10-Q: Trans American Aquaculture Reports Modest Revenue Increase in Q2 2024 Amidst Ongoing Financial Challenges
Quarterly Report
Trans American Aquaculture reports a revenue increase to $315,145 for the six months ended June 30, 2024, but continues to face significant financial hurdles and going concern uncertainty.
Summary
- Trans American Aquaculture, Inc. reported its financial results for the quarter ended June 30, 2024.
- The company's revenue for the six months ended June 30, 2024, was $315,145, compared to $0 for the same period in 2023.
- The cost of revenues for the six months ended June 30, 2024, was $223,299.
- The company's gross profit for the six months ended June 30, 2024, was $91,846.
- General and administrative expenses for the six months ended June 30, 2024, were $321,383.
- The company reported a net loss of $568,332 for the six months ended June 30, 2024, compared to a net loss of $554,263 for the same period in 2023.
- As of June 30, 2024, the company had a cash balance of $0.
- The company's current liabilities exceeded its current assets by $4,175,913 as of June 30, 2024.
- The company has entered into a forbearance agreement with Kings Aqua Farm, LLC regarding a $5,600,000 note.
- The company is seeking to raise additional capital to fund its operations.
- The company's ability to continue as a going concern is dependent on its ability to raise additional capital and implement its business plan.
Sentiment
Score: 3
Explanation: The document presents a mixed picture with increased revenue but significant financial challenges, including a net loss, negative cash balance, and going concern uncertainty. The sentiment is therefore negative.
Positives
- Revenue increased to $315,145 for the six months ended June 30, 2024, compared to $0 in the same period last year, indicating some sales traction.
- The company secured a forbearance agreement with Kings Aqua Farm, LLC, providing temporary relief from immediate foreclosure.
- Gross profit for the six-months ended June 30, 2024 was $91,846 for an operating profit of 29.1% compared to no gross margin for the same period in 2023.
Negatives
- The company reported a net loss of $568,332 for the six months ended June 30, 2024.
- As of June 30, 2024, the company's cash balance was $0.
- Current liabilities exceeded current assets by $4,175,913 as of June 30, 2024.
- The company is in default on notes to shareholders.
- The company has a material weakness in its internal control over financial reporting.
Risks
- The company's ability to continue as a going concern is dependent on its ability to raise additional capital.
- The company's liquidity is significantly impacted by the farm note to Kings Aqua Farm LLC.
- The company is subject to production risks such as weather and disease.
- The company's business is highly dependent on the prices of and demand for shrimp, which are volatile.
- Increased availability of imported shrimp can affect the business by lowering commodity prices.
- The company has a material weakness in its internal control over financial reporting.
Future Outlook
The company anticipates adding management positions for corporate development and the corresponding operations of the Company, but this will not occur prior to obtaining additional capital. The company is in the process of raising additional capital to support the completion of the developmental stage activities and ramp up ongoing full shrimp harvest cycles and establish its customer base.
Industry Context
The report mentions that shrimp prices have dropped as much as 44% since 2022, according to preliminary 2023 data from the National Marine Fisheries Service. The company's business, prospects, revenues, profitability, and future growth are highly dependent upon the prices of and demand for shrimp. Increased availability of imported shrimp can affect the business by lowering commodity prices.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Fractional Chief Financial Officer and Principal Financial and Accounting Officer | Malcolm McNeill | NA | 2024-07-21 | Resignation |
Legal Proceedings
- From time to time the Company is involved in lawsuits against the Company involving general liability or various contractual matters.
Related Party Transactions
- As of June 30, 2024, shareholders have loaned the Company approximately $1,562,131 in notes which accrue interest ranging from 12 % and 18 % per annual period.
Stakeholder Impact
- Shareholders face the risk of dilution and potential loss of investment if the company cannot raise additional capital.
- Employees face uncertainty regarding job security due to the company's financial instability.
- Customers may be concerned about the company's ability to fulfill orders and maintain product quality.
- Suppliers may face the risk of delayed or non-payment.
- Creditors face the risk of non-repayment of debts.
Next Steps
- The company plans to extend the due date of shareholder notes to January 1, 2025.
- The company plans to stock in August 2024.
- The company is seeking to raise additional capital to fund its operations.
Key Dates
| Date | Description |
|---|---|
| 2006-09-18 | Trans American Aquaculture, Inc. was incorporated in the State of Delaware as Polythene Metro Corp. |
| 2007-01-25 | Polythene Metro Corp was acquired by Gold River Productions, Inc. |
| 2017-06-15 | Date of the Real Estate Lien Note with Kings Aqua Farm LLC. |
| 2018-07 | The Company was re-incorporated in the State of Colorado. |
| 2022-08-28 | Richard Goulding and Adam Thomas executed a Stock Purchase Agreement (SPA). |
| 2022-08-29 | Gold River Productions, Inc. and Goulding executed an Assignment of Rights and Assumption of Liabilities Agreement. |
| 2022-09-13 | Gold River Productions, Inc. and Trans American Aquaculture, LLC executed a Definitive Equity Exchange Agreement. |
| 2023-01-20 | The Company entered into an Equity Financing Agreement (the EFA) and Registration Rights Agreement with GHS Investments, LLC. |
| 2023-02 | The Company changed its name to Trans American Aquaculture, Inc. |
| 2023-12-11 | The Company entered into an accounts receivable factoring agreement in the amount of $750,000. |
| 2024-02-07 | The amount received for the factored receivables totaled $135,847. |
| 2024-02-27 | The Company put 4,615,277 shares of common stock to GHS at a purchase price of $0.00224 under the EFA for net proceeds of $2,106. |
| 2024-05-16 | Date of the Secured Promissory Note with IG Holdings, Inc. and Iron Rings Holdings, LLC. |
| 2024-05-29 | The Company put 11,683,300 shares of common stock to GHS at the purchase price of $0.0012 under EFA for a net proceeds of $12,715. |
| 2024-05-31 | The Company entered into a Forbearance and Modification Agreement with the lender, Kings Aqua Farm, LLC. |
| 2024-06-30 | End of the reporting period for the 10-Q filing. |
| 2024-07-02 | Date of the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC. |
| 2024-07-21 | Malcolm McNeill resigned as our Fractional Chief Financial Officer and Principal Financial and Accounting Officer. |
| 2024-08-06 | The lender agreed that it would not exercise or enforce its rights or remedies against the Company to which it would be entitled under the terms of the Real Estate Lien Note dated June 15, 2017 in the original principal amount of $5,600,000, and the Deed of Trust executed by the Company as grantor in favor of Jizhong Wang, as trustee, for the benefit of the lender by occurrence of the failure by the Company to pay principal and interest installments from May 1, 2023 through May 31, 2024 before August 6, 2024. |
| 2024-08-19 | Date of the 10-Q filing. |
Keywords
aquaculture, shrimp farming, financial results, revenue, net loss, going concern, forbearance agreement, notes payable, liquidity, Trans American Aquaculture
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