Sable Offshore Corp. current report, 17 November 2021

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Filing Summary

Registrant and period: This November 17, 2021 Form 8-K was filed by Flame Acquisition Corp., not Sable Offshore Corp. It reports an accounting restatement issue related to the company’s March 1, 2021 initial public offering.

Material Accounting Issue

Management and the audit committee concluded that all Public Shares issued in the IPO should have been classified as temporary equity rather than partially as permanent equity. The prior classification relied on maintaining net tangible assets above the threshold required to complete the initial business combination.

The company determined that provisions in the Public Shares require temporary-equity classification regardless of the minimum net tangible asset requirement.

Affected Financial Statements

  • Audited balance sheet as of March 1, 2021, as previously restated in the March 31, 2021 Form 10-Q.
  • Unaudited interim financial statements included in the March 31, 2021 Form 10-Q.
  • Unaudited interim financial statements included in the June 30, 2021 Form 10-Q.

These financial statements should no longer be relied upon. The company intended to restate the affected periods in its September 30, 2021 Form 10-Q.

Financial Impact and Controls

  • The filing does not provide revised revenue, profit, cash flow, margin, debt, or liquidity figures.
  • Management stated that the accounting changes were not expected to affect cash or cash held in the IPO Trust Account.
  • The classification error resulted in a material weakness in internal control over financial reporting.
  • Management also concluded that disclosure controls and procedures were not effective.
  • A remediation plan was expected to be described in greater detail in the September 30, 2021 Form 10-Q.

Management, Audit, and Outlook Commentary

Management and the audit committee reached their conclusions after consultation with Marcum LLP, the independent registered public accounting firm. The company discussed the matter with Marcum pursuant to Item 4.02 of Form 8-K.

The filing provides no operating guidance, business outlook, revenue forecast, or quantified estimate of the restatement’s effect on equity classifications or reported balances.

Most Important Facts to Verify

  1. Confirm that the filing belongs to Flame Acquisition Corp. rather than Sable Offshore Corp.
  2. Review the subsequent September 30, 2021 Form 10-Q for the completed restatement and revised financial statements.
  3. Verify the effect of reclassifying all Public Shares as temporary equity on total equity, liabilities, net tangible assets, and per-share amounts.
  4. Review the company’s remediation plan and later disclosures regarding the material weakness and disclosure-control deficiency.
  5. Confirm that cash and Trust Account balances were unchanged by the accounting correction.