Business context and reporting period
The supplied filing is East Resources Acquisition Company’s unaudited Form 10-Q for the quarter ended June 30, 2022—not a filing under the name Abacus Global Management, Inc. East Resources was a blank-check company seeking a business combination, with a stated focus on North American energy. It had not begun operations or generated operating revenue by quarter-end.
After quarter-end, the company announced a non-binding letter of intent to combine with a vertically integrated alternative asset manager specializing in specialty insurance products. The filing says the parties still needed to complete due diligence and negotiate a definitive agreement.
Financial results and liquidity
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior balance |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| Net income (loss) | $(1.13) million for the quarter | $(7.18) million in Q2 2021 |
| Six-month net income | $8.25 million | $3.61 million in H1 2021 |
| Operating costs | $360,069 for Q2; $658,363 for H1 | $205,051 for Q2; $450,212 for H1 2021 |
| Cash flow from operations | $(626,312) for H1 | $(487,716) for H1 2021 |
| Cash outside trust | $562,541 | $853,130 at Dec. 31, 2021 |
| Trust assets | $345.0 million | $345.05 million at Dec. 31, 2021 |
| Total liabilities | $20.62 million | $29.23 million at Dec. 31, 2021 |
The six-month profit primarily reflected an $8.16 million non-cash gain from a decline in warrant liability fair value. Q2’s loss included a $1.07 million fair-value expense on the forward purchase agreement liability. These valuation changes make reported earnings less indicative of operating performance. Operating margins are not meaningful because the company had no operating revenue.
At June 30, the company reported a $1.04 million working-capital deficiency and a $1.5 million non-interest-bearing related-party working-capital note. Other significant liabilities included a $12.08 million deferred underwriting fee, payable only if a business combination is completed, and $5.75 million of warrant liabilities. The filing identifies no long-term debt or off-balance-sheet arrangements.
Material changes, outlook and risks
- After quarter-end, stockholders approved extending the business-combination deadline to January 27, 2023. Holders redeemed 24,781,028 Class A shares for approximately $248.09 million, or about $10.01 per share, from the trust. The Sponsor deposited $320,726 under an interest-free extension note to extend the deadline initially through August 27; further monthly deposits were required to extend beyond that date.
- Management stated that additional financing may be needed to fund operations and transaction costs, but Sponsor and other insider loans are not assured. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern through one year from issuance.
- The company had until January 27, 2023 to complete a business combination under the extension; failure to do so could require liquidation and redemption of public shares. Warrants may expire worthless if no transaction is completed.
- Management reported disclosure controls were not effective because of material weaknesses involving accrual accounting and complex financial instruments. It described remediation efforts but gave no assurance they would succeed.
- The filing references restated financial statement amounts, including presentation of redeemable shares, earnings per share and non-cash cash-flow items. It also cites potential uncertainty from COVID-19 and the Russia-Ukraine conflict. No operating guidance was provided.
Important facts for investors to verify
- Confirm the registrant: the supplied document is for East Resources Acquisition Company, although the request identifies Abacus Global Management, Inc.
- Check the status and final terms of the non-binding business-combination LOI, including whether a definitive agreement was signed and the target’s identity.
- Verify subsequent redemptions, remaining trust funds, extension-note funding and the applicable business-combination deadline.
- Review the going-concern disclosure, available outside-trust cash, related-party financing, and the company’s ability to fund a transaction.
- Review the restatement and material-weakness disclosures, including whether accounting-control remediation was completed.