References to the "Company," "our," "us" or "we" refer to Chavant Capital
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the financial statements and the notes thereto contained elsewhere in this
Annual Report on Form 10-K. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements reflecting our
current expectations, estimates and assumptions concerning events and financial
trends that may affect our future operating results or financial position.
Actual results and the timing of events may differ materially from those
contained in these forward-looking statements due to a number of factors,
including those discussed in the sections entitled "Risk Factors" and
"Forward-Looking Statements" appearing elsewhere in this Annual Report on Form
10-K.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K 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"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-K. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on March 19, 2021 for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination. We
have neither engaged in any operations nor generated any revenue to date. Based
on our business activities, the Company is a "shell company" as defined under
the Securities Exchange Act of 1934 (the "Exchange Act") because we have no
operations and nominal assets consisting almost entirely of cash.
On July 22, 2021, we consummated our IPO of 8,000,000 units. Each unit consists
of one ordinary share and three-fourths of one redeemable warrant. Each whole
warrant entitles the holder thereof to purchase one ordinary share at a price of
$11.50 per share. The units were sold at an offering price of $10.00 per unit,
generating gross proceeds, before expenses, of $80,000,000. Prior to the
consummation of the IPO, on April 7, 2021, the Company issued 2,875,000 ordinary
shares, par value $0.0001 (the "Founder Shares"), for which the Sponsor paid
$25,000. On July 19, 2021, the Company reduced the offering size of the IPO and
575,000 Founder Shares were surrendered to the Company for cancellation for no
consideration, resulting in 2,300,000 Founder Shares outstanding. On September
5, 2021, the underwriters' over-allotment option expired unexercised, resulting
in the forfeiture of an additional 300,000 Founder Shares. As a result, a total
of 2,000,000 Founder Shares remains outstanding and represents 20% of the
Company's issued and outstanding ordinary shares.
Simultaneously with the closing of the IPO, pursuant to the Sponsor Private
Placement Warrants Purchase Agreement, dated July 19, 2021, by and between the
Company and the Sponsor, and the Representative Designees Private Placement
Warrants Purchase Agreement, dated July 19, 2021, by and between the Company and
the Representative Designees, the Company completed the private sale of
3,400,000 warrants (the "Private Placement Warrants") to the Sponsor and the
Representative Designees at a purchase price of $1.00 per Private Placement
Warrant, generating gross proceeds to the Company of $3,400,000 (the "Private
Placement"). The Private Placement Warrants are identical to the Warrants
included as part of the Units sold in the IPO, except that the Private Placement
Warrants, so long as they are held by the initial purchasers or their permitted
transferees, (i) are not redeemable by the Company, (ii) may not (including the
ordinary shares issuable upon exercise of the warrants), subject to certain
limited exceptions, be transferred, assigned or sold until 30 days after the
completion of the Company's initial business combination, (iii) may be exercised
on a cashless basis and (iv) are entitled to registration rights. No
underwriting discounts or commissions were paid with respect to such sale. The
issuance of the Private Placement Warrants was made pursuant to the exemption
from registration contained in Section 4(a)(2) of the Securities Act of 1933, as
amended.
After deducting the underwriting discounts and commissions and incurred offering
costs, a total of $80,000,000 of the proceeds from the IPO and the proceeds of
the sale of the Private Placement Warrants was placed in the Trust Account at
J.P. Morgan Chase
38
Table of Contents
Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as
trustee. Except with respect to interest earned on the funds held in the Trust
Account that may be released to the Company to pay its taxes and up to $100,000
of interest to pay dissolution expenses, the funds held in the Trust Account
will not be released from the Trust Account until the earliest of (i) the
completion of the Company's initial business combination, (ii) the redemption of
any of the ordinary shares included in the Units sold in the IPO (the "public
shares") properly submitted in connection with a shareholder vote to amend the
Company's amended and restated memorandum and articles of association (A) to
modify the substance or timing of the Company's obligation to redeem 100% of the
public shares if it does not complete its initial business combination within 12
months from the closing of the IPO or (B) with respect to any other material
provisions relating to shareholders' rights or pre-initial business combination
activity or (iii) the redemption of the Company's public shares if it is unable
to complete its initial business combination within 12 months from the closing
of the IPO, subject to applicable law. The proceeds deposited in the Trust
Account could become subject to the claims of our creditors, if any, which could
have priority over the claims of our public shareholders. The proceeds held in
the Trust Account will be invested only in U.S. government treasury obligations
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 that invest only in
direct U.S. government treasury obligations.
Our management has broad discretion with respect to the specific application of
the net proceeds of the IPO and the sale of Private Placement Warrants, although
substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination.
After the payment of underwriting discounts and commissions and approximately
$458,249 in expenses relating to the IPO, approximately $1,693,616 of the net
proceeds of the IPO and Private Placement was not deposited into the Trust
Account and was retained by us for working capital purposes. The net proceeds
deposited into the Trust Account remain on deposit in the Trust Account earning
interest. As of December 31, 2021, there was $80,002,777 in investments and cash
held in the Trust Account and $240,706 of cash held outside the Trust Account
available for working capital purposes. As of December 31, 2021, no funds had
been withdrawn from the Trust Account to pay the Company's income taxes.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to raise capital or to
complete our initial Business Combination will be successful.
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, 2021 were
organizational activities and those necessary to prepare for the IPO, described
below. 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.
From March 19, 2021 (inception) through December 31, 2021, we had a net loss of
approximately $361,000, which consists of income of approximately $1,121,000
derived from fair value of warrant liabilities and interest earned on marketable
securities held in our Trust Account of approximately $3,000, offset by
operating costs of approximately $763,000.
Liquidity and Capital Resources
As of December 31, 2021, we had $240,706 in cash. Until the consummation of the
IPO, our only source of liquidity was an initial purchase of ordinary shares by
the Sponsor and loans from our Sponsor.
On July 19, 2021, we consummated the IPO of 8,000,000 Units, at a price of
$10.00 per Unit, generating gross proceeds of $80,000,000. Simultaneously with
the closing of the IPO, we consummated the sale of 3,400,000 Private Placement
Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant
generating gross proceeds of $3,400,000.
Following the IPO and the sale of the Private Placement Warrants, a total of
$80,000,000 ($10.00 per unit) was placed in the Trust Account, and we had
$1,693,616 of cash held outside of the Trust Account, after payment of costs
related to the IPO, and available for working capital purposes. Transaction
costs amounted to $2,058,249, consisting of $1,600,000 of underwriting fees and
$458,249 of other offering costs.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account, which
interest shall be net of taxes payable, to complete our Business Combination. We
may withdraw interest from the
39
Table of Contents
Trust Account to pay taxes, if any. To the extent that our share capital or debt
is used, in whole or in part, as consideration to complete a Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the target business or businesses,
make other acquisitions and pursue our growth strategies.
Our liquidity needs to date have been satisfied through the $25,000 capital
contribution to purchase Founder Shares by our Sponsor and the net proceeds from
the consummation of the Private Placement not held in the Trust Account. The
balance of the promissory note was fully repaid on July 22, 2021. In addition,
in order to finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor, or certain of our officers and
directors may, but are not obligated to, provide us Working Capital Loans. As of
December 31, 2021, there were no amounts outstanding under any Working Capital
Loans.
However, 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 initial Business Combination.
Moreover, we may need to obtain additional financing either to complete our
Business Combination or because we become obligated to redeem a significant
number of our public shares upon completion of our Business Combination, in
which case we may issue additional securities or incur debt in connection with
such Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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. Up to $1,500,000 of such loans may be convertible into warrants, at a
price of $1.00 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants. As of March 23, 2022, there were no
amounts outstanding under any Working Capital Loans and management further
intends to close a Business Combination before the mandatory liquidation date.
As of December 31, 2021, the Company had $240,706 in cash held outside of the
Trust Account and a working capital deficiency of $1,062,967. The Company
anticipates that the cash held outside of the Trust Account as of December 31,
2021 will be not sufficient to allow the Company to operate for at least the
next 12 months from the issuance of the financial statements, assuming that a
Business Combination is not consummated during that time. The Company has
incurred and expects to continue to incur significant costs in pursuit of its
acquisition plans. These conditions raise substantial doubt about the Company's
ability to continue as a going concern for a period of time within one year
after the date that the financial statements are issued. Management plans to
address this uncertainty through the initial Business Combination as discussed
above. There is no assurance that the Company's plans to consummate an initial
Business Combination will be successful or successful within the Combination
Period. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We had no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021. 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
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
Pursuant to the Business Combination Marketing Agreement between the Company,
Roth Capital Partners, LLC and Craig-Hallum Capital Group LLC, marketing fees
equal to 3.5% of the gross proceeds of the IPO will become payable to Roth
Capital Partners, LLC and Craig-Hallum Capital Group LLC only if the Company
consummates a Business Combination. If a Business Combination does not occur,
the Company will not be required to pay these contingent fees. There can be no
assurances that the Company will complete a Business Combination.
40
Table of Contents
Critical Accounting Policies
The preparation of 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 period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the Private Placement Warrants in accordance with the guidance
contained in ASC 815-40-15 under which the Private Placement Warrants do not
meet the criteria for equity treatment and must be recorded as liabilities.
Accordingly, we classify the Private Placement Warrants as liabilities at their
fair value and adjust the Warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statements of
operations.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" under the JOBS Act and are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an independent registered public accounting firm's
attestation report on our system of internal controls over financial reporting
pursuant to Section 404, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the independent registered public accounting firm's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis), and (iv) disclose certain
executive compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of the IPO or until we are no longer an "emerging
growth company," whichever is earlier.
© Edgar Online, source Glimpses