Business context and reporting period
Filing identity: The supplied filing is Flame Acquisition Corp.’s Form 10-Q for the quarter ended June 30, 2021—not a filing by Sable Offshore Corp. Investors should verify the issuer before relying on this summary.
Flame was a blank-check company seeking a business combination and had not begun operating activities. It completed its IPO on March 1, 2021, raising $287.5 million gross from 28.75 million units, and raised another $7.75 million from private placement warrants. The interim statements are unaudited.
Financial results and position
- Revenue: None; the company expected no operating revenue before a business combination. Profit margins are not meaningful for this pre-operating SPAC.
- Net loss: $5.28 million for Q2 2021 and $5.19 million for the six months ended June 30. Q2 formation and operating costs were $424,566; six-month costs were $529,793. The six-month loss included $4.38 million of non-cash warrant fair-value expense and $280,829 of warrant-related offering costs, partly offset by $5,710 of interest income.
- Cash flow: Six-month operating cash use was $1.08 million; investing cash use was $287.5 million, primarily the trust deposit; financing cash flow was positive $288.66 million. Ending cash outside the trust was $85,727.
- Assets and liquidity: Total assets were $288.45 million, including $287.51 million in the trust account. Trust funds were generally unavailable before a business combination or redemptions. Current liabilities were $307,597.
- Debt and obligations: No long-term debt or working-capital loans were outstanding at quarter-end. A $365,000 non-interest-bearing sponsor note was undrawn at June 30 but was fully drawn on August 11, 2021. Underwriters were also entitled to a deferred fee of $10.06 million upon completion of a business combination; it would be waived if no combination is completed, subject to the agreement.
- Warrants: Warrant liabilities were $23.19 million at June 30, up from an initial $18.80 million valuation. Their recurring fair-value changes can materially affect reported earnings without corresponding cash flows.
Changes, outlook, and risks
- The company completed its IPO during the six-month period; there is no prior-year comparable operating period presented in the statements.
- Management provided no operating or earnings guidance. The company had 24 months from the IPO closing to complete a business combination, subject to possible extension with stockholder approval.
- Management said it did not expect to need additional funding for planned expenditures, but acknowledged that cost overruns or financing needs could leave it short of working capital. The sponsor and affiliates were not generally obligated to provide additional funds.
- Management reported disclosure controls were ineffective due to a material weakness in warrant accounting classification, identified following the SEC’s April 2021 SPAC warrant statement. The company was undertaking remediation; it cautioned that remediation might be costly and might not prevent future weaknesses.
- Other disclosed risks included uncertainty from COVID-19 and its potential effect on a business combination, possible creditor claims against trust assets, the sponsor’s uncertain ability to meet its limited indemnity, and potential litigation relating to the accounting weakness. No legal proceedings were reported.
Important facts to verify
- Confirm the filing belongs to the intended issuer: the filing names Flame Acquisition Corp., not Sable Offshore Corp.
- Reconcile the filing’s differing counts of redeemable Class A shares: 25,995,601 in the balance sheet and notes versus 25,931,588 in MD&A.
- Confirm the post-quarter draw of the $365,000 sponsor note and its repayment terms.
- Review warrant valuation assumptions, earnings volatility, and the status of remediation for the material weakness.
- Assess available unrestricted cash, potential additional funding needs, trust-account redemption terms, and the deferred underwriting fee before any business combination.