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, 2020
 
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.)
 
15150 Preston Road, Suite #300
Dallas, Texas
 
75248
(Address of Principal Executive Offices)
 
(Zip Code)
 
(888) 791-9474
(Registrant’s telephone number, including area code)
 
N/A
(Former address)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol(s)
 
Name of exchange on
which registered
None
 
N/A
 
N/A
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” a “smaller reporting company” and an “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act: ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
 
As of February 16, 2021, there were 551,301,181 shares of the registrant’s common stock outstanding.
 

 
 
 
NATURALSHRIMP INCORPORATED
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020
 
TABLE OF CONTENTS
 
 
Page
 
 
PART I. FINANCIAL INFORMATION
 3
 
 
 
ITEM 1.
Financial Statements
 3
 
 
 
 
Condensed Consolidated Balance Sheets as of December 31, 2020 (unaudited) and March 31, 2020
 3
 
 
 
 
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2020 and 2019 (unaudited)
 4
 
 
 
 
Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Nine Months Ended December 31, 2020 and 2019 (unaudited)
 5
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2020 and 2019 (unaudited)
 7
 
 
 
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 8
 
 
 
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 21
 
 
 
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
 32
 
 
 
ITEM 4.
Controls and Procedures
 32
 
 
 
PART II. OTHER INFORMATION
 33
 
 
 
ITEM 1.
Legal Proceedings
 33
 
 
 
ITEM 1A.
Risk Factors
 34
 
 
 
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 34
 
 
 
ITEM 3.
Defaults Upon Senior Securities
 34
 
 
 
ITEM 4.
Mine Safety Disclosures
 34
 
 
 
ITEM 5.
Other Information
 34
 
 
 
ITEM 6.
Exhibits
 35
 
 
 
SIGNATURES
 36
 
 
2
 
 
PART I – FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
NATURALSHRIMP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
December 31,
2020
 
 
March 31,
2020  
 
Current assets
 
 (unaudited)
 
 
   
 
Cash
 $311,848 
 $109,491 
Prepaid expenses
  778,019 
  128,693 
Insurance settlement
  - 
  917,210 
 
    
    
Total current assets
  1,089,867 
  1,155,394 
 
    
    
Fixed assets
  12,286,515 
  707,808 
 
    
    
Other assets
    
    
Construction-in-process
  1,719,945 
  - 
Right of Use asset
  275,400 
  275,400 
Deposits
  20,633 
  178,198 
 
    
    
Total other assets
  2,015,978 
  453,598 
 
    
    
Total assets
 $15,392,360 
 $2,316,800 
 
    
    
LIABILITIES AND STOCKHOLDERS' DEFICIT
    
    
Current liabilities
    
    
Accounts payable
 $896,379 
 $641,146 
Accrued interest
  64,246 
  81,034 
Accrued interest - related parties
  175,520 
  296,624 
Other accrued expenses
  628,204 
  1,204,815 
Short-term Promissory Note and Lines of credit
  575,910 
  570,497 
Bank loan
  8,438 
  8,904 
PPP loan
  103,200 
  - 
Convertible debentures
  - 
  463,161 
Notes payable - related parties
  1,247,162 
  1,221,162 
Dividends payable
  182,639 
  - 
Derivative liability
  - 
  176,000 
Warrant liability
  - 
  90,000 
 
    
    
Total current liabilities
  3,881,698 
  4,753,343 
 
    
    
Bank loans, less current maturities
  208,493 
  225,837 
Notes payable
  5,000,000 
    
Note payable - related party, less current maturities
  239,604 
  - 
Lease Liability
  275,400 
  275,400 
 
    
    
Total liabilities
  9,605,195 
  5,254,580 
 
    
    
 
    
    
Commitments and contingencies (Note 11)
    
    
 
    
    
 
    
    
Series D Redeemable Convertible Preferred stock, $0.0001 par value, 20,000 shares authorized, 5,000 and 0 shares issued and outstanding at December 31, 2020 and March 31, 2020, respectively
  208,333 
  - 
 
    
    
 
    
    
Stockholders' deficit
    
    
Series A Convertible Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding at December 31, 2020 and March 31, 2020
  500 
  500 
Series B Convertible Preferred stock, $0.0001 par value, 5,000 shares authorized, 1,920 and 2,250 shares issued and outstanding at December 31, 2020 and March 31, 2020, respectively
  - 
  - 
Common stock, $0.0001 par value, 900,000,000 shares authorized, 544,989,181 and 379,742,524 shares issued and outstanding at December 31, 2020 and March 31, 2020, respectively
  54,500 
  37,975 
Additional paid in capital
  55,437,431 
  43,533,242 
Stock Payable
  135,000 
  - 
Accumulated deficit
  (49,961,843)
  (46,427,396)
Total stockholders' deficit attributable to NaturalShrimp, Inc. shareholders
  5,665,588 
  (2,855,679)
 
    
    
Non-controlling interest in NAS
  (86,756)
  (82,101)
 
    
    
Total stockholders' deficit
  5,578,832 
  (2,937,780)
 
    
    
Total liabilities mezzanine and stockholders' deficit
 $15,392,360 
 $2,316,800 
 
The accompanying footnotes are in integral part of these condensed consolidated financial statements.
 
 
3
 
 
NATURALSHRIMP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
For the Three Months Ended
 
 
  For the Nine months Ended
 
 
 
December 31,
2020  
 
 
December 31,
2019  
 
 
  December 31,
2020
 
 
  December 31,
2019
 
 
 
   
 
 
   
 
 
   
 
 
   
 
Sales
 $- 
 $- 
 $- 
 $- 
 
    
    
    
    
Operating expenses:
    
    
    
    
General and administrative
  394,654 
  306,834 
  1,131,662 
  944,571 
Research and development
  - 
  101,500 
  79,550 
  101,500 
Facility operations
  154,470 
  41,375 
  234,113 
  180,934 
Depreciation and amortization
  18,173 
  15,958 
  37,850 
  41,521 
 
    
    
    
    
Total operating expenses
  567,297 
  465,667 
  1,483,175 
  1,268,526 
 
    
    
    
    
Net loss from operations
  (567,297)
  (465,667)
  (1,483,175)
  (1,268,526)
 
    
    
    
    
Other income (expense):
    
    
    
    
Interest expense
  (42,541)
  (40,820)
  (102,057)
  (160,351)
Amortization of debt discount
  - 
  (38,831)
  - 
  (515,204)
Financing costs
  - 
  (53,528)
  (64,452)
  (217,746)
Change in fair value of derivative liability
  - 
  58,000 
  (29,000)
  19,000 
Change in fair value of warrant liability
  - 
  - 
  - 
  - 
Loss on warrant settlement
  - 
  - 
  - 
  (50,000)
 
    
    
  - 
    
 
    
    
    
    
Total other income (expense)
  (42,541)
  (75,179)
  (195,509)
  (924,301)
 
    
    
    
    
Loss before income taxes
  (609,838)
  (540,846)
  (1,678,684)
  (2,192,827)
 
    
    
    
    
Provision for income taxes
  - 
  - 
  - 
  - 
 
    
    
    
    
Net loss
  (609,838)
  (540,846)
  (1,678,684)
  (2,192,827)
 
    
    
    
    
Less net loss attributable to non-controlling interest
  (1,074)
  -51363 
  (4,655)
  (51,363)
 
    
    
    
    
Net loss attributable to NaturalShrimp Inc.
  (608,764)
  (489,483)
  (1,674,029)
  (2,141,464)
 
    
    
    
    
Amortization of beneficial conversion feature on PS
  (443,333)
  (380,000)
  (1,543,333)
  (380,000)
Dividends
  (172,291)
  - 
  (317,083)
  - 
 
    
    
    
    
Net loss available for common stockholders
 $(1,224,388)
 $(869,483)
 $(3,534,445)
 $(2,521,464)
 
    
    
    
    
EARNINGS PER SHARE (Basic and diluted)
 $(0.00)
 $(0.00)
 $(0.01)
 $(0.01)
 
    
    
    
    
   
  451,549,772 
  345,260,292 
  419,177,832 
  326,835,226 
 
The accompanying footnotes are in integral part of these condensed consolidated financial statements.
 
 
4
 
 
NATURALSHRIMP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
 
 
 
Series A Preferred stock  
 
 
Series B Preferred stock  
 
 
Common stock      
 
 
Additional paid
 
 
Stock
 
 
Accumulated
 
 
Non-controlling
 
 
Total stockholders'
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
in Capital
 
 
Payable
 
 
deficit
 
 
interest
 
 
deficit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
Balance March 31, 2020
  5,000,000 
 $500 
  2,250 
 $- 
  379,742,524 
 $37,975 
 $43,533,243 
  - 
 $(46,427,396)
 $(82,101)
  (2,937,780)
 
    
    
    
    
    
    
    
    
    
    
    
Issuance of common stock upon conversion
    
    
    
    
  37,926,239 
  3,793 
  222,644 
    
    
    
  226,437 
Reclass of derivative liability upon conversion or redemption of related convertible debentures
    
    
    
    
    
    
  205,000 
    
    
    
  205,00 
Purchase of Series B Preferred shares
    
    
  1,250 
  - 
    
    
  1,250,000 
    
    
    
  1,250,000 
Beneficial conversion feature related to the Series B Preferred Shares
    
    
    
    
    
    
  293,000 
    
  (293,000)
    
  - 
Dividends payable on Series B PS
    
    
    
    
    
    
    
    
  (144,792)
    
  (144,792)
Series B PS Dividends in kind issued
    
    
  50 
  - 
    
    
  56,458 
    
    
    
  56,458 
Conversion of Series B PS to common stock
    
    
  (800)
  - 
  33,569,730 
  3,357 
  (3,357)
    
    
    
  - 
Common stock issued in Vista Warrant settlement
    
    
    
    
  17,500,000 
  1,750 
  608,250 
    
    
    
  610,000 
Reclass of warrant liability upon the cancellation of warrants under Vista Warrant settlement
    
    
    
    
    
    
  90,000 
    
    
    
  90,000 
Common stock issued to consultant
    
    
    
    
  1,250,000 
  125 
  61,125 
    
    
    
  61,250 
 
    
    
    
    
    
    
    
    
    
    
   
Net loss
    
    
    
    
    
    
    
    
  (477,072)
  (1,895)
  (478,967)
 
    
    
    
    
    
    
    
    
    
    
  - 
Balance June 30, 2020
  5,000,000 
 $500 
  2,750 
 $- 
  469,988,493 
 $47,000 
 $46,316,363 
 $- 
 $(47,342,260)
 $(83,996)
 $(1,062,394)
 
    
    
    
    
    
    
    
    
    
    
    
Issuance of common stock upon conversion
    
    
    
    
  1,014,001 
  101 
  125,635 
    
    
    
  125,736 
Purchase of Series B Preferred shares
    
    
  1,250 
  - 
    
    
  1,250,000 
    
    
    
  1,250,000 
Beneficial conversion feature related to the Series B Preferred Shares
    
    
  65 
  - 
    
    
  807,000 
    
  (807,000)
    
  - 
Dividends payable on Series B PS
    
    
    
    
    
    
    
    
  (83,960)
    
  (83,960)
Series B PS Dividends in kind issued
    
    
    
    
    
    
  77,984 
    
    
    
  77,984 
Conversion of Series B PS to common stock
    
    
  (2,369)
  - 
  58,521,249 
  5,852 
  (5,852)
    
    
    
  - 
Common stock issued to consultant
    
    
    
    
  1,500,000 
  150 
  67,350 
    
    
    
  67,500 
 
    
    
    
    
    
    
    
    
    
    
    
Net loss
    
    
    
    
    
    
    
    
  (588,193)
  (1,686)
  (589,879)
 
    
    
    
    
    
    
    
    
    
    
    
Balance September 30, 2020
  5,000,000 
 $500 
  1,696 
 $- 
  531,023,743 
 $53,103 
 $48,638,480 
 $- 
 $(48,821,413)
 $(85,682
 $(215,012)
 
    
    
    
    
    
    
    
    
    
    
    
Issuance of common stock upon conversion
    
    
    
    
  795,387 
  80 
  198,768 
    
    
    
  198,848 
Purchase of Series B Preferred shares
    
    
  750 
  - 
    
    
  750,000 
    
    
    
  750,000 
Beneficial conversion feature related to the Series B Preferred Shares
    
    
    
    
    
    
  235,000 
    
  (235,000)
    
  - 
Dividends payable on Series B Preferred Shares
    
    
    
    
    
    
    
    
  (88,333)
    
  (88,333)
Conversion of Series B Preferred Shares to common stock
    
    
  (526)
  - 
  5,670,051 
  567 
  (567)
    
    
    
  - 
Beneficial conversion feature related to the Series D Preferred Shares
    
    
    
    
    
    
  5,000,000 
    
    
    
  5,000,000 
Amortization of beneficial conversion feature related to Series D Preferred Shares
    
    
    
    
    
    
    
    
  (208,333)
    
  (208,333)
Commitment shares issued with Series D Preferred Shares
    
    
    
    
  6,000,000 
  600 
  (600)
    
    
    
  - 
Common stock issued to consultant
    
    
    
    
  1,500,000 
  150 
  616,350 
    
    
    
  616,500 
Common stock to be issued as finder's fees related to asset acquisition
    
    
    
    
    
    
    
  135,775 
    
    
  135,775 
 
    
    
    
    
    
    
    
    
    
    
    
Net loss
    
    
    
    
    
    
    
    
  (608,764)
  (1,074)
  (609,838)
 
    
    
    
    
    
    
    
    
    
    
    
Balance December 31, 2020
  5,000,000 
 $500 
  1,920 
 $- 
  544,989,181 
 $54,500 
 $55,437,431 
  135,775 
 $(49,961,843)
 $(86,756
 $5,579,607 
 
 
5
 
 
 
 
Series A Preferred stock  
 
 
Series B Preferred stock  
 
 
Common stock      
 
 
Additional paid
 
 
Stock
 
 
Accumulated
 
 
Non-controlling
 
 
Total stockholders'
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
in Captial
 
 
Receivable
 
 
deficit
 
 
interest
 
 
deficit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
Balance April 1, 2019
  5,000,000 
  500 
 
 
 
 
 
 
  301,758,293 
  30,177 
  38,335,782 
 
   
 
  (41,223,445)
 
 
 
  (2,856,986)
 
    
    
 
 
 
 
 
 
    
    
    
 
   
 
    
 
 
 
    
Issuance of shares under equity financing agreement
    
    
 
 
 
 
 
 
  11,482,721 
  1,148 
  1,498,852 
 
   
 
    
 
 
 
  1,500,000 
Issuance of shares upon conversion
    
    
 
 
 
 
 
 
  3,000,000 
  300 
  29,700 
 
   
 
    
 
 
 
  30,000 
Beneficial conversion feature
    
    
 
 
 
 
 
 
    
    
  58,548 
 
   
 
    
 
 
 
  58,548 
 
    
    
 
 
 
 
 
 
    
    
    
 
   
 
    
 
 
 
  - 
Net loss
    
    
 
 
 
 
 
 
    
    
    
 
   
 
  (795,270)
  - 
  (795,270)
 
    
    
 
 
 
 
 
 
    
    
    
 
   
 
    
    
    
Balance June 30, 2019
  5,000,000 
 $500 
  - 
 $- 
  316,241,014 
 $31,625 
 $39,922,882 
  - 
 $(42,018,715)
 $- 
 $(2,063,708)
 
    
    
    
    
    
    
    
    
    
    
    
Purchase of Series B Preferred shares
    
    
  250 
  - 
    
    
  250,000 
    
    
    
  250,000 
Issuance of shares upon conversion
    
    
    
    
  14,000,000 
  1,400 
  138,600 
    
    
    
  140,000 
Issuance of shares under equity financing agreement
    
    
    
    
  3,275,060 
  326 
  273,675 
    
    
  # 
  274,001 
 
    
    
    
    
    
    
    
    
    
    
    
Net loss
    
    
    
    
    
    
    
    
  (856,711)
    
  (856,711)
 
    
    
    
    
    
    
    
    
    
    
    
Balance September 30, 2019
  5,000,000 
 $500 
  250 
 $- 
  333,516,074 
 $33,351 
 $40,585,157 
    
 $(42,875,426)
    
 $(2,256,418)
 
    
    
    
    
    
    
    
    
    
    
    
 
    
    
    
    
    
    
    
    
    
    
    
Purchase of Series B Preferred shares
    
    
  1,250 
  - 
    
    
  1,250,000 
    
    
    
  1,250,000 
Issuance of shares upon conversion
    
    
    
    
  20,600,461 
  2,060 
  211,388 
    
    
    
  213,448 
Reclass of derivative liability upon conversion of related convertible debentures
    
    
    
    
    
    
  8,000 
    
    
    
  8,000 
Beneficial conversion feature related to the Series B Preferred Shares
    
    
    
    
    
    
  380,000 
    
  (380,000)
    
  - 
 
    
    
    
    
    
    
    
    
    
    
  - 
Net loss
    
    
    
    
    
    
    
    
  (489,483)
  (51,363)
  (540,846)
 
    
    
    
    
    
    
    
    
    
    
    
Balance December 31, 2019
  5,000,000 
 $500 
  1,500 
 $- 
  354,116,535 
 $35,411 
 $42,434,545 
    
 $(43,744,909)
    
 $(1,325,816)
 
The accompanying footnotes are in integral part of these condensed consolidated financial statements.
 
 
6
 
 
NATURALSHRIMP INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
 
For the Nine Months Ended
 
 
 
December 31,
2020
 
 
December 31,
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net loss attributable to NaturalShrimp Inc.
 $(1,674,029)
 $(2,141,464)
 
    
    
Adjustments to reconcile net loss to net cash used in operating activities
    
    
 
    
    
Depreciation expense
  37,850 
  41,521 
Amortization of debt discount
  - 
  515,204 
Change in fair value of derivative liability
  29,000 
  (19,000)
Default penalty
  41,112 
  27,000 
Net loss attributable to non-controlling interest
  (4,655)
  (51,363)
Shares issued for services
  745,250 
  - 
 
    
    
Changes in operating assets and liabilities:
    
    
Prepaid expenses and other current assets
  (649,326)
  (91,643)
Deposits
  - 
  (10,133)
Accounts payable
  255,231 
  56,002 
Other accrued expenses
  143,793 
  180,728 
Accrued interest
  29,959 
  - 
Accrued interest - related parties
  32,096 
  (10,560)
 
    
    
Cash used in operating activities
  (1,013,719)
  (1,503,708)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
 
    
    
Cash paid for machinery and equipment
  (1,481,558)
  (611,790)
Cash paid for asset acquisition with VeroBlue Farms, Inc.
  (5,000,000)
  - 
Cash received from Insurance settlement
  917,210 
  - 
Cash paid for construction in process
  (1,562,380)
  (541,735)
 
    
    
CASH USED IN INVESTING ACTIVITIES
  (7,126,728)
  (1,153,525)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
 
    
    
Payments on bank loan
  (17,810)
  (5,989)
Payment of related party notes payable
  (48,000)
  - 
     Repayment line of credit short-term
  5,413 
  (110,788)
Proceeds from PPP loan
  103,200 
  - 
Proceeds from issuance of common shares under equity agreement
  - 
  1,774,001 
Proceeds from sale of Series B Convertible Preferred stock
  3,250,000 
  1,500,000 
Proceeds from convertible debentures
  - 
  100,000 
Proceeds from sale of Series D PS
  5,000,000 
  (85,500)
Payments on convertible debentures, related party
  - 
  (69,000)
Cash received in relation to Vista warrant settlement
  50,000 
  - 
 
    
    
Cash provided by financing activities
  8,342,803 
  3,102,724 
 
    
    
NET CHANGE IN CASH
  202,357 
  445,491 
 
    
    
CASH AT BEGINNING OF PERIOD
  109,491 
  137,499 
 
    
    
CASH AT END OF PERIOD
 $311,848 
 $582,990 
 
    
    
INTEREST PAID
 $69,961 
 $170,911 
 
    
    
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
    
    
Shares issued upon conversion
 $1,131,824 
 $383,448 
Right of Use asset and Lease liability
 $- 
 $275,400 
Dividends in kind issued
 $134,446 
 $- 
Shares issued on Vista Warrant settlement
 $610,000 
 $- 
Note payable, related party, issued in place of Settlement Agreement
 $383,604 
 $- 
Notes payable, issued as consideration in VeroBlue Farms, Inc. asset acquisition
 $5,000,000 
 $- 
Shares payable, to be issued as finders fee in VeroBlue Farms, Inc. asset acquisition
 $135,775 
 $- 
 
The accompanying footnotes are in integral part of these condensed consolidated financial statements.
 
 
7
 
 
NATURALSHRIMP INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020
(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. Its initial production facility is located outside of San Antonio, Texas.
 
The Company has two wholly-owned subsidiaries including NaturalShrimp Corporation, NaturalShrimp Global, Inc. and 51% owned Natural Aquatic Systems, Inc. (“NAS”).
 
Going Concern
 
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended December 31, 2020, the Company had a net loss available for common stockholders of approximately $3,534,000. As of December 31, 2020, the Company had an accumulated deficit of approximately $49,962,000 and a working capital deficit of approximately $2,792,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern, within one year from the issuance date of this filing. The Company’s ability to continue as a going concern is dependent on its ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the nine months ended December 31, 2020, the Company received net cash proceeds of $3,250,000 from the sale of 3,250 Series B Preferred shares and $5,000,000 from the sale of 5,000 Series D Preferred shares. Management believes that private placements of equity capital will be needed to fund the Company’s long-term operating requirements. The Company may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. If the Company raises additional funds through the issuance of equity, the percentage ownership of its current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. The Company continues to pursue external financing alternatives to improve its working capital position. If the Company is unable to obtain the necessary capital, the Company may be unable to develop its facilities and enter in production.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
The accompanying unaudited financial information as of and for the three and nine months ended December 31, 2020 and 2019 has been prepared in accordance with GAAP in the U.S. for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three and nine months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended March 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on June 26, 2020.
 
 
8
 
 
The condensed consolidated balance sheet as of March 31, 2020 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.
 
Consolidation
 
The consolidated financial statements include the accounts of NaturalShrimp Incorporated and its wholly-owned subsidiaries, NaturalShrimp Corporation, NaturalShrimp Global and 51 % owned Natural Aquatic Systems, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.
 
Use of Estimates
 
Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Basic and Diluted Earnings/Loss per Common Share
 
Basic and diluted earnings or loss per share (“EPS”) amounts in the consolidated financial statements are computed in accordance with ASC 260 – 10 “Earnings per Share”, which establishes the requirements for presenting EPS. Basic EPS is based on the weighted average number of shares of common stock outstanding. Diluted EPS is based on the weighted average number of shares of common stock outstanding and dilutive common stock equivalents. Basic EPS is computed by dividing net income or loss available to common stockholders (numerator) by the weighted average number of shares of common stock outstanding (denominator) during the period. For the nine months ended December 31, 2020, the Company had a 1,920 shares of Series B PS whose approximately 12,308,000 underlying shares are convertible at the investors’ option at a conversion price based on the lowest market price over the last 20 trading days, and 5,000 of Series D PS whose approximately 50,000,000 underlying shares are convertible at the investors’ option at a fixed conversion price of $0.10, which were not included in the calculation of diluted EPS as their effect would be anti-dilutive. For the nine months ended December 31, 2019, the Company had approximately $709,000 in principal on convertible debentures whose approximately 22,895,000 underlying shares are convertible at the holders’ option at conversion prices  ranging from $0.01 to $0.30 for fixed conversion rates, and 57% - 60% of the defined trading price for variable conversion rates and approximately 848,000 warrants  with an exercise price of 45% of the market price of the Company’s common stock, which were not included in the calculation of diluted EPS as their effect would be anti-dilutive.
 
Fair Value Measurements
 
ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Financial Instruments.”
 
Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company’s balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.
 
 
9
 
 
The Company did not have any Level 1 or Level 2 assets and liabilities as of December 31, 2020 and March 31, 2020.
 
The Derivative liabilities are Level 3 fair value measurements.
 
The following is a summary of activity of Level 3 liabilities during the nine months ended December 31, 2020 and 2019:
 
Derivatives
 
 
 
2020
 
 
2019
 
Derivative liability balance at beginning of period
 $176,000 
 $157,000 
Reclass to equity upon conversion or redemption
  (205,000)
  (8,000)
Change in fair value
  29,000 
  (19,000)
Balance at end of period
 $- 
 $130,000 
 
As of December 31, 2019, the fair value of the derivative liabilities of convertible notes was estimated using the following weighted-average inputs: the price of the Company’s common stock of $0.11; a risk-free interest rate of 1.55%, and expected volatility of the Company’s common stock of 98.46%, and the various estimated reset exercise prices weighted by probability.
 
Warrant liability
 
 
 
2020
 
 
2019
 
Warrant liability balance at beginning of period
 $90,000 
 $93,000 
Reclass to equity upon cancellation or exercise
  (90,000)
  - 
Change in fair value