Filing summary
Registrant identity: The supplied filing is for JATT Acquisition Corp, not Zura Bio Ltd. It is a SPAC quarterly report for the three months ended September 30, 2021; financial statements also present results from inception on March 10, 2021. JATT had not identified a business-combination target by quarter-end.
Business context and financial performance
- JATT completed its IPO and over-allotment in July 2021, raising $138.0 million gross, and raised a further $5.91 million from private-placement warrants. Approximately $139.4 million was held in the trust account.
- No operating revenue was reported, and the company stated it would not generate operating revenue before completing a business combination. Operating expenses for Q3 were $321,863, including $79,850 of related-party expenses.
- Q3 net income was $6.08 million; inception-to-date net income was $6.03 million. Results primarily reflected an $8.62 million gain from revaluing warrant liabilities, partly offset by a $1.77 million loss on issuance of private-placement warrants and $450,887 of offering costs allocated to warrant liabilities. Trust investment income was $6,919 for each reported period. Profit margins are not meaningful without revenue.
- At September 30, cash outside the trust was $986,647; prepaid expenses were $531,248; working capital was approximately $1.4 million. Trust investments were $139.39 million. Total liabilities were $11.83 million, including $7.69 million of derivative warrant liabilities and $4.01 million of deferred underwriting commissions. No working-capital loans were outstanding; the approximately $117,000 sponsor note had been repaid. The filing reports no other debt.
- Operating cash use from inception through September 30 was $840,722; investing cash use was $139.38 million, principally the trust deposit; financing cash provided was $141.21 million. No cash-flow comparison with the prior-year period is presented.
Changes, outlook and risks
- The company restated its July 16, 2021 balance sheet to classify all redeemable Class A shares as temporary equity, rather than partly as permanent equity. This non-cash correction did not change previously reported cash, trust investments or total assets; accumulated deficit and equity presentation changed materially.
- Management reported disclosure controls were ineffective because of a material weakness in accounting for complex financial instruments. It said remediation work was underway. The company also disclosed that its July 2021 balance sheet should no longer be relied upon.
- Management believed available working capital and borrowing capacity would meet needs through the earlier of a business combination or one year from filing. The company had until January 16, 2023, to complete a business combination, or it must wind up and redeem public shares, subject to stated terms.
- In August 2021, JATT entered forward purchase agreements for up to 7.5 million Class A shares at $10.00 per share, or $75 million, to be purchased in connection with a business combination. These commitments were contingent on closing and are not current-period revenue or cash proceeds.
- The filing identifies COVID-19 as a possible risk to the company’s financial position and target search, but says the impact was not readily determinable. Warrants could expire worthless if no business combination is completed. No material changes to previously disclosed risk factors were reported.
Facts to verify
- Confirm the intended company: this filing names JATT Acquisition Corp, not Zura Bio Ltd.
- Check the cash-flow statement’s “Net loss” line of $6,031,019 against the statements of operations, which report inception-to-date net income of $6,031,018; the filing text does not reconcile this apparent sign/amount inconsistency.
- Review the warrant valuation assumptions and the extent to which the $8.62 million non-cash fair-value gain drives reported profit.
- Confirm the terms, conditions and funding status of the $75 million forward purchase agreements and any eventual business-combination transaction.
- Track remediation of the disclosed material weakness and any subsequent changes to internal controls or the business-combination deadline.