The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Annual Report on Form 10-K. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on
Form 10-K.
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 "Target"), 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 Target (the "Business Combination") with the Target as the surviving
corporation of the Business Combination 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 Business Combination 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 Business Combination, the Company will issue 17.5 million shares
of common stock, to the former security holders of the Target. In the event the
Company or the Target 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 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 the Target.
On January 20, 2023, the Company issued an unsecured promissory note in the
aggregate principal amount of $575,000 to the Sponsor in exchange for its
depositing such amount into the Company's trust account in order to extend the
time for the Company to complete the Business Combination from January 22, 2023
to April 22, 2023. Pursuant to the terms of the Agreement, the Target paid
one-half of the extension fee while the Company paid the other half.
On January 20, 2023, the Company deposited $1,150,000 into the Trust Account
(representing $0.10 per each share of redeemable common stock) to extend the
time to complete the Business Combination by three months until April 22, 2023.
On February 5, 2023, the Company issued an unsecured promissory note in the
aggregate principal amount of $250,000 to our Sponsor in exchange for its
depositing such amount into the Company's operating account in order to meet the
working capital needs of the company. The note does not bear interest and
matures upon the closing of a business combination by the Company.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through December 31, 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.
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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 year ended December 31, 2022, we had net income of $145,189, which
consisted of loss of approximately $1,196,341 derived from general and
administrative expenses of approximately $1,020,741, franchise tax expense of
$175,600, offset by interest earned on marketable securities of approximately
$1,651,461; income tax expense was $309,931 for the year.
For the period from March 8, 2021 (inception) through December 31, 2021, we had
a net loss of $11,769, which was derived from general and administrative
expenses of $1,189 and franchise tax expense of $10,580.
Liquidity and Going Concern
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 December 31, 2022, we had marketable securities held in the Trust Account
of $116,651,461. Interest income on the balance in the Trust Account may be used
by us to pay taxes. Through December 31, 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 December 31, 2022, we had cash of $235,864 outside the Trust Account and a
working capital deficit of $301,331(excluding income tax and franchise tax
payable). On February 5, 2023, we issued an unsecured promissory note in the
aggregate principal amount of $250,000 to our sponsor in order to meet our
working capital needs. The note does not bear interest and matures upon the
closing of a business combination by the Company. As result of depositing
$1,150,000 into the Trust Account on January 20, 2022, the Company has 12 months
(or up to 15 months if the time to complete a business combination is extended)
from the closing of the IPO to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution.
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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. The Company may need to obtain additional financing either to
complete its Business Combination or because it becomes obligated to redeem a
significant number of public shares upon consummation of its Business
Combination, in which case the Company may issue additional securities or incur
debt in connection with such Business Combination. In addition, if the Company
is unable to complete a Business Combination within the Combination Period (by
April 22, 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 will
be successful within the Combination Period. As a result, management has
determined that such additional condition also raises 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 December 31, 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 entered into an administrative services agreement dated April 19, 2022,
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 the IPO, 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, 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
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:
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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 adjust 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 