UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended:                                      June 30, 2017                                     

 

or

 

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

 

For the transition period

from _______________________________ to_______________________________

 

Commission File Number:                                      000-49901                                     

 

OMNI SHRIMP, INC. 

(Exact name of registrant as specified in its charter)

 

Nevada		87-0646435
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
13613 Gulf Boulevard, Madeira Beach FL		33738
(Address of principal executive offices)		(Zip Code)

 

727-398-2692 

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ☒   No  ☐

 

Indicate by checkmark if the registrant has submitted electronically and posted on its Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒   No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐		Smaller reporting company	☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes  ☐  No  ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 7,371,670 as of October 13, 2017

 

 

Table of Contents

 

PART I-FINANCIAL INFORMATION
	Item 1.	Financial Statements	3
		Condensed Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016	3
		Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2017 and 2016	4
		Condensed Consolidated Statements of Stockholders’ Deficiency (unaudited) for the period December 31, 2016 through June 30, 2017	5
		Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2017 and 2016	6
		Notes to unaudited Condensed consolidated financial statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations Note Regarding Forward-Looking Statements	23
	Item 4.	Controls and Procedures	28
PART II-OTHER INFORMATION
	Item 1.	Legal Proceedings	29
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 3.	Defaults Upon Senior Securities	29
	Item 4.	Mine Safety Disclosures	29
	Item 5.	Other Information	29
	Item 6.	Exhibits	29
SIGNATURES			30

 

 

Item 1.  Financial Statements

 

 OMNI SHRIMP, INC.

 CONDENSED CONSOLIDATED BALANCE SHEETS 

		June 30, 2017				December 31, 2016
		(Unaudited)				(Audited)
ASSETS
CURRENT ASSETS:
Cash		$	36,325			$	200,107
Accounts Receivable net of Allowance for doubtful accounts of $65,307 and $-0- at June 30, 2017 and December 31, 2016, respectively			212,473				156,650
Inventory			313,393				119,813
Prepaid and Other			1,430				2,309
Total Current Assets			563,620				478,879
NON-CURRENT ASSETS
Property and Equipment, net			797				797
Total Non-current assets			797				797
Total Assets		$	564,417			$	479,676
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts Payable		$	159,666				148,847
Accrued Expenses			546,694				362,356
Accrued Interest			215,110				134,279
Accrued Dividend Payable on  Series E Preferred			50,832				26,099
Convertible Notes Payable , face value of $2,134,415 and $1,968,600, net of discount of $631,715 and $1,233,602, resspectively at June 30, 2017 and December 31, 2016, respectively			1,502,700				734,998
Advances from Related party			184,900				127,148
Due to Related Party			311,743				221,743
Derivative liability			3,991,312				2,165,891
Total Current Liabilities			6,962,956				3,921,362
STOCKHOLDERS’ DEFICIENCY:
Preferred Series E, 28,500 and 28,500 shares outstanding at June 30, 2017 and December 31, 2016, respectively, par value $.001 per share, liquidation preference of $1,048,332 and $1,023,599 at June 30, 2017 and December 31 2016, respectively			29				29
Common stock at $0.001 par value: 800,000,000 shares authorized; 6,769,474 and 3,854,185 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively			6,769				3,854
Dividends due to Series E Preferred Holders			(50,832	)			(26,099	)
Additional paid-in capital			39,427				14,864
Accumulated deficit			(6,393,933	)			(3,434,334	)
Total Stockholders’ Deficiency			(6,398,539	)			(3,441,686	)
Total Liabilities and Stockholders’ Deficiency		$	564,417			$	479,676

 

See notes to unaudited condensed consolidated financial statements

 

OMNI SHRIMP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three months				Three months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016
INCOME:
Revenue		$	816,401			$	616,586			$	1,589,747			$	1,250,800
Cost of Goods Sold			773,006				542,188				1,452,713				1,087,683
Gross Profit			43,396				74,398				137,034				163,117
OPERATING EXPENSES:
Compensation Expense			90,000				—				180,000				—
Professional Fees			29,684				1,688				40,004				1,688
Consulting Services			33,012				—				107,685				—
Transportation, Storage and Broker Fees			36,089				17,139				76,692				38,538
General and Administrative Expenses			32,809				2,891				63,413				3,234
Sales and Marketing			2,233				5,233				18,530				7,367
Bad Debt Expense			65,307				—				65,307				—
Total operating expenses			289,135				26,952				551,631				50,825
INCOME (LOSS) FROM OPERATIONS			(245,739	)			47,446				(414,597	)			112,291
OTHER INCOME (EXPENSE):
Interest expense			(462,110	)			(2,154	)			(896,581	)			(2,154	)
Loss on change in fair market value of derivative liability			(753,909	)			—				(1,648,421	)			—
Other income (expense), net			(1,216,019	)			(2,154	)			(2,545,002	)			(2,154	)
Loss before income tax provision			(1,461,759	)			45,292				(2,959,599	)			110,138
Income tax provision			—				—				—				—
NET INCOME (LOSS) OMNI SHRIMP INC			(1,461,759	)			45,292				(2,959,599	)			110,138
Accrued dividends to Preferred Stockholders			(12,435	)							(24,733	)
Net Income (Loss) applicable to common shareholders		$	(1,474,193	)		$	45,292			$	(2,984,332	)		$	110,138
Basic Earnings; Gain (loss) per share		$	(0.24	)		$	.02			$	(0.52	)		$	0.04
Diluted Earnings: Gain (loss) per share		$	(0.24	)		$	.01			$	(0.52	)		$	0.02
Weighted average common shares outstanding
- Basic and diluted			6,197,858				2,894,684				5,730,232				2,894,684
- Diluted			6,197,858				7,150,185				5,730,232				7,150,185

 

See notes to unaudited condensed consolidated financial statements

 

 

OMNI SHRIMP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

		Preferred Stock Series E, $0.001 Par Value								Common Stock, $0.001 Par Value								Dividends on Preferred Stock				Additional Paid-in				Accumulated				Total Stockholders’
		Number of								Number of
		Shares				Amount				Shares				Amount				Series E				Capital				Deficit				Deficiency
Balance, December 31, 2016			28,500			$	29				3,854,185			$	3,854			$	(26,099	)		$	14,864			$	(3,434,334	)		$	(3,441,687	)
Issuance of common stock for conversion of debt			—				—				2,915,289				2,915				—				24,564				—				27,479
Issuance of Dividends on Series E Preferred			—				—				—				—				(24,733	)			—				—				(24,733	)
Net loss for the six months ended  June 30, 2017			—				—				—				—				—				—				(2,959,599	)			(2,959,599	)
Balance, June 30, 2017			28,500			$	29				6,769,474			$	6,769			$	(50,832	)		$	39,427			$	(6,393,933	)		$	(6,398,539	)

 

See notes to unaudited condensed consolidated financial statements

 

 

 

OMNI SHRIMP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the six months ended June 30, 2017				For the six months ended June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)		$	(2,959,599	)		$	110,138
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Bad Debt Expense			65,307				—
Loss on change in fair market value of derivative liability			1,648,421				—
Amortization of Convertible note discount			778,887				—
Changes in operating assets and liabilities:
Accounts Receivable			(121,130	)			(224,564	)
Inventory			(193,580	)			(112,980	)
Prepaid and Other			879				(151	)
Accounts Payable and Accrued Expenses			195,157				185,614
Accrued Interest			97,125				—
NET CASH USED IN OPERATING ACTIVITIES			(488,533	)			(41,943	)
CASH FLOWS FROM INVESTING ACTIVITIES:
NET CASH FROM IN INVESTING ACTIVITIES			—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in advances from Related party			184,595				—
Increase in due to Related party			(36,843	)			133,743
Issuance of convertible debt for cash			102,000				—
Issuance of Consulting Notes			75,000				—
NET CASH PROVIDED BY FINANCING ACTIVITIES			324,751				133,743
NET CHANGE IN CASH			(163,782	)			91,800
Cash at beginning of period			200,107				—
Cash at end of period		$	36,325				91,800
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest		$	—			$	—
Cash paid during the period for income taxes		$	—			$	—
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Convertible debentures and accrued interest retired through issuance of common stock		$	27,479			$	—
Notes issued for Consulting services		$	75,000			$	—
Debt discount as a result of beneficial conversion feature		$	177,000			$	—

 

See notes to unaudited condensed consolidated financial statements

 

 

Omni Shrimp, Inc.

June 30, 2017

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1.

PRINCIPAL BUSINESS ACTIVITY, MATERIAL DEFINITIVE AGREEMENT AND SIGNIFICANT ACCOUNTING POLICIES

 

Interim Financial Statements

The condensed consolidated financial statements include the following: 1) Balance sheets as of June 30, 2017 and December 31, 2016; 2) Statements of Operations for the three months and six months ended June 30, 2017 and June 30, 2016; 3) Statement of Shareholders’ Deficiency from December 31, 2016 through June 30, 2017, and 4) Statement of Cash Flows for the six months ended June 30, 2017 and June 30, 2016. They are unaudited. However, in the opinion of management of the Company, these condensed consolidated financial statements reflect all material adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the consolidated financial position and results of operations for such interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results to be obtained for a full year. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X for smaller reporting companies. Accordingly, these condensed consolidated financial statements do not include all of the information required by U.S. generally accepted accounting principles for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the Securities and Exchange Commission on April 28, 2017.

 

Liquidity and Going Concern

Going Concern - The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss for the three month and six month period ending June 30, 2017 of approximately ($1,462,000) and ($2,960,000), respectively. The Company had negative working capital and stockholders’ deficiency of approximately $6,400,000 at June 30, 2017. Since, inception the Company’s growth has been funded through the issuance of convertible debt, borrowings under lines of credit and internal operations These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and ultimately to attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements do not include any adjustments that might result from the uncertainty.

 

Basis of Consolidation

The condensed consolidated financial statements include assumed former liabilities of our former parent company. All significant inter-company accounts and transactions have been eliminated in consolidation.

 

Accounting for Reverse Capitalization

 

The Company follows the guidelines set forth in Topic 12: Reverse Acquisitions and Reverse Capitalizations of the SEC Financial Reporting Manual (“SEC Manual”) for the acquisition of Omni Shrimp, Inc. (“Omni”) (See Material Definitive Agreement below.) For both accounting purposes, Omni Shrimp, Inc. (“Omni”) has been deemed the acquiring entity due to the fact that the owners of Omni have effective voting and operating control of the combined company. The Company believes it was not a shell company.

 

 

On July 5, 2016, the staff of the Securities and Exchange Commission’s Division of Corporation Finance advised the Company that in light of the information set forth in the Form 8-K filed on June 29, 2016, the Staff was of the opinion that the Company was a “shell company” as defined in Rule 405 under the Securities Act of 1933 and Rule 12b-2 of the Exchange Act. The Company replied with a letter to the Staff contesting the factual basis of such determination, and the Staff replied with a subsequent letter affirming its prior determination.

 

The Company intends to have further communications with the Staff regarding their determination as to the Company’s shell company status.

 

The financial statements enclosed herewith were prepared on the assumption that the Company was not a shell company on June 23, 2016 and is not a shell company at the present time.

 

Pursuant to the SEC Manual, the Company filed a form 8-K/A on September 1, 2016. In Item 9.01 of that filing, the Company reported the required financial statements, including audited financial statements of Omni and pro forma financial information.

 

Material Definitive Agreement

 

The Company announced on June 23, 2016 (the “Effective Date”), it entered into a Share Exchange Agreement (the “Exchange Agreement”) with all of the shareholders of Omni Shrimp, Inc., a Florida corporation (“Omni”), pursuant to which the shareholders exchanged with the Company all of the outstanding shares of stock of Omni and Omni thereupon became a wholly owned subsidiary of the Company. In consideration for the exchange of those Omni shares, the Company issued 28,500 shares of a newly created Series E Preferred Stock of the Company (the “Series E Preferred Stock”).

 

As a result of their ownership of the Series E Preferred Stock, the Omni shareholders acquired the right to vote 95% of the voting control of the Company. The Series E Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to 95% of the outstanding common stock after the conversion. In addition, on the Effective Date, the holders of all of the Company’s outstanding Series B and Series D Preferred Stock, including James Wemett, who is a director of the Company and was an officer and principal shareholder of the company prior to the effective date, as the holder of the Series D shares, surrendered those shares to the Company.

 

Additionally, on the Effective Date the Company entered into an Asset Purchase Agreement with James Wemett, the former President and CEO, pursuant to which Mr. Wemett acquired all right, title and interest to the existing business activities of the Company prior to that date; specifically, those activities were (i) developing and commercializing material additives based on a technology utilizing halloysite nanotubes and (ii) reselling Ebola personal protective equipment and ancillary supplies, and assumed the related liabilities. In connection with that transaction, Mr. Wemett waived all accumulated compensation due to him from the Company.

 

 

In connection with the Asset Purchase Agreement, the Company and Mr. Wemett exchanged releases, and the Company issued to Mr. Wemett a six year divisible Warrant with cashless exercise to purchase up to 2,000,000 shares of the Company’s common stock at a purchase price of $0.05 per share.

 

Description of the Business

 

Omni Shrimp, Inc. (“Omni” or the “Company” or “we”) was organized on September 22, 2015 with executive offices located in Madeira Beach, Florida on the Gulf of Mexico. Omni is a wholesaler of locally caught wild American shrimp, predominantly the highly popular Key West pink variety. Customers are large distributors in the US, who then resell the product to grocery store chains, restaurants and other retail stores in the Florida, Boston and New York markets.

 

Omni does not own vessels nor have employees who are involved with the catching, transporting or processing of shrimp. Omni’s business model is as follows:

 

●

We purchase shrimp from incoming vessels;

●

Through brokers, we arrange for sales to distributors;

●

We refrigerate as inventory that we cannot immediately sell;

●

We process at a facility in Louisiana if purchasers require certain needs (e.g.- shrimp are to be headless), and

●

We send directly to customers the remainder

 

Estimates 

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate such estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

 

Fair Value of Financial Instruments 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring 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). These tiers include:

 

	●	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
	●	Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
	●	Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.

 

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The carrying amounts reported in the balance sheet of cash, accounts receivable, inventory, prepaid assets, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s derivative liability was determined utilizing Level 3 inputs.

 

 

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

 

Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.

 

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest related to unrecognized tax benefits in income tax expense. Income tax expense was $0 for the three and six month periods ending June 30, 2017 and 2016.

 

Net income/ (Loss) Per Share

Loss per common share is computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss per common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants outstanding during the period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss per share as their effect is anti-dilutive based on the net loss incurred.

 

As of June 30, 2017 there were 327,840,585 shares, respectively, underlying preferred stock, convertible debt, outstanding options and warrants that could potentially dilute future earnings.

 

These potentially dilutive shares have been limited by certain debt and equity agreements with lenders. These agreements provide limitations on the conversion of the dilutive instruments such that the number of shares of Common Stock that may be acquired by the holder upon conversion of such instruments shall be limited to ensure that following such conversion the total number of shares of Common Stock then beneficially owned by the holder does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock. The Company does not have sufficient authorized shares to satisfy conversion of all the potentially dilutive instruments.

 

Shares associated with the issuance of Series E Preferred stock are reported on an as converted basis

 

Recent Accounting Pronouncements 

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-011 to Topic 330, Inventory. This ASU requires entities using inventory costing methods other than last-in-first-out and retail inventory method to value their inventory at the lower of cost and net realizable value. This ASU is effective for fiscal years beginning after December 15, 2016 and is to be applied prospectively. Early adoption of this ASU is permitted. The Company does not expect adoption of this ASU to have a material impact on its Condensed consolidated financial statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this update defers the effective date of ASU 2014-09 for all entities by one year. Additional ASUs have been issued that are part of the overall new revenue guidance including: ASU 2016-08: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10: Identifying Performance Obligations and Licensing and ASU 2016-12: Narrow Scope Improvements and Practical Expedients. The Company is currently assessing the impact that adopting these new revenue accounting standards will have on its consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which requires the identification of arrangements that should be accounted for as leases by lessees. In general, for operating or financing lease arrangements exceeding a twelve month term, a right-of-use asset and a lease obligation will be recognized on the balance sheet of the lessee while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

 

 

NOTE 2. ACCOUNTS RECEIVABLE

 

Accounts receivable represent sales of shrimp not yet paid for. Sales terms vary with each contract but payment is on average received within 30 days.

 

Balances of Accounts Receivables are as follows:

 

		June 30, 2017				December 31, 2016
Accounts receivables		$	277,780			$	156,650
Allowance for doubtful accounts			(65,307	)			—
Accounts Receivable, net of Allowance for doubtful accounts		$	212,473			$	156,650

 

NOTE 3. INVENTORY

 

Inventory represents the cost of shrimp caught but not yet sold. Shrimp may be retained for up two years in a refrigerated environment. As such, there is no allowance for obsolescence. All inventory is finished product. The company uses the First In- First Out (“FIFO”) method for cost flow assumptions.

 

Balances of Inventory are as follows:

 

		June 30, 2017				December 31, 2016
Gross Inventory		$	313,393			$	119,813
Allowance for Obsolescence			—				—
Inventory		$	313,393			$	119,813

 

NOTE 4. PROPERTY AND EQUIPMENT, NET

 

Property and equipment consisted of the following at June 30, 2017 and December 31, 2016:

 

		June 30, 2017				December 31, 2016
Property and Equipment		$	1,860			$	1,860
Accumulated depreciation			(1,063	)			(1,063	)
Property and equipment, net		$	797			$	797

 

Property and Equipment is Office furniture and equipment located at our Madeira Beach headquarters. No Depreciation expense on property and equipment was recorded for the three months and six months ended June 30, 2017 due to its immaterial nature.

 

 

NOTE 5. CONVERTIBLE NOTES PAYABLE

 

Convertible Notes payable totaled $1,502,700 and $734,998 at June 30, 2017 and December 31, 2016, respectively as follows:

 

		June 30, 2017				December 31, 2016
Convertible Notes Payable (at face value)		$	2,134,415			$	1,968,600
Unamortized discount			(631,715	)			(1,233,602	)
Convertible notes payable (net of discount)		$	1,502,700			$	734,998

 

The Company is currently in discussion with its creditors to extend the maturities of all of its outstanding indebtedness.

 

At June 30, 2017, the balances were as follows:

 

Convertible Notes Payable
Balance at June 30, 2017  

		Date of Financing		Date of Maturity			Amount of Financing				Conversions				Outstanding Balance				Unamortized Discount				Net balance
Surrender Agreement Notes		23-Jun-16		31-Dec-17		$	1,430,005			$	(12,865	)		$	1,417,140			$	473,239			$	943,901
Cape One Notes		15-Dec-15		30-Jun-17			344,000				—				344,000				0				344,000
December 27, 2016 cash financing		27-Dec-16		27-Dec-17			128,775				—				128,775				63,505				65,270
November 25,2016 cash financing		25-Nov-16		31-Aug-17			7,500				—				7,500				1,667				5,833
Consulting note-October 2016		1-Oct-16		31-Mar-17			20,000				—				20,000				0				20,000
Consulting note-November 2016		1-Nov-16		30-Apr-17			20,000				—				20,000				0				20,000
Consulting note-December 2016		1-Dec-16		31-May-17			20,000				—				20,000				0				20,000
March 21,2017 cash financing		21-Mar-17		21-Mar-18			57,000				—				57,000				41,227				15,773
February 13, 2017 cash financing		13-Feb-17		13-Feb-18			20,000				—				20,000				12,493				7,507
March 28,2017 cash financing		28-Mar-17		31-Dec-17			5,000				—				5,000				3,309				1,691
January 2017 consulting note		1-Jan-17		30-Jun-17			20,000				—				20,000				0				20,000
February 2017 consulting note		1-Feb-17		31-Jul-17			20,000				—				20,000				3,444				16,556
March 2017 consulting note		1-Mar-17		31-Jul-17			20,000				—				20,000				6,776				13,224
April 2017 consulting note		1-Apr-17		31-Aug-17			5,000				—				5,000				2,039				2,961
Alpha financing- April 2017		27-Apr-17		30-Apr-18			15,000				—				15,000				12,391				2,609
May 2017 consulting note		1-May-17		30-Sep-17			5,000				—				5,000				3,026				1,974
June 2017 consulting note		1-Jun-17		31-Oct-17			5,000				—				5,000				4,046				954
June 6, 2017 cash financing		6-Jun-17		28-Feb-18			5,000				—				5,000				4,551				449
Convertible Notes payable at June 30, 2017						$	2,147,280			$	(12,865	)		$	2,134,415			$	631,715			$	1,502,700

 

At December 31, 2016, the balances were as follows:

 

Convertible Notes Payable

Balance at December 31, 2016 

		Date of Financing		Date of Maturity			Amount of Financing				Conversions				Outstanding Balance				Unamortized Discount				Net balance
Surrender Agreement Notes		23-Jun-16		31-Dec-17		$	1,430,005			$	(1,680	)		$	1,428,325			$	938,762			$	489,563
Cape One Notes		15-Dec-15		30-Jun-17			344,000				—				344,000				120,980				223,020
December 27, 2016 cash financing		27-Dec-16		27-Dec-17			128,775				—				128,775				127,364				1,411
November 25,2016 cash financing		25-Nov-16		31-Aug-17			7,500				—				7,500				6,532				968
Consulting note-October 2016		1-Oct-16		31-Mar-17			20,000				—				20,000				9,945				10,055
Consulting note-November 2016		1-Nov-16		30-Apr-17			20,000				—				20,000				13,333				6,667
Consulting note-December 2016		1-Dec-16		31-May-17			20,000				—				20,000				16,685				3,315
Convertible Notes payable at December 31, 2016						$	1,970,280			$	(1,680	)		$	1,968,600			$	1,233,602			$	734,998

 

 

Financings in 2016

 

Assumption of Convertible Notes Per Surrender and Amendment Agreement

 

The following debtholders of the Predecessor entity agreed to reduce the face value of the obligations owed to them by approximately $300,000 as well as approximately $600,000 in accrued in interest. Subsequent to these reductions, the amounts owed to these creditors, which were assumed by Omni were as follows:

 

$1,417,140 in convertible notes payable (as detailed below), and $28,563 in accrued interest

 

Date Issued		Description		Purchaser		Original Amount				Face value Outstanding at June 30, 2017
6/29/16		Interest at the rate of 10%, and convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion.		Alpha Capital Anstalt, LLC		$	900,000			$	900,000
6/29/16		Interest at the rate of 10%, and convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion.		Marlin Capital LLC		$	210,000			$	210,000
6/29/16		Interest at the rate of 10%, and convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion.		Bull Hunter LLC		$	140,000			$	140,000
6/29/16		Interest at the rate of 10%, and convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion.		Oscaleta Partners LLC		$	180,005			$	167,140
		Total Convertible debt from Surrender and Amendment Agreement				$	1,430,005			$	1,417,140

 

 

The Company accounted for the assumption of the convertible promissory notes in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The assumed value of the note was recorded net of a discount of $1,430,005. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $473,239. These notes mature on December 31, 2017 and bear an interest rate of 10%.

 

Cape One Master Fund II LP Convertible Promissory Notes

 

Omni assumed $344,000 of convertible notes owed to Cape One Master Fund II LP. The Notes have a face value of $344,000, carry an 8% interest rate, mature on June 30, 2017 and are convertible at $.02 per share.

 

The Company accounted for the assumption of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The assumed value of the note was recorded net of a discount of $344,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $-0-. The notes matured on June 30, 2017 and bear an interest rate of 8%.

 

December 27, 2016 Financing

 

On that date, the Company issued a note for $128,775 comprised of various financings throughout the year. These notes were combined into a single note which was recorded on December 27, 2016. The Note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 30 trading days prior to conversion.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note were recorded net of a discount of $128,775. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. The fair value of the conversion option on the date of issuance in excess of the face amount of the note was recorded to interest expense on the date of issuance. At the balance sheet date, the remaining unamortized discount was $63,505. The notes mature on December 27, 2017 and carry an interest rate of 8%.

 

November 25, 2016 Financing

 

On that date, the Company issued a note for $7,500 The Note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 20 trading days prior to conversion. The convertible note matures on August 31, 2017 and has a stated interest rate of 10%.

 

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $7,500. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $1,667.

 

Consulting Notes

 

October 2016 

On October 1, 2016 the Company issued a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on March 31, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized balance was $-. The notes carry an interest rate of 10% and are at maturity.

 

November 2016

 

On November 1, 2016 the Company issued a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on April 30, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $-0-. The notes carry an interest rate of 10% and are due on April 30, 2017.

 

December 2016 

On December 1, 2016 the Company issued a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on May 31, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $-0-. The notes carry an interest rate of 10% and are due on May 31, 2017.

 

 

Financings in 2017

 

February 13, 2017 Financing

 

On that date, the Company issued a note for $20,000 The Note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 20 trading days prior to conversion.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. The fair value of the conversion option on the date of issuance in excess of the face amount of the note was recorded to interest expense on the date of issuance. At the balance sheet date, the remaining unamortized discount was $12,493. The notes mature on February 13, 2018 and carry an interest rate of 8%.

 

March 21, 2017 Financing

 

On that date, the Company issued a note for $57,000 The Note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 25 trading days prior to conversion.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $57,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $41,227. The notes mature on March 21, 2018 and carry an interest rate of 12% and a default interest rate of 24%.

 

March 28, 2017 Financing

 

On that date, the Company issued a note for $5,000 The Note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 20 trading days prior to conversion.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $5,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $3,309. The notes mature on December 31, 2017 and carry an interest rate of 10%.

 

April 27, 2017 Financing

 

On that date, the Company issued a note for $15,000 The Note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 20 trading days prior to conversion.

 

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $15,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $12,391. The notes mature on April 30, 2018 and carry an interest rate of 8%.

 

June 6, 2017 Financing

 

On that date, the Company issued a note for $5,000 The Note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 20 trading days prior to conversion.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $5,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $4,551. The notes mature on February 28, 2018 and carry an interest rate of 10%.

 

Consulting Notes

 

January 2017 

On January 1, 2017 the Company issued a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on June 30, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized balance was $-0-. The notes carry an interest rate of 10% and matured on June 30, 2017.

 

February 2017

 

On February 1, 2017 the Company issued a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on July 31, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $3,444.

 

 

March 2017 

On March 1, 2017 the Company issued a convertible promissory note in the principal amount of $20,000 to an unrelated party. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $6,776. The notes carry an interest rate of 10% and are due on July 31, 2017.

 

April 2017

 

On April 1, 2017 the Company issued a convertible promissory note in the principal amount of $5,000 to an unrelated party. The convertible note matures on August 31, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $5,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $2,039.

 

May 2017

 

On May 1, 2017 the Company issued a convertible promissory note in the principal amount of $5,000 to an unrelated party. The convertible note matures on September 30, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $5,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $3,026.

 

June 2017

 

On June 1, 2017 the Company issued a convertible promissory note in the principal amount of $5,000 to an unrelated party. The convertible note matures on August 30, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 70% discount of the lowest closing bid price during the 20 trading days prior to conversion. The conversion price is subject to anti-dilution protection and down round provisions in the event that the Company issues additional equity securities at a price less than the conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued but unpaid interest.

 

 

The Company accounted for the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net of a discount of $5,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $4,046.

 

NOTE 6: ADVANCES FROM RELATED PARTY

 

Commencing in the fourth quarter of the prior Fiscal year, Ms. Linda Giampietro, a related party of the Company advanced funds to the Company. All advances bear interest at a rate of 1% per month with a minimum commitment on each advance of thirty days.

 

Advances from Related parties are as follows:

 

		June 30, 2017				December 31, 2016
Advances from Related Party		$	184,900			$	127,148

 

NOTE 7: DUE TO RELATED PARTY

 

The Company has been given access to the Line of Credit that Madeira Beach Seafood, Inc. (“MBS”) has with Bank of America. As of June 30, 2017 and December 31, 2016, Omni Shrimp had utilized $286,000 and $196,000, respectively, from that line of credit. Interest, charge at a rate of 5.25% per year, is paid by Omni to MBS who then pays the bank. The liability to Bank of America lies with MBS.

 

Prior to the onset of operations at Omni Shrimp, Inc., MBS advance Omni $20,000 for the commencement of operations. Additionally, they funded Omni and additional $5,743 for expenses. As such, the liability to MBS is $25,743.

 

At June 30, 2017 and December 31, 2016, the amount owed to MBS was as follows:

 

		June 30, 2017				December 31, 2016
Amount forwarded from MBS from Bank of America line		$	286,000			$	196,000
Amount advanced by MBS to Omni Shrimp, Inc.			25,743				25,743
Amount outstanding at June 30, 2017 and December 31, 2016		$	311,743			$	221,743

 

 

NOTE 8. DERIVATIVE LIABILITY

 

The Company’s derivative liabilities as of June 30, 2017 and December 31, 2016 are as follows:

 

●	The debt conversion feature embedded in the various Convertible Promissory Notes which contain anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described in Note 2.)

 

●	Derivative liabilities related to outstanding warrants and options due to the Company having insufficient authorized shares to satisfy the exercise or conversion of all outstanding instruments as of June 30, 2017 and December 31, 2016.

 

The fair value of the derivative liabilities as of June 30, 2017 and December 31, 2016 are as follows:

 

		June 30, 2017				December 31, 2016
Note conversion feature liabilities		$	3,974,897			$	2,077,850
Warrant liability			16,415				88,041
Total		$	3,991,312			$	2,165,891

 

NOTE 9. STOCKHOLDERS’ DEFICIENCY

 

Common Stock

 

Common Stock Issuances 

During 2017, the Company issued 2,915,289 common shares in satisfaction of $11,185 of principal obligations plus $16,294 of accrued interest to lenders on convertible debt.

 

Warrants

 

The company still has the following warrants outstanding from prior to our reverse merger on June 23, 2016.

 

 

		2016												2017
		Shares				Weighted average exercise price				Weighted average remaining life-Years				Shares				Weighted average exercise price				Weighted average remaining life-Years
Outstanding: beginning of the year			545,294			$	1.13				5.9				1,217,941			$	0.35				3.9
Granted during the year			675,000			$	0.07								—				—				—
Cancelled or forfeited			(2,353	)		$	102.00								—			$	—				—
Warrants outstanding: end of period			1,217,941			$	0.35				4.9				1,217,941			$	0.35				3.3
Warrants exercisable: end of period			1,217,941			$	0.35				4.9				1,217,941			$	0.35				3.3

 

As of June 30, 2017, the aggregate intrinsic value of the stock options outstanding and exercisable was $0.

 

As of December 31, 2016, the aggregate intrinsic value of the stock options outstanding and exercisable was $0.

 

Preferred Stock Series E

 

The Series E Convertible Preferred Stock is convertible into 95% of the Company’s common stock and votes on an as-converted basis. The Series E designation limits the holders’ rights to convert its Convertible Preferred Stock, and the aggregate voting powers, to no more than 4.99% of the votes attributable to the total outstanding common shares.

 

There are currently 28,500 shares of Series E Preferred stock with a face value of $35. Dividends of $50,832 have been accrued since issuance.

 

The Series E Preferred stock has a liquidation preference of $1,048,332 as follows:

 

Shares outstanding			28,500
Face value per share		$	35
Total face value			997,500
Accrued dividends			50,832
Liquidation preference at June 30, 2017		$	1,048,332

 

NOTE 10. SEGEMENT DATA

 

The Company’s operates in one segment, sales of shrimp and related products.

 

NOTE 10. LEASES

 

The Company leases its office space at 13613 Gulf Boulevard, Madeira Beach FL. The monthly rent is $1,500, and rent expense for the period ended June 30, 2017 was $9.000.

 

 

NOTE 11. RELATIONSHIPS WITH AFFILIATES

 

The Management of the Company and the owners of MBS are the same. The Company believes that the following relationships with these parties are to be disclosed:

 

Shared Management

 

The CEO, COO and Executive Vice President, Mr. Wrynn, Mr. Stelcer and Ms. Giampietro, respectively are all employees of MBS. Pursuant to management contracts, a liability of $30,000 per month, $180,000 at June 30, 2017 has been incurred by the Company to compensate MBS for their services in 2017. Throughout the year, each individual has paid been $60,000 through June 30, 2017

 

Use of Line of Credit

 

The Company funds its operations in part through the use of MBS’ outstanding line of credit with Bank of America. Interest on the line of credit is 5.25% per annum. As of June 30, 2017, the Company has borrowed $282,000 under this arrangement.

 

Loans from MBS

 

MBS has loaned the Company approximately $25,000 since its inception. These loans are promissory notes with no due date or interest rate.

 

Rental of Office space

 

The Company rents its office space from MBS. Monthly rent is $1,500.

 

Shared Administrative Personnel

 

The accounting and record-keeping function at Omni Shrimp, Inc. is provided by personnel at MBS. No fee is charged for these services

 

The Company’s President and Chief Executive Officer did not receive a management fee or other compensation in connection with his services to the Company. The Company reimburses its President and Chief Executive Officer for all direct and indirect costs of services provided and other expenses necessary or appropriate to the conduct of our business.

 

NOTE 12. SUBSEQUENT EVENTS

 

Issuance of Common stock

 

On July 26, 2017, the Company issued 602,196 shares for the conversion of $3,000 of convertible debt plus $3,333 in accrued interest.

 

Issuance of Debt

 

On July 1, 2017, the Company issued a note for $5,000 for consulting services. The convertible promissory note bears ten percent interest and matures on November 30, 2017. The third party has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 70% of the lowest closing bid price for the twenty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.

 

 

On July 10, 2017, the Company issued a note for $15,000 for cash. The convertible promissory note bears twelve percent interest and matures on July 31, 2018. The third party has the option to convert all or a portion of the note plus accrued interest into common stock a conversion price at the lesser of (a) seventy five percent of the closing bid price for the Company’s common stock on the date of issuance or (b) 70% of the lowest closing bid price for the thirty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.

 

On August 1, 2017, the Company issued a note for $5,000 for consulting services. The convertible promissory note bears ten percent interest and matures on December 31, 2017. The third party has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 70% of the lowest closing bid price for the twenty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.

 

On September 1, 2017, the Company issued a note for $5,000 for consulting services. The convertible promissory note bears ten percent interest and matures on January 31, 2018. The third party has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 70% of the lowest closing bid price for the twenty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.

 

On October 1, 2017, the Company issued a note for $5,000 for consulting services. The convertible promissory note bears ten percent interest and matures on February 28, 2018. The third party has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 70% of the lowest closing bid price for the twenty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.

 

New Consulting Contract

 

Effective July 1, 2017, the Company entered into a new consulting contract with Wall Street Consulting Group, Inc. (“WSCG”) WSCG will provide sponsorship for the Company’s stock in the public markets. This will include, among other things: a) introducing the Company to retail brokers; b) disseminating company emails; c) holding investor conference calls and d) answering inquiries by stockholders.

 

WSCG’s fee shall be $5,000 per month. In addition, they will receive 20,000 restricted shares and 20,000 options exercisable at $.035 for two years.

 

Advance from Related Party

 

From July 1, to the date of this report Ms. Giampietro has advanced the Company about $89,500 and has been repaid approximately $114,000. As a result, the balance owed is approximately $25,500 less than it was at June 30, 2017.

 

Discussions with Creditors

 

The Company is currently in discussion with its creditors to extend the maturities of all of its outstanding indebtedness.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q and other reports that we file with the SEC contain statements that are considered forward-looking statements that involve risks and uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” and similar expressions. Such forward looking statements include statements addressing operating performance, events or developments that the Company expects or anticipates will occur in the future, including statements relating to revenue realization, revenue growth, earnings, earnings per share, or similar projections. These statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed for the reasons described in this report. You should not place undue reliance on these forward-looking statements.

 

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors such as:

 

	●	the ability to raise capital to fund our operations until we generate adequate cash flow internally;
	●	the terms and timing of product sales and licensing agreements;
	●	our ability to enter into strategic partnering and joint development agreements;
	●	our ability to competitively market our controlled release and filled tube products;

 

 

	●	the successful implementation of research and development programs;
	●	our ability to attract and retain key personnel;
	●	general market conditions.

 

Our actual results may differ materially from management’s expectations. The following discussion and analysis should be read in conjunction with our financial statements included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue in the future, or that any conclusion reached herein will necessarily be indicative of actual operating performance in the future. Such discussion represents only the best present assessment of our management.

 

The forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

The Company

 

Omni Shrimp

 

On June 23, 2016, the Company announced a new business line, Omni Shrimp, located in Madeira Beach, Florida on the Gulf of Mexico. It is a fast growing seller of wild American shrimp. It is a wholesaler of locally caught shrimp, predominantly the highly popular Key West pink variety, to large distributors in the US, who then resell the product to grocery store chains, restaurants and other retail stores in the Florida, Boston and New York markets. According to Marine Science Today Magazine, shrimp is the most eaten seafood within the United States. Shrimps come in many varieties which are differentiated by their color.

 

Omni believes that it differentiates itself from its competitors not only by the quality of its product but its relationships with distributors allowing it to get its product to market as quickly as possible in order to guarantee freshness and taste.

 

Liquidity

 

Going Concern - The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss for the six months ended June 30, 2017 of approximately $2,960,000, but used approximately $488,000 in cash from operations. The Company had negative working capital and stockholders’ deficiency of approximately $6,399,000 at June 30, 2017. Since inception the Company’s growth has been funded through a combination of convertible and non-convertible debt from private investors and sales of common stock. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and ultimately to attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements do not include any adjustments that might result from the uncertainty.

 

As of June 30, 2017 the Company owed approximately $2,350,000 to lenders in the form of convertible notes payable and accrued interest to unrelated parties. Much of this debt is convertible into the Company’s common stock at terms beneficial to the lenders compared to the market price of the Company’s common stock. The Company continues to rely on these lenders to provide additional loans to cover Company expenses and to provide forbearance agreements extending the due dates of the various notes.

 

 

Operating activities

Net cash (used) in operating activities for the six months ended June 30, 2017 and 2016 was ($488,533) and ($42,093), respectively. The net loss generated for the six months ended June 30, 2017 was ($2,959,599) compared to net income of $110,138 in the six month period ended June 30, 2016. The following items were used to reconcile the change in net income (loss) for the following three month periods:

 

		June 30, 2017				June 30, 2016
Net income (loss)		$	(2,959,599	)		$	110,138
Add:
Gain on change in fair value of derivative liability			1,648,421				—
Amortization of convertible note discount			778,887
Bad Debt Expense			65,307				—
Change in Working capital and other			(21,549	)			(152,081	)
Cash used in Operating activities		$	(488,533	)			(41,943	)

 

Investing activities

 

There were no cash flows from investing activities for the six months ended June 30, 2017 or June 30, 2016.

 

Financing Activities

 

During the six months ended June 30, 2017, the Company generated cash flows of $324,751 through related party advances of $184,595, issuances of cash notes of $102,000 and consulting notes of $75,000. These were offset by repayments of amounts due to related parties of $36,843. During the six months ended June 30, 2016, the Company borrowed an additional $133,743 from a Related Party.

 

Critical Accounting Policies and Estimates

Refer to the Company’s December 31, 2016 report on Form 10K issued on April 28, 2017 for a complete discussion of the critical accounting policies which have not changed during the six months ended June 30, 2017.

 

Comparison of Statement of Operations for the three months and six months ended June 30, 2017 and 2016

 

Three months ended June 30, 2017 and 2016

 

Revenue, Cost of Goods Sold and Gross Profit

 

Revenue, Cost of goods sold and gross profit for the three months ended June 30, 2017 and 2016 were as follows:

 

		June 30, 2017			June 30, 2016
Revenue		$	816,401		$	616,586
Cost of goods sold			773,006			542,188
Gross Profit		$	43,396		$	74,398
Gross profit margin			5%			12%

 

Revenues were $199,816 higher, in the quarter ended June 30, 2017, due to expansion of operations.

 

 

Cost of goods sold were $230,818 higher, in the quarter ended June 30, 2017 due to expansion of operations.

 

The Company’s margins were lower in the quarter ended June 30, 2017 due to the mix of product that was sold during the second quarter.

 

Operating Expenses

 

Operating expenses were $289,135 for the three months ended June 30, 2017 versus $26,952 in the three months ended June 30, 2016.

 

Compensation Expense was $90,000 and $-0- for the quarter ended June 30, 2017 and 2016, respectively, due to the establishment of employment contracts for our management team as of January 1, 2017. Expenses are $30,000 per month.

 

Professional Fees were $29,684 and $1,688 for the quarter ended June 30, 2017 and 2016, respectively. These expenses related to audit and legal fees. The increase was due to becoming a public company.

 

Consulting services were $33,012 and $-0- for the quarter ended June 30, 2017 and 2016, respectively, primarily due to the establishment of consulting contracts in the current year.

 

Transportation, Storage and Broker Fees were $36,089 and $17,139 for the quarter ended June 30, 2017 and 2016, respectively. These expenses are associated with storage in freezer facilities, transporting to buyers as well as paying brokers for arranging sales.

 

General and Administrative Expenses were $32,809 and $2,891 for the quarter ended June 30, 2017 and 2016, respectively. These expenses are comprised mostly of rent, travel, payroll taxes and SEC filing expenses. Expenses were higher due to the cost of being a public entity.

 

Sales and Marketing Expenses were $2,233 and $5,233 for the quarter ended June 30, 2017 and 2016, respectively. These expenses are mostly for advertising.

 

Bad Debt Expense was $65,307 and $-0- for the quarter ended June 30, 2017 and 2016, respectively. The expense in 2017 relates to a receivable which was not remitted to the Company form one of its brokers. The Company is contemplating various steps to obtain these funds, including legal action.

 

Other Income (expense), net for the three months ended June 30, 2017 and 2016

 

Other income (expense) for the three months ended June 30, 2017 was ($1,216,019). There was ($2,154) in other income (expense) for the three month period ended June 30, 2016.

 

Interest expense was ($462,110) for the three months ended June 30, 2017. $394,223 was the amortization of discounts on convertible notes after the establishment of derivative liabilities, a non-cash item. The remainder was the interest on the convertible and non-convertible indebtedness of the Company.

 

Loss on Change of the Fair market value of the derivative liability was ($753,909) for the three month period ending June 30, 2017. This was principally due to increased volatility in the stock price for the current period.

  

 

Six months ended June 30, 2017 and 2016

 

Revenue, Cost of Goods Sold and Gross Profit

  

Revenue, Cost of goods sold and gross profit for the six months ended June 30, 2017 and 2016 were as follows:

  

		June 30, 2017				June 30, 2016
Revenue		$	1,589,747			$	1,250,800
Cost of goods sold			1,452,713				1,087,683
Gross Profit		$	137,034			$	163,117
Gross profit margin			9	%			13	%

 

Revenues were $338,947 higher, in the six months ended June 30, 2017 due to the expansion of the Company’s operations.

 

Cost of goods sold were $365,030 higher, in the six months ended June 30, 2017 due to the expansion of the Company’s operations.

 

The Company’s margins were lower in the six months ended June 30, 2017 due to the mix of product that was sold during that timeframe.

 

Operating Expenses

 

Operating expenses were $551,631 for the six months ended June 30, 2017 versus $50,825 for the six months ended June 30, 2016.

 

Compensation Expense was $180,000 and $-0- for the six months ended June 30, 2017 and 2016, respectively, due to the establishment of employment contracts for our management team as of January 1, 2017. Expenses are $30,000 per month

 

Professional Fees were $40,004 and $1,688 for the six months ended June 30, 2017 and 2016, respectively. These expenses related to audit and legal expenses. The increase was due to the Company becoming a public entity.

 

Consulting services were $107,685 and $-0- for the six months ended June 30, 2017 and 2016, respectively, primarily due to the establishment of consulting contracts.

 

Transportation, Storage and Broker Fees were $76,692 and $38,538 for the six months ended June 30, 2017 and 2016, respectively. These expenses are associated with storing in freezer facilities, transporting to buyers as well as paying brokers for arranging sales.

 

General and Administrative Expenses were $63,413 and $3,234 for the six months ended June 30, 2017 and 2016, respectively. These expenses are comprised mostly of rent, travel, payroll taxes and SEC filing expenses.

 

Sales and Marketing Expenses were $18,530 and $7,367 for the six months ended June 30, 2017 and 2016, respectively. These expenses are mostly for advertising

 

Bad Debt Expense was $65,307 and $-0- for the six months ended June 30, 2017 and 2016, respectively. The expense in 2017 relates to a receivable which was not remitted to the Company form one of its brokers. The Company is contemplating various steps to obtain these funds, including legal action.

 

 

Other Income (expense), net for the six months ended June 30, 2017 and 2016

 

Other income (expense) for the six months ended June 30, 2017 was ($2,545,002). There was ($2,154) in other income (expense) for the three month period ended June 30, 2016.

  

Interest expense was ($896,581) for the six months ended June 30, 2017. $778,887 was the amortization of discounts on convertible notes after the establishment of derivative liabilities, a non-cash item. The remainder was the interest on the convertible and non-convertible indebtedness of the Company.

 

Loss on Change of the Fair market value of the derivative liability was ($1,648,421) for the six month period ending June 30, 2017. This was principally due to increased volatility in the stock price for the current period.

  

Item 4. - Controls and Procedures

  

Evaluation of Disclosure Controls and Procedures

  

The Company’s management is responsible for establishing and maintaining effective disclosure controls and procedures. Our Chief Executive Officer has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the CEO as appropriate, to allow timely decisions regarding required disclosure.

  

Based on this evaluation, and in light of the material weaknesses in our internal control over financial reporting that are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 our Chief Executive Officer has concluded that our disclosure controls and procedures were not effective. The material weaknesses consist of an insufficient complement of qualified accounting personnel and controls associated with segregation of duties and ineffective controls associated with identifying and accounting for complex and non-routine transactions in accordance with U.S. generally accepted accounting principles.

  

The Company did not maintain a sufficient complement of qualified accounting personnel and controls associated with the segregation of duties were ineffective. Notwithstanding these material weaknesses, management believes that the financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, result of operations and cash flows for the periods presented.

  

There can be no assurance, however, that our disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.

 

Changes in Internal Control over Financial Reporting

  

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

  

 

PART II-OTHER INFORMATION

 

Item 1. Legal Proceedings

  

Not applicable

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Recent Sales of Unregistered Securities

None besides those reported in our Form 10K filed on April 28, 2017 and this document

 

Item 3. Defaults Upon Senior Securities

None 

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit No.		Description
31.1		Certification of principal executive officer and principal accounting officer pursuant to section 302(a) of the Sarbanes-Oxley Act of 2002			*
32.1		Certification of principal executive officer and principal accounting officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002			*
101		Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Stockholders’ Deficiency, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed consolidated financial statements			*
101. INS		XBRL Instance Document			*
101. SCH		XBRL Taxonomy Extension Schema Document			*
101 CAL		XBRL Taxonomy Extension Calculation Linkbase Document			*
101. DEF		XBRL Taxonomy Extension Definition Linkbase Document			*
101. LAB		XBRL Taxonomy Extension Label Linkbase Document			*
101. PRE		XBRL Taxonomy Extension Presentation Linkbase Document			*

 

*	Filed herewith

 

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  

			Omni Shrimp, Inc.
Date:	October 13, 2017		/s/ Colm Wrynn
			Colm Wrynn
			President and Chief Executive Officer
			(Principal Executive, Financial and Accounting Officer)