10-Q: NaturalShrimp Faces Liquidation Amid Debt Defaults

Sentiment:

Quarterly Report 21 August 2025 9:26 AM

NaturalShrimp Incorporated is transitioning to a liquidation basis of accounting after a court approved the sale of substantially all assets to lenders to settle outstanding debt.

Delay expectedThe maturity date for the January 2023 Note was extended multiple times, first to June 30, 2024, and then to August 15, 2024, but the note is still in default.The maturity date for the Restructured August Note was extended to August 15, 2024, but the note is in default.The maturity date for the Restructured Senior Note was modified to 12 months from the Merger Agreement closing or termination, provided not to be later than September 30, 2024, and an investor issued a waiver on equal monthly payments through August 15, 2024, but the note is now in default.The Series G preferred shares, due for redemption in December 2024, were not redeemed as required.

Capital raiseThe company sold 108,775,526 shares of common stock for approximately $653,719 under an Equity Financing Agreement during the six months ended September 30, 2024.The company received $300,000 from the sale of Series G Preferred Shares during the six months ended September 30, 2024.The company received $40,000 in proceeds from promissory notes with related parties during the three months ended September 30, 2024.

Worse than expectedThe company is transitioning to a liquidation basis of accounting, indicating the failure of its business operations and the inability to continue as a going concern.Substantially all of the company's assets have been sold to lenders to extinguish debt, confirming the dire financial state.The company defaulted on approximately $29.9 million in debt obligations.Cash on hand is critically low, and the working capital deficiency is substantial.

Summary

NaturalShrimp Incorporated is transitioning to a liquidation basis of accounting as a court approved the sale of substantially all of its assets to Streeterville Capital, LLC and Bucktown Capital, LLC.
The asset sale, approved on March 30, 2025, and title transfer on May 14, 2025, involves a credit bid of approximately $35.7 million and $100,000 cash.
The company transferred ownership rights to its fixed assets, patents, and license agreements (totaling $25.5 million as of September 30, 2024) in exchange for the extinguishment of $30.8 million in outstanding debt to the lenders.
As of September 30, 2024, the company had cash of $43,330 and a working capital deficiency of $39,312,635.
Net loss for the six months ended September 30, 2024, was $3,914,477, compared to $4,944,970 for the same period in 2023.
Total sales revenue for the six months ended September 30, 2024, decreased by 60% to $106,991 from $263,882 in the prior year, primarily due to the non-recurrence of $150,000 in technology rental revenue.
Operating expenses for the six months ended September 30, 2024, decreased by 63.5% to $3,237,833, mainly due to a $1.3 million write-off of deferred offering costs in the prior period that did not recur.
The company defaulted on several debt obligations, including the January 2023 Note ($221,000 due), Restructured August Note Payable ($2.79 million due), and Restructured Senior Note Payable ($27.6 million due), totaling approximately $29.9 million in outstanding balance including interest.
The Series G preferred shares, with a redemption value of $820,000, were required to be redeemed as of December 2024.

Sentiment

Score: 1

Explanation: The company is in liquidation, having sold substantially all its assets to satisfy debt. This represents a complete failure of the business as a going concern, leading to the lowest possible sentiment score.

Positives

Operating expenses for the six months ended September 30, 2024, decreased by $2,586,964 (63.5%) compared to the same period in 2023, primarily due to non-recurring deferred offering costs and reductions in facility operations and salaries.
Net cash used in operating activities decreased by approximately $644,000 for the six months ended September 30, 2024, compared to the same period in 2023, mainly due to a lower net loss and changes in fair value of restructured notes.

Negatives

The company is transitioning to a liquidation basis of accounting due to the court-approved sale of substantially all assets to settle debt, indicating severe financial distress.
Total sales revenue for the six months ended September 30, 2024, significantly decreased by 60% to $106,991 from $263,882 in the prior year.
The company reported a net loss of $3,914,477 for the six months ended September 30, 2024.
Cash on hand as of September 30, 2024, was critically low at $43,330, down from $115,525 at March 31, 2024.
A substantial working capital deficiency of $39,312,635 existed as of September 30, 2024.
The company defaulted on multiple debt obligations totaling approximately $29.9 million.
The Series G preferred shares, with a redemption value of $820,000, were due for redemption in December 2024, adding to liabilities.

Risks

The company is in receivership, and its assets have been sold to lenders, indicating the cessation of normal business operations and imminent liquidation.
Significant debt defaults on multiple promissory notes and restructured notes, totaling approximately $29.9 million, led to the receivership and asset sale.
The company's shares were no longer quoted on the Over the Counter (OTC) market as of September 30, 2024, implying a loss of market liquidity and value.
Material weaknesses in internal control over financial reporting persist, including inadequate segregation of duties, lack of an independent Board of Directors and Audit Committee, and insufficient risk assessment procedures and documentation.
The company's ability to continue as a going concern was compromised, leading to the adoption of a liquidation basis of accounting.

Future Outlook

The company believes it continued to function as a going concern until March 30, 2025, the date the motion to sell its assets was approved. Subsequent to that date, the company plans to present its financial statements using the liquidation basis of accounting as liquidation was considered imminent. The company previously expected combined output from its Texas and Iowa facilities to be approximately 24,000 pounds of shrimp production per week by the third or fourth calendar quarter of 2025, but this outlook is now superseded by the liquidation.

Management Comments

Management believes that it continued to function as a going concern until the date that the motion to sell its assets was approved by the court (on March 30, 2025) at which point liquidation became imminent.
For purposes of reporting under the liquidation basis of accounting, the company plans to measure its assets at the amount used to settle its liabilities (i.e., based on the proposed credit bid).

Industry Context

The company operates in the aquaculture technology sector, specifically focusing on indoor recirculating Pacific White shrimp production. While the broader aquaculture industry is growing due to demand for sustainable seafood, NaturalShrimp's current situation of receivership and liquidation indicates a failure to achieve sustainable operations or secure adequate financing, contrasting sharply with the growth potential seen by successful players in the controlled-environment agriculture and aquaculture space.

Comparison to Industry Standards

The company's transition to a liquidation basis of accounting and the sale of its core assets to satisfy debt obligations place it far below industry standards for operational viability and financial health.
Unlike successful aquaculture companies that are scaling production and achieving profitability, NaturalShrimp has failed to generate sufficient revenue to cover its costs and service its substantial debt.
The inability to maintain a going concern status and the forced asset sale are indicative of severe underperformance compared to industry benchmarks for financial stability and growth, such as those seen in companies like AquaBounty Technologies or other emerging indoor farming ventures that are actively expanding and attracting investment.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Material Weaknesses Identified	Inadequate segregation of duties, lack of independent Board of Directors and Audit Committee, lack of risk assessment procedures on internal controls, and lack of documentation on policies and procedures critical to financial reporting objectives.	2024-09-30	These weaknesses indicate a high risk of material misstatement in financial statements not being prevented or detected on a timely basis, severely impacting financial reporting reliability.

Legal Proceedings

Streeterville Capital, LLC and Bucktown Capital, LLC filed a Verified Emergency Motion for Appointment of Receiver on September 4, 2024, alleging default under loan agreements.
An order was entered on September 9, 2024, appointing Amplo Turnaround and Restructuring, LLC as receiver over NaturalShrimp's assets.
On November 20, 2024, Lenders and NaturalShrimp filed a Verified Amended and Stipulated Emergency Motion for Immediate Appointment of a Receiver, which was granted on November 22, 2024.
On February 11, 2025, the Receiver filed a Motion for Approval to Sell Substantially all of the Receivership Entities Assets to Streeterville Capital, LLC and Bucktown Capital, LLC for approximately $35.7 million credit bid and $100,000 cash.
The order to sell assets was approved on March 30, 2025, and title was transferred to the lenders on May 14, 2025, extinguishing $30.8 million in debt in exchange for $25.5 million in assets.

Related Party Transactions

The company received $140,000 in proceeds from the issuance of three promissory notes with related parties between July 10 and July 17, 2023, and an additional $40,000 during the three months ended September 30, 2024, totaling $180,000 outstanding.
The company issued a loan agreement for $300,000 with related parties on August 10, 2022, with five related parties entering into promissory notes for $50,000 each, totaling $250,000 received.
The company has an outstanding note payable to NaturalShrimp Holdings, Inc. (a shareholder) for approximately $77,000, with accrued interest of approximately $74,000 as of September 30, 2024.
The company has working capital notes payable to multiple shareholders of NSH and a former officer/director for a total of $356,404, with accrued interest of approximately $182,000 as of September 30, 2024.
The company has working capital notes payable with various shareholders of NSH for a total of $54,647, with accrued interest of approximately $21,570 as of September 30, 2024.

Stakeholder Impact

Shareholders: Common stockholders face significant losses as the company is liquidating, and its shares were no longer quoted on the OTC market. Preferred stockholders (Series G) also face uncertainty regarding redemption.
Creditors: Secured lenders (Streeterville and Bucktown Capital) have taken control of substantially all assets to satisfy their debt, indicating a recovery for them, but other creditors may face losses.
Employees: The liquidation of assets and cessation of normal operations will likely result in significant job losses.
Customers: The company's ability to supply shrimp will cease, impacting its customer base.
Suppliers: Unsecured suppliers may face challenges in recovering outstanding payments due to the liquidation.

Next Steps

The company plans to present its financial statements under the liquidation basis of accounting as of March 31, 2025.
The company will measure its assets at the amount used to settle its liabilities (based on the proposed credit bid) for liquidation accounting purposes.
Management will continue to monitor and evaluate the relevance of its risk-based approach and the effectiveness of internal controls and procedures over financial reporting, and implement remediation actions as funds allow.

Key Dates

Date	Description
2020-07-15	Company issued a promissory note to Ms. Williams for $383,604.
2021-08-25	Company, through NAS, entered into Equipment Rights Agreements with Hydrenesis-Delta Systems, LLC and Technology Rights Agreement with Hydrenesis Aquaculture LLC.
2021-11-22	Company entered into a securities purchase agreement for 1,500 shares of Series E Preferred Stock.
2021-12-15	Company entered into a securities purchase agreement for a secured promissory note totaling approximately $16,320,000 (December 2021 Debenture).
2022-08-10	Company issued a loan agreement for $300,000 with related parties.
2022-08-17	Company entered into a securities purchase agreement for a secured promissory note (August Note) totaling approximately $5,433,333.
2022-11-04	Company entered into a Restructuring Agreement for an Amended and Restated Secured Promissory Note (August Note) and a Restructuring Agreement for an Amended and Restated Secured Promissory Note (Senior Note).
2023-01-20	Company entered into a secured promissory note (January 2023 Note) with an investor for $631,968.
2023-04-21	Company entered into a $60,000 promissory note with Yotta Investment LLC.
2023-04-28	Company entered into an Equity Financing Agreement with GHS Investments LLC for up to $10,000,000.
2023-05-09	Company entered into a purchase agreement (GHS 2023 Purchase Agreement) with GHS for up to $6,000,000.
2023-05-17	Company entered into an additional $60,000 promissory note with Yotta Investment LLC.
2023-07-24	Company entered into a Securities Purchase Agreement for the additional sale of 156 shares of Series E Preferred Stock.
2023-09-28	Company increased authorized common shares to 1,400,000,000.
2023-11-08	Company and Investor entered into an Exchange Agreement on the January 2023 Note, partitioning it into a $132,000 new promissory note exchanged for 10,000,000 common shares.
2023-11-17	Maturity date of January 2023 Note extended to June 30, 2024.
2023-11-20	Lenders and NaturalShrimp filed a Verified Amended and Stipulated Emergency Motion for Immediate Appointment of a Receiver.
2023-11-22	Utah State Court entered an order granting the Stipulated Motion and appointed Amplo Turnaround and Restructuring, LLC as receiver.
2023-12-01	Board authorized the issuance of 10,000 preferred shares designated as Series G Preferred Stock.
2023-12-14	Company entered into a Securities Purchase Agreement for the sale of 110 shares of Series G Preferred Stock for $110,000.
2024-01-17	Company and Investor entered into an Exchange Agreement on the January 2023 Note, partitioning it into a $99,450 new promissory note exchanged for 10,000,000 common shares.
2024-02-11	Receiver filed a Motion for Approval to Sell Substantially all of the Receivership Entities Assets.
2024-02-22	Company and Investor entered into an Exchange Agreement on the January 2023 Note, partitioning it into a $91,800 new promissory note exchanged for 10,000,000 common shares.
2024-03-30	Order to sell the assets was approved by the court.
2024-04-03	Company and Investor entered into an Exchange Agreement on the January 2023 Note, partitioning it into a $92,700 new promissory note exchanged for 10,000,000 common shares.
2024-04-23	Company received a tranche of $100,000 under the SPA for 100 Series G Preferred Stock.
2024-06-12	Company received a tranche of $100,000 under the SPA for 100 Series G Preferred Stock.
2024-07-03	Company and Investor entered into an Exchange Agreement on the Restructured Senior Note, partitioning it into a $90,000 new promissory note exchanged for 10,000,000 common shares. Investor issued a waiver on equal monthly payments through August 15, 2024.
2024-07-10	Company received a tranche of $100,000 under the SPA for 100 Series G Preferred Stock.
2024-08-21	Date of filing of this Quarterly Report on Form 10-Q.
2024-09-04	Streeterville Capital, LLC and Bucktown Capital, LLC filed a Verified Emergency Motion for Appointment of Receiver against NaturalShrimp, Inc.
2024-09-09	Utah State Court entered an ex parte order granting the relief requested by Lenders and appointed Amplo Turnaround and Restructuring, LLC as receiver.
2024-09-30	End of the quarterly period covered by this report.
2025-05-14	Title to the assets was transferred to the lenders.

Recommendation

strong sell

The company is undergoing liquidation, with substantially all assets sold to satisfy secured debt. This indicates a complete failure of the business as a going concern. Common stockholders are highly unlikely to recover any value, and the shares are no longer quoted on the OTC market. Any remaining value is being used to extinguish liabilities, leaving nothing for equity holders. This is a definitive exit event for the company, making the stock worthless for current investors.

Keywords

Aquaculture, Shrimp farming, Biotechnology, Receivership, Liquidation, Debt default, SEC filing, Financial distress, Preferred stock, Promissory notes

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