NaturalShrimp Incorporated (“NaturalShrimp” “the Company”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 threetwo wholly-owned subsidiaries including NaturalShrimp Corporation, NaturalShrimp Global, Inc. and 51% owned Natural Aquatic Systems, Inc. (“NAS”).

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), assuming the Company will continue as a going concern, which contemplates the realization ofassetsof assets and satisfaction of liabilities in the normal course of business. For the three and ninesix months ended December 31, 2017,September 30, 2020, the Company had a net loss available for common stockholders of approximately $1,694,000 and $3,037,000, respectively.$2,394,000. At December 31, 2017,September 30, 2020, the Company had an accumulated deficit of approximately $31,765,000$48,821,000 and a working capital deficit of approximately $5,256,000.$3,088,000. 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 ninesix months ended December 31, 2017,September 30, 2020, the Company received net cash proceeds of approximately $744,000 from the issuance of convertible debentures, $140,000 from the issuance of convertible debt to a related party and $25,000$2,500,000 from the sale of the Company’s common stock.2,500 Series B Preferred shares. Subsequent to December 31, 2017,September 30, 2020, the Company received $118,000 in net proceeds$250,000 from three convertible debenturesthe sale of Series B Preferred shares (See Note 12)11). 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 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 have to cease operations.

The accompanying unaudited financial information as of and for the three and ninesix months ended December 31, 2017September 30, 2020 and 20162019 has been prepared in accordance with accounting principles generally acceptedGAAP 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 ninesix months ended December 31, 2017September 30, 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, 20172020 included in ourthe Company’s Annual Report on Form 10-K filed with the SEC on June 29, 2017.26, 2020.

The condensed consolidated balance sheet at March 31, 20172020 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.

The condensed consolidated financial statements include the accounts of NaturalShrimp Incorporated and its wholly-owned subsidiaries, NaturalShrimp Corporation, NaturalShrimp Global and NaturalShrimp Global.51 % owned Natural Aquatic Systems, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

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.

The Company did not have any potentially dilutiveLevel 1 or Level 2 assets and liabilities at September 30, 2020 and March 31, 2020.

Equipment is carried at historical value 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, which does not materially differ from GAAP. Estimated useful lives are as follows:

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 condensed consolidated statements of operations reflect depreciation expense of approximately $18,000$9,000 and $53,000, and $22,000 and $43,000$20,000 for the three and ninesix months ended December 31, 2017September 30, 2020 and 2016,$13,000 and $26,000 for the three and six months ended September 30, 2019, respectively.

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

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

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

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amountAs of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods for public business entities beginning after December 15, 2017, including interim periods within that reporting period. The new standard permits the use of either the retrospective or cumulative effect transition method. The Company has elected to use the cumulative effect transition method and does not expect the adoption to have a material impact on its financial statements and related disclosures as revenues to date have been insignificant.

The Company also has an additional linesline of credit with Extraco Bank for $100,000 and $200,000, which werewas renewed on January 19, 2017 andwith a maturity date of April 30, 2017, respectively, with maturity dates2021, for a balance of January 19, 2019 and April 30, 2018, respectively.$177,778. The lines of credit bear an interest at a rate of 4.5% (increased to 6.5% and 5%, respectively, upon renewal in 2017) that is compounded monthly and to be paid with the principal on unpaid balances andthe maturity date. The line of credit is payable monthly.  They are secured by certificates of deposit and letters of credit owned by directors and shareholders of the Company. The balance of the linesline of credit was $278,470$177,778 at both December 31, 2017September 30, 2020 and March 31, 2017.

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 30.40%29.15% as of December 31, 2017.September 30, 2020. The line of credit is unsecured. The balance of the line of credit was $9,580 at both December 31, 2017September 30, 2020 and March 31, 2017.2020.

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 14.50%13.25% as of December 31, 2017.September 30, 2020. The line of credit is secured by assets of the Company’s subsidiaries. The balance of the line of credit is $11,197$10,237 at both December 31, 2017September 30, 2020 and March 31, 2017.2020.

On January 10, 2017, the Company 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 considerationOn January 10, 2020, the loan was modified, with certain terms amended. The modified note is for the guarantee, the Company issued 600,000principal balance of its common stock$222,736, with initial monthly payments of $1,730 through February 1, 2037, when all unpaid principal and interest will be due and payable. The loan has an initial yearly rate of interest of 5.75% , which may change beginning on February 1, 2023 and each 36 months thereafter, to the shareholders, which was recognized as debt issuance costs with a fair value of $264,000, basedWall Street Journal Prime Rate plus 1%, but never below 4.25%. The monthly payments may change on the market value ofsame dates as the Company’s common stock of $0.44 oninterest changes. The Company is also allowed to make payments against the date of issuance. As the fair value of the debt issuance costs exceeded the face amount of the promissory note, the excess of the fair value was recognized as financing costs in the statement of operations.principal at any time. The resulting debt discount is to be amortized over the termbalance of the CNB Note underis $218,947 at September 30, 2020, $8,990 of which was in current liabilities, and $222,736 at March 31, 2020, of which $8,904 was in current liabilities.

Maturities on Bank loan is as follows:

On January 23, 2017,August 24, 2018, the Company entered into a Securities Purchase Agreement (“January SPA”) for10% convertible note in the sale of a convertible debenture (“January debenture”) with an original principal amount of $262,500, for consideration$55,000, convertible into shares of $250,000, withcommon stock of the Company, which matures August 24, 2019. The interest rate increases to 24% per annum upon an event of default, as set forth in the agreement, including a prorated five percent original issue discount (“OID”)cross default to all other outstanding notes, and if the debenture is not paid at maturity the principal due increases by 10%. The debenture has a one-time interest charge of twelve percent appliedIf the Company loses its bid price the principal outstanding on the issuance datedebenture increases by 20%, and due onif the maturity date, whichCompany’s common stock is two years fromdelisted, the date of each payment of consideration. principal increases by 50%.

The January SPA included a warrant to purchase 350,000note is convertible into shares of the Company’s common stock. The warrants have a five-year term and vest such that the buyer shall receive 1.4 warrants for every dollar funded to the Company under the January debenture. The Company received $50,000 at closing, with additional consideration to be paid at the holder’s option. Upon the closing the buyer was granted a warrant to purchase 70,000 shares of the Company’s common stock.

TheDuring the first 180 days the convertible redeemable note is in effect, the Company estimatedmay redeem the fair valuenote at amounts ranging from 130% to 145% of the conversion feature derivatives embedded in the convertible debenturesprincipal and accrued interest balance, based on weighted probabilitiesthe redemption date’s passage of assumptions used intime ranging from 60 days to 180 days from the Black Scholes pricing model. The key valuation assumptions used consist, in part,date of issuance of the pricedebenture. On January 10, 2019 the outstanding principal of $55,000 and accrued interest of $1,974 was purchased from the Company’s common stock of $0.46 at issuance date;noteholder by a risk-free interest rate of 1.16%third party, for $82,612. The additional $25,638 represents the redemption amount owing to the original noteholder and expected volatility ofincreases the Company’s common stock, of 384.75%,principal amount due to the new noteholder and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $35,000 was immediately expensedrecognized as Financing costs. As the discount was in excess of the face amount of the debenture, the effective interest rate is not determinable, and as such, all of the discount was immediately expensed.financing cost.

During the fourth fiscal quarter of 2019, in three months ended September 30, 2017,separate conversions, the holder converted $40,000$57,164 of principal into 9,291,354 shares of common stock of the January debentures to common shares of the Company, leaving outstanding principal of $10,000 as of September 30, 2017.Company. As a result of the conversionconversions the derivative liability related to the debenture was remeasured immediately prior to the conversionconversions with aan overall increase in the fair value of $55,000, with an increase of $2,000$65,000 recognized, with the fair value of the derivative liability related to the converted portion, of $44,000$171,000 being reclassified to equity. The key valuation assumptions used consist, in part, of the price of the Company’s common stock on the dates of $0.17;conversion, of $0.28 to $0.40; a risk-free interest rate of 1.12%2.36% to 2.41% and expected volatility of the Company’s common stock, of 190.70%343.98% to 374.79%, and the various estimated reset exercise prices weighted by probability.

During the three months ended December 31, 2017, the holder convertedOn May 5, 2020, the remaining $10,000outstanding balance of $29,057 was converted into 2,039,069 shares of common stock of the January debentures to common sharesCompany, at a conversion rate of the Company.$0.014. As a result of the conversion the derivative liability related to the debenture was remeasured immediately prior to the conversionconversions with aan overall increase in the fair value of $16,000, with an increase of $4,000$8,000 recognized, with the fair value of the derivative liability related to the converted portion, of $30,000 being reclassified to equity. The key valuation assumptions used consist, in part, of the price of the Company’s common stock on the dates of $0.10;conversion of $0.03; a risk-free interest rate of 1.46%0.13% and expected volatility of the Company’s common stock, of 200.17%158.29%, and the various estimated reset exercise prices weighted by probability.

On September 22, 2017, the Company exercised its option to redeem the first closing of the March debenture, for a redemption price at $130,000, 130% of the principal amount. The principal of $100,000 was derecognized with the additional $30,000 paid upon redemption recognized as a financing cost. As a result of the redemption, the unamortized discount related to the converted balance of $91,667 was immediately expensed. Additionally, the derivative was remeasured upon redemption of the debenture, resulting in an estimated fair value of $189,000, for an increase in fair value of $45,000. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $0.17; a risk-free interest rate of 1.58% and expected volatility of the Company’s common stock, of 290.41%, and the various estimated reset exercise prices weighted by probability.

The note is convertible into shares of the Company’s common stock at a variable conversion rate that is equal to the lesser of 60% of the lowest trading price for the last 20 days prior to the issuance of the note or 60% of the lowest market price over the 20 days prior to conversion. The conversion price shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. There are additional 10% adjustments to the conversion price for events set forth in the agreement, including if the conversion price is less than $0.01, if the Company is not DTC eligible, the Company is no longer a reporting company, or the note cannot be converted into free trading shares on or after nine months from issue date. Per the agreement, the Company is required at all times to have authorized and reserved fivethree times the number of shares that is actually issuable upon full conversion of the note. The conversion feature meets the definition of a derivative and therefore requires bifurcation and is accounted for as a derivative liability.

On three separate dates during the first quarter of the fiscal year ending March 31, 2021, the remaining outstanding balance was converted into 35,887,170 shares of common stock of the Company, estimatedat a conversion rate of $0.006. As a result of the conversion the derivative liability related to the debenture was remeasured immediately prior to the conversions with an overall increase in the fair value of $8,000 recognized, with the fair value of the conversion feature derivatives embedded inderivative liability related to the convertible debentures at issuance at $150,000, based on weighted probabilitiesconverted portion, of assumptions used in the Black Scholes pricing model.$30,000 being reclassified to equity. The key valuation assumptions used consist, in part, of the price of the Company’s common stock on the dates of $0.17 at issuance date;conversion of $0.03; a risk-free interest rate of 1.12%0.13% and expected volatility of the Company’s common stock, of 190.70%158.29%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $116,438, was immediately expensed as financing costs.

As of September 30, 2020 and March 31, 2020, the various estimated reset exercise prices weighted by probability. This resulted in the calculated fairCompany had 200,000,000 shares of preferred stock authorized with a par value of the debt discount being greater than the face$0.0001. Of this amount, 5,000,000 shares of the debt,Series A preferred stock are authorized and the excess amount of $18,000 was immediately expensed as financing costs.outstanding, and 5,000 shares Series B preferred stock are authorized and 2,750 outstanding, respectively.

On August 23, 2019, the Company entered into a new Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”) with GHS. Under the terms of the Equity Financing Agreement, GHS agreed to sellprovide the Company with up to $11,000,000 upon effectiveness of a 12% Convertible Note for $55,000registration statement on Form S-1 (the “Registration Statement”) filed with a maturity date of September 28, 2018, for a purchase price of $51,700,the U.S. Securities and $2,200 deducted for legal fees, resulting in net cash proceeds of $49,500. The effective closing dateExchange Commission (the “Commission”).

Following effectiveness of the Securities Purchase AgreementRegistration Statement, the Company shall have the discretion to deliver puts to GHS and Note is October 17, 2017. The note is convertible at the holders’ option, at any time, at a conversion price equalGHS will be obligated to the lower of (i) the closing sale pricepurchase shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) based on the closing date, or (ii) 60%investment amount specified in each put notice. The maximum amount that the Company shall be entitled to put to GHS in each put notice shall not exceed two hundred percent (200%) of either the lowest sale price for the Company’s common stock during the twenty (20) consecutiveaverage daily trading days including and immediately preceding the closing date, or the closing bid price, whichever is lower , provided that, if the pricedollar volume of the Company’s common stock loses a bid, thenCommon Stock during the conversion priceten (10) trading days preceding the put, so long as such amount does not exceed $500,000. Pursuant to the Equity Financing Agreement, GHS and its affiliates will not be permitted to purchase and the Company may be reduced, at the holder’s absolute discretion, to a fixed conversion price of $0.00001. If at any time the adjusted conversion price for any conversion would be less than par valuenot put shares of the Company’s common stock, thenCommon Stock to GHS that would result in GHS’s beneficial ownership equaling more than 4.99% of the conversionCompany’s outstanding Common Stock. The price shall equal such par value for any such conversion and the conversion amount for such conversionof each put share shall be increasedequal to include additional principaleighty percent (80%) of the Market Price (as defined in the Equity Financing Agreement). Puts may be delivered by the Company to GHS until the extent necessary to causeearlier of thirty-six (36) months after the numbereffectiveness of shares issuable upon conversion equal the same numberRegistration Statement or the date on which GHS has purchased an aggregate of shares as would have been issued had$11,000,000 worth of Common Stock under the Conversion Price not been subject toterms of the minimum par value price. The conversion feature meets the definition of a derivative and therefore requires bifurcation and is accounted for as a derivative liability.Equity Financing Agreement.

The Registration Rights Agreement provides that the Company estimatedshall (i) use its best efforts to file with the Commission the Registration Statement within 30 days of the date of the Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the Commission within 30 days after the date the Registration Statement is filed with the Commission, but in no event more than 90 days after the Registration Statement is filed. The Registration Statement was filed on October 8, 2019 and as of this filing has not yet been deemed effective.

On August 24, 2020, the Company issued 1,500,000 shares of common stock to a consultant per an agreement entered into on June 25, 2020. The agreement has a six month term, and therefore the fair value of the conversion feature derivatives embedded in the convertible debentures at issuance at $91,000,$67,500, based on weighted probabilitiesthe market value of assumptions used in$0.045 on the Black Scholes pricing model. The key valuation assumptions used consist, in part,grant date, will be recognized over the term of the price ofagreement, with $32,500 expensed during the Company’s common stock of $0.11 at issuance date; a risk-free interest rate of 1.41% and expected volatility of the Company’s common stock, of 193.79%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount being greater than the face amount of the debt, and the excess amount of $41,500 was immediately expensed as financing costs.

On November 14, 2017,June 12, 2020, the Company entered into two 8% convertible redeemable notes, in the aggregate principal amount of $112,000, convertible intoissued 1,250,000 shares of common stock of the Company,to a consultant, with maturity dates of November 14, 2018. Each note was in the face amount of $56,000, with an original issue discount of $2,800, resulting in a purchase price for each note of $53,200. The first of the two notes was paid for by the buyer in cash upon closing, with the second note initially paid for by the issuance of an offsetting $53,200 secured promissory note issued to the Company by the buyer (“Buyer Note”). The Buyer Note is due on July 14, 2018. The notes are convertible at 57% of the lowest of trading price for last 20 days, or lowest closing bid price for last 20 days, with the discount increased to 47% in the event of a DTC chill, with the second note not being convertible until the buyer has settled the Buyer Note in cash payment. The Buyer Note is included in Notes Receivable in the accompanying financial statements.

The Company has not granted any options since inception.

The Company has granted approximately 3,087,499 warrants in connection with various convertible debentures. For further discussions seedebentures in previous periods. The remaining outstanding warrants were cancelled in connection with the legal settlement with Vista Capital Investments, LLC, on April 9, 2020. See discussion in Note 5.10. The related warrant liability was revalued upon cancellation on April 9, 2020, resulting in no change to the fair value of the warrant liability and the $90,000 fair value was reclassified to equity.

On January 1, 2016 the Company entered into a notes payable agreement with NaturalShrimp Holdings, Inc.(“NSH”), a shareholder. Between January 16, 2016 and March 31, 2017,7, 2016, the Company borrowed $736,111$134,750 under this agreement. ThereAn additional $601,361 was no borrowing onborrowed under this loan foragreement in the nine monthsyear ended DecemberMarch 31, 2017. The note payable has no set monthly payment or maturity date with a stated interest rate of 2%. As of September 30, 2020 and March 31, 2020 the outstanding balance is approximately $735,000. At September 30, 2020 and March 31, 2020, accrued interest payable was approximately $58,000 and $51,000, respectively.

The Company has entered into several working capital notes payable to multiple shareholders of NSH and Bill Williams, ana former officer aand director, and a shareholder of the Company, for a total of $486,500. The notes are unsecured and bear interest at 8%. These notes had stock issued in lieu of interest and have no set monthly payment or maturity date. The balance of these notes was $356,404 at both December 31, 2017September 30, 2020 and $426,404 at March 31, 2017 was $426,404,2020, respectively, and is classified as a current liability on the condensed consolidated balance sheets. At December 31, 2017September 30, 2020 and March 31, 2017,2020, accrued interest payable was $198,922approximately $140,000 and $172,808,$240,000, respectively.

Beginning in 2010, the Company started entering into several working capital notes payable with various shareholders of NSH for a total of $290,000 and bearing interest at 8%. The balance of these notes at December 31, 2017September 30, 2020 and March 31, 20172020 was $5,000,$54,647 and is classified as a current liability on the condensed consolidated balance sheets. At December 31, 2017 and March 31, 2017, accrued interest payable was $1,400 and $1,200, respectively.

On June 24, 2019, the Company entered into a service and equipment lease agreement for water treatment services, consumables and equipment. The lease term is for five years, with a renewal option of an additional five years, with a monthly lease payment of $5,000. The Company accounts for income taxesanalyzed the classification of the lease under ASC 740-10, which provides842, and as it did not meet any of the criteria for a financing lease it has been classified as an operating lease. The Company determined the Right of Use asset and Lease liability approachvalues at inception calculated at the present value of accountingall future lease payments for income taxes. Under this approach, deferred tax assetsthe lease term, using an incremental borrowing rate of 5%. The Lease Liability will be expensed each month, on a straight line basis, over the life of the lease. As of September 30, 2020 and liabilities are recognized basedMarch 31, 2020, the lease is on anticipated future tax consequences, using currently enacted tax laws, attributedhold while the Company waits for new equipment to temporary differences betweenbe delivered and installed. As the carrying amountslease is on hold there has been no lease expense or amortization of assetsthe Right of Use asset for the three and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.six months ended September 30, 2020.

For the three and ninesix months ended December 31, 2017September 30, 2019 the lease expense was $15,000, and 2016, 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 uncertaintyamortization of the realizationRight of any deferred tax assets.Use asset was $11,702.

On April 1, 2015, the Company entered into an employment agreementsagreement with each of Bill G. Williams, as the Company’s Chief Executive Officer, and Gerald Easterling at the time as the Company’s President, effective as of April 1, 2015 (the “Employment Agreements”Agreement”).

The Employment Agreements are eachAgreement is terminable at will and each provide for a base annual salary of $96,000. In addition, the Employment Agreements each provideAgreement provides that the employee is entitled, at the sole and absolute discretion of the Company’s Board of Directors, to receive performance bonuses. Each employeeMr. Easterling will also be entitled to certain benefits including health insurance and monthly allowances for cell phone and automobile expenses.

EachThe Employment Agreement provides that in the event the employee is terminated without cause or resigns for good reason (each as(as defined in their Employment Agreements)Agreement), the employee will receive, as severance the employee’s base salary for a period of 60 months following the date of termination. In the event of a change of control of the Company, the employee may elect to terminate the Employment Agreement within 30 days thereafter and upon such termination would receive a lump sum payment equal to 500% of the employee’s base salary.

EachThe 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.

During the first 180 days, the convertible redeemable notes are in effect,On August 11, 2020, the Company may redeemissued a press release announcing that it has signed a letter of intent to acquire the note at amounts ranging from 115%assets of Alder Aqua, formerly known as VeroBlue Farms, in Webster City, Iowa, including, but not limited to, 140%the real property, equipment, tanks, rolling stock, inventory, permits, contracts, customer lists and contracts and other such assets used in the operation of the principalbusiness. The purchase price will be $10,000,000, consisting of a $5,000,000 down payment and accrued interest balance, based on the redemption date’s passage of time ranging from 30 daysnotes due in 36 and 48 months. The acquisition is subject to 180 days from the date of issuance of each debenture. Upon any sale event, as defined, at the holder’s requestsuccessful due diligence by the Company will redeemand is expected to close in the note for 150%fourth quarter of 2020. Additionally, the principalfacilities located in Blairsburg, Iowa and accrued interest.Buckeye, Iowa are included in the transaction.

Although we believe that the expectations reflected in ourthe 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 thesethe forward-looking statements to conform suchthese statements to actual results.

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

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 18-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 101-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 NSC and NS Global, 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,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 we 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.

On October 16, 2015, we formed NAS.Natural Aquatic Systems, Inc. (“NAS”). The purpose of the NAS is to formalize the business relationship between our Company and F&T Water Solutions LLC for the joint development of certain water technologies. The technologies shall include, without limitation, 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. On December 25, 2018, we were awarded U.S. Patent “Recirculating Aquaculture System and Treatment Method for Aquatic Species” covering all indoor aquatic species that utilizes proprietary art.

The Company has threetwo wholly-owned subsidiaries, including NSC and NS Global and owns 51% of NAS.

Historically, efforts to raise shrimp in a high-density, closed system at the commercial level have been met with either modest success or outright failure through “BioFloc Technology.” Infectious agents such as parasites, bacteria and viruses are the most damaging and most difficult to control. Bacterial infection can in some cases be combated through the use of antibiotics (although not always), and in general, the use of antibiotics is considered undesirable and counter to “green” cultivation practices. Viruses can be even worse, in that they are immune to antibiotics. Once introduced to a shrimp population, viruses can wipe out entire farms and shrimp populations, even with intense probiotic applications.

In 2001, we began research and development of a high density, natural aquaculture system that is not dependent on ocean water to provide quality, fresh shrimp every week, fifty-two weeks a year. TheOur initial NaturalShrimp system was successful, but the Companywe determined that it would not be economically feasible due to high operating costs. Over the next several years, using the knowledge we gained from developing the first system, we developed a shrimp production system that eliminated the high costs associated with the previous system. We have continued to refine this technology, eliminating bacteria and other problems that affect enclosed systems, and now have a successful shrimp growing process. We have produced thousands of pounds of shrimp over the last few years in order to develop a design that will consistently produce quality shrimp that grow to a large size at a specific rate of growth. This included experimenting with various types of natural live and synthesized feed supplies before selecting the most appropriate nutritious and reliable combination. It also included utilizing monitoring and control automation equipment to minimize labor costs and to provide the necessary oversight for proper regulation of the shrimp environment. However, there were further enhancements needed to our process and technology in order to begin production of shrimp on a commercially viable scale and to generate revenues.

Our current system consists of a reception tank where the shrimp are acclimated, then moved to a larger grow-out tank for the rest of the twenty-weektwenty-four week cycle. During 2016, we engaged in additional engineering projects with third parties to further enhance our indoor production capabilities. For example, through our relationship with Trane, Inc., a division of Ingersoll-Rand Plc (“Trane”), Trane is proceeding withhas provided a detailed audit to use data to build and verify the capabilities of anthen initial Phase 1 prototype of a Trane-proposed three tank system at our La Coste, Texas facility. The prototype consistsCompany contracted F&T Water Solutions and RGA Labs, Inc. (“RGA Labs”) to complete final engineering and building of athe initial patent-pending modified Electrocoagulation system for the human grow-out, harvesting and processing of fully mature, antibiotic-free Pacific White Leg shrimp. The detailed audit and design is ongoing and, once completed, will present a viable pathway to begin generating revenue and producing shrimp on a commercially viable scale. After theThe design is completed installation of the system is expected to be providedand was installed in early June 2018 by an outside general contractor,RGA Labs, and final financing for the system is expected to be provided by one of the Company’s existing intuitional investors. The first post larvae (PL) arrived from the hatchery on July 3, 2018. The Company used the shrimp for sampling to key potential customers and special events such as the Texas Restaurant Association trade show. The Company also received two production PL lots from Global Blue Technologies on March 21, 2019 and April 17, 2019 and from American Penaeid, Inc. on August 7, 2019. Because the shrimp displayed growth that was slower than normal, the Company had a batch tested by an outside firm. Once bothindependent lab at the University of these factorsArizona. The shrimp tested positive for Infectious hypodermal and hematopoietic necrosis (“IHHNV”) and the Texas Parks and Wildlife Department was notified that the facility was under quarantine. On August 26, 2019, the Company was forced to terminate all lots due to the infection. The Company will begin restocking on shrimp in the refurbished facility sections. On August 30, 2019, the Company received notice that it was in compliance again and the quarantine had been lifted. During the aforementioned quarantine, the Company decided to begin an approximately $1,000,000 facility renovation demolishing the interior 16 wood structure lined tanks (720,000 gallons). The Company would be replacing the previous tanks with 40 new fiberglass tanks (600,000 gallons) at a cost of approximately $400,000 allowing complete production flexibility with more smaller tanks. The Company had expected that the first shrimp tanks harvest target date will be April 2020.

On March 18, 2020, our research and development plant in La Coste, Texas was destroyed by a fire. The Company believes that it was caused by a natural gas leak, but the fire was so extensive that the cause was undetermined. No one was injured as a result of the fire. The majority of the damage was to our pilot production plant, which comprises approximately 35,000 square feet of the total size of all facilities at the La Coste location of approximately 53,000 square feet, but the fire did not impact the separate greenhouse, reservoirs or utility buildings. We have received total insurance proceeds in the amount of $917,210, the full amount of our claim. These funds are complete, which is estimatedbeing utilized to rebuild a 40,000 square foot production facility at the La Coste facility and to repurchase the equipment needed to replace what was lost in the fire. We expect this facility to be in the Q-2 of calendar 2018, we expect it would take approximately six to nine months to begin producing and shipping shrimp.operational by January 2021.

We have not earned any significant revenues since our inception and, although we do not anticipate earningexpect revenues to begin in the near future.third quarter of 2021, we can provide no assurances as to how significant they will be at that time.

Our expenses for the three months ended December 31, 2017September 30, 2020 are summarized as follows, in comparison to our expenses for the three months ended December 31, 2016:September 30, 2019:

Operating expenses for the three months ended December 31, 2017September 30, 2020 were $274,333, representing$557,746, which is an approximately 37% increase of 37% compared toover operating expenses of $209,189$406,725 for the same period in 2016.2019. The primary reason foroverall change in expenses is mainly due to the change is an increase in professional fees plus services provided byresulting from an increase in legal fees this period, related in part to the warrant settlement with Vista, the new expense for research and development and an increase in accounting consulting fees, over the same period in the previous year. The increase of approximately $53,000 in the three months ended September 30, 2020 for facility operations and the research and development is a new consultant,result of the fees to whomCompany recommencing with its testing and start-up operations in the production plant. All other costs between periods are included in other general and administrative expenses. This increase was slightly offset by reduced facility fees and depreciation expense.fairly consistent.

We have not earned any significant revenues since our inception and, although we do not anticipate earningexpect revenues to begin in the near future.third quarter of 2021, we can provide no assurances as to how significant they will be at that time.

Our expenses for the ninesix months ended December 31, 2017September 30, 2020 are summarized as follows, in comparison to our expenses for the ninesix months ended December 31, 2016:September 30, 2019:

Operating expenses for the ninesix months ended December 31, 2017September 30, 2020 were $940,464, representing$915,878, which is an increase of 49%approximately 14% as compared to operating expenses of $631,249 for the same period in 2016.2019. The primary reasonoverall change in expenses is mainly due to the increase in professional fees and the new expense for research and development, offset by the changedecrease in facility operations between the periods. The increase in professional fees is the amortization of prepaid expenses of $220,000 for the current period expense relateddue to shares issued in January 2017 to a consultant for services to be provided over six months, plus an increase in professional fees. Thislegal fees this period, related in part to the Vista warrant settlement, and an increase was offset byin accounting consulting fees, over the same period in the previous year. The decrease of approximately $60,000 in facility operations is a decreaseresult of the fire on March 18, 2020, at our pilot production plant, which is currently in salariesthe process of being rebuilt. While we have been starting up the testing and relatedstart-up operations in the current quarter of 2020, facility operation expenses for the six months are lower due to an executive who has leftreduction of work as a result of the company sincefire. In the prior year,three months ending September 30, 2019, the Company was progressing with its testing and reduced facility fees.planning to begin commercial operations, which had resulted in a ramp-up of costs. All other costs between periods are fairly consistent.

As of December 31, 2017,September 30, 2020, we had cash and cash equivalents on hand of $15,715approximately $316,000 and a working capital deficiency of approximately $5,256,197,$3,088,000, as compared to cash equivalents on hand of $88,195approximately $109,000 and a working capital deficiency of $2,384,695approximately $3,598,000 as of March 31, 2017.2020. The increasedecrease in working capital deficiency for the periodsix months ended December 31, 2017September 30, 2020 is mainly due to an approximate $650,000 increasethe decrease in current liabilities reflecting the reclassification to current liabilitiesas a result of certain lines of credit based on their maturity dates, an increasedecreases in convertible debentures net of debt discounts, an increase in the warrant liability of $435,000, an increase in the fair value of the derivative liability of $1,314,000 and the decreaserelated derivatives due to conversions of approximately $336,000 of convertible debt, the Vista settlement in prepaidApril of 2020, which was accrued as of March 31, 2020 and which consisted of $560,000 in accrued expenses discussed above,and $90,000 in warrant liability, as well as an increasethe issuance of the related party note to Ms. Williams in accrued expenses.exchange for the amounts owed under the late Mr. William’s settlement agreement, a portion of which in now non-current. This is offset by a decrease in current assets as a result of the collection of the insurance settlement of approximately $917,000.

Our working capital deficiency as of December 31, 2017,September 30, 2020, in comparison to our working capital deficiency as of March 31, 2017,2020, can be summarized as follows:

The decrease in current assets is mainly due to the receipt of the insurance settlement of approximately $917,000 which was in current period expense recognitionassets as of $220,000 outMarch 31, 2020. While this decreased current assets as compared to the prior year end, the remaining proceeds have increased cash as of prepaid expenses for shares issued for services in connection with a six-month agreement with a consultant, as well as an approximate $72,000September 30, 2020, by approximately $206,000. The decrease in cash and equivalents, offset by the addition of new notes receivable. The increase in current liabilities is primarily due an approximately $650,000 reclassification to current liabilities of certain lines of credit based on their maturity dates, as well as in increase in the carrying amountissuance of the convertible debenturesshares of the Company’s common stock in the current period netrelated to the Vista warrant settlement, with a fair value of $560,000, plus the cash payment to Vista of $75,000 on April 10, 2020, which were both included in accrued expenses as of March 31. 2020, along with the reclassification of the $90,000 warrant liability to equity upon cancellation of the Vista warrants. The current liabilities also were decreased by the conversion of approximately $336,000 of principal of convertible notes and the related reclassification to equity of the total derivative liability upon conversion. Additionally, the issuance of the related debt discounts. The new convertible debentures entered into duringparty note to Ms. Williams in exchange for the nine monthsamounts owed under the late Mr. William’s settlement agreement, also contained embedded derivatives, which were bifurcated and further increased the fair valueresulted in a decrease to current liabilities as a portion of the derivative liability, which was $1,532,000 asnew note payable in now non-current. Lastly, there also is an increase of December 31, 2017 as compared to $218,000 as of March 31, 2017. Additionally, the warrant liability increased by $435,000 due to additional warrants issued as well as the reset provision which increased the number of warrants outstanding.approximately $169,000 in accounts payable.

Our cash flows for the ninesix months ended December 31, 2017,September 30, 2020, in comparison to our cash flows for the ninesix months ended December 31, 2016,September 30, 2019, can be summarized as follows:

The increasedecrease in net cash used in operating activities in the ninesix months ended December 31, 2017,September 30, 2020 compared to the same period 2016, mainly relatesin 2019 is attributable partly due to athe decrease in prepaid expenses, offset by the non-cash charges ofnet loss, as well as the amortization of the debt discount, changes inapproximately $129,000 fair value of the derivative and warrant liabilities, financing costs and shares issued for services. There also was the decrease in accrued expenses, which was a result of the settlement with Vista and in accrued interest due to related parties, stemming from the issuance of the new Ms. Williams note payable in settlement of the late Mr. Williams separation agreement. This is offset in the current period of no longer recognizing amortization of debt discount, which was $476,373 in the prior period.

The Company also has an additional linesline of credit with Extraco Bank for $100,000 and $200,000, which werewas renewed on January 19, 2017 andwith a maturity date of April 30, 2017, respectively, with maturity dates2021, for a balance of January 19, 2019 and April 30, 2018, respectively.$177,778. The lines of credit bear an interest at a rate of 4.5% (increased to 6.5% and 5%, respectively, upon renewal in 2017) that is compounded monthly and to be paid with the principal on unpaid balances andthe maturity date. The line of credit is payable monthly. They are secured by certificates of deposit and letters of credit owned by directors and shareholders of the Company. The balance of the linesline of credit was $278,470$177,778 at both December 31, 2017September 30, 2020 and March 31, 2017.2020.

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 30.40%29.15% as of December 31, 2017.September 30, 2020. The line of credit is unsecured. The balance of the line of credit was $9,580 at both December 31, 2017September 30, 2020 and March 31, 2017.2020.

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 14.50%13.25% as of December 31, 2017.September 30, 2020. The line of credit is secured by assets of the Company’s subsidiaries. The balance of the line of credit is $11,197$10,237 at both December 31, 2017September 30, 2020 and March 31, 2017.2020.

On January 10, 2017, wethe Company entered into a promissory note agreement with Community National Bank in the principal amount offor $245,000, withat 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 La Coste,LaCoste, Texas, and is also personally guaranteed by the Company’s President, and Chairman of the Board, as well as certain non-affiliated shareholders of the Company. On January 10, 2020, the loan was modified, with certain terms amended. The modified note is for the principal balance of $222,736, with initial monthly payments of $1,730 through February 1, 2037, when all unpaid principal and interest will be due and payable. The loan has an initial yearly rate of interest of 5.75%, which may change beginning on February 1, 2023 and each 36 months thereafter, to the Wall Street Journal Prime Rate plus 1%, but never below 4.25%. The monthly payments may change on the same dates as the interest changes. The Company is also allowed to make payments against the principal at any time. The balance of the CNB Note is $218,947 at September 30, 2020, $8,990 of which was in current liabilities, and $220,899 at March 31, 2020, of which $8,904 was in current liabilities.

On March 28, 2017, the Company entered into a Securities Purchase Agreement with an accredited investor related to the purchase and sale of certain convertible debentures in the aggregate principal amount of up to $400,000 for an aggregate purchase price of up to $360,000. The agreement contemplates three separate convertible debentures, with each maturing three years following the date of issuance. On March 28, 2017, the Company issued the first convertible debenture in the principal amount of $100,000 for a purchase price of $90,000. Pursuant to the Securities Purchase Agreement, the closing of the second convertible debenture was to occur upon mutual agreementof the parties, at any time within sixty (60) to ninety (90) days following the original signing closing date, in the principal amount of $150,000 for a purchase price of $135,000. On July 5, 2017, the Securities Purchase Agreement was amended to reduce the maximum aggregate principal amount of the convertible debentures to $325,000, for an aggregate purchase price of up to $292,500, and to reduce the principal amount of the second convertible debenture to $75,000 for a purchase price of $67,500. The closing of the second convertible debenture occurred on July 5, 2017. In connection with the closing of the second convertible debenture, the Company issued 75,000 shares of restricted common stock to the holder as a fee in consideration of the expenses incurred in consummating the transaction. The closing of the third convertible debenture was to occur upon mutual agreement of the parties within sixty (60) to ninety (90) days following the second closing, in the principal amount of $150,000 for a purchase price of $135,000. The convertible debentures are convertible into shares of the Company’s common stock at a fixed conversion price of $0.30 for the first one hundred eighty (180) days. After one hundred eighty (180) days, or in an event of default, the conversion price will be the lower of $0.30 or sixty percent (60%) of the lowest closing bid price over the 20 trading days preceding the date of conversion. On September 22, 2017, the Company exercised its option to redeem the first closing of the March debenture, for a redemption price at $130,000, 130% of the principal amount. The principal of $100,000 was derecognized with the additional $30,000 paid upon redemption recognized as a financing cost. On December 28, 2017, the Company exercised its option to redeem the second closing of the March debenture, for a redemption price at $97,500, 130% of the principal amount. Upon redemption, the principal of $75,000 was relieved, with the additional $22,500 paid recognized as a financing cost.

The note is convertible into shares of the Company’s common stock at a variable conversion rate that is equal to the lesser of sixty percent (60%)60% of the lowest trading price overfor the last 20 trading days prior to the issuance of the note or sixty percent (60%)60% of the lowest tradingmarket price over the 20 trading days prior to conversion. The conversion subjectprice shall be adjusted upon subsequent sales of securities at a price lower than the original conversion price. There are additional 10% adjustments to adjustment. In connection with the note, the Company issued 50,000 warrants, exercisable at $0.20, with a five-year term. The exerciseconversion price is adjustable upon certainfor events as set forth in the agreement, including for future dilutive issuance. The exerciseif the conversion price was adjusted to $0.15 andis less than $0.01, if the warrants issued increased to 66,667, uponCompany is not DTC eligible, the Company is no longer a warrant issuance related to a new convertible debenturereporting company, or the note cannot be converted into free trading shares on September 11, 2017. The warrants exercise price was subsequently reset to 50%or after nine months from issue date. On December 13, 2018 the holder converted $11,200 of principal into 4,000,000 shares of common stock of the market priceCompany. On three separate dates during the thirdfirst quarter of the fiscal 2018, andyear ending March 31, 2021, the warrants issued increased accordingly. Additionally, in connection with the note, the Company also issued 343,750remaining outstanding balance was converted into 35,887,170 shares of common stock of the Company, asat a commitment fee. The commitment shares fair value was calculated as $58,438, based on the market valueconversion rate of the common shares at the closing date of $0.17, and was recognized as part of the debt discount. The shares are to be returned to the Treasury of the Company in the event the debenture is fully repaid prior to the date which is 180 days following the issue date. On October 31, 2017, there was a second closing to the August debenture, in the principal amount of $66,000, maturing on April 30, 2018. The second closing has the same conversion terms as the first closing, however there were no additional warrants issued with the second closing. Additionally, in connection with the second closing, the Company issued 332,500 shares of common stock of the Company as a commitment fee. The commitment shares fair value was calculated as $35,877, based on the market value of the common shares at the closing date of $0.11, and was recognized as part of the debt discount. The shares are to be returned to the Treasury of the Company in the event the debenture is fully repaid prior to the date which is 180 days following the issue date.

On September 11, 2017,March 1, 2019, the Company entered into a 12%10% convertible promissory note for $168,000, with an accredited investor in the principal amountOID of $146,000, with an original issue discount of $13,500, which matures on June 11, 2018. The note is convertible into shares of the Company’s common stock at a variable conversion rate equal to the lesser of the lowest trading price over the 25 trading days prior to the issuance of the note or fifty percent (50%) of the lowest trading price over the 25 trading days prior to conversion, subject to adjustment. In connection with the note, the Company issued 243,333 warrants, exercisable at $0.15, with a five-year term. The exercise price is adjustable upon certain events, as set forth in the agreement, including for future dilutive issuance. The warrants exercise price was subsequently reset to 50% of the market price during the third quarter of fiscal 2018, and the warrants issued increased accordingly.