UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
☑
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 2018
or
☐
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period from _________ to _________
Commission file number: 000-54030
NATURALSHRIMP INCORPORATED
(Exact
name of registrant as specified in its charter)
Nevada
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74-3262176
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(State
or other Jurisdiction of Incorporation or
Organization)
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(I.R.S.
Employer Identification No.)
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5080 Spectrum Dr., Suite 1000
Addison, Texas
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75001
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(888) 791-9474
(Registrant’s
telephone number, including area code)
N/A
(Former
address)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☑ No ☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ☑ No
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
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Large accelerated
filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
(Do not check if a smaller reporting company)
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Smaller reporting company
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☑
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Emerging Growth
Company
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☐
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act: ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑.
As of
November 13, 2018, there were 139,273,047 shares of the
registrant’s common stock outstanding.
NATURALSHRIMP INCORPORATED
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2018
TABLE OF CONTENTS
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Page
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PART I. FINANCIAL
INFORMATION
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ITEM
1.
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1
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1
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2
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3
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4
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ITEM
2.
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26
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ITEM
3.
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39
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ITEM
4.
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40
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PART II. OTHER
INFORMATION
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ITEM
1.
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41
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ITEM
1A.
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41
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ITEM
2.
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41
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ITEM
3.
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42
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ITEM
4.
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42
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ITEM
5.
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42
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ITEM
6.
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43
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47
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PART I
– FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATURALSHRIMP INCORPORATED
CONDENSED CONSOLIDATED BALANCE
SHEETS
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ASSETS
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Current
assets
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Cash
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$4,876
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$24,280
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Notes
receivable
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181,200
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207,200
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Inventory
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4,200
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-
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Prepaid
expenses
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33,323
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28,699
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Total
current assets
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223,599
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260,179
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Fixed
assets
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Land
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202,293
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202,293
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Buildings
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1,328,161
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1,328,161
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Machinery
and equipment
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934,595
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929,245
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Autos
and trucks
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14,063
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14,063
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Furniture
and fixtures
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22,060
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22,060
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Accumulated
depreciation
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(1,327,758)
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(1,292,313)
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Fixed
assets, net
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1,173,414
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1,203,509
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Other
assets
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Intercompany
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-
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-
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Construction-in-process
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247,477
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171,050
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Deposits
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10,500
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10,500
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Total
other assets
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257,977
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181,550
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Total
assets
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$1,654,990
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$1,645,238
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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Current
liabilities
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Accounts
payable
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$581,229
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$528,538
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Accrued
interest, including related parties of $257,587 and $233,322,
respectively
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286,331
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240,377
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Other
accrued expenses
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555,571
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497,321
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Short-term
Promissory Note and Lines of credit
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793,732
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143,523
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Current
maturities of bank loan
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7,687
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7,497
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Convertible
debentures, less debt discount of $631,556 and $691,558,
respectively
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577,254
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516,597
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Convertible
debentures, related party
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87,600
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87,600
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Notes
payable - related parties
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1,271,162
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1,271,162
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Derivative
liability
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2,110,500
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3,455,000
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Warrant
liability
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174,000
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277,000
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Total
current liabilities
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6,445,066
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7,024,615
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Bank
loan, less current maturities
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224,978
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228,916
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Lines
of credit
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-
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651,453
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Total
liabilities
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6,670,044
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7,904,984
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Commitments
and contingencies (Note 9)
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Stockholders'
deficit
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Series
A Convertible Preferred stock, $0.0001 par value, 5,000,000 shares
authorized 5,000,000 and 0 shares issued and outstanding at
September 30, 2018 and March 31, 2018, respectively
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500
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-
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Common
stock, $0.0001 par value, 300,000,000 shares authorized 100,944,928
and 97,656,095 shares issued and outstanding at September 30, 2018
and March 31, 2018, respectively
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10,094
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9,766
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Additional
paid in capital
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30,345,848
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27,743,352
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Accumulated
deficit
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(35,371,496)
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(34,012,864)
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Total
stockholders' deficit
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(5,015,054)
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(6,259,746)
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Total
liabilities and stockholders' deficit
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$1,654,990
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$1,645,238
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The
accompanying footnotes are in integral part of these condensed
consolidated financial statements.
NATURALSHRIMP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
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For the Three months ended
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Sales
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$-
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$-
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$-
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$-
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Operating
expenses:
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Facility
operations
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22,978
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8,117
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43,963
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15,406
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General
and administrative
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206,942
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238,846
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429,968
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615,281
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Depreciation
and amortization
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17,719
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17,719
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35,445
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35,444
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Total
operating expenses
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247,639
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264,682
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509,376
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666,131
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Net
Operating loss before other income (expense)
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(247,639)
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(264,682)
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(509,376)
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(666,131)
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(17,043)
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0.064390476
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Other
income (expense):
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Interest
expense
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(68,708)
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(20,161)
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(136,927)
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(60,516)
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Amortization
of debt discount
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(365,529)
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(156,146)
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(708,983)
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(169,479)
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Financing
costs
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(675,647)
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(510,064)
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(1,284,346)
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(510,064)
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Change
in fair value of derivative liability
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1,096,000
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58,000
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1,328,000
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93,000
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Change
in fair value of warrant liability
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-
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(33,000)
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(47,000)
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(30,000)
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Total
other income (expense)
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(13,884)
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(661,371)
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(849,256)
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(677,059)
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Loss
before income taxes
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(261,523)
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(926,053)
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(1,358,632)
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(1,343,190)
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Provision
for income taxes
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-
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-
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-
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-
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Net
loss
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$(261,523)
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$(926,053)
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$(1,358,632)
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$(1,343,190)
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Loss
per share - Basic
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$(0.00)
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$(0.01)
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$(0.01)
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$(0.01)
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Weighted
average shares outstanding - Basic
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120,729,446
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92,851,835
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117,301,552
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92,663,520
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The
accompanying footnotes are in integral part of these condensed
consolidated financial statements.
NATURALSHRIMP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net
loss
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$(1,358,632)
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$(1,343,190)
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Adjustments to reconcile net loss to net cash used in operating
activities
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Depreciation
expense
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35,445
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35,444
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Amortization
of debt discount
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708,983
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169,479
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Change
in fair value of derivative liability
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(1,328,000)
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(93,000)
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Change
in fair value of warrant liability
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47,000
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30,000
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Financing
costs related to convertible debentures
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1,284,346
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510,064
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Changes in operating assets and liabilities:
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Inventory
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(4,200)
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-
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Prepaid
expenses and other current assets
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(4,624)
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134,144
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Accounts
payable
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46,841
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29,470
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Other
accrued expenses
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74,896
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70,748
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Accrued
interest
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95,147
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20,000
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Cash used in operating activitites
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(402,798)
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(436,841)
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Cash flows from investing activities
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Cash
paid for fixed assets
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(5,350)
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-
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Cash
paid for construction in progress
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(76,427)
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-
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Cash used in investing activitites
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(81,777)
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-
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Cash flows from financing activities
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Payments
on bank loan
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(3,748)
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(2,837)
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Payment
of related party notes payable
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-
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(24,000)
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Repayment
Line of Credit Short-term
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(1,244)
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(2,486)
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Notes
receivable
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112,000
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-
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Proceeds
from sale of stock
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15,400
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25,000
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Proceeds
from convertible debentures
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465,800
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432,750
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Proceeds
from convertible debentures, related party
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180,000
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Payments
on convertible debentures
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(123,038)
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(130,000)
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Payments
on convertible debentures, related party
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-
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(67,500)
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Cash provided by financing activitites
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465,170
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410,927
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Net change in cash
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(19,405)
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(25,914)
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Cash at beginning of period
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24,280
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88,195
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Cash at end of period
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$4,875
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$62,281
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Interest paid
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$60,398
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$40,516
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Suplemental Disclosure of Non-Cash Investing and Financing
Activities:
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Shares
issued upon conversion of convertible debentures
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$662,953
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$-
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Shares
issued upon exercise of warrants
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$150,000
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$-
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Notes
receivable for convertible debentures
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$90,000
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$-
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Common
shares exchanged for Series A Preferred Shares
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$500
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$-
|
The
accompanying footnotes are in integral part of these condensed
consolidated financial statements.
NATURALSHRIMP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2018
(Unaudited)
NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS
Nature of the Business
NaturalShrimp
Incorporated (“NaturalShrimp” “the
Company”), a Nevada corporation, is a biotechnology company
and has developed a proprietary technology that allows it to grow
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. The Company’s system uses technology which allows
it to produce a naturally-grown shrimp “crop” weekly
and accomplishes this without the use of antibiotics or toxic
chemicals. The Company has developed several proprietary technology
assets, including a knowledge base that allows it to produce
commercial quantities of shrimp in a closed system with a computer
monitoring system that automates, monitors and maintains proper
levels of oxygen, salinity and temperature for optimal shrimp
production. Its initial production facility is located outside of
San Antonio, Texas.
The
Company has three wholly-owned subsidiaries including NaturalShrimp
Corporation, NaturalShrimp Global, Inc. and Natural Aquatic
Systems, Inc.
Going Concern
The
accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States of America, assuming the Company will continue as a
going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. For
the three and six months ended September 30, 2018, the Company had
a net loss of approximately $262,000 and $1,359,000, respectively.
At September 30, 2018, the Company had an accumulated deficit of
approximately $35,371,000 and a working capital deficit of
approximately $6,221,000. These factors raise substantial doubt
about the Company’s ability to continue as a going concern,
within one year from the issuance date of this filing. The
Company’s ability to continue as a going concern is dependent
on its ability to raise the required additional capital or debt
financing to meet short and long-term operating requirements.
During the six months ended September 30, 2018, the Company
received net cash proceeds of approximately $466,000 from the
issuance of new convertible debentures and $15,400 from the sale of
the Company’s common stock. The Company had approximately
$597,000 of principal of their convertible debentures converted
into 63,841,481 shares of their common stock, reducing their
current obligations. The Company also entered into an Equity
Financing Agreement (Note 6) whereby the Company has the discretion
to deliver puts to the investor for purchases of shares of the
Company’s common stock, at 80% of the market price, for up to
$7,000,000 over the next 36 months. Subsequent to September 30,
2018, the Company received $100,000 in net proceeds from the
issuance of new convertible debentures and approximately $42,000 in
net proceeds from the sales of common shares through their equity
financing agreement (Note 6). Management believes that private
placements of equity capital and/or additional debt financing 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.
If the Company raises additional funds through the issuance of
equity or convertible debt securities, the percentage ownership of
its current shareholders could be reduced, and such securities
might have rights, preferences or privileges senior to our common
stock. Additional financing may not be available upon acceptable
terms, or at all. If adequate funds are not available or are not
available on acceptable terms, the Company may not be able to take
advantage of prospective business endeavors or opportunities, which
could significantly and materially restrict our operations. The
Company continues to pursue external financing alternatives to
improve its working capital position. If the Company is unable to
obtain the necessary capital, the Company may have to cease
operations.
The
Company plans to improve the growth rate of the shrimp and the
environmental conditions of its production facilities. If
management is unsuccessful in these efforts, discontinuance of
operations is possible. The consolidated financial statements do
not include any adjustments that might result from the outcome of
these uncertainties.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The
accompanying unaudited financial information as of and for the
three and six months ended September 30, 2018 and 2017 has been
prepared in accordance with accounting principles generally
accepted in the U.S. for interim financial information and with the
instructions to Quarterly Report on Form 10-Q and Article 10 of
Regulation S-X. In the opinion of management, such financial
information includes all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation
of our financial position at such date and the operating results
and cash flows for such periods. Operating results for the three
and six months ended September 30, 2018 are not necessarily
indicative of the results that may be expected for the entire year
or for any other subsequent interim period.
Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules of
the U.S. Securities and Exchange Commission, or the SEC. These
unaudited financial statements and related notes should be read in
conjunction with our audited financial statements for the year
ended March 31, 2018 included in our Annual Report on Form
10-K filed with the SEC on July 13, 2018.
The
condensed consolidated balance sheet at March 31, 2018 has been
derived from the audited financial statements at that date but does
not include all of the information and footnotes required by
generally accepted accounting principles in the U.S. for complete
financial statements.
Consolidation
The
consolidated financial statements include the accounts of
NaturalShrimp Incorporated and its wholly-owned subsidiaries,
NaturalShrimp Corporation, NaturalShrimp Global and Natural Aquatic
Systems, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates
Preparing financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Basic and Diluted Earnings/Loss per Common Share
Basic
and diluted earnings or loss per share (“EPS”) amounts
in the consolidated financial statements are computed in accordance
with ASC 260 – 10 “Earnings per Share”, which
establishes the requirements for presenting EPS. Basic EPS is based
on the weighted average number of common shares outstanding.
Diluted EPS is based on the weighted average number of common
shares outstanding and dilutive common stock equivalents. Basic EPS
is computed by dividing net income or loss available to common
stockholders (numerator) by the weighted average number of common
shares outstanding (denominator) during the period. For the six
months ended September 30, 2018, the Company had approximately
$1,296,000 in principal on convertible debentures whose
approximately 193,807,000 underlying shares are convertible at the
holders’ option at conversion prices ranging from 34% - 61%
of the defined trading price and approximately 14,537,000 warrants
with an exercise price of 50% to 57% of the market price of the
Company’s common stock, which were not included in the
calculation of diluted EPS as their effect would be anti-dilutive.
For the six months ended September 30, 2017, the Company had
$595,000 in convertible debentures whose underlying shares were
convertible at the holders’ option at initial fixed
conversion prices ranging from $0.30 to 60% of the defined trading
price and 890,000 warrants with an exercise price of $0.15, which
were not included in the calculation of diluted EPS as their effect
would be anti-dilutive.
Fair Value Measurements
ASC
Topic 820, “Fair Value
Measurement”, requires that certain financial
instruments be recognized at their fair values at our balance sheet
dates. However, other financial instruments, such as debt
obligations, are not required to be recognized at their fair
values, but Generally Accepted Accounting Principles in the United
States (“GAAP”) provides an option to elect fair value
accounting for these instruments. GAAP requires the disclosure of
the fair values of all financial instruments, regardless of whether
they are recognized at their fair values or carrying amounts in our
balance sheets. For financial instruments recognized at fair value,
GAAP requires the disclosure of their fair values by type of
instrument, along with other information, including changes in the
fair values of certain financial instruments recognized in income
or other comprehensive income. For financial instruments not
recognized at fair value, the disclosure of their fair values is
provided below under “Financial
Instruments.”
Nonfinancial
assets, such as property, plant and equipment, and nonfinancial
liabilities are recognized at their carrying amounts in the
Company’s balance sheets. GAAP does not permit nonfinancial
assets and liabilities to be remeasured at their fair values.
However, GAAP requires the remeasurement of such assets and
liabilities to their fair values upon the occurrence of certain
events, such as the impairment of property, plant and equipment. In
addition, if such an event occurs, GAAP requires the disclosure of
the fair value of the asset or liability along with other
information, including the gain or loss recognized in income in the
period the remeasurement occurred.
The
Company did not have any Level 1 or Level 2 assets and liabilities
at September 30, 2018 and 2017.
The
Derivative liabilities are Level 3 fair value
measurements.
The
following is a summary of activity of Level 3 liabilities during
the six months ended September 30, 2018:
Derivative
liability balance at March 31, 2018
|
$3,455,000
|
Additions to
derivative liability for new debt
|
1,724,000
|
Reclass to equity
upon conversion/cancellation
|
(1,740,500)
|
Change in fair
value
|
(1,328,000)
|
Balance at
September 30, 2018
|
$2,110,500
|
At
September 30, 2018, the fair value of the derivative liabilities of
convertible notes was estimated using the following
weighted-average inputs: the price of the Company’s common
stock of $0.02; a risk-free interest rate ranging from 1.93% to
2.33%, and expected volatility of the Company’s common stock
ranging from 248.71% to 321.92%, and the various estimated reset
exercise prices weighted by probability.
Fixed Assets
Equipment is
carried at historical value or cost and is depreciated over the
estimated useful lives of the related assets. Depreciation on
buildings is computed using the straight-line method, while
depreciation on all other fixed assets is computed using the
Modified Accelerated Cost Recovery System (MACRS) method, which
does not materially differ from GAAP. Estimated useful lives are as
follows:
|
|
Buildings
|
27.5
– 39 years
|
Other
Depreciable Property
|
5
– 10 years
|
Furniture
and Fixtures
|
3
– 10 years
|
Maintenance and
repairs are charged to expense as incurred. At the time of
retirement or other disposition of equipment, the cost and
accumulated depreciation will be removed from the accounts and the
resulting gain or loss, if any, will be reflected in
operations.
The
consolidated statements of operations reflect depreciation expense
of approximately $18,000 and $35,000 for both the three and six
months ended September 30, 2018 and 2017,
respectively.
Commitments and Contingencies
Certain
conditions may exist as of the date the consolidated financial
statements are issued, which may result in a loss to the Company,
but which will only be resolved when one or more future events
occur or fail to occur. The Company’s management and its
legal counsel assess such contingent liabilities, and such
assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are
pending against the Company or unasserted claims that may result in
such proceedings, the Company’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or
expected to be sought therein.
If the
assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can
be estimated, then the estimated liability would be accrued in the
Company’s consolidated financial statements. If the
assessment indicates that a potentially material loss contingency
is not probable, but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability,
together with an estimate of the range of possible loss if
determinable and material, would be disclosed.
Loss
contingencies considered remote are generally not disclosed unless
they involve guarantees, in which case the nature of the guarantee
would be disclosed.
Recently Issued Accounting Standards
In May
2014, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2014-09,
“Revenue from Contracts with Customers,” which requires
an entity to recognize the amount of revenue to which it expects to
be entitled for the transfer of promised goods or services to
customers. ASU 2014-09 will replace most existing revenue
recognition guidance in U.S. GAAP when it becomes effective. The
new standard is effective for annual reporting periods for public
business entities beginning after December 15, 2017, including
interim periods within that reporting period. The new standard
permits the use of either the retrospective or cumulative effect
transition method. The Company adopted ASU 2014-09 on April 1,
2018, and as there have not been any significant revenues to date,
the adoption did not have a material impact on the Company’s
financial position or results of operations, and no transition
method was necessary upon adoption.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) The standard
requires all leases that have a term of over 12 months to be
recognized on the balance sheet with the liability for lease
payments and the corresponding right-of-use asset initially
measured at the present value of amounts expected to be paid over
the term. Recognition of the costs of these leases on the income
statement will be dependent upon their classification as either an
operating or a financing lease. Costs of an operating lease will
continue to be recognized as a single operating expense on a
straight-line basis over the lease term. Costs for a financing
lease will be disaggregated and recognized as both an operating
expense (for the amortization of the right-of-use asset) and
interest expense (for interest on the lease liability). This
standard will be effective for our interim and annual periods
beginning January 1, 2019 and must be applied on a modified
retrospective basis to leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements. Early adoption is permitted. We are currently
evaluating the timing of adoption and the potential impact of this
standard on our financial position, but we do not expect it to have
a material impact on our results of operations.
During
the six months ended September 30, 2018, there were several 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.
Management’s Evaluation of Subsequent Events
The
Company evaluates events that have occurred after the balance sheet
date of September 30, 2018, through the date which the consolidated
financial statements were issued. Based upon the review, other than
described in Note 10 – Subsequent Events, the Company did not
identify any recognized or non-recognized subsequent events that
would have required adjustment or disclosure in the consolidated
financial statements.
NOTE 3 – SHORT-TERM NOTE AND LINES OF CREDIT
On
November 3, 2015, the Company entered into a short-term note
agreement with Community National Bank for a total value of
$50,000. On July 18, 2018 the outstanding principal balance of
$25,298 was exchanged for an 8% promissory note with a maturity
date of July 18, 2021. The balance of the note agreement at both
September 30, 2018 and March 31, 2018 was $25,298.
The
Company also has a working capital line of credit with Extraco
Bank. On April 30, 2018, the Company renewed the line of credit for
$475,000. The line of credit bears an interest rate of 5.0% that is
compounded monthly on unpaid balances and is payable monthly. The
line of credit matures on April 30, 2019 and is secured by
certificates of deposit and letters of credit owned by directors
and shareholders of the Company. The balance of the line of credit
is $472,675 at both September 30, 2018 and March 31,
2018.
The
Company also has additional lines of credit with Extraco Bank for
$100,000 and $200,000, which were renewed on January 19, 2018 and
April 30, 2018, respectively, with maturity dates of January 19,
2019 and April 30, 2019, respectively. The lines of credit bear an
interest rate of 4.5% (increased to 6.5% and 5%, respectively, upon
renewal in 2017) that is compounded monthly on unpaid balances and
is payable monthly. They are secured by certificates of deposit and
letters of credit owned by directors and shareholders of the
Company. The balance of the lines of credit was $276,958 at both
September 30, 2018 and March 31, 2018.
The
Company also has a working capital line of credit with Capital One
Bank for $50,000. The line of credit bears an interest rate of
prime plus 25.9 basis points, which totaled 30.9% as of September
30, 2018. The line of credit is unsecured. The balance of the line
of credit was $9,580 at both September 30, 2018 and March 31,
2018.
The
Company also has a working capital line of credit with Chase Bank
for $25,000. The line of credit bears an interest rate of prime
plus 10 basis points, which totaled 15.00% as of September 30,
2018. The line of credit is secured by assets of the
Company’s subsidiaries. The balance of the line of credit is
$11,197 at both September 30, 2018 and March 31, 2018.
NOTE 4 – BANK LOAN
On
January 10, 2017, the Company entered into a promissory note with
Community National Bank for $245,000, at an annual interest rate of
5% and a maturity date of January 10, 2020 (the “CNB
Note”). The CNB Note is secured by certain real property
owned by the Company in LaCoste, Texas, and is also personally
guaranteed by the Company’s President, as well as certain
shareholders of the Company. As consideration for the guarantee,
the Company issued 600,000 of its common stock to the shareholders,
which was recognized as debt issuance costs with a fair value of
$264,000, based on the market value of the Company’s common
stock of $0.44 on the date of issuance. As the fair value of the
debt issuance costs exceeded the face amount of the promissory
note, the excess of the fair value was recognized as financing
costs in the statement of operations. The resulting debt discount
is to be amortized over the term of the CNB Note under the
effective interest method. As the debt discount is in excess of the
face amount of the promissory note, the effective interest rate is
not determinable, and as such, all of the discount was immediately
expensed.
Maturities on Bank
loan is as follows:
12 months
ending:
|
|
September 30,
2019
|
$7,687
|
September 30,
2020
|
224,978
|
|
$232,665
|
NOTE 5 – CONVERTIBLE DEBENTURES
July Debenture
On July
31, 2017, the Company entered into a 5% Securities Purchase
Agreement. The agreement calls for the purchase of up to $135,000
in convertible debentures, due 12 months from issuance, with a
$13,500 OID. The first closing was for principal of $45,000 with a
purchase price of $40,500 (an OID of $4,500), with additional
closings at the sole discretion of the holder. On October 2, 2017,
the Company entered into a second closing of the July 31, 2017
debenture, in the principal amount of $22,500 for a purchase price
of $20,250, with $1,500 deducted for legal fees, resulting in net
cash proceeds of $18,750. The July 31 debenture is convertible at a
conversion price of 60% of the lowest trading price during the
twenty-five days prior to the conversion date and is also subject
to equitable adjustments for stock splits, stock dividends or
rights offerings by the Company. A further adjustment occurs if the
trading price at any time is equal to or lower than $0.10, whereby
an additional 10% discount to the market price shall be factored
into the conversion rate, as well as an adjustment to occur upon
subsequent sales of securities at a price lower than the original
conversion price. The conversion feature meets the definition of a
derivative and therefore requires bifurcation and is accounted for
as a derivative liability.
On
February 5, 2018, the Company entered into an amendment to the July
Debenture, whereby in exchange for a payment of $6,500 the note
holder, except for a conversion of up to 125,000 shares of the
Company’s common shares, would be only entitled to effectuate
a conversion under the note on or after March 2, 2018.
The
Company estimated the fair value of the conversion feature
derivatives embedded in the convertible debentures at issuance at
$61,000, based on weighted probabilities of assumptions used in the
Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.33 at issuance date; a risk-free interest rate of 1.23% and
expected volatility of the Company’s common stock, of
192.43%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $45,500, including the commitment fees, was
immediately expensed as financing costs.
On
February 20, 2018, the holder converted $4,431 of the January
debentures into 125,000 common shares of the Company. As a result
of the conversion the derivative liability relating to the portion
converted was remeasured immediately prior to the conversion with a
fair value of $11,000, with an increase of $4,000 recognized, with
the fair value of the derivative liability related to the converted
portion being reclassified to equity. The key valuation assumptions
used consist, in part, of the price of the Company’s common
stock of $0.12; a risk-free interest rate of 1.87% and expected
volatility of the Company’s common stock, of 353.27%, and the
various estimated reset exercise prices weighted by
probability.
During
March 2018, the holder converted an additional $17,113 of the July
debentures into 630,000 common shares of the Company. As a result
of the conversion the derivative liability was remeasured
immediately prior to the conversion with a fair value of $138,000,
with an increase of $74,000 recognized, with the fair value of the
derivative liability related to the converted portion being
reclassified to equity. The key valuation assumptions used consist,
in part, of the price of the Company’s common stock of $0.11;
a risk-free interest rate of 1.77% and expected volatility of the
Company’s common stock, of 375.93%, and the various estimated
reset exercise prices weighted by probability.
During
April 2018, in three separate conversions, the remainder of the
first closing was fully converted into 1,225,627 common shares of
the Company. As a result of the conversions the derivative
liability was remeasured immediately prior to the conversions with
an overall decrease of $25,000 recognized, with the fair value of
the derivative liability related to the converted portion, of
$66,000 being reclassified to equity. The key valuation assumptions
used consist, in part, of the price of the Company’s common
stock on the date of conversion, of $0.07 to $0.09; a risk-free
interest rate of 1.73% to 1.87% and expected volatility of the
Company’s common stock, of 248.71%, and the various estimated
reset exercise prices weighted by probability.
During
May and June 2018, in two separate conversions, the remainder of
the second closing was fully converted into 2,810,725 common shares
of the Company. As a result of the conversions the derivative
liability was remeasured immediately prior to the conversions with
an overall decrease of $25,000 recognized, with the fair value of
the derivative liability related to the converted portion of
$67,000 being reclassified to equity. The key valuation assumptions
used consist, in part, of the price of the Company’s common
stock on the date of conversion, of $0.03 to $0.04; a risk-free
interest rate of 1.91% to 1.93% and expected volatility of the
Company’s common stock, of 248.71%, and the various estimated
reset exercise prices weighted by probability.
Additionally, with
each tranche under the note, the Company shall issue a warrant to
purchase an amount of shares of its common stock equal to the face
value of each respective tranche divided by $0.60 as a commitment
fee. The Company issued a warrant to purchase 75,000 shares of the
Company’s common stock with the first closing and 37,500 with
the second closing, with an exercise price of $0.60. The warrants
have an anti-dilution provision for future issuances, whereby the
exercise price would reset. The warrants exercise price was
subsequently reset to 50% of the market price during the third
quarter of fiscal 2018, and the warrants issued increased
accordingly. As a result of the dilutive issuance adjustment
provision, the warrants have been classified out of equity as a
warrant liability. The Company issued 6,719,925 shares of their
common stock on July 17, 2018, upon cashless exercise of the
warrants granted in connection with the first closing of the July
Debenture, and on August 28, 2018, 4,494,347 shares were issued
upon cashless exercise of the warrants granted in connection with
the second closing. As a result of the exercise, the fair value of
the warrants at the date of exercise was reclassed into equity. The
Company estimated the fair value of the warrants using the Black
Scholes pricing model. The key valuation assumptions used consist,
in part, of the price of the Company’s common stock of $0.02
at both exercise dates; a risk-free interest rate of 2.73 and 2.77%
and expected volatility of the Company’s common stock, of
351.29 and 342.70%, resulting in an aggregate fair value of
$150,000.
August Debenture
On
August 28, 2017, the Company entered into a 12% convertible
promissory note for $110,000, with an OID of $10,000, which matures
on February 28, 2018. The note is convertible at a variable
conversion rate that is the lesser of 60% of the lowest trading
price for last 20 days prior to issuance of the note or 60% of the
lowest market price over the 20 days prior to conversion. The
conversion price shall be adjusted upon subsequent sales of
securities at a price lower than the original conversion price.
There are additional adjustments to the conversion price for events
set forth in the agreement, including if the Company is not DTC
eligible, the Company is no longer a reporting company, or the note
cannot be converted into free trading shares on or after nine
months from issue date. Per the agreement, the Company is required
at all times to have authorized and reserved five times the number
of shares that is actually issuable upon full conversion of the
note. The conversion feature meets the definition of a derivative
and therefore requires bifurcation and is accounted for as a
derivative liability. The note was sold to the holder of the
January 29, 2018 note (below) on February 8, 2018, with an
amendment entered into to extend the note until March 5, 2018. In
exchange for a cash payment of $5,000 and the issuance of 50,000
shares of common stock, on March 5, 2018, the holder agreed to not
convert any of the outstanding debt into common stock of the
Company until April 8, 2018. The new holder issued a waiver as to
the maturity date of the note and a technical default
provision.
The
Company estimated the fair value of the conversion feature
derivatives embedded in the convertible debentures at issuance at
$150,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.17 at issuance date; a risk-free interest rate of 1.12% and
expected volatility of the Company’s common stock, of
190.70%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $116,438, was immediately expensed as
financing costs.
During
April through June 2018, in a number of separate conversions, the
August debenture was fully converted into 8,332,582 common shares
of the Company. As a result of the conversions the derivative
liability was remeasured immediately prior to the conversions with
an overall decrease of $112,000 recognized, with the fair value of
the derivative liability related to the converted portion, of
$316,000 being reclassified to equity. The key valuation
assumptions used consist, in part, of the price of the
Company’s common stock on the date of conversion, of $0.09 to
$0.02; a risk-free interest rate of 1.72% to 1.94% and expected
volatility of the Company’s common stock of 248.71% to
375.93% , and the various estimated reset exercise prices weighted
by probability
In
connection with the note, the Company issued 50,000 warrants,
exercisable at $0.20, with a five-year term. The exercise price is
adjustable upon certain events, as set forth in the agreement,
including for future dilutive issuance. The exercise price was
adjusted to $0.15 and the warrants outstanding increased to 66,667,
upon a warrant issuance related to a new convertible debenture on
September 11, 2017. The warrants exercise price was subsequently
reset to 50% of the market price during the third quarter of fiscal
2018, and the warrants issued increased accordingly. As a result of
the dilutive issuance adjustment provision, the warrants have been
classified out of equity as a warrant liability. The Company
estimated the fair value of the warrant liability using the Black
Scholes pricing model. The key valuation assumptions used consist,
in part, of the price of the Company’s common stock of $0.17
at issuance date; a risk-free interest rate of 1.74% and expected
volatility of the Company’s common stock, of 276.90%,
resulting in a fair value of $8,000.
Additionally, in
connection with the debenture the Company also issued 343,750
shares of common stock of the Company as a commitment fee. The
commitment shares fair value was calculated as $58,438, based on
the market value of the common shares at the closing date of $0.17,
and was recognized as part of the debt discount. The shares are to
be returned to the Treasury of the Company in the event the
debenture is fully repaid prior to the date which is 180 days
following the issue date. On February 22, 2018, in connection with
the sale of the note to the January 29, 2019 note holder, 171,965
of the shares were returned to the Company and cancelled. The
remaining shares are not required to be returned to the Company, as
the note was not redeemed prior to the date 180 days following the
issue date.
On
October 31, 2017, there was a second closing to the August
debenture, in the principal amount of $66,000, maturing on April
30, 2018. The second closing has the same conversion terms as the
first closing, however there were no additional warrants issued
with the second closing. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
is accounted for as a derivative liability. Subsequent to year end
the holder issued a waiver as to the maturity date of the note and
a technical default provision.
The
Company estimated the fair value of the conversion feature
derivatives embedded in the convertible debentures at issuance at
$94,000, based on weighted probabilities of assumptions used in the
Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.11 at issuance date; a risk-free interest rate of 1.28% and
expected volatility of the Company’s common stock, of
193.79%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $69,877, was immediately expensed as financing
costs.
Additionally, in
connection with the second closing, the Company also issued 332,500
shares of common stock of the Company as a commitment fee. The
commitment shares fair value was calculated as $35,877, based on
the market value of the common shares at the closing date of $0.11,
and was recognized as part of the debt discount. The shares are to
be returned to the Treasury of the Company in the event the
debenture is fully repaid prior to the date which is 180 days
following the issue date.
During
May 2018, the second closing was fully converted into 5,072,216
common shares of the Company. As a result of the conversion the
derivative liability was remeasured immediately prior to the
conversions with an overall decrease of $42,000 recognized, with
the fair value of the derivative liability related to the converted
portion, of $196,000 being reclassified to equity. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock on the date of conversion, of $0.03; a
risk-free interest rate of 1.87% and expected volatility of the
Company’s common stock, of 248.71%, and the various estimated
reset exercise prices weighted by probability
September 11, 2017 Debenture
On
September 11, 2017, the Company entered into a convertible
promissory note for $146,000, with an OID of $13,500, which matured
on June 11, 2018, and is in default as of September 30, 2018. The
note bears interest at 12%, which increases to 24% upon an event of
default. The note is convertible at a variable conversion rate that
is the lower of the trading price for last 25 days prior to
issuance of the note or 50% of the lowest market price over the 25
days prior to conversion. Furthermore, the conversion rate may be
adjusted downward if, within three business days of the transmittal
of the notice of conversion, the common stock has a closing bid
which is 5% or lower than that set forth in the notice of
conversion. There are additional adjustments to the conversion
price for events set forth in the agreement, if any third party has
the right to convert monies at a discount to market greater than
the conversion price in effect at that time then the holder, may
utilize such greater discount percentage. Per the agreement, the
Company is required at all times to have authorized and reserved
seven times the number of shares that is actually issuable upon
full conversion of the note. The Company has not maintained the
required share reservation under the terms of the note agreement.
The Company believes it has sufficient available shares of the
Company’s common stock in the event of conversion for these
notes. The conversion feature meets the definition of a derivative
and therefore requires bifurcation and is accounted for as a
derivative liability.
The
Company estimated the fair value of the conversion feature
derivatives embedded in the convertible debentures at issuance at
$269,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.17 at issuance date; a risk-free interest rate of 1.16% and
expected volatility of the Company’s common stock, of
190.70%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $168,250, was immediately expensed as
financing costs.
In
connection with the note, the Company issued 243,333 warrants,
exercisable at $0.15, with a five-year term. The exercise price is
adjustable upon certain events, as set forth in the agreement,
including for future dilutive issuance. The warrants exercise price
was subsequently reset to 50% of the market price during the third
quarter of fiscal 2018, and the warrants issued increased
accordingly. As a result of the dilutive issuance adjustment
provision, the warrants have been classified out of equity as a
warrant liability. The Company estimated the fair value of the
warrant liability using the Black Scholes pricing model. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock of $0.13 at issuance date; a risk-free
interest rate of 1.71% and expected volatility of the
Company’s common stock, of 276.90%, resulting in a fair value
of $32,000.
During
April and June 2018, in three separate conversions, $85,000 of the
note was converted into 9,200,600 common shares of the Company.
During July and September 2018, in two separate conversions, an
additional $20,654 of principal and $3,700 accrued interest of the
note was converted into 5,436,049 common shares of the Company. The
remainder of the principal, $40,328, is in default as of September
30, 2018, although the Company has not received a written notice of
default from the lender. As a result of the conversions in the
second quarter of 2019, the derivative liability was remeasured
immediately prior to the conversions with an overall decrease of
$82,000 recognized, with the fair value of the derivative liability
related to the converted portion, of $61,000 being reclassified to
equity. The key valuation assumptions used consist, in part, of the
price of the Company’s common stock on the date of
conversion, $0.01; a risk-free interest rate of 2.00% and expected
volatility of the Company’s common stock, of 248.71% , and
the various estimated reset exercise prices weighted by
probability. As a result of the conversions in the first quarter of
2019, the derivative liability was remeasured immediately prior to
the conversions with an overall decrease of $124,000 recognized,
with the fair value of the derivative liability related to the
converted portion, of $263,000 being reclassified to equity. The
key valuation assumptions used consist, in part, of the price of
the Company’s common stock on the date of conversion, of
$0.03 to $0.10; a risk-free interest rate of 1.73% to 1.94% and
expected volatility of the Company’s common stock, of 248.71%
to 375.93%, and the various estimated reset exercise prices
weighted by probability.
September 12, 2017 Debenture
On
September 12, 2017, the Company entered into a 12% convertible
promissory note for principal amount of $96,500 with a $4,500 OID,
which matures on June 12, 2018. The note is able to be prepaid
prior to the maturity date, at a cash redemption premium, at
various stages as set forth in the agreement. The note is
convertible commencing 180 days after issuance date (or upon an
event of Default), or March 11, 2018, with a variable conversion
rate at 60% of market price, defined as the lowest trading price
during the twenty days prior to the conversion date. Additionally,
the conversion price adjusts if the Company is not able to issue
the shares requested to be converted, or upon any future financings
have more favorable terms. Per the agreement, the Company is
required at all times to have authorized and reserved six times the
number of shares that is actually issuable upon full conversion of
the note. The conversion feature meets the definition of a
derivative and therefore requires bifurcation and is accounted for
as a derivative liability.
On
March 20, 2018, the holder converted $32,500 of the September 12,
2017 debentures into 1,031,746 common shares of the Company. As a
result of the conversion the derivative liability was remeasured
immediately prior to the conversion with a fair value of $318,000,
with an increase of $165,000 recognized, with the fair value of the
derivative liability related to the converted portion of $107,000
being reclassified to equity. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.09; a risk-free interest rate of 1.81% and expected
volatility of the Company’s common stock, of 375.93%, and the
various estimated reset exercise prices weighted by
probability.
The
Company estimated the fair value of the conversion feature
derivatives embedded in the convertible debentures at issuance at
$110,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.13 at issuance date; a risk-free interest rate of 1.16% and
expected volatility of the Company’s common stock, of
190.70%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $18,000 was immediately expensed as financing
costs.
During
April 2018, in two separate conversions, the debenture was fully
converted into 2,611,164 common shares of the Company. As a result
of the conversions the derivative liability was remeasured
immediately prior to the conversions with an overall decrease of
$43,000 recognized, with the fair value of the derivative liability
related to the converted portion, of $206,000 being reclassified to
equity. The key valuation assumptions used consist, in part, of the
price of the Company’s common stock on the date of
conversion, of $0.06 to $0.08; a risk-free interest rate of 1.73%
to 1.82% and expected volatility of the Company’s common
stock, of 375.93%, and the various estimated reset exercise prices
weighted by probability
October 17, 2017 Debenture
On
September 28, 2017, the Company entered into a Securities Purchase
Agreement, pursuant to which the Company agreed to sell a 12%
Convertible Note for $55,000 with a maturity date of September 28,
2018, for a purchase price of $51,700, and $2,200 deducted for
legal fees, resulting in net cash proceeds of $49,500. The
effective closing date of the Securities Purchase Agreement and
Note is October 17, 2017. The note is convertible at the
holders’ option, at any time, at a conversion price equal to
the lower of (i) the closing sale price of the Company’s
common stock on the closing date, or (ii) 60% of either the lowest
sale price for the Company’s common stock during the twenty
(20) consecutive trading days including and immediately preceding
the closing date, or the closing bid price, whichever is lower ,
provided that, if the price of the Company’s common stock
loses a bid, then the conversion price may be reduced, at the
holder’s absolute discretion, to a fixed conversion price of
$0.00001. If at any time the adjusted conversion price for any
conversion would be less than par value of the Company’s
common stock, then the conversion price shall equal such par value
for any such conversion and the conversion amount for such
conversion shall be increased to include additional principal to
the extent necessary to cause the number of shares issuable upon
conversion equal the same number of shares as would have been
issued had the Conversion Price not been subject to the minimum par
value price. The conversion feature meets the definition of a
derivative and therefore requires bifurcation and is accounted for
as a derivative liability.
The
Company estimated the fair value of the conversion feature
derivatives embedded in the convertible debentures at issuance at
$91,000, based on weighted probabilities of assumptions used in the
Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.11 at issuance date; a risk-free interest rate of 1.41% and
expected volatility of the Company’s common stock, of
193.79%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $41,500 was immediately expensed as financing
costs.
During
April and May 2018, in a number of separate conversions,
approximately $43,000 of the debenture plus accrued interest was
converted into 3,800,000 common shares of the Company. As a result
of the conversions the derivative liability was remeasured
immediately prior to the conversions with an overall decrease of
$50,000 recognized, with the fair value of the derivative liability
related to the converted portion, of $85,000 being reclassified to
equity. The key valuation assumptions used consist, in part, of the
price of the Company’s common stock on the date of
conversion, of $0.03 to $0.05; a risk-free interest rate of 1.80%
to 1.91% and expected volatility of the Company’s common
stock of 248.71% to 375.93%, and the various estimated reset
exercise prices weighted by probability.
During
the second quarter of fiscal 2019, in a number of separate
conversions, the debenture plus accrued interest was fully
converted into 4,517,493 common shares of the Company. As a result
of the conversions the derivative liability was remeasured
immediately prior to the conversions with an overall decrease in
the fair value of $15,000 recognized, with the fair value of the
remaining derivative liability of $31,000 being reclassified to
equity. The key valuation assumptions used consist, in part, of the
price of the Company’s common stock on the date of
conversion, of $0.02; a risk-free interest rate of 2.02% to 2.14%
and expected volatility of the Company’s common stock of
193.06 % to 248.71% , and the various estimated reset exercise
prices weighted by probability.
November 14, 2017 Debenture
On
November 14, 2017, the Company entered into two 8% convertible
redeemable notes, in the aggregate principal amount of $112,000,
convertible into shares of common stock of the Company, with
maturity dates of November 14, 2018. Each note was in the face
amount of $56,000, with an original issue discount of $2,800,
resulting in a purchase price for each note of $53,200. The first
of the two notes was paid for by the buyer in cash upon closing,
with the second note initially paid for by the issuance of an
offsetting $53,200 secured promissory note issued to the Company by
the buyer (“Buyer Note”). The Buyer Note is due on July
14, 2018. The notes are convertible at 57% of the lowest of trading
price for last 20 days, or lowest closing bid price for last 20
days, with the discount increased to 47% in the event of a DTC
chill, with the second note not being convertible until the buyer
has settled the Buyer Note in cash payment. The Buyer Note is
included in Notes Receivable in the accompanying financial
statements.
During
the first six months, the convertible redeemable notes are in
effect, the Company may redeem the note at amounts ranging from
120% to 140% of the principal and accrued interest balance, based
on the redemption date’s passage of time ranging from 90 days
to 180 days from the date of issuance of each
debenture.
The
conversion feature meets the definition of a derivative and
therefore requires bifurcation and is accounted for as a derivative
liability.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the two convertible debentures at
issuance at $164,000, based on weighted probabilities of
assumptions used in the Black Scholes pricing model. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock of $0.10 at issuance date; a risk-free
interest rate of 1.59% and expected volatility of the
Company’s common stock, of 192.64%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $63,200 was
immediately expensed as financing costs.
During
May and June 2018, in three separate conversions, the first
debenture was fully converted into 4,834,790 common shares of the
Company. As a result of the conversions the derivative liability
was remeasured immediately prior to the conversions with an overall
decrease of $47,000 recognized, with the fair value of the
derivative liability related to the converted portion, of $106,000
being reclassified to equity. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
on the date of conversion, of $0.03 to $0.04; a risk-free interest
rate of 2.08% to 2.14% and expected volatility of the
Company’s common stock, of 321.92%, and the various estimated
reset exercise prices weighted by probability.
December 20, 2017 Debenture
On
December 20, 2017, the Company entered into two 8% convertible
redeemable notes, in the aggregate principal amount of $240,000,
convertible into shares of common stock, of the Company, with the
same buyers as the November 14, 2017 debenture. Both notes are due
on December 20, 2018. If the note is not paid by its maturity date
the outstanding principal due on the note increases by 10%. The
note also contains a cross default to all other outstanding notes.
The first note has face amount of $160,000, with a $4,000 OID,
resulting in a purchase price of $156,000. The second note has a
face amount of $80,000, with an OID of $2,000, for a purchase price
of $78,000. The first of the two notes was paid for by the buyer in
cash upon closing, with the second note initially paid for by the
issuance of an offsetting $78,000 secured promissory note issued to
the Company by the buyer (“Buyer Note”). The Buyer Note
is included in Notes Receivable in the accompanying financial
statements. The Buyer Note was due on August 20, 2018. The Buyer
Note was settled on July 11, 2018, for a purchase price of $74,000,
net of fees. The notes are convertible at 60% of the lower of: (i)
lowest trading price or (ii) lowest closing bid price, of the
Company’s common stock for the last 20 trading days prior to
conversion, with the discount increased to 50% in the event of a
DTC chill, with the second note not being convertible until the
buyer has settled the Buyer Note in cash payment.
On
August 7, 2018, the holder converted $25,000 of the December 20,
2017 debentures and $1,178 of accrued interest into 4,363,013
common shares of the Company. As a result of the conversions the
derivative liability was remeasured immediately prior to the
conversions with an overall decrease in the fair value of $260,000
recognized, with the fair value of the derivative liability related
to the converted portion, of $36,000 being reclassified to equity.
The key valuation assumptions used consist, in part, of the price
of the Company’s common stock on the date of conversion, of
$0.02; a risk-free interest rate of 2.06% and expected volatility
of the Company’s common stock, of 248.71%, and the various
estimated reset exercise prices weighted by
probability.
During
the first six months, the convertible redeemable notes are in
effect, the Company may redeem the note at amounts ranging from
120% to 136% of the principal and accrued interest balance, based
on the redemption date’s passage of time ranging from 90 days
to 180 days from the date of issuance of each
debenture.
The
conversion feature meets the definition of a derivative and
therefore requires bifurcation and is accounted for as a derivative
liability.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the two convertible debentures at
issuance at $403,000, based on weighted probabilities of
assumptions used in the Black Scholes pricing model. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock of $0.15 at issuance date; a risk-free
interest rate of 1.72% and expected volatility of the
Company’s common stock, of 215.40%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $181,000 was
immediately expensed as financing costs.
January 29, 2018 Debenture
On
January 29, 2018, the Company entered into three 12% convertible
notes of the Company in the aggregate principal amount of $120,000,
convertible into shares of common stock of the Company, with
maturity dates of January 29, 2019. The interest upon an event of
default, as defined in the note, including a cross default to all
other outstanding notes, is 24% per annum. If the note is not paid
by its maturity date the outstanding principal due on the note
increases by 10%. Each note was in the face amount of $40,000, with
$2,000 legal fees, for net proceeds of $38,000. The first of the
three notes was paid for by the buyer in cash upon closing, with
the other two notes initially paid for by the issuance of an
offsetting $40,000 secured promissory note issued to the Company by
the buyer (“Buyer Note”). The Buyer Notes are due on
September 29, 2018. The first of the Buyer’s Notes was funded
on July 26, 2018, for cash proceeds of $38,000. Per the agreement,
the Company is required at all times to have authorized and
reserved three times the number of shares that is actually issuable
upon full conversion of the note. Failure to maintain the reserved
number of shares is considered an event of default if not cured
within three days of a notice of conversion. The Company has not
maintained the required share reservation under the terms of the
note agreement. The Company believes it has sufficient available
shares of the Company’s common stock in the event of
conversion for these notes.
The
notes are convertible at 60% of the lowest closing bid price for
the last 20 days, with the discount increased to 50% in the event
of a DTC chill. The second and third notes not being convertible
until the buyer has settled the Buyer Notes in a cash payment. The
conversion feature meets the definition of a derivative and
therefore requires bifurcation and will be accounted for as a
derivative liability.
During
the first 180 days, the convertible redeemable notes are in effect,
the Company may redeem the note at amounts ranging from 115% to
140% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 30 days to 180
days from the date of issuance of each debenture. Upon any sale
event, as defined, at the holder’s request the Company will
redeem the note for 150% of the principal and accrued
interest.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the three convertible debentures at
issuance at $185,000, based on weighted probabilities of
assumptions used in the Black Scholes pricing model. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock of $0.12 at issuance date; a risk-free
interest rate of 1.80% and expected volatility of the
Company’s common stock, of 215.40%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $71,000 was
immediately expensed as financing costs.
During
the second fiscal quarter of 2019, in three separate conversions,
the first debenture was fully converted into 12,607,777 common
shares of the Company. As a result of the conversions the
derivative liability related to the first debenture was remeasured
immediately prior to the conversions with an overall decrease in
the fair value of $37,000 recognized, with the fair value of the
derivative liability related to the converted portion, of $64,000
being reclassified to equity. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
on the date of conversion, of $0.01 to $0.02; a risk-free interest
rate of 2.17% to 2.22% and expected volatility of the
Company’s common stock, of 193.06% to 321.92%, and the
various estimated reset exercise prices weighted by
probability.
January 30, 2018 Debenture
On
January 30, 2018, the Company entered into a 12% convertible note
for the principal amount of $80,000, convertible into shares of
common stock of the Company, which matures on January 30, 2019.
Upon an event of default, as defined in the note, the note becomes
immediately due and payable, in an amount equal to 150% of all
principal and accrued interest due on the note, with default
interest of 22% per annum (the “Default Amount”). If
the Company fails to deliver conversion shares within 2 days of a
conversion request, the note becomes immediately due and payable at
an amount of twice the Default Amount. The note is convertible at
61% of the lowest closing bid price for the last 15 days. Per the
agreement, the Company is required at all times to have authorized
and reserved six times the number of shares that is actually
issuable upon full conversion of the note. Failure to maintain the
reserved number of shares is considered an event of default if not
cured within three days of a notice of conversion. The conversion
feature meets the definition of a derivative and therefore requires
bifurcation and will be accounted for as a derivative
liability.
During
the first 180 days, the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 115% to
140% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 30 days to 180
days from the date of issuance of the debenture. The note was
redeemed on July 27, 2018, for approximately $123,000, with the
approximately $40,000 redemption amount being recognized as
financing costs. Upon redemption, the fair value of the related
derivative liability was remeasured immediately prior to the
redemption with an overall decrease in the fair value of $90,000
recognized, and the derivative liability fair value of $119,000
reclassed to equity. The key valuation assumptions used consist, in
part, of the price of the Company’s common stock on the date
of redemption, of $0.01; a risk-free interest rate of 1.93% and
expected volatility of the Company’s common stock, of
248.71%, and the various estimated reset exercise prices weighted
by probability.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the convertible debenture at
issuance at $163,000, based on weighted probabilities of
assumptions used in the Black Scholes pricing model. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock of $0.08 at issuance date; a risk-free
interest rate of 1.88% and expected volatility of the
Company’s common stock, of 215.40%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $83,000 was
immediately expensed as financing costs.
On
March 9, 2018, the Company entered into a 12% convertible note for
the principal amount of $43,000, with the holder of the January 30,
2018 debenture, convertible into shares of common stock of the
Company, which matures on March 9, 2019. Upon an event of default,
as defined in the note, the note becomes immediately due and
payable, in an amount equal to 150% of all principal and accrued
interest due on the note, with default interest of 22% per annum
(the “Default Amount”). If the Company fails to deliver
conversion shares within 2 days of a conversion request, the note
becomes immediately due and payable at an amount of twice the
Default Amount. The note is convertible on the date beginning 180
days after issuance of the note, at 61% of the lowest closing bid
price for the last 15 days. Per the agreement, the Company is
required at all times to have authorized and reserved six times the
number of shares that is actually issuable upon full conversion of
the note. Failure to maintain the reserved number of shares is
considered an event of default. The Company has not maintained the
required share reservation under the terms of the note agreement.
The Company believes it has sufficient available shares of the
Company’s common stock in the event of conversion for these
notes. The conversion feature meets the definition of a derivative
and therefore requires bifurcation and will be accounted for as a
derivative liability.
During
the first 180 days the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 115% to
140% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 30 days to 180
days from the date of issuance of the debenture. On August 24, 2018
the outstanding principal and $2,304 in accrued interest of the
note was purchased from the noteholder by a third party, for
$71,000. The additional $25,696 represents the redemption amount
owing to the original noteholder and increases the principal amount
due to the new noteholder and was recognized as financing
cost.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the convertible debenture at
issuance at $94,000, based on weighted probabilities of assumptions
used in the Black Scholes pricing model. The key valuation
assumptions used consist, in part, of the price of the
Company’s common stock of $0.09 at issuance date; a risk-free
interest rate of 2.03% and expected volatility of the
Company’s common stock, of 215.40%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $54,000 was
immediately expensed as financing costs.
During
the second fiscal quarter of 2019, in two separate conversions, the
holder converted $29,464 of principal into 4,500,000 common shares
of the Company. As a result of the conversions the derivative
liability related to the first debenture was remeasured immediately
prior to the conversions with an overall decrease in the fair value
of $60,000 recognized, with the fair value of the derivative
liability related to the converted portion, of $33,000 being
reclassified to equity. The key valuation assumptions used consist,
in part, of the price of the Company’s common stock on the
date of conversion, of $0.01 ; a risk-free interest rate of 2.33%
to 2.37% and expected volatility of the Company’s common
stock, of 223.20% , and the various estimated reset exercise prices
weighted by probability.
March 20, 2018 Debenture
On
March 20, 2018, the Company entered into a convertible note for the
principal amount of $84,000, convertible into shares of common
stock of the Company, which matures on December 20, 2018. The note
bears interest at 12% for the first 180 days, which increases to
18% after 180 days, and 24% upon an event of default. Upon an event
of default, as defined in the note, the note becomes immediately
due and payable, in an amount equal to 150% of all principal and
accrued interest due on the note. The note is convertible on the
date beginning 180 days after issuance of the note, at the lower of
60% of the lowest trading price for the last 20 days prior to the
issuance date of this note, or 60% of the lowest trading price for
the last 20 days prior to conversion. In the event of a "DTC
chill", the conversion rate is adjusted to 40% of the market price.
Per the agreement, the Company is required at all times to have
authorized and reserved ten times the number of shares that is
actually issuable upon full conversion of the note. The Company has
not maintained the required share reservation under the terms of
the note agreement. The Company believes it has sufficient
available shares of the Company’s common stock in the event
of conversion for these notes. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
will be accounted for as a derivative liability.
During
the first 180 days the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 125% to
150% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from the issuance
to 180 days from the date of issuance of the debenture. On
September 20, 2018 the outstanding principal and $5,040 in accrued
interest of the note was purchased from the noteholder by a third
party, for $126,882. The additional $37,842 represents the
redemption amount owing to the original noteholder and increases
the principal amount due to the new noteholder and was recognized
as financing cost.
Additionally, the
Company also issued 255,675 shares of common stock of the Company
as a commitment fee. The commitment shares fair value was
calculated as $28,124, based on the market value of the common
shares at the closing date of $0.11, and was recognized as part of
the debt discount.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the convertible debenture at
issuance at $191,000, based on weighted probabilities of
assumptions used in the Black Scholes pricing model. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock of $0.06 at issuance date; a risk-free
interest rate of 2.09% and expected volatility of the
Company’s common stock, of 272.06%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $144,124
(including the fair value of the common shares issued) was
immediately expensed as financing costs.
March 21, 2018 Debenture
On
March 21, 2018, the Company entered into a convertible note for the
principal amount of $39,199, which includes an OID of $4,199,
convertible into shares of common stock of the Company, which
matures on December 20, 2018. The note bears interest at 12% for
the first 180 days, which increases to 18% after 180 days, and 24%
upon an event of default. Upon an event of default, as defined in
the note, the note becomes immediately due and payable, in an
amount equal to 150% of all principal and accrued interest due on
the note. The note is convertible on the date beginning 180 days
after issuance of the note, at the lowest of 60% of the lowest
trading price for the last 20 days prior to the issuance date of
this note, or 60% of the lowest trading price for the last 20 days
prior to conversion. The discount is increased upon certain events
set forth in the agreement regarding the obtainability of the
shares, such as a DTC "chill". Additionally, if the Company ceases
to be a reporting company, or after 181 days the note cannot be
converted into freely traded shares, the discount is increased an
additional 15%. Per the agreement, the Company is required at all
times to have authorized and reserved ten times the number of
shares that is actually issuable upon full conversion of the note.
The Company has not maintained the required share reservation under
the terms of the note agreement. The Company believes it has
sufficient available shares of the Company’s common stock in
the event of conversion for these notes. The conversion feature
meets the definition of a derivative and therefore requires
bifurcation and will be accounted for as a derivative
liability.
During
the first 180 days the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 125% to
150% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from the issuance
to 180 days from the date of issuance of the debenture. On
September 20, 2018 the outstanding principal and $2,352 in accrued
interest of the note was purchased from the noteholder by a third
party, for $62,326. The additional $20,775 represents the
redemption amount owing to the original noteholder and increases
the principal amount due to the new noteholder and was recognized
as financing cost.
Additionally, the
Company also issued 119,300 shares of common stock of the Company
as a commitment fee. The commitment shares fair value was
calculated as $13,123, based on the market value of the common
shares at the closing date of $0.11, and was recognized as part of
the debt discount.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the two convertible debentures at
issuance at $89,000, based on weighted probabilities of assumptions
used in the Black Scholes pricing model. The key valuation
assumptions used consist, in part, of the price of the
Company’s common stock of $0.06 at issuance date; a risk-free
interest rate of 2.09% and expected volatility of the
Company’s common stock, of 272.06%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $67,123
(including the fair value of the common shares issued) was
immediately expensed as financing costs.
April 10, 2018 Debenture
On
April 10, 2018, the Company entered into two 10% convertible notes
in the aggregate principal amount of $110,000, convertible into
shares of common stock of the Company, with maturity dates of April
10, 2019. The interest upon an event of default, as defined in the
note, is 24% per annum. Each note was in the face amount of
$55,000, with $2,750 for legal fees deducted upon funding. The
first of the notes was paid for by the buyer in cash upon closing,
with the other note ("Back-End Note") initially paid for by the
issuance of an offsetting $55,000 secured promissory note issued to
the Company by the buyer (“Buyer Note”). The Buyer Note
is due on December 12, 2018. The interest rate increases to 24%
upon an event of default, as set forth in the agreement, including
a cross default to all other outstanding notes, and if the
debenture is not paid at maturity the principal due increases by
10%. If the Company loses its bid price the principal outstanding
on the debenture increases by 20%, and if the Company’s
common stock is delisted, the principal increases by 50%. An event
of default also occurs if the Company’s common stock has a
closing bid price of less than $0.03 per share for at least five
consecutive days, or the aggregate dollar trading volume of the
Company’s common stock is less than $20,000 in any five
consecutive days. The Company’s common stock closing bid
price fell below $0.03 on June 18, 2018 and continued for over five
consecutive days, and the Company is therefore in default on the
note. The Company has obtained a waiver from the holder on this
technical default. Due to the default the holder cancelled the
Back-End and Buyer notes as of September 30, 2018. Upon
cancellation the remaining unamortized debt discount of $27,500 was
immediately expensed. Also as a result of the cancellation, the
fair value of the derivative liability related to the Back-End note
was remeasured with a decrease in the fair value of $128,000
recognized, and the fair value of the derivative liability related
to the note of $91,500 being reclassified to equity. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock on the date of conversion, of $0.01; a
risk-free interest rate of 2.36% and expected volatility of the
Company’s common stock, of 223.20%, and the various estimated
reset exercise prices weighted by probability.
The
notes are convertible at 57% of the lowest closing bid price for
the last 20 days. The discount is increased an additional 10%, to
47%, upon a DTC "chill". The Company has not maintained the
required share reservation under the terms of the note agreement.
The Back-End note is not convertible until the buyer has settled
the Buyer Notes in a cash payment. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
will be accounted for as a derivative liability.
During
the first 180 days the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 130% to
145% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 60 days to 180
days from the date of issuance of the debenture.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the two convertible debentures at
issuance at $348,000, based on weighted probabilities of
assumptions used in the Black Scholes pricing model. The key
valuation assumptions used consist, in part, of the price of the
Company’s common stock of $0.09 at issuance date; a risk-free
interest rate of 2.09% and expected volatility of the
Company’s common stock, of 272.06%, and the various estimated
reset exercise prices weighted by probability. This resulted in the
calculated fair value of the debt discount being greater than the
face amount of the debt, and the excess amount of $243,500 was
immediately expensed as financing costs.
April 27, 2018 Debenture
On
April 27, 2018, the Company entered into a convertible note for the
principal amount of $53,000 for a purchase price of $50,000,
convertible into shares of common stock of the Company, which
matures on January 27, 2019. The note bears interest at 12% for the
first 180 days, which increases to 18% after 180 days, and 24%. The
interest rate increases to 24% upon an event of default, as set
forth in the agreement, including a cross default to all other
outstanding notes. Additionally, in the majority of events of
default, except for the non-payment of the note upon maturity, the
note becomes immediately due and payable at an amount at 150% of
the principal plus accrued interest due.
The
note is convertible on the date beginning 180 days after issuance
of the note, at the lowest of 60% of the lowest trading price for
the last 20 days prior to the issuance date of this note, or 60% of
the lowest trading price for the last 20 days prior to conversion.
The discount rate is adjusted based on various situations regarding
the ability to deliver the common shares, such as in the event of a
"DTC chill" or the Company ceases to be a reporting company. Per
the agreement, the Company is required at all times to have
authorized and reserved ten times the number of shares that is
actually issuable upon full conversion of the note. The Company has
not maintained the required share reservation under the terms of
the note agreement. The Company believes it has sufficient
available shares of the Company’s common stock in the event
of conversion for these notes. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
will be accounted for as a derivative liability.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the debenture at issuance at
$159,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.09 at issuance date; a risk-free interest rate of 2.24% and
expected volatility of the Company’s common stock, of
272.06%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $109,000 was immediately expensed as financing
costs.
June 5, 2018 Debenture
On June
5, 2018, the Company entered into a convertible note for the
principal amount of $125,000 for a purchase price of $118,800,
convertible on the date beginning 180 days after issuance of the
note, into shares of common stock of the Company, which matures on
June 5, 2019. The note bears interest at 12%, which increases to
18% upon an event of default, as defined in the agreement. The note
is convertible at 60% of the lowest trading price for the last 20
days prior to conversion, with the discount increased 5% in the
event the Company does not have sufficient shares authorized and
outstanding to issue the shares upon conversion request. The
conversion price is adjusted upon a future dilutive issuance, to
the lower of the conversion price or a 25% discount to the
aggregate per share common share price. Per the agreement, the
Company is required at all times to have authorized and reserved
four times the number of shares that is actually issuable upon full
conversion of the note. The Company has not maintained the required
share reservation under the terms of the note agreement. The
Company believes it has sufficient available shares of the
Company’s common stock in the event of conversion for these
notes. The conversion feature meets the definition of a derivative
and therefore requires bifurcation and will be accounted for as a
derivative liability.
During
the first 180 days the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 135% to
145% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 90 days to 180
days from the date of issuance of the debenture. After 180 days,
the note is redeemable, with the holders prior written consent, at
150% of the principal and accrued interest balance.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the debenture at issuance at
$375,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.04 at issuance date; a risk-free interest rate of 2.32% and
expected volatility of the Company’s common stock, of
292.85%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $256.200 was immediately expensed as financing
costs.
July 27, 2018 Debenture
On July
27, 2018, the Company entered into two 10% convertible notes in the
aggregate principal amount of $186,000, convertible into shares of
common stock of the Company, with maturity dates of July 27, 2019.
The interest upon an event of default, as defined in the note, is
24% per annum. Each note was in the face amount of $93,000, with
$3,000 OID, for a purchase price of $90,000. The first of the notes
was paid for by the buyer in cash upon closing, with the other note
("Back-End note") initially paid for by the issuance of an
offsetting $93,000 secured promissory note issued to the Company by
the buyer (“Buyer Note”). The Buyer Note is due on
December 12, 2018. The interest rate increases to 24% upon an event
of default, as set forth in the agreement, including a cross
default to all other outstanding notes, and if the debenture is not
paid at maturity the principal due increases by 10%. If the Company
loses its bid price the principal outstanding on the debenture
increases by 20%, and if the Company’s common stock is
delisted, the principal increases by 50%. Per the agreement, the
Company is required at all times to have authorized and reserved
16,900,000 common shares of the Company. The Company has not
maintained the required share reservation under the terms of the
note agreement. The Company believes it has sufficient available
shares of the Company’s common stock in the event of
conversion for these notes.
The
notes are convertible at 60% of the lowest closing bid price for
the last 20 days. The discount is increased an additional 10%, to
50%, upon a DTC "chill". The Back-End note is not convertible until
the buyer has settled the Buyer Notes in a cash payment. The
conversion feature meets the definition of a derivative and
therefore requires bifurcation and will be accounted for as a
derivative liability.
During
the first 180 days the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 120% to
136% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 90 days to 180
days from the date of issuance of the debenture.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the debenture at issuance at
$374,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.01 at issuance date; a risk-free interest rate of 2.43% and
expected volatility of the Company’s common stock, of
292.85%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $194,000 was immediately expensed as financing
costs.
August 24, 2018 Debenture
On
August 24, 2018, the Company entered into a 10% convertible note in
the principal amount of $55,000, convertible into shares of common
stock of the Company, which matures August 24, 2019. The interest
rate increases to 24% per annum upon an event of default, as set
forth in the agreement, including a cross default to all other
outstanding notes, and if the debenture is not paid at maturity the
principal due increases by 10%. If the Company loses its bid price
the principal outstanding on the debenture increases by 20%, and if
the Company’s common stock is delisted, the principal
increases by 50%.
The
notes are convertible at 57% of the lowest closing bid price for
the last 20 days. The discount is increased an additional 10%, to
47%, upon a DTC "chill". The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
will be accounted for as a derivative liability.
During
the first 180 days the convertible redeemable note is in effect,
the Company may redeem the note at amounts ranging from 130% to
145% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 60 days to 180
days from the date of issuance of the debenture.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the debenture at issuance at
$375,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.02 at issuance date; a risk-free interest rate of 2.44% and
expected volatility of the Company’s common stock, of
295.23%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $95,750 was immediately expensed as financing
costs.
September 14, 2018 Debenture
On
September 14, 2018, the Company entered into a 12% convertible
promissory note for $112,500, with an OID of $10,250, which matures
on March 14, 2019. There is a right of prepayment in the first 180
days, but there is no right to repay after 180 days. Per the
agreement, the Company is required at all times to have authorized
and reserved three times the number of shares that is actually
issuable upon full conversion of the note. The Company has not
maintained the required share reservation under the terms of the
note agreement. The Company believes it has sufficient available
shares of the Company’s common stock in the event of
conversion for these notes. The interest rate increases to a
default rate of 24% for events as set forth in the agreement,
including if the market capitalization is below $5 million, or
there are any dilutive issuances. There is also a cross default
provision to all other notes. In the event of default, the
outstanding principal balance increases to 150%, and if the Company
fails to maintain the required authorized share reserve, the
outstanding principal increases to 200%. Additionally, If the
Company enters into a 3(a)(9) or 3(a)(10) issuance of shares there
are liquidation damages of 25% of principal, not to be below
$15,000. The Company must also obtain the noteholder's written
consent before issuing any new debt. Additionally, if the note is
not repaid by the maturity date the principal balance increases by
$15,000. The market capitalization is below $5 million and
therefore the note is in default as of September 30,
2018.
The
note is convertible at a variable conversion rate that is the
lesser of 60% of the lowest trading price for the last 20 days
prior to the issuance of the note or 60% of the lowest market price
over the 20 days prior to conversion. The conversion price shall be
adjusted upon subsequent sales of securities at a price lower than
the original conversion price. There are additional 10% adjustments
to the conversion price for events set forth in the agreement,
including if the conversion price is less than $0.01, if the
Company is not DTC eligible, the Company is no longer a reporting
company, or the note cannot be converted into free trading shares
on or after nine months from issue date. Per the agreement, the
Company is required at all times to have authorized and reserved
three times the number of shares that is actually issuable upon
full conversion of the note. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
is accounted for as a derivative liability.
Additionally, in
connection with the debenture the Company also issued 3,000,000
shares of common stock of the Company as a commitment fee. The fair
value of the commitment shares was calculated as $34,500, based on
the market value of the common shares at the closing date of
$0.012, and was recognized as part of the debt discount. The shares
are to be returned to the Treasury of the Company in the event the
debenture is fully repaid prior to the date which is 180 days
following the issue date but are not required to be returned if
there is an event of default.
The
Company estimated the aggregate fair value of the conversion
feature derivatives embedded in the debenture at issuance at
$189,000, based on weighted probabilities of assumptions used in
the Black Scholes pricing model. The key valuation assumptions used
consist, in part, of the price of the Company’s common stock
of $0.01 at issuance date; a risk-free interest rate of 2.33% and
expected volatility of the Company’s common stock, of
224.70%, and the various estimated reset exercise prices weighted
by probability. This resulted in the calculated fair value of the
debt discount being greater than the face amount of the debt, and
the excess amount of $121,000 was immediately expensed as financing
costs.
As the
September 11, 2017 debenture was not paid in full by the maturity
date, the above notes which have cross default provisions as
disclosed, are in technical default.
The
derivative liability arising from all of the above discussed
debentures was revalued at September 30, 2018, resulting in a
decrease of the fair value of the derivative liability of $424,000
and $188,000, respectively, for the three and six months ended
September 30, 2018. During the three and six months ended September
30, 2018, there was a reclass of $222,000 and $1,527,000 of the
derivative fair value to equity upon the conversions of
approximately $130,000 and $597,000 of principal, and a decrease in
the fair value of $457,000 and $925,000 immediately prior to
conversion . The key valuation assumptions used consist, in part,
of the price of the Company’s common stock of $0.012; a
risk-free interest rate ranging from 1.93% to 2.59%, and expected
volatility of the Company’s common stock ranging from 193.06%
to 294.17%, and the various estimated reset exercise prices
weighted by probability.
The
warrant liability relating to all of the outstanding warrant
issuances discussed above was revalued at September 30, 2018,
resulting in an estimated fair value of $174,000, for an increase
to the fair value of $47,000 for both the three and six months
ended September 30, 2018. The key valuation assumptions used
consists, in part, of the price of the Company’s common stock
of $0.012; a risk-free interest rate of 2.88%, and expected
volatility of the Company’s common stock of
342.70%.
NOTE 6 – STOCKHOLDERS’ DEFICIT
Preferred Stock
On
August 15, 2018, the Company authorized 5,000,000 of their
Preferred Stock to be designated as Series A Convertible Preferred
Stock (“Series A PS”), with a par value of $0.001. The
Series A PS shall have 60 to 1 voting rights such that each share
shall vote as to 60 shares of common stock. The Series A PS holders
shall not be entitled to receive dividends, if and when declared by
the Board. Upon the dissolution, liquidation or winding up of the
Company, the holders of Series A PS shall be entitled to receive
out of the assets of the Company the sum of $0.00l per share before
any payment or distribution shall be made on the common stock, or
any other class of capital stock of the Company ranking junior to
the Series A Preferred Stock. The Series A PS is convertible, after
two years from the date of issuance, with the consent of a majority
of the Series A PS holders, into the same number of common shares
of the Company as are outstanding at the time.
On
August 21, 2018, the NaturalShrimp Holdings,
Inc.(“NSH”) shareholders exchanged 75,000,000 of the
common shares of the Company which they held, into 5,000,000 newly
issued Series A PS. The common shares were returned to the treasury
and cancelled. The Series A PS do not have any redemption feature
and are therefore classified in permanent equity. The conversion
feature was evaluated, and as at the commitment date the fair value
of the common shares exchanged was greater than the fair value of
the shares into which they would be converted, it was determined
there was no beneficial aspect to the conversion
feature.
Common Stock
On
April 12, 2018, the Company sold 220,000 shares of its common stock
at $0.077 per share, for a total financing of $15,400.
Between
April 6, 2018 and September 30, 2018, the Company issued 63,841,481
shares of the Company’s common stock upon conversion of
approximately $597,000 of their outstanding convertible debt and
approximately $43,000 of accrued interest.
The
Company issued 6,719,925 shares of their common stock on July 17,
2018, upon cashless exercise of the warrants granted in connection
with the first closing of the July Debenture, and on August 28,
2018, 4,494,347 shares were issued upon cashless exercise of the
warrants granted in connection with the second closing. (Note
5).
Equity Financing Agreement
On
August 21, 2018, the Company entered into an Equity Financing
Agreement (“Equity Financing Agreement”) and
Registration Rights Agreement (“Registration Rights
Agreement”) with GHS Investments LLC, a Nevada limited
liability company (“GHS”). Under the terms of the
Equity Financing Agreement, GHS agreed to provide the Company with
up to $7,000,000 upon effectiveness of a registration statement on
Form S-1 (the “Registration Statement”) filed with the
U.S. Securities and Exchange Commission (the
“Commission”). The Registration Statement was filed and
deemed effective on September 19, 2018.
Following
effectiveness of the Registration Statement, the Company has the
discretion to deliver puts to GHS and GHS will be obligated to
purchase shares of the Company’s common stock, par value
$0.0001 per share (the “Common Stock”) based on the
investment amount specified in each put notice. The maximum amount
that the Company shall be entitled to put to GHS in each put notice
shall not exceed two hundred percent (200%) of the average daily
trading dollar volume of the Company’s Common Stock during
the ten (10) trading days preceding the put, so long as such amount
does not exceed $300,000. Pursuant to the Equity Financing
Agreement, GHS and its affiliates will not be permitted to
purchase, and the Company may not put shares of the Company’s
Common Stock to GHS that would result in GHS’s beneficial
ownership equaling more than 9.99% of the Company’s
outstanding Common Stock. The price of each put share shall be
equal to eighty percent (80%) of the Market Price (as defined in
the Equity Financing Agreement). Puts may be delivered by the
Company to GHS until the earlier of thirty-six (36) months after
the effectiveness of the Registration Statement or the date on
which GHS has purchased an aggregate of $7,000,000 worth of Common
Stock under the terms of the Equity Financing Agreement.
Additionally, in accordance with the Equity Financing Agreement,
the Company shall issue GHS a promissory note in the principal
amount of $15,000 to offset transaction costs (the
“Note”). The Note bears interest at the rate of 8% per
annum, is not convertible and is due 180 days from the issuance
date of the Note.
The
Company issued their first put notices to GHS in October 2018 (Note
10).
NOTE 7 – RELATED PARTY TRANSACTIONS
Notes Payable – Related Parties
On
April 20, 2017, the Company entered into a convertible debenture
with an affiliate of the Company whose managing member is the
Treasurer, Chief Financial Officer, and a director of the Company
(the “affiliate”), for $140,000. The convertible
debenture matures one year from date of issuance, and bears
interest at 6%. Upon an event of default, as defined in the
debenture, the principal and any accrued interest becomes
immediately due, and the interest rate increases to 24%. The
convertible debenture is convertible at the holder’s option
at a conversion price of $0.30. As of September 30, 2018 and March
31, 2018, the Company has paid $52,400 on this note, with $87,600
remaining outstanding.
NaturalShrimp Holdings, Inc.
On
January 1, 2016 the Company entered into a notes payable agreement
with NSH, a shareholder. Between January 16, 2016 and March 7,
2016, the Company borrowed $134,750 under this agreement. An
additional $601,361 was borrowed under this agreement in the year
ended March 31, 2017, for a total of $736,111. The note payable has
no set monthly payment or maturity date with a stated interest rate
of 2%. Interest expense on the note was approximately $3,700 and
$7,400 during the three and six months ended September 30, 2018,
respectively. At September 30, 2018 and March 31, 2018, accrued
interest payable was $28,823 and $21,462,
respectively.
Shareholder Notes
The
Company has entered into several working capital notes payable to
multiple shareholders of NSH and Bill Williams, an officer, a
director, and a shareholder of the Company, for a total of
$486,500. These notes had stock issued in lieu of interest and have
no set monthly payment or maturity date. The balance of these notes
at both September 30, 2018 and March 31, 2018 was $426,404 and is
classified as a current liability on the consolidated balance
sheets. Interest expense on the note was approximately $8,500 and
$17,000 during the three and six months ended September 30, 2018,
respectively. At September 30, 2018 and March 31, 2018, accrued
interest payable was $223,976 and $206,920,
respectively.
Shareholders
In
2009, the Company entered into a note payable to Randall Steele, a
shareholder of NSH, for $50,000. The note bears interest at 6.0%
and was payable upon maturity on January 20, 2011. The note is
unsecured. The balance of the note at September 30, 2018 and March
31, 2018 was $50,000, respectively, and is classified as a current
liability on the consolidated balance sheets. Interest expense on
the note was $750 and $1,500 during the three and six months ended
September 30, 2018, respectively.
Beginning in 2010,
the Company started entering into several working capital notes
payable with various shareholders of NSH for a total of $290,000
and bearing interest at 8%. The balance of these notes at September
30, 2018 and March 31, 2018 was $5,000 and is classified as a
current liability on the consolidated balance sheets. At September
30, 2018 and March 31, 2018, accrued interest payable was $1,800
and $1,600, respectively.
NOTE 8 – CONCENTRATION OF CREDIT RISK
The
Company maintains cash balances at one financial institution.
Accounts at this institution are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $250,000. As of September 30,
2018 and March 31, 2018, the Company’s cash balance did not
exceed FDIC coverage.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Executive Employment Agreements – Bill Williams and Gerald
Easterling
On
April 1, 2015, the Company entered into employment agreements with
each of Bill G. Williams, as the Company’s Chief Executive
Officer, and Gerald Easterling as the Company’s President,
effective as of April 1, 2015 (the “Employment
Agreements”).
The
Employment Agreements are each terminable at will and each provide
for a base annual salary of $96,000. In addition, the Employment
Agreements each provide that the employee is entitled, at the sole
and absolute discretion of the Company’s Board of Directors,
to receive performance bonuses. Each employee will also be entitled
to certain benefits including health insurance and monthly
allowances for cell phone and automobile expenses.
Each
Employment Agreement provides that in the event employee is
terminated without cause or resigns for good reason (each as
defined in their Employment Agreements), the employee will receive,
as severance the employee’s base salary for a period of 60
months following the date of termination. In the event of a change
of control of the Company, the employee may elect to terminate the
Employment Agreement within 30 days thereafter and upon such
termination would receive a lump sum payment equal to 500% of the
employee’s base salary.
Each
Employment Agreement contains certain restrictive covenants
relating to non-competition, non-solicitation of customers and
non-solicitation of employees for a period of one year following
termination of the employee’s Employment
Agreement.
NOTE 10 – SUBSEQUENT EVENTS
Subsequent to
period end, the Company has converted approximately $63,000 of
their outstanding convertible debt as of September 30, 2018 and
approximately $2,000 of accrued interest and fees, into 21,398,126
shares of the Company’s common stock.
On October 3, 2018,
the Company put to GHS for the issuance of 2,814,682 shares of
common stock, at $0.0088, for a total of $24,769. On October 22,
2018, the Company put to GHS for the issuance of 3,525,917 shares
of common stock, at $0.0048, for a total of $16,924.
On
October 30, 2018, the Company entered into an 8% convertible
promissory note for $113,300, with an OID of $10,300, which matures
on October 30, 2019. During the first 180 days the convertible
redeemable note is in effect, the Company may redeem the note at a
prepayment percentage of 123% of the outstanding principal and
accrued interest. Per the agreement, the Company is required at all
times to have authorized and reserved four times the number of
shares that is actually issuable upon full conversion of the note.
The interest rate increases to a default rate of 24% for events as
set forth in the agreement. In the event of default, the
outstanding principal balance increases to 150%, and if the Company
fails to maintain the required authorized share reserve or is
unable to issue the requested shares upon a conversion notice, the
outstanding principal increases to 200%.
The
note is convertible after 180 days at a variable conversion rate
that is 75% of the average of the lowest two trading prices over
the 15 days prior to conversion. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
is accounted for as a derivative liability.
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Note Regarding Forward-Looking Statements
This 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 are based. 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, 2018, as filed with the
U.S. Securities and Exchange Commission (the “SEC”) on
July 13, 2018, 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. These risks and factors
include, by way of example and without limitation:
●
our ability to
successfully commercialize our equipment and shrimp farming
operations to produce a market-ready product in a timely manner and
in enough quantity;
●
absence of
contracts with customers or suppliers;
●
our ability to
maintain and develop relationships with customers and
suppliers;
●
our ability to
successfully integrate acquired businesses or new
brands;
●
the impact of
competitive products and pricing;
●
supply constraints
or difficulties;
●
the retention and
availability of key personnel;
●
general economic
and business conditions;
●
substantial doubt
about our ability to continue as a going concern;
●
our need to raise
additional funds in the future;
●
our ability to
successfully recruit and retain qualified personnel in order to
continue our operations;
●
our ability to
successfully implement our business plan;
●
our ability to
successfully acquire, develop or commercialize new products and
equipment;
●
the commercial
success of our products;
●
intellectual
property claims brought by third parties; and
●
the impact of any
industry regulation.
Although 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.
Readers are urged to carefully review and consider the various
disclosures made by us in this report and in our other reports
filed with the SEC. 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.
As used
in this Quarterly Report on Form 10-Q and unless otherwise
indicated, the terms “Company,” “we,”
“us,” and “our” refer to NaturalShrimp
Incorporated and its wholly-owned subsidiaries: NaturalShrimp
Corporation, NaturalShrimp Global, Inc. and Natural Aquatic
Systems, Inc. Unless otherwise specified, all dollar amounts are
expressed in United States dollars.
Corporate History
We were
incorporated in the State of Nevada on July 3, 2008 under the name
“Multiplayer Online Dragon, Inc.” Effective November 5,
2010, we effected an 8 for 1 forward stock split, increasing the
issued and outstanding shares of our common stock from 12,000,000
shares to 96,000,000 shares. On October 29, 2014, we effected a 1
for 10 reverse stock split, decreasing the issued and outstanding
shares of our common stock from 97,000,000 to
9,700,000.
On
November 26, 2014, we entered into an Asset Purchase Agreement (the
“Agreement”) with NaturalShrimp Holdings, Inc. a
Delaware corporation (“NSH”), pursuant to which we
agreed to acquire substantially all of the assets of NSH which
assets consisted primarily of all of the issued and outstanding
shares of capital stock of NaturalShrimp Corporation, a Delaware
corporation, (“NSC”) and NaturalShrimp Global, Inc., a
Delaware corporation, (“NS Global”) and certain real
property located outside of San Antonio, Texas (the
“Assets”).
On
January 30, 2015, we consummated the acquisition of the Assets
pursuant to the Agreement. In accordance with the terms of the
Agreement, we issued 75,520,240 shares of our common stock to NSH
as consideration for the Assets. As a result of the transaction,
NSH acquired 88.62% of our issued and outstanding shares of common
stock; NSC and NS Global became our wholly-owned subsidiaries, and
we changed our principal business to a global shrimp farming
company.
In
connection with our receipt of approval from the Financial Industry
Regulatory Authority (“FINRA”), effective March 3,
2015, we amended our Articles of Incorporation to change our name
to “NaturalShrimp Incorporated.”
Business Overview
We are
a biotechnology company and have developed a proprietary technology
that allows us to grow 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. Our system uses technology which
allows us to produce a naturally-grown shrimp “crop”
weekly, and accomplishes this without the use of antibiotics or
toxic chemicals. We have developed several proprietary technology
assets, including a knowledge base that allows us to produce
commercial quantities of shrimp in a closed system with a computer
monitoring system that automates, monitors and maintains proper
levels of oxygen, salinity and temperature for optimal shrimp
production. Our initial production facility is located outside of
San Antonio, Texas.
NS
Global, one of our wholly-owned subsidiaries, owns less than 1% of
NaturalShrimp International A.S. in Europe. Our European-based
partner, NaturalShrimp International A.S., Oslo, Norway, is
responsible for the construction cost of its facility and initial
operating capital.
The
first facility built in Spain for NaturalShrimp International A.S.
is GambaNatural de España, S.L. The land for the first
facility was purchased in Medina del Campo, Spain, and construction
of the 75,000 sq. ft. facility was completed in 2016. Medina del
Campo is approximately seventy-five miles northwest of Madrid,
Spain.
On
October 16, 2015, we formed Natural Aquatic Systems, Inc., at Texas
corporation, (“NAS”). The purpose of the NAS is to
formalize the business relationship between our Company and F&T
Water Solutions LLC for the joint development of certain water
technologies. The technologies shall include, without limitation,
any and all inventions, patents, intellectual property and know-how
dealing with enclosed aquatic production systems worldwide. This
includes construction, operation, and management of enclosed
aquatic production, other than shrimp, facilities throughout the
world, co-developed by both parties at our facility located outside
of La Coste, Texas.
The
Company has three wholly-owned subsidiaries, including NSC, NS
Global and NAS.
Evolution of Technology and Revenue Expectations
Historically,
efforts to raise shrimp in a high-density, closed system at the
commercial level have been met with either modest success or
outright failure through “BioFloc Technology.”
Infectious agents such as parasites, bacteria and viruses are the
most damaging and most difficult to control. Bacterial infection
can in some cases be combated through the use of antibiotics
(although not always), and in general, the use of antibiotics is
considered undesirable and counter to “green”
cultivation practices. Viruses can be even worse, in that they are
immune to antibiotics. Once introduced to a shrimp population,
viruses can wipe out entire farms and shrimp populations, even with
intense probiotic applications.
Our
primary solution against infectious agents is our “Vibrio
Suppression Technology.” We believe this system creates
higher sustainable densities, consistent production, improved
growth and survival rates and improved food conversion without the
use of antibiotics, probiotics or unhealthy anti-microbial
chemicals. Vibrio Suppression Technology helps to exclude and
suppress harmful organisms that usually destroy
“BioFloc” and other enclosed technologies.
In
2001, we began research and development of a high density, natural
aquaculture system that is not dependent on ocean water to provide
quality, fresh shrimp every week, fifty-two weeks a year. The
initial NaturalShrimp system was successful, but the Company
determined that it would not be economically feasible due to high
operating costs. Over the next several years, using the knowledge
we gained from developing the first system, we developed a shrimp
production system that eliminated the high costs associated with
the previous system. We have continued to refine this technology,
eliminating bacteria and other problems that affect enclosed
systems, and now have a successful shrimp growing process. We have
produced thousands of pounds of shrimp over the last few years in
order to develop a design that will consistently produce quality
shrimp that grow to a large size at a specific rate of growth. This
included experimenting with various types of natural live and
synthesized feed supplies before selecting the most appropriate
nutritious and reliable combination. It also included utilizing
monitoring and control automation equipment to minimize labor costs
and to provide the necessary oversight for proper regulation of the
shrimp environment. However, there were further enhancements needed
to our process and technology in order to begin production of
shrimp on a commercially viable scale and to generate
revenues.
Our
current system consists of a reception tank where the shrimp are
acclimated, then moved to a larger grow-out tank for the rest of
the twenty-four week cycle. During 2016, we engaged in additional
engineering projects with third parties to further enhance our
indoor production capabilities. For example, through our
relationship with Trane, Inc., a division of Ingersoll-Rand Plc
(“Trane”), Trane has provided a detailed audit to use
data to build and verify the capabilities of the initial Phase 1
prototype of a Trane-proposed three tank system at our La Coste,
Texas facility. The Company contracted F&T Water Solutions and
RGA Labs, Inc. (“RGA Labs”) to complete final
engineering and building of the initial patent-pending modified
Electrocoagulation system for the grow-out, harvesting and
processing of fully mature, antibiotic-free Pacific White Leg
shrimp. We believe that the design will present a viable pathway to
begin generating revenue and producing shrimp on a commercially
viable scale. The design is completed and was installed in early
June 2018 by RGA Labs, and final financing for the system is
expected to be provided by institutional investors. The first post
larvae (PL) arrived from the hatchery at the end of June 2018, and
the Company expects it will take approximately six to nine months
to begin producing and shipping shrimp.
Results of Operations
Comparison of the Three Months Ended September 30, 2018 to the
Three Months Ended September 30, 2017
Revenue
We have
not earned any significant revenues since our inception and we do
not anticipate earning revenues in the near future.
Expenses
Our
expenses for the three months ended September 30, 2018 are
summarized as follows, in comparison to our expenses for the three
months ended September 30, 2017:
|
Three
Months Ended September 30,
|
|
|
|
Salaries and
related expenses
|
$101,223
|
$77,095
|
Rent
|
2,749
|
3,290
|
Professional
fees
|
63,939
|
84,595
|
Other general and
administrative expenses
|
39,031
|
73,866
|
Facility
operations
|
22,978
|
8,117
|
Depreciation
|
17,719
|
17,719
|
Total
|
$247,639
|
$264,682
|
Operating expenses
for the three months ended September 30, 2018 were $247,639,
representing a decrease of 6% compared to operating expenses of
$264,682 for the same period in 2017. The slight decrease in
expenses is the result of a decrease in general and administrative
costs, offset by an increase in salaries and facility operations,
as the Company is progressing with their testing and planning to
begin commercial operations.
Comparison of the Six Months Ended September 30, 2018 to the Six
Months Ended September 30, 2017
Revenue
We have
not earned any significant revenues since our inception and we do
not anticipate earning revenues in the near future.
Expenses
Our
expenses for the six months ended September 30, 2018 are summarized
as follows, in comparison to our expenses for the six months ended
September 30, 2017:
|
Six
Months Ended September 30,
|
|
|
|
Salaries and
related expenses
|
$205,165
|
$154,495
|
Rent
|
6,030
|
4,790
|
Professional
fees
|
122,943
|
117,895
|
Other general and
administrative expenses
|
95,830
|
338,101
|
Facility
operations
|
43,963
|
15,406
|
Depreciation
|
35,445
|
35,444
|
Total
|
$509,376
|
$666,131
|
Operating expenses
for the six months ended September 30, 2018 were $509,376,
representing a decrease of 24% compared to operating expenses of
$666,131 for the same period in 2017. The primary reason for the
change is that in the six months ended September 30, 2017 there was
$220,000 amortization of the remaining prepaid expenses arising
from shares issued in January 2017 to a consultant for services to
be provided over six months. This decrease in expenses is offset by
an increase in salaries and facility operations, as the Company is
progressing with their testing and planning to begin commercial
operations.
Liquidity, Financial Condition and Capital Resources
As of
September 30, 2018, we had cash on hand of approximately $5,000 and
a working capital deficiency of approximately
$6,221,000.
as compared to cash on hand of $24,280 and a working capital
deficiency of approximately $6,764,000 as of March 31, 2018. The
decrease in working capital deficiency for the six months ended
September 30, 2018 is mainly due to an approximate $650,000
increase in current liabilities reflecting the reclassification to
current liabilities of certain lines of credit based on their
maturity dates and an increase in accounts payable and accrued
interest of approximately $100,000, offset by a decrease in the
convertible debentures due to their settlement through conversions
into common stock, and a decrease in the fair value of the
derivative liability arising from the convertible debentures. in
the warrant liability
Working Capital Deficiency
Our
working capital deficiency as of September 30, 2018, in comparison
to our working capital deficiency as of March 31, 2018, can be
summarized as follows:
|
|
|
|
|
|
Current
assets
|
$223,599
|
$260,179
|
Current
liabilities
|
6,445,066
|
7,024,615
|
Working capital
deficiency
|
$6,221,467
|
$6,764,436
|
The
decrease in current assets is mainly due to the funding of two Back
end notes receivable in the amount of $112,000, offset by the
addition of a new Back end note receivable of $90,000. The total
current liabilities have decreased approximately $580,000, one
reason for which is due to an approximate $650,000 increase in
current liabilities reflecting the reclassification to current
liabilities of certain lines of credit based on their maturity
dates. Additionally, there are small increases in both accounts
payable and accrued expenses balances. These increases to the
current liabilities are balanced out by decreases as a result of
new convertible debentures entered into during the current period
of $642,000, reduced by a redemption and cancellation of
convertible debentures of $138,000, offset by conversions of the
convertible debentures and related accrued interest of
approximately $597,000. In relation to the reductions in the
convertible debentures, $1,740,000 of the derivative liability was
reclassed to equity which along with the reduced fair value of the
remaining derivative liability of $1,328,000, offset by an increase
of $1,724,000 of additions to the derivative liability upon
issuance of the new convertible debentures, resulted in a total
decrease in the derivative liability of $1,345,000. Also, the
warrant liability decreased based on warrant exercises, offset by
an increase in fair value of $47,000 when remeasured at period
end.
Cash Flows
Our
cash flows for the six months ended September 30, 2018, in
comparison to our cash flows for the six months ended September 30,
2017, can be summarized as follows:
|
Six
Months Ended September 30,
|
|
|
|
Net cash used in
operating activities
|
$(402,798)
|
$(436,841)
|
Net cash used in
investing activities
|
(81,777)
|
-
|
Net cash provided
by financing activities
|
465,170
|
410,927
|
Decrease in
cash
|
$(19,405)
|
$(25,914)
|
The
decrease in net cash used in operating activities in the six months
ended September 30, 2018, compared to the same period in 2017,
mainly relates to an increase in the non-cash charges of the
amortization of the debt discount and the financing costs related
to the issuance of new convertible debentures, offset by the
difference in the changes in fair value of the derivative and
warrant liabilities between the two periods, as well increases in
accounts payable and accrued expenses during 2018 as compared to
2017, and the impact of the decrease in prepaid assets occurring in
2017. The net cash used in investing activities in the six months
ended September 30, 2018, related mainly to costs paid on
construction in process on the new facility. The net cash provided
by financing activities increased between periods, as the Company
received proceeds of $112,000 from the funding of Back end notes
receivable in the six month period in 2018, while the Company made
approximately $91,000 of payments on debt with related parties in
the six months period in 2017. The cash provided by financing
activities during both the six months ended September 30, 2018 and
2017 arising from proceeds on convertible debentures and the sale
of common stock of the Company, offset by payments on outstanding
convertible debentures, was fairly consistent between the
periods.
Our
cash position was approximately $5,000 as of September 30, 2018.
Management believes that our cash on hand and working capital are
not sufficient to meet our current anticipated cash requirements
through fiscal 2019, as described in further detail under the
section titled “Going
Concern” below.
Recent Financing Arrangements and Developments During the
Period
Lines of Credit
On
November 3, 2015, the Company entered into a short-term note
agreement with Community National Bank for a total value of
$50,000. On July 18, 2018 the outstanding principal balance of
$25,298 was exchanged for a 8% promissory note with a maturity date
of July 18, 2021. The balance of the note agreement at both
September 30, 2018 and March 31, 2018 was $25,298.
The
Company also has a working capital line of credit with Extraco
Bank. On April 30, 2018, the Company renewed the line of credit for
$475,000. The line of credit bears an interest rate of 5.0% that is
compounded monthly on unpaid balances and is payable monthly. The
line of credit matures on April 30, 2019, and is secured by
certificates of deposit and letters of credit owned by directors
and shareholders of the Company. The balance of the line of credit
is $472,675 at both September 30, 2018 and March 31,
2018.
The
Company also has additional lines of credit with Extraco Bank for
$100,000 and $200,000, which were renewed on January 19, 2018 and
April 30, 2018, respectively, with maturity dates of January 19,
2019 and April 30, 2019, respectively. The lines of credit bear an
interest rate of 4.5% (increased to 6.5% and 5%, respectively, upon
renewal in 2017) that is compounded monthly on unpaid balances and
is payable monthly. They are secured by certificates of deposit and
letters of credit owned by directors and shareholders of the
Company. The balance of the lines of credit was $276,958 at both
September 30, 2018 and March 31, 2018.
The
Company also has a working capital line of credit with Capital One
Bank for $50,000. The line of credit bears an interest rate of
prime plus 25.9 basis points, which totaled 30.9% as of September
30, 2018. The line of credit is unsecured. The balance of the line
of credit was $9,580 at both September 30, 2018 and March 31,
2018.
The
Company also has a working capital line of credit with Chase Bank
for $25,000. The line of credit bears an interest rate of prime
plus 10 basis points, which totaled 15.00% as of September 30,
2018. The line of credit is secured by assets of the
Company’s subsidiaries. The balance of the line of credit is
$11,197 at both September 30, 2018 and March 31, 2018.
Convertible Debentures
On July
31, 2017, the Company entered into a 5% Securities Purchase
Agreement with an accredited investor. The agreement calls for the
purchase of up to $135,000 in convertible debentures, due 12 months
from issuance, with an original issue discount of $13,500. The
first convertible debenture was issued in the principal amount of
$45,000 for a purchase price of $40,500 (an original issue discount
of $4,500), with additional closings to occur at the sole
discretion of the holder. The convertible debentures are
convertible into shares of the Company’s common stock at a
conversion price of sixty percent (60%) of the lowest trading price
over the 25 trading days preceding the date of conversion, subject
to adjustment. With each tranche under the July 31, 2017
convertible debentures, the Company shall issue a warrant to
purchase an amount of shares of its common stock equal to the face
value of each respective tranche divided by $0.60 as a commitment
fee. The Company issued a warrant to purchase 75,000 shares of the
Company’s common stock with the first closing, with an
exercise price of $0.60. The warrant has an anti-dilution provision
for future issuances, whereby the exercise price would reset. The
exercise price was adjusted to $0.15, and the number of warrants
issued to 300,000, upon a warrant issuance related to a new
convertible debenture on September 11, 2017. The warrants exercise
price was subsequently reset to 50% of the market price during the
third quarter of fiscal 2018, and the warrants issued increased
accordingly. On October 2, 2017, the Company entered into a second
closing of the July 31, 2017 debenture, in the principal amount of
$22,500 for a purchase price of $20,250, with $1,500 deducted for
legal fees, resulting in net cash proceeds of $18,750. On February
5, 2018, the Company entered into an amendment to the July 31, 2017
debenture, whereby in exchange for a payment of $6,500, except for
a conversion of up to 125,000 shares of the Company’s common
shares, the noteholder shall only be entitled to effectuate a
conversion under the note on or after March 2, 2018. On February
20, 2018, the holder converted $4,431 of the January debentures
into 125,000 common shares of the Company. During March, 2018, the
holder converted an additional $17,113 of the July debentures into
630,000 common shares of the Company. During April 2018, in three
separate conversions, the remainder of the first closing was fully
converted into 1,225,627 common shares of the Company. During May
and June, 2018, in two separate conversions, the remainder of the
second closing was fully converted into 2,810,725 common shares of
the Company.
On
August 28, 2017, the Company entered into a 12% convertible
promissory note with an accredited investor in the principal amount
of $110,000, with an original issue discount of $10,000, which
matured on February 28, 2018. The note is convertible into shares
of the Company’s common stock at a variable conversion rate
equal to the lesser of sixty percent (60%) of the lowest trading
price over the 20 trading days prior to the issuance of the note or
sixty percent (60%) of the lowest trading price over the 20 trading
days prior to conversion, subject to adjustment. In connection with
the note, the Company issued 50,000 warrants, exercisable at $0.20,
with a five-year term. The exercise price is adjustable upon
certain events, as set forth in the agreement, including for future
dilutive issuance. The exercise price was adjusted to $0.15 and the
warrants issued increased to 66,667, upon a warrant issuance
related to a new convertible debenture on September 11, 2017. The
warrants exercise price was subsequently reset to 50% of the market
price during the third quarter of fiscal 2018, and the warrants
issued increased accordingly. Additionally, in connection with the
note, the Company also issued 343,750 shares of common stock of the
Company as a commitment fee. The commitment shares fair value was
calculated as $58,438, based on the market value of the common
shares at the closing date of $0.17, and was recognized as part of
the debt discount. The shares are to be returned to the Treasury of
the Company in the event the debenture is fully repaid prior to the
date which is 180 days following the issue date. The note was sold
to the holder of the January 29, 2018 note (below) on February 8,
2018, with an amendment entered into to extend the note until March
5, 2018. On February 22, 2018, in connection with the sale of the
note to the January 29, 2019 note holder, 171,965 of the shares
were returned to the Company and cancelled. The remaining shares
are not required to be returned to the Company, as the note was not
redeemed prior to the date 180 days following the issue date. In
exchange for a cash payment of $5,000 and the issuance of 50,000
shares of common stock, on March 5, 2018, the holder agreed to not
convert any of the outstanding debt into common stock of the
Company until April 8, 2018. The new holder issued a waiver as to
the maturity date of the note and a technical default provision.
During April through June, 2018, in a number of separate
conversions, the August debenture was fully converted into
8,332,582 common shares of the Company.
On
October 31, 2017, there was a second closing to the August
debenture, in the principal amount of $66,000, maturing on April
30, 2018. The second closing has the same conversion terms as the
first closing, however there were no additional warrants issued
with the second closing. Additionally, in connection with the
second closing, the Company issued 332,500 shares of common stock
of the Company as a commitment fee. The commitment shares fair
value was calculated as $35,877, based on the market value of the
common shares at the closing date of $0.11, and was recognized as
part of the debt discount. The shares are to be returned to the
Treasury of the Company in the event the debenture is fully repaid
prior to the date which is 180 days following the issue date.
Subsequent to year end the note holders issued a waiver as to the
maturity date of the two notes and a technical default provision.
The notes have subsequently been fully converted. During May 2018,
the second closing was fully converted into 5,072,216 common shares
of the Company.
On
September 11, 2017, the Company entered into a 12% convertible
promissory note with an accredited investor in the principal amount
of $146,000, with an original issue discount of $13,500, which
matured on June 11, 2018. The note is convertible into shares of
the Company’s common stock at a variable conversion rate
equal to the lesser of the lowest trading price over the 25 trading
days prior to the issuance of the note or fifty percent (50%) of
the lowest trading price over the 25 trading days prior to
conversion, subject to adjustment. In connection with the note, the
Company issued 243,333 warrants, exercisable at $0.15, with a
five-year term. The exercise price is adjustable upon certain
events, as set forth in the agreement, including for future
dilutive issuance. The warrants exercise price was subsequently
reset to 50% of the market price during the third quarter of fiscal
2018, and the warrants issued increased accordingly. During April
and June, 2018, in three separate conversions, $85,000 of the note
was converted into 9,200,600 common shares of the Company. During
July and September, 2018, in two separate conversions, an
additional $20,654 of principal and $3,700 accrued interest of the
note was converted into 5,436,049 common shares of the Company. The
remainder of the principal, $40,328, is in default as of September
30, 2018, although the Company has not received a written notice of
default from the lender.
On
September 12, 2017, the Company entered into a 12% convertible
promissory note with an accredited investor in the principal amount
of $96,500 with an original issue discount of $4,500, which had an
original maturity date of June 12, 2018. The note is able to be
prepaid prior to the maturity date, at a cash redemption premium,
at various stages as set forth in the agreement. The note is
convertible commencing 180 days after issuance date (or upon an
event of default), or March 11, 2018, at a variable conversion rate
of sixty percent (60%) of the market price, defined as the lowest
trading price during the 20 trading days prior to conversion,
subject to adjustment. On March 20, 2018, the holder converted
$32,500 of the September 12, 2017 debentures into 1,031,746 common
shares of the Company. During April 2018, in two separate
conversions, the debenture was fully converted into 2,611,164
common shares of the Company.
On
September 28, 2017, the Company entered into a Securities Purchase
Agreement with an accredited investor, pursuant to which the
Company agreed to sell a 12% Convertible Note in the principal
amount of $55,000 with a maturity date of September 28, 2018, for a
purchase price of $51,700, and $2,200 deducted for legal fees,
resulting in net cash proceeds of $49,500. The effective closing
date of the Securities Purchase Agreement and Convertible Note was
October 17, 2017. The note is convertible into shares of the
Company’s common stock at the holders’ option, at any
time, at a conversion price equal to the lower of (i) the closing
sale price of the Company’s common stock on the closing date,
or (ii) sixty percent (60%) of either the lowest sale price for the
Company’s common stock during the 20 consecutive trading days
including and immediately preceding the closing date, or the
closing bid price, whichever is lower, provided that, if the price
of the Company’s common stock loses a bid, then the
conversion price may be reduced, at the holder’s absolute
discretion, to a fixed conversion price of $0.00001. If at any time
the adjusted conversion price for any conversion would be less than
par value of the Company’s common stock, then the conversion
price shall equal such par value for any such conversion and the
conversion amount for such conversion shall be increased to include
additional principal to the extent necessary to cause the number of
shares issuable upon conversion equal the same number of shares as
would have been issued had the Conversion Price not been subject to
the minimum par value price. During April and May, 2018, in a
number of separate conversions, approximately $43,000 of the
debenture plus accrued interest was converted into 3,800,000 common
shares of the Company. During the second quarter of fiscal 2019, in
a number of separate conversions, the debenture plus accrued
interest was fully converted into 4,517,493 common shares of the
Company.
On
November 14, 2017, the Company entered into two 8% convertible
redeemable notes with an accredited investor, in the aggregate
principal amount of $112,000, convertible into shares of common
stock of the Company, with maturity dates of November 14, 2018.
Each note was in the principal amount of $56,000, with an original
issue discount of $2,800, resulting in a purchase price for each
note of $53,200. The first of the two notes was paid for by the
buyer in cash upon closing, with the second note initially paid for
by the issuance of an offsetting $53,200 secured promissory note
issued to the Company by the buyer (“Buyer Note”). The
Buyer Note is due on July 14, 2018. The notes are convertible into
shares of the Company’s common stock at a conversion rate of
fifty-seven percent (57%) of the lowest of trading price over last
20 trading days prior to conversion, or the lowest closing bid
price over the last 20 trading days prior to conversion, with the
discount increased (i.e., the conversion rate decreased) to
forty-seven percent (47%) in the event of a DTC chill, with the
second note not being convertible until the buyer has settled the
Buyer Note in cash payment. During the first six months the
convertible redeemable notes are in effect, the Company may redeem
the notes at amounts ranging from 120% to 140% of the principal and
accrued interest balance, based on the redemption date’s
passage of time ranging from 90 days to 180 days from the date of
issuance of each note. During May and June, 2018, in three separate
conversions, the debenture was fully converted into 4,834,790
common shares of the Company.
On
December 20, 2017, the Company entered into two 8% convertible
redeemable notes with an accredited investor, in the aggregate
principal amount of $240,000, convertible into shares of common
stock of the Company, with the same buyers as the November 14, 2017
debenture. Both notes are due on December 20, 2018. If the note is
not paid by its maturity date the outstanding principal due on the
note increases by 10%. The note also contains a cross default
provision to all other outstanding notes. The first note was issued
in the principal amount of $160,000, with a $4,000 original issue
discount, resulting in a purchase price of $156,000. The second
note was issued in the principal amount of $80,000, with an
original issue discount of $2,000, for a purchase price of $78,000.
The first of the two notes was paid for by the buyer in cash upon
closing, with the second note initially paid for by the issuance of
an offsetting $78,000 secured promissory note issued to the Company
by the buyer (“Buyer Note”). The Buyer Note was due on
August 20, 2018, and the Company received the funding on July 11,
2018, for cash proceeds of $74,000. The notes are convertible into
shares of the Company’s common stock at a conversion rate of
sixty percent (60%) of the lower of: (i) lowest trading price or
(ii) lowest closing bid price of the Company’s common stock
over the last 20 trading days prior to conversion, with the
discount increased (i.e., the conversion rate decreased) to fifty
percent (50%) in the event of a DTC chill, with the second note not
being convertible until the buyer has settled the Buyer Note in
cash payment. During the first six months the convertible
redeemable notes are in effect, the Company may redeem the notes at
amounts ranging from 120% to 136% of the principal and accrued
interest balance, based on the redemption date’s passage of
time ranging from 90 days to 180 days from the date of issuance of
each note. On August 7, 2018, the holder converted $25,000 of the
December 20, 2017 debentures into 4,363,013 common shares of the
Company.
On
January 29, 2018, the Company entered into three (3) 12%
convertible redeemable promissory notes with an accredited investor
in the aggregate principal amount of $120,000, with maturity dates
of January 29, 2019. The notes are convertible into shares of the
Company’s common stock at a conversion rate of sixty percent
(60%) of the lowest closing bid price over the last 20 trading days
prior to conversion, with the discount increased (i.e., the
conversion rate decreased) to fifty percent (50%) in the event of a
DTC chill. The interest rate upon an event of default, as defined
in the notes including a cross default to all other outstanding
notes, is 24% per annum. If the note is not paid by its maturity
date the outstanding principal due on the note increases by 10%.
Each note was issued in the principal amount of $40,000, with
$2,000 deducted for legal fees, for net proceeds of $38,000. The
first note was paid for by the buyer in cash upon closing, with the
second and third notes initially paid by the issuance of offsetting
$40,000 secured promissory notes issued to the Company by the buyer
(the “Buyer Notes”). The Buyer Notes are due on
September 29, 2018. The first of the Buyers Notes was funded on
July 26, 2018. During the first 180 days the notes are in effect,
the Company may redeem the note at amounts ranging from 115% to
140% of the principal and accrued interest balance, based on the
redemption date’s passage of time ranging from 30 days to 180
days from the date of issuance of the note. Upon any sale event, as
defined in the note, at the holder’s request, the Company
will redeem the note for 150% of the principal and accrued
interest. During the second fiscal quarter of 2019, in three
separate conversions, the first debenture was fully converted into
12,607,777 common shares of the Company.
On
January 30, 2018, Company entered into a 12% convertible redeemable
promissory note with an accredited investor for the principal
amount of $80,000, which matures on January 30, 2019. The note is
convertible into shares of the Company’s common stock at a
conversion rate of sixty-one percent (61%) of the lowest closing
bid price over the last 15 trading days prior to conversion. The
interest rate upon an event of default, as defined in the note, is
22% per annum, and the note becomes immediately due and payable in
an amount equal to 150% of the principal and interest due on the
note upon an event of default. If the Company fails to deliver
conversion shares within two (2) days following a conversion
request, the note will become immediately due and payable at an
amount of twice the default amount. During the first 180 days the
note is in effect, the Company may redeem the note at amounts
ranging from 115% to 140% of the principal and accrued interest
balance, based on the redemption date’s passage of time
ranging from 30 days to 180 days from the date of issuance of the
note. The Company redeemed the note on July 27, 2018, for
approximately $123,000.
On
March 9, 2018, the Company entered into a 12% convertible note for
the principal amount of $43,000, with the holder of the January 30,
2018 debenture, convertible into shares of common stock of the
Company, which matures on March 9, 2019. Upon an event of default,
as defined in the note, the note becomes immediately due and
payable, in an amount equal to 150% of all principal and accrued
interest due on the note, with default interest of 22% per annum
(the “Default Amount”). If the Company fails to deliver
conversion shares within 2 days of a conversion request, the note
becomes immediately due and payable at an amount of twice the
Default Amount. The note is convertible on the date beginning 180
days after issuance of the note, at 61% of the lowest closing bid
price for the last 15 days. Per the agreement, the Company is
required at all times to have authorized and reserved six times the
number of shares that is actually issuable upon full conversion of
the note. Failure to maintain the reserved number of shares is
considered an event of default. During the second fiscal quarter of
2019, in two separate conversions, the holder converted $29,464 of
principal into 4,500,000 common shares of the Company.
On
March 20, 2018, the Company entered into a convertible note for the
principal amount of $84,000, convertible into shares of common
stock of the Company, which matures on December 20, 2018. The note
bears interest at 12% for the first 180 days, which increases to
18% after 180 days, and 24% upon an event of default. On September
20, 2018 the outstanding principal and $5,040 in accrued interest
of the note was purchased from the noteholder by a third party, for
$126,882. The additional $37,842 represents the redemption amount
owing to the original noteholder, and increases the principal
amount due to the new noteholder, and was recognized as financing
cost. Upon an event of default, as defined in the note, the note
becomes immediately due and payable, in an amount equal to 150% of
all principal and accrued interest due on the note. The note is
convertible on the date beginning 180 days after issuance of the
note, at the lower of 60% of the lowest trading price for the last
20 days prior to the issuance date of this note, or 60% of the
lowest trading price for the last 20 days prior to conversion. In
the event of a "DTC chill", the conversion rate is adjusted to 40%
of the market price. Per the agreement, the Company is required at
all times to have authorized and reserved ten times the number of
shares that is actually issuable upon full conversion of the note.
Additionally, the Company also issued 255,675 shares of common
stock of the Company as a commitment fee. The commitment shares
fair value was calculated as $28,124, based on the market value of
the common shares at the closing date of $0.11, and was recognized
as part of the debt discount.
On
March 21, 2018, the Company entered into a convertible note for the
principal amount of $39,199, which includes an OID of $4,199,
convertible into shares of common stock of the Company, which
matures on December 20, 2018. The note bears interest at 12% for
the first 180 days, which increases to 18% after 180 days, and 24%
upon an event of default. Upon an event of default, as defined in
the note, the note becomes immediately due and payable, in an
amount equal to 150% of all principal and accrued interest due on
the note. The note is convertible on the date beginning 180 days
after issuance of the note, at the lowest of 60% of the lowest
trading price for the last 20 days prior to the issuance date of
this note, or 60% of the lowest trading price for the last 20 days
prior to conversion. The discount is increased upon certain events
set forth in the agreement regarding the obtainability of the
shares, such as a DTC "chill". Additionally, if the Company ceases
to be a reporting company, or after 181 days the note cannot be
converted into freely traded shares, the discount is increased an
additional 15%. Per the agreement, the Company is required at all
times to have authorized and reserved ten times the number of
shares that is actually issuable upon full conversion of the note.
Additionally, the Company also issued 119,300 shares of common
stock of the Company as a commitment fee. The commitment shares
fair value was calculated as $13,123, based on the market value of
the common shares at the closing date of $0.11, and was recognized
as part of the debt discount.
On
April 10, 2018, the Company entered into two 10% convertible notes
in the aggregate principal amount of $110,000, convertible into
shares of common stock of the Company, with maturity dates of April
10, 2019. The interest upon an event of default, as defined in the
note, is 24% per annum. Each note was in the face amount of
$55,000, with $2,750 for legal fees deducted upon funding. The
first of the notes was paid for by the buyer in cash upon closing,
with the other note ("Back-End note") initially paid for by the
issuance of an offsetting $55,000 secured promissory note issued to
the Company by the buyer (“Buyer Note”). The Buyer Note
is due on December 12, 2018. The interest rate increases to 24%
upon an event of default, as set forth in the agreement, including
a cross default to all other outstanding notes, and if the
debenture is not paid at maturity the principal due increases by
10%. If the Company loses its bid price the principal outstanding
on the debenture increases by 20%, and if the Company’s
common stock is delisted, the principal increases by 50%. An event
of default also occurs if the Company’s common stock has a
closing bid price of less than $0.03 per share for at least five
consecutive days, or the aggregate dollar trading volume of the
Company’s common stock is less than $20,000 in any five
consecutive days. The Company’s common stock closing bid
price fell below $0.03 on June 18, 2018 and continued for over five
consecutive days, and the Company is therefore in default on the
note. The Company The
Company has obtained a waiver from the holder on this
technical default. Due to the default the holder cancelled the
Back-End and Buyer notes as of September 30, 2018. The notes are
convertible at 57% of the lowest closing bid price for the last 20
days. The discount is increased an additional 10%, to 47%, upon a
DTC "chill". The Company has not maintained the required share
reservation under the terms of the note agreement. The Back-End
note is not convertible until the buyer has settled the Buyer Notes
in a cash payment. During the first 180 days the convertible
redeemable note is in effect, the Company may redeem the note at
amounts ranging from 130% to 145% of the principal and accrued
interest balance, based on the redemption date’s passage of
time ranging from 60 days to 180 days from the date of issuance of
the debenture.
On
April 27, 2018, the Company entered into a convertible note for the
principal amount of $53,000 for a purchase price of $50,000,
convertible into shares of common stock of the Company, which
matures on January 27, 2019. The note bears interest at 12% for the
first 180 days, which increases to 18% after 180 days, and 24%. The
interest rate increases to 24% upon an event of default, as set
forth in the agreement, including a cross default to all other
outstanding notes. Additionally, in the majority of events of
default, except for the non-payment of the note upon maturity, the
note becomes immediately due and payable at an amount at 150% of
the principal plus accrued interest due. The note is convertible on
the date beginning 180 days after issuance of the note, at the
lowest of 60% of the lowest trading price for the last 20 days
prior to the issuance date of this note, or 60% of the lowest
trading price for the last 20 days prior to conversion. The
discount rate is adjusted based on various situations regarding the
ability to deliver the common shares, such as in the event of a
"DTC chill" or the Company ceases to be a reporting company. Per
the agreement, the Company is required at all times to have
authorized and reserved ten times the number of shares that is
actually issuable upon full conversion of the note. The Company has
not maintained the required share reservation under the terms of
the note agreement. The Company believes it has sufficient
available shares of the Company’s common stock in the event
of conversion for these notes.
On June
5, 2018, the Company entered into a convertible note for the
principal amount of $125,000 for a purchase price of $118,800,
convertible on the date beginning 180 days after issuance of the
note, into shares of common stock of the Company, which matures on
June 5, 2019. The note bears interest at 12%, which increases to
18% upon an event of default, as defined in the agreement. The note
is convertible at 60% of the lowest trading price for the last 20
days prior to conversion, with the discount increased 5% in the
event the Company does not have sufficient shares authorized and
outstanding to issue the shares upon conversion request. The
conversion price is adjusted upon a future dilutive issuance, to
the lower of the conversion price or a 25% discount to the
aggregate per share common share price. Per the agreement, the
Company is required at all times to have authorized and reserved
four times the number of shares that is actually issuable upon full
conversion of the note. The Company has not maintained the required
share reservation under the terms of the note agreement. The
Company believes it has sufficient available shares of the
Company’s common stock in the event of conversion for these
notes. During the first 180 days the convertible redeemable note is
in effect, the Company may redeem the note at amounts ranging from
135% to 145% of the principal and accrued interest balance, based
on the redemption date’s passage of time ranging from 90 days
to 180 days from the date of issuance of the debenture. After 180
days, the note is redeemable, with the holders prior written
consent, at 150% of the principal and accrued interest
balance.
On July
27, 2018, the Company entered into two 10% convertible notes in the
aggregate principal amount of $186,000, convertible into shares of
common stock of the Company, with maturity dates of July 27, 2019.
The interest upon an event of default, as defined in the note, is
24% per annum. Each note was in the face amount of $93,000, with
$3,000 OID, for a purchase price of $90,000. The first of the notes
was paid for by the buyer in cash upon closing, with the other note
("Back-End note") initially paid for by the issuance of an
offsetting $93,000 secured promissory note issued to the Company by
the buyer (“Buyer Note”). The Buyer Note is due on
December 12, 2018. The interest rate increases to 24% upon an event
of default, as set forth in the agreement, including a cross
default to all other outstanding notes, and if the debenture is not
paid at maturity the principal due increases by 10%. If the Company
loses its bid price the principal outstanding on the debenture
increases by 20%, and if the Company’s common stock is
delisted, the principal increases by 50%. The notes are convertible
at 60% of the lowest closing bid price for the last 20 days. The
discount is increased an additional 10%, to 50%, upon a DTC
"chill". The Company has not maintained the required share
reservation under the terms of the note agreement. The Back-End
note is not convertible until the buyer has settled the Buyer Notes
in a cash payment. During the first 180 days the convertible
redeemable note is in effect, the Company may redeem the note at
amounts ranging from 120% to 136% of the principal and accrued
interest balance, based on the redemption date’s passage of
time ranging from 90 days to 180 days from the date of issuance of
the debenture.
On
August 24, 2018, the Company entered into a 10% convertible note in
the principal amount of $55,000, convertible into shares of common
stock of the Company, which matures August 24, 2019. The interest
rate increases to 24% per annum upon an event of default, as set
forth in the agreement, including a cross default to all other
outstanding notes, and if the debenture is not paid at maturity the
principal due increases by 10%. If the Company loses its bid price
the principal outstanding on the debenture increases by 20%, and if
the Company’s common stock is delisted, the principal
increases by 50%. The notes are convertible at 57% of the lowest
closing bid price for the last 20 days. The discount is increased
an additional 10%, to 47%, upon a DTC "chill". During the first 180
days the convertible redeemable note is in effect, the Company may
redeem the note at amounts ranging from 130% to 145% of the
principal and accrued interest balance, based on the redemption
date’s passage of time ranging from 60 days to 180 days from
the date of issuance of the debenture.
On
September 14, 2018, the Company entered into a 12% convertible
promisory note for $112,500, with an OID of $10,250, which matures
on March 14, 2019. There is a right of prepayement in the first 180
days, but there is no right to repay after 180 days. Per the
agreement, the Company is required at all times to have authorized
and reserved three times the number of shares that is actually
issuable upon full conversion of the note. The Company has not
maintained the required share reservation under the terms of the
note agreement. The Company believes it has sufficient available
shares of the Company’s common stock in the event of
conversion for these notes. The interest rate increases to a
default rate of 24% for events as set forth in the agreement,
including if the market capitalizaiton is below $5 million, or
there are any dilutive issuances. There is also a cross default
provision to all other notes. In the event of default, the
outstanding principal balance increases to 150%, and if the Company
fails to maintain the required authorized share reserve, the
outstanding principal increases to 200%. Additionally, If the
Company enters into a 3(a)(9) or 3(a)(10) issuance of shares there
are liquidation damages of 25% of principal, not to be below
$15,000. The Company must also obtain the noteholder's written
consent before issuing any new debt. Additionally, if the note is
not repaid by the maturity date the principal balance increases by
$15,000. The market capitalization is below $5 million and
therefore the note was in default as of September 30, 2018. The
holder hs issued a waiver to the Company on this default provision.
The note is convertible at a variable conversion rate that is the
lesser of 60% of the lowest trading price for the last 20 days
prior to the issuance of the note or 60% of the lowest market price
over the 20 days prior to conversion. The conversion price shall be
adjusted upon subsequent sales of securities at a price lower than
the original conversion price. There are additional 10% adjustments
to the conversion price for events set forth in the agreement,
including if the conversion price is less than $0.01, if the
Company is not DTC eligible, the Company is no longer a reporting
company, or the note can not be converted into free trading shares
on or after nine months from issue date. Per the agreement, the
Company is required at all times to have authorized and reserved
three times the number of shares that is actually issuable upon
full conversion of the note. Additionally, in connection with the
debenture the Company also issued 3,000,000 shares of common stock
of the Company as a commitment fee. The fair value of the
commitment shares was calculated as $34,500, based on the market
value of the common shares at the closing date of $0.012, and was
recognized as part of the debt discount. The shares are to be
returned to the Treasury of the Company in the event the debenture
is fully repaid prior to the date which is 180 days following the
issue date, but are not required to be returned if there is an
event of default.
Certain
of the above notes which contain cross default provisions are in
technical default due to the September 11, 2017 note was not paid
in full by the maturity date.
Sale and Issuance of Common Stock
On
August 15, 2018, the Company authorized 5,000,000 of their Prefered
Stock to be designated as Series A Convertible Preferred Stock
(“Series A PS”), with a par value of $0.001. The Series
A PS shall have 60 to 1 voting rights such that each share shall
vote as to 60 shares of common stock. The Series A PS holders shall
not be entitled to receive dividends, if and when declared by the
Board. Upon the dissolution, liquidation or winding up of the
Company, the holders of Series A PS shall be entitled to receive
out of the assets of the Company the sum of $0.00l per share before
any payment or distribution shall be made on the common stock, or
any other class of capital stock of the Company ranking junior to
the Series A Preferred Stock. The Series A PS is convertible, after
two years from the date of issuance, with the consent of a majority
of the Series A PS holders, into the same number of common shares
of the Company as are outstanding at the time.
On
August 21, 2018, the NaturalShrimp Holdings,
Inc.(“NSH”) shareholders exchanged 75,000,000 of the
common shares of the Company which they held, into 5,000,000 newly
issued Series A PS. The common shares were returned to the treasury
and cancelled.
On
April 12, 2018, the Company sold 220,000 shares of its common stock
at $0.077 per share, for a total financing of $15,400.
Between
April 6, 2018 and September 30, 2018, the Company issued 63,841,481
shares of the Company’s common stock upon conversion of
approximately $597,000 of their outstanding convertible debt and
approximately $43,000 of accrued interest.
The
Company issued 6,719,925 shares of their common stock on July 17,
2018, upon cashless exercise of the warrants granted in connection
with the first closing of the July Debenture, and on August 28,
2018, 4,494,347 shares were issued upon cashless exercise of the
warrants granted in connection with the second closing. (Note
5).
Equity Financing Agreement
On
August 21, 2018, the Company entered into an Equity Financing
Agreement (“Equity Financing Agreement”) and
Registration Rights Agreement (“Registration Rights
Agreement”) with GHS Investments LLC, a Nevada limited
liability company (“GHS”). Under the terms of the
Equity Financing Agreement, GHS agreed to provide the Company with
up to $7,000,000 upon effectiveness of a registration statement on
Form S-1 (the “Registration Statement”) filed with the
U.S. Securities and Exchange Commission (the
“Commission”). The Registration Statement was filed,
and deemed effective on September 19, 2018.
Following effectiveness of the Registration
Statement, the Company has the discretion to deliver puts to GHS
and GHS will be obligated to purchase shares of the Company’s
common stock, par value $0.0001 per share (the “Common
Stock”) based on the investment amount specified in each put
notice. The maximum amount that the Company shall be entitled to
put to GHS in each put notice shall not exceed two hundred percent
(200%) of the average daily trading dollar volume of the
Company’s Common Stock during the ten (10) trading days
preceding the put, so long as such amount does not exceed $300,000.
Pursuant to the Equity Financing Agreement, GHS and its affiliates
will not be permitted to purchase and the Company may not put
shares of the Company’s Common Stock to GHS that would result
in GHS’s beneficial ownership equaling more than 9.99% of the
Company’s outstanding Common Stock. The price of each put
share shall be equal to eighty percent (80%) of the Market Price
(as defined in the Equity Financing Agreement). Puts may be
delivered by the Company to GHS until the earlier of thirty-six
(36) months after the effectiveness of the Registration Statement
or the date on which GHS has purchased an aggregate of $7,000,000
worth of Common Stock under the terms of the Equity Financing
Agreement. Additionally, in
accordance with the Equity Financing Agreement, the Company shall
issue GHS a promissory note in the principal amount of $15,000 to
offset transaction costs (the “Note”). The Note bears
interest at the rate of 8% per annum, is not convertible and is due
180 days from the issuance date of the Note.
The
Company issued their first put notices to GHS in October 2018 (Note
10).
Shareholder Notes Payable
On
April 20, 2017, the Company issued a Six Percent (6%) Unsecured
Convertible Note to Dragon Acquisitions LLC, an affiliate of the
Company (“Dragon Acquisitions”) in the principal amount
of $140,000. William Delgado, our Treasurer, Chief Financial
Officer, and director, is the managing member of Dragon
Acquisitions. The note accrues interest at the rate of six percent
(6%) per annum, and matures one (1) year from the date of issuance.
Upon an event of default, the default interest rate will be
increased to twenty-four percent (24%), and the total amount of
principal and accrued interest shall become immediately due and
payable at the holder’s discretion. The note is convertible
into shares of the Company’s common stock at a conversion
price of $0.30 per share, subject to adjustment. $52,400 of the
note was repaid during the year ended March 31, 2018.
Going Concern
The
unaudited consolidated financial statements contained in this
quarterly report on Form 10-Q have been prepared, assuming that the
Company will continue as a going concern. The Company has
accumulated losses through the period to September 30, 2018 of
approximately $35,371,000 as well as negative cash flows from
operating activities of approximately $403,000. During the six
months ended September 30, 2018, the Company received net cash
proceeds of approximately $466,000 from the issuance of new
convertible debentures, $112,000 from the payments on notes
receivable, and $15,400 from the sale of the Company’s common
stock. . The Company had approximately $597,000 of their
convertible debentures converted into 63,841,481 shares of their
common stock, reducing their current obligations. The Company also
entered into an Equity Financing Agreement whereby the Company has
the discretion to deliver puts to the investor for purchases of
shares of the Company’s common stock, with each put not to
exceed 200% of their average trading dollar volume for the previous
10 days, for up to $7,000,000 over the next 36 months. Subsequent
to September 30, 2018, the Company received $100,000 in net
proceeds from the issuance of a new convertible debenture.
Presently, the Company does not have sufficient cash resources to
meet its plans in the twelve months following September 30, 2018.
These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management is in the
process of evaluating various financing alternatives in order to
finance the continued build-out of our equipment and for general
and administrative expenses. These alternatives include raising
funds through public or private equity markets and either through
institutional or retail investors. Although there is no assurance
that the Company will be successful with our fund raising
initiatives, management believes that the Company will be able to
secure the necessary financing as a result of ongoing financing
discussions with third party investors and existing
shareholders.
The
consolidated financial statements do not include any adjustments
that may be necessary should the Company be unable to continue as a
going concern. The Company’s continuation as a going concern
is dependent on its ability to obtain additional financing as may
be required and ultimately to attain profitability. If the Company
raises additional funds through the issuance of equity, the
percentage ownership of current shareholders could be reduced, and
such securities might have rights, preferences or privileges senior
to the rights, preferences and privileges of the Company’s
common stock. Additional financing may not be available upon
acceptable terms, or at all. If adequate funds are not available or
are not available on acceptable terms, the Company may not be able
to take advantage of prospective business endeavors or
opportunities, which could significantly and materially restrict
its future plans for developing its business and achieving
commercial revenues. If the Company is unable to obtain the
necessary capital, the Company may have to cease
operations.
Future Financing
We will
require additional funds to implement our growth strategy for our
business. In addition, while we have received capital from various
private placements that have enabled us to fund our operations,
these funds have been largely used to develop our processes,
although additional funds are needed for other corporate
operational and working capital purposes. As previously noted, the
Company entered into an Equity Financing Agreement whereby the
Company will have access to up to $7,000,000 through the sale of
shares of the Company’s common stock to an investor, with
each sale not to exceed 200% of their average trading dollar volume
over the previous 10 days over the next 36 months. Subsequent to
September 30, 2018 we have raised approximately an additional
$100,000, net of OID, from the issuance of new convertible
debentures. However, not including funds needed for capital
expenditures or to pay down existing debt and trade payables, we
anticipate that we will need to raise an additional $950,000 to
cover all of our operational expenses over the next 12 months, not
including any capital expenditures needed as part of any commercial
scale-up of our equipment. These funds may be raised through equity
financing, debt financing, or other sources, which may result in
further dilution in the equity ownership of our shares. There can
be no assurance that additional financing will be available to us
when needed or, if available, that such financing can be obtained
on commercially reasonable terms. If we are not able to obtain the
additional necessary financing on a timely basis, or if we are
unable to generate significant revenues from operations, we will
not be able to meet our other obligations as they become due, and
we will be forced to scale down or perhaps even cease our
operations.
Off-Balance Sheet Arrangements
We have
no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital
resources that is material to stockholders.
Effects of Inflation
We do
not believe that inflation has had a material impact on our
business, revenues or operating results during the periods
presented.
Critical Accounting Policies and Estimates
Our
significant accounting policies are more fully described in the
notes to our financial statements included herein for the quarter
ended September 30, 2018 and in the notes to our consolidated
financial statements included in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2018.
Recently Adopted Accounting Pronouncements
Our
recently adopted accounting pronouncements are more fully described
in Note 2 to our financial statements included herein for the
quarter ended September 30, 2018.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
Applicable. As a smaller reporting company, we are not required to
provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We
carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer (who is our Principal Executive Officer) and our Chief
Financial Officer and Treasurer (who is our Principal Financial
Officer and Principal Accounting Officer), of the effectiveness of
the design of our disclosure controls and procedures (as defined by
Exchange Act Rules 13a-15(e) or 15d-15(e)) as of September 30, 2018
pursuant to Exchange Act Rule 13a-15. Based upon that evaluation,
our Principal Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures were not
effective as of September 30, 2018 in ensuring that information
required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the SEC’s rules
and forms. This conclusion is based on findings that constituted
material weaknesses. A material weakness is a deficiency, or a
combination of control deficiencies, in internal control over
financial reporting such that there is a reasonable possibility
that a material misstatement of the Company’s interim
financial statements will not be prevented or detected on a timely
basis.
Management’s Report on Internal Control Over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act. Under the
supervision and with the participation of our management, which
currently consists of our Chief Executive Officer and Treasurer, we
conducted an evaluation of the effectiveness of our internal
control over financial reporting based on criteria established in
the framework in Internal Control
– Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(“COSO” - 2013) and SEC guidance on conducting such
assessments. Our management concluded, as of September 30, 2018,
that our internal control over financial reporting was not
effective. Management realized there were deficiencies in the
design or operation of the Company’s internal control that
adversely affected the Company’s internal controls which
management considers to be material weaknesses.
In
performing the above-referenced assessment, management had
concluded that as of September 30, 2018, there were deficiencies in
the design or operation of our internal control that adversely
affected our internal controls, which management considers to be
material weaknesses, including those described below:
(i) Lack of Formal Policies and Procedures.
We utilize a third-party independent contractor for the preparation
of our financial statements. Although the financial statements and
footnotes are reviewed by our management, we do not have a formal
policy to review significant accounting transactions and the
accounting treatment of such transactions. The third-party
independent contractor is not involved in the day to day operations
of the Company and may not be provided information from management
on a timely basis to allow for adequate reporting/consideration of
certain transactions.
(ii) Audit
Committee and Financial Expert. We do not have a formal
audit committee with a financial expert, and thus we lack the board
oversight role within the financial reporting process.
(iii) Insufficient
Resources. We have insufficient quantity of dedicated
resources and experienced personnel involved in reviewing and
designing internal controls. As a result, a material misstatement
of the interim and annual financial statements could occur and not
be prevented or detected on a timely basis.
(iv) Entity
Level Risk Assessment. We did not perform an entity level
risk assessment to evaluate the implication of relevant risks on
financial reporting, including the impact of potential fraud
related risks and the risks related to non-routine transactions, if
any, on internal control over financial reporting. Lack of an
entity-level risk assessment constituted an internal control design
deficiency which resulted in more than a remote likelihood that a
material error would not have been prevented or detected and
constituted a material weakness.
(v) Lack of Personnel with GAAP Experience.
We lack personnel with formal training to properly analyze and
record complex transactions in accordance with U.S.
GAAP.
Our
management feels the weaknesses identified above have not had any
material effect on our financial results. However, we are currently
reviewing our disclosure controls and procedures related to these
material weaknesses and expect to implement changes in the near
term as resources permit, including identifying specific areas
within our governance, accounting and financial reporting processes
to add adequate resources to potentially mitigate these material
weaknesses.
Our
management will continue to monitor and evaluate the effectiveness
of our internal controls and procedures and our internal controls
over financial reporting on an ongoing basis and is committed to
taking further action and implementing additional enhancements or
improvements, as necessary and as funds allow.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and
presentation.
Changes in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting
during the quarter ended September 30, 2018 that have materially
affected, or are reasonably likely to materially affect our
internal control over financial reporting. We believe that a
control system, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the control
system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within any company have been detected.
PART II – OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
We know
of no material pending proceedings to which we are a party or of
which our properties are subject.
As a
smaller reporting company, we are not required to provide the
information required by this Item. We note, however, that an
investment in our common stock involves a number of very
significant risks. Investors should carefully consider the risk
factors included in the “Risk Factors” section of our
Annual Report on Form 10-K for our fiscal year ended March 31,
2018, as filed with SEC on July 13, 2018, in addition to other
information contained in such Annual Report and in this Quarterly
Report on Form 10-Q, in evaluating the Company and our business
before purchasing shares of our common stock. The Company’s
business, operating results and financial condition could be
adversely affected due to any of those risks.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
On July
27, 2018, the Company entered into two 10% convertible notes in the
aggregate principal amount of $186,000, convertible into shares of
common stock of the Company, with maturity dates of July 27, 2019.
The interest upon an event of default, as defined in the note, is
24% per annum. Each note was in the face amount of $93,000, with
$3,000 OID, for a purchase price of $90,000. The first of the notes
was paid for by the buyer in cash upon closing, with the other note
("Back-End note") initially paid for by the issuance of an
offsetting $93,000 secured promissory note issued to the Company by
the buyer (“Buyer Note”). The Buyer Note is due on
December 12, 2018. The interest rate increases to 24% upon an event
of default, as set forth in the agreement, including a cross
default to all other outstanding notes, and if the debenture is not
paid at maturity the principal due increases by 10%. If the Company
loses its bid price the principal outstanding on the debenture
increases by 20%, and if the Company’s common stock is
delisted, the principal increases by 50%. Per the agreement, the
Company is required at all times to have authorized and reserved
16,900,000 common shares of the Company. The Company has not
maintained the required share reservation under the terms of the
note agreement. The notes are convertible at 60% of the lowest
closing bid price for the last 20 days. The discount is increased
an additional 10%, to 50%, upon a DTC "chill". The Back-End note is
not convertible until the buyer has settled the Buyer Notes in a
cash payment. The conversion feature meets the definition of a
derivative and therefore requires bifurcation and will be accounted
for as a derivative liability.
On
August 24, 2018, the Company entered into a 10% convertible note in
the principal amount of $55,000, convertible into shares of common
stock of the Company, which matures August 24, 2019. The interest
rate increases to 24% per annum upon an event of default, as set
forth in the agreement, including a cross default to all other
outstanding notes, and if the debenture is not paid at maturity the
principal due increases by 10%. If the Company loses its bid price
the principal outstanding on the debenture increases by 20%, and if
the Company’s common stock is delisted, the principal
increases by 50%. The notes are convertible at 57% of the lowest
closing bid price for the last 20 days. The discount is increased
an additional 10%, to 47%, upon a DTC "chill". The conversion
feature meets the definition of a derivative and therefore requires
bifurcation and will be accounted for as a derivative
liability.
On
September 14, 2018, the Company entered into a 12% convertible
promissory note for $112,500, with an OID of $10,250, which matures
on March 14, 2019. There is a right of prepayment in the first 180
days, but there is no right to repay after 180 days. Per the
agreement, the Company is required at all times to have authorized
and reserved three times the number of shares that is actually
issuable upon full conversion of the note. The Company has not
maintained the required share reservation under the terms of the
note agreement. The Company believes it has sufficient available
shares of the Company’s common stock in the event of
conversion for these notes. The interest rate increases to a
default rate of 24% for events as set forth in the agreement,
including if the market capitalization is below $5 million, or
there are any dilutive issuances. There is also a cross default
provision to all other notes. In the event of default, the
outstanding principal balance increases to 150%, and if the Company
fails to maintain the required authorized share reserve, the
outstanding principal increases to 200%. Additionally, If the
Company enters into a 3(a)(9) or 3(a)(10) issuance of shares there
are liquidation damages of 25% of principal, not to be below
$15,000. The Company must also obtain the noteholder's written
consent before issuing any new debt. Additionally, if the note is
not repaid by the maturity date the principal balance increases by
$15,000. The market capitalization is below $5 million and
therefore the note is in default as of September 30, 2018. The note
is convertible at a variable conversion rate that is the lesser of
60% of the lowest trading price for the last 20 days prior to the
issuance of the note or 60% of the lowest market price over the 20
days prior to conversion. The conversion price shall be adjusted
upon subsequent sales of securities at a price lower than the
original conversion price. There are additional 10% adjustments to
the conversion price for events set forth in the agreement,
including if the conversion price is less than $0.01, if the
Company is not DTC eligible, the Company is no longer a reporting
company, or the note cannot be converted into free trading shares
on or after nine months from issue date. Per the agreement, the
Company is required at all times to have authorized and reserved
three times the number of shares that is actually issuable upon
full conversion of the note. The conversion feature meets the
definition of a derivative and therefore requires bifurcation and
is accounted for as a derivative liability.
All the
capital under the foregoing issuances was used for working capital
and to repay certain existing indebtedness. The issuances were
exempt from the registration requirements of the Securities Act
pursuant to the exemption for transactions by an issuer not
involved in any public offering under Section 4(a)(2) of the
Securities Act. The Company intends to use the proceeds of the
foregoing transactions for general working capital purposes. The
foregoing descriptions do not purport to be complete, and are
qualified in their entirety by reference to the full text of such
documents attached hereto as exhibits and incorporated herein by
reference.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
Applicable.
ITEM 5. OTHER
INFORMATION
None.
Exhibit
Number
|
Description
|
(2)
|
Plan of acquisition, reorganization, arrangement, liquidation or
succession
|
|
Asset
Purchase Agreement, dated November 26, 2014, by and between
Multiplayer Online Dragon, Inc. and NaturalShrimp Holdings, Inc.
(incorporated by reference to our Current Report on Form 8-K filed
on December 3, 2014).
|
(3)
|
(i) Articles of Incorporation; and (ii) Bylaws
|
|
Articles
of Incorporation (incorporated by reference to our Registration
Statement on Form S-1 originally filed on June 11,
2009).
|
|
Amendment
to Articles of Incorporation (incorporated by reference to our
Amended Quarterly Report on Form 10-Q/A filed on May 19,
2014).
|
|
Bylaws
(incorporated by reference to our Registration Statement on Form
S-1 originally filed on June 11, 2009).
|
(4)
|
Instruments Defining the Rights of Security Holders, Including
Indentures
|
4.1
|
Specimen
Common Stock Certificate (incorporated by reference to our
Registration Statement on Form S-1 filed on December 29,
2008)
|
4.2
|
Form of
Registrant’s 10% Senior Convertible Promissory Note
(incorporated by reference to our Registration Statement on Form
8-K filed on October 17, 2013)
|
(10)
|
Material Agreements
|
|
Business
Loan Agreement, dated September 13, 2005, by and among
NaturalShrimp Holdings, Inc., Amarillo National Bank, NSC,
NaturalShrimp International, Inc., NaturalShrimp San Antonio, L.P.,
Shirley Williams, Gerald Easterling, Mary Ann Untermeyer, and High
Plain Christian Ministries Foundation, as amended, modified and
assigned (incorporated by reference to our Current Report on Form
8-K filed on February 11, 2015).
|
|
Secured
Promissory Note, dated September 13, 2005, issued by NaturalShrimp
Holdings, Inc. to Amarillo National Bank in the original principal
amount of $1,500,000, as amended, modified and assigned
(incorporated by reference to our Current Report on Form 8-K filed
on February 11, 2015).
|
|
Assignment
Agreement, dated March 26, 2009, by and between Baptist Community
Services, Amarillo National Bank and NaturalShrimp Holdings, Inc.
(incorporated by reference to our Current Report on Form 8-K filed
on February 11, 2015).
|
|
Fifth
Forbearance Agreement, dated January 30, 2015, by and between the
Company, NaturalShrimp Holdings, Inc. and Baptist Community
Services (incorporated by reference to our Current Report on Form
8-K filed on February 11, 2015).
|
|
Stock
Pledge Agreement, dated January 30, 2015, by and between the
Company and Baptist Community Services (incorporated by reference
to our Current Report on Form 8-K filed on February 11,
2015).
|
|
Agreement
Regarding Loan Documents, dated January 30, 2015, by and between
the Company and NaturalShrimp Holdings, Inc. (incorporated by
reference to our Current Report on Form 8-K filed on February 11,
2015).
|
|
Exclusive
Rights Agreement, dated August 19, 2014, between NaturalShrimp
Holdings, Inc., its subsidiaries and F&T Water Solutions, LLC
(incorporated by reference to our Current Report on Form 8-K filed
on February 11, 2015).
|
|
Members
Agreement, dated August 19, 2014, between NaturalShrimp Holdings,
Inc., F&T Water Solutions, LLC and the members of Natural
Aquatic Systems, LLC (incorporated by reference to our Current
Report on Form 8-K filed on February 11, 2015).
|
|
Form of
Subscription Agreement (incorporated by reference to our Current
Report on Form 8-K filed on May 7, 2015).
|
|
Form of
Promissory Note with Shirley K. Williams, Kay Chafin and Jack Heald
(incorporated by reference to our Annual Report on Form 10-K filed
on July 28, 2015).
|
|
Form of
Loan Agreement with Bill G. Williams (incorporated by reference to
our Annual Report on Form 10-K filed on July 28,
2015).
|
|
Form of
Security Agreement with Kay Chafin and Jack Heald (incorporated by
reference to our Annual Report on Form 10-K filed on July 28,
2015).
|
|
Form of
Line of Credit Agreement with Extraco Bank (incorporated by
reference to our Annual Report on Form 10-K filed on July 28,
2015).
|
|
Employment
Agreement dated April 1, 2015 with Bill G. Williams (incorporated
by reference to our Current Report on Form 8-K filed on May 7,
2015).
|
|
Employment
Agreement dated April 1, 2015 with Gerald Easterling (incorporated
by reference to our Current Report on Form 8-K filed on May 7,
2015).
|
|
Form of
Private Placement Subscription Agreement and 6% Unsecured
Convertible Note with Dragon Acquisitions LLC. (incorporated by
reference to our Annual Report on Form 10-K filed on June 29,
2017)
|
|
Form of
Promissory Note dated January 10, 2017 with Community National Bank
(incorporated by reference to our Quarterly Report on Form 10-Q
filed on February 14, 2017).
|
|
Form of
Guaranty made by Gerald Easterling to Community National Bank
(incorporated by reference to our Quarterly Report on Form 10-Q
filed on February 14, 2017).
|
|
Payoff
Letter, Termination and Release dated January 13, 2017 from Baptist
Community Services (incorporated by reference to our Quarterly
Report on Form 10-Q filed on February 14, 2017).
|
|
Securities
Purchase Agreement dated January 23, 2017 with Vista Capital
Investments, LLC. (incorporated by reference to our Annual Report
on Form 10-K filed on June 29, 2017)
|
|
Warrant
to Purchase Shares of Common Stock issued January 23, 2017 to Vista
Capital Investments, LLC. (incorporated by reference to our Annual
Report on Form 10-K filed on June 29, 2017)
|
|
Convertible
Note dated January 23, 2017 issued to Vista Capital Investments,
LLC. (incorporated by reference to our Annual Report on Form 10-K
filed on June 29, 2017)
|
|
Securities
Purchase Agreement dated March 16, 2017 with Peak One Opportunity
Fund, L.P. (incorporated by reference to our Annual Report on Form
10-K filed on June 29, 2017)
|
|
Convertible
Debenture dated March 28, 2017 issued to Peak One Opportunity Fund,
L.P.
|
|
6%
Convertible Note dated January 20, 2017 issued Dragon Acquisitions
LLC (incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.1 on February 14, 2018)
|
|
Securities
Purchase Agreement dated March 16, 2017 with Peak One Opportunity
Fund, L.P. (incorporated by reference to our Quarterly Report on
Form 10-Q filed as Exhibit 10.2 on February 14, 2018)
|
|
Amendment
#1 to the Securities Purchase Agreement Entered into on March 16,
2017, dated July 5, 2017, with Peak One Opportunity Fund, L.P.
(incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.3 on February 14, 2018)
|
|
6%
Convertible Note dated March 11, 2017 issued to Dragon Acquisitions
LLC (incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.4 on February 14, 2018)
|
|
6%
Convertible Note dated April 20, 2017 issued to Dragon Acquisitions
LLC (incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.5 on February 14, 2018)
|
|
Securities
Purchase Agreement dated July 31, 2017, with Crown Bridge Partners
LLC (incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.6 on February 14, 2018)
|
|
5%
Convertible Note dated July 31, 2017, issued to Crown Bridge
Partners LLC (incorporated by reference to our Quarterly Report on
Form 10-Q filed as Exhibit 10.7 on February 14, 2018)
|
|
Common
Stock Purchase Warrant dated July 31, 2017, issued to Crown Bridge
Partners LLC (incorporated by reference to our Quarterly Report on
Form 10-Q filed as Exhibit 10.8 on February 14, 2018)
|
|
Securities
Purchase Agreement dated August 28, 2017 with Labrys Fund, LP
(incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.9 on February 14, 2018)
|
|
12%
Convertible Note dated August 28, 2017, with Labrys Fund, LP
(incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.10 on February 14, 2018)
|
|
Common
Stock Purchase Warrant dated August 28, 2017, issued to Labrys
Fund, LP (incorporated by reference to our Quarterly Report on Form
10-Q filed as Exhibit 10.11 on February 14, 2018)
|
|
12%
Convertible Note dated September 11, 2017 issued to Auctus Funds,
LLC (incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.12 on February 14, 2018)
|
|
Common
Stock Purchase Warrant dated September 11, 2017 issued to Auctus
Funds, LLC (incorporated by reference to our Quarterly Report on
Form 10-Q filed as Exhibit 10.13 on February 14, 2018)
|
|
12%
Convertible Note dated September 12, 2017 issued to JSJ
Investments, Inc. (incorporated by reference to our Quarterly
Report on Form 10-Q filed as Exhibit 10.14 on February 14,
2018)
|
|
Securities
Purchase Agreement dated September 28, 2017 with EMA Financial, LLC
(incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.15 on February 14, 2018)
|
|
12%
Convertible Note issued to EMA Financial, LLC dated September 28,
2017 (incorporated by reference to our Quarterly Report on Form
10-Q filed as Exhibit 10.16 on February 14, 2018)
|
|
Common
Stock Purchase Warrant dated October 2, 2017, issued to Crown
Bridge Partners LLC (incorporated by reference to our Quarterly
Report on Form 10-Q filed as Exhibit 10.17 on February 14,
2018)
|
|
Securities
Purchase Agreement dated October 31, 2017 with Labrys Fund, LP
(incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.18 on February 14, 2018)
|
|
12%
Convertible Note dated October 31, 2017, issued to Labrys Fund, LP
(incorporated by reference to our Quarterly Report on Form 10-Q
filed as Exhibit 10.19 on February 14, 2018)
|
|
Securities
Purchase Agreement dated November 9, 2017 with GS Capital Partners,
LLC. (incorporated by reference to our Quarterly Report on Form
10-Q filed as Exhibit 10.20 on February 14, 2018)
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated November 14, 2017 (incorporated by reference to our
Quarterly Report on Form 10-Q filed as Exhibit 10.21 on February
14, 2018)
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated November 14, 2017 (incorporated by reference to our
Quarterly Report on Form 10-Q filed as Exhibit 10.22 on February
14, 2018)
|
|
8%
Collateralized Secured Promissory Note dated November 14, 2017,
from GS Capital Partners, LLC (incorporated by reference to our
Quarterly Report on Form 10-Q filed as Exhibit 10.23 on February
14, 2018)
|
|
Securities
Purchase Agreement dated December 20, 2017 with GS Capital
Partners, LLC. (incorporated by reference to our Quarterly Report
on Form 10-Q filed as Exhibit 10.24 on February 14,
2018)
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated December 20, 2017 (incorporated by reference to our
Quarterly Report on Form 10-Q filed as Exhibit 10.25 on February
14, 2018)
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated December 20, 2017 (incorporated by reference to our
Quarterly Report on Form 10-Q filed as Exhibit 10.26 on February
14, 2018)
|
|
8%
Collateralized Secured Promissory Note dated November 14, 2017,
from GS Capital Partners, LLC (incorporated by reference to our
Quarterly Report on Form 10-Q filed as Exhibit 10.27 on February
14, 2018)
|
10.52
|
12%
Convertible Note dated April 27, 2018 from BlueHawk Capital, LLC
(incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.53
|
Securities
Purchase Agreement dated March 20, 2018 with BlueHawk Capital, LLC
(incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.54
|
12%
Collateralized Secured Promissory Note dated January 29, 2018 from
Adar Bays, LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.55
|
12%
Collateralized Secured Promissory Note dated January 29, 2018 from
Adar Bays, LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.56
|
Debt
Purchase Agreement dated February 8, 2018 between Labrys Fund LP
and Adar Bays, LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.57
|
12%
Convertible Redeemable Note dated January 29, 2018 from Adar Bays,
LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.58
|
12%
Convertible Redeemable Note dated January 29, 2018 from Adar Bays,
LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.59
|
Securities
Purchase Agreement dated January 29, 2018 with Adar Bays, LLC
(incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.60
|
Securities
Purchase Agreement dated April 12, 2018 with One44 Capital, LLC
(incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.61
|
10%
Collateralized Secured Promissory Note dated April 12, 2018 with
One44 Capital, LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.62
|
First
Amendment to the Convertible Promissory Note dated July 31, 2017
with Crown Bridge Partners, LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.63
|
Securities
Purchase Agreement dated March 20, 2018 with Jefferson Street
Capital, LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.64
|
12%
Secured Convertible Promissory Note dated March 20, 2018 with
Jefferson Street Capital, LLC (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.65
|
12%
Convertible Promissory Note dated March 9, 2018 with Power Up
Lending Group Ltd. (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.66
|
12%
Convertible Promissory Note dated January 30, 2018 with Power Up
Lending Group Ltd. (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.67
|
Securities
Purchase Agreement dated January 30, 2018 with Power Up Lending
Group Ltd. (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.68
|
Securities
Purchase Agreement dated March 9, 2018 with Power Up Lending Group
Ltd. (incorporated by
reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.69
|
Equity
Financing Agreement with GHS Investments LLC (incorporated
by reference to our Annual Report on Form 10-K filed on July 13,
2018)
|
10.70
|
Registration Rights Agreement with GHS Investments LLC
(incorporated by reference to our Current Report on Form 8-K filed
as Exhibit 10.2 on August 27, 2018)
|
|
12% Convertible Promissory Note dated June 5, 2018 with JSJ
Investments, Inc.
|
|
12%
Convertible Promissory Note dated June 5, 2018 with JSJ
Investments, Inc.
|
|
10%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated July 27, 2018
|
|
10%
Collateralized Secured Promissory Note dated July 27, 2018, from GS
Capital Partners, LLC
|
|
Securities Purchase
Agreement dated August 24, 2018 with One44 Capital,
LLC
|
|
10%
Convertible Redeemable Note issued August 24, 2018 with One44
Capital, LLC
|
|
Securities Purchase
Agreement dated September 14, 2018 with Labrys Fund
LP
|
|
12%
Convertible Promissory Note dated September 14, issued to Labrys
Fund, LP
|
|
Securities Purchase
Agreement dated October 30, 2018 with Power Up Lending Group
Ltd
|
|
8%
Convertible Promissory Note dated October 30, 2018 with Power Up
Lending Group Ltd
|
(31)
|
Rule 13a-14(a)/15d-14(a) Certifications
|
31.1*
|
Section
302 Certification under the Sarbanes-Oxley Act of 2002 of the
Principal Executive Officer
|
31.2*
|
Section
302 Certification under the Sarbanes-Oxley Act of 2002 of the
Principal Financial Officer and Principal Accounting
Officer
|
(32)
|
Section 1350 Certifications
|
32.1*
|
Section
906 Certification under the Sarbanes-Oxley Act of 2002 of the
Principal Executive Officer
|
32.2*
|
Section
906 Certification under the Sarbanes-Oxley Act of 2002 of the
Principal Financial Officer and Principal Accounting
Officer
|
(101)*
|
Interactive Data Files
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
NATURALSHRIMP
INCORPORATED
|
|
|
|
|
|
Date: November 13,
2018
|
By:
|
/s/
Bill G.
Williams
|
|
|
|
Bill G.
Williams
|
|
|
|
Chief
Executive Officer
(Principal
Executive Officer
|
|
|
|
|
|
|
|
|
Date: November 13,
2018
|
By:
|
/s/
William
Delgado
|
|
|
|
William
Delgado
|
|
|
|
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
|
|
47