UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended December 31, 2021

 

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

 

NATURAL SHRIMP INCORPORATED

(Exact name of registrant as specified in its charter)

     

Nevada

74-3262176

(State or other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

     

5501 LBJ Freeway, Suite 450Dallas, Texas

75240

(Address of Principal Executive Offices)

(Zip Code)

 

(888) 791-9474

(Registrant’s telephone number, including area code)

 

N/A

(Former address)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading symbol(s)

 

Name of exchange on which registered

None

 

N/A

 

N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically 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 ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” a “smaller reporting company” and an “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated Filer

☒

Smaller reporting company

☒

 

 

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 7(a)(2)(B) of the Securities Act: ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of February 16, 2022, there were 642,222,044shares of the registrant’s common stock outstanding.

  

 

 

  

NATURALSHRIMP INCORPORATED

FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021

 

TABLE OF CONTENTS

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

ITEM 1.

Financial Statements

 

3

 

 

 

 

Condensed Consolidated Balance Sheets as of December 31, 2021 (unaudited) and March 31, 2021

 

3

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2021 and 2020 (unaudited)

 

4

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Deficit for the Nine Months Ended December 31, 2021 and 2020 (unaudited)

 

5

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended December 31, 2021 and 2020 (unaudited)

 

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

7

 

 

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

 

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

 

35

 

 

 

 

ITEM 4.

Controls and Procedures

 

35

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

ITEM 1.

Legal Proceedings

 

36

 

 

 

 

 

ITEM 1A.

Risk Factors

 

37

 

 

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

37

 

 

 

 

 

ITEM 3.

Defaults Upon Senior Securities

 

37

 

 

 

 

 

ITEM 4.

Mine Safety Disclosures

 

37

 

 

 

 

 

ITEM 5.

Other Information

 

37

 

 

 

 

 

ITEM 6.

Exhibits

 

38

 

 

 

 

SIGNATURES

 

39

 

  

 
2

Table of Contents

  

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

   

NATURALSHRIMP INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

  

ASSETS

 

December 31,

2021

 

 

March 31,

2021

 

Current assets

 

 

 

 

 

 

Cash

 

$2,665,205

 

 

$155,795

 

Escrow account

 

 

5,000,000

 

 

 

-

 

Inventory

 

 

28,128

 

 

 

-

 

Prepaid expenses

 

 

326,505

 

 

 

655,339

 

Total current assets

 

 

8,019,838

 

 

 

811,134

 

 

 

 

 

 

 

 

 

 

Fixed assets

 

 

13,766,272

 

 

 

12,236,557

 

 

 

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

 

 

 

Construction-in-process

 

 

2,306,608

 

 

 

1,873,219

 

Patents

 

 

6,756,000

 

 

 

-

 

License Agreement

 

 

10,492,376

 

 

 

 

 

Right of Use asset

 

 

301,733

 

 

 

275,400

 

Deposits

 

 

20,633

 

 

 

20,633

 

Total other assets

 

 

19,877,350

 

 

 

2,169,252

 

Total assets

 

$41,663,460

 

 

$15,216,943

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$3,321,164

 

 

$963,289

 

Accrued interest

 

 

10,850

 

 

 

73,350

 

Accrued interest - related parties

 

 

203,520

 

 

 

187,520

 

Other accrued expenses

 

 

500,472

 

 

 

602,368

 

Accrued expenses - related parties

 

 

200,000

 

 

 

-

 

Short-term Promissory Note and Lines of credit

 

 

20,044

 

 

 

573,621

 

Bank loan

 

 

-

 

 

 

8,725

 

PPP loan

 

 

-

 

 

 

103,200

 

Convertible debenture

 

 

-

 

 

 

483,637

 

Note payable

 

 

96,000

 

 

 

96,000

 

Notes payable - related parties

 

 

495,412

 

 

 

1,151,162

 

Dividends payable

 

 

472,803

 

 

 

182,639

 

Derivative liability

 

 

12,985,000

 

 

 

-

 

Warrant liability

 

 

6,047,000

 

 

 

-

 

Total current liabilities

 

 

24,352,265

 

 

 

4,425,511

 

 

 

 

 

 

 

 

 

 

Bank loans, less current maturities

 

 

-

 

 

 

206,127

 

Convertible debenture, less unamortized debt discount of $15,400,000

 

 

340,000

 

 

 

-

 

Notes payable

 

 

-

 

 

 

5,000,000

 

Note payable, less current maturities

 

 

143,604

 

 

 

215,604

 

Lease Liability

 

 

303,920

 

 

 

275,400

 

Total liabilities

 

 

25,139,789

 

 

 

10,122,642

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

Series E Redeemable Convertible Preferred stock, $0.0001 par value, 10,000 shares authorized, 2,840 and 0 shares issued and outstanding at December 31, 2021 and March 31, 2021, respectively

 

 

1,925,371

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Series D Redeemable Convertible Preferred stock, $0.0001 par value, 20,000 shares authorized,  0 and 6,050 shares issued and outstanding at December 31, 2021 and March 31, 2021, respectively

 

 

-

 

 

 

2,023,333

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Series A Convertible Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding at December 31, 2021 and March 31, 2021, respectively

 

 

500

 

 

 

500

 

Series B Convertible Preferred stock, $0.0001 par value, 5,000 shares authorized, 67 and 607 shares issued and outstanding at December 31, 2021 and March 31, 2021, respectively

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value, 900,000,000 shares authorized, 642,222,044 and 560,745,180 shares issued and 641,822,043 and 560,745,180 shares outstanding at December 31, 2021 and March 31, 2021, respectively

 

 

64,183

 

 

 

56,075

 

Additional paid in capital

 

 

86,808,591

 

 

 

56,649,491

 

Stock Payable

 

 

29,524,000

 

 

 

136,000

 

Accumulated deficit

 

 

(101,798,974)

 

 

(53,683,268)

Total stockholders' equity attributable to NaturalShrimp Incorporated shareholders

 

 

14,598,300

 

 

 

3,158,798

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in NAS

 

 

-

 

 

 

(87,830)

 

 

 

 

 

 

 

 

 

Total stockholders' equity

 

 

14,598,300

 

 

 

3,070,968

 

Total liabilities mezzanine and stockholders' equity

 

$41,663,460

 

 

$15,216,943

 

 

The accompanying footnotes are in integral part of these condensed consolidated financial statements.

   

 
3

Table of Contents

  

NATURALSHRIMP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Nine months Ended

 

 

 

December 31,

2021

 

 

December 31,

2020

 

 

December 31,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$16,640

 

 

$-

 

 

$16,640

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

1,527,699

 

 

 

394,654

 

 

 

5,182,358

 

 

 

1,131,662

 

Research and development

 

 

20,357

 

 

 

-

 

 

 

217,229

 

 

 

79,550

 

Facility operations

 

 

398,504

 

 

 

154,470

 

 

 

810,260

 

 

 

234,113

 

Depreciation

 

 

218,134

 

 

 

18,173

 

 

 

830,409

 

 

 

37,850

 

Amortization

 

 

367,500

 

 

 

-

 

 

 

514,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

2,532,194

 

 

 

567,297

 

 

 

7,554,256

 

 

 

1,483,175

 

Net loss from operations

 

 

(2,515,554)

 

 

(567,297)

 

 

(7,537,616)

 

 

(1,483,175)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(80,991)

 

 

(42,541)

 

 

(228,190)

 

 

(102,057)

Amortization of debt discount

 

 

(340,000)

 

 

-

 

 

 

(576,364)

 

 

-

 

Financing costs

 

 

(1,393,000)

 

 

-

 

 

 

(1,502,953)

 

 

(64,452)

Change in fair value of derivative liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(29,000)

Change in fair value of warrant liability

 

 

(137,000)

 

 

-

 

 

 

(137,000)

 

 

-

 

Forgiveness of PPP loan

 

 

-

 

 

 

-

 

 

 

103,200

 

 

 

-

 

Gain on Vero Blue note settlement

 

 

500,000

 

 

 

-

 

 

 

500,000

 

 

 

-

 

Legal Settlement

 

 

(29,400,000)

 

 

-

 

 

 

(29,400,000)

 

 

-

 

Total other income (expense)

 

 

(30,850,991)

 

 

(42,541)

 

 

(31,241,307)

 

 

(195,509)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(33,366,545)

 

 

(609,838)

 

 

(38,778,923)

 

 

(1,678,684)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(33,366,545)

 

 

(609,838)

 

 

(38,778,923)

 

 

(1,678,684)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less net loss attributable to non-controlling interest

 

 

-

 

 

 

(1,074)

 

 

-

 

 

 

(4,655)

Net loss attributable to NaturalShrimp Incorporated

 

 

(33,366,545)

 

 

(608,764)

 

 

(38,778,923)

 

 

(1,674,029)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of beneficial conversion feature on Preferred shares

 

 

-

 

 

 

(443,333)

 

 

(817,376)

 

 

(1,543,333)

Redemption and exchange of Series D Preferred shares

 

 

 

 

 

 

-

 

 

 

(5,792,947)

 

 

-

 

Dividends

 

 

-

 

 

 

(172,291)

 

 

-

 

 

 

(317,083)

Net loss available for common stockholders

 

$(33,366,545)

 

$(1,224,388)

 

$(45,389,246)

 

$(3,534,445)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE (Basic and diluted)

 

$(0.05)

 

$(0.00)

 

$(0.07)

 

$(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and diluted)

 

 

635,536,459

 

 

 

451,549,772

 

 

 

608,191,555

 

 

 

419,177,832

 

  

The accompanying footnotes are in integral part of these condensed consolidated financial statements.

   

 
4

Table of Contents

   

NATURALSHRIMP INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

   

 

 

Series A Preferred Stock

 

 

Series B Preferred Stock

 

 

Common Stock

 

 

Additional Paid In

 

 

Stock

 

 

Accumulated

 

 

Non-controlling

 

 

Total Stockholders' Equity/

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Payable

 

 

Deficit

 

 

Interest

 

 

(Deficit)

 

Balance March 31, 2021

 

 

5,000,000

 

 

$500

 

 

 

607

 

 

$-

 

 

 

560,745,180

 

 

$56,076

 

 

$56,649,491

 

 

$136,000

 

 

$(53,683,268)

 

$(87,830)

 

$3,070,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,329,246

 

 

 

133

 

 

 

421,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

421,486

 

Conversion of Series B PS to common stock

 

 

 

 

 

 

 

 

 

 

(262)

 

 

-

 

 

 

3,144,000

 

 

 

314

 

 

 

(314)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Conversion of Series D PS to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

428,572

 

 

 

43

 

 

 

(43)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Exchange of Series D PS to Series E PS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,258,189)

 

 

 

 

 

 

(3,258,189)

Sale of common shares and warrants for cash, less offering costs and commitment shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,772,729

 

 

 

3,577

 

 

 

17,273,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,277,123

 

Exercise of warrants related to the sale of common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,100,000

 

 

 

110

 

 

 

10,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,000

 

Beneficial conversion feature related to the Series E Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,269,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,269,505

 

Amortization of beneficial conversion feature related to Series E Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(817,376)

 

 

 

 

 

 

(817,376)

Redemption of Series D Preferred shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,534,758)

 

 

 

 

 

 

(2,534,758)

Common shares to be issued for the acquisition of the non-controlling interest subsidiary's remaining equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,087,830)

 

 

2,000,000

 

 

 

 

 

 

 

87,830

 

 

 

(1,000,000)

Common shares to be issued for Patent acquisition 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

 

 

 

 

 

5,000,000

 

Common stock vested to consultants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125,000

 

 

 

13

 

 

 

48,738

 

 

 

24,900

 

 

 

 

 

 

 

 

 

 

 

73,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,562,743)

 

 

 

 

 

 

(2,562,743)

Balance June 30, 2021

 

 

5,000,000

 

 

$500

 

 

 

345

 

 

$-

 

 

 

602,644,727

 

 

$60,266

 

 

$74,585,336

 

 

$7,160,900

 

 

$(62,856,334)

 

$-

 

 

$18,950,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series E PS to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,114,286

 

 

 

411

 

 

 

(411)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Amortization of beneficial conversion feature related to Series E Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,341,948)

 

 

 

 

 

 

(1,341,948)

Revision of dividends payable on Series B Preferred Shares (See Note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(182,639)

 

 

 

 

 

 

 

 

Dividends payable on Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(177,586)

 

 

 

 

 

 

 

 

Common shares to be issued for Technical and Equipment Rights Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,762,376

 

 

 

 

 

 

 

 

 

 

 

4,762,376

 

Common stock vested to consultants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,500

 

 

 

6

 

 

 

24,369

 

 

 

24,900

 

 

 

 

 

 

 

 

 

 

 

49,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,849,635)

 

 

 

 

 

 

(2,849,635)

Balance September 30, 2021

 

 

5,000,000

 

 

$500

 

 

 

345

 

 

$-

 

 

 

606,821,513

 

 

$60,683

 

 

$74,609,294

 

 

$11,948,176

 

 

$(67,408,142)

 

$-

 

 

$19,210,511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series B PS to common stock

 

 

 

 

 

 

 

 

 

 

(278)

 

 

 

 

 

 

3,336,000

 

 

 

334

 

 

 

(334)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(334)

Conversion of Series E PS to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,114,286

 

 

 

411

 

 

 

2,879,589

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,879,589

 

Amortization of beneficial conversion feature related to Series E Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

(831,543)

 

 

 

 

 

 

(831,543)

Beneficial conversion feature related to the Series E Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

169,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

169,714

 

Accretion of Series E Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

(80,167)

 

 

 

 

 

 

(80,167)

Dividends payable on Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

(112,577)

 

 

 

 

 

 

(112,577)

Common shares issued for Technical and Equipment Rights Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,732,673

 

 

 

2,673

 

 

 

11,759,703

 

 

 

(11,762,376)

 

 

 

 

 

 

 

 

 

 

-

 

Common stock vested to consultants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

112,500

 

 

 

21

 

 

 

99,054

 

 

 

(49,800)

 

 

 

 

 

 

 

 

 

 

49,275

 

Common stock issued to consultants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

430,071

 

 

 

43

 

 

 

158,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

158,328

 

Common stock issued to employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

175,000

 

 

 

18

 

 

 

68,286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68,304

 

Reclassification of warrants to liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2,935,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,935,000)

 

Common stock to be issued for legal settlement to NSH shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 29,388,000

 

 

 

 

 

 

 

 

 

 

 

 29,388,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,366,545)

 

 

 

 

 

 

(33,366,545)

Balance December 31, 2021

 

 

5,000,000

 

 

$500

 

 

 

67

 

 

$-

 

 

 

641,722,043

 

 

$64,183

 

 

$86,808,591

 

 

$29,524,000

 

 

$(101,798,974)

 

$-

 

 

$14,598,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2020

 

 

5,000,000

 

 

$500

 

 

 

2,250

 

 

$-

 

 

 

379,742,524

 

 

$37,975

 

 

$43,533,243

 

 

 

-

 

 

$(46,427,396)

 

$(82,101)

 

 

(2,937,780)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37,926,239

 

 

 

3,793

 

 

 

222,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

226,437

 

Reclass of derivative liability upon conversion or redemption of related convertible debentures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

205,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

205,000

 

Purchase of Series B Preferred shares

 

 

 

 

 

 

 

 

 

 

1,250

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

1,250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,250,000

 

Beneficial conversion feature related to the Series B Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

293,000

 

 

 

 

 

 

 

(293,000)

 

 

 

 

 

 

-

 

Dividends payable on Series B PS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(144,792)

 

 

 

 

 

 

(144,792)

Series B PS Dividends in kind issued

 

 

 

 

 

 

 

 

 

 

50

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

56,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56,458

 

Conversion of Series B PS to common stock

 

 

 

 

 

 

 

 

 

 

(800)

 

 

(0)

 

 

33,569,730

 

 

 

3,357

 

 

 

(3,357)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Common stock issued in Vista Warrant settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,500,000

 

 

 

1,750

 

 

 

608,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

610,000

 

Reclass of warrant liability upon the cancellation of warrants under Vista Warrant settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90,000

 

Common stock issued to consultant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,250,000

 

 

 

125

 

 

 

61,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(477,072)

 

 

(1,895)

 

 

(478,967)

Balance June 30, 2020

 

 

5,000,000

 

 

$500

 

 

 

2,750

 

 

$0

 

 

 

469,988,493

 

 

$47,000

 

 

$46,316,363

 

 

$-

 

 

$(47,342,260)

 

$(83,996)

 

$(1,062,394)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,014,001

 

 

 

101

 

 

 

125,635

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125,736

 

Purchase of Series B Preferred shares

 

 

 

 

 

 

 

 

 

 

1,250

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

1,250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,250,000

 

Beneficial conversion feature related to the Series B Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

807,000

 

 

 

 

 

 

 

(807,000)

 

 

 

 

 

 

-

 

Dividends payable on Series B PS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(83,960)

 

 

 

 

 

 

(83,960)

Series B PS Dividends in kind issued

 

 

 

 

 

 

 

 

 

 

65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77,984

 

Conversion of Series B PS to common stock

 

 

 

 

 

 

 

 

 

 

(2,369)

 

 

(0)

 

 

58,521,249

 

 

 

5,852

 

 

 

(5,852)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Common stock issued to consultant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,500,000

 

 

 

150

 

 

 

67,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(588,193)

 

 

(1,686)

 

 

(589,879)

Balance September 30, 2020

 

 

5,000,000

 

 

$500

 

 

 

1,696

 

 

$(0)

 

 

531,023,743

 

 

$53,103

 

 

$48,638,480

 

 

$-

 

 

$(48,821,413)

 

$(85,682)

 

$(215,012)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

795,387

 

 

 

80

 

 

 

198,768

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

198,848

 

Purchase of Series B Preferred shares

 

 

 

 

 

 

 

 

 

 

750

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

750,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

750,000

 

Beneficial conversion feature related to the Series B Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

235,000

 

 

 

 

 

 

 

(235,000)

 

 

 

 

 

 

-

 

Dividends payable on Series B Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(88,333)

 

 

 

 

 

 

(88,333)

Conversion of Series B Preferred Shares to common stock

 

 

 

 

 

 

 

 

 

 

(526)

 

 

-

 

 

 

5,670,051

 

 

 

567

 

 

 

(567)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Beneficial conversion feature related to the Series D Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000,000

 

Amortization of beneficial conversion feature related to Series D Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(208,333)

 

 

 

 

 

 

(208,333)

Commitment shares issued with Series D Preferred Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,000,000

 

 

 

600

 

 

 

(600)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Common stock issued to consultant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,500,000

 

 

 

150

 

 

 

616,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

616,500

 

Common stock to be issued as finder's fees related to asset acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

135,775

 

 

 

 

 

 

 

 

 

 

 

135,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(608,764)

 

 

(1,074)

 

 

(609,838)

Balance December 31, 2020

 

 

5,000,000

 

 

$500

 

 

 

1,920

 

 

$-

 

 

 

544,989,181

 

 

$54,500

 

 

$55,437,431

 

 

 

135,775

 

 

$(49,961,843)

 

$(86,756)

 

$5,579,607

 

 

The accompanying footnotes are in integral part of these condensed consolidated financial statements.

    

 
5

Table of Contents

  

NATURALSHRIMP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  

 

 

For the 9 Months Ended

 

 

 

December 31,

2021

 

 

December 31,

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss attributable to NaturalShrimp Incorporated

 

$(38,778,923)

 

$(1,674,029)

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

586,409

 

 

 

37,850

 

Amortization expense

 

 

514,000

 

 

 

-

 

Amortization of debt discount

 

 

576,364

 

 

 

-

 

Change in fair value of derivative liability

 

 

-

 

 

 

29,000

 

Change in fair value of warrant liability

 

 

137,000

 

 

 

-

 

Financing costs

 

 

1,502,953

 

 

 

-

 

Default penalty

 

 

-

 

 

 

41,112

 

Net loss attributable to non-controlling interest

 

 

-

 

 

 

(4,655)

Forgiveness of PPP loan

 

 

(103,200)

 

 

-

 

Gain on Vero Blue note settlement

 

 

(500,000)

 

 

-

 

          Legal settlement

 

 

                     29,388,000

 

 

 

                                      -

 

Shares issued for services

 

 

398,831

 

 

 

745,250

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

(28,128)

 

 

-

 

Prepaid expenses and other current assets

 

 

(321,162)

 

 

(649,326)

Deposits

 

 

-

 

 

 

-

 

Accounts payable

 

 

(5,637,796)

 

 

255,231

 

Other accrued expenses

 

 

(101,896)

 

 

143,793

 

Accrued expenses - related parties

 

 

200,000

 

 

 

-

 

Accrued interest

 

 

(49,482)

 

 

29,959

 

Accrued interest - related parties

 

 

16,000

 

 

 

32,096

 

Cash used in operating activities

 

 

(12,201,031)

 

 

(1,013,719)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for machinery and equipment

 

 

(2,116,124)

 

 

(1,481,558)

Cash paid for asset acquisition with VeroBlue Farms, Inc.

 

 

-

 

 

 

(5,000,000)

Cash paid for patent acquisition with F & T

 

 

(2,000,000)

 

 

-

 

Cash paid for acquisition of shares of NCI

 

 

(1,000,000)

 

 

-

 

Cash paid for License Agreement

 

 

(2,350,000)

 

 

-

 

Cash received from Insurance settlement

 

 

-

 

 

 

917,210

 

Cash paid for construction in process

 

 

(433,389)

 

 

(1,562,380)

Cash (used in) provided by investing activities

 

 

(7,899,513)

 

 

(7,126,728)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments on bank loan

 

 

(214,852)

 

 

(17,810)

Payment of note payable

 

 

(72,000)

 

 

(48,000)

Payment of note payable, related party

 

 

(655,750)

 

 

-

 

Repayment of short-term promissory note and lines of credit

 

 

(553,577)

 

 

5,413

 

Proceeds from PPP loan

 

 

-

 

 

 

103,200

 

Proceeds from issuance of common shares

 

 

17,277,123

 

 

 

-

 

Shares issued upon exercise of warrants

 

 

11,000

 

 

 

-

 

Proceeds from sale of Series B Convertible Preferred stock

 

 

-

 

 

 

3,250,000

 

Proceeds from convertible debentures

 

 

8,905,000

 

 

 

-

 

Escrow account in relation to the proceeds from convertible debenture

 

 

5,000,000

 

 

 

-

 

Payments on  convertible debentures

 

 

(421,486)

 

 

-

 

Payments on  notes payable

 

 

(4,500,000)

 

 

-

 

Redemption of Series D PS

 

 

(3,513,504)

 

 

-

 

Proceeds from sale of Series E Preferred Stock

 

 

1,348,000

 

 

 

5,000,000

 

Cash received in relation to Vista warrant settlement

 

 

-

 

 

 

50,000

 

Cash provided by financing activities

 

 

22,609,954

 

 

 

8,342,803

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

2,509,410

 

 

 

202,356

 

 

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

 

 

155,795

 

 

 

109,491

 

 

 

 

 

 

 

 

 

 

CASH AT END OF PERIOD

 

$2,665,205

 

 

$311,847

 

 

 

 

 

 

 

 

 

 

INTEREST PAID

 

$212,190

 

 

$69,961

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Shares issued upon conversion

 

$421,486

 

 

$1,131,824

 

Cancellation of Right of Use asset and Lease liability

 

$275,400

 

 

$-

 

Dividends in kind issued

 

$-

 

 

$134,446

 

Shares issued on Vista Warrant settlement

 

$-

 

 

$610,000

 

Shares issued as consideration for Patent acquisition

 

$5,000,000

 

 

$-

 

Shares issued as consideration for acquisition of remaining NCI

 

$2,000,000

 

 

$-

 

Notes payable,  issued as consideration in VeroBlue Farms, Inc. asset acquisition

 

$  

 

 

$5,000,000

 

Shares payable,  to be issued as finders fee in VeroBlue Farms, Inc. asset acquisition

 

$-

 

 

$136,000

 

Shares issued as consideration for Rights Agreement

 

$4,762,376

 

 

$-

 

Note payable, related party, issued in place of Settlement Agreement

 

$-

 

 

$383,604

 

 

The accompanying footnotes are in integral part of these condensed consolidated financial statements.

    

 
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NATURALSHRIMP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021

(Unaudited)

 

NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS

 

Nature of the Business

 

NaturalShrimp Incorporated (“NaturalShrimp” or the “Company”), a Nevada corporation, is a biotechnology company and has developed a proprietary technology that allows it to grow Pacific White shrimp (Litopenaeus vannamei, formerly Penaeus vannamei) in an ecologically controlled, high-density, low-cost environment, and in fully contained and independent production facilities. The Company’s system uses technology which allows it to produce a naturally-grown shrimp “crop” weekly and accomplishes this without the use of antibiotics or toxic chemicals. The Company has developed several proprietary technology assets, including a knowledge base that allows it to produce commercial quantities of shrimp in a closed system with a computer monitoring system that automates, monitors and maintains proper levels of oxygen, salinity and temperature for optimal shrimp production. The Company’s production facilities are located in La Coste, Texas and Webster City, Iowa.

 

On December 15, 2020, the Company entered into an Asset Purchase Agreement (“APA”) between VeroBlue Farms USA, Inc., a Nevada corporation (“VBF”), VBF Transport, Inc., a Delaware corporation (“Transport”), and Iowa’s First, Inc., an Iowa corporation (“Iowa’s First”) (each a “Seller” and collectively, “Sellers”). Transport and Iowa’s First were wholly-owned subsidiaries of VBF. The agreement called for the Company to purchase all of the tangible assets of VBF, the motor vehicles of Transport and the real property (together with all plants, buildings, structures, fixtures, fittings, systems and other improvements located on such real property) of Iowa’s First. The facility was originally designed as an aquaculture facility, with the company having production issues. The Company began a modification process to convert the plant to produce shrimp, which will allow them to scale faster without having to build new facilities. The three Iowa facilities contain the tanks and infrastructure that will be used to support the production of shrimp with the incorporation of the Company’s patented EC platform technology. On May 19, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with F&T Water Solutions, LLC (“F&T”), for F&T’s owned shares of Natural Aquatic Systems, Inc. (“NAS”). Prior to entering into the SPA, the Company owned fifty-one percent (51%) and F&T owned forty-nine percent (49%) of the issued and outstanding shares of common stock of NAS. After the SPA, NAS is a 100% owned subsidiary of the Company (See Note 10).

 

The Company has three wholly-owned subsidiaries including NaturalShrimp USA Corporation, NaturalShrimp Global, Inc. and NAS.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended December 31, 2021, the Company had a net loss available for common stockholders of approximately $33,367,000. At December 31, 2021, the Company had an accumulated deficit of approximately $101,799,000 and a working capital deficit of approximately $16,332,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern, within one year from the issuance date of this filing. The Company’s ability to continue as a going concern is dependent on its ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the nine months ended December 31, 2021, the Company received net cash proceeds of approximately $17,277,000 from the sale of common shares (See Note 11), $1,348,000 from the sale of Series E Preferred Stock and $8,905,000 proceeds from the issuance of a convertible debenture. Management believes that private placements of equity capital will be needed to fund the Company’s long-term operating requirements. The Company may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. If the Company raises additional funds through the issuance of equity, the percentage ownership of its current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. The Company continues to pursue external financing alternatives to improve its working capital position. If the Company is unable to obtain the necessary capital, the Company may be unable to develop its facilities and enter in production.

  

 
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NOTE 2 – REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

 

In the Company’s previously issued financial statement for the first quarter of the current fiscal year for the three months ending June 30, 2021, the Company made an incorrect extinguishment of the Dividends payable in relation to the redemption of the Series D Preferred Stock as of April 15, 2021. However, it was later evaluated that the Dividends payable related to preferred shares that were still outstanding. The reclassification of the Dividends payable into Accumulated deficit was only presented as of June 30, 2021 on the Consolidated Balance Sheet, and did not impact the Consolidated Statements of Operations or the Consolidated Statement of Cash Flows.

 

In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the change and has determined that the related impact was not material to any previously presented financial statements. As such the Company is reporting the revision to dividends to that period in this Quarterly Report.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited financial information as of and for the three months ended December 31, 2021 and 2020 has been prepared in accordance with GAAP in the U.S. for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the nine months ended December 31, 2021 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended March 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on June 29, 2021.

 

The condensed consolidated balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

 

Consolidation

 

The consolidated financial statements include the accounts of NaturalShrimp Incorporated and its wholly-owned subsidiaries, NaturalShrimp USA Corporation, NaturalShrimp Global, Inc. and Natural Aquatic Systems, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

 
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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 nine months ended December 31, 2021, the Company had Redeemable Convertible Preferred stock with approximately  9,842,000 underlying common shares, approximately $18,768,000 in a convertible debenture whose approximately 67,816,000 underlying shares are convertible at the holders’ option at conversion price of 90 % of the average of the two lowest market prices over the last 10 days and 18,506,429 warrants outstanding which were not included in the calculation of diluted EPS as their effect would be anti-dilutive. For the nine months ended December 31, 2020, the Company had 1,920   shares of Series B Preferred Stock whose approximately 12,308,000 underlying shares are convertible at the investors’ option at a conversion price based on the lowest market price over the last 20 trading days, and 5,000 shares of Series D Preferred Stock whose approximately 50,000,000 underlying shares are convertible at the investors’ option at a fixed conversion price of $0.10, which were not included in the calculation of diluted EPS as their effect would be anti-dilutive. 

 

Fair Value Measurements

 

ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Financial Instruments.”

 

Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company’s balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.

 

The Company did not have any Level 1 or Level 2 assets and liabilities at December 31, 2021 and March 31, 2021.

 

The Derivative and Warrant liabilities are Level 3 fair value measurements. There were no Warrant liabilities in Level 3 fair value measurements during the three months ended December 31, 2021.

 

The following is a summary of activity of Level 3 derivatives during the nine months ended December 31, 2021 and the year ended March 31, 2021:

 

Derivatives

 

 

 

December 31,

2021

 

 

March 31,

2021

 

Derivative liability balance at beginning of period

 

$-

 

 

$176,000

 

Reclass to equity upon conversion or redemption

 

 

-

 

 

 

(205,000)

Additions to derivatives

 

 

12,985,000

 

 

 

-

 

Change in fair value

 

 

-

 

 

 

29,000

 

Balance at end of period

 

$12,985,000

 

 

$-

 

 

 
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At December 31, 2021, the fair value of the derivative liabilities of convertible notes was estimated using the following inputs: the price of the Company’s common stock of $0.3075; a risk-free interest rate of 0.69% and expected volatility of the Company’s common stock of 125.90%, and the various estimated reset exercise prices weighted by probability.

 

Warrant liability

 

 

 

December 31,

2021

 

 

March 31,

2021

 

Warrant liability balance at beginning of period

 

$-

 

 

$90,000

 

Additions to warrant liability

 

 

5,910,000

 

 

 

-

 

Reclass to equity upon cancellation or exercise

 

 

-

 

 

 

(90,000)

Change in fair value

 

 

137,000

 

 

 

-

 

Balance at end of period

 

$6,047,000

 

 

$-

 

 

At December 31, 2021, the fair value of the warrant liability was estimated using the following inputs: the price of the Company’s common stock of $0.337; a risk-free interest rate of 1.33% and expected volatility of the Company’s common stock ranging of 209.9%.

 

Financial Instruments

 

The Company’s financial instruments include cash and cash equivalents, receivables, payables, and debt and are accounted for under the provisions of ASC Topic 825, “Financial Instruments”. The carrying amount of these financial instruments, with the exception of discounted debt, as reflected in the consolidated balance sheets approximates fair value.

 

Cash and Cash Equivalents

 

For the purpose of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents at December 31, 2021 and March 31, 2021.

 

Concentration of Credit Risk

 

The Company maintains cash balances at two financial institutions. Accounts at this institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. As of December 31, 2021 the Company’s cash balance exceeded FDIC coverage. As of March 31, 2021, the Company’s cash balance did not exceed FDIC coverage. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible.

 

Fixed Assets

  

Equipment is carried at historical value or cost and is depreciated using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:

 

Buildings

 

39 years

 

Machinery and Equipment

 

7 – 10 years

 

Vehicles

 

10 years

 

Furniture and Fixtures

 

3 – 10 years

 

 

Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

  

 
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If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

 

Recently Issued Accounting Standards

 

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its consolidated financial statements and related disclosures.

 

As of December 31, 2021, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

 

Management’s Evaluation of Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date of December 31, 2021, through the date which the consolidated financial statements were issued. Based upon the review, other than described in Note 15 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

 

Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

 

 
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NOTE 4 – FIXED ASSETS

 

A summary of the fixed assets as of December 31, 2021 and March 31, 2021 is as follows:

 

 

 

December 31,

2021

 

 

March 31,

2021

 

Land

 

$324,293

 

 

$324,293

 

Buildings

 

 

5,007,505

 

 

 

4,702,063

 

Machinery and equipment

 

 

9,607,180

 

 

 

7,580,873

 

Autos and trucks

 

 

247,356

 

 

 

213,849

 

 

 

 

15,186,334

 

 

 

12,891,078

 

Accumulated depreciation

 

 

(1,420,062)

 

 

(4,52158)

Fixed assets, net

 

$13,766,272

 

 

$12,236,557

 

 

The consolidated statements of operations reflect depreciation expense of approximately $218,000 and $18,000 and $830,000 and $38,000 for the three and nine months ended December 31, 2021 and 2020, respectively.

 

NOTE 5 – PATENT ACQUISITION

 

On May 19, 2021, the Company entered into a Patents Purchase Agreement (the “Patents Agreement”) with F&T. The Company and F&T had previously jointly developed and patented a water treatment technology used or useful in growing aquatic species in re-circulating and enclosed environments (the “Patent”) with each party owning a fifty percent (50%) interest. Upon the closing of the Patents Agreement, the Company would purchase F&T’s interest in the Patent, F&T’s 100% interest in a second patent associated with the first Patent issued to F&T in March 2018, and all other intellectual property rights owned by F&T for a purchase price of $2,000,000 in cash and issue9,900,990 shares of the Company’s common stock with a market value of $0.505 per share for a total fair value of $5,000,000, for a total acquisition price of $7,000,000. The Company paid the cash purchase price on May 20, 2021 and the closing of the Patents Agreement took place on May 25, 2021.

 

In accordance with ASC 805-10-55-5A, as substantially all the assets acquired are concentrated in a single identifiable asset, the patents, the acquisition has been determined to not be considered a business combination but an asset acquisition. The consideration will be allocated to the two patents, which were both approved in December, 2018, and will be amortized through the earliest of their useful life or December, 2038. Amortization over the next five years is expected to be $390,000 per year, for a total of $1,950,000. Amortization expense was $97,500 and $244,000 for the three and nine months ended December 31, 2021

 

NOTE 6 – RIGHTS AGREEMENTS

 

On August 25, 2021, the Company, through their 100% owned subsidiary NAS, entered into an Equipment Rights Agreements with Hydrenesis-Delta Systems, LLC (“Hydrenesis-Delta”) and a Technology Rights Agreement, in a sub-license agreement with Hydrenesis Aquaculture LLC (“Hydrenesis-Aqua”), The Equipment Rights involve specialized and proprietary equipment used to produce and control, dose, and infuse Hydrogas® and RLS® into both water and other chemical species, while the Technology sublicense pertains to the rights to Hydrogas® and RLS®. Both Rights agreements are for a 10 year term, which shall automatically renew for ten year successive terms. The term can be terminated by written notice by mutual consent, or by either party upon a breach of contract, insolvency or filing of bankruptcy. The agreements accord the exclusive rights to purchase or distribute the technology, or buy or rent the equipment, in the Industry Sector, which is the primary business and revenue stream generated from indoor aquaculture farming of any species in the Territory, defined as anywhere in the world except for the countries in the Gulf Corporation Council.

 

The consideration for the Equipment Rights consists of the sum of $2,500,000, with $500,000 in cash paid at closing, and $500,000 to be paid on the first day of the next calendar quarter, plus $250,000 to be paid on the first day of each successive calendar quarter until the amount is paid in full.

 

Per the Terms set forth in the Technology Rights Agreement, the consideration is defined as the sum of $10,000,000, consisting of $2,500,000 in cash at closing, and an additional $1,000,000 within 60 days after closing, and $6,500,000 worth of unrestricted common shares of stock in the parent company, NSI, at a stipulated share price of $0.505. Determined with this stipulated price, 12,871,287 shares were issued. Based on the market price on August 25, 2021 of $0.37, the fair value of the shares is $4,762,376, which results in a fair value total consideration of $8,262,376. The common shares are covered by a Lock-Up and Leak-Out Agreement.

  

 
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The terms of the Agreements set forth that NAS will pay Hydrenesis  12.5% royalty fees. The royalties are calculated per all customer or sub-license revenue generated by NAS, NSI or any Affiliate, from the sale or rental of either the Technologies or Hydrenesis Equipment, based on gross revenue less returns, rebates and sales taxes. There are sales milestones for exclusivity, whereby if NAS fails to achieve a sales milestone starting in Year 3, the exclusivity rights in both of the Rights agreements shall revert to non-exclusive rights. To maintain the exclusivity for the subsequent year, the Company may pay the amount of the royalty fees that would have been due if the Sales Milestone had been meet in the current year.

 

The Sales Milestones are:

 

Year 3

 

$

250,000 Royalty

 

Year 4

 

$

375,000 Royalty

 

Year 5

 

$

625,000 Royalty

 

Year 6

 

$

875,000 Royalty

 

All subsequent years

 

$

1,000,000Royalty

 

 

For the three months ended December 31, 2021, the amortization of the Rights was $270,000. The amortization is approximately $1,076,000 per year, and approximately $5,381,000 over the next five years.

 

NOTE 7 – SHORT-TERM NOTE AND LINES OF CREDIT

 

The Company has a working capital line of credit with Extraco Bank. On April 30, 2020, the line of credit was renewed with a maturity date of April 30, 2021 for a balance of $372,675. The line of credit bore an interest rate of 5.0%, that was compounded monthly and to be paid with the principal on the maturity date. The line of credit matured on April 30, 2021 and was secured by certificates of deposit and letters of credit owned by directors and shareholders of the Company. On May 5, 2021, the Company paid off the line of credit. The balance of the line of credit was $372,675 at March 31, 2021.

 

The Company also had an additional line of credit with Extraco Bank for $200,000, which was renewed with a maturity date of April 30, 2021, for a balance of $177,778. The line of credit bore interest at a rate of 5%, that was compounded monthly and to be paid with the principal on the maturity date. The line of credit was secured by certificates of deposit and letters of credit owned by directors and shareholders of the Company. On April 15, 2021, the line of credit was paid off in full. The balance of the line of credit was $177,778 at March 31, 2021.

 

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 29.15% as of December 31, 2021. The line of credit is unsecured. The balance of the line of credit was $9,580 at both December 31, 2021 and March 31, 2021.

 

The Company also has a working capital line of credit with Chase Bank for $