10-Q: NaturalShrimp Inc. Reports Q1 2025 Results: Revenue Declines Amid Ongoing Financial Challenges

Sentiment:

Quarterly Report 14 August 2024 5:01 PM

NaturalShrimp Inc. reported a significant decrease in revenue for the first quarter of 2025, alongside a net loss and ongoing concerns about its ability to continue as a going concern.

Delay expectedThe maturity date of the January 2023 Note has been extended to August 15, 2024.The maturity date of the Restructured August Note has been extended to August 15, 2024.The equal monthly payments of the Restructured Senior Note are not currently required to be paid through August 15, 2024.

Capital raiseThe company is dependent on raising additional capital or debt financing to meet its operating requirements.Management believes that private placements of equity capital will be needed to fund the Company's long-term operating requirements.The company anticipates needing to raise an additional $2.5 million to cover all of its capital and operational expenses over the next 12 months.The company received $486,000 from the sale of common shares and $200,000 from the sale of Series G Preferred stock during the quarter.

Worse than expectedThe company's revenue decreased by 82% compared to the same period last year.The company reported a net loss of $2.93 million for the quarter.The company's cash balance is critically low at approximately $5,000.The company's working capital deficit increased to $39.4 million.

Summary

NaturalShrimp Incorporated reported a net loss available for common stockholders of approximately $2.93 million for the three months ended June 30, 2024.
The company's revenue decreased significantly to $36,618, compared to $205,872 for the same period last year, primarily due to a lack of technology service revenue and decreased shrimp sales.
Operating expenses were $2.07 million, a decrease from $2.46 million in the prior year, mainly due to reduced facility operations and rent expenses.
The company's working capital deficit increased slightly to $39.4 million as of June 30, 2024, compared to $38.1 million as of March 31, 2024.
NaturalShrimp's cash balance was approximately $5,000 as of June 30, 2024, down from $115,525 at the end of the previous quarter.
The company is facing substantial doubt about its ability to continue as a going concern due to its accumulated deficit of $186.7 million and working capital deficit.
The company is dependent on raising additional capital or debt financing to meet its short and long-term operating requirements.
The company received $486,000 from the sale of common shares and $200,000 from the sale of Series G Preferred stock during the quarter.

Sentiment

Score: 2

Explanation: The document presents a very negative outlook due to significant revenue decline, substantial net losses, a critically low cash balance, and a large working capital deficit. The company's ability to continue as a going concern is in serious doubt, and it is heavily reliant on external financing, which may not be available. The overall sentiment is very poor from an investment perspective.

Positives

Operating expenses decreased by 16% year-over-year, indicating some cost control measures.
The company secured $200,000 in funding through the sale of Series G Preferred stock.
The company received approximately $486,000 from the sale of common shares.

Negatives

Revenue decreased by 82% year-over-year, indicating a significant decline in sales.
The company reported a net loss of $2.93 million for the quarter.
The company's cash balance is critically low at approximately $5,000.
The company has a substantial working capital deficit of $39.4 million.
There is substantial doubt about the company's ability to continue as a going concern.
The company is heavily reliant on external financing to continue operations.

Risks

The company's ability to continue as a going concern is highly uncertain due to its financial condition.
The company is dependent on raising additional capital or debt financing to meet its operating requirements.
The company may not be able to secure additional financing on acceptable terms, or at all.
Failure to obtain necessary capital could significantly restrict the company's operations and growth.
The company's reliance on private placements of equity capital could dilute the ownership of current shareholders.
The company's ability to achieve profitability is uncertain.
The company's ability to scale up operations and increase shrimp production is dependent on securing additional capital.

Future Outlook

Management believes that private placements of equity capital will be needed to fund the Company's long-term operating requirements. The company may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. The company anticipates needing to raise an additional $2.5 million to cover all of its capital and operational expenses over the next 12 months, not including any capital expenditures needed as part of any commercial scale-up of its equipment.

Management Comments

Management believes that private placements of equity capital will be needed to fund the Company's long-term operating requirements.
Management believes that our cash on hand and working capital deficit are not sufficient to meet our current anticipated cash requirements for additional anticipated capital expenditures, operating expenses and scale-up of operations for the next twelve months.

Industry Context

The company operates in the aquaculture industry, specifically focusing on indoor shrimp farming. The report highlights the challenges of scaling production and achieving profitability in this sector, which is often capital-intensive and subject to market fluctuations. The company's technology aims to differentiate it from traditional shrimp farming methods, but it faces significant financial hurdles.

Comparison to Industry Standards

The company's revenue of $36,618 for the quarter is significantly lower than what would be expected for a company with its stated production capacity and facilities.
The company's net loss of $2.93 million is substantial and indicates significant operational and financial challenges.
The company's working capital deficit of $39.4 million is a major concern and is not typical for companies in a stable financial position.
The company's cash balance of approximately $5,000 is critically low and is not sustainable for ongoing operations.
The company's reliance on private placements of equity capital is a common strategy for early-stage companies, but the extent of its dependence raises concerns about its long-term viability.
The company's financial metrics are significantly worse than those of established aquaculture companies, which typically have higher revenues, lower losses, and stronger balance sheets.
The company's financial performance is not comparable to industry leaders in aquaculture, such as large-scale shrimp producers in Asia or established land-based aquaculture companies in North America.

Related Party Transactions

The company has entered into several working capital notes payable to multiple shareholders of NSH and Bill Williams, a former officer and director, and a shareholder of the Company.
The company issued a loan agreement for $300,000 with related parties, which is to be considered priority debt of the Company.
The company received $140,000 in proceeds from the issuance of three promissory notes with related parties.

Stakeholder Impact

Shareholders face significant risk of further dilution due to the company's reliance on equity financing.
Employees may be concerned about job security due to the company's financial instability.
Customers may be concerned about the company's ability to fulfill orders and maintain consistent supply.
Suppliers may be concerned about the company's ability to pay its debts.
Creditors face a high risk of non-payment due to the company's financial difficulties.

Next Steps

The company will continue to pursue external financing alternatives to improve its working capital position.
The company will continue to develop formal policies and procedures on accounting and internal control over financial reporting.
The company will continue to monitor and evaluate the relevance of its risk-based approach and the effectiveness of its internal controls and procedures over financial reporting on an ongoing basis.

Key Dates

Date	Description
2016-01-01	Date of notes payable agreement with NaturalShrimp Holdings, Inc.
2020-07-15	Date of promissory note issued to Ms. Williams.
2021-08-25	Date of Equipment Rights Agreements with Hydrenesis-Delta Systems, LLC and Technology Rights Agreement with Hydrenesis Aquaculture LLC.
2021-11-22	Date of securities purchase agreement for Series E Preferred Stock.
2021-12-15	Date of securities purchase agreement for secured promissory note.
2022-08-17	Date of securities purchase agreement with an investor for a secured promissory note.
2022-11-04	Date of Restructuring Agreement for Amended and Restated Secured Promissory Note.
2023-01-20	Date of secured promissory note (January 2023 Note) with an investor.
2023-04-21	Date of $60,000 promissory note with Yotta Investment LLC.
2023-04-28	Date of Equity Financing Agreement with GHS.
2023-05-09	Date of purchase agreement (the GHS 2023 Purchase Agreement) with GHS.
2023-05-17	Date of additional $60,000 promissory note with Yotta Investment LLC.
2023-06-19	Date of common shares issued to a consultant.
2023-07-24	Date of Securities Purchase Agreement for additional sale of Series E Preferred Stock.
2023-09-28	Date the company increased their authorized common shares to 1,400,000,000.
2023-11-17	Date of extension of the maturity date of the January 2023 Note to June 30, 2024.
2023-12-01	Date the Board authorized the issuance of Series G Preferred Stock.
2023-12-14	Date of Securities Purchase Agreement for the sale of Series G Preferred Stock.
2023-12-19	Date the company received an initial tranche of $110,000 under the SPA for Series G Preferred Stock.
2023-12-20	Date the company entered into a sublease for a new office space in Texas.
2024-01-17	Date of Exchange Agreement on the January 2023 Note.
2024-01-24	Date the company received a tranche of $100,000 under the SPA for Series G Preferred Stock.
2024-02-22	Date of Exchange Agreement on the January 2023 Note.
2024-02-23	Date the company entered into a consulting agreement and issued Series G Preferred Stock.
2024-04-03	Date of Exchange Agreement on the January 2023 Note.
2024-04-23	Date the company received a tranche of $100,000 under the SPA for Series G Preferred Stock.
2024-06-12	Date the company received a tranche of $100,000 under the SPA for Series G Preferred Stock.
2024-06-30	End of the quarterly period.
2024-07-03	Date the Investor issued a waiver to the Company on the equal monthly payments of the Restructured Senior Note.
2024-07-10	Date the company received a tranche of $100,000 under the SPA for Series G Preferred Stock.
2024-07-24	Date one of the holders converted 85 Series E Preferred Stock into 12,289,157 shares of common stock.
2024-08-14	Date of the report.

Keywords

NaturalShrimp, aquaculture, shrimp farming, financial results, going concern, revenue decline, net loss, working capital deficit, equity financing, preferred stock, debt financing

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