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website address is https://naturalshrimp.com. The
information on our website, however, is not, and should not be
deemed to be, a part of this prospectus.
This
prospectus and any prospectus supplement are part of a registration
statement that we filed with the SEC and do not contain all of the
information in the registration statement. The full registration
statement may be obtained from the SEC or us, as provided below.
Forms of the documents establishing the terms of the offered
securities are or may be filed as exhibits to the registration
statement. Statements in this prospectus or any prospectus
supplement about these documents are summaries and each statement
is qualified in all respects by reference to the document to which
it refers. You should refer to the actual documents for a more
complete description of the relevant matters. You may view a copy
of the registration statement through the SEC’s website, as
provided above.
Incorporation by Reference
The
SEC’s rules allow us to “incorporate by
reference” information into this prospectus, which means that
we can disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus,
and subsequent information that we file with the SEC will
automatically update and supersede that information. Any statement
contained in a previously filed document incorporated by reference
will be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this
prospectus modifies or replaces that statement.
We
incorporate by reference our documents listed below and any future
filings made by us with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, which we
refer to as the “Exchange Act” in this prospectus,
between the date of this prospectus and the termination of the
offering of the securities described in this prospectus. We are
not, however, incorporating by reference any documents or portions
thereof, whether specifically listed below or filed in the future,
that are not deemed “filed” with the SEC, including any
information furnished pursuant to Items 2.02 or 7.01 of Form 8-K or
related exhibits furnished pursuant to Item 9.01 of Form
8-K.
This
prospectus and any accompanying prospectus supplement incorporate
by reference the documents set forth below that have previously
been filed with the SEC:
●
Our
Annual Report on Form 10-K for the year ended March 31, 2020, filed
with the SEC on June 26, 2020.
●
Our
Quarterly Reports on Form 10-Q for the quarters ended June 30,
2020, September 30, 2020, and December 31, 2020, filed with the SEC
on August 13, 2020, November 16, 2020, and February 16, 2021,
respectively.
●
Our
Current Reports on Form 8-K filed with the SEC on April 14, 2020,
June 4, 2020, June 17, 2020, August 12, 2020, August 20, 2020,
September 16, 2020, September 28, 2020, October 5, 2020, October 7,
2020, December 22, 2020, January 11, 2021, February 18, 2021, and
February 25, 2021.
●
The
description of our common stock contained in our Registration
Statement on Form 8-A, filed with the SEC on July 13, 2010, and any
amendment or report filed with the SEC for the purpose of updating
such description.
All
reports and other documents we subsequently file pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering, including all such documents we may
file with the SEC after the date of the initial registration
statement and prior to the effectiveness of the registration
statement, but excluding any information furnished to, rather than
filed with, the SEC, will also be incorporated by reference into
this prospectus and deemed to be part of this prospectus from the
date of the filing of such reports and documents.
You may
request a free copy of any of the documents incorporated by
reference in this prospectus (other than exhibits, unless they are
specifically incorporated by reference in the documents) by writing
or telephoning us at the following address:
NaturalShrimp
Incorporated
15150
Preston Road, Suite #300
Dallas,
Texas 75248
(888)
791-9474
Exhibits
to the filings will not be sent, however, unless those exhibits
have specifically been incorporated by reference in this prospectus
and any accompanying prospectus supplement.
THE COMPANY
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 NaturalShrimp Corporation
(“NSC”) and NaturalShrimp Global, Inc. (“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.
In
connection with our receipt of approval from the Financial Industry
Regulatory Authority (“FINRA”), effective March 3,
2015, we amended our Articles of Incorporation to change our name
to “NaturalShrimp Incorporated.”
Business Overview
We
are a biotechnology company and has 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. Our initial production facility is
located outside of San Antonio, Texas.
NS
Global, one of our wholly-owned subsidiaries, owns less than 1% of
NaturalShrimp International A.S. in Europe. Our European-based
partner, NaturalShrimp International A.S., Oslo, Norway, was
responsible for the construction cost of its facility and initial
operating capital.
The
first facility built in Spain for NaturalShrimp International A.S.
is GambaNatural de España, S.L. The land for the first
facility was purchased in Medina del Campo, Spain, and construction
of the 75,000 sq. ft. facility was completed in 2016. Medina del
Campo is approximately seventy-five miles northwest of Madrid,
Spain.
On
October 16, 2015, we formed Natural Aquatic Systems, Inc.
(“NAS”). The purpose of the NAS is to formalize the
business relationship between our Company and F&T Water
Solutions LLC for the joint development of certain water
technologies. The technologies shall include, without limitation,
any and all inventions, patents, intellectual property, and
know-how dealing with enclosed aquatic production systems
worldwide. This includes construction, operation, and management of
enclosed aquatic production, other than shrimp, facilities
throughout the world, co-developed by both parties at our facility
located outside of La Coste, Texas. On December 25, 2018, we were
awarded U.S. Patent “Recirculating Aquaculture System and
Treatment Method for Aquatic Species” covering all indoor
aquatic species that utilizes proprietary art.
The
Company has two wholly-owned subsidiaries, NSC and NS Global and
owns 51% of 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 even worse, in that they are
immune to antibiotics. Once introduced to a shrimp population,
viruses can wipe out entire farms and shrimp populations, even with
intense probiotic applications.
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.
Our
current system consists of a reception tank where the shrimp are
acclimated, then moved to a larger grow-out tank for the rest of
the twenty-four week cycle. During 2016, we engaged in additional
engineering projects with third parties to further enhance our
indoor production capabilities. For example, through our
relationship with Trane, Inc., a division of Ingersoll-Rand Plc
(“Trane”), Trane 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.
On
March 18, 2020, our research and development plant in La Coste,
Texas was destroyed by a fire. The Company believes that it was
caused by a natural gas leak, but the fire was so extensive that
the cause was undetermined. No one was injured as a result of the
fire. The majority of the damage was to our pilot production plant,
which comprises approximately 35,000 square feet of the total size
of all facilities at the La Coste location of approximately 53,000
square feet, but the fire did not impact the separate greenhouse,
reservoirs, or utility buildings. We have received total insurance
proceeds in the amount of $917,210, the full amount of our claim.
These funds are being utilized to rebuild a 40,000 square foot
production facility at the La Coste facility and to repurchase the
equipment needed to replace what was lost in the fire. Had this
facility fire not occurred, the Company had expected that the first
shrimp tanks harvest target date would have been April
2020.
Overview of Industry
Shrimp
is a well-known and globally-consumed commodity, constituting one
of the most important types of seafood and a staple protein source
for much of the world. According to the USDA Foreign Agricultural
Service, the world consumes approximately 9 billion pounds of
shrimp annually with over 1.7 billion pounds consumed in the United
States alone. Approximately 65% of the global supply of shrimp is
caught by ocean trawlers and the other 35% is produced by open-air
shrimp farms, mostly in developing countries.
Shrimp
boats catch shrimp through the use of large, boat-towed nets. These
nets are quite toxic to the undersea environment as they disturb
and destroy ocean-bottom ecosystems; these nets also catch a
variety of non-shrimp sea life, which is typically killed and
discarded as part of the shrimp harvesting process. Additionally,
the world’s oceans can only supply a finite amount of shrimp
each year, and in fact, single-boat shrimp yields have fallen by
approximately 20% since 2010 and continue to decrease. The
shrimping industry’s answer to this problem has been to
deploy more (and larger) boats that deploy ever-larger nets, which
has in the short-term been successful at maintaining global shrimp
yields. However, this benefit cannot continue forever, as
eventually global demand has the potential of outstripping the
oceans’ ability to maintain the natural ecosystem’s
balance, resulting in a permanent decline in yields. When taken in
light of global population growth and the ever-increasing demand
for nutrient-rich foods such as shrimp, this is clearly an
unsustainable production paradigm.
Shrimp
farming, known in the industry as “aquaculture,” has
ostensibly stepped in to fill this demand/supply imbalance. Shrimp
farming is typically done in open-air lagoons and man-made shrimp
ponds connected to the open ocean. Because these ponds constantly
exchange water with the adjacent sea, the farmers are able to
maintain the water chemistry that allows the shrimp to prosper.
However, this method of cultivating shrimp also carries severe
ecological peril. First of all, most shrimp farming is primarily
conducted in developing countries, where poor shrimp farmers have
little regard for the global ecosystem. Because of this, these
farmers use large quantities of antibiotics and other chemicals
that maximize each farm’s chance of producing a crop, putting
the entire system at risk. For example, a viral infection that
crops up in one farm can spread to all nearby farms, quite
literally wiping out an entire region’s production. In 1999,
the White Spot virus invaded shrimp farms in at least five Latin
American countries: Honduras, Nicaragua, Guatemala, Panama, and
Ecuador and in 2013-14 EMS (Early Mortality Syndrome) wiped out
most of the Asia Pacific region and Mexico. Secondly, there is also
a finite amount of coastline that can be used for shrimp production
– eventually shrimp farms that are dependent on the open
ocean will have nowhere to expand. Again, this is an ecologically
damaging and ultimately unsustainable system for producing
shrimp.
In
both the cases, the current method of shrimp production is
unsustainable. As global populations rise and the demand for shrimp
continues to grow, the current system is bound to fall short.
Shrimp trawling cannot continue to increase production without
completely depleting the oceans’ natural shrimp population.
Trends in per-boat yield confirm that this industry has already
crossed the overfishing threshold, putting the global open-ocean
shrimp population in decline. While open-air shrimp aquaculture may
seem to address this problem, it is also an unsustainable system
that destroys coastal ecological systems and produces shrimp with
very high chemical contamination levels. Closed-system shrimp
farming is clearly a superior alternative, but its unique
challenges have prevented it from becoming a widely-available
alternative.
Of
the 1.7 billion pounds of shrimp consumed annually in the United
States, over 1.5 billion pounds are imported – much of this
from developing countries’ shrimp farms. These farms are
typically located in developing countries and use high levels of
antibiotics and pesticides that are not allowed under USDA
regulations. As a result, these shrimp farms produce chemical-laden
shrimp in an ecologically unsustainable way.
Unfortunately,
most consumers here in the United States are not aware of the
origin of their store-bought shrimp or that which they consume in
restaurants. This is due to a USDA rule that states that only
bulk-packaged shrimp must state the shrimp’s country of
origin; any “prepared” shrimp, which includes
arrangements sold in grocery stores and seafood markets, as well as
all shrimp served in restaurants, can simply be sold “as
is.” Essentially, this means that most U.S. consumers may be
eating shrimp laden with chemicals and antibiotics. Our product is
free of pesticide chemicals and antibiotics, a fact that we believe
is highly attractive and beneficial in terms of our eventual
marketing success.
Technology
Intensive, Indoor, Closed-System Shrimp Production
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 even
worse, in that they are immune to antibiotics. Once introduced to a
shrimp population, viruses can wipe out entire farms and shrimp
populations, even with intense probiotic applications.
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.
Automated Monitoring and Control System
The Company’s “Automated Monitoring and Control
System” uses individual tank monitors to automatically
control the feeding, oxygenation, and temperature of each of the
facility tanks independently. In addition, a facility computer
running custom software communicates with each of the controllers
and performs additional data acquisition functions that can report
back to a supervisory computer from anywhere in the world. These
computer-automated water controls optimize the growing conditions
for the shrimp as they mature to harvest size, providing a
disease-resistant production environment.
The principal theories behind the Company’s system are
characterized as:
●
High-density
shrimp production
These principles form the foundation for the Company and our
potential distributors so that consumers can be provided with
continuous volumes of live and fresh shrimp at competitive
prices.
Research and Development
In 2001, we began research and development (R&D) of a high
density, natural aquaculture system that is not dependent on ocean
water to provide quality, fresh shrimp every week, fifty-two weeks
per year. Our initial system was successful, but the Company
determined that it would not be economically feasible due to high
operating costs. Over the next several years, using the knowledge
we gained from the first R&D 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.
On September 7, 2016, we entered into a Letter of Commitment with
Trane, Inc. (“Trane”), a division of Ingersoll-Rand
Plc, whereby Trane proceeded with a detailed audit to use data to
verify the capabilities of an initial Phase 1 prototype of a
Trane-proposed three tank system at our La Coste, Texas facility.
The prototype consisted of a modified Electrocoagulation (EC)
system for the human grow-out, harvesting and processing of fully
mature, antibiotic-free Pacific White Leg shrimp. Trane was
authorized to proceed with such detailed audit to utilize data for
purposes of verifying the capabilities of the EC system, including
the ammonia and chlorine capture, and sequestering and pathogen
kill. The detailed audit delivered (i) a report on the inspection
of the existing infrastructure determining if proper fit, adequate
security, acceptable utility service, environmental protection and
equipment sizing are achievable; (ii) provide firm fixed pricing
for the EC system, electrode selection and supply, waste removal,
ventilation of the off-gassing of the equipment; and (iii) a
formalized plan for commissioning and on-site investigation of
hardware design to simplify build-out of Phase 2 and future phases.
The detailed Trane audit and engineering provided by F&T Water
Solutions and NaturalShrimp was utilized by RGA Labs to build and
install the initial system in La Coste, Texas pilot plant the first
week of June 2018.
After successful testing of the EC system, we began a renovation of
the La Coste facility in 2019 to include 4 nursery tanks and 40
grow-out tanks. On March 18, 2020, this pilot plant was destroyed
by a fire. The Company believes that it was caused by a natural gas
leak, but the fire was so extensive that the cause was
undetermined. This fire occurred just as we began the restocking of
1,500,000 PLs in the newly renovated building. At that time, all of
our growth metrics for these PLs were better than
expected.
Management has diligently analyzed all possible options to finalize
a strong financial go-forward strategy to rebuild our shrimp
production facilities. These strategies include time-to-market,
patented technologies, operational systems, environmental impacts,
employee safety, distribution, etc. As previously reported, the
Company committed to reviewing all options including the
acquisition and/or leasing of existing regional production
warehouses or any existing seafood facility that could be quickly
adapted to our technology processes and procedures. We completed
our evaluation during our fiscal first quarter of new buildings,
seafood production facilities, and the option of rebuilding in La
Coste. The evaluation process provided two best options: first,
acquisition of an existing seafood grow-out facility and, second,
building a new pilot plant on our La Coste property. We identified
VeroBlue, an existing aquaculture Barramundi grow-out facility
during our fiscal first quarter, but we were not able to consummate
a transaction under terms and conditions that would make the
purchase financially viable. During this process, management was
concurrently developing a detailed plan to rebuild the facility in
La Coste. We have committed $2.5 million to rebuild in La Coste
with plans to utilize its existing infrastructure.
Target Markets and Sales Price
Our goal is to establish production systems and distribution
centers in metropolitan areas of the United States, as well as
international distribution networks through joint venture
partnerships throughout the world. This should allow the Company to
capture a significant portion of world shrimp sales by offering
locally grown, environmentally “green,” naturally
grown, fresh shrimp at competitive wholesale prices.
The United States population is approximately 330 million people
with an annual shrimp consumption of 1.7 billion pounds, of which
less than 400 million pounds are domestically produced. According
to IndexMundi.com, from January 2006 through January 2021, the
wholesale price for frozen, commodity grade shrimp (shell-on
headless, 26-30 count; which is comparable to our target growth
size) rose 18%. With world shrimp problems, this price is expected
to rise more in the next few years.
We strive to build a profitable global shrimp production company.
We believe our foundational advantage is that we can deliver fresh,
organically grown, gourmet-grade shrimp, 52 weeks per year to
retail and wholesale buyers in major market areas at competitive,
yet premium prices. By locating regional production and
distribution centers in close proximity to consumer demand, we can
provide a fresh product to customers within 24 hours after harvest,
which is unique in the shrimp industry. We can be the “first
to market” and perhaps “sole weekly provider” of
fresh shrimp and capture as much market share as production
capacity can support.
For those customers that want a frozen product, we may be able to
provide this in the near future and the product will still be
differentiated as a “naturally grown, sustainable
seafood” that will meet the increasing demand of socially
conscious consumers.
Our patented technology and eco-friendly, bio-secure production
processes enable the delivery of a chemical and antibiotic free,
locally grown product that lives up to the Company’s mantra:
“Always Fresh, Always Natural,” thereby solving the
issue of “unsafe” imported seafood.
Product Description
Nearly
all of the shrimp consumed today are shipped frozen. Shrimp are
typically frozen from six to twenty-four months before consumption.
Our system is designed to harvest a different tank each week, which
provides for fresh shrimp throughout the year. We strive to create
a niche market of “Always Fresh, Always Natural”
shrimp. As opposed to many of the foreign shrimp farms, we can also
claim that our product is 100% free of antibiotics. The ability to
grow shrimp locally, year round allows us to provide this high-end
product to specialty grocery stores and upscale restaurants
throughout the world. We rotate the stocking and harvesting of our
tanks each week, which allows for weekly shrimp harvests. Our
product is free of all pollutants and is fed only all-natural
feeds.
The
seafood industry lacks a consistent “Source
Verification” method to track seafood products as they move
through countries and customs procedures. With worldwide
overfishing leading to declining shrimp freshness and
sustainability around the world, it is vital for shrimp providers
to be able to realistically identify the source of their product.
We have well-managed, sustainable facilities that are able to track
shrimp from hatchery to plate using environmentally responsible
methods.
Shrimp Growth Period
Our
production system is designed to produce shrimp at a harvest size
of twenty-one to twenty-five shrimp per pound in a period of
twenty-four weeks. The Company currently purchases post-larva
shrimp that are approximately ten days old (PL 10). In the future,
we plan to build our own hatcheries to control the supply of shrimp
to each of our facilities. Our full-scale production systems
include grow-out and nursery tanks, projected to produce fresh
shrimp fifty-two weeks per year.
Distribution and Marketing
We
plan to build environmentally “green” production
systems near major metropolitan areas of the United States. Today,
we have one production facility in La Coste, Texas (near San
Antonio) and three production facilities in Iowa. We have signed a
joint venture agreement with Ecoponex and letters of intent to
build production facilities in Roseville, CA, Atlanta, GA, and
Puerto Rico. We also have signed a joint venture agreement with
Hydrenesis to build a production facility in Florida. Over the next
five years, our plan is to increase construction of new facilities
each year. In the fifth year, we plan for a new system to be
completed each month, expanding first into the largest shrimp
consumption markets of the United States.
Because
our system is enclosed and also indoors, it is not affected by
weather or climate and does not depend on ocean proximity. As such,
we believe we will be able to provide, naturally grown,
high-quality, fresh shrimp to major market customers each week.
This will allow distribution companies to leverage their existing
customer relationships by offering an uninterrupted supply of high
quality, fresh and locally grown shrimp. We plan to sell and
distribute the vast majority of our shrimp production through
distributors which have established customers and sufficient
capacity to deliver a fresh product within hours following harvest.
We believe we have the added advantage of being able to market our
shrimp as fresh, natural, and locally grown using sustainable,
eco-friendly technology, a key differentiation from all existing
shrimp producers. Furthermore, we believe that our ability to
advertise our product in this manner along with the fact that it is
a locally grown product, provides us with a marketing advantage
over the competition. We expect to utilize distributors that
currently supply fresh seafood to upscale restaurants, country
clubs, specialty supermarkets and retail stores whose clientele
expect and appreciate fresh, natural products.
Harvesting, Packaging and Shipment
Each
location is projected to include production, harvesting/processing
and a general shipping and receiving area, in addition to
warehousing space for storage of necessary supplies and products
required to grow, harvest, package and otherwise make ready for
delivery, a fresh shrimp crop on a weekly basis to consumers in
each individual market area within 24 hours following
harvest.
The
seafood industry lacks a consistent source verification method to
track seafood products as they move through countries and customs
procedures. With worldwide overfishing leading to declining shrimp
freshness and sustainability around the world, it is vital for
shrimp providers to be able to realistically identify the source of
their product. Our future facilities are expected to be designed to
track shrimp from hatchery to plate using environmentally
responsible methods.
International
We own one hundred percent of NaturalShrimp Global, Inc., which was
formed to create international partnerships. Each international
partnership is expected to use the Company’s proprietary
technology to penetrate shrimp markets throughout the world
utilizing existing food service distribution channels.
NaturalShrimp Global, Inc., owns less than one percent of Noray
Seafood A.S. (formerly NaturalShrimp International A.S.) in Oslo,
Norway. NaturalShrimp International A.S. was responsible for the
construction cost of their facility and initial operating
capital.
The first facility built in Spain for NaturalShrimp International
A.S. is GambaNatural de España, S.L. in Medina del Campo and
is approximately seventy-five miles northwest of Madrid, Spain. The
construction of the 75,000 sq. ft. facility was completed in 2016
with NaturalShrimp engineering and design
consultation.
Go to Market Strategy and Execution
Our
strategy is to acquire or develop regional production and
distribution centers or joint ventures near major metropolitan
areas throughout the United States and internationally. Along with
our reconstruction of our La Coste facility that includes an 8,000
square foot water treatment plant and a 40,000 square foot
production facility and our purchase of the assets from VeroBlue
Farms USA, Inc. Our current plan includes a NaturalShrimp Iowa
expansion, a La Coste, TX expansion, Ecoponex and Hydrenesis joint
ventures while developing regional production and distribution
centers near major markets, adding one system per month in 2022
depending on market demand.
We
have sold limited amounts of product to restaurants at $12.00 per
pound and to retail consumers at $16.50 to $21.00 per pound,
depending on size, which helps to validate our pricing strategy.
Additionally, from 2011 to 2013, we had two successful North Texas
test markets which distributed thousands of pounds of fresh product
to customers within 24 hours following harvest. The fresh product
was priced from $8.40 to $12.00 per pound wholesale, heads on, net
price to the Company.
Current Systems and Expansion
The
shrimp production facility rebuilt in La Coste, Texas will use the
new patent-pending technologies the Company developed with
Trane’s engineering audit, F&T Water Solutions, and
Hydrenesis. This facility utilizing the aforementioned platform
technologies is projected to produce approximately 3,000 pounds of
shrimp every week. By staging the stocking and harvests from tank
to tank, it enables us to produce weekly and therefore deliver
fresh shrimp every week.
With our acquisition of NaturalShrimp Iowa (formerly Veroblue Farms
USA, Inc.), the Company will utilize the aforementioned platform
technologies to retrofit 344,000 square feet of the existing Iowa
facilities that we expect to produce 9,000 pounds of shrimp per
week. The combined output from La Coste, TX and Iowa should result
in 12,000 pounds of shrimp production per week by late
2021.
These
locations are targeted to begin construction in fiscal 2022 (which
begins on April 1, 2021) and the funding for these plans is
projected to come from this offering and joint venture agreements
with strategic partners, as well as from additional internal
financing. These cities are not surrounded by commercial shrimp
production, and we believe there will be a high demand for fresh
shrimp in all of these locations. In addition, the Company will
continue to use the land it owns in La Coste and Iowa to build as
many systems as the Texas and Iowa markets demand.
Competition
There
are a number of companies conducting research and development
projects in their attempt to develop closed-system technologies in
the U.S., some with reported production and sales. Most North
American shrimp farms are using a Bio-Floc System to intensify
shrimp growth. Since these are privately-held companies, it is not
possible to know, with certainty, their state of technical
development, production capacity, need for water exchange, location
requirements, financial status, and other matters. To the best of
our knowledge, none are producing significant quantities of shrimp
relative to their local markets, and such fresh shrimp sales are
likely confined to an area near the production
facility.
Additionally,
any new competitor would face significant barriers for entry into
the market and would likely need years of research and development
to develop the proprietary technology necessary to produce similar
shrimp at a commercially viable level. We believe our technology
and business model sets us apart from any current competition. It
is possible that additional competitors will arise in the future,
but with the size and growth of the worldwide shrimp market, many
competitors could co-exist and thrive in the fresh shrimp
industry.
Intellectual Property
We intend to take appropriate steps to protect our intellectual
property. We have registered the trademark
“NATURALSHRIMP” which has been approved and was
published in the Official Gazette on June 5, 2012. On December 25,
2018, we were awarded U.S. Patent 10,163,199 “Recirculating
Aquaculture System and Treatment Method for Aquatic Species”
covering all indoor aquatic species that utilizes proprietary art.
There are potential technical processes for which the Company may
be able to file a patent. However, there are no assurances that
such applications, if filed, would be issued and no right of
enforcement is granted to a patent application. Therefore, the
Company has filed a provisional patent with the U.S. Patent Office
and plans to use a variety of other methods, including copyright
registrations as appropriate, trade secret protection, and
confidentiality and non-compete agreements to protect its
intellectual property portfolio.
Source and Availability of Raw Materials
Raw materials are received in a timely manner from established
suppliers. Currently, we buy our feed from Zeigler, a leading
producer of aquatic feed. Post larvae (“PL”) shrimp are
available from American Penaeid, Inc. (API) in Florida and Global
Blue Technologies in Texas.
There have not been any issues regarding the availability of our
raw materials. We have favorable contacts and past business
dealings with other major shrimp feed producers if current
suppliers are not available.
Government Approvals and Regulations
We are subject to government regulation and require certain
licenses. The following list includes regulations to which we are
subject and/or the permits and licenses we currently
hold:
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Texas
Parks and Wildlife Department (TPWD) - “Exotic species
permit” to raise exotic shrimp (non-native to Texas). The La
Coste facility is north of the coastal shrimp exclusion zone (east
and south of H-35, where it intersects Hwy 21 down to Laredo) and
therefore outside of TPWD’s major area of concern for exotic
shrimp. This license is currently active, expiring on December 31,
2021.
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Texas
Department of Agriculture (TDA) - “Aquaculture License”
for aquaculture production facilities. License to “operate a
fish farm or cultured fish processing plant.” This license is
currently active, expiring on June 30, 2022.
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Texas
Commission on Environmental Quality (TCEQ) - Regulates facility
wastewater discharge. According to the TCEQ permit classification
system, we are rated Level 1 – Recirculation system with no
discharge. This license is currently active, with no set expiration
date.
We are subject to certain regulations regarding the need for field
employees to be certified. We strictly adhere to these regulations.
The cost of certification is an accepted part of expenses.
Regulations may change and become a cost burden, but compliance and
safety are our main concern.
Market Advantages and Corporate Drivers
The following are what we consider to be our advantages in the
marketplace:
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Early-mover
Advantage: Commercialized technology in a large growing market with
no significant competition yet identified. Most are early stage
start-ups or early stage companies with limited production and
distribution.
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Farm-to-Market:
This has significant advantages including reduced transportation
costs and a product that is more attractive to local
consumers.
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Bio-secured
Building: Our process is a re-circulating, highly-filtered water
technology in an indoor-regulated environment. External pathogens
are excluded.
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Eco-friendly
“Green” Technology: Our closed-loop, re-circulating
system has no ocean water exchange requirements, does not use
chemical or antibiotics and therefore is sustainable, eco-friendly,
environmentally sound and produces a superior quality shrimp that
is totally natural.
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Availability
of Weekly Fresh Shrimp: Assures consumers of optimal freshness,
taste, and texture of product which will command premium
prices.
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Sustainability:
Our naturally grown product does not deplete wild supplies, has no
by-catch kill of marine life, does not damage sensitive ecological
environments, and avoids potential risks of imported
seafood.
Subsidiaries
The Company has two wholly-owned subsidiaries, NaturalShrimp
Corporation and NaturalShrimp Global, Inc. and owns 51% of Natural
Aquatic Systems, Inc.
Employees
As of February 26, 2021, we had
12 full-time employees. We intend to hire additional staff and to
engage consultants in general administration on an as-needed basis.
We also may engage experts in general business to advise us in
various capacities. None of our employees are subject to a
collective bargaining agreement, and we believe that our
relationship with our employees is good.
Recent Developments
On
February 17, 2021, the Company issued a press release announcing
that it has appointed Peter Najarian to its advisory
board.
On
July 29, 2020, the Company issued a press release announcing that
it has signed a letter of intent (the “F&T LOI”) to
acquire the assets of F&T Water Solutions LLC in Largo, Florida
(“F&T”). The F&T LOI contained an exclusivity
provision through September 15, 2020. On October 2, 2020, January
8, 2021, and March 4, 2021, the Company and F&T executed
extensions of the exclusivity and expected closing date provisions
of the F&T LOI. The exclusivity period has been extended to
April 15, 2021 with the closing date expected to be the same
date.
On
December 18, 2020, the Company entered into securities purchase
agreements (the “Purchase Agreement”) with GHS
Investments LLC, Platinum Point Capital LLC and BHP Capital NY
(collectively, the “Investors”) , whereby, at the
closing, the Investors have agreed to purchase from the Company an
aggregate of 5,000 shares of the Company’s Series D
Convertible Preferred Stock, par value $0.0001 per share (the
“Series D Preferred Stock”), at a purchase price of
$1,000 per share of Series D Preferred Stock. The aggregate
purchase price for the Series D Preferred Stock is $5,000,000. In
connection with the sale of the Series D Preferred Stock, the
Investors will receive 6,000,000 shares of the Company’s
common stock, par value $0.0001 (the “Commitment
Shares”).
On
December 15, 2020, the Company 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 the
Company 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, with a fair value of $135,000
based on the market value of the common stock as of the closing
date of the acquisition.
The
facility was originally designed as a farming facility, with the
company never beginning production. The Company’s plan is to
begin 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 patented EC
platform technology.
On
August 11, 2020, Company issued a press release announcing that it
has signed a letter of intent to acquire the assets of Alder Aqua,
formerly known as VeroBlue Farms, in Webster City, Iowa,
(“VeroBlue”) including, but not limited to, the real
property, equipment, tanks, rolling stock, inventory, permits,
contracts, customer lists and contracts and other such assets used
in the operation of the business (the “LOI”). Under the
terms of the LOI, the acquisition is subject to successful due
diligence by the Company and is expected to close in the fourth
quarter of 2020. The LOI also contained exclusivity provisions
through September 15, 2020. On October 1, 2020, the Company and
VeroBlue executed an extension of exclusivity agreement to the LOI
to extend the exclusivity period to October 31, 2020 or the
closing, whichever occurs first.
DESCRIPTION OF DEBT SECURITIES
General
The
debt securities that we may offer by this prospectus consist of
notes, debentures, or other evidences of indebtedness. The debt
securities may constitute either senior or subordinated debt
securities, and in either case may be either secured or unsecured.
Any debt securities that we offer and sell will be our direct
obligations. Debt securities may be issued in one or more series.
All debt securities of any one series need not be issued at the
same time, and unless otherwise provided, a series of debt
securities may be reopened, with the required consent of the
holders of outstanding debt securities, for issuance of additional
debt securities of that series or to establish additional terms of
that series of debt securities (with such additional terms
applicable only to unissued or additional debt securities of that
series). The form of indenture has been filed as an exhibit to the
registration statement of which this prospectus is a part and is
subject to any amendments or supplements that we may enter into
with the trustee(s), however, we may issue debt securities not
subject to the indenture provided such terms of debt securities are
not otherwise required to be set forth in the indenture. The
material terms of the indenture are summarized below and we refer
you to the indenture for a detailed description of these material
terms. Additional or different provisions that are applicable to a
particular series of debt securities will, if material, be
described in a prospectus supplement relating to the offering of
debt securities of that series. These provisions may include, among
other things and to the extent applicable, the
following:
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the
title of the debt securities, including, as applicable, whether the
debt securities will be issued as senior debt securities, senior
subordinated debt securities or subordinated debt securities, any
subordination provisions particular to the series of debt
securities;
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any
limit on the aggregate principal amount of the debt
securities;
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whether
the debt securities are senior debt securities or subordinated debt
securities and applicable subordination provisions, if
any;
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whether
the debt securities will be secured or unsecured;
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if
other than 100% of the aggregate principal amount, the percentage
of the aggregate principal amount at which we will sell the debt
securities, such as an original issuance discount;
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the
date or dates, whether fixed or extendable, on which the principal
of the debt securities will be payable;
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the
rate or rates, which may be fixed or variable, at which the debt
securities will bear interest, if any, the date or dates from which
any such interest will accrue, the interest payment dates on which
we will pay any such interest, the basis upon which interest will
be calculated if other than that of a 360-day year consisting of
twelve 30-day months, and, in the case of registered securities,
the record dates for the determination of holders to whom interest
is payable;
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the
place or places where the principal of and any premium or interest
on the debt securities will be payable and where the debt
securities may be surrendered for conversion or
exchange;
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whether
we may, at our option, redeem the debt securities, and if so, the
price or prices at which, the period or periods within which, and
the terms and conditions upon which, we may redeem the debt
securities, in whole or in part, pursuant to any sinking fund or
otherwise;
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if
other than 100% of the aggregate principal amount thereof, the
portion of the principal amount of the debt securities which will
be payable upon declaration of acceleration of the maturity date
thereof or provable in bankruptcy, or, if applicable, which is
convertible or exchangeable;
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any
obligation we may have to redeem, purchase, or repay the debt
securities pursuant to any sinking fund or analogous provisions or
at the option of a holder of debt securities, and the price or
prices at which, the currency in which and the period or periods
within which, and the terms and conditions upon which, the debt
securities will be redeemed, purchased or repaid, in whole or in
part, pursuant to any such obligation, and any provision for the
remarketing of the debt securities;
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the
issuance of debt securities as registered securities or
unregistered securities or both, and the rights of the holders of
the debt securities to exchange unregistered securities for
registered securities, or vice versa, and the circumstances under
which any such exchanges, if permitted, may be made;
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the
denominations, which may be in United States Dollars or in any
foreign currency, in which the debt securities will be issued, if
other than denominations of $1,000 and any integral multiple
thereof;
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whether
the debt securities will be issued in the form of certificated debt
securities, and if so, the form of the debt securities (or forms
thereof if unregistered and registered securities are issuable in
that series), including the legends required by law or as we deem
necessary or appropriate, the form of any coupons or temporary
global security which may be issued and the forms of any other
certificates which may be required under the indenture or which we
may require in connection with the offering, sale, delivery or
exchange of the debt securities;
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if
other than United States Dollars, the currency, or currencies in
which payments of principal, interest, and other amounts payable
with respect to the debt securities will be denominated, payable,
redeemable or repurchasable, as the case may be;
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whether
the debt securities may be issuable in tranches;
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the
obligations, if any, we may have to permit the conversion or
exchange of the debt securities into common stock, preferred stock
or other capital stock or property, or a combination thereof, and
the terms and conditions upon which such conversion or exchange
will be effected (including conversion price or exchange ratio),
and any limitations on the ownership or transferability of the
securities or property into which the debt securities may be
converted or exchanged;
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if
other than the trustee under the indenture, any trustees,
authenticating or paying agents, transfer agents or registrars or
any other agents with respect to the debt securities;
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any
deletions from, modifications of or additions to the events of
default with respect to the debt securities or the right of the
Trustee or the holders of the debt securities in connection with
events of default;
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any
deletions from, modifications of or additions to the covenants with
respect to the debt securities;
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if the
amount of payments of principal of, and make-whole amount, if any,
and interest on the debt securities may be determined with
reference to an index, the manner in which such amount will be
determined;
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whether
the debt securities will be issued in whole or in part in the
global form of one or more debt securities and, if so, the
depositary for such debt securities, the circumstances under which
any such debt security may be exchanged for debt securities
registered in the name of, and under which any transfer of debt
securities may be registered in the name of, any person other than
such depositary or its nominee, and any other provisions regarding
such debt securities;
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whether,
under what circumstances and the currency in which, we will pay
additional amounts on the debt securities to any holder of the debt
securities who is not a United States person in respect of any tax,
assessment, or governmental charge and, if so, whether we will have
the option to redeem such debt securities rather than pay such
additional amounts, and the terms of any such option;
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whether
the debt securities will be secured by any collateral and, if so, a
general description of the collateral and the terms of any related
security, pledge, or other agreements;
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the
persons to whom any interest on the debt securities will be
payable, if other than the registered holders thereof on the
regular record date therefor; and
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any
other material terms or conditions upon which the debt securities
will be issued.
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Unless
otherwise indicated in the applicable prospectus supplement, we
will issue debt securities in fully registered form without coupons
and in denominations of $1,000 and in integral multiples of $1,000,
and interest will be computed on the basis of a 360-day year of
twelve 30-day months. If any interest payment date or the maturity
date falls on a day that is not a business day, then the payment
will be made on the next business day without additional interest
and with the same effect as if it were made on the originally
scheduled date. “Business day” means any calendar day
that is not a Saturday, Sunday or legal holiday in New York, New
York, and on which the trustee and commercial banks are open for
business in New York, New York.
Unless
we inform you otherwise in a prospectus supplement, each series of
our senior debt securities will rank equally in right of payment
with all of our other unsubordinated debt. The subordinated debt
securities will rank junior in right of payment and be subordinate
to all of our unsubordinated debt.
Unless
otherwise indicated in the applicable prospectus supplement, the
trustee will act as paying agent and registrar for the debt
securities under the indenture. We may act as paying agent under
the indenture.
The
prospectus supplement will contain a description of United States
federal income tax consequences relating to the debt securities, to
the extent applicable.
Covenants
The
applicable prospectus supplement will describe any covenants, such
as restrictive covenants restricting us or our subsidiaries, if
any, from incurring, issuing, assuming or guarantying any
indebtedness or restricting us or our subsidiaries, if any, from
paying dividends or acquiring any of our or its capital
stock.
Consolidation, Merger and Transfer of Assets
The
indenture permits a consolidation or merger between us and another
entity and/or the sale, conveyance, or lease by us of all or
substantially all of our property and assets, provided
that:
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the
resulting or acquiring entity, if other than us, is organized and
existing under the laws of a United States jurisdiction and assumes
all of our responsibilities and liabilities under the indenture,
including the payment of all amounts due on the debt securities and
performance of the covenants in the indenture;
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immediately
after the transaction, and giving effect to the transaction, no
event of default under the indenture exists; and
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we have
delivered to the trustee an officers’ certificate stating
that the transaction and, if a supplemental indenture is required
in connection with the transaction, the supplemental indenture
comply with the indenture and that all conditions precedent to the
transaction contained in the indenture have been
satisfied.
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If we
consolidate or merge with or into any other entity, or sell or
lease all or substantially all of our assets in compliance with the
terms and conditions of the indenture, the resulting or acquiring
entity will be substituted for us in the indenture and the debt
securities with the same effect as if it had been an original party
to the indenture and the debt securities. As a result, such
successor entity may exercise our rights and powers under the
indenture and the debt securities, in our name and, except in the
case of a lease, we will be released from all our liabilities and
obligations under the indenture and under the debt
securities.
Notwithstanding
the foregoing, we may transfer all of our property and assets to
another entity if, immediately after giving effect to the transfer,
such entity is our wholly owned subsidiary. The term “wholly
owned subsidiary” means any subsidiary in which we and/or our
other wholly owned subsidiaries, if any, own all of the outstanding
capital stock.
Modification and Waiver
Under
the indenture, some of our rights and obligations and some of the
rights of the holders of the debt securities may be modified or
amended with the consent of the holders of not less than a majority
in aggregate principal amount of the outstanding debt securities
affected by the modification or amendment. However, the following
modifications and amendments will not be effective against any
holder without its consent:
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a
change in the stated maturity date of any payment of principal or
interest;
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a
reduction in the principal amount of or interest on any debt
securities;
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an
alteration or impairment of any right to convert at the rate or
upon the terms provided in the indenture;
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a
change in the currency in which any payment on the debt securities
is payable;
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an
impairment of a holder’s right to sue us for the enforcement
of payments due on the debt securities; or
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a
reduction in the percentage of outstanding debt securities required
to consent to a modification or amendment of the indenture or
required to consent to a waiver of compliance with certain
provisions of the indenture or certain defaults under the
indenture.
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Under
the indenture, the holders of not less than a majority in aggregate
principal amount of the outstanding debt securities may, on behalf
of all holders of the debt securities:
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waive
compliance by us with certain restrictive provisions of the
indenture; and
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waive
any past default under the indenture in accordance with the
applicable provisions of the indenture, except a default in the
payment of the principal of or interest on any series of debt
securities.
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Events of Default
Unless
we indicate otherwise in the applicable prospectus supplement,
“event of default” under the indenture will mean, with
respect to any series of debt securities, any of the
following:
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failure
to pay interest on any debt security for 30 days after the payment
is due;
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failure
to pay the principal of any debt security when due, either at
maturity, upon redemption, by declaration or
otherwise;
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failure
on our part to observe or perform any other covenant or agreement
in the indenture that applies to the debt securities for 90 days
after we have received written notice of the failure to perform in
the manner specified in the indenture; and
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certain
events of bankruptcy, insolvency, or reorganization.
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Remedies Upon an Event of Default
If an
event of default occurs and continues, the trustee or the holders
of not less than 25% in aggregate principal amount of the
outstanding debt securities of such series may declare the entire
principal of all the debt securities to be due and payable
immediately, except that, if the event of default is caused by
certain events in bankruptcy, insolvency or reorganization, the
entire principal of all of the debt securities of such series will
become due and payable immediately without any act on the part of
the trustee or holders of the debt securities. If such a
declaration occurs, the holders of a majority of the aggregate
principal amount of the outstanding debt securities of such series
can, subject to conditions, rescind the declaration.
The
indenture requires us to furnish to the trustee not less often than
annually, a certificate from our principal executive officer,
principal financial officer or principal accounting officer, as the
case may be, as to such officer’s knowledge of our compliance
with all conditions and covenants under the indenture. The trustee
may withhold notice to the holders of debt securities of any
default, except defaults in the payment of principal of or interest
on any debt securities if the trustee in good faith determines that
the withholding of notice is in the best interests of the holders.
For purposes of this paragraph, “default” means any
event which is, or after notice or lapse of time or both would
become, an event of default under the indenture.
The
trustee is not obligated to exercise any of its rights or powers
under the indenture at the request, order or direction of any
holders of debt securities, unless the holders offer the trustee
satisfactory security or indemnity. If satisfactory security or
indemnity is provided, then, subject to other rights of the
trustee, the holders of a majority in aggregate principal amount of
the outstanding debt securities may direct the time, method, and
place of:
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conducting
any proceeding for any remedy available to the trustee;
or
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exercising
any trust or power conferred upon the trustee.
The
holder of a debt security will have the right to begin any
proceeding with respect to the indenture or for any remedy only
if:
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the
holder has previously given the trustee written notice of a
continuing event of default;
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the
holders of not less than a majority in aggregate principal amount
of the outstanding debt securities have made a written request of,
and offered reasonable indemnity to, the trustee to begin such
proceeding;
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the
trustee has not started such proceeding within 60 days after
receiving the request; and
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no
direction inconsistent with such written request has been given to
the trustee under the indenture.
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However,
the holder of any debt security will have an absolute right to
receive payment of principal of and interest on the debt security
when due and to institute suit to enforce this
payment.
Satisfaction and Discharge; Defeasance
Satisfaction and Discharge of Indenture. Unless
otherwise indicated in the applicable prospectus supplement, if at
any time,
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we have
paid the principal of and interest on all the debt securities of
any series, except for debt securities which have been destroyed,
lost, or stolen and which have been replaced or paid in accordance
with the indenture, as and when the same shall have become due and
payable, or
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we have
delivered to the trustee for cancellation all debt securities of
any series theretofore authenticated, except for debt securities of
such series which have been destroyed, lost, or stolen and which
have been replaced or paid as provided in the indenture,
or
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all the
debt securities of such series not theretofore delivered to the
trustee for cancellation have become due and payable, or are by
their terms are to become due and payable within one year or are to
be called for redemption within one year, and we have deposited
with the trustee, in trust, sufficient money or government
obligations, or a combination thereof, to pay the principal, any
interest and any other sums due on the debt securities, on the
dates the payments are due or become due under the indenture and
the terms of the debt securities,
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then
the indenture shall cease to be of further effect with respect to
the debt securities of such series, except for:
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rights
of registration of transfer and exchange, and our right of optional
redemption;
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substitution
of mutilated, defaced, destroyed, lost or stolen debt
securities;
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rights
of holders to receive payments of principal thereof and interest
thereon upon the original stated due dates therefor (but not upon
acceleration) and remaining rights of the holders to receive
mandatory sinking fund payments, if any;
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the
rights, obligations, and immunities of the trustee under the
indenture; and
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the
rights of the holders of such series of debt securities as
beneficiaries thereof with respect to the property so deposited
with the trustee payable to all or any of them.
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Defeasance and Covenant Defeasance. Unless otherwise
indicated in the applicable prospectus supplement, we may elect
with respect to any debt securities of any series
either:
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to
defease and be discharged from all of our obligations with respect
to such debt securities (“defeasance”), with certain
exceptions described below; or
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to be
released from our obligations with respect to such debt securities
under such covenants as may be specified in the applicable
prospectus supplement, and any omission to comply with those
obligations will not constitute a default or an event of default
with respect to such debt securities (“covenant
defeasance”).
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We must
comply with the following conditions before the defeasance or
covenant defeasance can be effected:
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we must
irrevocably deposit with the indenture trustee or other qualifying
trustee, under the terms of an irrevocable trust agreement in form
and substance satisfactory to the trustee, trust funds in trust
solely for the benefit of the holders of such debt securities,
sufficient money or government obligations, or a combination
thereof, to pay the principal, any interest, and any other sums on
the due dates for those payments; and
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we must
deliver to the trustee an opinion of counsel to the effect that the
holders of such debt securities will not recognize income, gain or
loss for federal income tax purposes as a result of defeasance or
covenant defeasance, as the case may be, to be effected with
respect to such debt securities and will be subject to federal
income tax on the same amount, in the same manner and at the same
times as would be the case if such defeasance or covenant
defeasance, as the case may be, had not occurred.
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In
connection with defeasance, any irrevocable trust agreement
contemplated by the indenture must include, among other things,
provision for:
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payment
of the principal of and interest on such debt securities, if any,
appertaining thereto when due (by redemption, sinking fund payments
or otherwise),
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the
payment of the expenses of the trustee incurred or to be incurred
in connection with carrying out such trust provisions,
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rights
of registration, transfer, substitution, and exchange of such debt
securities in accordance with the terms stated in the indenture,
and
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continuation
of the rights, obligations, and immunities of the trustee as
against the holders of such debt securities as stated in the
indenture.
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The
accompanying prospectus supplement may further describe any
provisions permitting or restricting defeasance or covenant
defeasance with respect to the debt securities of a particular
series.
Global Securities
Unless
otherwise indicated in the applicable prospectus supplement, each
debt security offered by this prospectus will be issued in the form
of one or more global debt securities representing all or part of
that series of debt securities. This means that we will not issue
certificates for that series of debt securities to the holders.
Instead, a global debt security representing that series will be
deposited with, or on behalf of, a securities depositary and
registered in the name of the depositary or a nominee of the
depositary. Any such depositary must be a clearing agency
registered under the Exchange Act. We will describe the specific
terms of the depositary arrangement with respect to a series of
debt securities to be represented by a global security in the
applicable prospectus supplement.
Notices
We will
give notices to holders of the debt securities by mail at the
addresses listed in the security register. In the case of notice in
respect of unregistered securities or coupon securities, we may
give notice by publication in a newspaper of general circulation in
New York, New York.
Governing Law
The
particular terms of a series of debt securities will be described
in a prospectus supplement relating to such series of debt
securities. Any indentures will be subject to and governed by the
Trust Indenture Act of 1939, as amended, and may be supplemented or
amended from time to time following their execution. Unless
otherwise stated in the applicable prospectus supplement, we will
not be limited in the amount of debt securities that we may issue,
and neither the senior debt securities nor the subordinated debt
securities will be secured by any of our property or assets. Thus,
by owning debt securities, you are one of our unsecured
creditors.
Regarding the Trustee
From
time to time, we may maintain deposit accounts and conduct other
banking transactions with the trustee to be appointed under the
indenture or its affiliates in the ordinary course of
business.