Abacus Global Management, Inc. quarterly report, Q3 FY2021

Business context and reporting period

Issuer mismatch: The supplied filing is for East Resources Acquisition Company, not Abacus Global Management, Inc. It is an unaudited Form 10-Q for the quarter ended September 30, 2021, signed February 25, 2022.

East Resources was a shell company seeking a business combination, with a stated focus on North American energy businesses. It had not begun operations or generated operating revenue. Its deadline to complete a business combination was July 27, 2022.

Financial results and position

Net income primarily reflected noncash gains from decreases in the fair values of warrant liabilities ($10.72 million in Q3; $13.08 million for nine months) and the forward purchase agreement liability ($600,000; $2.30 million, respectively). Trust interest was only $5,211 in Q3 and $15,518 for nine months. Thus reported profit did not reflect operating revenue or cash generation.

The company reported no long-term debt, but had the $1.50 million related-party loan. The $12.075 million deferred underwriting fee was payable only if a business combination closed. The $345 million of redeemable Class A shares was presented as temporary equity, not ordinary stockholders’ equity.

Material changes versus comparable periods

Q3 2021 net income of $10.76 million compared with restated net income of $4.95 million in Q3 2020; nine-month 2021 net income was $14.38 million. The filing’s 2020 nine-month comparison covers inception through September 30, rather than a comparable nine-month year-to-date period. Fair-value gains, rather than operating activity, drove the reported earnings.

Cash outside the Trust Account increased from $589,685 at December 31, 2020 to $1.19 million at September 30, 2021, supported by $1.50 million of working capital loan proceeds. Trust Account assets were nearly unchanged from year-end.

Outlook, risks, and unusual items

• Management said it may need additional financing; the Sponsor and related parties were not obligated to provide it. Management reported substantial doubt about the company’s ability to continue as a going concern through February 25, 2023.
• If no business combination was completed by July 27, 2022, the company was required to wind up and redeem public shares, subject to the filing’s stated terms. Warrants could expire worthless.
• A forward purchase agreement contemplated up to $50 million of units at $10 each, but the affiliate purchaser’s obligation was conditional, including on the target and transaction being acceptable to it and unanimous board approval.
• The filing restated prior-period earnings-per-share and cash-flow disclosures and described prior accounting errors involving complex financial instruments and redeemable shares. Management identified a material weakness in internal control over financial reporting and said disclosure controls were ineffective as of September 30, 2021. Remediation efforts were planned, with no assurance they would be effective.
• Management said COVID-19 could adversely affect the company’s financial position, operations, or target search, but the specific impact was not determinable. The filing reported no legal proceedings and no other material risk-factor changes beyond the control weakness.

Key facts investors should verify

• Confirm the intended issuer: this filing is for East Resources Acquisition Company, not Abacus Global Management, Inc.
• Review the restatement disclosures and the status of the identified material weakness and remediation.
• Assess the limited operating cash, working capital deficiency, related-party financing, and going-concern disclosure.
• Verify the status and terms of any business combination, forward purchase funding, and the July 27, 2022 deadline.
• Distinguish noncash fair-value gains from cash flows and recurring operating performance.