Business context and reporting period
This is Chavant Capital Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2023, filed May 15, 2023. Although the request identifies Mobix Labs, the filing reports the SPAC’s financial position, not Mobix Labs’ operating results. Chavant had no operations or operating revenue and was pursuing its proposed merger with Mobix Labs.
The transaction contemplated a $30 million PIPE investment, subject to closing conditions. An April 7, 2023 amendment extended the business-combination agreement’s outside date to November 22, 2023 and addressed certain Mobix Labs financing securities. The SPAC’s then-current deadline to complete a business combination was July 22, 2023.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Operating revenue | None | None |
| Operating expenses | $462,438 | $384,876 |
| Net income (loss) | $(312,060) | $604,359 |
| Net cash used in operating activities | $(191,566) | $(121,584) |
Revenue margins are not applicable because the SPAC had no operating revenue. Q1 2023 results included a $233,240 noncash gain from the warrant liability’s fair-value change, a $216,168 noncash loss from the PIPE derivative liability’s fair-value change, and $133,306 of trust interest and unrealized gains. Q1 2022 included a $987,262 warrant-liability fair-value gain.
At March 31, 2023, cash outside the trust was $105,038; trust assets were $9,092,522; total assets were $9,197,560; and working capital deficiency was $1,435,314. Current liabilities were $1,540,352, including $962,000 owed under sponsor working-capital loans and $578,352 of accrued expenses. Total liabilities were $2,923,817, including a $1,281,465 PIPE derivative liability and $102,000 warrant liability. The filing reports no long-term debt apart from the described working-capital loans. Cash declined by $70,750 during the quarter.
Material changes versus the prior comparable period
The SPAC moved from $604,359 net income in Q1 2022 to a $312,060 net loss in Q1 2023, as the prior-year warrant fair-value gain was substantially larger and Q1 2023 included a PIPE derivative fair-value loss and higher operating costs. Operating expenses increased by $77,562. The trust balance fell from $9,835,409 at December 31, 2022 to $9,092,522 at March 31, 2023, primarily reflecting $1,004,600 paid for 96,991 share redemptions, partly offset by trust deposits and investment gains. Redeemable shares declined from 953,033 to 856,042. Sponsor loans outstanding increased from $662,000 to $962,000.
Outlook, risks and unusual items
- Going concern: Management said outside cash was insufficient to fund operations for at least 12 months absent a business combination, raising substantial doubt about the SPAC’s ability to continue as a going concern. Sponsor loans may be available but are not obligatory.
- Transaction and deadline risk: The merger remained subject to customary closing conditions, including shareholder approval, minimum net tangible assets of $5,000,001 after redemptions and PIPE funding, and regulatory conditions. Failure to complete a business combination by the applicable deadline could lead to liquidation; warrants would expire worthless. The filing describes a July 22, 2023 combination deadline while also disclosing the amended agreement’s November 22, 2023 outside date.
- Nasdaq: Chavant received notice that its public shares had been below the $35 million minimum market value requirement. It had until September 19, 2023 to regain compliance, or could face delisting proceedings.
- Controls: Management concluded disclosure controls were ineffective as of March 31, 2023 because material weaknesses in internal controls remained. Weaknesses involved staffing and accounting expertise, earnings-per-share and cash-flow classifications, complex PIPE accounting, and review of third-party valuations.
- Contingencies and valuation: The $30 million PIPE included make-whole features accounted for as a fair-value liability; its valuation uses significant unobservable inputs. A $2.8 million transaction marketing fee would be payable only if a business combination closes.
- The filing reports no legal proceedings and no material changes to the risk factors in the prior Form 10-K.
Important facts for investors to verify
- Whether the proposed Mobix Labs transaction closed, and the operative deadline and status of any subsequent amendments or extensions.
- Whether the PIPE was funded, whether the $5,000,001 net tangible asset condition was met after redemptions, and the final amount of redemptions.
- How the SPAC funded operations after March 31, 2023, including additional sponsor loans and any Mobix Labs financing securities.
- Whether Chavant regained Nasdaq’s market-value compliance and whether the reported internal-control weaknesses were remediated.
- The final treatment and dilution impact of the PIPE make-whole features, warrants, and any post-March 26, 2023 financing securities.