Tru Shrimp seeks IPO; Company has a $41 million deficit and will run out of cash in the fall – Dakota Free Press

Three years after his much-vaunted bail from Minnesota for the promise of better corporate welfare in South Dakota, the Minnesota Shrimp Farming Society Tru Shrimp has yet to begin building its shrimp tanks in Madison, South Dakota. Clearly unable to raise enough money from local private investors, Tru Shrimp documents filed Tuesday with the Securities and Exchange Commission to launch an initial public offering of shares under the NasDAQ ticker symbol BTRU. But this SEC prospectus points to huge debt and impending collapse this year that a simple IPO could not avoid.

What’s in your wallet? Not much, if you’re Tru Shrimp!

Tru Shrimp’s S-1 filing on January 18 shows that, despite South Dakota’s bluster”America’s Strongest Economy», the owners of Tru Shrimp still haven’t moved or Minnesota headquarters in South Dakota, and they keep getting their fancy financial lawyer done by Twin Cities lawyers instead of trying to Discover the unexpected genius lawyers on Main Street Madison. The prospectus does not indicate how many shares Tru Shrimp plans to offer or at what price Tru Shrimp will offer them. But they don’t plan to sell a lot of stock: On page 16, the prospectus says this initial public offering won’t cover the $75 million to $80 million that might be needed to build the Port of Madison Bay. Tru Shrimp only plans to sell enough inventory to “finalize the engineering of the Port of Madison Bay and fund our operating expenses for the next 12 months.”

The company says it has so far “focused almost exclusively on research and development and now intends[s] to market our technology platform. The prospectus says the research and development phase consumed “approximately $70 million in cash,” including $11 million spent on the Balaton Bay Reef pilot production facility. Tru Shrimp says it made its first commercial sale of shrimp to a Minneapolis distributor in September 2019. Tru Shrimp halted production due to the coronavirus pandemic and did not resume production until last summer.

The prospectus claims that in ten cohorts of prawns grown in Balaton since July 2021, the company was able to grow 30 times more prawns per cubic meter of water and cause them to grow twice as fast as the 10% farmed. best performing shrimp. in Ecuador. Tru Shrimp also claims to be harvesting heavier shrimp (average terminal harvest weight of 32.53g compared to 21.38g for major Ecuadorian ponds) and seeing more of these larger shrimp survive to harvest (up to 70.3% in the Balaton pond compared to 55-60% in Ecuador’s best facilities.

Tru Shrimp is trying to get investors excited by talking about working on a deal for Supply Gordon Food Service. Tru Shrimp tells the SEC the deal has been ongoing since a letter of intent signed in December 2020. Tru Shrimp says there’s a lot of market for his product: “According to the National Fisheries Institute, the average American consumes 4.7 pounds of shrimp per year. , twice the consumption rate of tuna and 1.5 times that of salmon, the other two most consumed seafood species, confirming that shrimp is by far America’s favorite seafood product. Tru Shrimp estimates that its Madison plant can add 790,000 pounds of shrimp to our national annual consumption of 1.7 billion pounds of shrimp (90% of which is currently imported), sell their shrimp at $15.73 a pound, and earn thus 12.4 million dollars per year. Tru Shrimp hopes to earn an additional $3.0 million a year on pet food made from 450,000 pounds of shrimp head waste. But its biggest budget will come from chitosan, a biopolymer of crustacean exoskeletons that can be used for biomedical and pharmaceutical applications. Tru Shrimp says he can grind up what we and Fido don’t eat to get about 6,200 pounds of chitosan each year, or about 2.8 million grams, which selling for $7.50 would bring in $21 million a year. year.

Tru Shrimp says he spent about $4 million designing and engineering the Madison facility. Tru Shrimp estimates the construction of the Madison plant will cost between $75 million and $80 million, “but we haven’t got any bids yet to confirm our estimates.” Tru Shrimp talks about innovating this year, but they don’t offer any completion or operating date for the Madison plant, though the company previously cited 18 to 24 months as the time from groundbreaking to launch. put shrimp on the barbies. But give us $90 million in investment, says Tru Shrimp, and with chitosan and edibles for man and beast generating $36.4 million a year and an estimated operating profit target of 45%, they can recoup the investment in less than five years. Tru Shrimp also says that in ten years they “plan” to build two more “ports” that would quadruple their total production.

Alas, Tru Shrimp is more underwater than its Pilot Shrimp. It reports to the SEC revenues of $111,000 in 2019 and $9,000 in 2020 and net losses of $9.2 million in 2019 and $7.4 million in 2020. For the first three quarters of 2021, Tru Shrimp reports $4,000 in revenue and a net loss of $8.0 million.

Tru Shrimp has received more money in coronavirus relief money than it has earned from sales. In April 2020, the company obtained $483,000 in loans from the CARES Act Paycheck Protection Program, $436,573 was forgiven. In January 2021, Tru Shrimp drew an additional $436,638 from the PPP, which represents long-term debt on Tru Shrimp’s ledger.

In each year listed, Tru Shrimp spent more on general and administrative expenses (primarily the salaries of seven executives and administrative employees) than on research and development (including the salaries of four scientists and ten technicians at Balaton). In the first nine months of 2021, Tru Shrimp reduced its research and development expenses by 47% compared to the comparable period of 2020, but its general and administrative expenses by only 6%.

As of September 30, 2021, Tru Shrimp told the SEC that its accumulated deficit was $41.47 million. At that time, the company “had approximately $15.1 million in debt”. The two biggest chunks of that debt are a $6.0 million loan from Eagle Energy and the $6.5 million loan from Madison’s Lake Area Improvement Corporation that includes state bait money. (and these numbers are just the main one; as of September 30, 2021, the convertible due to LAIC was $6.83 million). LAIC had previously extended the maturity date of this loan to December 27, 2021. (This is also the expiry date of Tru Shrimp’s option to purchase 43 acres from the city for $10,000 per acre. in cash or $15,000 per acre in common stock.) Tru Shrimp tells SEC she is seeking another LAIC expansion; if that fails and they default, they will default on the Eagle Energy loan as well, and Eagle Energy will likely want some blood, or at least some fixed assets to bank. “Any of these events,” Tru Shrimp calmly states, “would have a significant negative impact on our business and operations.”

Tru Shrimp tells the SEC they will run out of operating capital by this fall. If people don’t buy Tru Shrimp stock, “We will need to generate additional funds through financing, sales of our products, government grants, loans, or other sources or transactions.” Note the term buried in the middle of this sentence: government grants. Imagine how bad it would be if they made that request when they ran out of money in September, right in the middle of election season. Should we keep an eye on the Governor’s Office of Economic Development to see if he’s slipping some federal coronavirus relief money out the side door right now to keep Tru Shrimp from going bankrupt until after the 8th November ?

If I’m reading the prospectus correctly, Tru Shrimp is telling the Securities and Exchange Commission that, as it stands, three years after getting a big loan from South Dakota and not doing anything concrete with it, the company has less than a year to live. South Dakota’s bet has yet to pay off, and now Tru Shrimp is an even bigger bet for investors who might consider jumping on a possible IPO which, far from providing the funds to start building, to dig in and make a profit, can only pay to fire the engineers and prevent bankruptcy for a few more months.

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