Blue Star seeking acquisitions and investors
West Palm Beach, Florida, U.S.A.-based crab supplier Blue Star Foods is seeking investors to purchase stock in its now-public company as it plans to acquire other seafood companies.
Blue Star Acquisition Corp. – a Delaware corporation made up of investors – merged with John Keeler & Co. dba Blue Star Foods, which is now a subsidiary of Blue Star Acquisition Corp., Blue Star Foods said in its 12 April prospectus filing with the United States Securities and Exchange Commission.
“This reverse-merger was done for a specific purpose: to build a diversified, triple bottom-line sustainable seafood company. This company will be built via acquisition on both the supply and importer/distribution sides, as well as organic growth of the platform companies,” Blue Star Foods CEO Carlos Faria told SeafoodSource.
The company’s strategy is “to acquire both horizontally and vertically throughout the seafood value chain,” Faria said.
“It is imperative that any acquisition that we look at meet our triple bottom-line and sustainability criteria or have the short-term potential to become such,” he added.
Blue Star Foods intends to introduce new species to its product line, including lobster tails, finfish, and other specialty seafood proteins, in the next 18 months, according to one of its filings with the SEC.
Blue Star plans to sell up to approximately 7.1 million shares of its common stock on the over-the-counter market. It is also applying to be eligible for trading on the Over-The-Counter Bulletin Board.
Blue Star already has several investors that have purchased stock via a private placement. However, company executives declined to say the total amount they are trying to raise by selling common stock.
“The amount we would raise would vary with each acquisition depending on the needs of the companies we acquire,” Blue Star Chief Financial Officer Christopher Constable told SeafoodSource.
Meanwhile, Faria confirmed that Blue Star purchased Miami, Florida, U.S.A.-based Bonamar’s crabmeat when the company was forced to liquidate after it could not repay a USD 22 million (EUR 19.4 million) bank loan.
Faria said the transaction was confidential at the time, and he defended the quality of the crab Blue Star purchased from Bonamar.
"After our internal QC protocol under the British Retail Consortium umbrella – of which we are the only U.S.-based pastuerized crabmeat importer to be approved by BRC (AA rating) – the quality of Bonamar’s Hanaii inventory ranked the highest we have seen in years," he said.
Constable defended the company’s 2018 losses, which were included in an annual report filed with the SEC. Blue Star realized a net loss of USD 2.3 million (EUR 2 million) and a deficit of USD 3.9 million (EUR 3.5 million), according to the report.
“These circumstances raise substantial doubt as to the company’s ability to continue as a going concern,” the document said.
The language used in SEC filings, even by large companies, is always conservative, risk-averse, and offers little leeway for expansion, Constable told SeafoodSource. Plus, several expenses were related to Blue Star going public.
“Included in the net loss were USD 1,299,400 (EUR 1.2 million) in non-recurring, non-cash expenses related to the closing of the public transaction and USD 808,300 (EUR 716,000) non-cash compensation expenses, some of which may be recurring,” Constable said.
Blue Star’s deficit working capital of USD 1.1 million (EUR 975,000) includes USD 2.9 million (EUR 2.6 million) in loans from stockholders that are subordinated to the company’s lender, and cannot be repaid, giving an adjusted positive working capital in excess of USD 1 million (EUR 886,000), Constable added.