,906
Total cash, cash
equivalents, and restricted cash shown in the cash flow statement $ 337,687 $ 195,810 Accounts
Receivable Accounts
receivable consist of unsecured obligations due from customers under normal trade terms, usually net 30 days. The Company grants
credit to its customers based on the Company’s evaluation of a particular customer’s credit worthiness. Allowances
for doubtful accounts are maintained for potential credit losses based on the age of the accounts receivable and the results of
the Company’s periodic credit evaluations of its customers’ financial condition. Receivables are written off as uncollectible
and deducted from the allowance for doubtful accounts after collection efforts have been deemed to be unsuccessful. Subsequent
recoveries are netted against the provision for doubtful accounts expense. The Company generally does not charge interest on receivables. Receivables
are net of estimated allowances for doubtful accounts and sales return and allowances. They are stated at estimated net realizable
value. As of December 31, 2020, and 2019, the Company recorded sales return and allowances and refund liability of approximately
$ 62,800 59,100 no Inventories Substantially
all of the Company’s inventory consists of packaged crab meat located at the Company’s warehouse facility as well
as public cold storage facilities and merchandise in transit from suppliers. The cost of inventory is primarily determined using
the specific identification method. Inventory is valued at the lower of cost or net realizable value, cost being determined
using the first-in, first-out method. Merchandise
is purchased cost and freight shipping point and becomes the Company’s asset and liability upon leaving the suppliers’
warehouse. The Company had in-transit inventory of approximately $ 522,000 1,958,000 The
Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory
to the lower of cost or market based on its assessment of market conditions, inventory turnover and current stock levels. Inventory
write-downs are charged to cost of goods sold. The Company recorded an inventory allowance of approximately $ 71,400 40,800 Advances
to Suppliers and Related Party In
the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod, a related party. These
advances are in the form of prepayments for products that will ship within a short window of time. In the event that it becomes
necessary for the Company to return products or adjust for quality issues, the Company is issued a credit by the vendor in the
normal course of business and these credits are also reflected against future shipments. As
of December 31, 2020, and 2019, the balance due from the related party for future shipments was approximately $ 1,300,000 1,286,000 1,280,000 9,531,000 Fixed
Assets Fixed
assets are stated at cost less accumulated depreciation and are being depreciated using the straight-line method over the estimated
useful life of the asset as follows: Schedule of Estimated Useful Life of Assets
Furniture and fixtures 7 10
Computer equipment 5
Warehouse and refrigeration equipment 10
Leasehold improvements 7
Automobile 5
Trade show booth 7 Leasehold
improvements are amortized using the straight-line method over the shorter of the expected life of the improvement or the remaining
lease term. The
Company capitalizes expenditures for major improvements and additions and expenses those items which do not improve or extend
the useful life of the fixed assets. The
Company reviews fixed assets for recoverability if events or changes in circumstances indicate the assets may be impaired. At
December 31, 2020 and 2019, the Company believes the carrying values of its long-lived assets are recoverable and as such, the
Company did not record any impairment. Other
Comprehensive (loss) Income The
Company reports its comprehensive (loss) income in accordance with ASC 220, Comprehensive Income Foreign
Currency Translation The
Company’s functional and reporting currency is the U.S. Dollars. The assets and liabilities held by the Company’s
previous VIE had a functional currency other than the U.S. Dollar. In the third quarter of 2020, the VIE was assessed as no longer
being a VIE. The VIE results were translated into U.S. Dollars at exchange rates in effect at the end of each reporting period.
The VIE’s revenue and expenses were translated into U.S. Dollars at the average rates that prevailed during the period.
The rates used in the financial statements as presented for December 31, 2020 and 2019 were 1.260 and 1.337 US dollar to UK pound
sterling, respectively. 23,700 50 Revenue
Recognition Effective
with the January 1, 2018 adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and the associated
ASUs (collectively, “Topic 606”), the Company recognizes revenue when its customer obtains control of promised goods
or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services.
The Company’s source of revenue is from importing blue and red swimming crab meat primarily from Indonesia, the Philippines
and China and distributing it in the United States and Canada under several brand names such as Blue Star, Oceanica, Pacifika,
Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh. We sell primarily to food service distributors. We also sell
our products to wholesalers, retail establishments and seafood distributors. To
determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company
performs the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations
sent by the Company which includes a required line of credit approval process, (2) identify the performance obligations in the
contract which includes shipment of goods to the customer FOB shipping point or destination, (3) determine the transaction price
which initiates with the purchase order received from the customer and confirmation sent by the Company and will include discounts
and allowances by customer if any, (4) allocate the transaction price to the performance obligations in the contract which is
the shipment of the goods to the customer and transaction price determined in step 3 above and (5) recognize revenue when (or
as) the entity satisfies a performance obligation which is when the Company transfers control of the goods to the customers by
shipment or delivery of the products. The
Company elected an accounting policy to treat shipping and handling activities as fulfillment activities. Consideration payable
to a customer is recorded as a reduction of the arrangement’s transaction price, thereby reducing the amount of revenue
recognized, unless the payment is for distinct goods or services received from the customer. Leases On
January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments using the modified retrospective
method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance
of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting
standard in effect for those periods. The
new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected
the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and
initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts
entered into prior to adoption are leases or contain leases. We
categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally
those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired
under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did
not have any finance leases as of December 31, 2020. Our leases generally have terms that range from three years for equipment
and six to seven years for property. We elected the accounting policy to include both the lease and non-lease components of our
agreements as a single component and account for them as a lease. Lease
liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings
available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord
incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived
assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful
life or the lease term. When
we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased
asset, and it is reasonably certain that we will exercise the option, we consider these options in determining the classification
and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating
expenses over the term of the lease. The
table below presents the lease-related assets and liabilities recorded on the balance sheets. Schedule of Lease-related Assets and Liabilities
December
31,
Assets
Operating
lease assets $ 99,472
Liabilities
Current $ 29,337
Operating
lease liabilities
Noncurrent
Operating
lease liabilities $ 69,844 Supplemental
cash flow information related to leases were as follows: Schedule of Supplemental Cash Flow Information Related to Leases
Twelve
Months Ended
Cash
used in operating activities:
Operating
leases $ 156,582
ROU
assets recognized in exchange for lease obligations:
Operating
leases $ 28,137 The
table below presents the remaining lease term and discount rates for operating leases. Schedule of Remaining Lease Term and Discount Rates for Operating Leases
December
31, 2020
Weighted-average
remaining lease term
Operating
leases 3.39
Weighted-average
discount rate
Operating
leases 4.3 % Maturities
of lease liabilities as of December 31, 2020, were as follows: Schedule of Maturities of Lease Liabilities
Operating
Leases
2021 33,552
2022 33,552
2023 26,474
2024 15,060
2025 -
Thereafter -
Total
lease payments 108,638
Less:
amount of lease payments representing interest (9,457 )
Present
value of future minimum lease payments $ 99,181
Less:
current obligations under leases $ (29,337 )
Non-current
obligations $ 69,844 Advertising The
Company expenses the costs of advertising as incurred. Advertising expenses which are included in Other Operating Expenses were
approximately $ 7,200 81,700 Use
of Estimates The
preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Customer
Concentration The
Company had three customers which accounted for approximately 26% 46% 19% Supplier
Concentration The
Company had five suppliers which accounted for approximately 65% 93% 25% The
Company had two suppliers which accounted for approximately 42% 21% 65% 27% The
loss of any major supplier could have a material adverse impact on the Company’s results of operations, cash flows and financial
position. Fair
Value of Financial Instruments Our
financial instruments include cash, accounts receivable, accounts payable, accrued expenses, and debt obligations. We believe
the carrying values of our financial instruments approximate their fair values because they are short term in nature or payable
on demand. Earnings
or Loss per Share The
Company accounts for earnings per share pursuant to ASC 260, Earnings per Share, which requires disclosure on the financial statements
of “basic” and “diluted” earnings (loss) per share. Basic earnings (loss) per share are computed by dividing
net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share
is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents
(if dilutive) related to stock options and warrants for each year. As further described in Footnote 6 - Series A Convertible Preferred
Stock, as of December 31, 2020 and 2019, 1,413 706,500 3,120,000 3,280,000 353,250 As
there was a net loss for the years ended December 31, 2020 and December 31, 2019, basic and diluted losses per share each year
are the same. Stock-Based
Compensation The
Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718
requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including
stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the
employee is required to provide service in exchange for the award, usually the vesting period. The Company has elected to adopt
ASU 2016-09 and has a policy to account for forfeitures as they occur. The
Company accounts for stock-based compensation awards to non-employees in accordance with ASU No. 2018-07, Compensation –
Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”),
which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic
718, with certain exceptions. Related
Parties The
Company accounts for related party transactions in accordance with ASC 850 (“Related Party Disclosures”). A party
is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls,
is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its
management, members of the immediate families of principal owners of the Company and its management and other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to
an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which
can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest
in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties
might be prevented from fully pursuing its own separate interests is also a related party. As
of December 31, 2020, and 2019, there was approximately $ 392,000 350,900 Reclassifications Certain
amounts in prior year have been reclassified to conform to the current year presentation. A permits renewal payment of $ 8,000
was made to Bacolod during the three months ended
June 30, 2021. Income
Taxes Prior
to November 8, 2018, the Company was taxed under the provisions of subchapter S of the Internal Revenue Code. Under these provisions,
the Company did not pay corporate federal income taxes on its taxable income but was liable for Florida corporate income taxes
and Texas Franchise Tax. The shareholder was liable for individual income taxes on the Company’s taxable income. Post-merger,
the Company files consolidated federal and state income tax returns. Income
tax expense is the total of the current year income tax due and the change in deferred tax assets and liabilities. Deferred tax
assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases
of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to
the amount expected to be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes. A
tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit
that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not”
test, no tax benefit is recorded. The
Company’s policy is to recognize interest and penalties on uncertain tax positions in “Income tax expense” in
the Consolidated Statements of Operations. There were no Recently
Adopted Accounting Pronouncements ASU
2019-12 Income Taxes (Topic 740) In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain
exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.
This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020,
with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements
and related disclosure. ASU
2016-13 Financial Instruments – Credit Losses (Topic 326) In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which requires entities to use a forward-looking, expected loss model to estimate credit losses. It also requires
entities to consider additional disclosures related to credit quality of trade and other receivables, including information related
to management’s estimate of credit allowances. ASU 2016-13 was further amended in November 2018 by ASU 2018-19, Codification
Improvements to Topic 236, Financial Instrument-Credit Losses. For public business entities that are U.S. Securities and Exchange
Commission (SEC) filers excluding smaller reporting companies, the amendments are effective for fiscal years beginning after December
15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments are effective
for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. On October 16, 2019,
FASB voted to delay implementation of ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) - Measurement of
Credit Losses on Financial Instruments.” For all other entities, the amendments are now effective for fiscal years beginning
after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company continues to evaluate
the impact of these amendments to the Company’s financial position and results of operations and currently expect no material
impact of the adoption of the amendments on the Company’s consolidated financial statements. |
