Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
☑
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended December 31, 2016
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
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74-3262176
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(State
or other Jurisdiction of Incorporation or
Organization)
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(I.R.S.
Employer Identification No.)
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15150 Preston Rd, Suite 300
Dallas, TX
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75248
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(888) 791-9474
(Registrant’s
telephone number, including area code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
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
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 and post such files). Yes ☐ No
☑
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller
reporting company
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☑
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(Do not
check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑.
As of
February 13, 2017, there were 90,482,583 shares of the
registrant’s common stock outstanding.
NATURALSHRIMP INCORPORATED
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2016
TABLE OF CONTENTS
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Page
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PART I. FINANCIAL INFORMATION
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ITEM
1
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Financial
Statements
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3
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Condensed
consolidated balance sheets as December 31, 2016 (unaudited) and
March 31, 2016
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3
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Condensed
consolidated statements of operations for the three and nine months
ended December 31, 2016 and 2015 (unaudited)
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4
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Condensed
consolidated statements of cash flows for the nine months ended
December 31, 2016 and 2015 (unaudited)
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5
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Notes
to consolidated financial statements (unaudited)
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6
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ITEM
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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12
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ITEM
3.
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Quantitative
and Qualitative Disclosures about Market Risk
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16
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ITEM
4.
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Controls
and Procedures
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17
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PART II. OTHER INFORMATION
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ITEM
1.
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Legal
Proceedings
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18
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ITEM
1A.
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Risk
Factors
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18
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ITEM
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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18
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ITEM
3.
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Defaults
Upon Senior Securities
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18
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ITEM
4.
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Mine
Safety Disclosures
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18
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ITEM
5.
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Other
Information
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18
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ITEM
6.
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Exhibits
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19
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SIGNATURES
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20
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2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATURALSHRIMP INCORPORATED
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
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December 31, 2016
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March 31, 2016
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ASSETS
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Current
assets
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Cash
and cash equivalents
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$89,663
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$6,158
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Prepaid
expenses
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4,000
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-
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Total
current assets
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93,663
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6,158
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Fixed
assets
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Land
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202,293
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202,293
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Buildings
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1,328,161
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1,328,161
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Machinery
and equipment
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929,214
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929,214
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Autos
and trucks
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14,063
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14,063
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Furniture
and fixtures
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22,060
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22,060
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Accumulated
depreciation
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(1,203,644)
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(1,161,144)
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Fixed
assets, net
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1,292,147
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1,334,647
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Other
assets
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Deposits
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21,500
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11,500
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Total
other assets
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21,500
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11,500
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Total
assets
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$1,407,310
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$1,352,305
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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Current
liabilities
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Short-term
note and Lines of credit
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$828,090
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$837,469
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Accounts
payable
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520,342
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568,806
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Accrued
interest - related parties
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427,481
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320,822
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Other
accrued expenses
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304,479
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154,558
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Notes
payable - related parties
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1,272,162
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654,906
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Notes
payable in default - related party
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2,305,953
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2,305,953
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Total
current liabilities
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5,658,507
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4,842,514
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Total
liabilities
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5,658,507
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4,842,514
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Commitments
and contingencies (Note 11)
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Stockholders'
deficit
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Common
stock, $0.0001 par value, 300,000,000 shares authorized 89,482,583
and 89,399,012 shares issued and outstanding at December 31, 2016
and March 31, 2016, respectively
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8,948
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8,940
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Additional
paid in capital
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25,377,685
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25,342,943
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Accumulated
deficit
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(29,637,830)
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(28,842,092)
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Total
stockholders' deficit
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(4,251,197)
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(3,490,209)
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Total
liabilities and stockholders' deficit
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$1,407,310
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$1,352,305
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The accompanying notes are an integral part of these consolidated
financial statements.
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3
NATURALSHRIMP INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months Ended
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For the Nine Months Ended
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December 31, 2016
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December 31, 2015
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December
31, 2016
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December 31, 2015
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Sales
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$-
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$-
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$-
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$-
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Operating
expenses
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Facility
operations
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16,344
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37,603
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58,674
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151,717
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General
and administrative
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171,345
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241,377
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530,075
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1,168,880
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Depreciation
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21,500
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24,250
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42,500
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65,250
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Loss
on extinguishment of debt
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-
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-
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319,369
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Total
operating expenses
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209,189
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303,230
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631,249
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1,705,216
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Net
operating loss
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(209,189)
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(303,230)
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(631,249)
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(1,705,216)
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Other
income (expense)
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Interest
expense
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(55,822)
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(35,790)
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(164,489)
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(108,464)
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Other
income
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-
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-
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-
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6,530
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Total
other income (expense)
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(55,822)
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(35,790)
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(164,489)
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(101,934)
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Loss
before income taxes
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(265,011)
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(339,020)
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(795,738)
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(1,807,150)
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Income
taxes
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-
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-
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-
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-
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Net
loss
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$(265,011)
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$(339,020)
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$(795,738)
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$(1,807,150)
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EARNINGS
PER SHARE (Basic)
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$(0.00)
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$(0.00)
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$(0.01)
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$(0.02)
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WEIGHTED
AVERAGE SHARES OUTSTANDING (Basic)
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89,424,477
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89,170,979
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89,437,931
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88,376,497
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The accompanying notes are an integral part of these consolidated
financial statements.
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4
NATURALSHRIMP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Nine Months Ended |
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December 31, 2016
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December
31, 2015
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CASH
FLOWS FROM OPERATING ACTIVITIES
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Net
loss
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$(795,738)
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$(1,807,150)
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Adjustments
to reconcile net loss to net cash used in operating
activities
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Stock-based
compensation
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24,750
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49,999
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Depreciation
expense
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42,500
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65,250
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Loss
on extinguishment of debt
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-
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319,369
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Changes
in operating assets and liabilities:
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Prepaid
expenses and other current assets
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(4,000)
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3,203
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Deposits
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(10,000)
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-
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Accounts
payable
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(48,465)
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411,488
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Other
accrued expenses
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149,921
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(87,580)
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Accrued
interest - related parties
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106,659
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60,951
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CASH
USED IN OPERATING ACTIVITIES
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(534,373)
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(984,470)
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CASH
FLOWS FROM INVESTING ACTIVITIES
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Cash
paid for purchase of fixed assets
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-
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(35,980)
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CASH
USED IN INVESTING ACTIVITIES
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-
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(35,980)
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Payment
of related party notes payable
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-
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(5,798)
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Borrowing
on Notes payable related party
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617,257
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-
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Borrowing
on Short-Term Note and Lines of credit
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38,000
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Repayment
of Lines of credit
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(9,379)
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(49,377)
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Proceeds
from sale of stock
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10,000
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-
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Proceeds
from sale of stock - post reverse acquisition
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-
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856,749
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CASH
PROVIDED BY FINANCING ACTIVITIES
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617,878
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839,574
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NET
CHANGE IN CASH
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83,505
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(180,876)
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CASH
AT BEGINNING OF PERIOD
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6,158
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220,874
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CASH
AT END OF PERIOD
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$89,663
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$39,998
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INTEREST
PAID
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$57,830
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$47,513
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Supplemental
Disclosure of Non-Cash Investing and Financing
Activities:
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Common
Stock issued in Settlement of Notes Payable-Related Party
$
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$-
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35,000
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The accompanying notes are an integral part of these consolidated
financial statements.
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5
NATURALSHRIMP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
NaturalShrimp
Incorporated is a global shrimp farming company that has developed
a technology to produce fresh, gourmet-grade shrimp reliably and
economically in an indoor, re-circulating, saltwater facility. Our
eco-friendly, bio-secure design does not rely on ocean water; it
recreates the natural ocean environment allowing for high-density
production which can be replicated anywhere in the
world.
Our
self-contained shrimp aquiculture system allows for the production
of Pacific White (Litopenaeus vannamei, formerly Penaeus vannamei)
shrimp in an ecologically controlled fully contained and
independent production system without the use of antibiotics or
toxic chemicals.
The
Company has developed several proprietary technology assets,
including a knowledge base that allows the production of commercial
quantities of shrimp in a closed system with a computer monitoring
system that automates, monitors and maintains proper levels of
oxygen, salinity and temperature for optimal shrimp
production.
Our
research and development facilities are located outside of San
Antonio, Texas, and we hold a minority interest in a Norwegian
company that owns and operates a similar shrimp production facility
in Medina del Campo, Spain.
On
November 26, 2014, Multiplayer Online Dragon, Inc., a Nevada
corporation (“MYDR”), entered into an Asset Purchase
Agreement (the “Agreement”) with NaturalShrimp
Holdings, Inc. a Delaware corporation (“NSH” or the
“Company”), pursuant to which MYDR was to acquire
substantially all of the assets of NSH which assets consist
primarily of all of the issued and outstanding shares of capital
stock of NaturalShrimp Corporation (“NSC”), a Delaware
corporation, and NaturalShrimp Global, Inc. (“NS
Global”), a Delaware corporation, and certain real property
located outside of San Antonio, Texas (the
“Assets”).
On
January 30, 2015, MYDR consummated the acquisition of the Assets
pursuant to the Agreement. In accordance with the terms of the
Agreement, MYDR effected a 1 for 10 reverse stock split, decreasing
the issued and outstanding shares of our common stock from
97,000,000 to 9,700,000 and MYDR issued 75,520,240 shares of its
common stock to NSH as consideration for the Assets. As a result of
the transaction, NSH acquired 88.62% of MYDR’s issued and
outstanding shares of common stock, NSC and NS Global became
MYDR’s wholly-owned subsidiaries, and MYDR changed its
principal business to a global shrimp farming company. All per
share amounts reflected hereafter give effect to the 1-for-10
reverse split.
As a
result of the controlling financial interest of the former
stockholders of NSH, for financial statement reporting purposes,
the asset acquisition has been treated as a reverse acquisition
with NSH deemed the accounting acquirer and the Company deemed the
accounting acquiree under the acquisition method of accounting in
accordance with ASC 805-10-55 of the Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC). The reverse
acquisition is deemed a capital transaction and the net assets of
NSH (the accounting acquirer) are carried forward to the Company
(the legal acquirer and the reporting entity) at their carrying
value before the acquisition. The acquisition process utilizes the
capital structure of the Company and the assets and liabilities of
NSH which are recorded at their historical cost. The equity of the
Company is the historical equity of NSH.
In
connection with MYDR’s receipt of approval from the Financial
Industry Regulatory Authority (“FINRA”), effective
March 3, 2015, MYDR amended its Articles of Incorporation to change
its name to “NaturalShrimp Incorporated” (the
“Company”).
The
Company has two wholly owned subsidiaries including NaturalShrimp
Corporation and NaturalShrimp Global, Inc.
As used
in this report and unless otherwise indicated, the term
“Company” refers to NaturalShrimp Incorporated and the
Company’s wholly-owned subsidiaries
(“Subsidiaries”). Unless otherwise specified, all
dollar amounts are expressed in United States dollars.
6
Basis of Presentation
The
condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with U.S. generally accepted
accounting principles have been omitted. However, in the opinion of
management, all adjustments (which include only normal recurring
adjustments, unless otherwise indicated) necessary to present
fairly the financial position and results of operations for the
periods presented have been made. The results for interim periods
are not necessarily indicative of trends or of results to be
expected for the full year. These financial statements should be
read in conjunction with the financial statements of the Company
for the year ended March 31, 2016 (including the notes thereto) set
forth on Form 10-K. The Company uses as guidance Accounting
Standard Codification (ASC) as established by the Financial
Accounting Standards Board (FASB).
Significant Accounting Policies
For
reference to a complete list of significant accounting policies,
these financial statements should be read in conjunction with the
financial statements of the Company for the year ended March 31,
2016 (including the notes thereto) set forth on Form
10-K.
Impairment of Long-Lived Assets and 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.
Recent Accounting Pronouncements
During
the period ended December 31, 2016 and through February 13, 2017,
there were several new accounting pronouncements issued by the
Financial Accounting Standards Board. Each of these pronouncements,
as applicable, has been or will be adopted by the Company.
Management does not believe the adoption of any of these accounting
pronouncements has had or will have a material impact on the
Company’s consolidated financial
statements.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY
PLANS
The
accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally
accepted in the United States of America, assuming the Company will
continue as a going concern, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business. For the nine months ended December 31, 2016, the Company
incurred losses from operations of $795,738. As of December 31,
2016, the Company had an accumulated deficit of $29,637,830 and a
working capital deficit of $5,564,844. These matters raise
substantial doubt about the ability to continue as a going concern.
The Company’s ability to continue as a going concern is
dependent on its ability to raise the required additional capital
or debt financing to meet short and long-term operating
requirements. During the nine months ended December 31, 2016, the
Company received net cash proceeds of $617,257 from the additional
issuance of debt from a related party. Management believes that
private placements of equity capital and/or additional debt
financing 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 or convertible debt
securities, the percentage ownership of our current shareholders
could be reduced, and such securities might have rights,
preferences or privileges senior to the Company’s common
stock. Additional financing may not be available upon acceptable
terms, or at all. If adequate funds are not available or are not
available on acceptable terms, the Company may not be able to take
advantage of prospective business endeavors or opportunities, which
could significantly and materially restrict our operations. The
Company is continuing to pursue external financing alternatives to
improve its working capital position. If the Company is unable to
obtain the necessary capital, the Company may have to cease
operations. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty. These matters raise substantial doubt about the
Company’s ability to continue as a going
concern.
7
NOTE 3 – BUILDINGS, MACHINERY AND EQUIPMENT
Equipment
is carried at historical value at the date of the reverse
acquisition or cost and is depreciated over the estimated useful
lives of the related assets. Depreciation on buildings is computed
using the straight-line method, while depreciation on all other
fixed assets is computed using the Modified Accelerated Cost
Recovery System (MACRS) method. MACRS does not materially differ
from GAAP. Estimated useful lives are as follows:
Autos
and Trucks
|
5
years
|
Buildings
|
27.5
– 39 years
|
Other
Depreciable Property
|
5
– 10 years
|
Furniture
and Fixtures
|
3
– 10 years
|
Maintenance
and repairs are charged to expense as incurred. At the time of
retirement or other disposition of equipment, the cost and
accumulated depreciation will be removed from the accounts and the
resulting gain or loss, if any, will be reflected in
operations.
The
Company is installing advanced technology it is process. Management
has analyzed the current equipment and believes the building and
equipment will integrate with the advanced technology and therefore
no impairment is necessary at this time.
NOTE 4 – SHORT-TERM DEBT AND LINES OF CREDIT
On
November 3, 2015 the Company entered into a short-term note
agreement with Community National Bank for a total value of
$50,000. As of March 31, 2016, the Company has drawn $50,000 on
this short-term note. The short-term note has a stated interest
rate of 5.25%, maturity date of November 3, 2016 and an initial
interest only payment on February 3, 2016. The short-term note is
guaranteed by two officers and directors. The balance of the line
of credit at December 31, 2016 and March 31, 2016 was $50,000. The
Company is currently working on an extension to this
note.
The
Company has a working capital line of credit with Community
National Bank. On August 28, 2013, the Company renewed the line of
credit for $30,000. The line of credit bears an interest rate of
7.3% and is payable quarterly. The line of credit matured on
February 28, 2014 and was renewed by the Company with a maturity
date of June 10, 2017. It is secured by various assets of the
Company’s subsidiaries, and is guaranteed by two directors of
the Company. The balance of the line of credit at December 31, 2016
and March 31, 2016 was $5,813 and $14,129,
respectively.
The
Company also has a working capital line of credit with Extraco
Bank. On March 12, 2015, the Company renewed the line of credit for
$475,000. The line of credit bears an interest rate of 4.0% that is
compounded monthly on unpaid balances and is payable monthly. The
line of credit matures on April 30, 2017, and is secured by
certificates of deposit and letters of credit owned by directors
and shareholders of the Company. The balance of the line of credit
is $473,029 and $473,029 at December 31, 2016 and March 31, 2016,
respectively.
The
Company has additional lines of credit with Extraco Bank for
$100,000 and $200,000, which were renewed on January 19, 2016 and
April 30, 2016, with maturity dates of January 19, 2017 and April
30, 2017, respectively. The lines of credit bear an interest rate
of 4.5% that is compounded monthly on unpaid balances and is
payable monthly. It is secured by certificates of deposit and
letters of credit owned by directors and shareholders of the
Company. The balance of the lines of credit was $278,470 and
$278,470 at December 31, 2016 and March 31, 2016,
respectively.
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 25.24% as of December
31, 2016. The line of credit is unsecured. The balance of the line
of credit was $9,580 and $9,580 at December 31, 2016 and March 31,
2016, respectively.
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 13.98% as of December 31, 2016.
The line of credit is secured by assets of the Company’s
subsidiaries. The balance of the line of credit is $11,197 and
$12,261 at December 31, 2016 and March 31, 2016,
respectively.
NOTE 5 – STOCKHOLDERS’ DEFICIT
Common Stock
8
On
August 1, 2016, the Company reached an agreement with a
professional advisor in which the Company issued 55,000 shares of
common stock with a fair value of $24,750. This amount was recorded
as stock compensation cost for the period ended December 31,
2016.
On
October 10, 2016, the Company entered into a form of Subscription
Agreement for $0.35 per common share and issued 28,571 common
shares.
During
the year ended March 31, 2016, the Company reached an agreement
with certain vendors in which the Company issued 199,103 shares of
common stock in full payment of debt of $35,000, accrued interest
of $23,927 and recorded a loss on extinguishment of debt of
$319,369.
On
August 7, 2015, the Company reached an agreement with a
professional advisor in which the Company issued 28,571 shares of
common stock with a fair value of $49,999. This amount was recorded
as stock compensation cost for the year ended March 31,
2016.
Between
May 7, 2015 and January 5, 2016, NaturalShrimp Incorporated entered
into a form of Subscription Agreement (the “Agreement”)
and consummated initial closings of a private placement offering of
the Company’s common stock. As of March 31, 2016 an aggregate
of 2,393,956 shares of common stock had been sold to investors
pursuant to the Agreement at a price of $0.35 per
share.
NOTE 6 – OPTIONS AND WARRANTS
The
Company has not granted any options or warrants since
inception.
NOTE 7 – RELATED PARTY TRANSACTIONS
Notes Payable – Related Parties
NaturalShrimp Holdings, Inc.
On
January 1, 2016 the Company entered into a notes payable agreement
with NaturalShrimp Holdings, Inc., a shareholder. Between January
16, 2016 and November 14, 2016 the Company borrowed $736,111 under
this agreement. The note payable has no set monthly payment or
maturity date with a stated interest rate of 2% and accrued
interest of $4,562 at December 31, 2016. The balance of the note at
December 31, 2016 and March 31, 2016 was $736,111 and $134,750,
respectively and was classified as a current liability on the
consolidated balance sheets.
Baptist Community Services (BCS)
Pursuant
to an assignment agreement dated March 26, 2009, Amarillo National
Bank sold and transferred a note to Baptist Community Services
(BCS), a shareholder of the Company, in the amount of $2,004,820.
The interest rate under the terms of the agreement is 2.25% and is
payable monthly. The note is collateralized by all inventories,
accounts, equipment, and all general intangibles related to the
Company’s shrimp production facility in La Coste, Texas.
Payment of the note is also guaranteed by High Plains Christian
Ministries Foundation, a shareholder of the Company. The balance of
the note at December 31, 2016 and March 31, 2016 was $2,004,820 and
classified as a current liability on the consolidated balance
sheets.
Effective
December 31, 2008, the Company entered into a subordinated
promissory note agreement with BCS for $70,000 (BCS subordinated
note) to provide working capital to pay accrued interest due under
the BCS note and other operating expenses. On April 7, 2009, the
BCS subordinated note was increased to $125,000 to provide
additional working capital for the Company. The balance of the BCS
subordinated note at December 31, 2016 and March 31, 2015 was
$301,133 and $301,133, respectively, and classified as a current
liability on the consolidated balance sheets. During the nine
months ended December 31, 2016 and 2015, the Company incurred
$56,416 and $56,416 in interest expense on the subordinated note.
At December 31, 2016 and March 31, 2016, accrued interest payable
was $233,398 and $176,982, respectively.
On
January 25, 2010, the Company received notice from BCS notifying it
that the Company was in default of its obligations to BCS and that
both the BCS note and the BCS subordinated note, as well as all
accrued interest, fees and expenses, were payable in full. Pursuant
to a forbearance agreement dated January 25, 2010, BCS agreed to
forbear from exercising any remedies available under the notes
until January 25, 2011 or when the Company fails to promptly
perform any of its covenants or obligation under the forbearance
agreement, whichever occurs first. In 2015, the parties executed a
fifth forbearance agreement which extended the forbearance terms to
December 31, 2016, see Note 12 - Subsequent Events.
9
Shareholder Notes
The
Company has entered into several working capital notes payable to
multiple shareholders and Bill Williams, an officer, a director,
and a shareholder of the Company, for a total of $486,500. These
notes had stock issued in lieu of interest and have no set monthly
payment or maturity date. The balance of these notes at December
31, 2016 and March 31, 2016 was $426,404 and $426,404,
respectively, and is classified as a current liability on the
consolidated balance sheets. At December 31, 2016 and March 31,
2016, accrued interest payable was $164,280 and $142,296,
respectively.
Shareholders
In
2009, the Company entered into a note payable to Randall Steele, a
shareholder of the Company, for $50,000. The note bears interest at
6.0% and is payable upon maturity on January 20, 2011. In addition,
the Company issued 100,000 shares of common stock for
consideration. The shares were valued at the date of issuance at
fair market value. The value assigned to the shares of $50,000 was
recorded as increase in common stock and additional paid-in capital
and was limited to the value of the note. The assignment of a value
to the shares resulted in a financing fee being recorded for the
same amount. The note is unsecured. The balance of the note at
December 31, 2016 and March 31, 2016 was $50,000, respectively, and
is classified as a current liability on the consolidated balance
sheets. Interest expense on the note was $2,250 and $2,258 during
the nine months ended December 31, 2016 and 2015, respectively. At
December 31, 2016 and March 31, 2016, accrued interest payable was
$ 1,533 and $1,543 respectively.
Beginning
in 2010, the Company started entering into several working capital
notes payable with various shareholders of the Company for a total
of $290,000 and bearing interest at 8%. The balance of these notes
at December 31, 2016 and March 31, 2016 was $30,000, and is
classified as a current liability on the consolidated balance
sheets. At December 31, 2016 and March 31, 2016, accrued interest
payable was $1,100 and $800, respectively.
NOTE 8 – FEDERAL INCOME TAX
The
Company accounts for income taxes under ASC 740-10, which provides
for an asset and liability approach of accounting for income taxes.
Under this approach, deferred tax assets and liabilities are
recognized based on anticipated future tax consequences, using
currently enacted tax laws, attributed to temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts calculated for income
tax purposes.
For the
years ended March 31, 2016 and 2015, the Company incurred net
operating losses and, accordingly, no provision for income taxes
has been recorded. In addition, no benefit for income
taxes has been recorded due to the uncertainty of the realization
of any deferred tax assets.
Based
on the available objective evidence, including the Company’s
history of losses, management believes it is more likely than not
that any net deferred tax assets will not be fully realizable.
Accordingly, the Company provided for a full valuation allowance
against its net deferred tax assets at December 31, 2016 and March
31, 2016, respectively.
In
accordance with ASC 740, the Company has evaluated its tax
positions and determined that there are no uncertain tax
positions.
NOTE 9 – CONCENTRATION OF CREDIT RISK
The
Company maintains cash balances at one financial institution.
Accounts at this institution are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $250,000. As of December 31,
2016 and March 31, 2016, the Company’s cash balance did not
exceed FDIC coverage.
NOTE 10 – REVERSE ACQUISITION
On
November 26, 2014, Multiplayer Online Dragon, Inc., a Nevada
corporation (“MYDR”), entered into an Asset Purchase
Agreement (the “Agreement”) with NaturalShrimp
Holdings, Inc. a Delaware corporation (“NSH”), pursuant
to which MYDR was to acquire substantially all of the assets of NSH
which assets consist primarily of all of the issued and outstanding
shares of capital stock of NaturalShrimp Corporation
(“NSC”), a Delaware corporation, and NaturalShrimp
Global, Inc. (“NS Global”), a Delaware corporation, and
certain real property located outside of San Antonio, Texas (the
“Assets”).
10
On
January 30, 2015, MYDR consummated the acquisition of the Assets
pursuant to the Agreement. In accordance with the terms of the
Agreement, the MYDR issued 75,520,240 shares of its common stock to
NSH as consideration for the Assets. As a result of the
transaction, NSH acquired 88.62% of MYDR’s issued and
outstanding shares of common stock, NSC and NS Global became
MYDR’s wholly-owned subsidiaries, and MYDR changed its
principal business to a global shrimp farming company.
There
were no material relationships between the MYDR and NSH or between
the Company’s or NSH’s respective affiliates,
directors, or officers or associates thereof, other than in respect
of the Agreement. Effective March 3, 2015, MYDR amended its
Articles of Incorporation to change its name to
“NaturalShrimp Incorporated”.
The
Company evaluated this transactions using ASC 805-40
“Business Combinations
Reverse Acquisitions”. Due to the change in control of
the Company, this transaction was accounted for as a reverse
acquisition in accordance with ASC No. 805-40 whereby NSH was
considered the accounting acquirer.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Executive Employment Agreements – Bill Williams and Gerald
Easterling
On
April 1, 2015, the Company entered into employment agreements with
each of Bill G. Williams, as the Company’s Chief Executive
Officer, and Gerald Easterling as the Company’s President,
effective as of April 1, 2015 (the “Employment
Agreements”).
The
Employment Agreements are each terminable at will and each provide
for a base annual salary of $96,000. In addition, the Employment
Agreements each provide that the employee is entitled, at the sole
and absolute discretion of the Company’s Board of Directors,
to receive performance bonuses. Each employee will also be entitled
to certain benefits including health insurance and monthly
allowances for cell phone and automobile expenses.
Each
Employment Agreement provides that in the event employee is
terminated without cause or resigns for good reason (each as
defined in their Employment Agreements), the employee will receive,
as severance and 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.
Each
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.
NOTE 12 – SUBSEQUENT EVENTS
On
January 10, 2017, NaturalShimp Corporation, a wholly-owned
subsidiary of NaturalShrimp entered into a promissory note with
Community National Bank for $245,000, at an annual interest rate of
5% and a maturity date of January 10, 2020 (the “CNB
Note”). The CNB Note is secured by certain real property
owned by the Company in LaCoste, Texas, and is also personally
guaranteed by the Company’s President, as well as certain
shareholders of the Company. As consideration for their personal
guarantees, the Company agreed to issue to these shareholders an
aggregate of 600,000 shares of our common stock.
Concurrent
with the closing of the CNB Note, the Company agreed to pay Baptist
Community Services of Amarillo, Texas (“BCS”) $200,000
of the proceeds from the CNB Note to payoff the Company’s
existing notes payable, plus accrued interest, owing to BCS
totaling approximately $2,540,000 (the “BCS Notes”).
Subsequent to the date of this filing, the Company expects to
execute mutual release agreements with BCS memorializing the payoff
of the BCS Notes and to further release the Company from any
further obligations under the BCS Notes.
On
January 10, 2017, the Company issued 1,000,000 shares to a
consultant for services to be rendered over six
months.
11
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This
report contains forward-looking statements. 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. Forward-looking statements made in this
quarterly report on Form 10-Q include statements about
●
our ability to
successfully commercialize our 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; and
●
the retention and
availability of key personnel.
These
statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors” set forth in our Annual
Report on Form 10-K for the year ended March 31, 2016, and filed on
July 14, 2016, any of which may cause the Company’s or our
industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by these forward-looking statements. These risks include,
by way of example and not in limitation:
●
general economic
and business conditions;
●
substantial doubt
about our ability to continue as a going concern;
●
our need to raise
additional funds in the future;
●
our ability to
successfully recruit and retain qualified personnel in order to
continue our operations;
●
our ability to
successfully implement our business plan;
●
our ability to
successfully acquire, develop or commercialize new products and
equipment;
●
the commercial
success of our products;
●
intellectual
property claims brought by third parties;
●
the impact of any
industry regulation; and
●
other factors
discussed under the section entitled “Risk Factors” set
forth in our Annual Report on Form 10-K for the year ended March
31, 2016.
Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Except as required by applicable
law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform
these statements to actual results.
Readers are urged to carefully review and consider the various
disclosures made by us in this report and in our other reports
filed with the Securities and Exchange Commission. The following
Management’s Discussion and Analysis of Financial Condition
and Results of Operations of the Company should be read in
conjunction with the Condensed Consolidated Financial Statements
and notes related thereto included in this Quarterly Report on Form
10-Q. We undertake no obligation to update or revise
forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes in the future
operating results over time except as required by law. We believe
that our assumptions are based upon reasonable data derived from
and known about our business and operations. No assurances are made
that actual results of operations or the results of our future
activities will not differ materially from our
assumptions.
As used
in this Quarterly Report on Form 10-Q and unless otherwise
indicated, the terms “we,” “us,”
“our,” or the “Company” refer to
NaturalShrimp Incorporated, inclusive of our wholly-owned
subsidiaries, NaturalShrimp Corporation, NaturalShrimp Global, Inc.
and Natural Aquatic Systems, Inc. Unless otherwise specified, all
dollar amounts are expressed in United States dollars.
12
Corporate Overview
We were
incorporated in the State of Nevada on July 3, 2008 under the name
“Multiplayer Online Dragon, Inc.” Effective November 5,
2010, we effected an 8 for 1 forward stock split, increasing the
issued and outstanding shares of our common stock from 12,000,000
shares to 96,000,000 shares. On October 29, 2014, we effected a 1
for 10 reverse stock split, decreasing the issued and outstanding
shares of our common stock from 97,000,000 to
9,700,000.
On
November 26, 2014, we entered into an Asset Purchase Agreement (the
“Agreement”) with NaturalShrimp Holdings, Inc. a
Delaware corporation (“NSH”), pursuant to which we
agreed to acquire substantially all of the assets of NSH which
assets consisted primarily of all of the issued and outstanding
shares of capital stock of NaturalShrimp Corporation
(“NSC”), a Delaware corporation, and NaturalShrimp
Global, Inc. (“NS Global”), a Delaware corporation, and
certain real property located outside of San Antonio, Texas (the
“Assets”).
On
January 30, 2015, we consummated the acquisition of the Assets
pursuant to the Agreement. In accordance with the terms of the
Agreement, we issued 75,520,240 shares of our common stock to NSH
as consideration for the Assets. As a result of the transaction,
NSH acquired 88.62% of our issued and outstanding shares of common
stock, NSC and NS Global became our wholly-owned subsidiaries, and
we changed our principal business to a global shrimp farming
company.
In
connection with our receipt of approval from the Financial Industry
Regulatory Authority (“FINRA”), effective March 3,
2015, we amended our Articles of Incorporation to change our name
to “NaturalShrimp Incorporated”.
We are
a biotechnology company and have developed a proprietary technology
that allows us to grow Pacific White shrimp (Litopenaeus vannamei,
formerly Penaeus vannamei) in an ecologically controlled,
high-density, low-cost environment, and in fully contained and
independent production facilities. Our system uses technology which
allows us to produce a naturally-grown shrimp “crop”
weekly, and accomplishes this without the use of antibiotics or
toxic chemicals. We have developed several proprietary technology
assets, including a knowledge base that allows us to produce
commercial quantities of shrimp in a closed system with a computer
monitoring system that automates, monitors and maintains proper
levels of oxygen, salinity and temperature for optimal shrimp
production. Our initial production facility is located outside of
San Antonio, Texas.
NS
Global, a wholly owned subsidiary of NaturalShrimp Incorporated.,
owns 10% of NaturalShrimp International A.S. in Europe. Our
European-based partner, NaturalShrimp International A.S., Oslo,
Norway is responsible for the construction cost of their facility
and initial operating capital.
The
first facility built in Spain for NaturalShrimp International A.S.
is GambaNatural de España, S.L. The land for the first
facility was purchased in Medina del Campo, Spain and construction
of the 75,000 sq. ft. facility and was completed in 2015. Medina
del Campo is approximately seventy-five miles northwest of Madrid,
Spain.
Since
the middle of 2015, we have continued to develop our indoor shrimp
production system. In addition, during 2016, we have engaged in
additional engineering projects with third parties to further
enhance our indoor production capabilities. We are also working on
expanding our intellectual property with respect to such additional
enhancements. At this time, we don’t expect commercial sales
until late calendar 2017, which would be limited. When production
does commence, wholesale prices for the shrimp produced by the
Company are expected to be between $9.00 to $12.00 per pound F.O.B,
based on preliminary estimates.
On
October 16, 2015, we formed Natural Aquatic Systems, Inc.
(“NAS”). The purpose of the NAS is to formalize the
business relationship between NaturalShrimp Incorporated and
F&T Water Solutions LLC for the joint development of certain
water technologies. The technologies shall include, but are not
limited to, any and all inventions, patents, intellectual property
and know-how dealing with enclosed aquatic production systems
worldwide. This includes construction, operation, and management of
enclosed aquatic production, other than shrimp, facilities
throughout the world, co-developed by both parties at our facility
located outside of La Coste, Texas.
13
Results of Operations
Comparison of the Nine months Ended December 31, 2016 to the Nine
months Ended December 31, 2015
Revenue
We have
not earned any significant revenues since our inception and we do
not anticipate earning revenues in the near future.
Expenses
Our
expenses for the nine months ended December 31, 2016 are summarized
as follows in comparison to our expenses for the nine months ended
December 31, 2015:
|
Nine months
Ended
December
31,
|
|
|
2016
|
2015
|
Salaries and
related expenses
|
$279,501
|
$298,983
|
Rent
|
8,803
|
10,378
|
Professional
fees
|
115,664
|
402,866
|
Other general and
administrative expenses
|
126,107
|
456,653
|
Facility
operations
|
58,674
|
151,717
|
Depreciation
|
42,500
|
65,250
|
Loss on
Extinguishment of debt
|
|
319,369
|
Total
|
$631,249
|
$1,705,216
|
Operating
expenses for the nine months ended December 31, 2016 were $631,249,
representing a decrease of 54% compared to operating expenses of
$1,705,216 for the same period in 2015. The primary reason for the
change is the decrease in professional fees and the decrease in
other general and administrative expenses associated with the
reverse acquisition transaction in comparison to the current
period.
Comparison of the Three Months Ended December 31, 2016 to the Three
Months Ended December 31, 2015
Revenue
We have
not earned any significant revenues since our inception and we do
not anticipate earning revenues in the near future.
Expenses
Our
expenses for the three months ended December 31, 2016 are
summarized as follows in comparison to our expenses for the three
months ended December 31, 2015:
|
Three Months
Ended
December
31,
|
|
|
2016
|
2015
|
Salaries and
related expenses
|
$88,440
|
$99,399
|
Rent
|
3,819
|
7,378
|
Professional
fees
|
17,137
|
36,801
|
Other general and
administrative expenses
|
61,949
|
97,799
|
Facility
operations
|
16,344
|
37,603
|
Depreciation
|
21,500
|
24,250
|
Total
|
$209,189
|
$303,230
|
Operating
expenses for the three months ended December 31, 2016 were
$209,189, representing a decrease of 31% compared to operating
expenses of $303,230 for the same period in 2015. The primary
reason for the change is the decrease in professional fees and the
decrease in other general and administrative expenses associated
with the reverse acquisition transaction in comparison to the
current period.
14
Liquidity, Financial Condition and Capital Resources
As of
December 31, 2016, we had cash and cash equivalents on hand of
$89,663 and a working capital deficiency of $5,564,884, as compared
to cash equivalents on hand of $6,158 and a working capital
deficiency of $4,836,356 as of March 31, 2016. The increase in
working capital deficiency is mainly due to an increase in accrued
expenses for the period ended December 31, 2016.
Working Capital Deficiency
|
December
31,
|
March
31,
|
|
2016
|
2016
|
Current
assets
|
$93,663
|
$6,158
|
Current
liabilities
|
5,658,507
|
4,842,514
|
Working capital
deficiency
|
$5,564,884
|
$4,836,356
|
The
decrease in current assets is mainly due to a decrease of in cash
and equivalents. The increase in current liabilities is primarily
due to increase in accrued interest and notes payable to related
parties. Management is attempting raise more capital in order to
increase the Company’s cash position and pay down current
liabilities.
Cash Flows
|
Nine months
Ended
December
31,
|
|
|
2016
|
2015
|
Net cash used in
operating activities
|
$(534,373)
|
$(984,470)
|
Net cash used in
investing activities
|
-
|
(35,980)
|
Net cash provided
by financing activities
|
617,878
|
839,574
|
Increase (decrease)
in cash and cash equivalents
|
$83,505
|
$(180,876)
|
The
decrease in net cash used in operating activities in the nine
months ended December 31, 2016, compared to the same period in
December 31 2015, mainly relates to a decrease in operating
expenses. The decrease in cash provided by financing activities is
mainly due to a decrease in cash flows from financing activities,
namely proceeds from sale of common stock in the previous period
reduced by issuance of related party debt from a related party in
the current period.
Our
cash position was approximately $89,663 as of December 31, 2016.
Management believes that our cash on hand and working capital are
not sufficient to meet our current anticipated cash requirements
through 2016.
Notes Payable-Related party
On
January 1, 2016 the Company entered into a notes payable agreement
with NaturalShrimp Holdings, Inc., a shareholder. Between January
16, 2016 and September 27, 2016 the Company borrowed $736,111 under
this agreement. The note payable has no set monthly payment or
maturity date with a stated interest rate of 2%.
Recent Developments
On
January 10, 2017, NaturalShimp Corporation, a wholly-owned
subsidiary of NaturalShrimp entered into a promissory note with
Community National Bank for $245,000, at an annual interest rate of
5% and a maturity date of January 10, 2020 (the “CNB
Note”). The CNB Note is secured by certain real property
owned by the Company in LaCoste, Texas, and is also personally
guaranteed by the Company’s President, as well as certain
shareholders of the Company. As consideration for their personal
guarantees, the Company agreed to issue to these shareholders an
aggregate of 600,000 shares of our common stock.
Concurrent
with the closing of the CNB Note, the Company agreed to pay Baptist
Community Services of Amarillo, Texas (“BCS”) $200,000
of the proceeds from the CNB Note to payoff the Company’s
existing notes payable, plus accrued interest, owing to BCS
totaling approximately $2,540,000 (the “BCS Notes”).
Subsequent to the date of this filing, the Company expects to
execute mutual release agreements with BCS memorializing the payoff
of the BCS Notes and to further release the Company from any
further obligations under the BCS Notes.
15
Going Concern
The
unaudited condensed consolidated financial statements contained in
this annual report on Form 10-Q have been prepared assuming that
the Company will continue as a going concern. The Company has
accumulated losses through the period to December 31, 2016 of
$29,637,830, as well as negative cash flows from operating
activities. Presently, the Company does not have sufficient cash
resources to meet its plans in the twelve months following December
31, 2016. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management
is in the process of evaluating various financing alternatives in
order to finance our research and development activities and
general and administrative expenses. For the nine months ended
December 31, 2016, our cash needs have primarily been funded via
advances from our loan with NaturalShrimp Holdings, Inc. Other
alternatives include raising funds through public or private equity
markets and either through institutional or retail investors. On
October 10, 2016, we sold 28,571 shares of our common stock at
$0.35 per share in a private placement. Although there is no
assurance that the Company will be successful with our fund raising
initiatives, management believes that the Company will be able to
secure the necessary financing as a result of ongoing financing
discussions with third party investors and existing
shareholders.
The
condensed consolidated financial statements do not include any
adjustments that may be necessary should the Company be unable to
continue as a going concern. The Company’s continuation as a
going concern is dependent on its ability to obtain additional
financing as may be required and ultimately to attain
profitability. If the Company raises additional funds through the
issuance of equity, the percentage ownership of current
shareholders could be reduced, and such securities might have
rights, preferences or privileges senior to 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 future plans for
developing its business and achieving commercial revenues. If the
Company is unable to obtain the necessary capital, the Company may
have to cease operations.
Future Financing
We will
require additional funds to implement our growth strategy for our
business. In addition, while we have received capital from various
private placements and credit lines that have enabled us to fund
our operations, these funds have been largely used to develop our
processes, although additional funds are needed for other corporate
operational and working capital purposes. Therefore, we will need
to raise an additional $1,000,000 to cover all of our expansion and
operational expenses over the next 12 months. These funds may be
raised through equity financing, debt financing, or other sources,
which may result in further dilution in the equity ownership of our
shares. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be
obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis should it be
required, or generate significant material revenues from
operations, we will not be able to meet our other obligations as
they become due and we will be forced to scale down or perhaps even
cease our operations.
Off-Balance Sheet Arrangements
We have
no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital
resources that is material to stockholders.
Critical Accounting Policies and Estimates
Our
significant accounting policies are more fully described in the
notes to our financial statements included herein for the quarter
ended December 31, 2016 and in the notes to our consolidated
financial statements included in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2016. We believe that the
accounting policies below are critical for one to fully understand
and evaluate our financial condition and results of
operations.
Recently Adopted Accounting Pronouncements
Our
recently adopted accounting pronouncements are more fully described
in Note 1 to our financial statements included herein for the
quarter ended December 31, 2016.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
Applicable
16
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), our management carried out
an evaluation, with the participation of our Chief Executive
Officer (Principal Executive Officer) and our Chief Financial
Officer (Principal Financial Officer), of the effectiveness of the
design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) of the Exchange Act), as of the period
covered by this report. Disclosure controls and procedures are
defined as controls and other procedures that are designed to
ensure that information required to be disclosed by us in reports
filed with the SEC under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and
(ii) accumulated and communicated to the Company’s
management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure. Based upon their evaluation, our
management (including our Chief Executive Officer and Chief
Financial Officer) concluded that our disclosure controls and
procedures were not effective as of December 31, 2016, based
on the material weaknesses defined below:
(i)
inadequate
segregation of duties consistent with control objectives;
and
(ii)
ineffective
controls over period end financial disclosure and reporting
processes.
Our
management feels the weaknesses identified above have not had any
material effect on our financial results. However, we are currently
reviewing our disclosure controls and procedures related to these
material weaknesses and expect to implement changes in the next
fiscal year, including identifying specific areas within our
governance, accounting and financial reporting processes to add
adequate resources to potentially mitigate these material
weaknesses.
Our
management will continue to monitor and evaluate the effectiveness
of our internal controls and procedures and our internal controls
over financial reporting on an ongoing basis and is committed to
taking further action and implementing additional enhancements or
improvements, as necessary and as funds allow.
Because
of its inherent limitations, internal controls over financial
reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and
presentation.
Management
believes that despite our material weaknesses set forth above, our
consolidated financial statements for the quarter ended December
31, 2016 are fairly stated, in all material respects, in accordance
with United States Generally Accepted Accounting
Principles.
Changes in Internal Control Over Financial Reporting
There
were no changes in our internal controls over financial reporting
that occurred during the three months ended December 31, 2016 that
have materially affected, or are reasonably likely to materially
affect, our internal controls over financial
reporting.
17
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know
of no material pending proceedings to which we are a party or of
which our properties are subject.
ITEM 1A. RISK FACTORS
An
investment in our common stock involves a number of very
significant risks. You should carefully consider the risk factors
included in the “Risk Factors” section of our Annual
Report on Form 10-K for the fiscal year ended March 31, 2016 that
was filed on July 14, 2016, in addition to other information
contained in those reports and in this quarterly report in
evaluating the Company and its business before purchasing shares of
its common stock. The Company’s business, operating results
and financial condition could be adversely affected due to any of
those risks.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
On
October 10, 2016, we offered and sold 28,571 shares of our common
stock at $0.35 per share in a private placement. These shares were issued to an "accredited
investor", as defined by Rule 501 of Regulation D promulgated under
the Securities Act. The issuance of the shares was exempt from the
registration requirements of the Securities Act pursuant to the
exemption for transactions by an issuer not involved in any public
offering under Section 4(a)(2) of the Securities Act and Rule 506
of Regulation D.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not
Applicable.
ITEM 5. OTHER INFORMATION
None.
18
ITEM 6. EXHIBITS
No.
|
Description
|
10.1*
|
Promissory
Note between NaturalShrimp Corporation and Community National Bank
dated January 10, 2017
|
10.2*
|
Payoff,
Termination and Release Letter between Baptist Community Services
and NaturalShrimp Corporation dated January 13, 2017.
|
3.1(a)
|
Articles
of Incorporation (incorporated by reference to our Registration
Statement on Form S-1 originally filed on June 11,
2009).
|
3.1(b)
|
Amendment
to Articles of Incorporation (incorporated by reference to our
Current Report on Form 8-K filed on May 19,
2014).
|
3.2
|
Bylaws (incorporated by reference to our Registration
Statement on Form S-1 originally filed on June 11,
2009).
|
31.1*
|
Certification
Statement of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
31.2*
|
Certification
Statement of the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
32.1*
|
Certification
Statement of the Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
32.2*
|
Certification
Statement of the Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
101*
|
Interactive
Data Files
|
* Filed
herewith
19
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NATURALSHRIMP INCORPORATED
By: /s/ Bill G.
Williams
Bill G.
Williams
Chief
Executive Officer
(Principal
Executive Officer)
Date:
February 13, 2017
By: /s/ William
Delgado
William
Delgado
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
Date:
February 13, 2017
20