NOTE 6 – RELATED PARTY TRANSACTIONS

Notes Payable – Related Parties

Baptist Community Services (BCS)

Pursuant to an assignment agreement dated March 26, 2009, Amarillo National Bank sold and transferred a note to Baptist Community Services (the “BCS Note”), a related party and shareholder of the Company, in the amount of $2,004,820.  The interest rate under the terms of the agreement is 2.25% and is payable monthly.  The note is collateralized by all inventories, accounts, equipment, and all general intangibles related to the Company’s shrimp production facility in La Coste, Texas.  Payment of the note is also guaranteed by High Plains Christian Ministries Foundation, a shareholder of the Company.

Effective December 31, 2008, the Company entered into a subordinated promissory note agreement with BCS for $70,000 (the “BCS Subordinated Note”) to provide working capital to pay accrued interest due under the BCS Note and other operating expenses.  On April 7, 2009, the BCS Subordinated Note was increased by $125,000 to provide additional working capital for the Company.  The aggregate balance of the BCS Subordinated Note and BCS Note at December 31, 2015 and March 31, 2015 was $2,305,953 and $2,305,953, respectively, and is classified as a current liability on the consolidated balance sheets.  During the nine months ended December 31, 2015 and 2014, the Company incurred $56,416 and $48,581 in interest expense on the subordinated notes.  At December 31, 2015 and March 31, 2015, accrued interest payable was $158,177 and $149,566, respectively.

On January 25, 2010, the Company received notice from BCS notifying it that the Company was in default of its obligations to BCS and that both the BCS Note and the BCS Subordinated Note, as well as all accrued interest, fees and expenses, were payable in full.  Pursuant to a forbearance agreement dated January 25, 2010, BCS agreed to forbear from exercising any remedies available under both the BCS Note and the BCS Subordinated Note until January 25, 2011, or when the Company fails to promptly perform any of its covenants or obligation under the forbearance agreement, whichever occurs first.  In 2015, a fifth forbearance agreement was executed extending the forbearance terms to December 31, 2016.

Shareholder Notes

The Company has entered into several working capital notes payable to multiple shareholders and Bill Williams, an officer, a director, and a shareholder of the Company, for a total of $486,500 since inception.  At the time of issuance, these noteholders had stock in a shareholder, NaturalShrimp Holdings Inc., issued in lieu of interest and have no set monthly payment or maturity date.  The balance of these notes at December 31, 2015 and March 31, 2015 was $426,404 and $426,404, respectively, and is classified as a current liability on the consolidated balance sheets.  At December 31, 2015 and March 31, 2015, accrued interest payable was $137,368 and $103,048, respectively.

In 2009, the Company entered into a note payable to Randall Steele, a shareholder of the Company, for $50,000.  The note bears interest at 6.0% and is payable upon maturity on January 20, 2011.  In addition, the Company issued 100,000 shares of common stock in a shareholder, NaturalShrimp Holdings, Inc., for consideration.  The shares were valued at the date of issuance at fair value.  The value assigned to the shares of $50,000 was recorded as increase in common stock and additional paid-in capital and was limited to the value of the note.  The assignment of a value to the shares resulted in a financing fee being recorded for the same amount.  The note is unsecured.  The balance of the note at December 31, 2015 and March 31, 2015 was $50,000, respectively, and is classified as a current liability on the consolidated balance sheets.  Interest expense on the note was $2,258 and $2,263 during the nine months ended December 31, 2015 and 2014, respectively.  At December 31, 2015 and March 31, 2015, accrued interest payable was $1,541 and $795, respectively.

Beginning in 2009, the Company started entering into notes payable with various shareholders of the Company.  The notes bear interest at 15.0% and are payable generally twelve months from the date of the note.  The notes are collateralized by the shrimp crop attributable to the post larvaes (PLs) acquired from the note proceeds.  On May 28, 2015 the Company reached an agreement with these various shareholders in which the Company issued 199,103 shares of common stock in full payment of debt of $35,000, accrued interest of $23,927 and recorded a loss on extinguishment of debt of $319,369.  At March 31, 2015 the balance of these notes totaled $35,000 and is classified as current liabilities on the consolidated balance sheets.  Interest expense on these notes totaled $656 during the nine months ended December 31, 2015 and 2014.  At December 31, 2015 and March 31, 2015, accrued interest payable was $0 and $23,271, respectively.

Beginning in 2010, the Company started entering into several working capital notes payable with various shareholders of the Company for a total of $290,000 and bearing interest at 8%.  The balance of these notes at December 31, 2015 and March 31, 2015 was $30,000 and $30,000, respectively, and classified as a current liability on the consolidated balance sheets.  At December 31, 2015 and March 31, 2015, accrued interest payable was $700 and $400, respectively.