NATURALSHRIMP INC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes a number of forward-looking
statements that reflect management’s current views with respect to future events
and financial performance. Forward-looking statements are projections in respect
of future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as “may,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these terms or other comparable
terminology. These statements include statements regarding the intent, belief or
current expectations of us and members of our management team, as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks set forth in the section
entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year
ended March 31, 2022, as filed with the U.S. Securities and Exchange Commission
(the “SEC”) on June 29, 2022, any of which may cause our company’s or our
industry’s actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied in our forward-looking statements. These risks
and factors include, by way of example and without limitation:

· our ability on a timely basis to successfully rebuild our water treatment plant

and replace our filtration equipment that was destroyed by fire on July 3, 2022

at our La Coste, Texas facility;

· our ability to continue developing and expanding our research and development

plant in La Coste, Texas and our production facility in Webster City, Iowa;

· our ability to successfully commercialize our equipment and shrimp farming

operations to produce a market-ready product in a timely manner and in enough

quantity;

· absence of contracts with customers or suppliers;

· our ability to maintain and develop relationships with customers and suppliers;

· our ability to successfully integrate acquired businesses or new brands;

· the impact of competitive products and pricing;

· supply constraints or difficulties;

· the retention and availability of key personnel;

· general economic and business conditions;

· substantial doubt about our ability to continue as a going concern;

· our continued ability to raise funding at the pace and quantities required to

scale our plant needs to commercialize our products;

· our ability to successfully recruit and retain qualified personnel in order to

continue our operations;

· our ability to successfully implement our business plan;

· our ability to successfully acquire, develop or commercialize new products and

equipment;

· the commercial success of our products;

· business interruptions resulting from geo-political actions, including war, and

terrorism or disease outbreaks (such as the outbreak of COVID-19);

· intellectual property claims brought by third parties; and

· the impact of any industry regulation.

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

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



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As used in this Quarterly Report on Form 10-Q and unless otherwise indicated,
the terms “Company,” “we,” “us,” and “our” refer to NaturalShrimp Incorporated
and its wholly-owned subsidiaries: NaturalShrimp USA Corporation (“NSC”) and
NaturalShrimp Global, Inc. (“NS Global”) and Natural Aquatic Systems, Inc.
(“NAS”). Unless otherwise specified, all dollar amounts are expressed in United
States
Dollars.




Corporate History



We were incorporated in the State of Nevada on July 3, 2008 under the name
Multiplayer Online Dragon, Inc.” Effective November 5, 2010, we effected an
8-for-1 forward stock split, increasing the issued and outstanding shares of our
common stock from 12,000,000 shares to 96,000,000 shares. On October 29, 2014,
we effected a 1-for-10 reverse stock split, decreasing the issued and
outstanding shares of our common stock from 97,000,000 to 9,700,000.

On November 26, 2014, we entered into an Asset Purchase Agreement (the
“Agreement”) with NaturalShrimp Holdings, Inc. a Delaware corporation (“NSH”),
pursuant to which we agreed to acquire substantially all of the assets of NSH
which assets consisted primarily of all of the issued and outstanding shares of
capital stock of 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; NSC and NS Global became our wholly-owned subsidiaries,
and we changed our principal business to a global shrimp farming company. We
changed our name to “NaturalShrimp Incorporated” in 2015.



Business Overview


We are a biotechnology company and have developed proprietary platform
technologies that allow 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. The Company’s production facilities are located in La Coste, Texas
and Webster City, Iowa.

On October 16, 2015, we formed NAS. The purpose of NAS is to formalize the
business relationship between our Company and F&T Water Solutions LLC (“F&T”)
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.

On December 15, 2020, we entered into an Asset Purchase Agreement (“APA”)
between VeroBlue Farms USA, Inc., a Nevada corporation (“VBF”), VBF Transport,
Inc.
, a Delaware corporation (“Transport”), and Iowa’s First, Inc., an Iowa
corporation (“Iowa’s First”) (each a “Seller” and collectively, “Sellers”).
Transport and Iowa’s First were wholly-owned subsidiaries of VBF. The agreement
called for us to purchase all of the tangible assets of VBF, the motor vehicles
of Transport and the real property (together with all plants, buildings,
structures, fixtures, fittings, systems, and other improvements located on such
real property) of Iowa’s First. The consideration was $10,000,000, consisting of
$5,000,000 in cash, paid at closing on December 17, 2020, (ii) $3,000,000
payable in 36 months with interest thereon at the rate of 5% per annuum,
interest only payable quarterly on the first day of the quarter, with the
remaining balance to be paid to VBF as a balloon payment on the maturity date,
and (iii) $2,000,000 payable in 48 months with interest thereon at the rate of
5% per annuum, interest only payable quarterly on the first day of the quarter,
with the remaining balance to be paid to VBF as a balloon payment on the
maturity date. The Company also agreed to issue 500,000 shares of Common Stock
as a finder’s fee.



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The facility was originally designed as an aquaculture facility, with the
company having production issues. The Company’s has begun a modification process
to convert the plant to produce shrimp, which will allow them to scale faster
without having to build new facilities. The three Iowa facilities contain the
tanks and infrastructure that will be used to support the production of shrimp
with the incorporation of the Company’s Electrocoagulation (EC) platform
technology.

On May 19, 2021, the Company entered into a Patents Purchase Agreement (the
“Patents Agreement”) with F&T. The Company and F&T had previously jointly
developed and patented a water treatment technology used or useful in growing
aquatic species in re-circulating and enclosed environments (the “Patent”) with
each party owning a fifty percent (50%) interest. Upon the closing of the
Patents Agreement, the Company would purchase F&T’s interest in the Patent,
F&T’s 100% interest in a second patent associated with the first Patent issued
to F&T in March 2018, and all other intellectual property rights owned by F&T
for a purchase price of $2,000,000 in cash and issue 9,900,990 shares of the
Company’s common stock with a market value of $0.505 per share for a total fair
value of $5,000,000, for a total acquisition price of $7,000,000. The Company
paid the cash purchase price on May 20, 2021 and the closing of the Patents
Agreement took place on May 25, 2021.

On August 25, 2021, the Company, through its 100% owned subsidiary NAS, entered
into an Equipment Rights Agreements with Hydrenesis-Delta Systems, LLC
(“Hydrenesis-Delta”) and a Technology Rights Agreement, in a sub-license
agreement with Hydrenesis Aquaculture LLC (“Hydrenesis-Aqua”), The Equipment
Rights involve specialized and proprietary equipment used to produce and
control, dose, and infuse Hydrogas® and RLS® into both water and other chemical
species, while the Technology sublicense pertains to the rights to Hydrogas® and
RLS®. Both Rights agreements are for a 10 year term, which shall automatically
renew for ten year successive terms. The term can be terminated by written
notice by mutual consent, or by either party upon a breach of contract,
insolvency or filing of bankruptcy. The agreements accord the exclusive rights
to purchase or distribute the technology, or buy or rent the equipment, in the
Industry Sector, which is the primary business and revenue stream generated from
indoor aquaculture farming of any species in the Territory, defined as anywhere
in the world except for the countries in the Gulf Corporation Council.

The Company has three wholly-owned subsidiaries: NSC, NS Global, and NAS.



Evolution of Technology


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 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.

Our primary solution against infectious agents is our “Vibrio Suppression
Technology.” We believe this system creates higher sustainable densities,
consistent production, improved growth and survival rates and improved food
conversion without the use of antibiotics, probiotics, or unhealthy
anti-microbial chemicals. Vibrio Suppression Technology helps to exclude and
suppress harmful organisms that usually destroy “BioFloc” and other enclosed
technologies.

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. Our initial system was
successful, but we 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.



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Our current system consists of a nursery tank where the shrimp are acclimated,
then moved to a larger grow-out tank for the rest of the twenty-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
provided a detailed audit to use data to build and verify the capabilities of
then initial Phase 1 prototype of a Trane-proposed three tank system at our La
Coste, Texas
facility. The Company working with F&T Water Solutions contracted
RGA Labs, Inc. (“RGA Labs“) to build the initial NaturalShrimp patented
Electrocoagulation system for the grow-out, harvesting and processing of fully
mature, antibiotic-free Pacific White Leg shrimp. The design provided a viable
pathway to begin generating revenue and producing shrimp on a commercially
viable scale. The equipment was installed in early June 2018 by RGA Labs, and
final financing for the system was provided by one of the Company’s
institutional 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 independent lab at the University
of Arizona
. 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. On August 30, 2019, the
Company received notice that it was in compliance again and the quarantine had
been lifted and the Company began restocking shrimp in the refurbished facility
sections. During the aforementioned quarantine, the Company decided to begin an
approximately $2,000,000 facility renovation demolishing the interior 16 wood
structure lined tanks (720,000 gallons). The Company began 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.

Recent Material Events During the Quarter

On July 3, 2022, a building containing our water treatment and purification
system in La Coste, Texas (the “Water Treatment Plant“) was completely destroyed
in a fire. The Water Treatment Plant is a separate building consisting of
approximately 8,000 square feet located apart from the production building which
was not damaged. We have filed a claim with our insurance company which, as of
this filing, has not yet been completed. Due to the damage caused by the fire,
we have written off approximately $1,764,000 of the fixed assets and $325,000 of
the accumulated depreciation, for a net impairment to be recognized of
$1,439,000.




Results of Operations



Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended
June 30, 2021



Revenue


We have not earned any significant revenues since our inception and, although we
had revenue of approximately $36,000 in the three months ended June 30, 2022, we
can provide no assurances as to how significant our revenue will be in the next
one to two fiscal quarters.



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Expenses


Our expenses for the three months ended June 30, 2022 are summarized as follows,
in comparison to our expenses for the three months ended June 30, 2021:



                                              Three Months Ended June 30,
                                                 2022               2021

Salaries and related expenses               $       443,303      $   632,321
Professional fees                                   433,970          597,246
Other general and administrative expenses           422,137          410,610
Rent                                                 26.622            4,085
Facility operations                                 531,736          239,325
Research and development                            172,643                -
Depreciation                                        525,229          354,503
Amortization                                        367,500                -
Total                                       $     2,923,140      $ 2,238,090



Operating expenses for the three months ended June 30, 2022 were $2,923,140,
which is a 31% increase over operating expenses of $2,238,090 for the same
period in 2021. The overall change in expenses is mainly the result of increases
in facility operations relating to the progress of the planning of the
commercial operations in the new plant in Iowa as well as in Texas.
Additionally, there is quarterly amortization of $367,500 for the new patents
and License rights, as well as research and development arising from conducting
trials of Atlantic salmon productions in Norway, neither of which existed in the
prior period. Salaries decreased by approximately $189,000, as there was a
$300,000 bonus paid to one of the executives in the three months ended June 30,
2021
. Professional fees decreased by approximately $163,000, due to increased
attorneys work with the Company on acquisitions and equity offerings and SEC
filings, as well as consultant and accounting fees, in the prior period. The
depreciation in the three months ended June 30, 2022, increased due to the
progressed fixed assets as well as the movement of construction in process to
fixed assets, in the two plants.

Liquidity, Financial Condition and Capital Resources

As of June 30, 2022, we had cash on hand of approximately $664,000 and working
capital deficiency of approximately $16,876,000, as compared to cash on hand of
approximately $1,734,000 and a working capital deficiency of approximately
$17,017,000 as of March 31, 2022. The decrease in working capital for the three
months ended June 30, 2022, is mainly due to the decrease in cash on-hand,
including the escrow account and increase in accounts payable and accrued
expenses, offset by a decrease in fair value of the derivative and warrant
liabilities.




Working Capital/(Deficiency)



Our working capital as of June 30, 2022, in comparison to our working capital
deficiency as of March 31, 2021, can be summarized as follows:



                               June 30,          March 31,
                                 2022              2022
Current assets               $   2,800,775     $   4,829,141
Current liabilities             19,676,993        21,846,261
Working capital deficiency   $ (16,876,218 )   $ (17,017,120 )



Current assets decreased mainly because of the use of the cash on hand, as a
result of the equity offerings during April through June 30, 2021, of
approximately $17,277,000, as well as the $1,500,000 escrow account which was
transferred to the Company’s cash. This was offset by an increase in prepaid
expenses, relating mainly to prepaid deposits for construction and equipment in
the Iowa plant. The decrease in current liabilities is primarily due to the
decrease in the fair value of the derivative liability and warrant liability,
off set by the increase in accounts payable and the accrued interest arising
from the convertible debenture.



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Cash Flows


Our cash flows for the three months ended June 30, 2022, in comparison to our
cash flows for the three months ended June 30, 2021, can be summarized as
follows:




                                              Three months Ended June 30,
                                                 2022               2021

Net cash used in operating activities $ (2,054,504 ) $ (2,140,787 )
Net cash used in investing activities

              (491,112 )     (4,160,944 )

Net cash provided by financing activities 1,476,000 12,118,553
Net change in cash

                          $       664,424     $ 12,118,553




The net cash used in operating activities in the three months ended June 30,
2022
is similar compared to the same period in 2021. However, the three months
ended June 30, 2022 has the change in fair value of the derivative and warrant
liabilities of $3,228,000 offset by the increase in amortization of the debt
discount and amortization of $2,407,500, and accounts receivable and inventory,
none of which occurred in the prior period. Additionally, there are increases in
prepaid expenses and accounts payable and accrued interest.

The net cash used in investing activities in the three months ended June 30,
2022
decreased by approximately $3,670,000 compared to the same period in the
prior fiscal year. During the current period cash was only used to purchase
consists of approximately $491,000 for machinery and equipment . The prior
year’s cash spent on investing activities consisted of the $2,000,000 of cash in
the patent acquisition and $1,000,000 in the acquisition of shares of the
non-controlling interest, as well as approximately $411,000 for machinery and
equipment and $750,000 for construction in process.

The net cash provided by financing activities decreased by approximately
$10,642,000 between periods. For the current period, the Company received
$1,500,000 that had been held in escrow from the convertible note they entered
into in December of 2021. In the same period in the prior year, the Company
received approximately $17,277,000 from the sale of common stock and warrants,
offset by amounts paying off the convertible note, notes payable with related
parties and bank loans, and the amount paid on the redemption of Series D
Preferred Shares.

Our cash position was approximately $664,000 as of June 30, 2022. Management
believes that our cash on hand and working capital deficit are not sufficient to
meet our current anticipated cash requirements for additional anticipated
capital expenditures, operating expenses and scale-up of operations for the next
twelve months.

Recent Financing Arrangements and Developments During the Period

Short-Term Debt and Lines of Credit

The Company also has a working capital line of credit with Capital One Bank for
$50,000. The line of credit bears an interest rate of prime plus 25.9 basis
points, which totaled 30.65% as of June 30, 2022. The line of credit is
unsecured. The balance of the line of credit was $9,580 at both June 30, 2022
and March 31, 2021.

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 14.75% as of June 30, 2022. The line of credit is secured
by assets of the Company’s subsidiaries. The balance of the line of credit is
$10,237 at June 30, 2022 and March 31, 2022.



Convertible Debentures


The Company entered into a securities purchase agreement (the “SPA”) with an
investor (the “Investor”) on December 15, 2021. Pursuant to the SPA, the
Investor purchased a secured promissory note (the “Note”) in the aggregate
principal amount totaling approximately $16,320,000 (the “Principal Amount”).
The Note has an interest rate of 12% per annum, with a maturity date 24 months
from the issuance date of the Note (the “Maturity Date”). The Note carried an
original issue discount totaling $1,300,000 and a transaction expense amount of
$20,000, both of which are included in the principal balance of the Note. The
Note had $2,035,000 in debt issuance costs, including fees paid in cash of
$1,095,000 and 3,000,000 warrants issued to placement agents with a fair value
of $940.000. The warrant fair value was estimated using the Black Scholes Model,
with the following inputs: the price of the Company’s common stock of $0.32; a
risk-free interest rate of 1.19%, the expected volatility of the Company’s
common stock of 209.9%; the estimated remaining term, a dividend rate of 0%. The
warrants were classified as a liability, as it is not known if there will be
sufficient authorized shares to be issued upon settlement, based on the
conversion terms of the convertible debt.



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

Within 180 days of the issuance date of the Note, the Company will obtain an
effective registration statement or a supplement to any existing registration
statement or prospectus with the SEC registering at least $15,000,000 in shares
of Common Stock for the Investor’s benefit such that any redemption using shares
of Common Stock could be done using registered Common Stock. Additionally, as
soon as reasonably possible following the issuance of the Note, the Company will
cause the Common Stock to be listed for trading on either of (a) NYSE, or (b)
NASDAQ (in either event, an “Uplist”). In the event the Company has not
effectuated the Uplist by March 1, 2022, the then-current outstanding balance
will be increased by 10%. On February 7, 2022, the Company and the Lender
entered into an amendment to the SPA, which extended the date by which the
Uplist must be completed to April 15, 2022. In consideration of the grant of the
extension there was an extension fee of $249,079 added to the principal balance,
which has been recognized as a financing cost in the accompanying unaudited
condensed consolidated financial statement. Subsequently, the date by which the
Uplist had to be completed was further extended to June 15, 2022, and again to
November 15, 2022, with no additional fee included. The Company will make a
one-time payment to the Investor equal to 15% of the gross proceeds the Company
receives from the offering expected to be effected in connection with the Uplist
(whether from the sale of shares of its Common Stock and / or preferred stock)
within ten (10) days of receiving such amount. In the event Borrower does not
make this payment, the then-current outstanding balance will be increased by
10%. The Note also contains certain negative covenants and Events of Default.
Upon an Event of a Default, at its option and sole discretion, the Investor may
consider the Note immediately due and payable. Upon such an Event of Default,
the interest rate increases to 18% per annum and the outstanding balance of the
Note increases from 5% to 15%, depending upon the specific Event of Default.



Series E Preferred Stock


During the three months ended June 30, 2022, 700 shares of Series E Preferred
Stock were converted into 4,537,240 shares of common stock.

During the three months ended June 30, 2022, the amortization of the beneficial
conversion feature of the Series E preferred stock was $141,500. The Company is
accreting the carrying value, of the Series E Preferred Stock in temporary
equity up to the redemption value over the period until its redemption. For the
three months ended June 30, 2022, $278,500 was accreted, and approximately
$637,000 to date as of June 30, 2022.

Common Shares Issued to Consultant

On April 14, 2021, 500,000 shares of common stock were issued to a consultant
per an agreement entered into on January 20, 2021 for advisory services for a
two-year period. The shares had a fair value of $195,000, based on the market
price of $0.39 on the grant date. 62,500 common shares shall vest each quarter
through October 1, 2022, at $24,275, with $146,750 vested through June 30, 2022.



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Common stock issued in relation to business agreement

As of June 22, 2022, 250,000 common shares were issued in relation to a Trial
Distribution agreement, which after the result of the Trial Period both parties
may negotiate and execute a long term Distribution Agreement. The shares will be
paid by the Company withholding sufficient profits from the sale by the other
party of the live shrimp.



Going Concern


The unaudited condensed consolidated financial statements contained in this
quarterly report on Form 10-Q have been prepared, assuming that the Company will
continue as a going concern. The Company has accumulated losses through the
period to June 30, 2022 of approximately $152,758,000 as well as negative cash
flows from operating activities of approximately $2,055,000. Presently, the
Company does not have sufficient cash resources to meet its plans in the twelve
months following the date of issuance of this filing. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management is in the process of evaluating various financing alternatives in
order to finance the continued build-out of our equipment and for general and
administrative expenses. These alternatives include raising funds through public
or private equity markets and either through institutional or retail investors.
Although there is no assurance that the Company will be successful with our
fund-raising initiatives, management believes that the Company will be able to
secure the necessary financing as a result of ongoing financing discussions with
third party investors and existing shareholders.

The unaudited condensed consolidated financial statements do not include any
adjustments that may be necessary should the Company be unable to continue as a
going concern. The Company’s continuation as a going concern is dependent on its
ability to obtain additional financing as may be required and ultimately to
attain profitability. If the Company raises additional funds through the
issuance of equity, the percentage ownership of current shareholders could be
reduced, and such securities might have rights, preferences or privileges senior
to the rights, preferences and privileges of the Company’s common stock.
Additional financing may not be available upon acceptable terms, or at all. If
adequate funds are not available or are not available on acceptable terms, the
Company may not be able to take advantage of prospective business endeavors or
opportunities, which could significantly and materially restrict its future
plans for developing its business and achieving commercial revenues. If the
Company is unable to obtain the necessary capital, the Company may have to cease
operations.




Future Financing



We will require additional funds to implement our growth strategy for our
business. In addition, while we have received capital from various private
placements that have enabled us to fund our operations, these funds have been
largely used to develop our processes, although additional funds are needed for
other corporate operational and working capital purposes. However, not including
funds needed for capital expenditures or to pay down existing debt and trade
payables, we anticipate that we will need to raise an additional $2,500,000 to
cover all of our capital and operational expenses over the next 12 months, not
including any capital expenditures needed as part of any commercial scale-up of
our equipment. These funds may be raised through equity financing, debt
financing, or other sources, which may result in further dilution in the equity
ownership of our shares. There can be no assurance that additional financing
will be available to us when needed or, if available, that such financing can be
obtained on commercially reasonable terms. If we are not able to obtain the
additional necessary financing on a timely basis, or if we are unable to
generate significant revenues from operations, we will not be able to meet our
other obligations as they become due, and we will be forced to scale down or
perhaps even cease our operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.



Effects of Inflation


We do not believe that inflation has had a material impact on our business,
revenues or operating results during the periods presented.



24






Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in the notes to our
financial statements included in this Quarterly Report on Form 10-Q and in our
Annual Report on Form 10-K for the fiscal year ended March 31, 2020. We believe
that the accounting policies below are critical for one to fully understand and
evaluate our financial condition and results of operations.



Fair Value Measurement


The fair value measurement guidance clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As
such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in the valuation of an asset
or liability. It establishes a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the fair value
hierarchy under the fair value measurement guidance are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical assets or liabilities;

Level 2 – Quoted prices in markets that are not active, or inputs that are
observable, either directly or indirectly, for substantially the full term of
the asset or liability; or

Level 3 – Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable (supported by little
or no market activity).

The Derivative and warrant liabilities are Level 3 fair value measurements.

Basic and Diluted Earnings/Loss per Common Share

Basic and diluted earnings or loss per share (“EPS”) amounts in the unaudited
condensed consolidated financial statements are computed in accordance with 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 three months ended June 30, 2022, the
Company had 5,000,000 Series A Convertible Preferred Stock which would be
converted at the holder’s option into approximately 740,711,000 underlying
common shares, 1,500 of Series E Redeemable Convertible Preferred shares whose
approximately 5,143,000 underlying shares are convertible at the investors’
option at a fixed conversion price of $0.35, and 640 of Series E Redeemable
Convertible Preferred shares whose approximately 7,676,000 underlying shares are
convertible at the investors’ option at conversion price of 90% of the average
of the two lowest market prices over the last 10 days, 750,000 shares of Series
F Preferred Stock which would be converted at the holders’ option into
approximately 177,771,000 underlying common shares, approximately $18,768,000 in
a convertible debenture whose approximately 164,177,000 underlying shares are
convertible at the holders’ option at conversion price of 90% of the average of
the two lowest market prices over the last 10 days and 18,506,429 warrants
outstanding which were not included in the calculation of diluted EPS as their
effect would be anti-dilutive. For the three months ended June 30, 2021, the
Company had 10,000,000 warrants outstanding which were not included in the
calculation of diluted EPS as their effect would be anti-dilutive.

Impairment of Long-lived Assets and Long-lived Assets

The Company will periodically evaluate the carrying value of long-lived assets
to be held and used when events and circumstances warrant such a review and at
least annually. The carrying value of a long-lived asset is considered impaired
when the anticipated undiscounted cash flow from such asset is separately
identifiable and is less than its carrying value. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair
value of the long-lived asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on long-lived assets to be disposed of are determined in a similar
manner, except that fair values are reduced for the cost to dispose.



25






Recently Adopted Accounting Pronouncements

Our recently adopted accounting pronouncements are more fully described in Note
2 to our financial statements included herein for the quarter ended June 30,
2022
.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and
Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in
Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the
accounting for certain financial instruments with characteristics of liabilities
and equity. This ASU (1) simplifies the accounting for convertible debt
instruments and convertible preferred stock by removing the existing guidance in
ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities
to account for beneficial conversion features and cash conversion features in
equity, separately from the host convertible debt or preferred stock; (2)
revises the scope exception from derivative accounting in ASC 815-40 for
freestanding financial instruments and embedded features that are both indexed
to the issuer’s own stock and classified in stockholders’ equity, by removing
certain criteria required for equity classification; and (3) revises the
guidance in ASC 260, Earnings Per Share, to require entities to calculate
diluted earnings per share (EPS) for convertible instruments by using the
if-converted method. In addition, entities must presume share settlement for
purposes of calculating diluted EPS when an instrument may be settled in cash or
shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is
effective for fiscal years beginning after December 15, 2021 including interim
periods within those fiscal years. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020. For all other entities, ASU
2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years. Entities should adopt the
guidance as of the beginning of the fiscal year of adoption and cannot adopt the
guidance in an interim reporting period. The Company is currently evaluating the
impact that ASU 2020-06 may have on its consolidated financial statements and
related disclosures.

During the period ending June 30, 2022, there were several new accounting
pronouncements issued by the Financial Accounting Standards Board. Each of these
pronouncements, as applicable, has been or will be adopted by the Company.
Management does not believe the adoption of any of these accounting
pronouncements has had or will have a material impact on the Company’s
consolidated financial statements.

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