false Q2 --03-31 0001465470 2024 0001465470 2023-04-01 2023-09-30 0001465470 2023-11-17 0001465470 2023-09-30 0001465470 2023-03-31 0001465470 us-gaap:NonrelatedPartyMember 2023-09-30 0001465470 us-gaap:NonrelatedPartyMember 2023-03-31 0001465470 us-gaap:RelatedPartyMember 2023-09-30 0001465470 us-gaap:RelatedPartyMember 2023-03-31 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockMember 2023-09-30 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockMember 2023-03-31 0001465470 SHMP:SeriesFRedeemableConvertiblePreferredStockMember 2023-09-30 0001465470 SHMP:SeriesFRedeemableConvertiblePreferredStockMember 2023-03-31 0001465470 SHMP:SeriesEConvertiblePreferredStockMember 2023-09-30 0001465470 SHMP:SeriesEConvertiblePreferredStockMember 2023-03-31 0001465470 SHMP:SeriesAConvertiblePreferredStockMember 2023-09-30 0001465470 SHMP:SeriesAConvertiblePreferredStockMember 2023-03-31 0001465470 2023-07-01 2023-09-30 0001465470 2022-07-01 2022-09-30 0001465470 2022-04-01 2022-09-30 0001465470 us-gaap:NonrelatedPartyMember 2023-07-01 2023-09-30 0001465470 us-gaap:NonrelatedPartyMember 2022-07-01 2022-09-30 0001465470 us-gaap:NonrelatedPartyMember 2023-04-01 2023-09-30 0001465470 us-gaap:NonrelatedPartyMember 2022-04-01 2022-09-30 0001465470 us-gaap:RelatedPartyMember 2023-07-01 2023-09-30 0001465470 us-gaap:RelatedPartyMember 2022-07-01 2022-09-30 0001465470 us-gaap:RelatedPartyMember 2023-04-01 2023-09-30 0001465470 us-gaap:RelatedPartyMember 2022-04-01 2022-09-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-03-31 0001465470 us-gaap:CommonStockMember 2023-03-31 0001465470 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001465470 SHMP:StockToBeIssuedMember 2023-03-31 0001465470 SHMP:SubscriptionReceivableMember 2023-03-31 0001465470 us-gaap:RetainedEarningsMember 2023-03-31 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-06-30 0001465470 us-gaap:CommonStockMember 2023-06-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0001465470 SHMP:StockToBeIssuedMember 2023-06-30 0001465470 SHMP:SubscriptionReceivableMember 2023-06-30 0001465470 us-gaap:RetainedEarningsMember 2023-06-30 0001465470 2023-06-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-03-31 0001465470 us-gaap:CommonStockMember 2022-03-31 0001465470 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001465470 SHMP:StockToBeIssuedMember 2022-03-31 0001465470 SHMP:SubscriptionReceivableMember 2022-03-31 0001465470 us-gaap:RetainedEarningsMember 2022-03-31 0001465470 2022-03-31 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-06-30 0001465470 us-gaap:CommonStockMember 2022-06-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001465470 SHMP:StockToBeIssuedMember 2022-06-30 0001465470 SHMP:SubscriptionReceivableMember 2022-06-30 0001465470 us-gaap:RetainedEarningsMember 2022-06-30 0001465470 2022-06-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-04-01 2023-06-30 0001465470 us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0001465470 SHMP:StockToBeIssuedMember 2023-04-01 2023-06-30 0001465470 SHMP:SubscriptionReceivableMember 2023-04-01 2023-06-30 0001465470 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001465470 2023-04-01 2023-06-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-07-01 2023-09-30 0001465470 us-gaap:CommonStockMember 2023-07-01 2023-09-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2023-07-01 2023-09-30 0001465470 SHMP:StockToBeIssuedMember 2023-07-01 2023-09-30 0001465470 SHMP:SubscriptionReceivableMember 2023-07-01 2023-09-30 0001465470 us-gaap:RetainedEarningsMember 2023-07-01 2023-09-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-04-01 2022-06-30 0001465470 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001465470 SHMP:StockToBeIssuedMember 2022-04-01 2022-06-30 0001465470 SHMP:SubscriptionReceivableMember 2022-04-01 2022-06-30 0001465470 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001465470 2022-04-01 2022-06-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-07-01 2022-09-30 0001465470 us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0001465470 SHMP:StockToBeIssuedMember 2022-07-01 2022-09-30 0001465470 SHMP:SubscriptionReceivableMember 2022-07-01 2022-09-30 0001465470 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2023-09-30 0001465470 us-gaap:CommonStockMember 2023-09-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2023-09-30 0001465470 SHMP:StockToBeIssuedMember 2023-09-30 0001465470 SHMP:SubscriptionReceivableMember 2023-09-30 0001465470 us-gaap:RetainedEarningsMember 2023-09-30 0001465470 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2022-09-30 0001465470 us-gaap:CommonStockMember 2022-09-30 0001465470 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0001465470 SHMP:StockToBeIssuedMember 2022-09-30 0001465470 SHMP:SubscriptionReceivableMember 2022-09-30 0001465470 us-gaap:RetainedEarningsMember 2022-09-30 0001465470 2022-09-30 0001465470 us-gaap:SubsequentEventMember 2023-10-01 2023-10-31 0001465470 SHMP:SeriesAConvertiblePreferredStockMember 2023-07-01 2023-09-30 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockMember 2023-07-01 2023-09-30 0001465470 us-gaap:SeriesFPreferredStockMember 2023-07-01 2023-09-30 0001465470 us-gaap:SeriesFPreferredStockMember 2023-09-30 0001465470 us-gaap:WarrantMember 2023-07-01 2023-09-30 0001465470 SHMP:SeriesAConvertiblePreferredStockMember 2022-04-01 2022-09-30 0001465470 SHMP:SeriesAConvertiblePreferredStockMember 2022-09-30 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockMember 2022-04-01 2022-09-30 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockMember 2022-09-30 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockOneMember 2022-04-01 2022-09-30 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockOneMember 2022-09-30 0001465470 SHMP:SeriesERedeemableConvertiblePreferredStockOneMember 2022-04-01 2022-09-30 0001465470 us-gaap:SeriesFPreferredStockMember 2022-04-01 2022-09-30 0001465470 us-gaap:SeriesFPreferredStockMember 2022-09-30 0001465470 SHMP:ConvertibleDebentureMember 2022-04-01 2022-09-30 0001465470 us-gaap:WarrantMember 2022-04-01 2022-09-30 0001465470 us-gaap:MeasurementInputSharePriceMember 2023-09-30 0001465470 us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MinimumMember 2023-09-30 0001465470 us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MaximumMember 2023-09-30 0001465470 us-gaap:MeasurementInputPriceVolatilityMember srt:MinimumMember 2023-09-30 0001465470 us-gaap:MeasurementInputPriceVolatilityMember srt:MaximumMember 2023-09-30 0001465470 us-gaap:MeasurementInputSharePriceMember 2023-03-31 0001465470 us-gaap:MeasurementInputRiskFreeInterestRateMember 2023-03-31 0001465470 us-gaap:MeasurementInputPriceVolatilityMember srt:MinimumMember 2023-03-31 0001465470 us-gaap:MeasurementInputPriceVolatilityMember srt:MaximumMember 2023-03-31 0001465470 2022-11-04 2022-11-04 0001465470 2022-11-04 0001465470 us-gaap:PatentsMember 2023-07-01 2023-09-30 0001465470 us-gaap:PatentsMember 2022-07-01 2022-09-30 0001465470 SHMP:LicenseRightMember 2023-07-01 2023-09-30 0001465470 SHMP:LicenseRightMember 2022-07-01 2022-09-30 0001465470 us-gaap:PatentsMember 2023-04-01 2023-09-30 0001465470 us-gaap:PatentsMember 2022-04-01 2022-09-30 0001465470 SHMP:LicenseRightMember 2023-04-01 2023-09-30 0001465470 SHMP:LicenseRightMember 2022-04-01 2022-09-30 0001465470 SHMP:HydrenesisDeltaSystemsLLCMember 2021-08-25 0001465470 SHMP:HydrenesisDeltaSystemsLLCMember SHMP:TechnologyRightsAgreementMember 2021-08-25 0001465470 SHMP:HydrenesisTechnologyAndEquipmentMember 2023-05-20 2023-05-21 0001465470 us-gaap:RelatedPartyMember 2023-05-21 0001465470 2023-05-20 2023-05-21 0001465470 us-gaap:WarrantMember 2023-04-01 2023-09-30 0001465470 SHMP:PromissoryNoteMember 2023-04-01 2023-09-30 0001465470 2022-04-01 2023-03-31 0001465470 us-gaap:BuildingMember 2023-09-30 0001465470 us-gaap:MachineryAndEquipmentMember srt:MinimumMember 2023-09-30 0001465470 us-gaap:MachineryAndEquipmentMember srt:MaximumMember 2023-09-30 0001465470 us-gaap:VehiclesMember 2023-09-30 0001465470 us-gaap:FurnitureAndFixturesMember srt:MinimumMember 2023-09-30 0001465470 us-gaap:FurnitureAndFixturesMember srt:MaximumMember 2023-09-30 0001465470 SHMP:ShrimpSalesMember 2023-04-01 2023-09-30 0001465470 SHMP:ShrimpSalesMember 2022-04-01 2022-09-30 0001465470 SHMP:TechnologyAndEquipmentServicesMember 2023-04-01 2023-09-30 0001465470 SHMP:TechnologyAndEquipmentServicesMember 2022-04-01 2022-09-30 0001465470 SHMP:CapitalOneBankMember 2023-09-30 0001465470 SHMP:CapitalOneBankMember 2023-04-01 2023-09-30 0001465470 SHMP:CapitalOneBankMember 2023-03-31 0001465470 SHMP:ChaseBankMember 2023-09-30 0001465470 SHMP:ChaseBankMember 2023-04-01 2023-09-30 0001465470 SHMP:ChaseBankMember 2023-03-31 0001465470 SHMP:JanuaryTwoThousandTwentyThreeNoteMember 2023-01-20 0001465470 SHMP:JanuaryTwoThousandTwentyThreeNoteMember 2023-01-19 2023-01-20 0001465470 us-gaap:CommercialPaperMember SHMP:YottaInvestmentLLCMember 2023-04-21 0001465470 us-gaap:CommercialPaperMember SHMP:YottaInvestmentLLCMember 2023-05-17 0001465470 SHMP:WilliamsMember SHMP:PromissoryNoteMember 2020-07-15 0001465470 SHMP:WilliamsMember SHMP:PromissoryNoteMember 2020-07-15 2020-07-15 0001465470 SHMP:WilliamsMember SHMP:PromissoryNoteMember 2023-09-30 0001465470 SHMP:WilliamsMember SHMP:PromissoryNoteMember 2023-03-31 0001465470 SHMP:SecuritiesPurchaseAgreementMember 2022-08-17 0001465470 SHMP:SecuritiesPurchaseAgreementMember 2022-08-17 2022-08-17 0001465470 SHMP:SecuritiesPurchaseAgreementMember 2022-08-16 2022-08-17 0001465470 srt:MaximumMember 2023-09-30 0001465470 us-gaap:SubsequentEventMember 2023-11-18 2023-11-20 0001465470 SHMP:RestructuredAugustNoteMember 2023-04-01 2023-09-30 0001465470 SHMP:RestructuredAugustNoteMember 2023-09-30 0001465470 SHMP:RestructuredAugustNoteMember 2023-03-31 0001465470 SHMP:RestructuredAugustNoteMember 2022-04-01 2023-03-31 0001465470 SHMP:SecuritiesPurchaseAgreementMember SHMP:DecemberFifteenTwoThousandTwentyOneDebentureMember 2021-12-15 0001465470 SHMP:SecuritiesPurchaseAgreementMember SHMP:DecemberFifteenTwoThousandTwentyOneDebentureMember 2021-12-15 0001465470 SHMP:SecuritiesPurchaseAgreementMember SHMP:DecemberFifteenTwoThousandTwentyOneDebentureMember us-gaap:DebenturesSubjectToMandatoryRedemptionMember 2021-12-15 0001465470 SHMP:SecuritiesPurchaseAgreementMember SHMP:DecemberFifteenTwoThousandTwentyOneDebentureMember 2021-12-15 2021-12-15 0001465470 SHMP:AmendedAndRestatedSecuredPromissoryNoteMember 2022-11-04 2022-11-04 0001465470 SHMP:AmendedAndRestatedSecuredPromissoryNoteMember 2023-06-30 0001465470 SHMP:DecemberFifteenTwoThousandTwentyOneDebentureMember 2023-04-01 2023-09-30 0001465470 SHMP:RestructuredSeniorNoteMember 2023-09-30 0001465470 SHMP:RestructuredSeniorNoteMember 2023-04-01 2023-09-30 0001465470 SHMP:RestructuredSeniorNoteMember 2021-04-01 2022-03-31 0001465470 SHMP:RestructuredSeniorNoteMember us-gaap:MeasurementInputRiskFreeInterestRateMember 2023-09-30 0001465470 SHMP:RestructuredSeniorNoteMember us-gaap:MeasurementInputPriceVolatilityMember 2023-09-30 0001465470 SHMP:RestructuredSeniorNoteMember us-gaap:MeasurementInputSharePriceMember 2023-09-30 0001465470 SHMP:RestructuredSeniorNoteMember 2023-03-31 0001465470 SHMP:RestructuredSeniorNoteMember 2022-04-01 2023-03-31 0001465470 2023-09-28 0001465470 us-gaap:SeriesAPreferredStockMember 2023-09-30 0001465470 us-gaap:SeriesBPreferredStockMember 2023-09-30 0001465470 us-gaap:SeriesDPreferredStockMember 2023-09-30 0001465470 us-gaap:SeriesEPreferredStockMember 2023-09-30 0001465470 us-gaap:SeriesEPreferredStockMember 2023-03-31 0001465470 SHMP:SecuritiesPurchaseAgreementMember us-gaap:SeriesEPreferredStockMember 2023-07-23 2023-07-24 0001465470 SHMP:SecuritiesPurchaseAgreementMember us-gaap:SeriesEPreferredStockMember 2023-07-24 0001465470 us-gaap:SeriesEPreferredStockMember 2023-05-01 2023-05-01 0001465470 SHMP:GHSPurchaseAgreementMember 2022-11-04 2022-11-04 0001465470 SHMP:GHSPurchaseAgreementMember 2022-11-04 0001465470 SHMP:GHSPurchaseAgreementMember 2023-04-01 2023-06-30 0001465470 SHMP:GHSPurchaseAgreementMember 2023-06-30 0001465470 SHMP:GHSPurchaseAgreementMember 2022-04-01 2023-03-31 0001465470 srt:MinimumMember SHMP:GHSPurchaseAgreementMember 2023-03-31 0001465470 srt:MaximumMember SHMP:GHSPurchaseAgreementMember 2023-03-31 0001465470 SHMP:EquityFinancingAgreementMember SHMP:GHSInvestmentLLCMember 2023-04-27 2023-04-28 0001465470 SHMP:EquityFinancingAgreementMember SHMP:GHSInvestmentLLCMember 2023-04-28 0001465470 SHMP:EquityFinancingAgreementMember 2023-07-01 2023-09-30 0001465470 SHMP:EquityFinancingAgreementMember 2023-09-30 0001465470 SHMP:GHSTwoThousandTwentyThreePurchaseAgreementMember 2023-05-08 2023-05-09 0001465470 SHMP:GHSTwoThousandTwentyThreePurchaseAgreementMember 2023-04-01 2023-06-30 0001465470 SHMP:GHSTwoThousandTwentyThreePurchaseAgreementMember srt:MaximumMember 2023-06-30 0001465470 SHMP:GHSTwoThousandTwentyThreePurchaseAgreementMember srt:MinimumMember 2023-06-30 0001465470 SHMP:ConsultantMember 2023-06-19 2023-06-19 0001465470 SHMP:ConsultantMember 2023-06-19 0001465470 us-gaap:WarrantMember 2023-09-30 0001465470 us-gaap:WarrantMember 2023-04-01 2023-09-30 0001465470 us-gaap:WarrantMember 2022-09-30 0001465470 us-gaap:WarrantMember 2022-04-01 2022-09-30 0001465470 srt:ChiefFinancialOfficerMember 2021-05-11 2021-05-11 0001465470 SHMP:PresidentAndChiefTechnicalOfficerMember 2021-08-10 0001465470 SHMP:PresidentAndChiefTechnicalOfficerMember 2021-04-01 2022-03-31 0001465470 SHMP:PresidentAndChiefTechnicalOfficerMember 2023-09-30 0001465470 SHMP:PresidentAndChiefTechnicalOfficerMember 2023-03-31 0001465470 us-gaap:RelatedPartyMember 2023-07-10 2023-07-17 0001465470 us-gaap:RelatedPartyMember 2023-07-17 0001465470 SHMP:LoanAgreementMember SHMP:PromissoryNotesMember 2022-08-09 2022-08-10 0001465470 SHMP:LoanAgreementMember SHMP:PromissoryNotesMember SHMP:FiveRelatedPartiesMember 2022-08-10 0001465470 SHMP:LoanAgreementMember SHMP:PromissoryNotesMember SHMP:FiveRelatedPartiesMember 2022-08-09 2022-08-10 0001465470 us-gaap:RelatedPartyMember SHMP:PromissoryNotesMember 2023-07-01 2023-09-30 0001465470 us-gaap:RelatedPartyMember SHMP:PromissoryNotesMember 2022-07-01 2022-09-30 0001465470 us-gaap:RelatedPartyMember SHMP:PromissoryNotesMember 2023-04-01 2023-09-30 0001465470 us-gaap:RelatedPartyMember SHMP:PromissoryNotesMember 2022-04-01 2022-09-30 0001465470 SHMP:LoanAgreementMember SHMP:PromissoryNotesMember us-gaap:RelatedPartyMember 2023-09-30 0001465470 SHMP:LoanAgreementMember SHMP:PromissoryNotesMember us-gaap:RelatedPartyMember 2023-03-31 0001465470 2016-01-01 0001465470 SHMP:NotesPayableMember 2021-04-01 2022-03-31 0001465470 SHMP:NotesPayableMember 2023-04-01 2023-09-30 0001465470 SHMP:NotesPayableMember 2022-04-01 2023-03-31 0001465470 SHMP:NotesPayableMember 2023-09-30 0001465470 SHMP:NotesPayableMember 2023-03-31 0001465470 SHMP:PresidentsMember us-gaap:RelatedPartyMember 2023-09-30 0001465470 SHMP:PresidentsMember 2023-04-01 2023-09-30 0001465470 SHMP:PresidentsMember us-gaap:RelatedPartyMember 2023-03-31 0001465470 2021-08-01 2021-08-01 0001465470 2022-10-01 2023-03-31 0001465470 2021-06-02 0001465470 2021-08-01 0001465470 2021-09-08 2021-09-08 0001465470 2021-09-08 0001465470 SHMP:AprilOneTwoThousandFifteenMember SHMP:EmploymentAgreementMember 2023-04-01 2023-09-30 0001465470 SHMP:AprilOneTwoThousandFifteenMember SHMP:MrEasterlingMember 2021-05-04 2021-05-04 0001465470 SHMP:AprilOneTwoThousandFifteenMember 2023-04-01 2023-09-30 0001465470 SHMP:MergerAgreementMember 2023-07-20 0001465470 us-gaap:SubsequentEventMember SHMP:NewEmployeeMember 2023-10-10 2023-10-10 0001465470 us-gaap:SubsequentEventMember SHMP:NewEmployeeMember 2023-10-10 0001465470 us-gaap:SubsequentEventMember 2023-10-31 2023-10-31 0001465470 us-gaap:SubsequentEventMember 2023-10-31 0001465470 us-gaap:SubsequentEventMember SHMP:NewEmployeeMember 2023-10-31 2023-10-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares SHMP:Integer xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended September 30, 2023

 

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 of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

5501 LBJ Freeway, Suite 450

Dallas, Texas

  75240
(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   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, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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 13(a) of the Exchange Act: ☐

 

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

 

As of November 17, 2023, there were 923,964,762 shares of the registrant’s common stock outstanding.

 

 

 

 

 

 

NATURALSHRIMP INCORPORATED

FORM 10-Q

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023

 

TABLE OF CONTENTS

 

  Page
   
PART I. FINANCIAL INFORMATION 3
     
ITEM 1. Financial Statements 3
     
  Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and March 31, 2023 3
     
  Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2023 and 2022 (unaudited) 4
     
  Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended September 30, 2023 and 2022 (unaudited) 5
     
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2023 and 2022 (unaudited) 6
     
  Notes to Condensed Consolidated Financial Statements (unaudited) 7
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
     
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 38
     
ITEM 4. Controls and Procedures 39
     
PART II. OTHER INFORMATION 40
     
ITEM 1. Legal Proceedings 40
     
ITEM 1A. Risk Factors 40
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 40
     
ITEM 3. Defaults Upon Senior Securities 40
     
ITEM 4. Mine Safety Disclosures 40
     
ITEM 5. Other Information 40
     
ITEM 6. Exhibits 41
     
SIGNATURES 42

 

2

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

NATURALSHRIMP INCORPORATED and subsidiaries

CONDENSED Consolidated Balance Sheets

 

   September 30,
2023
   March 31,
2023
 
   (unaudited)     
ASSETS          
Current assets          
Cash  $47,090   $216,465 
Accounts receivable   2,096    17,325 
Inventory   40,058    25,725 
Prepaid expenses   247,945    286,593 
Deferred offering costs   -    1,336,263 
           
Total current assets   337,189    1,882,371 
           
Fixed assets, net   14,177,850    15,043,715 
           
Other assets          
Construction-in-process   25,130    25,130 
Patents, net   6,073,500    6,268,500 
License Agreement, net   8,602,376    9,142,376 
Right of Use asset   183,152    204,243 
Deposits   20,633    20,633 
           
Total other assets   14,904,791    15,660,882 
           
Total assets  $29,419,830   $32,586,968 
           
LIABILITIES, MEZZANINE AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable  $3,675,529   $3,510,206 
Accrued interest   82,567    923,387 
Accrued interest - related parties   235,093    219,542 
Other accrued expenses   1,296,655    1,314,961 
Accrued expenses - related parties   745,518    400,306 
Contract liability   25,000    - 
Short-term Note and Lines of credit   19,817    19,817 
Notes payable   790,704    671,100 
Restructured August note payable   2,250,000    2,400,000 
Notes payable - related parties   880,412    740,412 
Dividends payable   419,688    579,248 
Warrant liability   85,000    355,000 
Lease Liability, current   87,804    87,804 
           
Total current liabilities   10,593,787    11,221,783 
           
Restructured Senior note payable   21,680,000    21,290,000 
Note payable, less current maturities   -    23,604 
Lease Liability, non-current   95,048    125,189 
           
Total liabilities   32,368,835    32,660,576 
           
           
Commitments and contingencies (Note 11)   -    - 
           
Series E Redeemable Convertible Preferred stock, $0.0001 par value, 10,000 shares authorized, 1,656 and 1,670 shares issued and outstanding at September 30, 2023 and March 31, 2023, respectively   1,959,300    2,003,557 
           
Series F Redeemable Convertible Preferred stock, $0.0001 par value, 750,000 shares authorized, 750,000 shares issued and outstanding at September 30, 2023 and March 31, 2023, respectively   43,612,000    43,612,000 
           
Stockholders’ deficit          
Series A Convertible Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding at September 30, 2023 and March 31, 2023   500    500 
           
Common stock, $0.0001 par value, 1,400,000,000 shares authorized, 900,071,985 and 803,123,748 shares issued and outstanding at September 30, 2023 and March 31, 2023, respectively   90,072    80,377 
           
Additional paid in capital   124,117,263    121,156,733 
Stock to be issued   390,024    662,767 
Subscription receivable   (166,161)   (56,250)
Accumulated deficit   (172,952,003)   (167,533,292)
Total stockholders’ deficit   (48,520,305)   (45,689,165)
           
Total liabilities, mezzanine and stockholders’ deficit  $29,419,830   $32,586,968 

 

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

 

3

 

 

NATURALSHRIMP INCORPORATED

CONDENSED Consolidated STATEMENTS OF OPERATIONS

(Unaudited)

 

   September 30, 2023   September 30, 2022   September 30, 2023   September 30, 2022 
   For the Three Months Ended   For the Six Months Ended 
   September 30, 2023   September 30, 2022   September 30, 2023   September 30, 2022 
                 
Sales  $58,010   $51,725   $263,882   $88,061 
Cost of sales   51,000    -    100,741    - 
Net revenue   7,010    51,725    163,141    88,061 
                     
Operating expenses:                    
General and administrative   2,403,892    1,449,592    3,702,343    2,775,624 
Research and development   -    4,000    -    176,643 
Facility operations   157,517    488,427    515,775    1,020,163 
Depreciation   436,870    408,232    871,679    933,461 
Amortization   367,500    367,500    735,000    735,000 
Total operating expenses   3,365,779    2,717,751    5,824,797    5,640,891 
                     
Net loss from operations   (3,358,769)   (2,666,026)   (5,661,656)   (5,552,830)
                     
Other income (expense):                    
Interest expense   (38,698)   (579,291)   (41,411)   (1,081,663)
Interest expense - related parties   (9,301)   (3,522)   (15,551)   (3,522)
Amortization of debt discount   -    (2,136,389)   -    (4,176,389)
Change in fair value of derivative liability   -    (18,241,000)   -    (16,927,000)
Change in fair value of warrant liability   220,000    (39,000)   270,000    1,876,000 
Change in fair value of restructured notes   530,000    -    667,634    - 
Loss due to fire   -    (863,117)        (863,117)
Extension fee   -    -    (180,000)   - 
Gain on sale of machinery and equipment   10,229    -    16,014    - 
                     
Total other income, net   712,230    (21,862,319)   716,686    (21,175,691)
                     
Loss before income taxes   (2,646,539)   (24,528,345)   (4,944,970)   (26,728,521)
                     
Provision for income taxes   -    -    -    - 
                     
Net loss   (2,646,539)   (24,528,345)   (4,944,970)   (26,728,521)
                     
Amortization of beneficial conversion feature on Preferred shares   -    (42,500)   -    (184,000)
Accretion on Preferred shares   (9,300)   (278,500)   (9,300)   (557,000)
Dividends   (59,616)   (55,427)   (464,441)   (157,654)
                     
Net loss available for common stockholders  $(2,715,455)  $(24,904,772)  $(5,418,711)  $(27,627,175)
                     
Loss per share (Basic and Diluted)  $(0.00)  $(0.03)  $(0.01)  $(0.04)
                     
WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted)   877,461,135    731,616,343    858,760,073    675,370,057 

 

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

 

4

 

 

NATURALSHRIMP INCORPORATED

CONDENSED Consolidated STATEMENT of CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)

 

   Shares   Amount   Shares   Amount   Capital   issued   receivable   deficit   deficit 
   Series A Preferred stock   Common stock   Additional paid in    Stock to be    Subscription    Accumulated    Total stockholders’  
   Shares   Amount   Shares   Amount   Capital   issued   receivable   deficit   deficit 
                                     
Balance March 31, 2023   5,000,000  $500    803,123,748  $80,377   $121,156,733  $662,767   $(56,250)  $(167,533,292)   (45,689,165)
                                              
Common stock issued for legal settlement to NSH shareholders   -    -    863,110    86    272,657    (272,743)   -    -    - 
Issuance of common shares under financing agreement   -    -    40,187,311    4,019    1,294,493    -    -    -    1,298,512 
Conversion of Series E Preferred Shares to common stock   -    -    23,989,570    2,399    825,601    -    -    (350,825)   477,175 
Dividends payable on Series E Preferred Shares   -    -    -    -    -    -    -    (54,000)   (54,000)
Common stock issued to consultants   -    -    100,000    10    4,690    -    -    -    4,700 
                                              
Net loss   -    -    -    -    -    -    -    (2,298,431)   (2,298,431)
                                              
Balance June 30, 2023   5,000,000  $500    868,263,739  $86,891   $123,554,174  $390,024   $(56,250)  $(170,236,548)   (46,261,209)
                                              
Issuance of common shares under financing agreement   -    -    31,808,246    3,181    563,089    -    (109,911)   -    456,359 
Dividends payable on Series E Preferred Shares   -    -    -    -    -    -    -    (59,616)   (59,616)
Accretion on Series E Preferred shares   -    -    -    -    -    -    -    (9,300)   (9,300)
                                              
Net loss   -    -    -    -    -    -    -    (2,646,539)   (2,646,539)
                                              
Balance September 30, 2023   5,000,000  $500    900,071,985  $90,072   $124,117,263  $390,024   $(166,161)  $(172,952,003)   (48,520,305)
                                              
Balance March 31, 2022   5,000,000   $500    674,644,124   $67,500   $96,701,607   $20,132,650   $-   $(150,036,023)  $(33,133,765)
                                              
Common stock issued for legal settlement to NSH shareholders   -    -    61,154,136    6,112    19,311,486    (19,317,598)   -    -    - 
Conversion of Series E PS to common stock   -    -    4,537,240    454    839,546    -    -    -    840,000 
Contingent beneficial conversion feature related to the Series E Preferred Shares, fully amortized   -    -    -    -    99,000    -    -    (99,000)   - 
Amortization of beneficial conversion feature related to Series E Preferred Shares   -    -    -    -    -    -    -    (42,500)   (42,500)
Accretion of Series E Preferred Shares   -    -    -    -    -    -    -    (278,500)   (278,500)
Dividends payable on Preferred Shares   -    -    -    -    -    -    -    (102,227)   (102,227)
Common stock issued in business agreement, to be paid from revenue earned   -    -    250,000    25    56,225    -    (56,250)   -    - 
Common stock vested to consultants   -    -    -    6    24,369    -    -    -    24,375 
                                              
Net loss   -    -    -    -    -    -    -    (2,200,176)   (2,200,176)
                                              
Balance June 30, 2022   5,000,000  $500    740,585,500  $74,097   $117,032,233  $815,052   $(56,250)  $(152,758,426)   (34,892,793)
                                              
Common stock issued for legal settlement to NSH shareholders   -    -    404,067    40    127,646    (127,686)   -    -    - 
Conversion of Series E Preferred Shares to common stock   -    -    9,920,887    992    827,008    -    -    (108,000)   720,000 
Increase of 10% in Series E Preferred Shares to one holder based on certain rights   -    -    -    -    -    -    -    (156,000)   (156,000)
Amortization of beneficial conversion feature related to Series E Preferred Shares   -    -    -    -    -    -    -    (42,500)   (42,500)
Accretion of Series E Preferred Shares   -    -    -    -    -    -    -    (278,500)   (278,500)
Dividends payable on Preferred Shares   -    -    -    -    -    -    -    (55,427)   (55,427)
Common stock issued in business agreement   -    -    250,000    25    25,975    -    -    -    26,000 
Common stock issued from shares payable   -    -    100,000    10    24,590    (24,600)   -    -    - 
Common stock vested to consultants   -    -    62,500    6    24,369    -    -    -    24,375 
                                              
Net loss   -    -    -    -    -    -    -    (24,528,345)   (24,528,345)
                                              
Balance September 30, 2022   5,000,000  $500    751,322,954  $75,170   $118,061,820  $662,767   $(56,250)  $(177,927,198)   (59,183,191)

 

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

 

5

 

 

NATURALSHRIMP INCORPORATED

CONDENSED Consolidated STATEMENTS OF CASH FLOWS

(Unaudited)

 

   September 30,
2023
   September 30,
2022
 
   For the Six Months Ended 
   September 30,
2023
   September 30,
2022
 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(4,944,970)  $(26,728,521)
           
Adjustments to reconcile net loss to net cash used in operating activities          
           
Depreciation expense   871,679    933,461 
Amortization expense   735,000    735,000 
Amortization of debt discount   -    4,176,389 
Change in fair value of derivative liability   -    16,927,000 
Change in fair value of warrant liability   (270,000)   (1,876,000)
Change in fair value of promissory notes   (667,634)   - 
Financing costs   120,000    - 
Gain on sale of machinery and equipment   (16,014)   - 
Shares issued for services   4,700    74,750 
Amortization of operating lease right-of-use assets   21,091    - 
           
Changes in operating assets and liabilities:          
Accounts receivable   15,229    (57,736)
Inventory   (14,333)   (40,079)
Prepaid expenses and other current assets   38,648    720,314 
Deferred offering costs   1,336,263    - 
Accounts payable   165,765    376,056 
Other accrued expenses   (18,306)   51,363 
Accrued expenses - related parties   345,212    - 
Accrued interest   66,814    1,065,705 
Accrued interest - related parties   15,551    11,796 
Contract liability   25,000    - 
Operating lease liabilities   (30,141)   - 
           
Cash used in operating activities   (2,200,446)   (3,630,502)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
           
Cash paid for fixed assets   (48,800)   (208,883)
Cash received for sale of machinery and equipment   59,000    - 
           
Cash provided by (used in) investing activities   10,200    (208,883)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
           
Payments of notes payable   (24,000)   (48,000)
Repayment of short-term promissory note and lines of credit   -    (227)
Proceeds from sale of stock   1,754,871    - 
Proceeds from promissory note   -    4,865,000 
Proceeds from promissory note, related parties   140,000    250,000 
Proceeds from convertible debentures   -    1,500,000 
Proceeds from convertible debentures, receipt from escrow   -    (3,900,000)
Proceeds from sale of Series E Preferred Shares   150,000    - 
           
Cash provided by financing activities   2,020,871    2,666,773 
           
NET CHANGE IN CASH   (169,375)   (1,172,612)
           
CASH AT BEGINNING OF PERIOD   216,465    1,734,040 
           
CASH AT END OF PERIOD  $47,090   $561,428 
           
INTEREST PAID  $616   $4,162 
           
Supplemental Disclosure of Non-Cash Investing and Financing Activities:          
Construction in process transferred to fixed assets  $-   $915,883 
Shares issued upon conversion of Preferred stock  $828,000    1,560,000 
Dividends on Series E Preferred stock  $345,209   $- 
Dividends in kind issued  $516,000   $- 
Shares issued/to be issued, for legal settlement  $272,743   $- 

 

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

 

6

 

 

NATURALSHRIMP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023

(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.

 

The Company has three wholly-owned subsidiaries including NaturalShrimp USA Corporation (“NSC”) and NaturalShrimp Global, Inc. (“NS Global”) and Natural Aquatic Systems, Inc. (“NAS”), and owns 51% of NaturalShrimp/Hydrenesis LLC, a Texas limited liability company.

 

Going Concern

 

The accompanying condensed 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 six months ended September 30, 2023, the Company had a net loss available for common stockholders of approximately $5,419,000. As of September 30, 2023, the Company had an accumulated deficit of approximately $172,952,000 and a working capital deficit of approximately $10,257,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern, within one year from the issuance date of this filing. The Company’s ability to continue as a going concern is dependent on its ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the six months ended September 30, 2023, the Company received net cash proceeds of approximately $1,865,000 from the sale of common shares (See Note 8), $150,000 from the sale of Series E Preferred stock and the Company received $140,000 proceeds from the issuance of promissory notes, related parties. Subsequent to period end, the Company received approximately $166,000 for the sale of common shares (See Note 12).

 

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 its 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 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 into production.

 

7

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited financial information as of and for the three and six months ended September 30, 2023 and 2022 has been prepared in accordance with GAAP for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three and six months ended September 30, 2023 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 GAAP have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission(“SEC”). These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended March 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on June 27, 2023.

 

The condensed consolidated balance sheet at March 31, 2023 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

 

Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NSC, NS Global, and NAS. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

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

 

Basic and Diluted Earnings/Loss per Common Share

 

Basic and diluted earnings or loss per share (“EPS”) amounts in the unaudited condensed consolidated financial statements are computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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. As of the three months ended September 30, 2023, the Company had 5,000,000 Series A Convertible Preferred Stock which would be converted at the holder’s option into approximately 900,072,000 underlying common shares, 1,656 of Series E Redeemable Convertible Preferred shares whose approximately 5,678,000 underlying shares are convertible at the investors’ option at a fixed conversion price of $0.35, 750,000 shares of Series F Preferred Stock which would be converted at the holders’ option into approximately 216,017,000 underlying common shares, and 18,573,116 warrants outstanding which were not included in the calculation of diluted EPS as their effect would be anti-dilutive. As of the six months ended September 30, 2022, the Company had 5,000,000 Series A Convertible Preferred Stock which would be converted at the holder’s option into approximately 751,323,000 underlying common shares, 1,500 of Series E Redeemable Convertible Preferred shares whose approximately 5,143,000 underlying shares are convertible at the investors’ option at a fixed conversion price of $0.35, and 170 of Series E Redeemable Convertible Preferred shares whose approximately 2,656,000 underlying shares are convertible at the investors’ option at conversion price of 90% of the average of the two lowest market prices over the last 10 days, 750,000 shares of Series F Preferred Stock which would be converted at the holders’ option into approximately 180,333,000 underlying common shares, approximately $18,768,000 in a convertible debenture whose approximately 259,759,000 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 18,573,429 warrants outstanding which were not included in the calculation of diluted EPS as their effect would be anti-dilutive.

 

8

 

 

Fair Value Measurements

 

ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at the 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. 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 the operating results or within comprehensive income (loss) of the respective period. 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 operating results in the period the remeasurement occurred.

 

The Company did not have any Level 1 or Level 2 assets and liabilities at September 30, 2023 and March 31, 2023.

 

The warrant liabilities and fair value option on Restructured notes, are Level 3 fair value measurements.

 

The following is a summary of activity of Level 3 derivatives during the six months ended September 30, 2023 and the year ended March 31, 2023:

 

SUMMARY OF ACTIVITY OF DERIVATIVES AT FAIR VALUE

Warrant liability

 

  

September 30,

2023

  

March 31,

2023

 
   (unaudited)     
Warrant liability balance at beginning of period  $355,000   $3,923,000 
Change in fair value   (270,000)   (3,568,000)
Balance at end of period  $85,000   $355,000 

 

At September 30, 2023, the fair value of the warrant liability was estimated using a Black Sholes option pricing model with the following inputs: the price of the Company’s common stock of $0.025; a risk-free interest rate ranging from 3.81% to 4.80%; and expected volatility of the Company’s common stock ranging from 109.2% to 115.3% and the remaining terms of each warrant issuance.

 

At March 31, 2023, the fair value of the warrant liability was estimated using a Black Sholes model with the following weighted-average inputs: the price of the Company’s common stock of $0.05; a risk-free interest rate of 3.81% and expected volatility of the Company’s common stock ranging from 113.6% to 121.0% and the remaining terms of each warrant issuance.

 

SCHEDULE OF RESTRUCTURED AUGUST AND SENIOR NOTES PAYABLE AT FAIR VALUE

Restructured August and Senior Notes Payable

 

  

September 30,

2023

  

March 31,

2023

 
Restructured notes payable fair value at beginning of period  $23,690,000   $- 
Reclass of accrued interest   907,634    - 
Fair value of restructured notes payable upon Restructuring Agreement   -    20,847,867 
Change in fair value   (667,634)   2,842,133 
Restructured notes payable fair value at end of period  $23,930,000   $23,690,000 

 

9

 

 

On November 4, 2022, when the Company entered into a Restructuring Agreement for an Amended and Restated Secured Promissory Note for two of their outstanding debentures (Note 6 and Note 7), which were accounted for as debt extinguishment, the Company elected to recognize the new debt under the fair value option within ASC Topic 825, “Financial Instruments.” . The fair value for both periods is based on the maturity dates, the interest of 12%, the 15% exit fee, the 2% appreciation fee for an estimated period, and a 40% present value factor. In accordance with ASC 825, the Company chose to present the component for the accrued interest in the same line item on the accompanying condensed consolidated balance sheet with the fair value option, and as of April 1, 2023, reclassed the accrued interest to not be presented as a separate line item.

 

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. The carrying amount of these financial instruments, with the exception of discounted debt, as reflected in the unaudited condensed consolidated balance sheets approximates fair value.

 

Cash and Cash Equivalents

 

For the purpose of the unaudited condensed 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 September 30, 2023 and March 31, 2023.

 

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 September 30, 2023 and March 31, 2023, the Company’s cash balance exceeded 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:

 

SCHEDULE OF ESTIMATED USEFUL LIVES

Buildings  39 years
Machinery and Equipment  710 years
Vehicles  10 years
Furniture and Fixtures  310 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.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation to employees and non-employees in accordance with ASC 718. “Stock-based Compensation to Employees” is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company estimates the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock options and warrants and the closing price of the Company’s common stock for common share issuances. Once the stock is issued the appropriate expense account is charged.

 

10

 

 

Intangible Assets

 

The Company has intangible assets, which were acquired in a patent acquisition, and license rights agreements. The Company’s patents represent definite lived intangible assets and will be amortized over the twenty year duration of the patent, unless at some point the useful life is determined to be less than the protected life of the patent. The Company’s license rights will be amortized on a straight-line basis over the expected term of the agreements of ten years. For the three months ended September 30, 2023 and September 30, 2022, the amortization of the patents was $97,500 and $97,500 and in the amortization of the license rights was $270,000 and $270,000, respectively. For the six months ended September 30, 2023 and September 30, 2022, the amortization of the patents was $195,000 and $195,000 and the amortization of the license rights was $540,000 and $540,000, respectively.

 

The Company periodically evaluates the remaining useful lives of its finite-lived intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. As of September 30, 2023, the Company believes the carrying value of the intangible assets are still recoverable, and there is no impairment to be recognized.

 

License agreements

 

On August 25, 2021, the Company, through its 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”).Both Rights agreements are for a 10-year term, which shall automatically renew for ten-year successive terms. The agreements accord the exclusive rights to purchase or distribute the technology, or buy or rent the equipment, which is the primary business and revenue stream generated from indoor aquaculture farming of any species in the territory, which will be named the NSI Technologies and Equipment (“NSI Technologies”).

 

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 Milestones had been met in the current year.

 

Impairment of Long-lived Assets

 

The Company will periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review and at least annually. The carrying value of a long-lived 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 long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose.

 

Commitments and Contingencies

 

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

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed 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.

 

11

 

 

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

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers”, as such, the Company records revenue when its customers obtain control of the promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company will sell primarily to food service distributors, as well as to wholesalers, retail establishments and seafood distributors. Additionally, the Company will sell or rent the NSI Technologies.

 

To determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company which includes a required line of credit approval process, (2) identify the performance obligations in the contract which includes shipment of goods to the customer FOB shipping point or destination, (3) determine the transaction price which initiates with the purchase order received from the customer and confirmation sent by the Company and will include discounts and allowances by customer if any, (4) allocate the transaction price to the performance obligations in the contract which is the shipment of the goods to the customer and transaction price determined in step 3 above and (5) recognize revenue when (or as) the entity satisfies a performance obligation which is when the Company transfers control of the goods to the customers by shipment or delivery of the products.

 

In the future, if the Company has customers with long-term contracts for multiple shipments of live shrimp, the Company will elect the right-to-invoice practical expedient and any variable consideration estimate will be excluded from the transaction price and the revenue will be recognized directly when the goods are delivered.

 

 SCHEDULE OF REVENUE RECOGNITION

  

September 30,

2023

  

September 30,

2022

 
   Six months ended 
  

September 30,

2023

  

September 30,

2022

 
         
Shrimp sales  $55,872   $88,061 
Technology and equipment services   175,000     
Total revenues  $263,882   $88,061 

 

On May 21, 2023, the Company entered into a six-month agreement with a company for the use of the NSI Technologies Per the agreement, the customer is to pay a total of $300,000 comprised of an initial payment equal to $150,000 at execution of the contract and then $25,000 per month for the combined total of the Service Fee. As of September 30, 2023, the Company has received $175,000, comprised of the initial payment and $25,000 related to the monthly service fees which began September 1, 2023.

 

Recently Issued Accounting Standards

 

In August 2020, the FASB issued Accounting Standards Update (“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 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.

 

12

 

 

As of September 30, 2023, there were several new accounting pronouncements issued by the 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.

 

Management’s Evaluation of Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date of September 30, 2023, through the date which the unaudited condensed consolidated financial statements were issued. Based upon the review, other than described in Note 12 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.

 

NOTE 3 – FIXED ASSETS

 

A summary of the fixed assets as of September 30, 2023 and March 31, 2023 is as follows:

 

SCHEDULE OF FIXED ASSETS

  

September 30,

2023

  

March 31,

2023

 
   (unaudited)     
Land  $324,293   $324,293 
Buildings   5,509,918    5,495,150 
Machinery and equipment   12,306,776    12,293,112 
Autos and trucks   260,043    307,227 
Fixed assets,gross   18,401,030    18,419,782 
Accumulated depreciation   (4,223,180)   (3,376,067)
Fixed assets, net  $14,177,850   $15,043,715 

 

The unaudited condensed consolidated statements of operations reflect depreciation expense of approximately $437,000 and $408,000 and $872,000 and $933,000 for the three and six months ended September 30, 2023 and 2022, respectively.

 

NOTE 4 – SHORT-TERM NOTE AND LINES OF CREDIT

 

The Company 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 34.4% as of September 30, 2023. The line of credit is unsecured. The balance of the line of credit was $9,580 at both September 30, 2023 and March 31, 2023.

 

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 18. 5% as of September 30, 2023. The line of credit is secured by assets of the Company’s subsidiaries. The balance of the line of credit is $10,237 at September 30, 2023 and March 31, 2023.

 

13

 

 

NOTE 5 –NOTES PAYABLE

 

January 2023 Note

 

On January 20, 2023, the Company entered into a secured promissory note (“January 2023 Note”) with an investor (the “Investor”). The January 2023 Note is in the aggregate principal amount of $631,968. The Note has an interest rate of 10% per annum, with a maturity date nine months from the issuance date of the Note. The Note carried an original issue discount totaling $56,868, whereby the purchase price is $575,100. All payments made by the Company under the terms in the note, including upon repayment of this Note at maturity, shall be subject to an exit fee of 15% of the portion of the Outstanding Balance being paid. The cash was not transferred to the Company’s bank account, but instead to the merger entity, Yotta Acquisition Corporation (Note 11), for a contribution to a required extension fee for the business combination. On November 20, 2023, the maturity date was extended to June 30, 2024.

 

April 2023 Promissory Note

 

On April 21, 2023, the Company entered into a $60,000 promissory note with Yotta Investment LLC (“Yotta Investment”), with no interest to accrue on the principal balance. The promissory note is to be settled on the date of closing of the business combination contemplated by the Merger Agreement with Yotta Acquisition Corporation, (“Merger Agreement”). Upon the occurrence of an event of default, including the termination of the Merger Agreement, the unpaid principal balance of this note, and all other sums payable with regard to this note, shall automatically and immediately become due and payable, in all cases without any action on the part of the Company. As discussed in Note 11, the Merger Agreement was terminated, and management believes the promissory note will be settled in the Breakup Fee.

 

May 2023 Promissory Note

 

On May 17, 2023, the Company entered into an additional $60,000 promissory note with Yotta Investment, with no interest to accrue on the principal balance. The promissory note is to be settled on the date of closing of the business combination contemplated by the Merger Agreement with Yotta Acquisition Corporation. Upon the occurrence of an event of default, including the termination of the Merger Agreement, the unpaid principal balance of this note, and all other sums payable with regard to this note, shall automatically and immediately become due and payable, in all cases without any action on the part of the Company. As discussed in Note 11, the Merger Agreement was terminated, and management believes the promissory note will be settled in the Breakup Fee.

 

Ms. Williams Promissory Note

 

On July 15, 2020, the Company issued a promissory note to Ms. Williams in the amount of $383,604 to settle the amounts that had been recognized per the separation agreement with the late Mr. Bill Williams dated August 15, 2019, for his portion of the related party notes and related accrued interest discussed above, and accrued compensation and allowances. The note bears interest at one percent per annum and calls for monthly payments of $8,000 until the balance is paid in full. The balance as of September 30, 2023 and March 31, 2023 was $95,604 and $119,604, respectively, with the balance as of September 30, 2023 and $96,000 for the year end March 31, 2023, classified in current liabilities, on the condensed consolidated balance sheets.

 

NOTE 6 – RESTRUCTURED AUGUST NOTE PAYABLE

 

The Company entered into a securities purchase agreement (the “SPA”) with an investor (the “Investor”) on August 17, 2022. Pursuant to the SPA, the Investor purchased a secured promissory note (the “Note”) in the aggregate principal amount totaling approximately $5,433,333. The Note has an interest rate of 12% per annum, with a maturity date nine months from the issuance date of the Note . The Note carried an original issue discount totaling $433,333 and a transaction expense amount of $10,000, both of which are included in the principal balance of the Note. On the closing date the Company received $1,100,000, with $3,900,000 put into escrow to be held until certain terms were to be met, which included $3,400,000 upon the completion of a successful uplist to NYSE or NASDAQ. The SPA includes a Security Agreement, whereby the note is secured by the collateral set forth in the agreement, covering all of the assets of the Company. All payments made by the Company under the terms in the note, including upon repayment of this Note at maturity, shall be subject to an exit fee of 15% of the portion of the outstanding balance being paid (the “Exit Fee”). As the Exit Fee is to be included in every settlement of the Note, an additional 15% of the principal balance, which totals $816,500, was recognized along with the principal balance, and offset by a contra account in a manner similar to a debt discount.

 

14

 

 

As soon as reasonably possible, the Company will cause the common stock to be listed for trading on either of (a) NYSE, or (b) NASDAQ (in either event, an “Uplist”). In the event the Company has not effectuated the Uplist by November 15, 2022, the then-current outstanding balance will be increased by 10%. Following the Uplist, while the Note is still outstanding, ten days after the Company may have a sale of any of its shares of common stock or preferred stock, there shall be a Mandatory Prepayment equal to the greater of $3,000,000 or thirty-three percent of the gross proceeds of the equity sale.

 

In conjunction with the Merger Agreement, entered into on October 24, 2022, with Yotta Acquisition Corporation (Note 11), on November 4, 2022, the Company entered into a Restructuring Agreement for an Amended and Restated Secured Promissory Note (the “August Note”), through which the August Note was amended and restated in its entirety. The Restructured August Note decreased the principal to $1,748,667, less an OID of $138,667, and the amount in escrow was returned to the investor, The Restructuring Agreement included key modifications, in which i) the Uplist terms were removed, ii) in the event that the closing of the Merger does not occur on or before December 31, 2022, the then-current Outstanding Balance will be increased by 2% and shall increase by 2% every 30 days thereafter until the closing or termination of the Merger Agreement, and iii) the outstanding balance of the Convertible Note may be increased by 5% to 15% upon the occurrence of an event of default or failure to obtain the Lender’s consent or notify the Lender for certain major equity related transactions (“Trigger Events”). The Merger has not yet closed, and therefore the 2% of the outstanding balance was increased as of June 30, 2023, in the amount of approximately $272,000. On July 20, 2023, the Company sent Yotta notice of the Company’s termination of the Merger Agreement. (See Note 11) On November 20, 2023, the maturity date was extended to June 30, 2024.

 

The Restructured August Note was analyzed under ASC 470-50 as to if the change in terms qualified as a modification or an extinguishment of the note. The changes in terms were considered an extinguishment as the present value of the cash flows under the terms of the new debt instrument was evaluated to be a substantial change, as over 10% difference from the present value of the remaining cash flows under the terms of the original instrument. As such, with the removal of the original note and its debt discount and accrued interest as compared to the restructured note with a fair value of approximately $1,933,000, there was a loss in extinguishment of approximately $157,000. As a result of the extinguishment and at the Company’s election of the fair value option under ASC 825, the August Note will be accounted for at fair value until they are settled. In accordance with ASC 815- 15-25-1(b) a hybrid instrument that is measured at fair value under ASC 825 fair value option each period with changes in fair value reported in earnings as they occur should not be evaluated for embedded derivatives. Therefore, the provisions in the August Note were not evaluated as to if they fell under the guidance of embedded derivatives and were required to be bifurcated. The August Note was revalued as of September 30, 2023 at approximately $2,250,000, with a change in fair value of approximately $(150,000) recognized in the accompanying condensed consolidated Statement of Operations. The August Note was revalued as of March 31, 2023 at approximately $2,400,000, with a change in fair value of approximately $467,000. As of September 30, 2023, the accrued interest from the restructuring date, which is included in the fair value is approximately $271,000.  

 

NOTE 7 – RESTRUCTURED SENIOR NOTE PAYABLE

 

December 15, 2021 Debenture

 

The Company entered into a securities purchase agreement (the “SPA”) with an investor (the “Investor”) on December 15, 2021. Pursuant to the SPA, the Investor purchased a secured promissory note (the “Note”) in the aggregate principal amount totaling approximately $16,320,000 (the “Principal Amount”). The Note has an interest rate of 12% per annum, with a maturity date 24 months from the issuance date of the Note (the “Maturity Date”).

 

Beginning on the date that is 6 months from the issuance date of the Note, the Investor had the right to redeem up to $1,000,000 of the outstanding balance per month. Payments could have been made by the Company, at the Company’s option, (a) in cash, or (b) by paying the redemption amount in the form of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), per the following formula: the number of redemption shares equals the portion of the applicable redemption amount divided by the Redemption Repayment Price. The “Redemption Repayment Price” equaled 90% multiplied by the average of the two lowest volume weighted average price per share of the Common Stock during the ten (10) trading days immediately preceding the date that the Investor delivers notice electing to redeem a portion of the Note. The redemption amount shall include an Exit Fee, consisting of a premium of 15% of the portion of the outstanding balance being paid. As the Exit Fee is to be included in every settlement of the Note, an additional 15% of the principal balance, which totals $2,448,000, was recognized along with the principal balance, and offset by a contra account in a manner similar to a debt discount. In addition to the Investor’s right of redemption, the Company has the option to prepay the Notes at any time prior to the Maturity Date by paying a premium of 15% plus the principal, interest, and fees owed as of the prepayment date.

 

15

 

 

On November 4, 2022, the Company entered into a Restructuring Agreement for an Amended and Restated Secured Promissory Note (the “Senior Note”) with the December 2021 Investor through which the December 2021 Note was amended and restated in its entirety. These amendments were made in conjunction with the Merger Agreement, entered into on October 24, 2022, with Yotta Acquisition Corporation (Note 11), The main modification of the terms of the Senior Note was that the conversion feature was eliminated. Second, a Mandatory Payment was added whereby within 3 trading days of the closing upon the Merger an amount equal to the lesser of (A) one-third of the amount retained in the Trust Account at the Effective Time or (B) $10,000,000, in order to repay a portion of the outstanding balance of the Senior Note; after which the remaining balance of the Senior Note is to be repaid in equal monthly installments over a 12-month period beginning on a date after the Merger Agreement closing date (“Closing Date”) or the termination of such agreement. All payments made shall be subject to an Exit Fee of 15% of the portion of the outstanding balance being paid. Additionally, if the Closing Date is after December 31, 2022, the outstanding balance of all indebtedness owed by the Company to December 2021 Investor will be increased automatically by 2% and will automatically increase by 2% every 30 days thereafter until the Closing, a termination, or substantially similar terms as approved by the Board of Directors of the Company. Additional key modifications include i) uplist terms in which the Company was to cause the common stock to be listed for trading on either of (a) NYSE, or (b) NASDAQ, were removed, ii) Maturity date was modified from December 15, 2023 to 12 months from the Closing or termination of the Merger Agreement, provided not to be later than September 30, 2024, and iii) the outstanding balance of the Senior Note may be increased by 5% to 15% upon the occurrence of an event of default or failure to obtain the Lender’s consent or notify the Lender for certain major equity related transactions (“Trigger Events”). As of June 30, 2023, the Merger has not yet closed, and therefore the 2% of the outstanding balance was increased as of June 30, 2023, in the amount of approximately $2,675,000. On July 20, 2023, the Company sent Yotta notice of the Company’s termination of the Merger Agreement (See Note 11). Based on the termination in July of 2023, the equal monthly payments were to begin on September 20, 2023. On November 20, 2023, the Investor issued a waiver to the Company on the equal monthly payments, which are not currently required to be paid.

 

The Note also contains certain negative covenants and Events of Default, which in addition to common events of default, include the Company fails to maintain the share reserve, the occurrence of a Fundamental Transaction without the Lenders written consent, the Company effectuates a reverse split of its common stock without 20 trading days written notice to Lender, fails to observe or perform or breaches any covenant, and, the Company or any of its subsidiaries, breaches any covenant or other term or condition contained in any Other Agreements in any material. Upon an Event of a Default, at its option and sole discretion, the Investor may consider the Note immediately due and payable. Upon such an Event of Default, the interest rate increases to 18% per annum and the outstanding balance of the Note increases from 5% to 15%, depending upon the specific Event of Default. As of September 30, 2023, the Company is in full compliance with the covenants and Events of Default.

 

The Restructured Senior Note was analyzed under ASC 470-50 as to if the change in terms qualified as a modification or an extinguishment of the note. The changes in terms were considered an extinguishment as the conversion feature has been eliminated and therefore the modified Senior Note is determined to be fundamentally different from the original convertible note. As such, with the removal of the original note and its debt discount and accrued interest as compared to the restructured note with a fair value of approximately $18,914,000, there was a gain in extinguishment of approximately $2,540,000. As of the restructuring date the derivative had a fair value of $12,290,000, based on assumptions used in a bi-nomial option pricing model, which resulted in a change in fair value of $17,738,000 as of the restructuring date, from its previous fair value of $30,028,000. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.16 at issuance date; a risk-free interest rate of 3.73% and expected volatility of the Company’s common stock, of 117.77%, and the strike price of $0.1017.

 

16

 

 

As a result of the extinguishment and at the Company’s election of the fair value option under ASC 825, the Company will account for the Restructured Senior Note at fair value every period end until it is settled. In accordance with ASC 815- 15-25-1(b) a hybrid instrument that is measured at fair value under ASC 825 fair value option each period with changes in fair value reported in earnings as they occur should not be evaluated for embedded derivatives. Therefore, the Company did not evaluate the provisions in the Restructured Senior Note as to whether they fell under the guidance of embedded derivatives and were required to be bifurcated. The Restructured Senior Note was revalued as of September 30, 2023 at approximately $21,680,000, with a change in fair value of approximately $390,000 recognized in the Company’s accompanying condensed consolidated Statement of Operations. The Senior Note was revalued as of March 31, 2023, at approximately $21,290,000, with a change in fair value of approximately $2,376,000 recognized in the accompanying condensed consolidated Statement of Operations. As of September 30, 2023, the accrued interest from the restructuring date, which is included in the fair value is approximately $4,201,000.

 

NOTE 8 – STOCKHOLDERS’ EQUITY

 

Common Stock

 

On September 28, 2023, the Company increased their authorized common shares to 1,400,000,000.

 

Preferred Stock

 

As of September 30, 2023 and March 31, 2023, the Company had 200,000,000 shares of preferred stock authorized with a par value of $0.0001. Of this amount, 5,000,000 shares of Series A preferred stock are authorized and outstanding, 5,000 shares Series B preferred stock are authorized and no shares outstanding, 5,000 shares Series D preferred stock are authorized with no shares outstanding, 10,000 shares Series E preferred stock are authorized and 1,656 and 1,670 outstanding, respectively, and 750,000 shares of Series F preferred stock are authorized with 750,000 outstanding, respectively.

 

Series E Preferred Stock

 

On July 24, 2023, the Company entered into a Securities Purchase Agreement for the additional sale of 156 shares of Series E Preferred Stock at a price of $1,000 per share of Preferred Stock, for a total of $156,000. The Series E Preferred Stock will earn a dividend of 12% per annum, for as long as the relevant Preferred Stock has not been redeemed or converted. Dividends are to be paid quarterly, and at the Company’s discretion, in cash or Preferred Stock calculated at the purchase price.

 

On May 1, 2023, one of the holders converted 600 Series E Preferred Stock into 23,989,570 shares of common stock. The conversion represented their remaining Series E Preferred Stock outstanding as of that date, including the 10% increase, accrued dividends in kind of $516,000 and the 15% Exit Fee of $108,000.

 

GHS 2022 Purchase Agreement

 

On November 4, 2022, the Company entered into a purchase agreement (the “GHS Purchase Agreement”) with GHS Investments LLC (“GHS”), an accredited investor, pursuant to which, the Company may require GHS to purchase a maximum of up to 64,000,000 shares of the Company’s common stock (“GHS Purchase Shares”) based on a total aggregate purchase price of up to $5,000,000 over a one-year term that ends on November 4, 2023. Notwithstanding the foregoing dollar limitations, the Company and GHS may, from time to time, mutually agree in writing to waive the aforementioned limitations for a relevant Purchase Notice, which waiver, shall not exceed the 4.99% beneficial ownership limitation contained in the GHS 2022 Purchase Agreement. The Company is to control the timing and amount of any sales of GHS Purchase Shares to GHS. The Company intends to use the net proceeds from this offering for working capital and general corporate purposes.

 

The “Purchase Price” means, with respect to a purchase made pursuant to the GHS Purchase Agreement, 90% of the lowest VWAP during the 10 consecutive business days immediately preceding, but not including, the applicable purchase date. The Company shall deliver a number of GHS Purchase Shares equal to 112.5% of the aggregate purchase amount for such GHS Purchase divided by the Purchase Price per share for such GHS Purchase.

 

If there are any default events, as set forth in the GHS Purchase Agreement, has occurred and is continuing, the Company shall not deliver to GHS any Purchase Notice.

 

17

 

 

Further, pursuant to the terms of the GHS Purchase Agreement, from November 4, 2022 until the date that is the later of (i) the closing of the transactions whereby Yotta Merger Sub, Inc. will merge with and into the Company, with the Company as the surviving company (the “Merger”); and (ii) the 12 month anniversary of the first delivery of GHS Purchase Shares, upon any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), GHS shall have the right to participate in any financing, up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing. Following the Merger, the Participation Maximum shall be 50% of the Subsequent Financing.

 

In the three months ended June 30, 2023, the Company sold 11,981,706 shares of common stock at a net amount of approximately $376000, at a share price of $0.03, of the GHS Purchase Agreement.

 

In the year ended March 31, 2023, the Company sold 52,018,294 shares of common stock at a net amount of approximately $3,076,000, at share prices ranging from $0.04 to $0.10.

 

$10,000,000 Common Stock Equity Financing

 

On April 28, 2023, the Company entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights Agreement with GHS. Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $10,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the SEC. The Registration Statement was filed on July 20, 2023 and the SEC declared it effective on August 14, 2023.

 

With the effectiveness of the Registration Statement, the Company now 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 equal less than ten thousand dollars ($10,000) or greater than one million dollars ($1,000,000). 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 4.99% 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). Following an up-list to the NASDAQ or equivalent national exchange, the price of each put share shall be equal to ninety percent (90%) of the Market Price, subject to a floor price of $1.00 per share. Puts may be delivered by the Company to GHS until the earlier of twenty-four (24) months after the effectiveness of the Registration Statement or the date on which GHS has purchased an aggregate of $10,000,000 worth of Common Stock under the terms of the Equity Financing Agreement.

 

In the three months ended September 30, 2023, the Company sold 31,808,246 shares of common stock at a net amount of approximately $566,000, at share price of $0.02 related to the Equity Financing Agreement.

 

GHS 2023 Purchase Agreement

 

On May 9, 2023, the Company entered into a purchase agreement (the “GHS 2023 Purchase Agreement”) with GHS pursuant which the Company may require GHS to purchase a maximum of up to 45,923,929 shares of the Company’s common stock (“GHS 2023 Purchase Shares”) based on a total aggregate purchase price of up to $6,000,000 over a one-year term that ends on May 9, 2024. The Company intends to use the net proceeds from this offering for working capital and general corporate purposes.

 

18

 

 

The GHS 2023 Purchase Agreement provides that, upon the terms and subject to the conditions and limitations set forth in the agreement, the Company has the right from time to time during the term of the agreement, in its sole discretion, to deliver to GHS a purchase notice (a “Purchase Notice”) directing GHS to purchase (each, a “GHS Purchase”) a specified number of GHS 2023 Purchase Shares. A GHS Purchase will be made in a minimum amount of $10,000 and up to a maximum of $1,500,000 and provided that, the purchase amount for any purchase will not exceed 200% of the average of the daily trading dollar volume of the Company’s common stock during the 10 business days preceding the purchase date. Notwithstanding the foregoing dollar limitations, the Company and GHS may, from time to time, mutually agree (in writing) to waive the aforementioned limitations for a relevant Purchase Notice, which waiver, for the avoidance of doubt, shall not exceed the 4.99% beneficial ownership limitation contained in the GHS Purchase Agreement. The “Purchase Price” means, with respect to a purchase made pursuant to the GHS Purchase Agreement, 90% of the lowest VWAP (as defined in the GHS 2023 Purchase Agreement) during the Valuation Period (the ten (10) consecutive business days immediately preceding, but not including, the applicable purchase date). The Company shall deliver a number of GHS 2023 Purchase Shares equal to 112.5% of the aggregate purchase amount for such GHS Purchase divided by the Purchase Price per share for such GHS Purchase, against payment by GHS to the Company of the purchase amount with respect to such Purchase (less documented deposit and clearing fees, if any), as full payment for such GHS Purchase Shares via wire transfer of immediately available funds.

 

If there are any default events, as set forth in the GHS Purchase Agreement, has occurred and is continuing, the Company shall not deliver to GHS any Purchase Notice.

 

Further, pursuant to the terms of the GHS 2023 Purchase Agreement, from May 9, 2023 until the date that is the later of (i) the closing of the transactions whereby Yotta Merger Sub, Inc. will merge with and into the Company, with the Company as the surviving company (the “Merger”); and (ii) the 12 month anniversary of the initial closing pursuant to the Section 2(a) of GHS Purchase Agreement, upon any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), GHS shall have the right to participate in any financing, up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing. Following the Merger, the Participation Maximum shall be 50% of the Subsequent Financing.

 

In the three months ended June 30, 2023, the Company sold 28,205,605 shares of common stock at a net amount of approximately $923,000, at share prices ranging from $0.03 to $0.04 related to the GHS 2023 Purchase Agreement.

 

Common Shares Issued to Consultant

 

On June 19, 2023, 100,000 shares of common stock were issued to a consultant. The shares had a fair value of $4,700, based on the market price of $0.047 on the grant date.

 

Options and Warrants

 

The Company has not granted any options since inception.

 

All of the warrants issued have been recognized as a liability, as of the issuance of the convertible debenture on December 15, 2021, based on the fact it as it is not known if there will be sufficient authorized shares to be issued upon settlement, based on the conversion terms of the existing convertible debt.

 

The 18,573,116 warrants outstanding as of September 30, 2023, were revalued as of period end for a fair value of $85,000, with a decrease in the fair value of $270,000 recognized on the accompanying condensed consolidated Statement of Operations. The fair value of the warrant liability was estimated using Black Scholes Model, with the following inputs: a risk-free interest rate ranging from 3.81% to 4.80%; and expected volatility of the Company’s common stock ranging from 109.2% to 115.3% and the remaining terms of each warrant issuance.

 

The 18,573,116 warrants outstanding as of September 30, 2022, were revalued as of period end for a fair value of $2,047,000, with a decrease in the fair value of $1,876,000 recognized on the accompanying condensed consolidated Statement of Operations. The fair value was estimated using Black Scholes Model, with the following inputs: the price of the Company’s common stock of $0.15; a risk-free interest rate of 4.06% to 4.25%, the expected volatility of the Company’s common stock ranging from 124.6% to 174.8%; the estimated remaining term, a dividend rate of 0%,

 

19

 

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

Bonus Compensation – Related Party

 

On May 11, 2021, the Company paid the Chief Financial Officer (“CFO”) a bonus of $300,000. On August 10, 2021, the Board of Directors ratified the bonus payment to the CFO and awarded the President and the CTO compensation bonuses of $300,000 each. The bonuses to the President and CTO are to be distributed within the next twelve months from the award date, and are included in accrued expenses, related parties as of December 31, 2021. During the year ended March 31, 2022, $200,000 was paid each to the President and CTO, with a total of $200,000 remaining in accrued expenses, related parties, as of September 30, 2023 and March 31, 2023.

 

Promissory Note

 

On July 10 through July 17, 2023, the Company received $140,000 in proceeds from the issuance of three promissory notes with related parties. The notes bear interest at 10% and have maturity dates one year from the issuance date.

 

On August 10, 2022, the Company issued a loan agreement for $300,000, with related parties, which is to be considered priority debt of the Company. As of this filing, five of the related parties have entered into promissory notes under the loan agreement for $50,000 each, for a total of cash received of $250,000. The notes bear interest at a 10% per annum and are due in one year from the issuance date of the notes.

 

For the three and six months ended September 30, 2023, the interest expense for the related party promissory notes was $9,301 and $15,551 and $3,522 and $3,522, respectively. As of September 30, 2023 and March 31, 2023, the accrued interest related to the related party promissory notes was approximately $36,000 and $22,000, respectively.

 

NaturalShrimp Holdings, Inc.

 

On January 1, 2016 the Company entered into a notes payable agreement with NaturalShrimp Holdings, Inc.(“NSH”), a shareholder. The note payable has no set monthly payment or maturity date with a stated interest rate of 2%. During the year ended March 31, 2022, the Company paid off $655,750 of the note payable. The outstanding balance is approximately $77,000 as of both September 30, 2023 and March 31, 2023. As of both September 30, 2023 and March 31, 2023, accrued interest payable was approximately $74,000.

 

Shareholder Notes

 

The Company has entered into several working capital notes payable to multiple shareholders of NSH and Bill Williams, a former officer and director, and a shareholder of the Company, for a total of $486,500. The notes are unsecured and bear interest at 8%. These notes had stock issued in lieu of interest and have no set monthly payment or maturity date. The balance of these notes was $356,404 as of both September 30, 2023 and March 31, 2023, and is classified as a current liability on the unaudited condensed consolidated balance sheets. As of September 30, 2023 and March 31, 2023, accrued interest payable was approximately $146,000.

 

Shareholders

 

Beginning in 2010, the Company started entering into several working capital notes payable with various shareholders of NSH for a total of $290,000 and bearing interest at 8%. The balance of these notes at September 30, 2023 and March 31, 2023 was $54,647 and is classified as a current liability on the unaudited condensed consolidated balance sheets.

 

20

 

 

NOTE 10 – LEASE

 

On May 26, 2021, the Company entered into a sublease for a new office space in Texas, on two floors. The lease commenced on August 1, 2021 for a monthly rent of $7,000, and will terminate on October 31, 2025, for one of the spaces, and commence in the second half of 2022 for monthly rent of $1,727, and terminate on October 31, 2025, for the second space. On June 2, 2021, the Company paid a deposit of $52,362 which shall be applied to the last six months of the sublease term, and $17,454 security deposit, which is included in Prepaid expenses on the accompanying condensed consolidated balance sheet. The Company assessed its new office lease as an operating lease.

 

At inception, on August 1, 2021, the ROU and lease liability was calculated as approximately $316,000, based on the net present value of the future lease payments over the term of the lease. When available, the Company uses the rate implicit in the lease discount payments as the incremental borrowing rate to calculate the net present value; however, the rate implicit in the lease is not readily determinable for their corporate office lease. In this case, the Company estimated its incremental borrowing rate of 5.75% as the interest rate it could have incurred to borrow an amount equal to the lease payments in a similar economic environment on a collateralized basis over a term similar to the lease term. The Company estimated its rate based on observable risk-free interest rate and credit spreads for commercial debt of a similar duration as to what rate would have been effective for the Company.

 

On September 8, 2021, the Company entered into an equipment lease agreement for VOIP phone equipment. The lease term is for sixty months, with a monthly lease payment of approximately $300. The Company assessed the equipment lease as an operating lease. The Company determined the Right of Use asset and Lease liability values at inception as approximately $17,000 calculated at the present value of all future lease payments for the lease term, using an incremental borrowing rate of 5.75%.

 

The following is a schedule of maturities of lease liabilities as of September 30, 2023:

 

      
2024  $43,902 
2025   87,804 
2026   54,709 
Total future minimum lease payments   186,415 
Less: imputed interest   3,563 
Total  $182,852 

 

NOTE 11 – COMMITMENTS AND CONTINGENCIES

 

Executive Employment Agreements –Gerald Easterling

 

On April 1, 2015, the Company entered into an employment agreement with Gerald Easterling at the time as the Company’s President, effective as of April 1, 2015 (the “Employment Agreement”).

 

The Employment Agreement is terminable at will and each provide for a base annual salary of $96,000. On May 4, 2021, the Company’s Board of Directors approved a salary for Mr. Easterling of $180,000 per annum. In addition, the Employment Agreement provides that the employee 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 Employment Agreement provides that in the event the employee is terminated without cause or resigns for good reason (as defined in their Employment Agreement), the employee will receive, as severance the employee’s base salary for a period of 60 months following the date of termination. In the event of a change of control of the Company, the employee may elect to terminate the Employment Agreement within 30 days thereafter and upon such termination would receive a lump sum payment equal to 500% of the employee’s base salary.

 

The Employment Agreement contains certain restrictive covenants relating to non-competition, non-solicitation of customers and non-solicitation of employees for a period of one year following termination of the employee’s Employment Agreement.

 

21

 

 

Merger Agreement

 

On October 24, 2022, the Company entered into a Merger Agreement (as it may be amended, supplemented, or otherwise modified from time to time, the “Merger Agreement”), by and among the Company, Yotta Acquisition Corporation, a Delaware corporation (“Yotta”), and Yotta Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of Yotta (“Merger Sub”). The Merger Agreement and the transactions contemplated thereby (the “Transactions”) were approved by the Board of Directors of each of the Company, Yotta, and Merger Sub.

 

The Merger Agreement provided, among other things, that Merger Sub will merge with and into the Company, with the Company as the surviving company (the “Surviving Company”) in the merger and, after giving effect to such merger, the Company was to be a wholly-owned subsidiary of Yotta (the “Merger”). In addition, Yotta was to be renamed “NaturalShrimp, Incorporated” or such other name as shall be designated by the Company.

 

On July 20, 2023, the Company sent Yotta notice of the Company’s termination of the Merger Agreement pursuant to Section 10.2(b) thereof based on breaches by Yotta of certain representations in the Merger Agreement that would render impossible the satisfaction of certain conditions to the Company’s obligations to consummate the transactions contemplated by the Merger Agreement. In particular, Yotta will not be able to comply with the provision of its Amended and Restated Certificate of Incorporation that prohibits Yotta from consummating an initial business combination unless it has net tangible assets of at least $5,000,001 upon consummation of such initial business combination. This conflicts with Yotta’s representation in the Merger Agreement that its consummation of the transactions contemplated by the Merger Agreement will not conflict with its organizational documents. The Company also cited delays in the SEC registration process that are attributable to Yotta, which breached its covenant pursuant to the Merger Agreement to use its reasonable best efforts to take all actions reasonably necessary or advisable to consummate the transactions contemplated by Merger Agreement as promptly as reasonably practicable. Per the Merger Agreement, if one of the parties validly terminates the Merger Agreement there will be a Breakup Fee of $3,000,000 to be paid to them by the other party. The Breakup Fee is not intended to be a penalty, but instead is liquidated damages to compensate the party which requests the termination, to not have any further liability with respect to the Merger Agreement. As of this filing date, Yotta has not responded to the Company’s notice of termination and the Company has not sought payment of the Breakup Fee beyond the July 20th notice.

 

NOTE 12 – SUBSEQUENT EVENTS 

 

Common Shares Issued to Employees

 

On October 10, 2023, a new employee was issued 50,000 shares of common stock as a signing bonus with a total fair value of $1,100, based on the market price of $0.02250 on the grant date.

 

Subsequent to the period end, in October 2023, the Company sold 10,443,858 shares of common stock at a net amount of approximately $166,000, at share prices of $0.02, in relation to the Equity Financing Agreement. In addition, on October 31, 2023, the Company issued GHS 7,868,985 shares of common stock, for no purchase price, as consideration resulting from GHS receiving a phishing email informing them to wire a purchase price to an incorrect bank, resulting in the Company not receiving the wire and for which GHS resent a second wire to the Company’s correct bank.

 

22

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 27, 2023, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:

 

  our ability on a timely basis to successfully rebuild our water treatment plant and replace our filtration equipment that was destroyed by fire on July 3, 2022 at our La Coste, Texas facility;
  our ability to continue developing and expanding our research and development plant in La Coste, Texas and our production facility in Webster City, Iowa;
  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 continued ability to raise funding at the pace and quantities required to scale our plant needs to commercialize our products;
  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;
  business interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as the outbreak of COVID-19);
  intellectual property claims brought by third parties; and
  the impact of any industry regulation.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

 

23

 

 

As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to NaturalShrimp Incorporated and its wholly-owned subsidiaries NSC, NS Global and NAS. The Company also owns 51% of NaturalShrimp/Hydrenesis LLC, a Texas limited liability company. Unless otherwise specified, all dollar amounts are expressed in United States Dollars.

 

Use of Generally Accepted Accounting Principles (“GAAP”) Financial Measures

 

We use United States GAAP financial measures, 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.

 

This discussion and analysis should be read in conjunction with our financial statements and the notes thereto included elsewhere in this annual report.

 

Overview

 

We are an aquaculture technology company that has developed proprietary, patented platform technologies to allow for the production of aquatic species in an ecologically controlled, high-density, low-cost environment, and in fully contained and independent production facilities without the use of antibiotics or toxic chemicals. We own and operate indoor recirculating Pacific White shrimp production facilities in Texas and Iowa using these technologies.

 

We were incorporated in July 2008 and acquired substantially all of the assets of NSH, the company that developed the proprietary technology to grow and sell shrimp potentially anywhere in the world that is now the basis of our business. In 2015 NSH acquired 88.62% of the issued and outstanding shares of NaturalShrimp Common Stock, NSC and NS Global became our wholly-owned subsidiaries, and we changed our principal business to a global shrimp farming company.

 

On October 5, 2015, we formed NAS with F&T, the purpose of which was to jointly develop with F&T certain water technologies.

 

On December 17, 2020, we acquired for $10.0 million certain assets from VeroBlue Farms USA, Inc. and its subsidiaries, which assets included our three current facilities located in Iowa.

 

On May 25, 2021, we purchased certain parent and intellectual property rights from F&T and acquired all of its outstanding shares in NAS, thereby making NAS our wholly-owned subsidiary, for $3.0 million in cash and 13,861,386 shares of NaturalShrimp Common Stock.

 

On August 25, 2021, through NAS, we entered into an Equipment Rights Agreements with Hydrenesis-Delta Systems, LLC and a Technology Rights Agreement with Hydrenesis Aquaculture LLC. The Equipment Rights Agreement relates to 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 Rights Agreement provides us with a sublicense to the rights to Hydrogas® and RLS®.

 

The Company has three wholly-owned subsidiaries: NSC, NS Global, and NAS, and owns 51% of NaturalShrimp/Hydrenesis LLC, a Texas limited liability company.

 

Most of the shrimp consumed in the world today come from shrimp farms that can only produce crops between one and four times per year. Consequently, the shrimp from these farms requires freezing between crops until consumed. Our system is designed to harvest different tanks 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 and year-round allows us to provide this high-end product to upscale restaurant and grocery stores 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 pollutants and is fed only the highest-quality feeds.

 

24

 

 

We began making regular weekly sales of live shrimp from our Iowa production facility in November 2021 and from our Texas production facility in June 2022. Although our revenues were initially limited, our gross sales for the fiscal year ended March 31, 2023 increased significantly as compared to the fiscal year ended March 31, 2022. The Company is using its aforementioned platform technologies to retrofit 344,000 square feet of its existing Iowa facilities that we expect will, once fully operational, produce 18,000 pounds of shrimp per week. We believe that the combined output from our La Coste, Texas and Iowa facilities will be approximately 24,000 pounds of shrimp production per week by the third or fourth calendar quarter of 2024. We can, however, provide no assurances as to how significant our revenue will be in the next one to two fiscal quarters.

 

Results of Operations

 

Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022

 

Revenue

 

We had gross sales revenue of $58,010 and $51,725, respectively, during the three months ended September 30, 2023 and 2022, an increase of approximately $6,000, or 12%.

 

Our increase in gross sales revenue during the three months ended September 30, 2023 over the same period in the prior year was a result of the revenue recognized in the current quarter of the first monthly $25,000 service fee connected to the contract for the use of the NSI Technologies, with a decrease in the sale of shrimp over the same period last year. In the same period in the prior year our sale of shrimp to two customers directly during fiscal 2023 that had been made exclusively through a consultant during fiscal 2022 and the increased production of shrimp available for sale, which resulted in us being able to sell more shrimp to meet existing demand.

 

We had net revenues of $7,010 and $51,725, respectively, during the three months ended September 30, 2023 and 2022. The decrease in net revenues for the second quarter of fiscal 2024 is the result of the decrease in gross sale of shrimp revenue, with the inclusion of the NSI Technologies $25,000 monthly payment, offset by the cost of sales in the second quarter of fiscal 2024, which was not recognized during the prior period.

 

Cost of Sales

 

Cost of sales includes direct costs related to the production and sale of our products, primarily the cost of the post-larva shrimp that we purchase to grow into our shrimp product at our facilities and the costs of shipping purchase orders to customers. Additionally, in the current period, there is the cost of sales related to the contract for the use of the NSI Technology, which is approximately $25,000. Cost of sales were $51,000 and $0, respectively, during the three months ended September 30, 2023 and 2022.

 

Operating Expenses

 

The following table summarizes the various components of our operating expenses for each of the three months ended September 30, 2023 and 2022:

 

   Three Months Ended
September 30,
 
   2023   2022 
         
Salaries and related expenses  $497,219   $540,773 
Professional services   1,534,687    312,470 
Other general and administrative expenses   371,986    540,716 
Rent   -    55,633 
Facility operations   157,517    488,427 
Research and development   -    4,000 
Depreciation   436,870    408,232 
Amortization   367,500    367,500 
Total  $3,365,779   $2,717,751 

 

25

 

 

Operating expenses for the three months ended September 30, 2023 were $3,365,779, which is a 23.8% increase over operating expenses of $2,717,751 for the same period in 2022. The overall change in expenses is mainly the result of the termination of the Merger Agreement, and therefore the expense of the previous Deferred offering costs of $1,394,366, which resulted in an increase in professional services expense. This increase was offset by decreases in the current period where there was an approximately $331,000 decrease in facility operations relating to the progress of the commercial operations in the new plant in Iowa as well as in Texas, and the fact that some facility operations now being considered as cost of revenue. Additionally, general and administrative expenses decreased by approximately $169,000 in the current period, as well as the salaries being decreased by approximately $44,000. Lastly, we did not pay our rent in the current period, but instead used the prepaid deposit against the rent expense.

 

Other Income (Expense)

 

The following table summarizes the various components of our other income (expense) for each of the three months ended September 30, 2023 and 2022:

 

  

Three Months Ended
September 30,

 
   2023   2022 
Interest expense  $(38,698)  $(579,291)
Interest expense – related parties   (9,301)   (3,522)
Amortization of debt discount   -    (2,136,389)
Change in fair value of derivative liability   -    (18,241,000)
Change in fair value of warrant liability   220,000    (39,000)
Loss due to fire   -    (863,117)
Change in fair value of restructured notes   530,000    - 
           
Gain on sale of machinery and equipment   10,229    - 
Total  $712,230   $(21,862,319)

 

Other Income(expense) for the three months ended September 30, 2023, increased approximately $22,045,000 into Other income, from the same period in the prior year, due almost entirely to the restructuring of the convertible and August note, which resulted in the removal of the derivative related to the conversion feature and the debt discount as a result of the accounting treatment as an extinguishment of debt. This resulted in the prior period of a decrease in a fair value of derivative liability of $18,241,000, and the full amortization of the related debt discounts of $2,136,389. Further, due to the election to account for the restructured notes under the fair value option, in the current period there is a change in fair value of the restructured notes, and the interest expense is not recognized separately in the condensed consolidated statement of operations but included in the change in fair value of the restructured notes. Additionally, in the prior period there was a loss due to a fire which occurred on July 3, 2022, in our building containing the water treatment and purification system in La Coste, Texas.

 

The Company originally recognized the warrant liability in December 2021 and revaluates it at each period-end. The decrease in the fair value for the three months ended September 30, 2023, as compared to the prior year end, resulted in a $220,000 recognition as income during the three months ended September 30, 2023, compared to an increase in fair value as of September 30, 2022, which resulted in $39,000 in expense during the three months ended September 30, 2022.

 

26

 

 

Comparison of the Six Months Ended September 30, 2023 to the Six Months Ended September 30, 2022

 

Revenue

 

We had gross sales revenue of $263,882 and $88,061, respectively, during the six months ended September 30, 2023 and 2022, an increase of approximately $176,000, or 200%.

 

Our increase in gross sales revenue during the six months ended September 30, 2023 over the prior period was a result mainly of the Company entering into a six-month agreement with a company for the use of the Hydrenesis Technology and Equipment on May 21, 2023, for an initial payment of $150,000 and the receipt of the first monthly payment of $25,000.

 

We had net revenues of $163,141 and $88,061, respectively, during the six months ended September 30, 2023 and 2022. The increase in net revenues for the six months ended September 30, 2023 is the result of the increase in gross sales revenue, with the inclusion of the NSI Technologies contract, offset by the cost of sales in the six months ended September 30, 2023, which was not recognized during the prior period.

 

Cost of Sales

 

Cost of sales includes direct costs related to the production and sale of our products, primarily the cost of the post-larva shrimp that we purchase to grow into our shrimp product at our facilities and the costs of shipping purchase orders to customers. Additionally, in the current six-month period, there is the cost of sales related to the contract for the use of the NSI Technologies, which is approximately $25,000. Cost of sales were $100,741 and $0, respectively, during the six months ended September 30, 2023 and 2022.

 

Operating Expenses

 

The following table summarizes the various components of our operating expenses for each of the six months ended September 30, 2023 and September 30, 2022:

 

   Six Months Ended
September 30,
 
   2023   2022 
         
Salaries and related expenses  $1,009,944   $984,076 
Professional fees   1,845,944    746,440 
Other general and administrative expenses   824,859    962,853 
Rent   22,313    82,255 
Facility operations   515,775    1,020,163 
Research and development   -    176,643 
Depreciation   871,679    933,461 
Amortization   735,000    735,000 
Total  $5,824,797   $5,640,891 

 

Operating expenses for the six months ended September 30, 2023 increased $183,906, or 3.3%, compared to the same period in 2022, primarily due to an increase in professional fees as a result of the termination of the Merger Agreement which caused the expense of the previous Deferred offering costs of $1,394,366. There was also a slight increase of approximately $26,000 for additional salaries for new employees. These increases were offset by decreases in the current period where there was an approximately $504,000 decrease in facility operations relating to the progress of the commercial operations in the new plant in Iowa as well as in Texas, and the fact that some facility operations now being considered as cost of revenue. The general and administrative expenses decreased by approximately $138,000 in the current period. Additionally, as a result of the production of the shrimp there was not any research and development in the current period. Lastly, the rent expense decreased by approximately $60,000 as we did not pay our rent in the current period, but instead used the prepaid deposit against the rent expense.

 

27

 

 

Other income (expense)

 

The following table summarizes the various components of our Other income(expense) for each of the six months ended September 30, 2023 and September 30, 2022:

 

   Six Months Ended
September 30,
 
   2023   2022 
         
Interest expense  $(41,411)  $(1,081,663)
Interest expense - related parties   (15,551)   (3,522)
Amortization of debt discount   -    (4,176,389)
Change in fair value of derivative liability   -    (16,927,000)
Change in fair value of warrant liability   270,000    (1,876,000)
Change in fair value of restructured notes   667,634    - 
Loss due to fire   -    (863,117)
Gain on sale of machinery and equipment   16,014    - 
Total  $716,686   $(21,175,691)

 

Other Income (expense) for the six months ended September 30, 2023, increased approximately $21,362,000 into Other income, from the same period in the prior year, due almost entirely to the restructuring of the convertible and August note, which resulted in the removal of the derivative related to the conversion feature and the debt discount as a result of the accounting treatment as an extinguishment of debt. Therefore, while there is no change in fair value of a derivative liability or amortization of debt discount in the six months ended September 30, 2023, in the six months ended September 30, 2022 there is a decrease in a fair value of derivative liability of $16,927,000, and amortization of the debt discounts of $4,176,389. Further, due to the election to account for the restructured notes under the fair value option, in the current period there is a change in fair value of the restructured notes, and the interest expense is not recognized separately in the condensed consolidated statement of operations but included in the change in fair value of the restructured notes.

 

The Company originally recognized the warrant liability in December 2021 and revaluates it at each period-end. The decrease in the fair value for the six months ended September 30, 2023, as compared to the prior year end, resulted in a $270,000 recognition as income during the six months ended September 30, 2023, compared to an increase in fair value as of September 30, 2022, which resulted in $1,876,000 in expense during the six months ended September 30, 2022.

 

On July 3, 2022, the Company’s building containing its water treatment and purification system in La Coste, Texas was completely destroyed in a fire. This resulted in the $863,117 loss due to fire recognized in the six months ended September 30, 2022.

 

Liquidity, Financial Condition and Capital Resources

 

As of September 30, 2023, we had cash on hand of approximately $47,000 and working capital deficiency of approximately $10,597,000, as compared to cash on hand of approximately $216,000 and a working capital deficiency of approximately $9,339,000 as of March 31, 2023. The working capital deficiency for the six months ended September 30, 2023, as compared to the March 31, 2023 year end has an increase (a reduced working capital deficiency) of 13.5%. This is mainly due to the decrease in cash on-hand and current period expense of the previous Deferred offering costs, offset by a slight decrease in current liabilities from the reclass of the accrued interest into the inclusion in the line item for the fair value of the restructured notes offset by new promissory notes.  

 

28

 

 

Working Capital Deficiency

 

The following table summarizes our working capital deficiency as of September 30, 2023 and March 31, 2023:

 

   September 30,   March 31, 
   2023   2023 
Current assets  $337,189   $1,882,371 
Current liabilities   10,593,787    11,221,783 
Working capital deficiency  $(10,256,598)  $(9,339,412)

 

Current assets decreased mainly as the deferred offering costs relating to the Merger Agreement were no longer to be recognized as a current asset based on the Merger termination and were expensed in July 2023. Additionally, the assets decreased because of the use of the cash on hand. The decrease in current liabilities is primarily due to the reclass of the accrued interest on the restructured notes into the line item for the fair value of the restructured notes, which only the Restructured August note payable is in the current liabilities, off set by the increase in accrued expenses to related parties and the fair value of the Restructured August note.

 

Cash Flows

 

The following table summarizes our cash flows for the six months ended September 30, 2023 and 2022:

 

   Six months Ended
September 30,
 
   2023   2022 
Net cash used in operating activities  $(2,200,446)  $(3,630,503)
Net cash provided by (used in) investing activities   10,200    (208,883)
Net cash provided by financing activities   2,020,871    2,666,773 
Net change in cash  $(169,375)  $(1,172,613)

 

Net cash used in operating activities during the six months ended September 30, 2023, was a decrease of approximately $1,430,000 as compared to the same period in 2022. The decrease in cash used is primarily due to the current period expense of the deferred offering costs of $1,336,263 due to the termination of the Merger Agreement, as well as a decrease in prepaid expenses and an increase in accrued expense for related parties, which is accrued payroll. Additionally, there was accrued interest activity in the prior six-month period, but no accrued interest activity in the current six-month period.

 

The net cash provided by investing activities in the six months ended September 30, 2023 increased by approximately $219,000 compared to net cash used by investing activities for the same period in the prior fiscal year. During the current period cash was only used to purchase approximately $49,000 and offset by $59,000 received for the sale of machinery and equipment as compared to only cash used to purchase fixed assets which consists of approximately $208,000 for the prior year period.

 

The net cash provided by financing activities decreased by approximately $646,000 between periods. For the current period, the Company received approximately $1,755,000 for the sale of shares of common stock, $150,000 from the sale of Series E Preferred Shares and $140,000 from promissory notes with related parties. In the same period in the prior year the Company received $4,865,000 from the original August promissory note, $1,500,000 that had been held in escrow from the convertible note they entered into in December of 2021, and $250,000 proceeds from related party promissory notes. This was offset in the six months ended September 30, 2022, by the removal of $3,900,000 that had been held in escrow upon the restructuring of the August promissory note.

 

Our cash position was approximately $47,000 as of September 30, 2023. Management believes that our cash on hand and working capital deficit are not sufficient to meet our current anticipated cash requirements for additional anticipated capital expenditures, operating expenses and scale-up of operations for the next twelve months.

 

Recent Financing Arrangements and Developments During the Period

 

Short-Term Debt and Lines of Credit

 

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 34.4% as of September 30, 2023. The line of credit is unsecured. The balance of the line of credit was $9,580 at both September 30, 2023 and March 31, 2023.

 

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 18. 50% as of September 30, 2023. The line of credit is secured by assets of the Company’s subsidiaries. The balance of the line of credit is $10,237 at September 30, 2023 and March 31, 2023.

 

29

 

 

GHS Purchase Agreement

 

On November 4, 2022, the Company entered into a purchase agreement (the “GHS Purchase Agreement”) with GHS pursuant to which the Company may require GHS to purchase a maximum of up to 64,000,000 shares of NaturalShrimp Common Stock (“GHS Purchase Shares”) based on a total aggregate purchase price of up to $5,000,000 over a one-year term that ends on November 4, 2023. Notwithstanding the foregoing dollar limitations, the Company and GHS may, from time to time, mutually agree in writing to waive the aforementioned limitations for a particular purchase of GHS Purchase Shares, which waiver may not exceed the 4.99% beneficial ownership limitation contained in the GHS Purchase Agreement. NaturalShrimp will control the timing and amount of any sales of GHS Purchase Shares to GHS. The Company intends to use the net proceeds from the sale of any GHS Purchase Shares for working capital and general corporate purposes.

 

The purchase price for the GHS Purchase Shares is 90% of the lowest volume-weighted average price during the 10 consecutive business days immediately preceding, but not including the applicable purchase date. The Company must deliver a number of GHS Purchase Shares equal to 112.5% of the aggregate purchase amount for any such purchase of GHS Purchase Shares divided by the applicable purchase price per share.

 

If any default events, as set forth in the GHS Purchase Agreement, has occurred and is continuing, the Company may not require GHS to purchase any GHS Purchase Shares.

 

Further, pursuant to the terms of the GHS Purchase Agreement, from November 4, 2022 until the later of the Closing and the 12-month anniversary of the first delivery of GHS Purchase Shares, upon any issuance by the Company or any of its subsidiaries of shares of NaturalShrimp Common Stock or NaturalShrimp Common Stock equivalents for cash, indebtedness, or a combination of units thereof (a “Subsequent Financing”), GHS will have the right to participate in any such financing in an amount equal to 100% or, following the Merger, up to 50% of such financing, on the same terms, conditions and price otherwise provided for in such subsequent financing.

 

In the three months ended June 30, 2023, the Company sold 11,981,706 shares of common stock at a net amount of approximately $376000, at a share price of $0.03, of the GHS Purchase Agreement.

 

$10,000,000 Common Stock Equity Financing

 

On April 28, 2023, the Company entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights Agreement with GHS. Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $10,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the SEC. The Registration Statement was filed on July 20, 2023 and the SEC declared it effective on August 14, 2023.

 

With the effectiveness of the Registration Statement, the Company now 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 equal less than ten thousand dollars ($10,000) or greater than one million dollars ($1,000,000). 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 4.99% 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). Following an up-list to the NASDAQ or equivalent national exchange, the price of each put share shall be equal to ninety percent (90%) of the Market Price, subject to a floor price of $1.00 per share. Puts may be delivered by the Company to GHS until the earlier of twenty-four (24) months after the effectiveness of the Registration Statement or the date on which GHS has purchased an aggregate of $10,000,000 worth of Common Stock under the terms of the Equity Financing Agreement.

 

30

 

 

In the three months ended September 30, 2023, the Company sold 31,808,246 shares of common stock at a net amount of approximately $566,000, at share price of $0.02 related to the Equity Financing Agreement.

 

GHS 2023 Purchase Agreement

 

On May 9, 2023, the Company entered into a purchase agreement (the “GHS 2023 Purchase Agreement”) with GHS pursuant which the Company may require GHS to purchase a maximum of up to 45,923,929 shares of the Company’s common stock (“GHS Purchase Shares”) based on a total aggregate purchase price of up to $6,000,000 over a one-year term that ends on May 9, 2024. The Company intends to use the net proceeds from this offering for working capital and general corporate purposes.

 

The GHS 2023 Purchase Agreement provides that, upon the terms and subject to the conditions and limitations set forth in the agreement, the Company has the right from time to time during the term of the agreement, in its sole discretion, to deliver to GHS a purchase notice (a “Purchase Notice”) directing GHS to purchase (each, a “GHS Purchase”) a specified number of GHS Purchase Shares. A GHS Purchase will be made in a minimum amount of $10,000 and up to a maximum of $1,500,000 and provided that, the purchase amount for any purchase will not exceed 200% of the average of the daily trading dollar volume of the Company’s common stock during the 10 business days preceding the purchase date. Notwithstanding the foregoing dollar limitations, the Company and GHS may, from time to time, mutually agree (in writing) to waive the aforementioned limitations for a relevant Purchase Notice, which waiver, for the avoidance of doubt, shall not exceed the 4.99% beneficial ownership limitation contained in the GHS 2023 Purchase Agreement. The “Purchase Price” means, with respect to a purchase made pursuant to the GHS 2023 Purchase Agreement, 90% of the lowest VWAP (as defined in the GHS 2023 Purchase Agreement) during the Valuation Period (the ten (10) consecutive business days immediately preceding, but not including, the applicable purchase date). The Company shall deliver a number of GHS Purchase Shares equal to 112.5% of the aggregate purchase amount for such GHS Purchase divided by the Purchase Price per share for such GHS Purchase, against payment by GHS to the Company of the purchase amount with respect to such Purchase (less documented deposit and clearing fees, if any), as full payment for such GHS Purchase Shares via wire transfer of immediately available funds.

 

If there are any default events, as set forth in the GHS 2023 Purchase Agreement, has occurred and is continuing, the Company shall not deliver to GHS any Purchase Notice.

 

Further, pursuant to the terms of the GHS 2023 Purchase Agreement, from May 9, 2023 until the date that is the later of (i) the closing of the transactions whereby Yotta Merger Sub, Inc. will merge with and into the Company, with the Company as the surviving company (the “Merger”); and (ii) the 12 month anniversary of the initial closing pursuant to the Section 2(a) of GHS Purchase Agreement, upon any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), GHS shall have the right to participate in any financing, up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing. Following the Merger, the Participation Maximum shall be 50% of the Subsequent Financing.

 

In the three months ended June 30, 2023, the Company sold 28,205,605 shares of common stock at a net amount of approximately $923,000, at share prices ranging from $0.03 to $0.04 related to the GHS 2023 Purchase Agreement.

 

January 2023 Note

 

On January 20, 2023, the Company entered into a secured promissory note (“January 2023 Note”) with an investor (the “Investor”). The January 2023 Note is in the aggregate principal amount of $631,968. The Note has an interest rate of 10% per annum, with a maturity date nine months from the issuance date of the Note. The Note carried an original issue discount totaling $56,868, whereby the purchase price is $575,100. All payments made by the Company under the terms in the note, including upon repayment of this Note at maturity, shall be subject to an exit fee of 15% of the portion of the outstanding balance being paid. The cash was not transferred to the Company’s bank account, but instead to the merger entity, Yotta, for a contribution to a required extension fee for the business combination. On November 20, 2023, the maturity date was extended to June 30, 2024.

 

31

 

 

April 2023 Promissory Note

 

On April 21, 2023, the Company entered into a $60,000 promissory note with Yotta Investment LLC (“Yotta”), with no interest to accrue on the principal balance. The promissory note is to be settled on the date of closing of the business combination contemplated by the Merger Agreement with Yotta (“Merger Agreement”). Upon the occurrence of an event of default, including the termination of the Merger Agreement, the unpaid principal balance of this note, and all other sums payable with regard to this note, shall automatically and immediately become due and payable, in all cases without any action on the part of the Company. The Merger Agreement was terminated, and management believes the promissory note will be settled in the Breakup Fee.

 

May 2023 Promissory Note

 

On May 17, 2023, the Company entered into an additional $60,000 promissory note with Yotta, with no interest to accrue on the principal balance. The promissory note is to be settled on the date of closing of the business combination contemplated by the Merger Agreement with Yotta. Upon the occurrence of an event of default, including the termination of the Merger Agreement, the unpaid principal balance of this note, and all other sums payable with regard to this note, shall automatically and immediately become due and payable, in all cases without any action on the part of the Company. The Merger Agreement was terminated, and management believes the promissory note will be settled in the Breakup Fee.

 

Secured Promissory Note

 

On August 17, 2022, Streeterville purchased from us the August Note. The August Note has an annual interest rate of 12% and was to mature nine months from the effective date. The August Note carried an original issue discount (“OID”) totaling $433,333 and a transaction expense amount of $10,000, both of which are included in its principal balance. At issuance the Company received $1.1 million, with $3.9 million put into escrow to be held until certain terms are met, which includes $3.4 million upon the listing of the NaturalShrimp Common Stock on the New York Stock Exchange (“NYSE”) or Nasdaq. The August Note also provided that if the Company did not effect the listing of the NaturalShrimp Common Stock by November 15, 2022, the then-current outstanding balance on the August Note increased by 10%, and that following such listing, while the August Note was still outstanding, 10 days after the Company sold any shares of NaturalShrimp Common Stock or NaturalShrimp Preferred Stock, it would have been required to make a mandatory prepayment on the August Note equal to the greater of $3.0 million or 33% of the gross proceeds of such equity sale. The August Note is secured by all of the assets of the Company. All payments made by the Company on the note, including upon repayment at maturity, is subject to an exit fee of 15% of the portion of the outstanding balance being paid.

 

In conjunction with the Merger Agreement, the Company entered into a Restructuring Agreement with respect to the August Note through which the August Note was amended and restated in its entirety. The Restructuring Agreement included key modifications, in which (i) the uplist terms were removed, (ii) in the event that the Closing does not occur on or before December 31, 2022, the then-current outstanding balance will be increased by 2% and will increase by 2% every 30 days thereafter until the Closing or termination of the Merger Agreement, and (iii) the outstanding balance of the August Note may be increased by 5% to 15% upon the occurrence of an event of default or failure to obtain Streeterville’s consent or notify Streeterville for certain major equity related transactions. On November 20, 2023, the maturity date was extended to June 30, 2024.

 

We analyzed the restructured August Note under ASC 470-50 as to whether the change in terms qualified as a modification or an extinguishment of the note. The changes in terms were considered an extinguishment as the present value of the cash flows under the terms of the new debt instrument was evaluated to be a substantial change, as over 10% difference from the present value of the remaining cash flows under the terms of the original instrument. As such, with the removal of the original note and its debt discount and accrued interest as compared to the restructured note with a fair value of approximately $1.9 million, there was a loss in extinguishment of approximately $157,000. As a result of the extinguishment and at the Company’s election of the fair value option under ASC 825, the August Note will be accounted for at fair value until it is settled. In accordance with ASC 815- 15-25-1(b), a hybrid instrument that is measured at fair value under ASC 825 fair value option each period with changes in fair value reported in earnings as they occur should not be evaluated for embedded derivatives. Therefore, we did not evaluate the provisions in the August Note as to whether it fell under the guidance of embedded derivatives and was required to be bifurcated. The August Note was revalued as of September 30, 2023 at approximately $2,250,000, with a change in fair value of approximately $(150,000) recognized in the condensed consolidated statement of operations.

 

32

 

 

Promissory Note — related parties

 

On July 10 through July 17, 2023, the Company received $140,000 in proceeds from the issuance of three promissory notes with related parties. The notes bear interest at 10% and have maturity dates one year from the issuance date.

 

On August 10, 2022, the Company entered into a loan agreement for an aggregate of $300,000 with six related parties, which is to be considered priority debt of the Company. As of the date of this report, five of the related parties have entered into promissory notes under the loan agreement for $50,000 each, for a total of cash received of $250,000. The notes bear interest at 10% per annum and are due one year from the date of the note. For the three and six months ended September 30, 2023, the interest expense for the related party promissory notes was $9,301 and $15,551 and $3,522 and $3,522, respectively. As of September 30, 2023 and March 31, 2023, the accrued interest related to the related party promissory notes was approximately $36,000 and $22,000, respectively.

 

Convertible Note

 

We issued the Convertible Note in December 2021. The Convertible Note had an annual interest rate of 12% and matured on December 15, 2023. The Convertible Note carried an OID totaling $1.3 million and a transaction expense amount of $20,000, both of which were included in the principal balance of the Convertible Note. The Convertible Note had $2.0 million in debt issuance costs, including fees paid in cash of $1.1 million and warrants to purchase 3,000,000 shares of the Company’s common stock that we issued to the placement agents with a fair value of $940,000. The warrant fair value was estimated using the Black Scholes Model, with the following inputs: the price of the common stock of $0.32; a risk-free interest rate of 1.19%; the expected volatility of the common stock of 209.9%; the estimated remaining term; and a dividend rate of 0%. We classified the warrants as a liability, as it was not known if there would be sufficient authorized shares to be issued upon settlement, based on the conversion terms of the convertible debt.

 

The Company was required to obtain an effective registration statement or a supplement to any existing registration statement or prospectus with the SEC registering at least $15.0 million in shares of NaturalShrimp common stock for Streeterville’s benefit such that any redemption using shares of NaturalShrimp common stock could be done using registered shares of NaturalShrimp common stock. Additionally, the Company was required, as soon as reasonably possible following the issuance of the Convertible Note, to cause the Company’s common stock to be listed for trading on either NYSE or Nasdaq. In the event the Company did not effectuate such listing by March 1, 2022, the then-current outstanding balance would be increased by 10%. On February 7, 2022, the Company and Streeterville entered into an amendment to the SPA, which extended the date by which the Uplist must be completed to April 15, 2022. In consideration of the grant of the extension an extension fee of $249,079 was added to the principal balance, which we recognized as a financing cost. Subsequently, the date by which the listing had to be completed was further extended to June 15, 2022, and again to November 15, 2022, with no additional fee included. The Company must make a one-time payment to Streeterville equal to 15% of the gross proceeds that the Company receives from the offering expected to be effected in connection with the listing (whether from the sale of shares of its common stock and / or preferred stock) within 10 days of receiving such amount. In the event that the Company does not make this payment, the then-current outstanding balance will be increased by 10%. The Convertible Note also contains certain negative covenants and events of default. Upon the occurrence of an event of default, at its option and sole discretion, Streeterville may