UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
(Mark
One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
Fiscal Year Ended March 31,
2019
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
|
74-3262176
|
|
(State
or other jurisdiction
|
(I.R.S.
Employer
|
|
of
incorporation or organization)
|
Identification
No.)
|
5080 Spectrum Dr., Suite 1000, Addison, Texas 75001
(Address
of principal executive offices) (Zip Code)
(888) 791-9474
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
|
Trading symbol(s)
|
|
Name of exchange on
which registered
|
|
None
|
|
None
|
|
None
|
Securities
registered pursuant to section 12(g) of the Act:
Shares of common stock with a par value of $0.0001
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No
[X]
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No
[X]
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 [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
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 such files). Yes [X] No
[ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting 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.
|
Large
accelerated filer [ ]
|
Accelerated
filer [ ]
|
|
Non-accelerated
filer [X]
|
Smaller
reporting company [X]
|
|
|
Emerging
growth company [ ]
|
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 [X]
The
aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price
of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter
was $689,785.
(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of the registrant’s classes
of common stock as of the latest practicable date was 313,254,149
shares of common stock as of June 28, 2019.
DOCUMENTS
INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Forward-Looking Statements
This
Annual Report on Form 10-K 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. Those 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 statement. These
statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors” set forth in this
Annual Report on Form 10-K for the year ended March 31, 2019, 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 by these
forward-looking statements. These risks 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
Securities and Exchange Commission (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 Annual Report on Form 10-K and unless otherwise indicated,
the terms “Company,” “we,”
“us,” and “our” refer to NaturalShrimp
Incorporated and the Company’s 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
(“NSC”), a Delaware corporation, and NaturalShrimp
Global, Inc. (“NS Global”), a Delaware corporation, 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.
(“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. On December 25, 2018, we were awarded U.S.
Patent “Recirculating Aquaculture System and Treatment Method
for Aquatic Species” covering all indoor aquatic species that
utilizes proprietary art.
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. Our
initial system was successful, but we 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 then 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. 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. The first post larvae (PL) arrived from the hatchery
at the end of June 2018, and we expect to use the first harvest to
market, sample, and refine production specifications by the third
calendar quarter of 2019.
Overview of Industry
Shrimp
is a well-known and globally-consumed commodity, constituting one
of the most important types of seafood and a staple protein source
for much of the world. According to the USDA Foreign Agricultural
Service, the world consumes approximately 9 billion pounds of
shrimp annually with over 1.7 billion pounds consumed in the United
States alone. Approximately 65% of the global supply of shrimp is
caught by ocean trawlers and the other 35% is produced by open-air
shrimp farms, mostly in developing countries.
Shrimp
boats catch shrimp through the use of large, boat-towed nets. These
nets are quite toxic to the undersea environment as they disturb
and destroy ocean-bottom ecosystems; these nets also catch a
variety of non-shrimp sea life, which is typically killed and
discarded as part of the shrimp harvesting process. Additionally,
the world’s oceans can only supply a finite amount of shrimp
each year, and in fact, single-boat shrimp yields have fallen by
approximately 20% since 2010 and continue to decrease. The
shrimping industry’s answer to this problem has been to
deploy more (and larger) boats that deploy ever-larger nets, which
has in the short-term been successful at maintaining global shrimp
yields. However, this benefit cannot continue forever, as
eventually global demand has the potential of outstripping the
oceans’ ability to maintain the natural ecosystem’s
balance, resulting in a permanent decline in yields. When taken in
light of global population growth and the ever-increasing demand
for nutrient-rich foods such as shrimp, this is clearly an
unsustainable production paradigm.
Shrimp
farming, known in the industry as “aquaculture,” has
ostensibly stepped in to fill this demand/supply imbalance. Shrimp
farming is typically done in open-air lagoons and man-made shrimp
ponds connected to the open ocean. Because these ponds constantly
exchange water with the adjacent sea, the farmers are able to
maintain the water chemistry that allows the shrimp to prosper.
However, this method of cultivating shrimp also carries severe
ecological peril. First of all, most shrimp farming is primarily
conducted in developing countries, where poor shrimp farmers have
little regard for the global ecosystem. Because of this, these
farmers use large quantities of antibiotics and other chemicals
that maximize each farm’s chance of producing a crop, putting
the entire system at risk. For example, a viral infection that
crops up in one farm can spread to all nearby farms, quite
literally wiping out an entire region’s production. In 1999,
the White Spot virus invaded shrimp farms in at least five Latin
American countries: Honduras, Nicaragua, Guatemala, Panama and
Ecuador and in 2013-14 EMS (Early Mortality Syndrome) wiped out
most of the Asia Pacific region and Mexico. Secondly, there is also
a finite amount of coastline that can be used for shrimp production
– eventually shrimp farms that are dependent on the open
ocean will have nowhere to expand. Again, this is an ecologically
damaging and ultimately unsustainable system for producing
shrimp.
In both
the cases, the current method of shrimp production is
unsustainable. As global populations rise and the demand for shrimp
continues to grow, the current system is bound to fall short.
Shrimp trawling cannot continue to increase production without
completely depleting the oceans’ natural shrimp population.
Trends in per-boat yield confirm that this industry has already
crossed the overfishing threshold, putting the global open-ocean
shrimp population in decline. While open-air shrimp aquaculture may
seem to address this problem, it is also an unsustainable system
that destroys coastal ecological systems and produces shrimp with
very high chemical contamination levels. Closed-system shrimp
farming is clearly a superior alternative, but its unique
challenges have prevented it from becoming a widely-available
alternative.
Of the
1.7 billion pounds of shrimp consumed annually in the United
States, over 1.5 billion pounds are imported – much of this
from developing countries’ shrimp farms. These farms are
typically located in developing countries and use high levels of
antibiotics and pesticides that are not allowed under USDA
regulations. As a result, these shrimp farms produce chemical-laden
shrimp in an ecologically unsustainable way.
Unfortunately, most
consumers here in the United States are not aware of the origin of
their store-bought shrimp or that which they consume in
restaurants. This is due to a USDA rule that states that only
bulk-packaged shrimp must state the shrimp’s country of
origin; any “prepared” shrimp, which includes
arrangements sold in grocery stores and seafood markets, as well as
all shrimp served in restaurants, can simply be sold “as
is.” Essentially, this means that most U.S. consumers may be
eating shrimp laden with chemicals and antibiotics. Our product is
free of pesticide chemicals and antibiotics, a fact that we believe
is highly attractive and beneficial in terms of our eventual
marketing success.
Technology
Intensive, Indoor, Closed-System Shrimp Production
Technology
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.
Automated Monitoring and Control System
The
Company’s “Automated Monitoring and Control
System” uses individual tank monitors to automatically
control the feeding, oxygenation, and temperature of each of the
facility tanks independently. In addition, a facility computer
running custom software communicates with each of the controllers
and performs additional data acquisition functions that can report
back to a supervisory computer from anywhere in the world. These
computer-automated water controls optimize the growing conditions
for the shrimp as they mature to harvest size, providing a
disease-resistant production environment.
The
principal theories behind the Company’s system are
characterized as:
●
High-density shrimp
production
These
principles form the foundation for the Company and our potential
distributors so that consumers can be provided with continuous
volumes of live and fresh shrimp at competitive
prices.
Research and Development
In
2001, we began research and development (R&D) of a high
density, natural aquaculture system that is not dependent on ocean
water to provide quality, fresh shrimp every week, fifty-two weeks
per year. Our initial 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 the first R&D 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.
After
the implementation of the first R&D facility in La Coste,
Texas, we have also made significant improvements that minimize the
transfer of shrimp, which will reduce shrimp stress and labor
costs. 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.
On
September 7, 2016, we entered into a Letter of Commitment with
Trane, Inc. (“Trane”), a division of Ingersoll-Rand
Plc, whereby Trane shall proceed with a detailed audit to use data
to verify the capabilities of an initial Phase 1 prototype of a
Trane-proposed three tank system at our La Coste, Texas facility.
The prototype consists of a modified Electrocoagulation (EC) system
for the human grow-out, harvesting and processing of fully mature,
antibiotic-free Pacific White Leg shrimp. Trane was authorized to
proceed with such detailed audit to utilize data for purposes of
verifying the capabilities of the EC system, including the ammonia
and chlorine capture and sequestering and pathogen kill. The
detailed audit delivered (i) a report on the inspection of the
existing infrastructure determining if proper fit, adequate
security, acceptable utility service, environmental protection and
equipment sizing are achievable; (ii) provide firm fixed pricing
for the EC system, electrode selection and supply, waste removal,
ventilation of the off-gassing of the equipment; and (iii) a
formalized plan for commissioning and on-site investigation of
hardware design to simplify build-out of Phase 2 and future phases.
The detailed audit was utilized by RGA Labs to build and install
the initial system in La Coste, Texas pilot plant the first week of
June 2018. Based on the results of the initial system, we intend to
increase shrimp production in our plant in La Coste, Texas by
adding and stocking additional tanks and adding needed filtration
equipment with plans to stock the entire facility by the end of
2019. Five new electrocoagulation systems have been purchased to
update the La Coste plant.
Target Markets and Sales Price
Our
goal is to establish production systems and distribution centers in
metropolitan areas of the United States, as well as international
distribution networks through joint venture partnerships throughout
the world. This should allow the Company to capture a significant
portion of world shrimp sales by offering locally grown,
environmentally “green,” naturally grown, fresh shrimp
at competitive wholesale prices.
The
United States population is approximately 325 million people with
an annual shrimp consumption of 1.7 billion pounds, of which less
than 400 million pounds are domestically produced. According to
IndexMundi.com, the wholesale price for frozen, commodity grade
shrimp has risen 15% since January 2015 (shell-on headless, 26-30
count; which is comparable to our target growth size). With world
shrimp problems, this price is expected to rise more in the next
few years.
We
strive to build a profitable global shrimp production company. We
believe our foundational advantage is that we can deliver fresh,
organically grown, gourmet-grade shrimp, 52 weeks per year to
retail and wholesale buyers in major market areas at competitive,
yet premium prices. By locating regional production and
distribution centers in close proximity to consumer demand, we can
provide a fresh product to customers within 24 hours after harvest,
which is unique in the shrimp industry. We can be the “first
to market” and perhaps “sole weekly provider” of
fresh shrimp and capture as much market share as production
capacity can support.
For
those customers that want a frozen product, we may be able to
provide this in the near future and the product will still be
differentiated as a “naturally grown, sustainable
seafood” that will meet the increasing demand of socially
conscious consumers.
Our
patented technology and eco-friendly, bio-secure production
processes enable the delivery of a chemical and antibiotic free,
locally grown product that lives up to the Company’s mantra:
“Always Fresh, Always Natural,” thereby solving the
issue of “unsafe” imported seafood.
Product Description
Nearly
all of the shrimp consumed today are shipped frozen. Shrimp are
typically frozen from six to twenty-four months before consumption.
Our system is designed to harvest a different tank each week, which
provides for fresh shrimp throughout the year. We strive to create
a niche market of “Always Fresh, Always Natural”
shrimp. As opposed to many of the foreign shrimp farms, we can also
claim that our product is 100% free of antibiotics. The ability to
grow shrimp locally, year round allows us to provide this high-end
product to specialty grocery stores and upscale restaurants
throughout the world. We rotate the stocking and harvesting of our
tanks each week, which allows for weekly shrimp harvests. Our
product is free of all pollutants and is fed only all-natural
feeds.
The
seafood industry lacks a consistent “Source
Verification” method to track seafood products as they move
through countries and customs procedures. With worldwide
overfishing leading to declining shrimp freshness and
sustainability around the world, it is vital for shrimp providers
to be able to realistically identify the source of their product.
We have well-managed, sustainable facilities that are able to track
shrimp from hatchery to plate using environmentally responsible
methods.
Shrimp Growth Period
Our
production system is designed to produce shrimp at a harvest size
of twenty-one to twenty-five shrimp per pound in a period of
twenty-four weeks. The Company currently purchases post-larva
shrimp that are approximately ten days old (PL 10). In the future,
we plan to build our own hatcheries to control the supply of shrimp
to each of our facilities. Our full-scale production systems
include grow-out and nursery tanks, projected to produce fresh
shrimp fifty-two weeks per year.
Distribution and Marketing
We plan
to build these environmentally “green” production
systems near major metropolitan areas of the United States. Today,
we have one pilot production facility in La Coste, Texas (near San
Antonio) and plan to begin construction of a full-scale production
facility in La Coste and plans for Nevada and New York. Over the
next five years, our plan is to increase construction of new
facilities each year. In the fifth year, we plan for a new system
to be completed each month, expanding first into the largest shrimp
consumption markets of the United States.
Because
our system is enclosed and also indoors, it is not affected by
weather or climate and does not depend on ocean proximity. As such,
we believe we will be able to provide, naturally grown,
high-quality, fresh shrimp to major market customers each week.
This will allow distribution companies to leverage their existing
customer relationships by offering an uninterrupted supply of high
quality, fresh and locally grown shrimp. We plan to sell and
distribute the vast majority of our shrimp production through
distributors which have established customers and sufficient
capacity to deliver a fresh product within hours following harvest.
We believe we have the added advantage of being able to market our
shrimp as fresh, natural and locally grown using sustainable,
eco-friendly technology, a key differentiation from all existing
shrimp producers. Furthermore, we believe that our ability to
advertise our product in this manner along with the fact that it is
a locally grown product, provides us with a marketing advantage
over the competition. We expect to utilize distributors that
currently supply fresh seafood to upscale restaurants, country
clubs, specialty super markets and retail stores whose clientele
expect and appreciate fresh, natural products.
Harvesting, Packaging and Shipment
Each
location is projected to include production, harvesting/processing
and a general shipping and receiving area, in addition to
warehousing space for storage of necessary supplies and products
required to grow, harvest, package and otherwise make ready for
delivery, a fresh shrimp crop on a weekly basis to consumers in
each individual market area within 24 hours following
harvest.
The
seafood industry lacks a consistent source verification method to
track seafood products as they move through countries and customs
procedures. With worldwide overfishing leading to declining shrimp
freshness and sustainability around the world, it is vital for
shrimp providers to be able to realistically identify the source of
their product. Our future facilities are expected to be designed to
track shrimp from hatchery to plate using environmentally
responsible methods.
International
We own
one hundred percent of NaturalShrimp Global, Inc. which was formed
to create international partnerships. Each international
partnership is expected to use the Company’s proprietary
technology to penetrate shrimp markets throughout the world
utilizing existing food service distribution channels.
NaturalShrimp Global, Inc., owns a percentage of NaturalShrimp
International A.S. in Oslo, Norway. As our European-based partner,
NaturalShrimp International A.S. is responsible for the
construction cost of their 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.
Go to Market Strategy and Execution
Our
strategy is to develop regional production and distribution centers
near major metropolitan areas throughout the United States and
internationally. Today, we have 53,000 sq. ft. of R&D
facilities, which includes, a pilot production system,
greenhouse/reservoirs and utility buildings in La Coste, TX (near
San Antonio). We intend to begin construction of a new
free-standing facility with the next generation shrimp production
system in place on the property in 2019.
The
reasoning behind building additional shrimp production systems in
La Coste is availability of trained production personnel, our
research and development team, and an opportunity to develop the
footprint and model for additional facilities. Our current plan is
to develop six regional production and distribution centers near
major markets in 2019, adding one system per month in a selected
production center, depending on market demand.
We have
sold product to restaurants at $12.00 per pound and to retail
consumers at $16.50 to $21.00 per pound, depending on size, which
helps to validate our pricing strategy. Additionally, from 2011 to
2013, we had two successful North Texas test markets which
distributed thousands of pounds of fresh product to customers
within 24 hours following harvest. The fresh product was priced
from $8.40 to $12.00 per pound wholesale, heads on, net price to
the Company.
Current Systems and Expansion
The
pilot plant is located in La Coste, Texas and is being retrofitted
with new patent-pending technology that the Company has been
developing with Trane’s engineering audit and F&T Water
Solutions, and RGA Labs. This facility, when completely retrofitted
with the new technology, is projected to produce approximately
6,000 pounds every month. The next facility in La Coste will be
substantially larger than the current system. The target yield of
shrimp for the new facility will be approximately 6,000 pounds per
week. Both facilities combined are projected to produce over 7,000
pounds of shrimp per week in La Coste. By staging the stocking and
harvests from tank to tank, it enables us to produce weekly and
therefore deliver fresh shrimp every week.
After
the completion of the next system in La Coste, our long-term plan
is to build additional production systems in Las Vegas, and New
York. These locations are targeted to begin construction in fiscal
2020, and the funding for these plans is projected to come from
joint venture agreements with strategic partners. These cities are
not surrounded by commercial shrimp production, and we believe
there will be a high demand for fresh shrimp in all of these
locations. In addition, the Company will continue to use the land
it owns in La Coste to build as many systems as the Texas market
demands.
Competition
There
are a number of companies conducting research and development
projects in their attempt to develop closed-system technologies in
the U.S., some with reported production and sales. Florida Organic
Aquaculture uses a Bio-Floc Raceway System to intensify shrimp
growth, while Marvesta Shrimp Farms’ tanks in water from the
Atlantic to use in their indoor system. Since these are
privately-held companies, it is not possible to know, with
certainty, their state of technical development, production
capacity, need for water exchange, location requirements, financial
status and other matters. To the best of our knowledge, none are
producing significant quantities of shrimp relative to their local
markets, and such fresh shrimp sales are likely confined to an area
near the production facility.
Additionally, any
new competitor would face significant barriers for entry into the
market and would likely need years of research and development to
develop the proprietary technology necessary to produce similar
shrimp at a commercially viable level. We believe our technology
and business model sets us apart from any current competition. It
is possible that additional competitors will arise in the future,
but with the size and growth of the worldwide shrimp market, many
competitors could co-exist and thrive in the fresh shrimp
industry.
Intellectual Property
We
intend to take appropriate steps to protect our intellectual
property. We have registered the trademark
“NATURALSHRIMP” which has been approved and was
published in the Official Gazette on June 5, 2012. On December 25,
2018, we were awarded U.S. Patent “Recirculating Aquaculture
System and Treatment Method for Aquatic Species” covering all
indoor aquatic species that utilizes proprietary art. There are
potential technical processes for which the Company may be able to
file a patent. However, there are no assurances that such
applications, if filed, would be issued and no right of enforcement
is granted to a patent application. Therefore, the Company has
filed a provisional patent with the U.S. Patent Office and plans to
use a variety of other methods, including copyright registrations
as appropriate, trade secret protection, and confidentiality and
non-compete agreements to protect its intellectual property
portfolio.
Source and Availability of Raw Materials
Raw
materials are received in a timely manner from established
suppliers. Currently, we buy our feed from Zeigler, a leading
producer of aquatic feed. Post larvae (“PL”) shrimp are
purchased from American Penaeid, Inc. (API) in Florida and Global
Blue Technologies in Texas.
There
have not been any issues regarding the availability of our raw
materials. We have favorable contacts and past business dealings
with other major shrimp feed producers if current suppliers are not
available.
Government Approvals and Regulations
We are
subject to government regulation and require certain licenses. The
following list includes regulations to which we are subject and/or
the permits and licenses we currently hold:
●
Texas Parks and
Wildlife Department (TPWD) - “Exotic species permit” to
raise exotic shrimp (non-native to Texas). The La Coste facility is
north of the coastal shrimp exclusion zone (east and south of H-35,
where it intersects Hwy 21 down to Laredo) and therefore outside of
TPWD’s major area of concern for exotic shrimp. Currently
Active - Expires December 31, 2019.
●
Texas Department of
Agriculture (TDA) - “Aquaculture License” for
aquaculture production facilities. License to “operate a fish
farm or cultured fish processing plant.” Currently Active
– Expires June 30, 2020.
●
Texas Commission on
Environmental Quality (TCEQ) - Regulates facility wastewater
discharge. According to the TCEQ permit classification system, we
are rated Level 1 – Recirculation system with no discharge.
Currently Active – No expiration.
●
San Antonio River
Authority - No permit required, but has some authority over any
effluent water that could impact surface and ground
waters.
●
OSHA - No permit
required but has right to inspect facility.
●
HACCP (Hazard
Analysis and Critical Control Point) - Not needed unless we process
shrimp on site. Training and preparation of HACCP plans remain to
be completed. There are multiple HACCP plans listed at
http://seafood.ucdavis.edu/haccp/Plans.htm and other web sites that
can be used as examples.
●
Texas Department of
State Health Services - Food manufacturer license #
1011080.
●
Aquaculture
Certification Council (ACC) and Best Aquaculture Practices (BAP) -
Provide shrimp production certification for shrimp marketing
purposes to mainly well-established vendors. ACC and BAP
certifications require extensive record keeping. No license is
required at this time.
We are
subject to certain regulations regarding the need for field
employees to be certified. We strictly adhere to these regulations.
The cost of certification is an accepted part of expenses.
Regulations may change and become a cost burden, but compliance and
safety are our main concern.
Market Advantages and Corporate Drivers
The
following are what we consider to be our advantages in the
marketplace:
●
Early-mover
Advantage: Commercialized technology in a large growing market with
no significant competition yet identified. Most are early stage
start-ups or early stage companies with limited production and
distribution.
●
Farm-to-Market:
This has significant advantages including reduced transportation
costs and a product that is more attractive to local
consumers.
●
Bio-secured
Building: Our process is a re-circulating, highly-filtered water
technology in an indoor-regulated environment. External pathogens
are excluded.
●
Eco-friendly
“Green” Technology: Our closed-loop, re-circulating
system has no ocean water exchange requirements, does not use
chemical or antibiotics and therefore is sustainable, eco-friendly,
environmentally sound and produces a superior quality shrimp that
is totally natural.
●
Availability of
Weekly Fresh Shrimp: Assures consumers of optimal freshness, taste,
and texture of product which will command premium
prices.
●
Sustainability: Our
naturally grown product does not deplete wild supplies, has no
by-catch kill of marine life, does not damage sensitive ecological
environments and avoids potential risks of imported
seafood.
Subsidiaries
The
Company has three wholly-owned subsidiaries including NaturalShrimp
Corporation, NaturalShrimp Global, Inc. and Natural Aquatic
Systems, Inc.
Employees
As of
March 31, 2019, we had 5 full-time employees. We intend to hire
additional staff and to engage consultants in general
administration on an as-needed basis. We also may engage experts in
general business to advise us in various capacities. None of our
employees are subject to a collective bargaining agreement, and we
believe that our relationship with our employees is
good.
You
should carefully consider the risks described below together with
all of the other information included in our public filings before
making an investment decision with regard to our securities. The
statements contained in or incorporated into this document that are
not historic facts are forward-looking statements that are subject
to risks and uncertainties that could cause actual results to
differ materially from those set forth in or implied by
forward-looking statements. If any of the following events
described in these risk factors actually occur, our business,
financial condition or results of operations could be harmed. In
that case, the trading price of our common stock could decline, and
you may lose all or part of your investment. Moreover, additional
risks not presently known to us or that we currently deem less
significant also may impact our business, financial condition or
results of operations, perhaps materially. For additional
information regarding risk factors, see Item 1 –
“Forward-Looking Statements.”
Risks Related to Our Business and Industry
The
market for our product may be limited, and as a result our business
may be adversely affected.
The
feasibility of marketing our product has been assumed to this point
and there can be no assurance that such assumptions are correct. It
is possible that the costs of development and implementation of our
shrimp production technology may be too expensive to market our
shrimp at a competitive price. It is likewise possible that
competing technologies will be introduced into the marketplace
before or after the introduction of our product to the market,
which may affect our ability to market our product at a competitive
price.
Furthermore, there
can be no assurance that the prices we determine to charge for our
product will be commercially acceptable or that the prices that may
be dictated by the market will be sufficient to provide to us
sufficient revenues to profitably operate and provide a financial
return to our investors.
Our
business and operations are affected by the volatility of prices
for shrimp.
Our
business, prospects, revenues, profitability and future growth are
highly dependent upon the prices of and demand for shrimp. Our
ability to borrow and to obtain additional capital on attractive
terms is also substantially dependent upon shrimp prices. These
prices have been and are likely to continue to be extremely
volatile for seasonal, cyclical and other reasons. Any substantial
or extended decline in the price of shrimp will have a material
adverse effect on our financing capacity and our prospects for
commencing and sustaining any economic commercial production. In
addition, increased availability of imported shrimp can affect our
business by lowering commodity prices. This could reduce the value
of inventories, held both by us and by our customers, and cause
many of our customers to reduce their orders for new products until
they can dispose of their higher cost inventories.
Market
demand for our products may decrease.
We face
competition from other producers of seafood as well as from other
protein sources, such as pork, beef and poultry. The bases on which
we expect to compete include, but may not be limited
to:
●
brand
identification; and
Demand
for our products will be affected by our competitors’
promotional spending. We may be unable to compete successfully on
any or all of these bases in the future, which may have a material
adverse effect on our revenues and results of
operations.
Moreover, although
historically the logistics and perishability of seafood has led to
regionalized competition, the market for fresh and frozen seafood
is becoming increasingly globalized as a result of improved
delivery logistics and improved preservation of the products.
Increased competition, consolidation, and overcapacity may lead to
lower product pricing of competing products that could reduce
demand for our products and have a material adverse effect on our
revenues and results of operations.
Competition and
unforeseen limited sources of supplies in the industry may result
in occasional spot shortages of equipment, supplies and materials.
In particular, we may experience possible unavailability of
post-larvae and materials and services used in our shrimp
production facilities. Such unavailability could result in
increased costs and delays to our operations. If we cannot find the
products, equipment, supplies and materials that we need on a
timely basis, we may have to suspend our production plans until we
find the products, equipment and materials that we
need.
If
we lose our key management and technical personnel, our business
may be adversely affected.
In
carrying out our operations, we will rely upon a small group of key
management and technical personnel including our Chief Executive
Officer, Chairman of the Board and President and Chief Financial
Officer. We do not currently maintain any key man insurance. An
unexpected partial or total loss of the services of these key
individuals could be detrimental to our business.
Our
expansion plans for our shrimp production facilities reflects our
current intent and is subject to change.
Our
current plans regarding expansion of our shrimp production
facilities are subject to change. Whether we ultimately undertake
our expansion plans will depend on the following factors, among
others:
●
availability and
cost of capital;
●
current and future
shrimp prices;
●
costs and
availability of post-larvae shrimp, equipment, supplies and
personnel necessary to conduct these operations;
●
success or failure
of system design and activities in similar areas;
●
changes in the
estimates of the costs to complete production facilities;
and
●
decisions of
operators and future joint venture partners.
We will
continue to gather data about our production facilities, and it is
possible that additional information may cause us to alter our
schedule or determine that a certain facility should not be pursued
at all.
Our
product is subject to regulatory approvals and if we fail to obtain
such approvals, our business may be adversely
affected.
Most of
the jurisdictions in which we operate will require us to obtain a
license for each facility owned and operate in that jurisdiction.
We have obtained and currently hold a license to own and operate
each of our facilities where a license is required. In order to
maintain the licenses, we have to operate our current farms and, if
we pursue acquisitions or construction of new farms, we will need
to obtain additional licenses to operate those farms, where
required. We are also exposed to dilution of the value of our
licenses where a government issues new licenses to fish farmers
other than us, thereby reducing the current value of our fish
farming licenses. Governments may change the way licenses are
distributed or otherwise dilute or invalidate our licenses. If we
are unable to maintain or obtain new fish farming licenses or if
new licensing regulations dilute the value of our licenses, this
may have a material adverse effect on our business.
It is
possible that regulatory authorities could make changes in
regulatory rules and policies and we would not be able to market or
commercialize our product in the intended manner and/or the changes
could adversely impact the realization of our technology or market
potential.
Failure
to ensure food safety and compliance with food safety standards
could result in serious adverse consequences for us.
As our
end products are for human consumption, food safety issues (both
actual and perceived) may have a negative impact on the reputation
of and demand for our products. In addition to the need to comply
with relevant food safety regulations, it is of critical importance
that our products are safe and perceived as safe and healthy in all
relevant markets.
Our
products may be subject to contamination by food-borne pathogens,
such as Listeria monocytogenes, Clostridia, Salmonella and E. Coli
or contaminants. These pathogens and substances are found in the
environment; therefore, there is a risk that one or more of these
organisms and pathogens can be introduced into our products as a
result of improper handling, poor processing hygiene or
cross-contamination by us, the ultimate consumer or any
intermediary. We have little, if any, control over handling
procedures once we ship our products for distribution. Furthermore,
we may not be able to prevent contamination of our shrimp by
pollutants such as polychlorinated biphenyls, or PCBs, dioxins or
heavy metals.
An
inadvertent shipment of contaminated products may be a violation of
law and may lead to product liability claims, product recalls
(which may not entirely mitigate the risk of product liability
claims), increased scrutiny and penalties, including injunctive
relief and plant closings, by regulatory agencies, and adverse
publicity.
Increased quality
demands from authorities in the future relating to food safety may
have a material adverse effect on our business, financial
condition, results of operations or cash flow. Legislation and
guidelines with tougher requirements are expected and may imply
higher costs for the food industry. In particular, the ability to
trace products through all stages of development, certification and
documentation is becoming increasingly required under food safety
regulations. Further, limitations on additives and use of medical
products in the farmed shrimp industry may be imposed, which could
result in higher costs for us.
The
food industry, in general, experiences high levels of customer
awareness with respect to food safety and product quality,
information and traceability. We may fail to meet new and exacting
customer requirements, which could reduce demand for our
products.
Our
success is dependent upon our ability to commercialize our shrimp
production technology.
We
began monthly stocking of post larvae in March of 2019 to commence
commercial sales by the end of 2019. Prior to March 2019, we had
been engaged principally in the research and development of our
technology. Therefore, we have a limited operating history upon
which an evaluation of our prospects can be made. Our prospects
must be considered in light of the risk, uncertainties, expenses,
delays and difficulties associated with the establishment of a new
business in the evolving food industry, as well as those risks
encountered in the shift from development to commercialization of
new technology and products or services based upon such
technology.
We have
developed our first commercial system that employs our technology
but additional work is required to incorporate that technology into
a system capable of accommodating thousands of customers, which is
the minimum capability we believe is necessary to compete in the
marketplace.
Our
shrimp production technology may not operate as
intended.
Although we have
successfully tested our technology, our approach, which is still
fairly new in the industry, may not operate as intended or may be
subject to other factors that we have not yet considered. These may
include the impact of new pathogens or other biological risks, low
oxygen levels, algal blooms, fluctuating seawater temperatures,
predation or escapes. Any of the foregoing may result in physical
deformities to our shrimp or affect our ability to increase shrimp
production, which may have a material adverse effect on our
operations.
Our
success is dependent upon our ability to protect our intellectual
property.
Our
success will depend in part on our ability to obtain and enforce
protection for our intellectual property in the United States and
other countries. It is possible that our intellectual property
protection could fail. It is possible that the claims for patents
or other intellectual property protections could be denied or
invalidated or that our protections will not be sufficiently broad
to protect our technology. It is also possible that our
intellectual property will not provide protection against
competitive products, or will not otherwise be commercially
viable.
Our
commercial success will depend in part on our ability to
commercialize our shrimp production without infringing on patents
or proprietary rights of others. We cannot guarantee that other
companies or individuals have not or will not independently develop
substantially equivalent proprietary rights or that other parties
have not or will not be issued patents that may prevent the sale of
our products or require licensing and the payment of significant
fees or royalties in order for us to be able to carry on our
business.
As
the owner of real estate, we are subject to risks under
environmental laws, the cost of compliance with which and any
violation of which could materially adversely affect
us.
Our
operating expenses could be higher than anticipated due to the cost
of complying with existing and future laws and regulations. Various
environmental laws may impose liability on the current or prior
owner or operator of real property for removal or remediation of
hazardous or toxic substances. Current or prior owners or operators
may also be liable for government fines and damages for injuries to
persons, natural resources and adjacent property. These
environmental laws often impose liability whether or not the owner
or operator knew of, or was responsible for, the presence or
disposal of the hazardous or toxic substances. The cost of
complying with environmental laws could materially adversely affect
our results of operations, and such costs could exceed the value of
our facility. In addition, the presence of hazardous or toxic
substances, or the failure to properly manage, dispose of or
remediate such substances, may adversely affect our ability to use,
sell or rent our property or to borrow using our property as
collateral which, in turn, could reduce our revenue and our
financing ability. We have not engaged independent environmental
consultants to assess the likelihood of any environmental
contamination or liabilities and have not obtained a Phase I
environmental assessment on our property. However, even if we did
obtain a Phase I environmental assessment report, such reports are
limited in scope and may not reveal all existing material
environmental contamination.
Risks Related to Financing Our Business
Our
independent registered public accounting firm has issued its audit
opinion on our consolidated financial statements appearing in our
annual report on Form 10-K, including an explanatory paragraph as
to substantial doubt with the respect to our ability to continue as
a going concern.
The accompanying
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America, assuming we will continue as a going concern, which
contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. For the year ended
March 31, 2019, we had a net loss of approximately $7,211,000. At
March 31, 2019, we had an accumulated deficit of approximately
$41,223,000 and a working capital deficit of approximately
$3,773,000. These factors raise substantial doubt about our ability
to continue as a going concern, within one year from the issuance
date of this filing. Our ability to continue as a going concern is
dependent on our ability to raise the required additional capital
or debt financing to meet short and long-term operating
requirements. We 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 we raise
additional funds through the issuance of equity or convertible debt
securities, the percentage ownership of our 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, we may not be able to take advantage of prospective business
endeavors or opportunities, which could significantly and
materially restrict our operations. If we are unable to obtain the
necessary capital, we may have to cease operations.
Expansion
of our operations will require significant capital expenditures for
which we may be unable to obtain sufficient financing.
Our
need for additional capital may adversely affect our financial
condition. We have no sustained history of earnings and have
operated at a loss since we commenced business. We have relied, and
continue to rely, on external sources of financing to meet our
capital requirements, to continue developing our proprietary
technology, to build our production facilities, and to otherwise
implement our corporate development and investment
strategies.
We plan
to obtain the future funding that we will need through the debt and
equity markets but there can be no assurance that we will be able
to obtain additional funding when it is required. If we fail to
obtain the funding that we need when it is required, we may have to
forego or delay potentially valuable opportunities to build shrimp
production facilities or default on existing funding commitments to
third parties. Our limited operating history may make it difficult
to obtain future financing.
Our
ability to generate positive cash flows is uncertain.
To
develop and expand our business, we will need to make significant
up-front investments in our manufacturing capacity and incur
research and development, sales and marketing and general and
administrative expenses. In addition, our growth will require a
significant investment in working capital. Our business will
require significant amounts of working capital to meet our
production requirements and support our growth.
We
cannot provide any assurance that we will be able to raise the
capital necessary to meet these requirements. If adequate funds are
not available or are not available on satisfactory terms, we may be
required to significantly curtail our operations and may not be
able to fund our current production requirements - let alone fund
expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance our products, or respond to
competitive pressures. Any failure to obtain such additional
financing could have a material adverse effect on our business,
results of operations and financial condition.
We have a history of operating losses, anticipate future losses and
may never be profitable.
We
have experienced significant operating losses in each period since
we began investing resources in our production of shrimp. These
losses have resulted principally from research and development,
sales and marketing, and general and administrative expenses
associated with the development of our business. During the year
ended March 31, 2019, we recorded a net loss applicable to common
shareholders of $7,210,581, or $0.04 per share, as compared with
$5,285,089, or $0.05 per share, of the corresponding period in
2018. We expect to continue to incur operating losses until we
reach sufficient commercial scale of our product to cover our
operating costs. We cannot be certain when, if ever, we will become
profitable. Even if we were to become profitable, we might not be
able to sustain such profitability on a quarterly or annual
basis.
Because
we may never have net income from our operations, our business may
fail.
We have
no history of revenues and profitability from operations. There can
be no assurance that we will ever operate profitably. Our success
is significantly dependent on uncertain events, including
successful development of our technology, establishing satisfactory
manufacturing arrangements and processes, and distributing and
selling our products.
Before
receiving revenues from sales to customers of our products, we
anticipate that we will incur increased operating expenses without
realizing any revenues. We therefore expect to incur significant
losses. If we are unable to generate significant revenues from
sales of our products, we will not be able to earn profits or
continue operations. We can provide no assurance that we will
generate any revenues or ever achieve profitability. If we are
unsuccessful in addressing these risks, our business will fail and
investors may lose all of their investment in our
Company.
We
need to raise additional funds and such funds may not be available
on acceptable terms or at all.
We may
consider issuing additional debt or equity securities in the future
to fund our business plan, for potential acquisitions or
investments, or for general corporate purposes. If we issue equity
or convertible debt securities to raise additional funds, our
existing stockholders may experience dilution, and the new equity
or debt securities may have rights, preferences and privileges
senior to those of our existing stockholders. If we incur
additional debt, it may increase our leverage relative to our
earnings or to our equity capitalization, requiring us to pay
additional interest expenses. We may not be able to obtain
financing on favorable terms, or at all, in which case, we may not
be able to develop or enhance our products, execute our business
plan, take advantage of future opportunities or respond to
competitive pressures.
Our
margins fluctuate which leads to further uncertainty in our
profitability model.
While
we will have the potential ability to negotiate prices that benefit
our clients and affect our profitability as it garners market-share
and increases our book of business, margins in the aquaculture
business are fluid, and our margins vary based upon production
volume and the customer. This may lead to continued uncertainty in
margins from quarter to quarter.
Risks Related to Doing Business in Foreign Countries
Our
operations in foreign countries are subject to political, economic,
legal and regulatory risks.
The
following aspects of political, economic, legal and regulatory
systems in foreign countries create uncertainty with respect to
many of the legal and business decisions that we make:
●
cancellation or
renegotiation of contracts due to uncertain enforcement and
recognition procedures of judicial decisions;
●
disadvantages of
competing against companies from countries that are not subject to
U.S. laws and regulations, including the Foreign Corrupt Practices
Act;
●
changes in foreign
laws or regulations that adversely impact our
business;
●
uncertainty
regarding tariffs that may be imposed against certain international
countries from time-to-time;
●
changes in tax laws
that adversely impact our business, including, but not limited to,
increases in the tax rates and retroactive tax claims;
●
royalty and license
fee increases;
●
expropriation or
nationalization of property;
●
foreign exchange
controls;
●
import and export
regulations;
●
changes in
environmental controls;
●
risks of loss due
to civil strife, acts of war and insurrection; and
●
other risks arising
out of foreign governmental sovereignty over the areas in which our
operations are conducted.
Consequently, our
development and production activities in foreign countries may be
substantially affected by factors beyond our control, any of which
could materially adversely affect our business, prospects,
financial position and results of operations. Furthermore, in the
event of a dispute arising from our operations in other countries,
we may be subject to the exclusive jurisdiction of courts outside
the United States or may not be successful in subjecting non-U.S.
persons or entities to the jurisdiction of the courts in the United
States, which could adversely affect the outcome of a
dispute.
The
cost of complying with governmental regulations in foreign
countries may adversely affect our business
operations.
We may
be subject to various governmental regulations in foreign
countries. These regulations may change depending on prevailing
political or economic conditions. In order to comply with these
regulations, we believe that we may be required to obtain permits
for producing shrimp and file reports concerning our operations.
These regulations affect how we carry on our business, and in order
to comply with them, we may incur increased costs and delay certain
activities pending receipt of requisite permits and approvals. If
we fail to comply with applicable regulations and requirements, we
may become subject to enforcement actions, including orders issued
by regulatory or judicial authorities requiring us to cease or
curtail our operations, or take corrective measures involving
capital expenditures, installation of additional equipment or
remedial actions. We may be required to compensate third parties
for loss or damage suffered by reason of our activities, and may
face civil or criminal fines or penalties imposed for violations of
applicable laws or regulations. Amendments to current laws,
regulations and permits governing our operations and activities
could affect us in a materially adverse way and could force us to
increase expenditures or abandon or delay the development of shrimp
production facilities.
Our
international operations will involve the use of foreign
currencies, which will subject us to exchange rate fluctuations and
other currency risks.
Currently, we have
no revenues from international operations. In the future, however,
any revenues and related expenses of our international operations
will likely be generally denominated in local currencies, which
will subject us to exchange rate fluctuations between such local
currencies and the U.S. dollar. These exchange rate fluctuations
will subject us to currency translation risk with respect to the
reported results of our international operations, as well as to
other risks sometimes associated with international operations. In
the future, we could experience fluctuations in financial results
from our operations outside of the United States, and there can be
no assurance we will be able, contractually or otherwise, to reduce
the currency risks associated with our international
operations.
Our
insurance coverage may be inadequate to cover all significant risk
exposures.
We will
be exposed to liabilities that are unique to the products we
provide. While we intend to maintain insurance for certain risks,
the amount of our insurance coverage may not be adequate to cover
all claims or liabilities, and we may be forced to bear substantial
costs resulting from risks and uncertainties of our business. It is
also not possible to obtain insurance to protect against all
operational risks and liabilities. The failure to obtain adequate
insurance coverage on terms favorable to us, or at all, could have
a material adverse effect on our business, financial condition and
results of operations. We do not have any business interruption
insurance. Any business disruption or natural disaster could result
in substantial costs and diversion of resources.
Risks Related to Ownership of our Common Stock
We
have limited capitalization and may require financing, which may
not be available.
We have
limited capitalization, which increases our vulnerability to
general adverse economic and industry conditions, limits our
flexibility in planning for or reacting to changes in our business
and industry and may place us at a competitive disadvantage to
competitors with sufficient or excess capitalization. If we are
unable to obtain sufficient financing on satisfactory terms and
conditions, we will be forced to curtail or abandon our plans or
operations. Our ability to obtain financing will depend upon a
number of factors, many of which are beyond our
control.
The
trading of our common stock may have liquidity
fluctuations.
Although our common
stock is listed for quotation on the OTCQB, under the symbol
“SHMP”, and the trading volume of our stock has
recently increased significantly, such liquidity may not continue
to be sustainable. As a result, any trading price of our common
stock may not be an accurate indicator of the valuation of our
common stock. Any trading in our shares could have a significant
effect on our stock price. If the public market for our common
stock declines, then investors may not be able to resell the shares
of our common stock that they have purchased and may lose all of
their investment. No assurance can be given that an active market
will continue or that a stockholder will be able to liquidate their
shares of common stock without considerable delay, if at all.
Furthermore, our stock price may be impacted by factors that are
unrelated or disproportionate to our operating performance. These
market fluctuations, as well as general economic, political and
market conditions, such as recessions, interest rates or
international currency fluctuations may adversely affect the market
price and liquidity of our common stock.
Our
stock price may be volatile.
The
market price of our common stock is likely to be highly volatile
and could fluctuate widely in price in response to various factors,
many of which are beyond our control, including the
following:
●
our stock being
held by a small number of persons whose sales (or lack of sales)
could result in positive or negative pricing pressure on the market
price for our common stock;
●
actual or
anticipated variations in our quarterly operating
results;
●
changes in our
earnings estimates;
●
our ability to
obtain adequate working capital financing;
●
changes in market
valuations of similar companies;
●
publication (or
lack of publication) of research reports about us;
●
changes in
applicable laws or regulations, court rulings, enforcement and
legal actions;
●
loss of any
strategic relationships;
●
additions or
departures of key management personnel;
●
actions by our
stockholders (including transactions in our shares);
●
speculation in the
press or investment community;
●
increases in market
interest rates, which may increase our cost of
capital;
●
changes in our
industry;
●
competitive pricing
pressures;
●
our ability to
execute our business plan; and
●
economic and other
external factors.
In
addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market
fluctuations may also materially and adversely affect the market
price of our common stock.
Our existing stockholders may experience significant dilution from
the sale of our common stock pursuant to the GHS financing
agreement.
The
sale of our common stock to GHS Investments LLC in accordance with
the Financing Agreement we entered into with GHS on August 21, 2018
may have a dilutive impact on our shareholders. As a result, the
market price of our common stock could decline. In addition, the
lower our stock price is at the time we exercise our put options,
the more shares of our common stock we will have to issue to GHS in
order to exercise a put under the Financing Agreement. If our stock
price decreases, then our existing shareholders would experience
greater dilution for any given dollar amount raised through the
offering.
The
perceived risk of dilution may cause our stockholders to sell their
shares, which may cause a decline in the price of our common stock.
Moreover, the perceived risk of dilution and the resulting downward
pressure on our stock price could encourage investors to engage in
short sales of our common stock. By increasing the number of shares
offered for sale, material amounts of short selling could further
contribute to progressive price declines in our common
stock.
Our
stock is categorized as a penny stock. Trading of our stock may be
restricted by the SEC’s penny stock regulations which may
limit a stockholder’s ability to buy and sell our
stock.
Our
stock is categorized as a “penny stock”, as that term
is defined in SEC Rule 3a51-1, which generally provides that
“penny stock”, is any equity security that has a market
price (as defined) less than US$5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules,
including Rule 15g-9, which impose additional sales practice
requirements on broker-dealers who sell to persons other than
established customers and accredited investors. The penny stock
rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC
which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations for
the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements
showing the market value of each penny stock held in the
customer’s account. The bid and offer quotations, and the
broker-dealer and salesperson compensation information, must be
given to the customer orally or in writing prior to effecting the
transaction and must be given to the customer in writing before or
with the customer’s confirmation. In addition, the penny
stock rules require that prior to a transaction in a penny stock
not otherwise exempt from these rules, the broker-dealer must make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in
the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade our securities and reduces the
number of potential investors. We believe that the penny stock
rules discourage investor interest in and limit the marketability
of our common stock.
According to SEC
Release No. 34-29093, the market for “penny stocks” has
suffered in recent years from patterns of fraud and abuse. Such
patterns include: (1) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or
issuer; (2) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (3)
boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (4)
excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same
securities by promoters and broker-dealers after prices have been
manipulated to a desired level, along with the resulting inevitable
collapse of those prices and with consequent investor losses. The
occurrence of these patterns or practices could increase the future
volatility of our share price.
FINRA
sales practice requirements may also limit a stockholder’s
ability to buy and sell our stock.
In
addition to the “penny stock” rules described above,
FINRA has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low-priced securities
to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s
financial status, tax status, investment objectives and other
information. Under interpretations of these rules, FINRA believes
that there is a high probability that speculative low-priced
securities will not be suitable for at least some customers. The
FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock and have an adverse
effect on the market for our shares.
To
date, we have not paid any cash dividends and no cash dividends
will be paid in the foreseeable future.
We do
not anticipate paying cash dividends on our common stock in the
foreseeable future and we may not have sufficient funds legally
available to pay dividends. Even if the funds are legally available
for distribution, we may nevertheless decide not to pay any
dividends. We presently intend to retain all earnings for our
operations.
The
existence of indemnification rights to our directors, officers and
employees may result in substantial expenditures by our Company and
may discourage lawsuits against our directors, officers and
employees.
Our
bylaws contain indemnification provisions for our directors,
officers and employees, and we have entered into indemnification
agreements with our officer and directors. The foregoing
indemnification obligations could result in us incurring
substantial expenditures to cover the cost of settlement or damage
awards against directors and officers, which we may be unable to
recoup. These provisions and resultant costs may also discourage us
from bringing a lawsuit against directors and officers for breaches
of their fiduciary duties, and may similarly discourage the filing
of derivative litigation by our stockholders against our directors
and officers even though such actions, if successful, might
otherwise benefit us and our stockholders.
If
we fail to develop or maintain an effective system of internal
controls, we may not be able to accurately report our financial
results or prevent financial fraud. As a result, current and
potential stockholders could lose confidence in our financial
reporting.
We are
subject to the risk that sometime in the future, our independent
registered public accounting firm could communicate to the board of
directors that we have deficiencies in our internal control
structure that they consider to be “significant
deficiencies.” A “significant deficiency” is
defined as a deficiency, or a combination of deficiencies, in
internal controls over financial reporting such that there is more
than a remote likelihood that a material misstatement of the
entity’s financial statements will not be prevented or
detected by the entity’s internal controls.
Effective internal
controls are necessary for us to provide reliable financial reports
and effectively prevent fraud. If we cannot provide reliable
financial reports or prevent fraud, we could be subject to
regulatory action or other litigation and our operating results
could be harmed. We are required to document and test our internal
control procedures to satisfy the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act” or “SOX”), which requires our management to
annually assess the effectiveness of our internal control over
financial reporting.
We
currently are not an “accelerated filer” as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section
404”) requires us to include an internal control report with
our Annual Report on Form 10-K. That report must include
management’s assessment of the effectiveness of our internal
control over financial reporting as of the end of the fiscal year.
This report must also include disclosure of any material weaknesses
in internal control over financial reporting that we have
identified. As of March 31, 2019, the management of the Company
assessed the effectiveness of the Company’s internal control
over financial reporting based on the criteria for effective
internal control over financial reporting established in Internal
Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(“COSO”) and SEC guidance on conducting such
assessments. Management concluded, during the fiscal year ended
March 31, 2019, that the Company’s internal controls and
procedures were not effective to detect the inappropriate
application of U.S. GAAP rules. 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. A material weakness in the effectiveness of our
internal controls over financial reporting could result in an
increased chance of fraud and the loss of customers, reduce our
ability to obtain financing and require additional expenditures to
comply with these requirements, each of which could have a material
adverse effect on our business, results of operations and financial
condition. For additional information, see Item 9A – Controls
and Procedures.
Our
intended business, operations and accounting are expected to be
substantially more complex than they have been in the past. It may
be time consuming, difficult and costly for us to develop and
implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial
reporting, internal controls and other finance personnel in order
to develop and implement appropriate internal controls and
reporting procedures. If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, then we may not be
able to obtain the independent accountant certifications required
by such act, which may preclude us from keeping our filings with
the SEC current.
If we
are unable to maintain the adequacy of our internal controls, as
those standards are modified, supplemented, or amended from time to
time, we may not be able to ensure that we can conclude on an
ongoing basis that we have effective internal control over
financial reporting in accordance with Section 404. Failure to
achieve and maintain an effective internal control environment
could cause us to face regulatory action and cause investors to
lose confidence in our reported financial information, either of
which could adversely affect the value of our common
stock.
As
a public company, we will incur significant increased operating
costs and our management will be required to devote substantial
time to new compliance initiatives.
Although our
management has significant experience in the food industry, it has
only limited experience operating the Company as a public company.
To operate effectively, we will be required to continue to
implement changes in certain aspects of our business and develop,
manage and train management level and other employees to comply
with on-going public company requirements. Failure to take such
actions, or delay in the implementation thereof, could have a
material adverse effect on our business, financial condition and
results of operations.
The
Sarbanes-Oxley Act, as well as rules subsequently implemented by
the SEC, imposes various requirements on public companies,
including requiring establishment and maintenance of effective
disclosure and financial controls and changes in corporate
governance practices. Our management and other personnel will need
to devote a substantial amount of time to these new compliance
initiatives. Moreover, these rules and regulations will increase
our legal and financial compliance costs and will make some
activities more time-consuming and costly.
ITEM 1B. UNRESOLVED STAFF
COMMENTS
Not
Applicable.
Our
principal offices are located at 5080 Spectrum Drive, Suite 1000,
Addison, TX, where we pay $550 per month under an operating lease
that expires on July 31, 2019. The Company expects to renew this
lease for the foreseeable futureEffective August 1, 2019, the Company has signed a
1 year lease for offices located at 15150 Preston Rd., Suite 300,
Dallas, TX 75248, where we will pay $650 per
month.
We also
own a pilot-production facility at 833 County Road 583, Medina, TX,
which consists of a 32,760 square foot production facility on 37
acres.
We own
no other properties.
Our
registered agent is Business Filings Incorporated, located at 701
S. Carson Street, Suite 200, Carson City, Nevada
89701.
ITEM 3. LEGAL PROCEEDINGS
Other
than described below, we know of no material proceedings in which
any of our directors, officers or affiliates, or any registered or
beneficial stockholder is a party adverse to our company or our
subsidiaries or has a material interest adverse to our company or
our subsidiaries. To our knowledge, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body
pending or, to the knowledge of the executive officers of our
Company, threatened against or affecting our Company or our common
stock, in which an adverse decision could have a material adverse
effect.
On
April 30, 2019, a complaint was filed against the Company in the
U.S. District Court in Dallas, Texas alleging that the Company
breached a provision in a common stock purchase warrant (the
“Vista Warrant”) issued by the Company to Vista Capital
Investments, LLC (“Vista”). Vista alleges that the
Company failed to issue certain shares of the Company’s
common stock as was required under the terms of the Vista Warrant.
Vista is currently seeking money damages in the approximate amount
of $7,000,000, which the Company believes is unwarranted and
excessive, as well as costs and reimbursement of expenses. As of
the date hereof, no hearing has been scheduled, but the Company is
vigorously defending itself against these claims, preparing a
counter-claim against Vista and taking such other appropriate
action, in addition to seeking for other costs and relief as may be
appropriate.
ITEM 4. MINE SAFETY DISCLOSURES
Not
applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our
common stock is quoted on the OTCQB, under the symbol
“SHMP.” On June 24, 2019, the closing price of our
common stock reported by the OTC Markets was $0.12 per
share.
Transfer Agent
Our
transfer agent is Transhare Corporation, 15500 Roosevelt Blvd,
Suite 302, Clearwater, FL 33760. Their telephone number is (303)
662-1112.
Holders of Common Stock
As of
June 24, 2019, there were 82 shareholders of record of our common
stock. As of such date, 313,254,149 shares were issued and
outstanding.
Dividends
We have
never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to increase our
working capital and do not anticipate paying any cash dividends in
the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation
Plans
There
were no equity compensation plans formally approved by the
shareholders of the Company as of March 31, 2019.
Recent Sales of Unregistered Securities
Convertible Debentures
During
April 2018, in connection with the July 31, 2017 convertible note,
the remainder of the first closing was fully converted into
1,225,627 common shares of the Company, with a conversion price of
$0.02.
During
May and June 2018, in connection with the July 31, 2017 convertible
note, the remainder of the second closing was fully converted into
2,810,725 common shares of the Company, with a conversion price of
$0.01.
On July
17, 2018, the Company issued 6,719,925 common shares, upon cashless
exercise of the warrants granted in connection with the first
closing of the July 31, 2017 convertible note.
On
August 28, 2018, the Company issued 4,494,397 common shares, upon
cashless exercise of the warrants granted in connection with the
second closing of the July 31, 2017 convertible note.
During
April through June 2018, in connection with the August 28, 2017
convertible note, the first closing was fully converted into
8,332,582 common shares of the Company, with conversion prices
ranging from $0.01 to $0.03.
During
May 2018, in connection with the August 28, 2017 convertible note,
the second closing was fully converted into 5,072,216 common shares
of the Company, with conversion prices ranging from $0.01 to
$0.20.
During
the first fiscal quarter of 2019, in connection with the September
11, 2017 convertible note, the holder converted $85,000 of
principal into 9,200,600 common shares of the Company, with
conversion prices ranging from $0.01 to $0.02.
During
the second fiscal quarter of 2019, in connection with the September
11, 2017 convertible note, the holder converted $20,654 of
principal and $3,700 of accrued interest into 5,436,049 common
shares of the Company, at a conversion price of $0.01.
During
the third fiscal quarter of 2019, in connection with the September
11, 2017 convertible note, the remaining outstanding principal and
$1,475 of accrued interest was converted into 27,186,186 common
shares of the Company, at a conversion price ranging from $0.002
to
$0.003.
During
April 2018, in connection with the September 12, 2017 convertible
note, the holder converted the remaining principal of $64,000 into
2,611,164 common shares of the Company, at conversion prices
ranging from $0.02 to $0.03.
During
the first fiscal quarter of 2019, in connection with the September
28, 2017 convertible note, the holder converted approximately
$43,000 of principal plus accrued interest into 3,800,000 common
shares of the Company, at a conversion price of $0.01.
During
the second quarter of 2019, in connection with the September 28,
2017 convertible note, the holder converted the remaining principal
plus accrued interest into 4,517,493 common shares of the Company,
at a conversion price of $0.01.
During
the first fiscal quarter of 2019, in connection with the November
14, 2017 convertible notes, the holder fully converted the first
debenture into 4,834,790 common shares of the Company, at a
conversion price of $0.01.
On
August 7, 2018, in connection with the December 20, 2017
convertible note, the holder converted $25,000 in principal and
$1,178 of accrued interest into 4,363,013 common shares of the
Company, at a conversion price of $0.01.
During
the third fiscal quarter of 2019, in connection with the December
20, 2017 convertible note, the holder converted $86,000 in
principal and approximately $6,000 of accrued interest into
27,288,948 common shares of the Company, at a conversion price of
$0.003.
During
the second fiscal quarter of 2019, in connection with the January
29, 2018 convertible debentures, the holder fully converted the
first debenture into 7,137,222 common shares of the Company, at a
conversion price of $0.01.
During
the third fiscal quarter of 2019, in connection with the January
29, 2018 convertible debentures, the holder fully converted the
second debenture into 12,551,676 common shares of the Company, at a
conversion price of $0.003.
On
November 11, 2018, in connection with the January 29, 2018
convertible notes, the holder fully converted the third debenture
into 2,666,667 common shares of the Company at a conversion price
of $0.02.
During
the second fiscal quarter of 2019, in connection with the March 9,
2018 convertible note, the holder converted $29,464 of principal
into 4,500,000 common shares of the Company, at a conversion price
of $0.01.
On
November 26, 2018, in connection with the March 9, 2018 convertible
note, the holder converted $16,168 of principal into 4,732,902
common shares of the Company at a conversion price of
$0.003.
During
the third fiscal quarter of 2019, in connection with the March 20,
2018 convertible note, the holder converted $91,592 of principal
into 16,870,962 common shares of the Company at a conversion price
of $0.01.
On
December 6, 2018, in connection with the March 21, 2018 convertible
note, the holder converted $20,160 of principal into 6,000,000
common shares of the Company, at a conversion price of
$0.003.
During
the third fiscal quarter of 2019, the holder fully converted the
April 10, 2018 convertible note into 18,832,713 common shares of
the Company, at a conversion price of $0.003.
During
the third fiscal quarter of 2019, in connection with the April 17,
2018 convertible note, the holder converted $35,000 of principal
into 13,246,753 common shares of the Company, at a conversion price
of $0.003.
On
September 14, 2018, the Company issued 3,000,000 common shares to
the holder of the September 14, 2018, convertible note as a
commitment fee., which was valued at $34,500, based on the market
value of the shares of common stock at the closing date of
$0.012.
On
December 13, 2018, in connection with the September 14, 2018
convertible note, the holder converted $11,200 of principal into
4,000,000 common shares of the Company, at a conversion price of
$0.003.
The
Company issued 10,000,000 and 6,093,683 shares of their common
stock on January 11, 2019 and February 8, 2019, respectively, upon
cashless exercise of the warrants granted in connection with the
September 11, 2017 Debenture.
On
January 28, 2019, the holder converted the $50,000 of principal of
the July 27, 2018 debenture back end note into 6,561,679 shares of
common stock of the Company, at a conversion price of
$0.01.
On
February 6, 2019, in connection with the March 9, 2018 debenture,
the holder converted the remaining principal balance of
approximately $27,000 and accrued interest into 2,542,702 shares of
common stock of the Company, at a conversion price of
$0.01.
During
the fourth quarter of 2019, in connection with the March 20, 2018
debenture, the holder converted $46,759 of principal and $7,142 of
accrued interest into 5,670,707 shares of common stock of the
Company, at conversion prices ranging from $0.004 to
$0.03.
During
the fourth quarter of 2019, in connection with the March 21, 2018,
the holder converted the remaining principal balance of $43,488 and
$1,127 of accrued interest into 4,921,835 shares of common stock of
the Company, at conversion prices ranging from $0.01 to
$0.03.
During
the fourth fiscal quarter of 2019, in connection with the August
24, 2018 convertible note, the holder converted $57,164 of
principal into 9,291,354 shares of common stock of the Company, at
a conversion price of $0.01.
The
foregoing 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 and Rule 506 of Regulation D. The foregoing
description of these issuances does not purport to be complete and
are qualified in their entirety by reference to the full text of
the stock purchase agreements and convertible notes as part of the
Companies exhibits incorporated herein by reference.
Sale and Issuance of Common Stock
On
April 12, 2018, the Company sold 220,000 shares of its common stock
at $0.77 per share, for a total financing of $15,400.
On
February 14, 2019, the Company issued 225,000 shares of its common
stock to the original noteholder of the March 20, 2018 convertible
debenture with a fair value of the shares of $72,450 based on the
market price of $0.32 on the date of issuance.
The
Company utilized the funds from each of the foregoing sales of
common stock for operating expenses, capital expenditures and for
general working capital. The foregoing 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 and Rule 506
of Regulation D.
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 holders shall have a 60 to 1 voting rights such that e ach
share shall vote as 60 shares of common stock. The Series A PS
holders shall not be entitled to receive dividends, is 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 $0.001 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 PS. 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
stock of the Company as are outstanding at the time.
On
August 21, 2018, the Company’s shareholders exchanged
75,000,000 of the shares of common stock of the Company which they
held, into 5,000,000 newly issued Series A PS. The shares of common
stock were returned to the treasury and cancelled.
Equity Financing Agreement
On
August 2, 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 the
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
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 of
date of the Note.
On
October 3, 2018, the Company put to GHS for the issuance of
2,814,682 shares of common stock, at $0.0088 per share, 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 per share, for a total
of $16,924.
On
November 13, 2108, the Company put to GHS for the issuance of
6,779,397 shares of common stock, at $0.0046 per share, for a total
of $31,456.
On
December 10,2018, the Company put to GHS for the issuance of
6,880,004 shares of common stock, at $0.0133 for a total of
$91,366.
On
March 25, 2019, the Company put to GHS for the issuance of
2,131,894 shares of common stock, at $0.141, for a total of
$300,000.
The
Company utilized the funds from each of the foregoing sales of
common stock for operating expenses, capital expenditures and for
general working capital.
Issuer Purchases of Equity Securities
During
the fiscal year ended March 31, 2019, we did not repurchase any of
our equity securities.
ITEM 6. SELECTED FINANCIAL DATA
Not
applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Notice Regarding Forward Looking Statements
The
information contained in Item 7 contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results may materially differ from those projected
in the forward-looking statements as a result of certain risks and
uncertainties set forth in this report. Although management
believes that the assumptions made and expectations reflected in
the forward-looking statements are reasonable, there is no
assurance that the underlying assumptions will, in fact, prove to
be correct or that actual results will not be different from
expectations expressed in this report.
We
desire to take advantage of the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995.
This filing contains a number of forward-looking statements that
reflect management’s current views and expectations with
respect to our business, strategies, products, future results and
events, and financial performance. All statements made in this
filing other than statements of historical fact, including
statements addressing operating performance, clinical developments
which management expects or anticipates will or may occur in the
future, including statements related to our technology, market
expectations, future revenues, financing alternatives, statements
expressing general optimism about future operating results, and
non-historical information, are forward looking statements. In
particular, the words “believe,” “expect,”
“intend,” “anticipate,”
“estimate,” “may,” variations of such
words, and similar expressions identify forward-looking statements,
but are not the exclusive means of identifying such statements, and
their absence does not mean that the statement is not
forward-looking. These forward-looking statements are subject to
certain risks and uncertainties, including those discussed below.
Our actual results, performance or achievements could differ
materially from historical results as well as those expressed in,
anticipated, or implied by these forward-looking statements. We do
not undertake any obligation to revise these forward-looking
statements to reflect any future events or
circumstances.
Readers
should not place undue reliance on these forward-looking
statements, which are based on management’s current
expectations and projections about future events, are not
guarantees of future performance, are subject to risks,
uncertainties and assumptions (including those described below),
and apply only as of the date of this filing. Our actual results,
performance or achievements could differ materially from the
results expressed in, or implied by, these forward-looking
statements. Factors which could cause or contribute to such
differences include, but are not limited to, the risks to be
discussed in this Annual Report on Form 10-K and in the press
releases and other communications to shareholders issued by us from
time to time which attempt to advise interested parties of the
risks and factors which may affect our business. We undertake no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise. For additional information regarding forward-looking
statements, see Item 1 – Our Business –
“Forward-Looking Statements.”
Use of Generally Accepted Accounting Principles
(“GAAP”) Financial Measures
We use
United States GAAP financial measures in the section of this report
captioned “Management’s Discussion and Analysis or Plan
of Operation” (MD&A), unless otherwise noted. All of the
GAAP financial measures used by us in this report relate to the
inclusion of financial information. This discussion and analysis
should be read in conjunction with our financial statements and the
notes thereto included elsewhere in this annual report. All
references to dollar amounts in this section are in United States
dollars, unless expressly stated otherwise. Please see Item 1A
– “Risk Factors” for a list of our risk
factors.
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
(“NSC”), a Delaware corporation, and NaturalShrimp
Global, Inc. (“NS Global”), a Delaware corporation, 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.
(“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. On December 25, 2018, we were awarded U.S.
Patent “Recirculating Aquaculture System and Treatment Method
for Aquatic Species” covering all indoor aquatic species that
utilizes proprietary art.
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. Our
initial system was successful, but we 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 then 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. 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. The first post larvae (PL) arrived from the hatchery
at the end of June 2018, and we expect to use the first harvest to
market, sample, and refine production specifications by the third
calendar quarter of 2019.
Results of Operations
Comparison of the Fiscal Year Ended March 31, 2019 and the Fiscal
Year Ended March 31, 2018
Revenue
We have
not earned any significant revenues since our
inception.
Expenses
Our
expenses for the year ended March 31, 2019 are summarized as
follows, in comparison to our expenses for the year ended March 31,
2018:
|
|
|
|
|
|
|
|
Salaries and
related expenses
|
$422,160
|
$352,757
|
|
Rent
|
12,134
|
11,197
|
|
Professional
fees
|
234,932
|
278,037
|
|
Other general and
administrative expenses
|
200,595
|
443,508
|
|
Facility
operations
|
100,596
|
27,789
|
|
Depreciation
|
30,296
|
70,894
|
|
Total
|
$1,000,713
|
$1,184,182
|
Operating expenses
for the year ended March 31, 2019 were $1,000,713, representing a
decrease of 15% compared to operating expenses of $1,184,182 for
the same period in 2018. The overall 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. The primary reason for the change in general and
administration costs is that in the year ended March 31, 2018 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. Depreciation expense decreased as many
of the fixed assets currently in use have become fully depreciated,
and the fixed assets related to the facility are still in
construction in progress and depreciation has not yet begun on
these assets.
Liquidity, Financial Condition and Capital Resources
As of
March 31, 2019, we had cash on hand of $137,499 and a working
capital deficiency of approximately $3,773,000.
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
increase in working capital deficiency for the year ended March 31,
2019 is mainly due to a slight decrease in current assets, and an
approximately $3.5 decrease in the derivative and warrant
liabilities, offset by an increase in the current maturity of the
bank loan, discussed in further detail below.
Working Capital Deficiency
Our
working capital deficiency as of March 31, 2019, in comparison to
our working capital deficiency as of March 31, 2018, can be
summarized as follows:
|
|
|
|
|
|
|
|
|
Current
assets
|
$178,685
|
$260,179
|
|
Current
liabilities
|
3,951,811
|
7,024,615
|
|
Working capital
deficiency
|
$3,773,126
|
$6,764,435
|
The
decrease in current assets is mainly due to the decrease of
approximately $205,000 in Notes receivable, which represents
funding on convertible debentures back-end notes, offset by an
approximate $113,000 increase in cash. The decrease in current
liabilities is primarily due to a decrease in the derivative and
warrant liabilities. The decrease in the derivatives included
approximately $4,069,000 of the derivative liability being
reclassed to equity upon conversion of the related convertible
debentures, and a decrease in the fair value of the derivatives of
approximately $1,320,000. This derivative liability decrease is
offset by the new convertible debentures entered into during the
current year also containing embedded derivatives, which were
bifurcated and increased the fair value of the derivative liability
by $2,090,000. Additionally, the warrant liability decreased by
$184,000 due to the exercise of warrants, as well offset by an
increase in the fair value of the warrants of $47,000.
Approximately $19,000 of the convertible debentures outstanding at
March 31, 2019, were converted subsequent to year end, and the
related derivative liability reclassed to equity. These primary
causes for the decrease in current liabilities is offset by slight
increases in accounts payable and accrued interest and expenses.
Another increase is due to the entire balance of the bank loan now
being current, as the outstanding balance is due January
2020.
Cash Flows
Our
cash flows for the year ended March 31, 2019, in comparison to our
cash flows for the year ended March 31, 2018, can be summarized as
follows:
|
|
|
|
|
|
|
|
Net cash used in
operating activities
|
$(990,334)
|
$(765,793)
|
|
Net cash used in
investing activities
|
(211,830)
|
(171,050)
|
|
Net cash provided
by financing activities
|
1,315,383
|
872,928
|
|
Increase (decrease)
in cash and cash equivalents
|
$113,219
|
$(63,915)
|
The
increase in net cash used in operating activities in the year ended
March 31, 2019, compared to the same period in 2018, mainly relates
to a the approximate $3,745,000 loss on the exercise of warrants, a
swing in the fair value of the derivative liability from an
increase in fair value of $1,600,000 in fiscal 2018 to a decrease
in the fair value of $1,319,500 in fiscal 2019, and increases in
the amortization of the debt discount and financing costs for the
year ended March 31, 2019, offset by the decrease in the net loss
of approximately.
The net
cash used in investing activities in the year ended March 31, 2019
included an increase in costs paid on construction in process on
the new facility as compared to the same period in 2018, and the
purchase of some machinery and equipment.
The net
cash provided by financing activities increased between periods,
with the increased cash provided by financing activities during the
year ended March 31, 2019 arising from the additional proceeds
received from the new equity financing agreement and cash funding
on the notes receivable which collateralized certain back end
convertible debentures, offset by a decrease in proceeds for new
convertible debentures during fiscal 2019 as compared to fiscal
2018 and by increased payments on outstanding convertible
debentures.
Our
cash position was approximately $137,000 as of March 31, 2019.
Management believes that our cash on hand and working capital are
not sufficient to meet our current anticipated cash requirements
through fiscal 2020, as described in further detail under the
section titled “Going
Concern” below.
Recent Financing Arrangements and Developments During the
Period
Short-Term Debt 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. The short-term note had a stated interest rate of 5.25%,
maturity date of December 15, 2017 and had an initial interest only
payment on February 3, 2016. On July 18, 2018, the short-term note
was replaced by a promissory note for the outstanding balance of
$25,298, which bears interest at 8% with a maturity date of July
18, 2021. The short-term note is guaranteed by an officer and
director. The balance of the line of credit at both March 31, 2019
and 2018 was $20,193 and $25,298, respectively.
The
Company also has a working capital line of credit with Extraco
Bank. On April 30, 2019, the Company renewed the line of credit for
$372,675. 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, 2020 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 and $473,029 at March 31, 2019 and March 31, 2018,
respectively, included in non-current liabilities. On April 12,
2019, prior to the renewal, the Company paid $100,000 on the
loan.
The
Company also has additional lines of credit with Extraco Bank for
$100,000 and $200,000, which were renewed on January 19, 2019 and
April 30, 2019, respectively, with maturity dates of January 19,
2020 and April 30, 2020, respectively. The $200,000 line of credit
is included in non-current liabilities as of March 31, 2019 and
March 31, 2018, with an outstanding balance of $178,778. The lines
of credit bear an interest rate of 6.5% and 5%, respectively, 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 March 31, 2019 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 31.4% as of March 31,
2019. The line of credit is unsecured. The balance of the line of
credit was $9,580 at both March 31, 2019 and 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 15.5% as of March 31, 2019. The
line of credit is secured by assets of the Company’s
subsidiaries. The balance of the line of credit is $10,237 at March
31, 2019 and March 31, 2018, respectively.
Bank Loan
On
January 10, 2017, we entered into a promissory note agreement with
Community National Bank in the principal amount of $245,000, with
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 La Coste, Texas, and
is also personally guaranteed by the Company’s President and
Chairman of the Board, as well as certain non-affiliated
shareholders of the Company.
Convertible Debentures
On
January 23, 2017, the Company entered into a Securities Purchase
Agreement and issued a Convertible Note in the original principal
amount of $262,500 to an accredited investor, along with a Warrant
to purchase 350,000 shares of the Company’s common stock, in
exchange for a purchase price of $250,000. The Company received
$50,000 upon closing, with additional consideration to be paid to
the Company in such amounts and at such dates as the holder may
choose in its sole discretion. The warrants are exercisable over a
period of five (5) years at an exercise price of $0.60, subject to
adjustment. The exercise price was adjusted to $0.15, and the
warrants issued increased to 280,000, 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. The note is convertible into shares
of the Company’s common stock at a conversion price of $0.35
per share, subject to adjustment. The maturity date of the note
shall be two years form the date of each payment of consideration
thereunder. A one-time interest charge of twelve percent (12%)
shall be applied on the issuance date and payable on the maturity
date. During the year ended March 31, 2018, the holder converted
the $50,000 of the January debentures to common shares of the
Company.
On
March 28, 2017, the Company entered into a Securities Purchase
Agreement with an accredited investor related to the purchase and
sale of certain convertible debentures in the aggregate principal
amount of up to $400,000 for an aggregate purchase price of up to
$360,000. The agreement contemplates three separate convertible
debentures, with each maturing three years following the date of
issuance. On March 28, 2017, the Company issued the first
convertible debenture in the principal amount of $100,000 for a
purchase price of $90,000. Pursuant to the Securities Purchase
Agreement, the closing of the second convertible debenture was to
occur upon mutual agreement of the parties, at any time within
sixty (60) to ninety (90) days following the original signing
closing date, in the principal amount of $150,000 for a purchase
price of $135,000. On July 5, 2017, the Securities Purchase
Agreement was amended to reduce the maximum aggregate principal
amount of the convertible debentures to $325,000, for an aggregate
purchase price of up to $292,500, and to reduce the principal
amount of the second convertible debenture to $75,000 for a
purchase price of $67,500. The closing of the second convertible
debenture occurred on July 5, 2017. In connection with the closing
of the second convertible debenture, the Company issued 75,000
shares of restricted common stock to the holder as a fee in
consideration of the expenses incurred in consummating the
transaction. The closing of the third convertible debenture was to
occur upon mutual agreement of the parties within sixty (60) to
ninety (90) days following the second closing, in the principal
amount of $150,000 for a purchase price of $135,000. The third
closing has not occurred. The convertible debentures are
convertible into shares of the Company’s common stock at a
fixed conversion price of $0.30 for the first one hundred eighty
(180) days. After one hundred eighty (180) days, or in an event of
default, the conversion price will be the lower of $0.30 or sixty
percent (60%) of the lowest closing bid price over the 20 trading
days preceding the date of conversion. On September 22, 2017, the
Company exercised its option to redeem the first closing of the
March debenture, for a redemption price at $130,000, 130% of the
principal amount. The principal of $100,000 was derecognized with
the additional $30,000 paid upon redemption recognized as a
financing cost. On December 28, 2017, the Company exercised its
option to redeem the second closing of the March debenture, for a
redemption price at $97,500, 130% of the principal amount. Upon
redemption, the principal of $75,000 was relieved, with the
additional $22,500 paid recognized as a financing
cost.
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 shares of common stock 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
shares of common stock 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
matures 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. 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 first and second
closing notes have been fully converted during the year ended March
31, 2019.
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
matures 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 the
year ended March 31, 2019, the note was fully
converted.
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 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, 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 stock of the Company. During April
2018, in two separate conversions, the debenture was fully
converted into 2,611,164 shares of common stock 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 shares of common
stock 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 shares of common stock
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 was cancelled on May 15, 2018, based on the trading
volume of the Company stock, per the terms of the debenture. The
note was 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 shares of common stock
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. 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 settled on July 11, 2018, for a purchase price of $74,000, net
of fees. The Buyer Note is included in Notes Receivable in the
accompanying financial statements as of March 31, 2018. 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 shares
of common stock of the Company. During the third fiscal quarter of
2019, in four separate conversions, the holder converted $86,000 of
the December 20, 2017 debentures and approximately $6,000 of
accrued interest into 27,288,948 shares of common stock of the
Company. On December 31, 2018, the remaining outstanding principal
for the December 20, 2017 notes were settled by payment from
another lender.
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, is 24% per annum. 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. 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 shares of
common stock of the Company. During the third fiscal quarter of
2019, in three separate conversions, the second debenture was fully
converted into 12,551,676 shares of common stock of the Company. On
November 11, 2019, the third debenture was fully converted into
2,666,667 shares of common stock 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 shares of common stock of the Company. On
November 26, 2018, the holder converted $16,168 of principal into
4,500,000 shares of common stock of the Company. On February 6,
2019, the holder converted the remaining principal balance of
approximately $27,000 and accrued interest into 2,542,702 shares of
common stock 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. 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 shares of common stock of the Company at the closing date of
$0.11, and was recognized as part of the debt discount. During the
third fiscal quarter of 2019, in two separate conversions, the
holder converted $91,592 of principal into 16,870,962 shares of
common stock of the Company. During the fourth quarter of 2019 on
two separate occasions, the holder converted $46,759 of principal
and $7,142 of accrued interest into 5,670,707 shares of common
stock of the Company.
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. 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 December
6, 2018, the holder converted $20,160 of principal into 6,000,000
shares of common stock of the Company. During the fourth quarter of
2019, on two separate occasions, the holder converted the remaining
principal balance of $43,488 and $1,127 of accrued interest into
4,921,835 shares of common stock of the Company.
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 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. The notes are
convertible into shares of the Company’s common stock at a
price per share equal to 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. During the third fiscal quarter of 2019,
in four separate conversions, the note was fully converted into
18,832,713 shares of common stock of the Company.
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 shares of common stock, 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. During the third fiscal quarter of
2019, in two separate conversions, the holder converted $35,000 of
principal into 13,246,753 shares of common stock of the
Company.
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.
During the fourth quarter of 2019, effective as of December 6,
2018, the outstanding principal and accrued interest of the note
was purchased from the noteholder by a third party, and replaced
with a new convertible debenture with a new principal balance of
$210,460 (disclosed below). The additional $85,460 was recognized
as financing cost.
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 Back-End note was funded on January 22,
2019, and as it was past the maturity date the Company and the
noteholder agreed to the Company returning $43,000 of the payment
and the remaining $50,000 principal balance being converted. 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 into shares of the
Company’s common stock at a price per share equal to 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 January
28, 2019, the holder converted the $50,000 of principal of the back
end note into 6,561,679 shares of common stock of the Company.
During the fourth quarter of 2019, effective as of December 31,
2018 the outstanding principal and accrued interest of the note was
purchased from the noteholder by a third party, and replaced with a
new convertible debenture for $135,910 (disclosed below). The
additional $42,910 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.
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 into shares of the
Company’s common stock at a price per share equal to 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 January
10, 2019 the outstanding principal of $55,000 and accrued interest
of $1,974 was purchased from the noteholder by a third party, for
$82,612. The additional $25,638 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.
During the fourth fiscal quarter of 2019, in three separate
conversions, the holder converted $57,164 of principal into
9,291,354 shares of common stock of the Company.
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 was in default as of September 30, 2018. The
holder has issued a waiver to the Company on this default
provision. The note is convertible into shares of the
Company’s common stock at a variable conversion rate that is
equal to 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. 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 shares of common stock 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. On December 13, 2018, the holder
converted $11,200 of principal into 4,000,000 shares of common
stock of the Company. On January 25, 2019 the outstanding principal
of $101,550, plus an additional $56,375 of default principal and
$13,695 in accrued interest of the note was purchased from the
noteholder by a third party. The additional $70,070 representing
the default principal and accrued interest which increased the
principal amount due to the new noteholder has been recognized as
financing cost.
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.
On
December 6, 2018, the Company entered into an 10% convertible
promissory note for $210,460, which matures on September 6, 2019.
During the first 180 days the convertible redeemable note is in
effect, the Company may redeem the note at a prepayment percentage
of 120% to 130% of the outstanding principal and accrued interest
based on the redemption date’s passage of time ranging from
60 days to 180 days from the date of issuance of the debenture. 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. In the event of
default, as set forth in the agreement, the outstanding principal
balance increases to 150%. In addition to standard events of
default, an event of default occurs if the common stock of the
Company shall lose the "bid" price for its Common Stock, on trading
markets, including the OTCBB, OTCQB or an equivalent replacement
exchange. 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. The note is
convertible at a fixed conversion price of $0.01. If an event of
default occurs, the fixed conversion price is extinguished and
replaced by a variable conversion rate that is 70% of the lowest
trading prices during the 20 days prior to conversion. The fixed
conversion price shall reset upon any future dilutive issuance of
shares, options or convertible securities.
On
December 31, 2018, the Company entered into an 10% convertible
promissory note for $135,910, which matures on September 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 120% to 130% of the outstanding principal and accrued interest
based on the redemption date’s passage of time ranging from
60 days to 180 days from the date of issuance of the debenture. 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. In the event of
default, as set forth in the agreement, the outstanding principal
balance increases to 150%. In addition to standard events of
default, an event of default occurs if the common stock of the
Company shall lose the "bid" price for its Common Stock, on trading
markets, including the OTCBB, OTCQB or an equivalent replacement
exchange. 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. The note is
convertible at a fixed conversion price of $0.01. If an event of
default occurs, the fixed conversion price is extinguished and
replaced by a variable conversion rate that is 70% of the lowest
trading prices during the 20 days prior to conversion. The fixed
conversion price shall reset upon any future dilutive issuance of
shares, options or convertible securities.
On
January 16, 2019, the Company entered into an 10% convertible
promissory note for $205,436.60, with an OID of $18,6867, for a
purchase price of $186,750.55, which matures on October 16, 2019.
During the first 180 days the convertible redeemable note is in
effect, the Company may redeem the note at a prepayment percentage
of 120% to 130% of the outstanding principal and accrued interest
based on the redemption date’s passage of time ranging from
60 days to 180 days from the date of issuance of the debenture. 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. In the event of
default, as set forth in the agreement, the outstanding principal
balance increases to 150%. In addition to standard events of
default, an event of default occurs if the common stock of the
Company shall lose the "bid" price for its Common Stock, on trading
markets, including the OTCBB, OTCQB or an equivalent replacement
exchange. 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 issue new debt. The note is
convertible at a fixed conversion price of $0.01. If an event of
default occurs, the fixed conversion price is extinguished and
replaced by a variable conversion rate that is 70% of the lowest
trading prices during the 20 days prior to conversion. The fixed
conversion price shall reset upon any future dilutive issuance of
shares, options or convertible securities.
On
February 4, 2019, the Company issued a 10% convertible promissory
note for $85,500, with an OID of $7,500, for a purchase price of
$75,000, which matures on November 4, 2019. During the first 180
days the convertible redeemable note is in effect, the Company may
redeem the note at a prepayment percentage of 120% to 130% of the
outstanding principal and accrued interest based on the redemption
date’s passage of time ranging from 60 days to 180 days from
the date of issuance of the debenture. 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. In the event of default, as set forth
in the agreement, the outstanding principal balance increases to
150%. In addition to standard events of default, an event of
default occurs if the common stock of the Company shall lose the
"bid" price for its Common Stock, on trading markets, including the
OTCBB, OTCQB or an equivalent replacement exchange. 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 issue new debt. The note is convertible at a
fixed conversion price of $0.01. If an event of default occurs, the
fixed conversion price is extinguished and replaced by a variable
conversion rate that is 70% of the lowest trading prices during the
20 days prior to conversion. The fixed conversion price shall reset
upon any future dilutive issuance of shares, options or convertible
securities.
On
March 1, 2019, the Company entered into an 10% convertible
promissory note for $168,000, with an OID of $18,000, for a
purchase price of $150,000, which matures on November 1, 2019.
During the first 180 days the convertible redeemable note is in
effect, the Company may redeem the note at a prepayment percentage
of 100% to 130% of the outstanding principal and accrued interest
based on the redemption date’s passage of time ranging from
60 days to 180 days from the date of issuance of the debenture. 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. In the event of
default, as set forth in the agreement, the outstanding principal
balance increases to 150%. In addition to standard events of
default, an event of default occurs if the common stock of the
Company shall lose the "bid" price for its Common Stock, on trading
markets, including the OTCBB, OTCQB or an equivalent replacement
exchange. 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. The
note is convertible at a fixed conversion price of $0.25. If an
event of default occurs, the fixed conversion price is extinguished
and replaced by a variable conversion rate that is 70% of the
lowest trading prices during the 20 days prior to conversion. The
fixed conversion price shall reset upon any future dilutive
issuance of shares, options or convertible securities.
On
April 17, 2019, the Company entered into an 10% convertible
promissory note for $110,000, with an OID of $10,000, for a
purchase price of $100,000, which matures on January 23, 2020.
During the first 180 days the convertible redeemable note is in
effect, the Company may redeem the note at a prepayment percentage
of 120% to 130% of the outstanding principal and accrued interest
based on the redemption date’s passage of time ranging from
60 days to 180 days from the date of issuance of the debenture. 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. In the event of
default, as set forth in the agreement, the outstanding principal
balance increases to 150%. In addition to standard events of
default, an event of default occurs if the common stock of the
Company shall lose the "bid" price for its Common Stock, on trading
markets, including the OTCBB, OTCQB or an equivalent replacement
exchange. 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. The
note is convertible at a fixed conversion price of $0.124. If an
event of default occurs, the fixed conversion price is extinguished
and replaced by a variable conversion rate that is 70% of the
lowest trading prices during the 20 days prior to
conversion.
Sale and Issuance of Common 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 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 PS. 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 shares of common stock
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
shares of common stock of the Company which they held, into
5,000,000 newly issued Series A PS. The shares of common stock 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.
On
February 14, 2019, the Company issued 225,00 shares of its common
stock to the original noteholder of the March 20, 2018 convertible
debenture. The fair value of the shares of $72,450 based on the
market price of $0.32 on the date of issuance, have been recognized
as a financing cost.
During
the year ended March 31, 2019, the Company issued 226,217,349
shares of the Company’s common stock upon conversion of
approximately $1,318,000 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.
On May
2, 2017, the Company sold 100,000 shares of its common stock to an
accredited investor at $0.25 per share, for total proceeds of
$25,000.
On
October 10, 2017, the Company issued 200,000 shares of its common
stock to consultants in consideration for consulting services
provided to the Company.
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.
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 November 13, 2018, the Company put to GHS for
the issuance of 6,779,397 shares of common stock, at $0.0046, for a
total of $31,456. On December 10, 2018, the Company put to GHS for
the issuance of 6,880,004 shares of common stock, at $0.0133, for a
total of $91,366. On March 25, 2019, the Company put to GHS for the
issuance of 2,131,894 shares of common stock, at $0.141, for a
total of $300,000.
Shareholder Notes Payable
On
April 20, 2017, the Company issued an additional Six Percent (6%)
Unsecured Convertible Note to Dragon Acquisitions in the principal
amount of $140,000. 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. As of March 31,
2019, the Company has paid $52,400 on this note, with $87,600
remaining outstanding as of March 31, 2019.
Going Concern
The
audited consolidated financial statements contained in this annual
report on Form 10-K have been prepared, assuming that the Company
will continue as a going concern. The Company has accumulated
losses through the period to March 31, 2019 of approximately
$41,223,000 as well as negative cash flows from operating
activities of approximately $990,000. Presently, the Company does
not have sufficient cash resources to meet its plans in the twelve
months following March 31, 2019. 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. Subsequent to year end we
have raised approximately an additional $100,000, net of OID, from
convertible debentures and $1,500,000 from the issuance of shares
of common stock under the equity financing agreement. 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 $2,500,000 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 in this Annual Report on
Form 10-K for the fiscal year ended March 31, 2019. We believe that
the accounting policies below are critical for one to fully
understand and evaluate our financial condition and results of
operations.
Fair Value Measurement
The
fair value measurement guidance clarifies that fair value is an
exit price, representing the amount that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that
market participants would use in the valuation of an asset or
liability. It establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level
3 measurements). The three levels of the fair value hierarchy under
the fair value measurement guidance are described
below:
Level 1
- Unadjusted quoted prices in active markets that are accessible at
the measurement date for identical assets or
liabilities;
Level 2
- Quoted prices in markets that are not active, or inputs that are
observable, either directly or indirectly, for substantially the
full term of the asset or liability; or
Level 3
- Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable
(supported by little or no market activity).
The
Company did not have any Level 1 or Level 2 assets and liabilities
at March 31, 2019 and 2018.
The
Derivative liabilities are Level 3 fair value
measurements.
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 shares of common stock
outstanding. Diluted EPS is based on the weighted average number of
shares of common stock 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 shares of common stock outstanding (denominator)
during the period. For
the year ended March 31, 2019, the Company had approximately
$695,000 in convertible debentures whose approximately 66,376,000
underlying shares are convertible at the holders’ option at
conversion prices ranging from 34 - 60% of the defined trading
price and approximately 444,000 warrants with an exercise price of
45% 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. Included in the diluted EPS for the year
ended March 31, 2018, the Company had approximately $1,293,000 in
convertible debentures whose approximately 46,170,000 underlying
shares are convertible at the holders’ option at conversion
prices ranging from 34 - 60% of the defined trading price and
approximately 4,625,000 warrants with an exercise price of 45% 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.
Income Taxes
Deferred income tax
assets and liabilities are computed for differences between the
financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the
change during the period in deferred tax assets and
liabilities.
In
addition, the Company’s management performs an evaluation of
all uncertain income tax positions taken or expected to be taken in
the course of preparing the Company’s income tax returns to
determine whether the income tax positions meet a “more
likely than not” standard of being sustained under
examination by the applicable taxing authorities. This evaluation
is required to be performed for all open tax years, as defined by
the various statutes of limitations, for federal and state
purposes.
On
December 22, 2017, the President of the United States signed and
enacted into law H.R. 1 (the “Tax Reform Law”). The Tax
Reform Law, effective for tax years beginning on or after January
1, 2018, except for certain provisions, resulted in significant
changes to existing United States tax law, including various
provisions that are expected to impact the Company. The Tax Reform
Law reduces the federal corporate tax rate from 35% to 21%
effective January 1, 2018. The Company will continue to analyze the
provisions of the Tax Reform Law to assess the impact on the
Company’s consolidated financial statements.
Impairment of Long-lived Assets and Long-lived Assets
The
Company will periodically evaluate the carrying value of
longlived assets to be held and used when events and
circumstances warrant such a review and at least annually. The
carrying value of a longlived asset is considered impaired
when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value. In
that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair value of the longlived asset.
Fair value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved. Losses on
longlived assets to be disposed of are determined in a
similar manner, except that fair values are reduced for the cost to
dispose.
Recent Accounting Standards
During
the year ended March 31, 2018 and through the date of this report,
there were several new accounting pronouncements issued by the
Financial Accounting Standards Board (“FASB”). 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.
Recently Issued Accounting Standards
In
February 2016, 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
information called for by Item 8 is included following the "Index
to Financial Statements" on page F-1 contained in this annual
report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”))
that are designed to ensure that information required to be
disclosed in our reports under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management,
including our principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding
required disclosures. In designing disclosure controls and
procedures, our management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure
controls and procedures also is based in part upon certain
assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Any controls and
procedures, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance of achieving the desired
control objectives.
Our
management, with the participation of our principal executive
officer and principal financial officer, has evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this
report. Based upon that evaluation and subject to the foregoing,
our principal executive officer and principal financial officer
concluded that, our disclosure controls and procedures were not
effective due to the material weaknesses in internal control over
financial reporting described below.
Management’s Annual Report on Internal Control Over Financial
Reporting
Management of and
its consolidated subsidiaries is responsible for establishing and
maintaining adequate internal control over financial reporting. The
Company’s internal control over financial reporting is a
process designed under the supervision of its principal executive
and principal financial officers and effected by the
Company’s Board of Directors, management and other personnel,
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of its consolidated
financial statements for external reporting purposes in accordance
with U.S. generally accepted accounting principles.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. In addition,
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.
Material Weakness in Internal Control over Financial
Reporting
Management assessed
the effectiveness of the Company’s internal control over
financial reporting as of March 31, 2019 based on the framework
established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management has determined
that the Company’s internal control over financial reporting
as of March 31, 2019 was not effective.
A
material weakness, as defined in the standards established by the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),
is a deficiency, or a combination of deficiencies, in internal
control over financial reporting such that there is a reasonable
possibility that a material misstatement of our annual or interim
financial statements will not be prevented or detected on a timely
basis.
The
ineffectiveness of the Company’s internal control over
financial reporting was due to the following material weaknesses
which are indicative of many small companies with small number of
staff:
●
inadequate
segregation of duties consistent with control
objectives;
●
lack of independent
Board of Directors and absence of Audit Committee to exercise
oversight responsibility related to financial reporting and
internal control;
●
lack of risk
assessment procedures on internal controls to detect financial
reporting risks in a timely manner; and
●
lack of
documentation on policies and procedures that are critical to the
accomplishment of financial reporting objectives.
Management
continues to implement measures designed to ensure that control
deficiencies contributing to the material weakness are remediated,
such that these controls are designed, implemented, and operating
effectively.
The
remediation actions planned include:
●
identify gaps in
our skills base and the expertise of our staff required to meet the
financial reporting requirements of a public company;
●
continue to obtain
sufficient resources to achieve adequate segregation of duties;
and
●
continue to develop
policies and procedures on internal control over financial
reporting and monitor the effectiveness of operations on existing
controls and procedures.
Our
management will continue to monitor and evaluate the relevance of
our risk-based approach and the effectiveness of our internal
controls and procedures 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.
This
annual report does not include an attestation report of the
company’s registered public accounting firm regarding
internal control over financial reporting. Management’s
report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the Company to
provide only Management’s report in this annual report, which
may increase the risk that weaknesses or deficiencies in our
internal control over financial reporting go
undetected.
Changes in Internal Control over Financial Reporting
There
have been no changes in our internal control over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter ended March 31, 2019 that
have materially affected, or that are reasonably likely to
materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set
forth below are the present directors and executive officers of the
Company. Except as set forth below, there are no other persons who
have been nominated or chosen to become directors, nor are there
any other persons who have been chosen to become executive
officers. Other than as set forth below, there are no arrangements
or understandings between any of the directors, officers and other
persons pursuant to which such person was selected as a director or
an officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill G.
Williams
|
|
84
|
|
Chairman
of the Board, Chief Executive Officer
|
|
2015
|
|
Gerald
Easterling
|
|
71
|
|
President,
Secretary, Director
|
|
2015
|
|
William
Delgado
|
|
60
|
|
Treasurer,
Chief Financial Officer, Director
|
|
2014
|
The
Board of Directors is comprised of only one class. All of the
directors serve for a term of one year and until their successors
are elected at the Company’s annual shareholders meeting and
are qualified, subject to removal by the Company’s
shareholders. Each executive officer serves, at the pleasure of the
Board of Directors, for a term of one year and until his successor
is elected at a meeting of the Board of Directors and is
qualified.
Our
Board of Directors believes that all members of the Board and all
executive officers encompass a range of talent, skill, and
experience sufficient to provide sound and prudent guidance with
respect to our operations and interests. The information below with
respect to our directors and executive officers includes each
individual’s experience, qualifications, attributes, and
skills that led our Board of Directors to the conclusion that he or
she should serve as a director and/or executive
officer.
Biographies of Executive Officers
Set
forth below are brief accounts of the business experience during
the past five years of each director, executive officer and
significant employee of the Company.
Bill G. Williams – Co-Founder, Chairman of the Board and
Chief Executive Officer
Mr.
Williams has served as Chairman of the Board and CEO of NSH since
its inception in 2001. From 1997 to 2003, he was Chairman and CEO
of Direct Wireless Communications, Inc. and its successor Health
Discovery Corporation, a public company listed on the OTCBB
exchange. From 1990 to 1997, Mr. Williams was Chairman and CEO of
Cafe Quick Enterprises, which uses a unique, patented air
impingement technology to cook fresh and frozen food in vending
machines. From 1985 to 1990, Mr. Williams was Chairman and CEO of
Ameritron Corporation, a multi-business holding company. Mr.
Williams has also served a member of the board of directors of
NaturalShrimp Corporation and NaturalShrimp Global, Inc. since
2001.
We
believe Mr. Williams is qualified to serve on our board of
directors because of his business experiences, including his
experience as a director of companies in similar industries, as
described above.
Gerald Easterling – Co-Founder, President and
Director
Mr.
Easterling has served as President and a director of NSH since its
inception in 2001. Mr. Easterling has experience in the food
business and related industries. In the five years prior to the
formation of NSH, Mr. Easterling was Chairman of the Board of Excel
Vending Companies. He also was President and Director of Cafe Quick
Enterprises and has been a member of the board since 1988. Mr.
Easterling has also served a member of the board of directors of
NaturalShrimp Corporation and NaturalShrimp Global, Inc. since
2001.
We
believe Mr. Easterling is qualified to serve on our board of
directors because of his business experiences, including his
experience as a director of companies in similar industries, as
described above.
William J. Delgado – Treasurer, Chief Financial Officer
(former President of Multiplayer Online Dragon, Inc.) and
Director
Mr.
Delgado has served as Director of the Company since May 19, 2014.
Since August 2004, Mr. Delgado has served as a Director, President,
Chief Executive Officer and Chief Financial Officer of Global
Digital Solutions, Inc. (“GDSI”), a publicly traded
company that provides cyber arms manufacturing, complementary
security and technology solutions and knowledge-based,
cyber-related, culturally attuned social consulting in unsettled
areas. Effective August 12, 2013, Mr. Delgado assumed the position
of Executive Vice President of GDSI. He began his career with
Pacific Telephone in the Outside Plant Construction. He moved to
the network engineering group and concluded his career at Pacific
Bell as the Chief Budget Analyst for the Northern California
region. Mr. Delgado founded All Star Telecom in late 1991,
specializing in OSP construction and engineering and systems
cabling. All Star Telecom was sold to International FiberCom in
April 1999. After leaving International FiberCom in 2002, Mr.
Delgado became President/CEO of Pacific Comtel in San Diego,
California, which was acquired by GDSI in 2004. Mr. Delgado holds a
BS with honors in Applied Economics from the University of San
Francisco and Graduate studies in Telecommunications Management at
Southern Methodist University.
We
believe Mr. Delgado is qualified to serve on our board of directors
because of his business experiences, including his experience in
management and as a director of public companies, as described
above.
Biographies of Key Employees
Thomas Untermeyer – Co-Founder and Chief Technology
Consultant
Mr.
Untermeyer is a co-founder of NSH, has served as an engineering
consultant to NSH since 2001, and is the Company’s Chief
Technology Officer. Mr. Untermeyer holds a Bachelor of Science in
electrical engineering from St. Mary’s University. Mr.
Untermeyer also serves as Senior Program Manager with Southwest
Research Institute, San Antonio. Mr. Untermeyer is the inventor of
the initial technology behind the computer-controlled
shrimp-raising system used by the Company.
Family Relationships
There
are no other family relationships between or among any of our
directors, executive officers and any incoming directors or
executive officers.
Involvement in Certain Legal Proceedings
No
director, executive officer, significant employee or control person
of the Company has been involved in any legal proceeding listed in
Item 401(f) of Regulation S-K in the past 10 years.
Committees of the Board
Our
Board of Directors held two formal meeting in the fiscal year-ended
March 31, 2019. Otherwise, all proceedings of the Board of
Directors were conducted by resolutions consented to in writing by
the directors and filed with the minutes of the proceedings of the
directors. Such resolutions consented to in writing by the
directors entitled to vote on that resolution at a meeting of the
directors are, according to the Nevada Revised Statutes and the
bylaws of our Company, as valid and effective as if they had been
passed at a meeting of the directors duly called and held. We do
not presently have a policy regarding director attendance at
meetings.
We do
not currently have a standing audit, nominating or compensation
committee of the Board of Directors, or any committee performing
similar functions. Our Board of Directors performs the functions of
audit, nominating and compensation committees.
Audit Committee
Our
Board of Directors has not established a separate audit committee
within the meaning of Section 3(a)(58)(A) of the Exchange Act.
Instead, the entire Board of Directors acts as the audit committee
within the meaning of Section 3(a)(58)(B) of the Exchange Act and
will continue to do so until such time as a separate audit
committee has been established.
Audit Committee Financial Expert
We
currently have not designated anyone as an “audit committee
financial expert,” as defined in Item 407(d)(5) of Regulation
S-K as we have not yet created an audit committee of the Board of
Directors.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section
16(a) of the Securities Exchange Act requires our executive
officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and
transactions in, our securities with the Securities and Exchange
Commission and to provide us with copies of those
filings.
Based
solely on our review of the copies of such forms received by us, or
written representations from certain reporting persons, we believe
that during the fiscal year ended March 31, 2019, none of our
officers, directors and greater than 10% percent beneficial owners
failed to comply on a timely basis with all applicable filing
requirements under Section 16(a) of the Exchange Act.
Nominations to the Board of Directors
Our
directors play a critical role in guiding our strategic direction
and oversee the management of the Company. Board candidates are
considered based upon various criteria, such as their broad-based
business and professional skills and experiences, a global business
and social perspective, concern for the long-term interests of the
stockholders, diversity, and personal integrity and
judgment.
In
addition, directors must have time available to devote to Board
activities and to enhance their knowledge in the growing business.
Accordingly, we seek to attract and retain highly qualified
directors who have sufficient time to attend to their substantial
duties and responsibilities to the Company.
In
carrying out its responsibilities, the Board will consider
candidates suggested by stockholders. If a stockholder wishes to
formally place a candidate’s name in nomination, however, he
or she must do so in accordance with the provisions of the
Company’s Bylaws. Suggestions for candidates to be evaluated
by the proposed directors must be sent to the Board of Directors,
c/o NaturalShrimp Incorporated, 15150 Preston Rd, Suite 300,
Dallas, TX 75248.
Director Nominations
As of
March 31, 2019, we did not affect any material changes to the
procedures by which our shareholders may recommend nominees to our
Board of Directors.
Board Leadership Structure and Role on Risk Oversight
Bill G.
Williams currently serves as the Company’s principal
executive officer and Chairman of the Company’s Board of
Directors. The Company determined this leadership structure was
appropriate for the Company due to our small size and limited
operations and resources. The Board of Directors will continue to
evaluate the Company’s leadership structure and modify as
appropriate based on the size, resources and operations of the
Company. It is anticipated that the Board of Directors will
establish procedures to determine an appropriate role for the Board
of Directors in the Company’s risk oversight
function.
Compensation Committee Interlocks and Insider
Participation
No
interlocking relationship exists between our board of directors and
the board of directors or compensation committee of any other
company, nor has any interlocking relationship existed in the
past.
Code of Ethics
The
Company has adopted a written code of ethics that governs the
Company’s employees, officers and directors. A copy of such
code of ethics is available upon written request to the
Company.
ITEM 11. EXECUTIVE COMPENSATION
General Philosophy
Our
Board of Directors is responsible for establishing and
administering the Company’s executive and director
compensation.
Executive Compensation
The
following summary compensation table indicates the cash and
non-cash compensation earned from the Company during the fiscal
years ended March 31, 2019 and 2018 by the current and former
executive officers of the Company and each of the other two highest
paid executives or directors, if any, whose total compensation
exceeded $100,000 during those periods.
Summary Compensation Table
|
Name and
Principal Position
|
|
|
|
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
|
|
Bill G.
Williams,
|
2019
|
$56,000
|
-
|
-
|
-
|
-
|
-
|
$56,000
|
|
Chairman of the Board, CEO
(1)
|
2018
|
$36,000
|
-
|
-
|
-
|
-
|
3,880
|
$39,880
|
|
|
|
|
|
|
|
|
|
|
Gerald
Easterling,
|
2019
|
$116,000
|
-
|
-
|
-
|
-
|
-
|
$116,000
|
| President (2) |
2018
|
$76,000
|
-
|
-
|
-
|
-
|
6,120
|
$82,120
|
|
(1)
|
As of
March 31, 2019, Mr. Williams is owed accrued salary of $216,874. In
addition, Mr. Williams is entitled to receive medical insurance
reimbursement, of which $6,436 was paid during the fiscal year
ending March 31, 2019, and for which $620 is accrued as of March
31, 2019. Mr. Williams is also entitled to an automobile allowance
of $500 per month, of which none was paid, and for which is $16,500
is accrued at March 31, 2019.
|
|
(2)
|
As of
March 31, 2018, Mr. Easterling is owed accrued salary of $68,896.
In addition, Mr. Easterling is entitled to receive medical
insurance reimbursement, of which $6,436 was paid during the fiscal
year ending March 31,2019 and for which $595 is accrued as of March
31, 2019. Mr. Easterling is also entitled to an automobile
allowance of $500 per month, of which none was paid, and for which
$18,000 is accrued at March 31, 2019.
|
Employment Agreements
We have
employment agreements in place with Bill G. Williams, our Chief
Executive Officer, and Gerald Easterling, our
President.
Bill G. Williams
On
April 1, 2015, the Company entered into an employment agreement
with Bill G. Williams as the Company’s Chief Executive
Officer. The agreement is terminable at will and provides for a
base annual salary of $96,000. In addition, the agreement provides
that the Mr. Williams is entitled, at the sole and absolute
discretion of the Company’s Board of Directors, to receive
performance bonuses. Mr. Williams will also be entitled to certain
benefits including health insurance and monthly allowances for cell
phone and automobile expenses.
The
agreement provides that in the event Mr. Williams is terminated
without cause or resigns for good reason (each as defined in the
agreement), Mr. Williams will receive, as severance, his base
salary for a period of 60 months following the date of termination.
In the event of a change of control of the Company, Mr. Williams
may elect to terminate the agreement within 30 days thereafter and
upon such termination would receive a lump sum payment equal to
500% of his base salary. The 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 agreement.
Gerald Easterling
On
April 1, 2015, the Company entered into an employment agreement
with Gerald Easterling as the Company’s President. The
agreement is terminable at will and provides for a base annual
salary of $96,000. In addition, the agreement provides that the Mr.
Easterling is entitled, at the sole and absolute discretion of the
Company’s Board of Directors, to receive performance bonuses.
Mr. Easterling will also be entitled to certain benefits including
health insurance and monthly allowances for cell phone and
automobile expenses.
The
agreement provides that in the event Mr. Easterling is terminated
without cause or resigns for good reason (each as defined in the
agreement), Mr. Easterling will receive, as severance, his base
salary for a period of 60 months following the date of termination.
In the event of a change of control of the Company, Mr. Easterling
may elect to terminate the agreement within 30 days thereafter and
upon such termination would receive a lump sum payment equal to
500% of his base salary.
The
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
agreement.
Potential Payments Upon Termination or
Change-in-Control
SEC
regulations state that we must disclose information regarding
agreements, plans or arrangements that provide for payments or
benefits to our executive officers in connection with any
termination of employment or change in control of the Company. Such
payments are set forth above in the section entitled
“Employment Agreements.”
Except
as described above, none of our executive officers or directors
received, nor do we have any arrangements to pay out, any bonus,
stock awards, option awards, non-equity incentive plan
compensation, or non-qualified deferred compensation.
Compensation of Directors
We have
no standard arrangement to compensate directors for their services
in their capacity as directors. Directors are not paid for meetings
attended. However, we intend to review and consider future
proposals regarding board compensation. All travel and lodging
expenses associated with corporate matters are reimbursed by us, if
and when incurred.
Stock Option Plans - Outstanding Equity Awards at Fiscal Year
End
None.
Pension Table
None.
Retirement Plans
We do
not offer any annuity, pension, or retirement benefits to be paid
to any of our officers, directors, or employees in the event of
retirement. There are also no compensatory plans or arrangements
with respect to any individual named above which results or will
result from the resignation, retirement, or any other termination
of employment with our company, or from a change in the control of
our Company.
Compensation Committee
The
Company does not have a separate Compensation Committee. Instead,
the Company’s Board of Directors reviews and approves
executive compensation policies and practices, reviews salaries and
bonuses for other officers, administers the Company’s stock
option plans and other benefit plans, if any, and considers other
matters.
Risk Management Considerations
We
believe that our compensation policies and practices for our
employees, including our executive officers, do not create risks
that are reasonably likely to have a material adverse effect on our
Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information as of June 24, 2019,
with respect to the beneficial ownership of our common stock for
(i) each director and officer, (ii) all of our directors and
officers as a group, and (iii) each person known to us to own
beneficially five percent (5%) or more of the outstanding shares of
our common stock. As of June 24, 2019, there were 313,254,149
shares of common stock outstanding. Unless otherwise indicated, the
address of each of the following persons is 5080 Spectrum Drive,
Suite 1000 Addison, Texas 75001, and based upon information
available or furnished to us, each person has sole voting and
investment power with respect to the shares set forth opposite his,
her or its name.
|
Name and Address
of Beneficial Owner(1)
|
Common
Shares
Beneficially
Owned
(2)
|
Percentage
of
Common
Shares
Beneficially
Owned
(2)
|
Series
A
Preferred
Shares
Beneficially
Owned
(5)
|
Percentage
of
Preferred
Shares
Beneficially
Owned
(5)
|
|
Directors,
Executive Officers and Key Employees
|
|
|
|
|
|
Bill G. Williams
(3)(6)
|
520,240
|
(7)
|
5,000,000
|
100%
|
|
Gerald Easterling
(3)(6)
|
520,240
|
(7)
|
5,000,000
|
100%
|
|
Tom
Untermeyer
|
-
|
-%
|
0
|
-%
|
|
William
Delgado(4)
|
5,215,719
|
1.67%
|
0
|
-%
|
|
5%
Stockholders
|
|
|
|
|
|
See Footnotes to
this Beneficial Ownership Table
|
|
|
|
|
|
(1)
|
Beneficial
ownership has been determined in accordance with Rule 13d-3 under
the Exchange Act. Pursuant to the rules of the SEC, shares of
common stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise of any option, warrant or
right, or through the conversion of a security, are deemed to be
outstanding for the purpose of computing the percentage ownership
of such individual or group, but are not deemed to be beneficially
owned and outstanding for the purpose of computing the percentage
ownership of any other person shown in the table.
|
|
(2)
|
Based
on 313,254,149 shares of our common stock issued and outstanding as
of June 24, 2019.
|
|
(3)
|
Bill G.
Williams is the indirect owner, together with Gerald Easterling, of
520,240 shares of common stock and 5,000,000 shares of Series A
Preferred Stock of the Company, which are directly held by
NaturalShrimp Holdings, Inc. Mr. Williams is the Chairman of the
Board and the Chief Executive Office of NaturalShrimp Holdings,
Inc. and has shared voting and dispositive power over the shares
held by NaturalShrimp Holdings, Inc.
|
|
(4)
|
William
Delgado is the indirect owner of 5,215,719 shares of common stock,
which are directly held by Dragon Acquisitions LLC. The shares of
common stock beneficially owned by Dragon Acquisitions LLC, and
indirectly owned by William Delgado, include 600,000 shares of
common stock issuable upon conversion of outstanding convertible
notes held by Dragon Acquisition LLC. Mr. Delgado is the managing
member of Dragon Acquisitions LLC and has shared voting and
dispositive power over the shares held by Dragon Acquisitions
LLC.
|
|
(5)
|
On
August 17, 2018, the Company, pursuant to approval by the
Company’s board of directors, filed a certificate of
designation (the “Certificate of Designation”) with the
state of Nevada in order to designate a class of preferred stock.
The class of preferred stock that was designated is referred to as
Series A Convertible Preferred Stock (the “Series A
Stock”), consists of 5,000,000 shares, and was designated
from the 20,000,000 authorized preferred shares of the Company. The
Series A Stock is not entitled to dividends, but carries
liquidation rights upon dissolution, liquidation or winding up of
the Company, whether voluntary or involuntary, at which the holders
of the Series A Stock shall receive the sum of $0.001 per share
before any payment or distribution shall be made on the
Company’s common stock, or any class ranking junior to the
Series A Stock. The shares of Series A Stock shall vote together as
a single class with the holders of the Company’s common stock
for all matters submitted to the holders of common stock, including
the election of directors, and shall carry voting rights of 60
common shares for every share of Series A Stock. Any time after the
two-year anniversary of the initial issuance date of the Series A
Stock, the Series A Stock shall be convertible at the written
consent of a majority of the outstanding shares of Series A Stock,
in an amount of shares of common stock equal to 100% of the then
outstanding shares of common stock at the time of such
conversion.
|
|
|
|
|
(6)
|
On
August 21, 2018, the Company entered into a Stock Exchange
Agreement (the “Exchange Agreement”) with NaturalShrimp
Holdings, Inc. (“NaturalShrimp”), the Company’s
majority shareholder, which is controlled by the Company’s
CEO and President. Pursuant to the Exchange Agreement, the Company
and NaturalShrimp exchanged 75,000,000 shares of common stock for
5,000,000 shares of Series A Stock. The 75,000,000 shares of common
stock was returned to the treasury and cancelled. Bill G. Williams
and Gerald Easterling share voting and dispositive power of the
shares beneficially owned by NaturalShrimp Holdings,
Inc.
|
|
|
|
|
(7)
|
*equals
less than 1%
|
Securities Authorized for Issuance Under Equity Compensation
Plans
None.
Non-Cumulative Voting
The
holders of our shares of common stock do not have cumulative voting
rights, which means that the holders of more than 50% of such
outstanding shares, voting for the election of Directors, can elect
all of the Directors to be elected, if they so choose. In such
event, the holders of the remaining shares will not be able to
elect any of our Directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
Transactions with Related Persons
Except
as set out below, as of March 31, 2019, there have been no
transactions, or currently proposed transactions, in which we were
or are to be a participant and the amount involved exceeds the
lesser of $120,000 or one percent of the average of our total
assets at year-end for the last two completed fiscal years, and in
which any of the following persons had or will have a direct or
indirect material interest:
●
any director or
executive officer of our company;
●
any person who
beneficially owns, directly or indirectly, shares carrying more
than 5% of the voting rights attached to our outstanding shares of
common stock;
●
any promoters and
control persons; and
●
any member of the
immediate family (including spouse, parents, children, siblings and
in laws) of any of the foregoing persons.
NaturalShrimp Holdings, Inc.
On
November 26, 2014, Multiplayer Online Dragon, Inc., a Nevada
corporation (“MYDR”), entered into an Asset Purchase
Agreement (the “Agreement”) with NaturalShrimp
Holdings, Inc. a Delaware corporation (“NSH”), pursuant
to which MYDR was to acquire substantially all of the assets of NSH
which assets consist primarily of all of the issued and outstanding
shares of capital stock of NaturalShrimp Corporation
(“NSC”), a Delaware corporation, and NaturalShrimp
Global, Inc. (“NS Global”), a Delaware corporation, and
certain real property located outside of San Antonio, Texas (the
“Assets”).
On
January 30, 2015, MYDR consummated the acquisition of the Assets
pursuant to the Agreement. In accordance with the terms of the
Agreement, the MYDR issued 75,520,240 shares of its common stock to
NSH as consideration for the Assets. As a result of the
transaction, NSH acquired 88.62% of MYDR’s issued and
outstanding shares of common stock, NSC and NS Global became
MYDR’s wholly-owned subsidiaries, and MYDR changed its
principal business to a global shrimp farming company.
There
were no material relationships between the MYDR and NSH or between
the Company’s or NSH’s respective affiliates,
directors, or officers or associates thereof, other than in respect
of the Agreement. Effective March 3, 2015, MYDR amended its
Articles of Incorporation to change its name to
“NaturalShrimp Incorporated”.
On
January 1, 2016 we entered into a note payable agreement with NSH.
As of March 31, 2019 and 2018, approximately $736,000 has been
borrowed under this note payable. The note payable has no set
monthly payment or maturity date with a stated interest rate of
2%.
Bill G. Williams
We have
entered into several working capital notes payable to Bill
Williams, an officer, a director, and a shareholder of the Company,
for a total of $486,500 since inception. These notes are demand
notes, had stock issued in lieu of interest and have no set monthly
payment or maturity date. The balance of these notes at March 31,
2019 and 2018 was $426,404 and $426,404, respectively, and is
classified as a current liability on the consolidated balance
sheets. At March 31, 2019 and 2018, accrued interest payable was
$241,032 and $206,920, respectively.
William Delgado
On
April 20, 2017, the Company issued a Six Percent (6%) Unsecured
Convertible Note to Dragon Acquisitions in the principal amount of
$140,000. 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. As of March 31, 2019, $52,400 of the
note has been repaid.
Gerald Easterling
On
January 10, 2017, we entered into a promissory note agreement with
Community National Bank in the principal amount of $245,000, with
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 La Coste, Texas, and
is also personally guaranteed by the Company’s President and
Chairman of the Board, as well as certain non-affiliated
shareholders of the Company. As consideration for the guarantee,
the Company issued 600,000 shares of common stock to the
guaranteeing shareholders, not including the Company’s
President and Chairman of the Board, which was recognized as debt
issuance costs. The balance of the CNB Note is $228,759 as of March
31, 2019.
Named Executive Officers and Current Directors
For
information regarding compensation for our named executive officers
and current directors, see “Executive
Compensation”.
Director Independence
Our
board of directors consists of Bill G. Williams, Gerald Easterling
and William Delgado. Our securities are quoted on the OTC Markets
Group, which does not have any director independence requirements.
We evaluate independence by the standards for director independence
established by applicable laws, rules, and listing standards
including, without limitation, the standards for independent
directors established by The New York Stock Exchange, Inc., the
NASDAQ National Market, and the Securities and Exchange
Commission.
Subject
to some exceptions, these standards generally provide that a
director will not be independent if (a) the director is, or in the
past three years has been, an employee of ours; (b) a member of the
director’s immediate family is, or in the past three years
has been, an executive officer of ours; (c) the director or a
member of the director’s immediate family has received more
than $120,000 per year in direct compensation from us other than
for service as a director (or for a family member, as a
non-executive employee); (d) the director or a member of the
director’s immediate family is, or in the past three years
has been, employed in a professional capacity by our independent
public accountants, or has worked for such firm in any capacity on
our audit; (e) the director or a member of the director’s
immediate family is, or in the past three years has been, employed
as an executive officer of a company where one of our executive
officers serves on the compensation committee; or (f) the director
or a member of the director’s immediate family is an
executive officer of a company that makes payments to, or receives
payments from, us in an amount which, in any twelve-month period
during the past three years, exceeds the greater of $1,000,000 or
two percent of that other company’s consolidated gross
revenues. Based on these standards, we have determined that none of
our directors are independent directors.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit and Accounting Fees
Effective April 11,
2015, the Board of Directors of the Company engaged Turner, Stone
& Company (“TSC”) as its independent registered
public accounting firm to audit the Company’s annual
financial statements. The following tables set forth the fees
billed to the Company for professional services rendered by TSC for
the years ended March 31, 2019 and 2018:
|
Services
|
|
|
|
Audit
fees
|
$45,700
|
$26,250
|
|
Audit related
fees
|
-
|
-
|
|
Tax
fees
|
-
|
-
|
|
All other
fees
|
-
|
-
|
|
Total
fees
|
$45,700
|
$26,250
|
Audit Fees
The
audit fees were paid for the audit services of our annual and
quarterly reports and issuing consents for our registration
statements.
Tax Fees
There
were no tax fees paid to TSC.
Pre-Approval Policies and Procedures
Our
board of directors preapproves all services provided by our
independent registered public accounting firm. All of the above
services and fees were reviewed and approved by the board of
directors before the respective services were
rendered.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
EXHIBIT INDEX
|
|
|
Incorporated by Reference
|
|
Exhibit Number
|
Exhibit Description
|
Form
|
Exhibit
|
Filing
Date/Period
End Date
|
|
|
Asset
Purchase Agreement, dated November 26, 2014, by and between
Multiplayer Online Dragon, Inc. and NaturalShrimp Holdings,
Inc.
|
8-K
|
2.1
|
12/3/2014
|
|
|
Articles
of Incorporation
|
S-1
|
3.1
|
6/11/2009
|
|
|
Amendment
to Articles of Incorporation
|
10-Q/A
|
3.3
|
5/19/2014
|
|
|
Bylaws
|
S-1
|
3.2
|
6/11/2009
|
|
4.1
|
Specimen
Common Stock Certificate
|
S-1
|
4.1
|
6/11/2009
|
|
|
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
|
8-K
|
10.1
|
2/11/2015
|
|
|
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
|
8-K
|
10.2
|
2/11/2015
|
|
|
Assignment
Agreement, dated March 26, 2009, by and between Baptist Community
Services, Amarillo National Bank and NaturalShrimp Holdings,
Inc.
|
8-K
|
10.3
|
2/11/2015
|
|
|
Fifth
Forbearance Agreement, dated January 30, 2015, by and between the
Company, NaturalShrimp Holdings, Inc. and Baptist Community
Services
|
8-K
|
10.4
|
2/11/2015
|
|
|
Stock
Pledge Agreement, dated January 30, 2015, by and between the
Company and Baptist Community Services
|
8-K
|
10.5
|
2/11/2015
|
|
|
Agreement
Regarding Loan Documents, dated January 30, 2015, by and between
the Company and NaturalShrimp Holdings, Inc.
|
8-K
|
10.6
|
2/11/2015
|
|
|
Exclusive
Rights Agreement, dated August 19, 2014, between NaturalShrimp
Holdings, Inc., its subsidiaries and F&T Water Solutions,
LLC
|
8-K
|
10.7
|
2/11/2015
|
|
|
Members
Agreement, dated August 19, 2014, between NaturalShrimp Holdings,
Inc., F&T Water Solutions, LLC and the members of Natural
Aquatic Systems, LLC
|
8-K
|
10.8
|
2/11/2015
|
|
|
Form
of Subscription Agreement
|
8-K
|
10.1
|
5/7/2015
|
|
|
Form
of Promissory Note
|
10-K
|
10.10
|
7/28/2015
|
|
|
Form
of Loan Agreement
|
10-K
|
10.11
|
7/28/2015
|
|
|
Form
of Security Agreement
|
10-K
|
10.12
|
7/28/2015
|
|
|
Form
of Line of Credit Agreement with Extraco Bank
|
10-K
|
10.13
|
7/28/2015
|
|
|
Employment
Agreement dated April 1, 2015 with Bill G. Williams
|
8-K
|
10.2
|
5/7/2015
|
|
|
Employment
Agreement dated April 1, 2015 with Gerald Easterling
|
8-K
|
10.3
|
5/7/2015
|
|
|
Form
of Private Placement Subscription Agreement and 6% Unsecured
Convertible Note with Dragon Acquisitions LLC.
|
10-K
|
10.16
|
6/29/2017
|
|
|
Form
of Promissory Note dated January 10, 2017 with Community National
Bank
|
10-Q
|
10.1
|
2/14/2017
|
|
|
Form
of Guaranty made by Gerald Easterling to Community National
Bank
|
10-Q
|
10.1
|
2/14/2017
|
|
|
Payoff
Letter, Termination and Release dated January 13, 2017 from Baptist
Community Services
|
10-Q
|
10.2
|
2/14/2017
|
|
|
Securities
Purchase Agreement dated January 23, 2017 with Vista Capital
Investments, LLC
|
10-K
|
10.23
|
6/29/2017
|
|
|
Warrant
to Purchase Shares of Common Stock issued January 23, 2017 to Vista
Capital Investments, LLC
|
10-K
|
10.21
|
6/29/2017
|
|
|
Convertible
Note dated January 23, 2017 issued to Vista Capital Investments,
LLC
|
10-K
|
10.22
|
6/29/2017
|
|
|
Securities
Purchase Agreement dated March 16, 2017 with Vista Capital
Investments, LLC
|
10-K
|
10.23
|
6/29/2017
|
|
|
Convertible
Debenture dated March 28, 2017 issued to Peak One Opportunity Fund,
L.P.
|
10-K
|
10.24
|
6/29/2017
|
|
|
6%
Convertible Note dated January 20, 2017 issued Dragon Acquisitions
LLC
|
10-Q
|
10.1
|
2/14/2018
|
|
|
Securities
Purchase Agreement dated March 16, 2017 with Peak One Opportunity
Fund, L.P.
|
10-Q
|
10.1
|
8/14/2017
|
|
|
Amendment
#1 to the Securities Purchase Agreement Entered into on March 16,
2017, dated July 5, 2017, with Peak One Opportunity Fund,
L.P.
|
10-Q
|
10.2
|
8/14/2017
|
|
|
6%
Convertible Note dated March 11, 2017 issued to Dragon Acquisitions
LLC
|
10-Q
|
10.4
|
2/14/2018
|
|
|
6%
Convertible Note dated April 20, 2017 issued to Dragon Acquisitions
LLC
|
10-Q
|
10.5
|
2/14/2018
|
|
|
Securities
Purchase Agreement dated July 31, 2017, with Crown Bridge Partners
LLC
|
10-Q
|
10.6
|
2/14/2018
|
|
|
5%
Convertible Note dated July 31, 2017, issued to Crown Bridge
Partners LLC
|
10-Q
|
10.7
|
2/14/2018
|
|
|
Common
Stock Purchase Warrant dated July 31, 2017, issued to Crown Bridge
Partners LLC
|
10-Q
|
10.8
|
2/14/2018
|
|
|
Securities
Purchase Agreement dated August 28, 2017 with Labrys Fund,
LP
|
10-Q
|
10.9
|
2/14/2018
|
|
|
12%
Convertible Note dated August 28, 2017, with Labrys Fund,
LP
|
10-Q
|
10.10
|
2/14/2018
|
|
|
Common
Stock Purchase Warrant dated August 28, 2017, issued to Labrys
Fund, LP
|
10-Q
|
10.11
|
2/14/2018
|
|
|
12%
Convertible Note dated September 11, 2017 issued to Auctus Funds,
LLC
|
10-Q
|
10.12
|
2/14/2018
|
|
|
Common
Stock Purchase Warrant dated September 11, 2017 issued to Auctus
Funds, LLC
|
10-Q
|
10.13
|
2/14/2018
|
|
|
12%
Convertible Note dated September 12, 2017 issued to JSJ
Investments, Inc.
|
10-Q
|
10.14
|
2/14/2018
|
|
|
Securities
Purchase Agreement dated September 28, 2017 with EMA Financial,
LLC
|
10-Q
|
10.1
|
10/17/2017
|
|
|
12%
Convertible Note issued to EMA Financial, LLC dated September 28,
2017
|
10-Q
|
10.2
|
10/17/2017
|
|
|
Common
Stock Purchase Warrant dated October 2, 2017, issued to Crown
Bridge Partners LLC
|
10-Q
|
10.17
|
2/14/2018
|
|
|
Securities
Purchase Agreement dated October 31, 2017 with Labrys Fund,
LP
|
10-Q
|
10.18
|
2/14/2018
|
|
|
12%
Convertible Note dated October 31, 2017, issued to Labrys Fund,
LP
|
10-Q
|
10.19
|
2/14/2018
|
|
|
Securities
Purchase Agreement dated November 9, 2017 with GS Capital Partners,
LLC.
|
10-Q
|
10.20
|
2/14/2018
|
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated November 14, 2017
|
10-Q
|
10.21
|
2/14/2018
|
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated November 14, 2017
|
10-Q
|
10.22
|
2/14/2018
|
|
|
8%
Collateralized Secured Promissory Note dated November 14, 2017,
from GS Capital Partners, LLC
|
10-Q
|
10.23
|
2/14/2018
|
|
|
Securities
Purchase Agreement dated December 20, 2017 with GS Capital
Partners, LLC.
|
10-Q
|
10.24
|
2/14/2018
|
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated December 20, 2017
|
10-Q
|
10.25
|
2/14/2018
|
|
|
8%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated December 20, 2017
|
10-Q
|
10.26
|
2/14/2018
|
|
|
8%
Collateralized Secured Promissory Note dated December 20, 2017,
from GS Capital Partners, LLC
|
10-Q
|
10.27
|
2/14/2018
|
|
|
Equity
Financing Agreement with GHS Investments LLC
|
8-K
|
10.1
|
8/27/2018
|
|
|
Registration
Rights Agreement with GHS Investments LLC
|
8-K
|
10.2
|
8/27/2018
|
|
|
12%
Convertible Promissory Note dated June 5, 2018 with JSJ
Investments, Inc.
|
10-Q
|
10.71
|
11/14/2018
|
|
|
Securities
Purchase Agreement dated July 27, 2018 with GS Capital Partners,
LLC
|
10-Q
|
10.72
|
11/14/2018
|
|
|
10%
Convertible Secured Redeemable Note issued to GS Capital Partners,
LLC dated July 27, 2018
|
10-Q
|
10.73
|
11/14/2018
|
|
|
10%
Collateralized Secured Promissory Note dated July 27, 2018, from GS
Capital Partners, LLC
|
10-Q
|
10.74
|
11/14/2018
|
|
|
Securities
Purchase Agreement dated August 24, 2018 with One44 Capital,
LLC
|
10-Q
|
10.75
|
11/14/2018
|
|
|
10%
Convertible Redeemable Note issued August 24, 2018 with One44
Capital, LLC
|
10-Q
|
10.76
|
11/14/2018
|
|
|
Securities
Purchase Agreement dated September 14, 2018 with Labrys Fund
LP
|
10-Q
|
10.77
|
11/14/2018
|
|
|
12%
Convertible Promissory Note dated September 14, 2018 issued to
Labrys Fund, LP
|
10-Q
|
10.78
|
11/14/2018
|
|
|
Securities
Purchase Agreement dated October 30, 2018 with Power Up Lending
Group Ltd
|
10-Q
|
10.79
|
11/14/2018
|
|
|
8%
Convertible Promissory Note dated October 30, 2018 with Power Up
Lending Group Ltd.
|
10-Q
|
10.80
|
11/14/2018
|
|
|
12%
Convertible Redeemable Note, Back End Note 1 of 2, dated January
29, 2018 from Adar Bays, LLC
|
|
|
|
|
|
12%
Convertible Redeemable Note, Back End Note, 2 of 2, dated January
29, 2018 with Adar Bays, LLC
|
|
|
|
|
|
12%
Collateralized Secured Promissory Note, 1 of 2, dated January 29,
2018 from Adar Bays, LLC
|
|
|
|
|
|
12%
Collateralized Secured Promissory Note 2of2, dated January 29, 2018
from Adar Bays, LLC
|
|
|
|
|
|
Securities
Purchase Agreement dated January 29, 2018 with Adar Bays,
LLC
|
|
|
|
|
|
12%
Convertible Promissory Note dated January 30, 2018 with Power Up
Lending Group Ltd.
|
|
|
|
|
|
Securities
Purchase Agreement dated January 30, 2018 with Power Up Lending
Group Ltd.
|
|
|
|
|
|
Debt
Purchase Agreement dated February 8, 2018 between Labrys Fund LP
and Adar Bays, LLC
|
|
|
|
|
|
12%
Convertible Promissory Note dated March 9, 2018 with Power Up
Lending Group Ltd.
|
|
|
|
|
|
Securities
Purchase Agreement dated March 9, 2018 with Power Up Lending Group
Ltd.
|
|
|
|
|
|
Securities
Purchase Agreement dated March 20, 2018 with Jefferson Street
Capital, LLC
|
|
|
|
|
|
12%
Secured Convertible Promissory Note dated March 20, 2018 with
Jefferson Street Capital, LLC
|
|
|
|
|
|
Securities
Purchase Agreement dated March 20, 2018 with BlueHawk Capital,
LLC
|
|
|
|
|
|
12%
Secured Convertible Promissory Note dated March 20, 2018 with
BlueHawk Capital, LLC
|
|
|
|
|
|
Securities
Purchase Agreement dated April 12, 2018 with One44 Capital,
LLC
|
|
|
|
|
|
10%
Collateralized Secured Promissory Note dated April 12, 2018 with
One44 Capital, LLC
|
|
|
|
|
|
10%
Convertible Redeemable Note, Back End Note, dated April 12, 2018
with One44 Capital, LLC
|
|
|
|
|
|
Securities
Purchase Agreement dated April 27, 2018 with BlueHawk Capital,
LLC
|
|
|
|
|
|
12%
Convertible Promissory Note dated April 27, 2018 from BlueHawk
Capital, LLC
|
|
|
|
|
|
10%
Secured Promissory Note issued to GHS Investments, LLC dated
December 6, 2018
|
|
|
|
|
|
Securities
Purchase Agreement dated December 6, 2018 with GHS Investments
LLC
|
|
|
|
|
|
10%
Secured Promissory Note issued to GHS Investments, LLC dated
December 31, 2018
|
|
|
|
|
|
Securities
Purchase Agreement dated December 31, 2018 with GHS Investments
LLC
|
|
|
|
|
|
10%
Convertible Promissory Note dated January 16, 2019 with GHS
Investments LLC
|
|
|
|
|
|
10%
Convertible Promissory Note dated February 4, 2019 with GHS
Investments LLC
|
|
|
|
|
|
10%
Convertible Promissory Note dated March 1, 2019 with GHS
Investments LLC
|
|
|
|
|
|
Securities
Purchase Agreement dated March 1, 2019 with GHS Investments
LLC
|
|
|
|
|
|
Subsidiaries of the
Registrant.
|
|
|
|
|
|
Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive
Officer.
|
|
|
|
|
|
Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial
Officer.
|
|
|
|
|
|
Section 1350 Certification of Chief Executive Officer.
|
|
|
|
|
|
Section 1350 Certification of Chief Financial Officer.
|
|
|
|
|
101.INS*
|
XBRL Instance Document
|
|
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
* Filed herewith.
|
|
** Furnished herewith.
|
Pursuant to the
requirements of Section 13 or 15(d) 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: June 28,
2019
|
By:
|
/s/ Bill G. Williams
|
|
|
|
|
Bill G.
Williams
|
|
|
|
|
Chief Executive
Officer and Chairperson of the Board (Principal Executive
Officer)
|
|
|
|
NATURALSHRIMP
INCORPORATED
|
|
|
|
|
|
|
|
Date: June 28,
2019
|
By:
|
/s/ William Delgado
|
|
|
|
|
William
Delgado
|
|
|
|
|
Chief Financial
Officer and Treasurer (Principal Financial Officer and Principal
Accounting Officer)
|
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
Bill G. Williams
|
|
Chief
Executive Officer, Chairman of the Board
(Principal Executive Officer)
|
|
Date: June 28,
2019
|
|
Bill G.
Williams
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Gerald Easterling
|
|
President and
Director
|
|
Date: June 28,
2019
|
|
Gerald
Easterling
|
|
|
|
|
|
|
|
|
|
|
|
/s/
William Delgado
|
|
Chief
Financial Officer, Treasurer and Director
(Principal Financial Officer and Principal Accounting
Officer)
|
|
Date: June 28,
2019
|
|
William
Delgado
|
|
|
|
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NATURALSHRIMP INCORPORATED
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2019
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders of NaturalShrimp
Incorporated:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
NaturalShrimp Incorporated (the “Company”) as of March
31, 2019 and 2018, and the related consolidated statements of
operations, stockholders’ deficit, and cash flows for the
years then ended, and the related notes (collectively referred to
as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the
financial position of the Company as of March 31, 2019 and 2018,
and the results of its operations and its cash flows for the years
then ended, in conformity with accounting principles generally
accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 1 to the financial statements, the Company has suffered
significant losses from inception and has a significant working
capital deficit. These conditions raise substantial doubt about its
ability to continue as a going concern. Management’s plans in
regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
/s/ Turner, Stone & Company, L.L.P.
Dallas, Texas
June 28, 2019
We have served as the Company’s auditor since
2015.
NATURALSHRIMP INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash
|
$137,499
|
$24,280
|
|
Notes
receivable
|
1,700
|
207,200
|
|
Inventory
|
4,200
|
-
|
|
Prepaid
expenses
|
35,286
|
28,699
|
|
Total
current assets
|
178,685
|
260,179
|
|
|
|
|
|
Fixed
assets
|
|
|
|
Land
|
202,293
|
202,293
|
|
Buildings
|
1,328,161
|
1,328,161
|
|
Machinery
and equipment
|
934,621
|
929,245
|
|
Autos
and trucks
|
14,063
|
14,063
|
|
Furniture
and fixtures
|
22,060
|
22,060
|
|
Accumulated
depreciation
|
(1,322,609)
|
(1,292,313)
|
|
Fixed
assets, net
|
1,178,589
|
1,203,509
|
|
|
|
|
|
Other
assets
|
|
|
|
Construction-in-process
|
377,504
|
171,050
|
|
Deposits
|
10,500
|
10,500
|
|
Total
other assets
|
388,004
|
181,550
|
|
Total
assets
|
$1,745,278
|
$1,645,238
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$576,028
|
$528,538
|
|
Accrued
interest - related parties
|
295,184
|
240,377
|
|
Other
accrued expenses
|
609,243
|
497,321
|
|
Short-term
Promissory Note and Lines of credit
|
139,418
|
143,523
|
|
Current
maturities of bank loan
|
228,725
|
7,497
|
|
Current
maturities of convertible debentures, less debt discount of
$511,640 and $ 691,558
|
494,451
|
516,597
|
|
Convertible
debentures, related party
|
87,600
|
87,600
|
|
Notes
payable - related parties
|
1,271,162
|
1,271,162
|
|
Derivative
liability
|
157,000
|
3,455,000
|
|
Warrant
liability
|
93,000
|
277,000
|
|
Total
current liabilities
|
3,951,811
|
7,024,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
loan, less current maturities
|
-
|
228,916
|
|
Lines
of credit
|
650,453
|
651,453
|
|
Convertible
debentures, less current maturities
|
-
|
-
|
|
|
|
|
|
Total
liabilities
|
4,602,264
|
7,904,984
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 11)
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
Series
A Convertible Preferred stock, $0.0001 par value, 5,000,000 shares
authorized, 5,000,000 and 0 shares issued and outstanding at March
31, 2019 and March 31, 2018, respectively
|
500
|
-
|
|
Common stock, $0.0001 par value,
900,000,000 and 300,000,000 shares
authorized, 301,758,293 and
97,656,095 shares issued and outstanding at March 31, 2019 and
March 31, 2018, respectively
|
30,177
|
9,766
|
|
Additional
paid in capital
|
38,335,782
|
27,743,352
|
|
Accumulated
deficit
|
(41,223,445)
|
(34,012,864)
|
|
Total
stockholders' deficit
|
(2,856,986)
|
(6,259,746)
|
|
Total
liabilities and stockholders' deficit
|
$1,745,278
|
$1,645,238
|
The accompanying notes are an integral part of these consolidated
financial statements.
NATURALSHRIMP INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$-
|
$-
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
Facility
operations
|
100,596
|
27,789
|
|
General
and administrative
|
200,595
|
443,508
|
|
Rent
|
12,134
|
11,197
|
|
Salaries
and Wages
|
422,160
|
352,757
|
|
Stock
Compensation
|
-
|
-
|
|
Professional
services
|
234,932
|
278,037
|
|
General
and administrative
|
869,821
|
1,085,499
|
|
Depreciation
and amortization
|
30,296
|
70,894
|
|
Total
operating expenses
|
1,000,713
|
1,184,182
|
|
|
|
|
|
Net
loss before other income (expense)
|
(1,000,713)
|
(1,184,182)
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
Interest
expense
|
(223,350)
|
(171,065)
|
|
Amortization
of debt discount
|
(1,613,984)
|
(775,091)
|
|
Financing
costs
|
(1,899,935)
|
(1,310,751)
|
|
Change
in fair value of derivative liability
|
1,319,500
|
(1,600,000)
|
|
Change
in fair value of warrant liability
|
(47,000)
|
(244,000)
|
|
Loss
on exercise of warrants
|
(3,745,099)
|
-
|
|
Total
other income (expense)
|
(6,209,868)
|
(4,100,907)
|
|
|
|
|
|
Loss
before income taxes
|
(7,210,581)
|
(5,285,089)
|
|
|
|
|
|
Provision
for income taxes
|
-
|
-
|
|
|
|
|
|
Net
loss
|
$(7,210,581)
|
$(5,285,089)
|
|
|
|
|
|
|
|
|
|
EARNINGS
PER SHARE (Basic and diluted)
|
$(0.04)
|
$(0.05)
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING (Basic and diluted)
|
171,325,837
|
97,656,095
|
The accompanying notes are an integral part of these consolidated
financial statements.
NATURALSHRIMP INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid in Capital
|
|
Total stockholders' deficit
|
|
Balance
April 1, 2017
|
-
|
$-
|
92,408,298
|
$9,242
|
$26,681,521
|
$(28,727,775)
|
$(2,037,012)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares in connection with debt
|
|
|
1,004,260
|
100
|
146,951
|
|
147,051
|
|
Issuance
of shares for services
|
|
|
1,000,000
|
100
|
99,900
|
|
100,000
|
|
Issuance
of shares for cash
|
|
|
100,000
|
10
|
24,990
|
|
25,000
|
|
Issuance
of shares upon conversion
|
|
|
2,820,204
|
282
|
119,022
|
|
119,304
|
|
Beneficial
conversion feature
|
|
|
|
|
28,000
|
|
|
