10-K: Trans American Aquaculture Faces Bankruptcy Amidst Financial Strain and Operational Halt

Trans American Aquaculture, Inc. (TAA) has filed for Chapter 11 bankruptcy protection following significant financial losses, a property foreclosure, and a halt in shrimp production, raising substantial doubt about its ability to continue as a going concern.

Summary

• Trans American Aquaculture, Inc. (TAA) filed for Chapter 11 bankruptcy protection on December 13, 2024, to safeguard its shrimp broodstock and key assets after a Deed in Lieu of Foreclosure was filed by Kings Aqua Farm LLC on December 2, 2024, due to non-payment.
• The company reported a net loss of $2,808,894 for the year ended December 31, 2024, an increase from a net loss of $1,894,993 in 2023, primarily due to expense recognition related to the property debt extinguishment.
• As of December 31, 2024, TAA had $0 cash and its current liabilities exceeded current assets by $3,351,602, indicating severe liquidity issues.
• Revenue for 2024 increased to $331,645 from $101,574 in 2023, but this was primarily from existing inventory, as the company did not produce a meaningful harvest in 2024, focusing instead on genetic line development.
• Gross profit improved to $10,030 in 2024 from a gross loss of $560,018 in 2023, attributed to streamlined production and smaller harvest totals.
• TAA's common stock is quoted on the OTC Markets under the symbol GRPS and is considered a penny stock, which may limit liquidity and increase transaction costs.
• The company is actively seeking additional capital and strategic partners to fund operations and accelerate sales, having previously raised funds through convertible preferred stock and factoring receivables.
• TAA operates an 1,880-acre farm in Rio Hondo, Texas, specializing in extra-large, antibioticand hormone-free Pacific white shrimp, focusing on sizes greater than 28 grams (21/25 count) due to market scarcity and premium pricing.
• The company maintains its own onsite maturation and hatchery facilities for developing superior genetic lineage broodstock, which it believes provides a distinct competitive advantage in producing large, disease-resistant shrimp.
• TAA is exploring the exportation of broodstock as a secondary revenue source and has received approval from India as a preferred broodstock importer.

Sentiment

Score: 2

Explanation: The company is in Chapter 11 bankruptcy, has zero cash, significant accumulated deficits, and is in default on loans. While there are some positive operational aspects and capital raising efforts, the overall financial distress and operational halt present an extremely negative outlook.

Positives

• Revenue increased by 227% to $331,645 in 2024 from $101,574 in 2023, although this was from inventory rather than new production.
• Gross profit turned positive at $10,030 in 2024, compared to a gross loss of $560,018 in 2023, reflecting improved efficiency in shrimp production.
• The company possesses onsite maturation and hatchery facilities, allowing for the development of superior genetic lineage broodstock, which is believed to lead to increased growth rates, lower mortality, and stronger disease resistance.
• TAA is the only team in the U.S. capable of consistently producing shrimp greater than 28 grams on a large scale, offering a unique jumbo, farm-raised U.S. product.
• The company has received approval from the Coastal Aquaculture Authority of India as a preferred broodstock importer, presenting a potential new revenue stream.
• Current liabilities decreased by $126,821 from $3,478,423 in 2023 to $3,351,602 in 2024.

Negatives

• The company's subsidiary, Trans American Aquaculture, LLC (TAA), filed for Chapter 11 bankruptcy protection on December 13, 2024.
• A Deed in Lieu of Foreclosure was filed on December 2, 2024, by Kings Aqua Farm LLC due to non-payment, resulting in the conveyance of the farm land back to the former note holder and the extinguishment of a $4,707,902 debt.
• The company reported a significant net loss of $2,808,894 for the year ended December 31, 2024, an increase from $1,894,993 in 2023.
• As of December 31, 2024, the company had $0 cash, down from $6,600 in 2023, and current liabilities exceeded current assets by $3,351,602.
• No production operations are currently being conducted at the farm, with only broodstock maintenance ongoing.
• Shrimp prices have dropped as much as 44% since 2022, which negatively impacts the company's business, prospects, revenues, and ability to obtain capital.
• The company is in default on approximately $1,646,636 in related party notes from shareholders, which accrued interest ranging from 12% to 18% per annum and were due between April 1 and July 1, 2024.
• Management identified material weaknesses in internal control over financial reporting, including the absence of a functioning audit committee, insufficient documentation of internal controls, and a lack of desired corporate governance for contractual agreements.
• The company has not adopted a formal, written code of ethics due to a small number of management members.
• The CEO's annual base salary of $169,900 and non-management directors' annual retainers of $43,000 (plus committee fees) were accrued but unpaid, and shares for directors have yet to be issued.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring net losses, negative working capital, and insufficient cash to fund operations for the next 12 months.
• The company's ability to continue operations is highly dependent on securing additional capital and successfully implementing its business plan, which is not assured.
• The Chapter 11 bankruptcy filing introduces significant uncertainty regarding the company's future, with a reorganization plan confirmation hearing scheduled for August 18, 2025.
• The business is highly dependent on volatile shrimp prices and demand, which have seen significant declines (e.g., 44% drop since 2022), materially affecting financing capacity and production prospects.
• Increased availability of imported shrimp can lower commodity prices, reducing inventory value and customer orders.
• Shrimp farming is seasonal and subject to weather conditions, which can impact production cycles and harvest yields.
• Production risks such as disease and other factors could affect the company's ability to realize revenue from its inventory stock.
• The company's common stock is considered a 'penny stock,' which may decrease broker-dealer willingness to make a market, reduce liquidity, and increase transaction costs for investors.
• Material weaknesses in internal control over financial reporting increase the risk of material misstatements in financial statements not being prevented or detected timely.
• The company relies on a single buyer at its current capacity, which could pose a concentration risk if that relationship changes.
• Cybersecurity threats pose a risk to customer data storage, potentially leading to loss of public trust, customers, and revenue.
• The company has not filed federal and state income tax returns for 2020, 2021, 2022, and 2023, and has an unremitted federal income tax liability of $33,180 for 2020, plus penalties and interest, which it intends to pay when sufficient cash is available.

Future Outlook

The company's future outlook is highly uncertain due to its Chapter 11 bankruptcy filing and severe liquidity issues. Management is focused on finalizing a reorganization plan, with a confirmation hearing scheduled for August 18, 2025. Production operations are currently halted, with efforts solely on maintaining broodstock. The company intends to focus on developing genetic lines, selling broodstock, and resuming shrimp production at appropriate times, contingent on securing additional capital and strategic partners. The ability to continue as a going concern is dependent on successful future capital offerings or alternative financing arrangements and generating sales.

Management Comments

• "We are solely maintaining the broodstock as plans to exit bankruptcy are finalized."
• "Our focus will be to sell to retailers first and niche markets second, where the pricing makes economic sense."
• "We believe that our onsite maturation and hatchery facilities give us a distinct advantage on all other farms in Texas because no other farm in Texas develops their own lines of Broodstock in the manner that we do."
• "Our team is the only one in the U.S. that has been capable of producing shrimp of greater than 28 grams on a large-scale consistent basis as we have both historically and currently done."
• "We believe that this gives us a product that is unique worldwide, a jumbo, farm raised shrimp that is 100% a product of the United States."
• "Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations; however, management cannot make any assurances that such financing will be secured."
• "In 2024, the Company focused efforts primarily on the development of genetic lines and did not produce a meaningful harvest. What shrimp revenue we did have was a result of inventory."
• "The main reason for the increased loss is the expense recognition for the difference in the asset value to the debt owed on the property."
• "We anticipate adding management positions for corporate development and the corresponding operations of the Company, but this will not occur prior to obtaining additional capital."
• "We plan to adopt a Code of Ethics during the fiscal year ending December 31, 2025."

Industry Context

The U.S. is the second-largest import and consumer market for shrimp globally, with a majority of imported shrimp being smaller varieties. Trans American Aquaculture focuses on larger shrimp (28+ grams) to address a strong demand for large, sustainably produced shrimp with limited supply. The global shrimp trade was valued at $24 billion USD in 2022, with farm-raised shrimp production growing significantly (60% in the last decade) and projected to grow at a 6.72% CAGR through 2028. However, recent trends show shrimp prices dropping as much as 44% since 2022, partly due to increased production from countries like Ecuador. Concerns over antibiotic use in Indian shrimp imports by the EU could significantly impact global prices, potentially benefiting domestic producers like TAA if the U.S. FDA follows suit.

Comparison to Industry Standards

• TAA's focus on producing shrimp greater than 28 grams (21/25 count) differentiates it from most global producers who are reluctant to grow shrimp to this size due to complexity, giving TAA a competitive advantage in a niche, premium market.
• The company's claim of being the only team in the U.S. capable of large-scale consistent production of 28+ gram shrimp suggests a unique operational capability compared to other domestic farms like Bowers Shrimp Farm in Texas.
• TAA's use of onsite maturation and hatchery facilities for developing superior genetic lineage broodstock is highlighted as a distinct advantage over other Texas farms, which reportedly do not develop their own lines in the same manner.
• The company's adherence to Best Aquaculture Practices (BAP) farm guidelines and commitment to antibiotic/hormone-free, closed-system production (zero ecological impact) positions it favorably against foreign competitors, especially given concerns about imported shrimp quality (less than 1% of imported shrimp tested for antibiotics/toxins).
• Despite industry-wide shrimp price drops (44% since 2022), TAA's focus on premium, larger shrimp aims to capture higher selling prices due to scarcity, potentially mitigating some of the broader market pressures.
• The potential reduction in Indian shrimp imports to the EU and U.S. due to antibiotic concerns could create a significant market opportunity for domestic, clean shrimp producers like TAA, as Indian imports account for almost 40% of total imports for both regions.

Management Changes

Corporate Governance

Legal Proceedings

• Trans American Aquaculture, LLC (TAA), a wholly-owned subsidiary, filed for Chapter 11 bankruptcy protection on December 13, 2024, in the United States Bankruptcy Court for the Southern District of Texas (Case # 24-10217).
• The bankruptcy filing was a voluntary action taken to protect company assets (shrimp broodstock and key property, plant, and equipment) due to threats from the former farm note holder, Kings Aqua Farm LLC.
• On December 2, 2024, Kings Aqua Farm LLC filed a Deed in Lieu (DIL) of Foreclosure due to non-payment by Trans American Aquaculture, resulting in the land being conveyed back to Kings Aqua Farm and the extinguishment of the related debt.
• The bankruptcy plan is currently being finalized between TAA management, its board of directors, and legal counsel, with a plan confirmation hearing scheduled for August 18, 2025.
• The company is not currently involved in any other pending legal proceeding or litigation, and no governmental authority is contemplating any proceeding that would reasonably be likely to have a material adverse effect on the business, financial condition, and operating results.

Related Party Transactions

• As of December 31, 2024, shareholders have loaned the Company approximately $1,646,636 in notes, which accrue interest ranging from 12% to 18% per annum.
• These shareholder notes had maturities between April 1, 2024, and July 1, 2024, and are currently in default, though no one has called them due to date.
• Accrued interest related to these notes totaled $562,063 as of December 31, 2024, and $414,624 as of December 31, 2023.
• The CEO, Adam Thomas, allows the company to use his principal executive office address (1022 Shadyside Lane, Dallas, Texas 75223) free of charge.
• Adam Thomas (CEO, CFO, Director) is related to Luis Fernando Granda Arias (COO) and Luis Arturo Granda Roman (Director) through marriage (Mr. Thomas's wife is Mr. Arias's niece and Mr. Roman's first cousin).

Stakeholder Impact

• **Shareholders**: Significant dilution of voting power is expected from the issuance of new securities. Existing shareholders face substantial risk of loss due to the company's bankruptcy filing, accumulated deficit, and going concern uncertainty. The common stock is a 'penny stock,' which limits liquidity and increases transaction costs. Series C Preferred Stock holders cannot convert their shares for a minimum of 12 months from issuance.
• **Employees**: The company currently has only four full-time employees. The halt in production operations and bankruptcy proceedings create job insecurity and potential for layoffs.
• **Customers**: Current production operations are halted, meaning the company cannot fulfill new orders for shrimp, potentially impacting its ability to serve existing customers and acquire new ones.
• **Suppliers**: The company's financial distress and bankruptcy filing may impact its ability to pay suppliers, although it states it does not rely on a single supplier.
• **Creditors**: Kings Aqua Farm LLC, a former note holder, foreclosed on the farm property due to non-payment. Shareholders who provided loans are now creditors with notes in default. The Chapter 11 bankruptcy process will determine how creditors are repaid, if at all.
• **Regulatory Authorities**: The company is subject to SEC reporting requirements and has identified material weaknesses in internal controls, which could lead to further regulatory scrutiny. The Texas Parks and Wildlife Department (TPWD) permits are essential for operations.

Next Steps

• Finalize the Chapter 11 bankruptcy reorganization plan.
• Present the reorganization plan at the confirmation hearing scheduled for August 18, 2025.
• Actively pursue additional sources of financing and strategic partners to fund operations.
• Continue developing genetic lines and selling broodstock.
• Resume shrimp production at the appropriate time, contingent on securing additional capital.
• Strengthen internal control documentation and corporate governance.
• Adopt a formal, written Code of Ethics during the fiscal year ending December 31, 2025.

Key Dates

Recommendation

Keywords

Aquaculture, Shrimp farming, Pacific white shrimp, SEC filing, 10-K, Bankruptcy, Chapter 11, Financial performance, Net loss, Liquidity, Going concern, Capital raise, Broodstock, Texas aquaculture, Farm-raised shrimp, Antibiotic-free, Hormone-free, Sustainable aquaculture, SEC compliance, Corporate governance, Risk management, OTC Markets, Penny stock