Annual report pursuant to Section 13 and 15(d)

8. RELATED PARTY TRANSACTIONS

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8. RELATED PARTY TRANSACTIONS
12 Months Ended
Mar. 31, 2017
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

Notes Payable – Related Parties

 

On January 20, 2017 and on March 14, 2017, the Company entered into convertible debentures with an affiliate of the Company whose managing member is the Treasurer, Chief Financial Officer, and a director of the Company. The convertible debentures are each in the amount of $20,000, mature one year from date of issuance, and bear interest at 6%. Upon an event of default, as defined in the debenture, the principal and any accrued interest becomes immediately due, and the interest rate increases to 24%. The convertible debentures are convertible at the holder’s option at a conversion price of $0.30.

 

NaturalShrimp Holdings, Inc.

 

On January 1, 2016 the Company entered into a notes payable agreement with NaturalShrimp Holdings, Inc.(“NSH”), a shareholder. Between January 16, 2016 and March 7, 2016 the Company borrowed $134,750 under this agreement. An additional $601,361 was borrowed under this agreement in the year ended March 31, 2017. The note payable has no set monthly payment or maturity date with a stated interest rate of 2%.

 

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 (BCS), a shareholder of NSH, 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 NSH. The balance of the note at March 31, 2016 was $2,004,820 and was classified as a current liability on the consolidated balance sheets.

 

Effective December 31, 2008, the Company entered into a subordinated promissory note agreement with BCS for $70,000 (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 to $125,000 to provide additional working capital for the Company. The balance of the BCS subordinated note at March 31, 2016 was $301,133 and was classified as a current liability on the consolidated balance sheets.

 

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 the notes 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.

 

On January 10, 2017, the Company agreed to pay to BCS $200,000 of the proceeds from the CNB Note (Note 4), in satisfaction of the outstanding amounts due on the BCS and BCS subordinated notes payable of $2,305,953, plus accrued interest of $233,398, resulting in a gain on extinguishment of debt of $2,339,353.

 

Shareholder Notes

 

The Company has entered into several working capital notes payable to multiple shareholders of NSH and Bill Williams, an officer, a director, and a shareholder of the Company, for a total of $486,500.  These notes had stock issued in lieu of interest and have no set monthly payment or maturity date. The balance of these notes at March 31, 2017 and 2016 was $426,404 and $426,404, respectively, and is classified as a current liability on the consolidated balance sheets. At March 31, 2017 and 2016, accrued interest payable was $172,808 and $142,296, respectively.

 

Shareholders

 

In 2009, the Company entered into a note payable to Randall Steele, a shareholder of NSH, for $50,000. The note bears interest at 6.0% and was payable upon maturity on January 20, 2011. In addition, the Company issued 100,000 shares of common stock for consideration. The shares were valued at the date of issuance at fair market 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 March 31, 2017 and 2016 was $50,000, respectively, and is classified as a current liability on the consolidated balance sheets. Interest expense on the note was $3,000 and $3,000 during the years ended March 31, 2017 and 2016, respectively. At March 31, 2017 and 2016, accrued interest payable was $2,283 and $1,543, respectively.

 

Beginning in 2010, the Company started entering into several working capital notes payable with various shareholders of NSH for a total of $290,000 and bearing interest at 8%. The balance of these notes at March 31, 2017 and 2016 was $5,000, and is classified as a current liability on the consolidated balance sheets. At March 31, 2017 and 2016, accrued interest payable was $1,200 and $800, respectively.

 

Beginning in 2009, the Company enter into notes payable with various shareholders of NSH. 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.