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Florida—Comments on Florida Organic Aquaculture

 

Florida Organic Aquaculture (FOA) recently filed for bankruptcy and retained Equity Partners HG to seek an investor, partner or buyer for its state-of-the-art, technology-driven shrimp farm.  As a result of the announcement, this exchange took place on The Shrimp List, a mailing list for the shrimp farming industry:

 

Durwood Dugger (ddugger@biocepts.com, http://www.biocepts.com/BCI/Home.html): I had informal visits and conversations (not as a consultant) early on with Florida Organic Aquaculture (FOA) founder Cliff Morris (below).  He understood and believed in the concepts of large-scale, vertical-integration and recirculating aquaculture systems (RAS).  I can’t say that I agree with many of the technical and economic choices that Cliff made during the implementation of FOA, but I do know that the right conceptual intent was there from the beginning.

 

Clifford R. Morris (cliff@mirzamgroup.com, FOA Founder): Durwood, thanks for your balanced and objective opinion.  You are a true gentleman, a bit of fresh air in an industry that, by and large, enjoys the perverse pleasure of seeing others fail.

 

We did indeed have overly optimistic income projections, based on all the academic research that we resourced prior to startup.  Not only was this supposedly thorough financial research weak, it was also based on extrapolating research-scale models into commercial operations.  Worse than the poor financial projections were the immense challenges we faced scaling up the technology to commercial scale.

 

We were solving problem after problem, and it was expensive.  We were burning through our precious capital reserves.

 

What surprised me beyond my wildest expectation was the demand for our product.  We could produce 1,000 metric tons a year and still only be delivering to South Florida.  We have, in hand, open purchase orders for as much shrimp as we can produce.  This is from some of the biggest food retailers and wholesalers in the country.  We have emails begging for more shrimp.

 

We received on average $8 a pound wholesale for our shrimp and up to $15 a pound retail.  Not once, but over and over.

 

Two of our biggest accomplishments:

• A working and repeatable methodology of successfully raising shrimp in a RAS system.

• The ability to produce at a cost-effective level.

 

The straw that broke the camel’s back was my inability to raise the $1.5 million needed to bring FOA into full production.  The frustrating thing for me was the fact that I could raise money with nothing on the land, yet once everything was completed and operational, I couldn’t raise the last $1.5 million.  We invested $29 million in the farm, and I mobilized every single penny I had to support it—against all common sense and sound investment logic.

 

The analogy I often use: We built a magnificent racecar, but didn’t have enough money to buy the gas.

 

My wife has a bottle of champagne in the fridge for the day when all of this is over.  The toll on my health and the burden on my family have been extreme, to say the least.

 

No one can point a finger and say I walked away with anything.  The company owes me many hundreds of thousands in deferred salary for all the years I took either no salary or a mere pittance.

 

This will be the only response I am sharing on this forum, so if I don’t enter into a chain of communication, it is more to preserve my sanity (what little is left) than to ignore any further comments or questions.

 

Whilst I bear the burden for the failure, any success we enjoyed and hopefully will enjoy in the future belongs to all the loyal staff that worked for FOA.

 

Durwood Dugger (ddugger@biocepts.com, http://www.biocepts.com/BCI/Home.html): Not sure I can claim to be a “gentleman”, but I have a “been there and been eaten whole by it” kind of empathy that allows me to appreciate your situation.

 

I believe conceptually that you were/are on the right path and that given sufficient capital and continued optimization of vertically integrated scale, the project might survive.

 

I truly hope for your sake, and undeniably selfishly for all our sakes, that you succeed.  Chapter 11 was written with us illogically persistent types in mind, and expressed so memorably well—if not eloquently—in the immortal words of Yogi Berra - “It ain’t over—till it’s over.”

 

Information: Hank Waida, Managing Director, Equity Partners HG, 16 North Washington Street, Suite 102, Easton, Maryland, USA (Phone 1-866-969-1115, Extension 5, Email hwaida@equitypartnershg.com, Webpage https://www.equitypartnershg.com).

 

Sources: 1. The Shrimp List (a mailing list for shrimp farmers).  Subject: United States—Florida Organic Aquaculture For Sale.  July 31, 2017.  2. Bob Rosenberry, Shrimp News International, August 2, 2017.

 

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