References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to Yotta Acquisition Corporation References to our "management"
or our "management team" refer to our officers and directors. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the unaudited condensed financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are not historical facts and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact
included in this Quarterly Report, including, without limitation, statements in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the search for an initial business combination, the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its initial public
offering filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's filings with the SEC can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated in Delaware on March 8, 2021. We were
formed for the purpose of entering into a merger, share exchange, asset
acquisition, stock purchase, recapitalization, reorganization or other similar
business combination with one or more target businesses, which we refer to
herein as our "initial business combination." Our efforts to identify a
prospective target business are not limited to any particular industry or
geographic region, although we intend to focus on target businesses in and
around the high technology, blockchain and other general business industries
globally. We intend to utilize cash derived from the proceeds of our initial
public offering ("IPO") and the private placement of Private Units, our
securities, debt or a combination of cash, securities and debt, in effecting our
initial business combination.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
On October 24, 2022, the Company, NaturalShrimp Incorporated, a Nevada
corporation (the "NaturalShrimp"), the Company, and Yotta Merger Sub, Inc., a
Nevada corporation ("Merger Sub") and wholly-owned subsidiary of the Company,
entered into a Merger Agreement (the "Agreement"), pursuant to which Merger Sub
will merge with and into the NaturalShrimp (the "Merger") with the NaturalShrimp
as the surviving corporation of the Merger and becoming a wholly-owned
subsidiary of the Company. The Board of Directors of the Company has unanimously
(i) approved and declared advisable the Agreement, the Merger and the other
transactions contemplated thereby and (ii) resolved to recommend approval of the
Agreement and related matters by the stockholders of the Company. At the closing
of the Merger, the Company will issue 17.5 million shares of common stock, to
the former security holders of NaturalShrimp. In the event the Company or
NaturalShrimp validly terminates the Agreement because of a default by the
other, a breakup fee of $3.0 million will be due to the terminating party.
The proposed business combination is expected to close in the first quarter of
2023, subject to the satisfaction of customary closing conditions, including the
effectiveness of the registration statement on Form S-4 that the Company is
required to file with the SEC, required Nasdaq approval, and the approval of the
proposed Transaction and the Agreement by a majority of the stockholders of the
Company and NaturalShrimp.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through September 30, 2022 were
organizational activities and those necessary to prepare, and consummate, for
the IPO and an initial Business Combination. We do not expect to generate any
operating revenues until after the completion of our initial Business
Combination.
We expect to generate non-operating income in the form of interest income on
marketable securities held after the IPO. We expect that we will incur increased
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses in
connection with searching for, and completing, a Business Combination.
For the three months ended September 30, 2022, we had net income of $248,109,
which consisted of loss of approximately $167,925 derived from general and
administrative expenses of approximately $142,317 and franchise tax expense of
$25,608, offset by interest earned on marketable securities of approximately
$519,818; income tax expense was $103,784 for the three month period.
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For the nine months ended September 30, 2022, we had net income of $227,889,
which consisted of loss of approximately $303,472 derived from general and
administrative expenses of approximately $252,256 and franchise tax expense of
$51,216, offset by interest earned on marketable securities of approximately
$658,994; income tax expense was $127,633 for the nine month period.
Liquidity and Capital Resources
On April 22, 2022, the Company consummated the IPO of 10,000,000 units (which
does not include the exercise of the over-allotment option by the underwriters
in the IPO) at an offering price of $10.00 per unit (the "Public Units'),
generating gross proceeds of $100,000,000. Simultaneously with the IPO, the
Company sold to its Sponsor 313,500 units at $10.00 per unit (the "Private
Units") in a private placement generating total gross proceeds of $3,135,000.
The Private Units are identical to the Units sold in the IPO, except that the
private warrants will be non-redeemable and may be exercised on a cashless
basis, in each case so long as they continue to be held by their initial
purchasers or their permitted transferees.
We granted the underwriters in the IPO a 45-day option to purchase up to
1,500,000 additional Units to cover over-allotments, if any. On April 27, 2022,
the underwriters fully exercised the over-allotment option and purchased an
additional 1,500,000 Units (the "Over-Allotment Units"), at a price of $10.00
per Unit, generating gross proceeds of $15,000,000. Simultaneously with the
closing of the over-allotment Units, the Company consummated the sale of an
additional aggregate of 30,000 Private Units with the Sponsor at a price of
$10.00 per Private Unit, generating total proceeds of $300,000.
Following the IPO and the private placement (including the Over-Allotment Units
and the Over-Allotment Private Units), a total of $115,000,000 was placed in a
trust account located in the United States established for the benefit of the
Company's public stockholders (the "Trust Account") maintained by Continental
Stock Transfer & Trust Company as a trustee and will be invested only in U.S.
government treasury bills with a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act of 1940, as amended, and that invest only in direct U.S. government treasury
obligations.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $115,658,994. Interest income on the balance in the Trust Account may be used
by us to pay taxes. Through September 30, 2022, we did not withdraw any interest
earned on the Trust Account to pay our taxes. We intend to use substantially all
of the funds held in the Trust Account, to acquire a target business and to pay
our expenses relating thereto. To the extent that our capital stock is used in
whole or in part as consideration to effect a Business Combination, the
remaining funds held in the Trust Account will be used as working capital to
finance the operations of the target business. Such working capital funds could
be used in a variety of ways including continuing or expanding the target
business' operations, for strategic acquisitions and for marketing, research and
development of existing or new products. Such funds could also be used to repay
any operating expenses or finders' fees which we had incurred prior to the
completion of our Business Combination if the funds available to us outside of
the Trust Account were insufficient to cover such expenses.
As of September 30, 2022, the Company had cash of $354,737 outside the Trust
Account and a working capital of $467,153 (excluding income tax and franchise
tax payable). Until consummation of the Business Combination, we intend to use
the funds held outside the Trust Account for identifying and evaluating
prospective acquisition candidates, performing business due diligence on
prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting
the target business to acquire and structuring, negotiating and consummating the
Business Combination. If our estimate of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating a Business
Combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our Business
Combination. In this event, our officers, directors or their affiliates may, but
are not obligated to, loan us funds as may be required. If we consummate an
initial Business Combination, we would repay such loaned amounts out of the
proceeds of the Trust Account released to us upon consummation of the Business
Combination. In the event that a Business Combination does not close, we may use
a portion of the working capital held outside the Trust Account to repay such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. The terms of such loans by our initial shareholders, officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans.
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The Company has incurred and expects to continue to incur significant
professional costs to remain as a publicly traded company and to incur
significant transaction costs in pursuit of the consummation of a Business
Combination. In connection with the Company's assessment of going concern
considerations in accordance with Financial Accounting Standard Board's
Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about
an Entity's Ability to Continue as a Going Concern," management has determined
that these conditions raise substantial doubt about the Company's ability to
continue as a going concern. The management's plan in addressing this
uncertainty is through the Working Capital Loans, as defined below (see Note 5).
In addition, if the Company is unable to complete a Business Combination within
the Combination Period (by January 27, 2023), the Company's board of directors
would proceed to commence a voluntary liquidation and thereby a formal
dissolution of the Company. There is no assurance that the Company's plans to
consummate a Business Combination (within 9 months from the closing of IPO) will
be successful within the Combination Period. As a result, management has
determined that such additional condition also raise substantial doubt about the
Company's ability to continue as a going concern. The financial statement does
not include any adjustments that might result from the outcome of this
uncertainty.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non- financial assets.
Contractual Obligations
Administrative Services Agreement
We intend to enter into an agreement, commencing on April 19, 2022 through the
earlier of our consummation of a Business Combination and our liquidation, to
pay the Sponsor a total of $10,000 per month for office space, utilities,
secretarial and administrative support. However, pursuant to the terms of such
agreement, the Sponsor agreed to defer the payment of such monthly fee. Any such
unpaid amount will accrue without interest and be due and payable no later than
the date of the consummation of initial Business Combination.
Underwriting Agreement
Upon closing of a Business Combination, the underwriters were paid a cash
underwriting discount of 2.0% of the gross proceeds of the IPO, or $2,300,000.
In addition, the underwriters will be entitled to a deferred fee of 3.5% of the
gross proceeds of the IPO, or $4,025,000 which will be paid from the amounts
held in the Trust Account solely in the event that we complete a Business
Combination s Combination, subject to the terms of the underwriting agreement.
Right of First Refusal
We granted Chardan for a period of 18 months after the date of the consummation
of the Company's Business Combination, a right of first refusal to act as
book-running manager, with at least 30% of the economics, or, in the case of a
"three-handed" deal 20% of the economics, for any and all future public and
private equity and debt offerings
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Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480,
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and measured at fair value.
Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets. We
recognize changes in redemption value immediately as they occur and adjusts the
carrying value of redeemable common stock to equal the redemption value at the
end of each reporting period. Increases or decreases in the carrying amount of
shares of redeemable common stock are affected by charges against additional
paid in capital or accumulated deficit if additional paid in capital equals to
zero.
Warrants
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC
815"). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to the
Company's own common shares and whether the warrant holders could potentially
require "net cash settlement" in a circumstance outside of the Company's
control, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of
warrant issuance and as of each subsequent quarterly period end date while the
warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. We determined that upon further review of the proposed
form of warrant agreement, management concluded that the Public Warrants and
Private Warrants to be issued pursuant to the warrant agreement qualify for
equity accounting treatment.
Net Income (Loss) Per Share
We comply with accounting and disclosure requirements of FASB ASC 260, Earnings
Per Share. Net income (loss) per common share is computed by dividing net income
(loss) by the weighted-average number of shares of common stock outstanding
during the period. As the Public Shares are considered to be redeemable at fair
value, and a redemption at fair value does not amount to a distribution
different than other stockholders, redeemable and non-redeemable common stock
are presented as one class of stock in calculating net income (loss) per share.
The Company has not considered the effect of the warrants sold in the IPO and
private placement to purchase an aggregate of 11,843,500 shares in the
calculation of diluted income (loss) per share, since the exercise of the
warrants are contingent upon the occurrence of future events. We then allocated
the net income (loss) ratably based on the weighted average number of shares
outstanding between the redeemable and non-redeemable shares.
Offering Costs
We comply with the requirements of ASC 340 10 S99 1 and SEC Staff Accounting
Bulletin Topic 5A - "Expenses of Offering". Offering costs were consisting
principally of underwriting, legal, accounting and other expenses incurred
through the balance sheet date that are directly related to the IPO and were
charged to stockholders' equity upon the completion of the IPO. We allocate
offering costs between public shares and public rights based on the relative
fair values of public shares and public rights.
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Recent accounting pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt-Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain
financial instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
The amendments are effective for smaller reporting companies for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal
years. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statement.
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YOTTA ACQUISITION CORPORATION 
