NaturalShrimp Inc 10-Q

Item 1A. Risk Factors Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1 of our Annual Report on Form 10-K for the year ended March 31, 2022. The risks described in our Form 10-K and this Report are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer. There have been no material changes to the risk factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2022, filed with SEC on June 29, 2022 other than the following: In this document: ● “Business Combination” means the merger and the other transactions contemplated by the Merger Agreement. 40 ● “Merger Agreement” means that certain Merger Agreement, dated as of October 24, 2022, by and among Yotta, Merger Sub and NaturalShrimp, as it may be amended or supplemented. ● “Merger Sub” means Yotta Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of Yotta. ● “New NaturalShrimp” means the combined company after the Business Combination. ● “New NaturalShrimp Common Stock” means the common stock, par value $0.0001 per share, of New NaturalShrimp. ● “Yotta” means Yotta Acquisition Corporation, a Delaware corporation. New NaturalShrimp will issue shares of New NaturalShrimp Common Stock as consideration in the Business Combination and may issue additional shares of New NaturalShrimp Common Stock or other equity or convertible debt securities without approval of the holders of New NaturalShrimp Common Stock, which would dilute then-existing ownership interests and may depress the market price of the New NaturalShrimp Common Stock. We anticipate that, following the Business Combination, (i) former NaturalShrimp securityholders will own approximately 51.6% of the outstanding shares of New NaturalShrimp Common Stock, (ii) former Yotta stockholders will own approximately 46.9% of the outstanding shares of New NaturalShrimp Common Stock, and (iii) the representative of the underwriters in Yotta’s initial public offering will own 1.5% of the outstanding shares of New NaturalShrimp Common Stock. These percentages are based on the pro forma ownership of New NaturalShrimp Common Stock as of September 30, 2022, and assume, among other things, that no shares of Yotta’s common stock are redeemed in connection with the Business Combination or any further extensions of the date by which Yotta must consummate an initial business combination. If the actual facts differ from these assumptions, these percentages will differ. New NaturalShrimp may continue to require capital investment to support its business and may issue additional shares of New NaturalShrimp Common Stock or other equity or convertible debt securities of equal or senior rank in the future without approval of its stockholders in certain of circumstances. New NaturalShrimp’s issuance of additional shares of New NaturalShrimp Common Stock or other equity or convertible debt securities would have the following effects: (i) New NaturalShrimp’s existing stockholders’ proportionate ownership interest in New NaturalShrimp would decrease; (ii) the amount of cash available per share, including for payment of dividends in the future, may decrease; (iii) the relative voting power of each previously outstanding shares of New NaturalShrimp Common Stock may be diminished; and (iv) the market price of New NaturalShrimp Common Stock may decline. Yotta may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in connection with redemptions of its Common Stock after December 31, 2022. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, imposes a 1% excise tax on any publicly traded domestic corporation that repurchases its stock after December 31, 2022 (the “Excise Tax”). The Excise Tax is imposed on the fair market value of the repurchased stock, with certain exceptions. Because Yotta is are a Delaware corporation and because its securities trade on Nasdaq, it is a “covered corporation” within the meaning of the Inflation Reduction Act. While not free from doubt, absent any further guidance from the U.S. Department of the Treasury (the “Treasury”), who has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the Excise Tax, the Excise Tax may apply to any redemptions of Yotta’s common stock after December 31, 2022, including redemptions in connection with the Business Combination, unless an exemption is available. Generally, issuances of securities in connection with an initial business combination transaction (including any PIPE transaction at the time of an initial business combination) are expected to reduce the amount of the Excise Tax in connection with redemptions occurring in the same calendar year. In addition, because the Excise Tax would be payable by Yotta and not by the redeeming holder, the mechanics of any required payment of the Excise Tax have not been determined. 41 Future resales of shares of New NaturalShrimp Common Stock issued to NaturalShrimp stockholders and other significant stockholders may cause the market price of the New NaturalShrimp Common Stock to drop significantly, even if New NaturalShrimp’s business is doing well. Pursuant to the Merger Agreement, immediately after the closing of the Business Combination NaturalShrimp’s securityholders will hold approximately 51.6% of the outstanding shares of New NaturalShrimp Common Stock, approximately [●]% of which will be eligible for sale immediately after the consummation of the Business Combination. These percentages are based on the pro forma ownership of New NaturalShrimp Common Stock as of September 30, 2022, and assume among other things, and that no shares of Yotta’s common stock are redeemed in connection with the Business Combination or any further extensions of the date by which Yotta must consummate an initial business combination. If the actual facts differ from these assumptions, these percentages will differ. Pursuant to Lock-Up Agreements entered into in connection with the execution of the Merger Agreement, certain New NaturalShrimp stockholders will be restricted, subject to certain exceptions, from selling any of the New NaturalShrimp Common Stock that they receive in or hold at the effective time of the Business Combination, which restrictions will expire, and therefore additional shares of New NaturalShrimp Common Stock will be eligible for resale six months after the effective time of the Business Combination. Subject to the Lock-Up Agreements, the NaturalShrimp stockholders that are a party thereto (which are NaturalShrimp’s three executive officers and directors) may sell New NaturalShrimp Common Stock pursuant to Rule 144 under the Securities Act (“Rule 144”), if available. In these cases, the resales must meet the criteria and conform to the requirements of that rule, including, because Yotta is currently a shell company, waiting until one year after New NaturalShrimp’s filing with the SEC of Form 10-type information reflecting the Business Combination. Upon expiration of the lock-up periods set forth in the Lock-Up Agreements, and upon effectiveness of the registration statement that New NaturalShrimp will be required to file pursuant to the Amended and Restated Registration Rights Agreement to be entered into prior to the closing of the Business Combination by Yotta, certain stockholders of Yotta and certain stockholders of NaturalShrimp who will be affiliates of New NaturalShrimp immediately after the closing, or upon satisfaction of the requirements of Rule 144, certain former Yotta stockholders and certain other significant stockholders of New NaturalShrimp may sell large amounts of New NaturalShrimp Common Stock in the open market or in privately-negotiated transactions, which could have the effect of increasing the volatility in New NaturalShrimp’s share price or putting significant downward pressure on the price of the New NaturalShrimp Common Stock. New NaturalShrimp may be unable to maintain the listing of its securities in the future. If New NaturalShrimp fails to meet the continued listing requirements and Nasdaq delists its securities, it could face significant material adverse consequences, including: ● a limited availability of market quotations for its securities; ● a limited amount of news and analyst coverage for New NaturalShrimp; and ● a decreased ability to issue additional securities or obtain additional financing in the future We face risks related to the COVID-19 pandemic that could significantly disrupt our research and development, operations, sales, and financial results, and other epidemics or outbreaks of infectious diseases may have a similar impact. In March 2020, the World Health Organization categorized COVID-19 as a pandemic. The spread of the outbreak has caused significant disruptions in the global economy, and the impact may continue to be significant. While the threat level has declined to a significant extent in the United States and globally, and our operations have not been materially and negatively impacted by the pandemic to date, our business could be adversely impacted by the effects of the COVID-19 pandemic as well as government efforts to control or combat it, particularly if there is a resurgence in infections, including as a result of the emergence of new variants of the virus that causes COVID-19. In addition to global macroeconomic effects, the COVID-19 outbreak and any other related adverse public health developments could cause disruption to our operations and manufacturing activities. For example, if governments re-implement restrictions in an attempt to combat any resurgence of COVID-19, we may experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and services in a timely manner or meet required milestones. Further, our third-party equipment manufacturers, third-party raw material suppliers, and consultants have been and may continue to be disrupted by worker absenteeism, quarantines, and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions, which could adversely affect our business and operations. Other epidemics or outbreaks of infectious diseases could have similar impacts on NaturalShrimp as well.