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Item 2. Management’s Discussion and Analysis

2026-02-17 compared with 2025-09-10 · 37 added, 279 removed, 45 unchanged (88% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Regarding Forward-Looking Statements

Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect

to future events and financial performance.

Forward-looking

statements are projections in respect of future events or our future financial performance.

In some cases, you can identify forward-looking

statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,”

“believes,” “estimates,” “predicts,” “potential” or “continue” or the negative

of these terms or other comparable terminology.

These statements include statements regarding the

intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and

involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks

set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024,

as filed with the U.S.

Securities and Exchange Commission (the “SEC”) on July 17, 2024, any of which may cause our company’s

or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results,

levels of activity, performance or achievements expressed or implied in our forward-looking statements.

we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels

of activity, or performance.

Except as required by applicable law, including the securities laws of the United States, we do not intend

to update any of the forward-looking statements to conform these statements to actual results.

are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the

We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated

events or changes in the future operating results over time except as required by law.

We believe that our assumptions are based upon

reasonable data derived from and known about our business and operations.

No assurances are made that actual results of operations or

the results of our future activities will not differ materially from our assumptions.

used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,”

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This discussion and analysis should be read in conjunction with our financial statements and

the notes thereto included elsewhere in this annual report.

All references to dollar amounts in this section are in United States dollars,

unless expressly stated otherwise.

discussion and analysis should be read in conjunction with our financial statements and the notes thereto included elsewhere in this

annual report.

are an aquaculture technology company that has developed proprietary, patented platform technologies to allow for the production of aquatic

species in an ecologically controlled, high-density, low-cost environment, and in fully contained and independent production facilities

without the use of antibiotics or toxic chemicals.

We own and operate indoor recirculating Pacific White shrimp production facilities

in Texas and Iowa using these technologies.

were incorporated in July 2008 and acquired substantially all of the assets of NSH, the company that developed the proprietary technology

to grow and sell shrimp potentially anywhere in the world that is now the basis of our business.

In 2015 NSH acquired 88.62% of the issued

and outstanding shares of NaturalShrimp Common Stock, NSC and NS Global became our wholly-owned subsidiaries, and we changed our principal

business to a global shrimp farming company.

October 5, 2015, we formed NAS with F&T, the purpose of which was to jointly develop with F&T certain water technologies.

December 17, 2020, we acquired for $10.0 million certain assets from VeroBlue Farms USA, Inc.

and its subsidiaries, which assets included

our three current facilities located in Iowa.

May 25, 2021, we purchased certain parent and intellectual property rights from F&T and acquired all of its outstanding shares in

NAS, thereby making NAS our wholly-owned subsidiary, for $3.0 million in cash and 13,861,386 shares of NaturalShrimp Common Stock.

August 25, 2021, through NAS, we entered into an Equipment Rights Agreements with Hydrenesis-Delta Systems, LLC and a Technology Rights

Agreement with Hydrenesis Aquaculture LLC.

The Equipment Rights Agreement relates to specialized and proprietary equipment used to produce

and control, dose, and infuse Hydrogas ® and RLS ® into both water and other chemical species, while the

Technology Rights Agreement provides us with a sublicense to the rights to Hydrogas ® and RLS ® .

Company has three wholly-owned subsidiaries:

NSC, NS Global, and NAS, and owns 51% of NaturalShrimp/Hydrenesis LLC, a Texas limited liability

of the shrimp consumed in the world today come from shrimp farms that can only produce crops between one and four times per year.

Consequently,

the shrimp from these farms requires freezing between crops until consumed.

Our system is designed to harvest different tanks each week,

which provides for fresh shrimp throughout the year.

We strive to create a niche market of “Always Fresh, Always Natural”

As opposed to many of the foreign shrimp farms, we can also claim that our product is 100% free of antibiotics.

The ability to

grow shrimp locally and year-round allows us to provide this high-end product to upscale restaurant and grocery stores throughout the

We rotate the stocking and harvesting of our tanks each week, which allows for weekly shrimp harvests.

Our product is free of

pollutants and is fed only the highest-quality feeds.

began making regular weekly sales of live shrimp from our Iowa production facility in November 2021 and from our Texas production facility

in June 2022.

The Company is using its aforementioned platform technologies to retrofit 344,000 square feet of its existing Iowa facilities

that we expect will, once fully operational, produce 18,000 pounds of shrimp per week.

We believe that the combined output from our La

Coste, Texas and Iowa facilities will be approximately 24,000 pounds of shrimp production per week by the third or fourth calendar quarter

We can, however, provide no assurances as to how significant our revenue will be in the next one to two fiscal quarters.

discussed in our consolidated financial statements, Ampleo Turnaround and Restructuring, LLC was placed as the receiver over the Company’s

assets during September of 2024.

Further, during February of 2025, the receiver submitted a motion to sell substantially all of the Company’s

assets to Streeterville and Bucktown Capital for an approximate credit bid of $35.7m and $100,000 in cash.

The motion to sell was approved

by the court on March 30, 2025.

The Company believes that it continued to function as a going concern until the date of the approved

Subsequent to that date, the Company plans to present its financial statements using the liquidation basis of accounting as liquidation

was considered imminent.

As such, in accordance with ASC 205-30, Liquidation Basis of Accounting , the Company will present a Consolidated

statement of net assets (liabilities) in liquidation and Consolidated statement of changes in net assets (liabilities).

of reporting under the liquidation basis of accounting the Company plans to measure its assets at the amount used to settle its liabilities

(based on the proposed credit bid).

and Capital Resources

of December 31, 2024, we had cash on hand of approximately $20,981 and a working capital deficiency of $40,860,138.

While we continued

to function as a going concern during the interim period ended December 31, 2024, the Company plans to liquidate its assets in order

to settle its outstanding debts.

the notes thereto included elsewhere in this quarterly report.

All references to dollar amounts in this section are in United States

dollars, unless expressly stated otherwise.

NaturalShrimp

Incorporated (“NaturalShrimp” or the “Company”), a Nevada corporation, is a former biotechnology company that

was focused on growing Pacific White shrimp (Litopenaeus vannamei, formerly Penaeus vannamei) in an ecologically controlled, high-density,

low-cost environment, and in fully contained and independent production facilities.

Company has three wholly-owned subsidiaries including NaturalShrimp USA Corporation (“NSC”) and NaturalShrimp Global, Inc.

(“NS Global”) and Natural Aquatic Systems, Inc.

(“NAS”), and owns 51% of NaturalShrimp/Hydrenesis LLC, a Texas

limited liability company.

and Liquidation

September 4, 2024, Streeterville Capital, LLC, a Utah limited liability company, and Bucktown Capital, LLC, a Utah limited liability

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(“NaturalShrimp”).

Motion alleges, among other things, that NaturalShrimp has defaulted under the terms of its loan agreements with Lenders.

Motion alleged, among other things, that NaturalShrimp had defaulted under the terms of its loan agreements with the Lenders.

sought the appointment of a Receiver to immediately take control of NaturalShrimp’s assets to preserve the same.

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assets of NaturalShrimp.

Under the Amended Receivership Order, the Receiver is the receiver over the Receivership Entities’ assets.

February 11, 2025, the Receiver filed a Motion for Approval to Sell Substantially all of the Receivership Entities’ Assets to

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The Sale Motion

seeks the Utah State Court’s approval for the Receiver to sell substantially all of the Receivership Entities’ assets free

sought the Utah State Court’s approval for the Receiver to sell substantially all of the Receivership Entities’ assets free

and clear of all liens, interests, claims, and encumbrances to Streeterville and Bucktown Capital, through their designated entities,

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to the lenders on May 14, 2025.

As part of the sale, the Company transferred its ownership rights to its fixed assets, patents and license

agreements (total balance of $24.7 million as of December 31, 2024) in exchange for the extinguishment of its outstanding debt to Streeterville

and Buckstown Capital ($31.2 million as of December 31, 2024).

following table summarizes our cash flows for the nine months ended December 30, 2024 and 2023:

Nine months Ended December 31,

Net cash used in operating activities

$ (2,112,033 )

$ (2,857,801 )

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net change in cash

cash used in operating activities during the nine months ended December 31, 2024, was a decrease of approximately $745,000 as compared

to the same period in 2023.

The decrease in cash used is primarily due to the decrease in the current period net loss as compared to

the same period the prior year and adjustments to reconcile the net loss to net cash, including i) the change in fair value of the restructured

notes and ii) the prior period write-off of deferred offering costs.

net cash provided by investing activities in the nine months ended December 31, 2024 increased by approximately $109,000 compared to

net cash used by investing activities for the same period in the prior fiscal year.

The increase was in the current period was due primarily

to cash of $117,712 that was received for the sale of machinery and equipment.

net cash provided by financing activities decreased by approximately $785,000 between periods.

For the current period, the Company received

approximately $1.1 million for the sale of common and preferred shares and $840,000 for the issuance of debt.

In the same period in the

prior year the Company received $2.6 million for the sale of shares and approximately $100,000 from the net issuance of debt.

and Capital Resources

Company had limited liquidity as of June 30, 2025 and is currently working on a plan with its existing creditors on how to settle

its remaining outstanding obligations, which were primarily comprised of i) payables to finance and legal service providers ii)

accrued salaries and iii) loans and the corresponding accrued interest.

of Operations

of the Three Months Ended December 31, 2024 to the Three Months Ended December 31, 2023

had gross sales revenue of $56,501 and $101,302, respectively, during the three months ended December 31, 2024 and 2023, a decrease of

approximately $45,000.

decrease in gross sales revenue during the three months ended December 31, 2024 over the same period in the prior year was a result of

the Company beginning to wind down the business.

of sales includes direct costs related to the production and sale of our products, primarily the cost of the post-larva shrimp that we

purchase to grow into our shrimp product at our facilities and the costs of shipping purchase orders to customers.

Cost of sales were

$32,221 and $23,353, respectively, during the three months ended December 31, 2024 and 2023.

expenses for the three months ended December 31, 2024 were $2,050,194, which is an approximately $300,000 decrease over operating expenses

of $2,351,293 for the same period in 2023.

The overall change in expenses is primarily due to a decrease in professional services during

the period stemming from a reduction in accounting and legal expenses.

Income (Expense)

following table summarizes the various components of our other income (expense) for the three months ended December 31, 2024 and 2023:

Three Months Ended December 31,

Interest expense

Interest expense – related parties

Change in fair value of warrant liability

Change in fair value of restructured notes

Extension Fee

Gain on termination of lease

Gain on sale of machinery and equipment

$ (3,128,720 )

Income (expense) for the three months ended December 31, 2024 decreased by approximately $2,784,000 as compared to the same period in

the prior year.

The decrease was primarily due to the change in fair value of the restructured notes and the change in fair value of

the warrant liability.

of the Nine Months Ended December 31, 2024 to the Nine Months Ended December 31, 2023

Company had gross sales revenue of $163,492 and $365,184, respectively, during the nine months ended December 31, 2024 and 2023, a decrease

of approximately $202,000.

The decrease in gross sales revenue during the nine months ended December 31, 2024 over the same period in

the prior year was a result of the $150,000 of revenue recognized in the prior period stemming from the rental of NSI Technologies that

did not recur during the current period.

of sales decreased by approximately $6,000 during the nine months ended December 31, 2024 as compared to the same period in the prior

The decrease in cost of sales was not material.

expenses for the nine months ended December 31, 2024 decreased by $2,888,063 compared to the same period in 2023, primarily due to a

decrease in professional fees of $2.8 million stemming primarily from the $1.3 million write-off of deferred offering costs as a result

of the termination of the Merger Agreement.

In addition, the decrease was also due to a decrease in facility operation of approximately

$267,000 and salaries of approximately $285,000 as compared to the same period in the prior year.

income (expense)

following table summarizes the various components of our Other income(expense) for each of the Nine months ended December 31, 2024 and

December 31, 2023:

Nine Months Ended December 31,

Interest expense

Interest expense - related parties

Change in fair value of warrant liability

Change in fair value of restructured notes

Extension Fee

Gain on termination of lease

Gain on sale of machinery and equipment

Total other income (expense)

$ (2,412,034 )

Income (expense) for the nine months ended December 31, 2024, decreased $1,369,079 as compared to the same period in the prior year.

The decrease was due to primarily to the change in fair value of the restructured notes and warrant liability.

the three months ended June 30, 2025, the Company settled its outstanding liabilities to both Streeterville and Buckstown (approximately

$36 million as of March 31, 2025) through the transfer of ownership rights to its fixed assets and intangible assets.

the date of the transfer, i) the outstanding debt to those entities was considered extinguished and ii) the fixed assets and intangible

assets were derecognized.

The Company had limited other activity during the period.

Accounting Estimates

Value Measurement

fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair value is a market-based measurement

that should be determined based on assumptions that market participants would use in the valuation of an asset or liability.

It establishes

a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest

priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority

to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under the fair value measurement guidance

are described below:

1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the

full term of the asset or liability;

3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported

by little or no market activity).

warrant liabilities and fair value option on Restructured notes, are Level 3 fair value measurements.

of Long-lived Assets and Long-lived Assets

Company will periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances warrant

such a review and at least annually.

The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted

cash flow from such asset is separately identifiable and is less than its carrying value.

In that event, a loss is recognized based on

the amount by which the carrying value exceeds the fair value of the long-lived asset.

Fair value is determined primarily using the anticipated

cash flows discounted at a rate commensurate with the risk involved.

Losses on long-lived assets to be disposed of are determined in

a similar manner, except that fair values are reduced for the cost to dispose.

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, and, as such, the Company records revenue

when its customers obtain control of the promised goods or services in an amount that reflects the consideration that the Company expects

to receive in exchange for those goods or services.

The Company will sell primarily to food service distributors, as well as to wholesalers,

retail establishments and seafood distributors.

Additionally, the Company will sell or rent either the NSI Technologies or Equipment.

determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs

the following five steps:

(1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company,

which includes a required line of credit approval process, (2) identify the performance obligations in the contract, which includes shipment

of goods to the customer FOB shipping point or destination, (3) determine the transaction price which initiates with the purchase order

received from the customer and confirmation sent by the Company and will include discounts and allowances by customer if any, (4) allocate

the transaction price to the performance obligations in the contract which is the shipment of the goods to the customer and transaction

price determined in step 3 above and (5) recognize revenue when (or as) the Company satisfies a performance obligation, which is when

the Company transfers control of the goods to the customers by shipment or delivery of the products.

Adopted Accounting Pronouncements

recently adopted accounting pronouncements are more fully described in Note 2 to our financial statements included herein for the quarter

ended December 31, 2024.

Basis of Accounting

accordance with ASC 205-30, Liquidation Basis of Accounting , the Company prepares its financial statements using the liquidation

basis of accounting when liquidation is imminent.

Liquidation is considered imminent when either of the following occurs-i) A plan for

liquidation has been approved by the person or persons with the authority to make such a plan effective, and the likelihood is remote

that either execution of the plan will be blocked by other parties or the entity will return from liquidation and ii) A plan for liquidation

is imposed by other forces, and the likelihood is remote that the entity will return from liquidation.

using the liquidation basis of accounting, the Company will i) recognize other items that is previously had not recognized but it expects

to sell in liquidation or use to settle liabilities ii) accrue costs and income that it expects to incur or earn through the end of its

liquidation if and when it has a reasonable basis for estimation iii) measure its assets to reflect the estimated amount of cash or other

consideration that it expects to collect in settling or disposing of those assets in carrying out its plan for liquidation and iv) measure

its liabilities in accordance with the measurement provision of other topics that it would otherwise apply to those liabilities.

Issued Accounting Standards

November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-07 , “ Segment Reporting (Topic

280 ) Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable

The amendments require enhanced disclosure for certain segment items and required disclosure on how management uses reported

measures to assess segment performance.

The amendments do not change how segments are determined, aggregated, or how thresholds are applied

to determine reportable segments.

The updated standard is effective for annual periods beginning in fiscal 2025 and interim periods beginning

in the first quarter of fiscal 2026.

Early adoption is permitted.

The Company is currently evaluating the effect of adopting this ASU.

December 2023, the FASB issued ASU No.

2023-09 “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”

which requires two primary enhancements of 1) disaggregated information on a reporting entity’s effective tax rate reconciliation,

and 2) information on cash income taxes paid.

Additionally, specific disclosures related to unrecognized tax benefits and indefinite

reinvestment assertions were removed.

For public business entities, the new requirements will be effective for annual periods beginning

after December 15, 2024.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

adoption is permitted.

The Company is currently evaluating the effect of adopting this ASU.

August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging

- Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s

Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities

This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing

guidance in ASC 470-20, Debt:

Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features

and cash conversion features in equity, separately from the host convertible debt or preferred stock;

(2) revises the scope exception

from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s

own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification;

and (3) revises

the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments

by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an

instrument may be settled in cash or shares.

For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal

years beginning after December 15, 2021 including interim periods within those fiscal years.

Early adoption is permitted, but no earlier

than fiscal years beginning after December 15, 2020.

For all other entities, ASU 2020-06 is effective for fiscal years beginning after

December 15, 2023, including interim periods within those fiscal years.

Entities should adopt the guidance as of the beginning of the

fiscal year of adoption and cannot adopt the guidance in an interim reporting period.

The Company adopted ASU 2020-06 as of April 1,

2024, which had no impact on its consolidated financial statements and related disclosures.

the period ending December 31, 2024, there were a few new accounting pronouncements issued by the Financial Accounting Standards Board.

Each of these pronouncements, as applicable, has been or will be adopted by the Company.

Management does not believe the adoption of

any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

the Company is currently reporting under the liquidation basis of accounting, it does not believe that there are any recently issued

accounting standards that would be material to its financial statements.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis