Zalatoris II Acquisition (ZLS) - 2022 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents XPAC Acquisition Corp.'s unaudited condensed financial statements as of March 31, 2022, detailing assets, operations, and cash flows, with notes on warrant accounting and the SuperBac business combination Condensed Balance Sheets As of March 31, 2022, total assets were $220.5 million, primarily trust account investments, with $13.4 million in liabilities and a $12.5 million shareholders' deficit Condensed Balance Sheet Data (As of March 31, 2022 vs. December 31, 2021) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $307,990 | $352,190 | | Investments held in Trust Account | $219,632,154 | $219,617,731 | | Total Assets | $220,518,436 | $220,614,902 | | Liabilities & Shareholders' Deficit | | | | Warrant liabilities | $4,763,355 | $5,825,972 | | Total Liabilities | $13,360,983 | $14,124,256 | | Class A ordinary shares subject to possible redemption | $219,632,154 | $219,617,731 | | Total shareholders' deficit | $(12,474,701) | $(13,127,085) | Condensed Statements of Operations For Q1 2022, the company reported a net income of $666,808, driven by a $1.06 million gain on warrant liabilities offsetting operating costs Statement of Operations Highlights | Item | Three months ended March 31, 2022 | Period from March 11, 2021 (inception) to March 31, 2021 | | :--- | :--- | :--- | | Formation and operating costs | $410,233 | $11,069 | | Loss from operations | $(410,233) | $(11,069) | | Change in fair value of warrant liabilities | $1,062,617 | — | | Net income (loss) | $666,808 | $(11,069) | Condensed Statements of Cash Flows For Q1 2022, net cash used in operations was $259,788, offset by $215,588 from financing, resulting in a $44,200 net cash decrease Cash Flow Summary | Cash Flow Activity | Three months ended March 31, 2022 | | :--- | :--- | | Net cash used in operating activities | $(259,788) | | Net cash provided by financing activities | $215,588 | | Net change in cash | $(44,200) | | Cash at end of period | $307,990 | Notes to Condensed Financial Statements Notes detail the company's SPAC formation, IPO, SuperBac business combination, warrant accounting, related-party transactions, and going concern uncertainty - The company is a special purpose acquisition company (SPAC) focused on a business combination, with activities centered on its formation, IPO, and target search[19][21] - On April 25, 2022, the company entered a Business Combination Agreement with SuperBac Biotechnology Solutions S.A., a Brazilian biotech firm[33][105] - Management identified conditions raising substantial doubt about the company's ability to continue as a going concern, primarily due to significant acquisition-related costs[34][36] - Warrants are accounted for as liabilities at fair value, subject to remeasurement with changes recognized in the statement of operations[55][89] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operations, highlighting its blank check status, the SuperBac business combination, Q1 2022 net income drivers, and liquidity challenges including going concern uncertainty Overview and Recent Developments XPAC, a blank check company, completed its IPO in August 2021 and entered a definitive Business Combination Agreement with SuperBac on April 25, 2022 - The company is a blank check company formed to effect a business combination, initially focusing on Brazilian sectors[112] - On April 25, 2022, the company entered a Business Combination Agreement with SuperBac Biotechnology Solutions S.A., aiming for SuperBac to become a Nasdaq-listed public company via PubCo[120][123] - The transaction is subject to customary conditions, including a Minimum Cash Condition of $150 million (net of certain expenses) for PubCo at closing[130] Results of Operations The company reported a Q1 2022 net income of $666,808, primarily from a non-cash gain on warrant liabilities and trust account interest income Net Income (Loss) Summary | Period | Net Income / (Loss) | Key Drivers | | :--- | :--- | :--- | | Three months ended March 31, 2022 | $666,808 | Gain on fair value of warrant liabilities ($1,062,617), offset by operating expenses ($410,233) | | March 11, 2021 (inception) to March 31, 2021 | $(11,069) | Consisted entirely of operating, general and administrative expenses | Liquidity, Capital Resources and Going Concern As of March 31, 2022, the company had $307,990 cash for working capital, with liquidity from IPO proceeds and a Sponsor promissory note, but faces going concern uncertainty - As of March 31, 2022, cash outside the Trust Account was $307,990[138] - Liquidity needs were met by IPO proceeds outside the trust and a fully drawn $300,000 promissory note from the Sponsor[140] - Significant incurred and expected costs raise substantial doubt about the company's ability to continue as a going concern within one year[141] Quantitative and Qualitative Disclosures About Market Risk The company faces no material market or interest rate risk due to its trust account funds being invested in short-term U.S. government securities or money market funds - The company is not subject to material market or interest rate risk, as trust account funds are in short-term U.S. government securities or money market funds[158] Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2022, due to a material weakness in Class A ordinary share classification, with remediation plans underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022[162] - A material weakness was identified regarding the improper classification of Class A redeemable ordinary shares outside of permanent equity[165][166] - Remediation plans include enhancing access to accounting literature and increasing communication with professionals on complex accounting matters[167] PART II OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings - The company has no legal proceedings to report[168] Item 1A. Risk Factors This section highlights material risks, including potential adverse effects from proposed SEC SPAC rules and geopolitical instability impacting business combination efforts - Proposed SEC rules for SPACs (March 30, 2022) could increase disclosure requirements and liability, potentially hindering business combination completion[171] - Geopolitical instability, including the Ukraine conflict and sanctions, could cause market disruptions and supply chain issues, adversely affecting business combination efforts[173][174] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In March 2021, the Sponsor purchased 5,750,000 Founder Shares for $25,000 in an unregistered private placement exempt under Section 4(a)(2) - In March 2021, the Sponsor acquired 5,750,000 Founder Shares for $25,000 in an unregistered sale[176]