SABLE OFFSHORE CORP. References to "we", "us", "our" or the "Company" are to
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-K. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our otherSecurities and Exchange Commission SEC filings.
Overview
We are a blank check company incorporated in
Our registration statement for our initial public offering was declared
effective on
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Simultaneously with the closing of our initial public offering, we consummated
the private placement of 7,750,000 warrants to our initial stockholders, each
exercisable to purchase one share of Class A common stock at
Upon the closing of our initial public offering and the private placement,$287.5 million of the net proceeds of the sale of the Units in our initial public offering and the sale of private placement warrants in the private placement were placed in a trust account (the "Trust Account") located inthe United States atJ.P. Morgan Chase Bank, N.A ., withAmerican Stock Transfer & Trust Company acting as trustee, and invested only inU.S. "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in directU.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of our initial business combination and (ii) the distribution of the Trust Account as described below. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, if any, the funds held in the trust account will not be released until the earliest to occur of: (a) the completion of our initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of our initial public offering or (B) with respect to any other provision relating to stockholders' rights or pre-initial business combination activity and (c) the redemption of our public shares if we are unable to complete our initial business combination within 24 months from the closing of our initial public offering, subject to applicable law. Based on current interest rates, we expect that interest income earned on the trust account (if any) will be sufficient to pay our income and franchise taxes.
If we are unable to complete our initial business combination by
Results of Operations
Our entire activity since inception through
For the period from
For the year ended
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We classify the warrants issued in connection with our initial public offering and Private Placement as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. For the year endedDecember 31, 2021 , the change in fair value of warrants was an increase of approximately$6.2 million .
Going Concern
As ofDecember 31, 2021 , we had$0.3 million in cash and working capital deficit of approximately$0.4 million . We are also subject to a mandatory liquidation and subsequent dissolution requirement if we do not complete our initial business combination byMarch 1, 2023 . Further, we expect to incur significant costs in pursuit of our acquisition plans. Management's plans to address this need for capital are discussed in Note 1 to our financial statements included elsewhere in this Annual Report on Form 10-K. Our plans to raise capital and to consummate our initial business combination byMarch 1, 2023 may not be successful. In addition, management is currently evaluating the continuing impact of the COVID-19 pandemic on the industry and its effect on our financial position, results of our operations and/or search for a target company. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this Annual Report on Form 10-K do not include any adjustments that might result from our inability to continue
as a going concern. Related Party Transactions Founder Shares InNovember 2020 , our founders acquired 7,187,500 founder shares for an aggregate purchase price of$25,000 . Our sponsor purchased 4,671,875 founder shares, FL Co-Investment purchased 1,257,813 founder shares andIntrepid Financial Partners purchased 1,257,812 founder shares. Also inNovember 2020 , our sponsor transferred 434,375 founder shares to our independent director nominees and certain individuals, includingGregory D. Patrinely , our Chief Financial Officer and Secretary, at their original purchase price. Simultaneously with such transfer, each of FL Co-Investment andIntrepid Financial Partners transferred 13,125 founder shares to our sponsor, respectively, at their original purchase price.
The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of:
(a) one year after the completion of our initial business combination or
(b) subsequent to our initial business combination, (x) if the last reported
sale price of our Class A common stock equals or exceeds
Private Placement Warrants
Simultaneously with the closing of our initial public offering, we consummated
the private placement of 7,750,000 private placement warrants to our initial
stockholders, each exercisable to purchase one share of Class A common stock at
Each private placement warrant is exercisable for one whole share of Class A common stock at a price of$11.50 per share. A portion of the proceeds from the sale of the private placement warrants to the initial stockholders was added to the proceeds from our initial public offering held in the Trust Account. If we do not complete a business combination byMarch 1, 2023 , the private placement warrants will expire worthless. Except as set forth below, the private placement warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by the initial stockholders or their permitted transferees. 61
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The purchasers of the private placement warrants agreed, subject to limited exceptions, not to transfer, assign or sell any of their private placement warrants (except to permitted transferees) until 30 days after the completion of the initial business combination.
Related Party Loans
OnNovember 25, 2020 , our founders agreed to loan us an aggregate of up to$300,000 to cover expenses related to our initial public offering pursuant to a promissory note (the "Initial Promissory Note"). This loan was non-interest bearing and payable upon the completion of our initial public offering. We borrowed approximately$75,000 under the Initial Promissory Note and repaid the Initial Promissory Note to our founders in full as ofMarch 31, 2021 . OnMarch 1, 2021 , we issued an unsecured promissory note as a working capital loan to our sponsor in the principal amount of$365,000 to cover additional expenses related to our initial public offering (the "First Working Capital Loan"). This loan was non-interest bearing and is payable upon the completion of the initial business combination. Our sponsor assigned approximately$145,000 of the First Working Capital Loan to our Chief Financial Officer and Secretary,Gregory Patrinely , approximately$110,000 of the First Working Capital Loan to our Vice President,Anthony Duenner , and approximately$110,000 of the First Working Capital Loan to our Vice President,Caldwell Flores . As ofDecember 31, 2021 , we have borrowed approximately$365,000 under the First Working Capital Loan. OnDecember 27, 2021 , we issued an unsecured promissory note as a working capital loan to our sponsor in the principal amount of$800,000 to cover additional expenses related to our search for the initial business combination (the "Second Working Capital Loan"). This loan was non-interest bearing and payable upon the completion of the initial business combination. As ofDecember 31, 2021 , we have borrowed approximately$800,000 under the Second Working Capital Loan. InMarch 2022 , we issued an unsecured promissory note as a working capital loan to our sponsor in the principal amount of$335,000 to cover additional expenses related to our search for the initial business combination. This loan is non-interest bearing and payable upon the completion of the initial business combination, and has been fully drawn down.
In addition, in order to finance transaction costs in connection with an
intended initial business combination, our sponsor or an affiliate of our
sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete our initial business
combination, we may repay such loaned amounts. In the event that our initial
business combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts but no proceeds from
our trust account would be used for such repayment. Up to
Commitments and Contingencies Registration Rights The holders of our founder shares, private placement warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the private placement warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the founder shares), are entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to certain demand and "piggyback" registration rights. However, the registration rights agreement provides that we will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of
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Critical Accounting Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification Topic 480
"Distinguishing Liabilities from Equity." Shares of Class A common stock subject
to mandatory redemption (if any) are classified as liability instruments and are
measured at fair value. Conditionally redeemable shares of Class A common stock
(including shares of Class A common stock that feature redemption rights that
are either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) are classified as
temporary equity. At all other times, shares of Class A common stock are
classified as stockholders' equity. Our shares of Class A common stock feature
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, as of
Under ASC 480-10-S99, we have elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of the reporting period. This method would view the end of the reporting period as if it were also the redemption date of the security. Effective with the closing of our initial public offering, we recognized the accretion from initial book value to redemption amount, which, resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares.
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Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period. We have not considered the effect of the warrants sold in our initial public offering and Private Placement to purchase an aggregate of 22,125,000 shares of our Class A common stock in the calculation of diluted loss per share, since they are not yet exercisable. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. We issued 14,375,000 common stock warrants to investors in our initial public offering and issued 7,750,000 private placement warrants. All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The difference between the fair market value of the private placement warrants and the initial purchase consideration thereof is recorded as compensation expense. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the Public Warrants and Private Warrants were initially and subsequently measured at fair value using a Monte-Carlo simulation model. Beginning as ofDecember 31, 2021 , the fair value of Public Warrants have been measured based on the listed market price of such Public Warrants. The private placement warrants are measured by reference to the listed trading price of the Public Warrants atDecember 31, 2021 .
Recent Accounting Pronouncements
In
Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that may be adopted by the
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