UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Amendment No. 1)
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 001-39644
ARCHAEA ENERGY INC.
(Exact name of Registrantregistrant as specified in its charter)
| Delaware | 85-2867266 | ||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification | ||||
| 4444 Westheimer Road, Suite G450 | ||
| Houston, Texas | 77027 | |
| (Address of principal executive offices) | (Zip Code) |
(346) 708-8272
(Registrant'sRegistrant’s telephone number, including area code)
Rice Acquisition Corp.
102 East Main Street, Second Story
Carnegie, Pennsylvania 15106
(Former name or former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class registered | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Class A | LFG | The New York Stock Exchange | ||||||||||||
Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐☒
No ☐
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||||||||||||||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||||||||||||||||||||
| Emerging growth company | ☒ | ||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐ No ☒
As of November 8,August 13, 2021, there were 53,590,97623,727,500 shares of Class A common stock, par value $0.0001, and 62,281,7355,931,350 shares of Class B common stock, par value $0.0001, were issued and outstanding.
EXPLANATORY NOTE
References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q to “we,” “us,” the “Company” or “our company” are to Archaea Energy Inc., formerly known as Rice Acquisition Corp., unless the context otherwise indicates.
This Amendment No. 1 (this “Amendment No. 1”) to the Quarterly Report on Form 10-Q/A amends and restates the Quarterly Report on Form 10-Q of Archaea Energy Inc., formerly known as Rice Acquisition Corp., for the quarterly period ended June 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on August 13, 2021.
On August 13, 2021, the Company filed its Form 10-Q for the quarterly period ended June 30, 2021 (the “Q2 Form 10-Q”). The Company classified a portion of the redeemable shares of Class A common stock of the Company (the “Public Shares”) issued as part of the units sold in the Company’s initial public offering as permanent equity to maintain net tangible assets greater than $5,000,000 on the basis that the Company will consummate its initial business combination only if the Company has net tangible assets of at least $5,000,001. Previously, the Company did not consider redeemable stock classified as temporary equity as part of net tangible assets. Effective with these financial statements, the Company revised this interpretation to include temporary equity in net tangible assets. As a result, management corrected the error by restating all Public Shares as temporary equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation differs from the previously presented method of earnings per share, which was similar to the two-class method. The Company determined the change in classification of the Class A common stock and change to its presentation of earnings per share is quantitatively material and it should restate its previously issued financial statements.
Therefore, on December 28, 2021, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that the Company’s previously issued (i) audited balance sheet as of October 26, 2020 (the “Post-IPO Balance Sheet”), as previously revised in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020, filed with the SEC on May 13, 2021 (“2020 Form 10-K/A No. 1”), (ii) audited financial statements included in the 2020 Form 10-K/A No. 1, (iii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC on May 26, 2021, and (iv) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 13, 2021 (collectively, the “Affected Periods”), should be restated to report all Public Shares as temporary equity and should no longer be relied upon.
As such, the Company has restated or will restate in this Amendment No. 1 its financial statements for the Affected Periods.
The above changes did not have any impact on its cash position or the cash held in the trust account established in connection with the IPO.
After re-evaluation, the Company’s management has concluded that in light of the errors described above, a material weakness existed in the Company’s internal control over financial reporting during the Affected Periods and that the Company’s disclosure controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness is described in more detail in Item 4 to Part 1 of this Amendment No. 1.
Items Amended in this Amendment No. 1
For the convenience of the reader, this Amendment No. 1 amends and restates the Q2 Form 10-Q in its entirety. As a result, this Amendment No. 1 includes both items that have been changed as a result of the restatement described above as well as items that are unchanged from the Q2 Form 10-Q. The following items have been amended in this Amendment No. 1 to reflect the restatement described above:
| ● | ||
| Part I, Item 1. Condensed Consolidated Financial Statements | ||
| ● | ||
| ● | Part II, Item 6. Exhibits |
In addition, in accordance with applicable SEC rules, this Amendment No. 1 includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act from our Chief Executive Officer (as principal executive officer) and our Chief Financial Officer (as principal financial officer) dated as of the filing date of this Amendment No. 1.
Except as described above, this Amendment No. 1 does not amend, update or change any other items or disclosures in the Q2 Form 10-Q. This Amendment No. 1 does not purport to reflect any information or events subsequent to the filing date of the Q2 Form 10-Q. As such, this Amendment No. 1 speaks only as of the date the Q2 Form 10-Q was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Q2 Form 10-Q to give effect to any subsequent events. Accordingly, this Amendment No. 1 should be read in conjunction with our filings made with the SEC subsequent to the filing of the Q2 Form 10-Q.
RICE ACQUISITION CORP.
Form 10-Q
For the Quarter Ended June 30, 2021
Table of Contents
| Page No. | ||||||||
| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 (as restated) | 3 | |||||||
| Notes to Unaudited Condensed Consolidated Financial Statements | 5 | |||||||
| SIGNATURES | ||||||||
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Report"“Report”), including, without limitation, statements under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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”). Statements that do not relate strictly to historical or current facts areThese forward-looking and usuallystatements can be identified by the use of forward-looking terminology, including the words such as “anticipate,“believes,” “estimate,“estimates,” “could,“anticipates,” “would,“expects,” “should,“intends,” “plans,” “may,” “will,” “may,“potential,” “forecast,“projects,” “approximate,“predicts,” “expect,“continue,” “project,or “should,” “intend,” “plan,” “believe”or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other similar words. Forward-looking statements may relate to expectations for future financial performance, business strategiesthat are not statements of current or expectations for the Company’s business. Specifically, forward-looking statements may include statements concerning market conditions and trends, earnings, performance, strategies, prospects and other aspects of the business of the Company. Forward lookinghistorical facts. These statements are based on management’s current expectations, estimates, projections, targets, opinions and/but actual results may differ materially due to various factors, including, but not limited to:
| ● | our ability to complete an initial business combination, including our proposed business combination with Aria Energy LLC and Archaea Energy LLC; |
| ● | our expectations around the performance of the prospective target business or businesses; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination; |
| ● | our potential ability to obtain additional financing to complete our initial business combination; |
| ● | our pool of prospective target businesses; |
| ● | the ability of our officers and directors to generate a number of potential investment opportunities; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the lack of a market for our securities; |
| ● | the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; |
| ● | the trust account not being subject to claims of third parties; or |
| ● | our financial performance, including following our initial business combination. |
The forward-looking statements contained in this Report are based on our current expectations and beliefs of the Company,concerning future developments and suchtheir potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve known and unknowna number of risks, uncertainties (some of which are beyond our control) and other factors.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of Contentsfuture performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.
ii
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Condensed Balance SheetsFinancial Statements
RICE ACQUISITION CORP.
| (in thousands, except shares and per share data) | September 30, 2021 | December 31, 2020 | |||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 153,644 | $ | 1,496 | |||||||
| Restricted cash | 17,156 | — | |||||||||
| Accounts receivable, net | 30,244 | 1,780 | |||||||||
| Inventory | 9,285 | — | |||||||||
| Prepaid expenses and other current assets | 29,311 | 4,730 | |||||||||
| Total Current Assets | 239,640 | 8,006 | |||||||||
| Property, plant and equipment, net | 281,610 | 52,368 | |||||||||
| Intangible assets, net | 592,123 | 8,693 | |||||||||
| Goodwill | 27,011 | 2,754 | |||||||||
| Equity method investments | 237,265 | — | |||||||||
| Other non-current assets | 9,596 | 2,460 | |||||||||
| Total Assets | $ | 1,387,245 | $ | 74,281 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable - trade | $ | 3,630 | $ | 14,845 | |||||||
| Current portion of long-term debt, net | 8,546 | 1,302 | |||||||||
| Accrued and other current liabilities | 21,587 | 8,270 | |||||||||
| Total Current Liabilities | 33,763 | 24,417 | |||||||||
| Long-term debt, net | 329,254 | 14,773 | |||||||||
| Derivative liabilities | 160,630 | — | |||||||||
| Below market contracts | 108,392 | — | |||||||||
| Asset retirement obligations | 3,904 | 306 | |||||||||
| Other long-term liabilities | 8,009 | 3,294 | |||||||||
| Total Liabilities | 643,952 | 42,790 | |||||||||
| Commitments and Contingencies | 0 | 0 | |||||||||
| Redeemable Noncontrolling Interests | 1,179,616 | — | |||||||||
| Equity | |||||||||||
| Members' Equity | — | 34,930 | |||||||||
| Members' Accumulated Deficit | — | (4,156) | |||||||||
| Stockholders' Equity | |||||||||||
| Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding | — | — | |||||||||
| Class A common stock, $0.0001 par value; 900,000,000 shares authorized; 52,847,195 shares and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 5 | — | |||||||||
| Class B common stock, $0.0001 par value; 190,000,000 shares authorized; 62,281,735 shares and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 6 | — | |||||||||
| Additional paid in capital | — | — | |||||||||
| Accumulated deficit | (436,461) | — | |||||||||
| Total Stockholders' Equity | (436,450) | — | |||||||||
| Nonredeemable noncontrolling interests | 127 | 717 | |||||||||
| Total Equity | (436,323) | 31,491 | |||||||||
| Total Liabilities, Redeemable Noncontrolling Interests and Equity | $ | 1,387,245 | $ | 74,281 | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2021 | December 31, 2020 | |||||||
| (unaudited) (as restated) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | 5,290 | $ | 1,335,167 | ||||
| Prepaid expenses | 469,693 | 662,865 | ||||||
| Total current assets | 474,983 | 1,998,032 | ||||||
| Investments held in Trust Account | 237,351,433 | 237,308,171 | ||||||
| Total Assets | $ | 237,826,416 | $ | 239,306,203 | ||||
| Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | 7,950,051 | $ | 118,446 | ||||
| Accounts payable | 71,571 | 217,918 | ||||||
| Franchise tax payable | 99,452 | 65,481 | ||||||
| Total current liabilities | 8,121,074 | 401,845 | ||||||
| Deferred legal fees | 187,500 | 187,500 | ||||||
| Deferred underwriting commissions in connection with the initial public offering | 7,610,750 | 7,610,750 | ||||||
| Derivative warrant liabilities | 138,965,647 | 42,588,487 | ||||||
| Total liabilities | 154,884,971 | 50,788,582 | ||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, $0.0001 par value; 23,725,000 shares at $10.00 per share as of June 30, 2021 and December 31, 2020, respectively | 237,250,000 | 237,250,000 | ||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Class A common stock, $0.0001 par value; 250,000,000 shares authorized; 2,500 shares issued and outstanding (excluding 23,725,000 shares subject to possible redemption) as of June 30, 2021 and December 31, 2020 | - | - | ||||||
| Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,931,350 shares issued and outstanding as of June 30, 2021 and December 31, 2020 | 593 | 593 | ||||||
| Additional paid-in capital | - | - | ||||||
| Accumulated deficit | (149,384,365 | ) | (47,868,812 | ) | ||||
| Total Rice Acquisition Corp. deficit | (149,383,772 | ) | (47,868,219 | ) | ||||
| Non-controlling interest in subsidiary | (4,924,783 | ) | (864,160 | ) | ||||
| Total stockholders’ deficit | (154,308,555 | ) | (48,732,379 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 237,826,416 | $ | 239,306,203 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
RICE ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands, except shares and per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenues and Other Income | |||||||||||||||||||||||
| Energy revenue | $ | 10,916 | $ | — | $ | 13,975 | $ | — | |||||||||||||||
| Other revenue | 865 | 1,904 | 4,588 | 4,496 | |||||||||||||||||||
| Amortization of intangibles and below-market contracts | 205 | — | 205 | — | |||||||||||||||||||
| Total Revenue and Other Income | 11,986 | 1,904 | 18,768 | 4,496 | |||||||||||||||||||
| Equity Investment Income, Net | 879 | — | 879 | — | |||||||||||||||||||
| Cost of Operations | |||||||||||||||||||||||
| Cost of energy | 9,478 | 52 | 12,625 | 87 | |||||||||||||||||||
| Cost of other revenues | 615 | 1,202 | 2,976 | 2,490 | |||||||||||||||||||
| Depreciation, amortization and accretion | 3,142 | 34 | 4,077 | 101 | |||||||||||||||||||
| Total Cost of Operations | 13,235 | 1,288 | 19,678 | 2,678 | |||||||||||||||||||
| General and administrative expenses | 9,053 | 1,205 | 20,097 | 3,652 | |||||||||||||||||||
| Operating Income (Loss) | (9,423) | (589) | (20,128) | (1,834) | |||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Interest expense, net | (1,586) | — | (1,606) | — | |||||||||||||||||||
| Gain (loss) on derivative contracts | (10,413) | — | (10,413) | — | |||||||||||||||||||
| Other income (expense) | 81 | (13) | 377 | 15 | |||||||||||||||||||
| Total Other Income (Expense) | (11,918) | (13) | (11,642) | 15 | |||||||||||||||||||
| Income (Loss) Before Income Taxes | (21,341) | (602) | (31,770) | (1,819) | |||||||||||||||||||
| Income tax benefit | — | — | — | — | |||||||||||||||||||
| Net Income (Loss) | (21,341) | (602) | (31,770) | (1,819) | |||||||||||||||||||
| Net income (loss) attributable to nonredeemable noncontrolling interests | (335) | 258 | (589) | 386 | |||||||||||||||||||
| Net income (loss) attributable to Legacy Archaea | (5,733) | (860) | (15,908) | (2,205) | |||||||||||||||||||
| Net income (loss) attributable to redeemable noncontrolling interests | (8,262) | — | (8,262) | — | |||||||||||||||||||
| Net Income (Loss) Attributable to Class A Common Stock | $ | (7,011) | $ | — | $ | (7,011) | $ | — | |||||||||||||||
| Net income (loss) per Class A common share: | |||||||||||||||||||||||
Net income (loss) – basic (1) | $ | (0.13) | $ | — | $ | (0.13) | $ | — | |||||||||||||||
Net income (loss) – diluted (1) | $ | (0.13) | $ | — | $ | (0.13) | $ | — | |||||||||||||||
| Weighted average shares of Class A Common Stock outstanding: | |||||||||||||||||||||||
Basic (1) | 52,847,195 | — | 52,847,195 | — | |||||||||||||||||||
Diluted (1) | 52,847,195 | — | 52,847,195 | — | |||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
(1) (AS RESTATED)
Class A Common Stock is outstanding beginning September 15, 2021 due to the reverse recapitalization transaction as described in Note 4.
| For The Three Months Ended June 30, 2021 | For The Six Months Ended June 30, 2021 | |||||||
| General and administrative expenses | $ | 6,168,889 | $ | 9,168,480 | ||||
| Franchise tax expense | 33,973 | 73,799 | ||||||
| Total operating expenses | (6,202,862 | ) | (9,242,279 | ) | ||||
| Other income (expense) | ||||||||
| Change in fair value of derivative warrant liabilities | (108,151,160 | ) | (96,377,160 | ) | ||||
| Interest earned on investments held in Trust Account | 5,752 | 43,263 | ||||||
| Net loss | (114,348,270 | ) | (105,576,176 | ) | ||||
| Net loss attributable to non-controlling interest in subsidiary | (4,398,010 | ) | (4,060,622 | ) | ||||
| Net loss attributable to Rice Acquisition Corp. | $ | (109,950,260 | ) | $ | (101,515,554 | ) | ||
| Weighted average shares outstanding of Class A common stock | 23,727,500 | 23,727,500 | ||||||
| Basic and diluted net income per share, Class A common stock | $ | (3.86 | ) | $ | (3.56 | ) | ||
| Weighted average shares outstanding of Class B common stock | 5,931,350 | 5,931,350 | ||||||
| Basic and diluted net loss per share, Class B common stock | $ | (3.86 | ) | $ | (3.56 | ) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
RICE ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
| Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Redeemable Noncontrolling Interests | Members' Equity | Members' Accumulated Deficit | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Nonredeemable Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2020 | $ | — | $ | 34,930 | $ | (4,156) | $ | — | $ | — | $ | — | $ | — | $ | 717 | $ | 31,491 | |||||||||||||||||||||||||||||||||||
| Net income (loss) prior to Closing | — | — | (15,908) | — | — | — | — | (534) | (16,442) | ||||||||||||||||||||||||||||||||||||||||||||
| Members' equity contributions | — | 70 | — | — | — | — | — | — | 70 | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense prior to Closing | — | 2,349 | — | — | — | — | — | — | 2,349 | ||||||||||||||||||||||||||||||||||||||||||||
| Reclassification in connection with reverse recapitalization | — | (37,349) | 20,064 | — | 3 | 37,346 | (20,064) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability | — | — | — | 5 | 1 | 346,239 | — | — | 346,245 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class B Common Stock in Aria Merger | — | — | — | — | 2 | 394,908 | — | — | 394,910 | ||||||||||||||||||||||||||||||||||||||||||||
| Reclassification to redeemable noncontrolling interest | 410,296 | — | — | — | — | (430,360) | 20,064 | — | (410,296) | ||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) after Closing | (8,262) | — | — | — | — | — | (7,011) | (56) | (7,067) | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of redeemable noncontrolling interest to redemption amount | 777,582 | — | — | — | — | (348,133) | (429,450) | — | (777,583) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2021 | $ | 1,179,616 | $ | — | $ | — | $ | 5 | $ | 6 | $ | — | $ | (436,461) | $ | 127 | $ | (436,323) | |||||||||||||||||||||||||||||||||||
(AS RESTATED)
| Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Redeemable Noncontrolling Interests | Members' Equity | Members' Accumulated Deficit | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital( | Accumulated Deficit | Nonredeemable Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2019 | $ | — | $ | 2,470 | $ | (1,683) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 787 | |||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | (2,205) | — | — | — | — | 386 | (1,819) | ||||||||||||||||||||||||||||||||||||||||||||
| Members' equity contributions | — | 32,460 | — | — | — | — | — | — | 32,460 | ||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest in acquired business acquisition | — | — | — | — | — | — | — | 480 | 480 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2020 | $ | — | $ | 34,930 | $ | (3,888) | $ | — | $ | — | $ | — | $ | — | $ | 866 | $ | 31,908 | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional | Non-controlling | Total | |||||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Interest in | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Subsidiary | Deficit | |||||||||||||||||||||||||
| Balance - December 31, 2020 | 2,500 | $ | - | 5,931,350 | $ | 593 | $ | - | $ | (47,868,812 | ) | $ | (864,160 | ) | $ | (48,732,379 | ) | |||||||||||||||
| Net income | - | - | - | - | - | 8,434,707 | 337,387 | 8,772,094 | ||||||||||||||||||||||||
| Balance - March 31, 2021 | 2,500 | - | 5,931,350 | 593 | - | (39,434,105 | ) | (526,773 | ) | (39,960,285 | ) | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (109,950,260 | ) | (4,398,010 | ) | (114,348,270 | ) | |||||||||||||||||||||
| Balance - June 30, 2021 | 2,500 | $ | - | 5,931,350 | $ | 593 | $ | - | $ | (149,384,365 | ) | $ | (4,924,783 | ) | $ | (154,308,555 | ) | |||||||||||||||
RICE ACQUISITION CORP.
FOR THE SIX MONTHS ENDED JUNE 30, 2021
| Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Redeemable Noncontrolling Interests | Members' Equity | Members' Accumulated Deficit | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Nonredeemable Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2021 | $ | — | $ | 35,178 | $ | (14,331) | $ | — | $ | — | $ | — | $ | — | $ | 462 | $ | 21,309 | |||||||||||||||||||||||||||||||||||
| Net income (loss) prior to Closing | — | — | (5,733) | — | — | — | — | (279) | (6,012) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense prior to Closing | — | 2,171 | — | — | — | — | — | — | 2,171 | ||||||||||||||||||||||||||||||||||||||||||||
| Reclassification in connection with reverse recapitalization | — | (37,349) | 20,064 | — | 3 | 37,346 | (20,064) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability | — | — | — | 5 | 1 | 346,239 | — | — | 346,245 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class B Common Stock in Aria Merger | — | — | — | — | 2 | 394,908 | — | — | 394,910 | ||||||||||||||||||||||||||||||||||||||||||||
| Reclassification to redeemable noncontrolling interest | 410,296 | — | — | — | — | (430,360) | 20,064 | — | (410,296) | ||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) after Closing | (8,262) | — | — | — | — | — | (7,011) | (56) | (7,067) | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of redeemable noncontrolling interests to redemption amount | 777,582 | — | — | — | — | (348,133) | (429,450) | — | (777,583) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2021 | $ | 1,179,616 | $ | — | $ | — | $ | 5 | $ | 6 | $ | — | $ | (436,461) | $ | 127 | $ | (436,323) | |||||||||||||||||||||||||||||||||||
(AS RESTATED)
| Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Redeemable Noncontrolling Interests | Members' Equity | Members' Accumulated Deficit | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2020 | $ | — | $ | 18,220 | $ | (3,028) | $ | — | $ | — | $ | — | $ | — | $ | 608 | $ | 15,800 | |||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | (860) | — | — | — | — | 258 | (602) | ||||||||||||||||||||||||||||||||||||||||||||
| Members' equity contributions | — | 16,710 | — | — | — | — | — | — | 16,710 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2020 | $ | — | $ | 34,930 | $ | (3,888) | $ | — | $ | — | $ | — | $ | — | $ | 866 | $ | 31,908 | |||||||||||||||||||||||||||||||||||
| Cash Flows from Operating Activities: | ||||
| Net loss | $ | (105,576,176 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Change in fair value of derivative warrant liabilities | 96,377,160 | |||
| Interest earned on securities held in Trust Account | (43,263 | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | 193,172 | |||
| Accounts payable | (146,347 | ) | ||
| Accrued expenses | 7,831,605 | |||
| Franchise tax payable | 33,972 | |||
| Net cash used in operating activities | (1,329,877 | ) | ||
| Net change in cash | (1,329,877 | ) | ||
| Cash - beginning of the period | 1,335,167 | |||
| Cash - end of the period | $ | 5,290 | ||
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net income (loss) | $ | (31,770) | $ | (1,819) | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation, amortization and accretion expense | 4,077 | 101 | |||||||||
| Amortization of debt issuance costs | 627 | — | |||||||||
| Amortization of intangibles and below-market contracts | (6) | — | |||||||||
| Bad debt expense | 10 | 76 | |||||||||
| Return on investment in equity method investments | 336 | — | |||||||||
| Equity in earnings of equity method investments | (879) | — | |||||||||
| Change in fair value of derivative liabilities | 10,413 | — | |||||||||
| Forgiveness of Paycheck Protection Loan | (201) | — | |||||||||
| Stock-based compensation expense | 2,887 | — | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (692) | (1,124) | |||||||||
| Inventory | (270) | — | |||||||||
| Prepaid expenses and other current assets | (22,315) | (627) | |||||||||
| Accounts payable - trade | (4,043) | (335) | |||||||||
| Accrued and other liabilities | (7,475) | 810 | |||||||||
| Other non-current assets | (3,490) | — | |||||||||
| Other long-term liabilities | (1,919) | 98 | |||||||||
| Net cash provided by (used in) operating activities | (54,710) | (2,820) | |||||||||
| Cash flows from investing activities | |||||||||||
| Acquisition of Aria, net of cash acquired | (463,334) | — | |||||||||
| Acquisition of assets and businesses, excluding Aria | (31,527) | (1,156) | |||||||||
| Purchases of property, plant and equipment | (88,209) | (9,659) | |||||||||
| Purchases of biogas rights | (202) | (7,892) | |||||||||
| Contributions to equity method investments | (4,100) | — | |||||||||
| Net cash used in investing activities | (587,372) | (18,707) | |||||||||
| Cash flows from financing activities | |||||||||||
| Borrowings on line of credit agreement | 12,478 | — | |||||||||
| Repayments on line of credit agreement | (12,478) | — | |||||||||
| Proceeds from long-term debt, net of issuance costs | 361,959 | — | |||||||||
| Repayments of long-term debt | (47,040) | — | |||||||||
| Proceeds from PPP Loan | — | 691 | |||||||||
| Proceeds from reverse recapitalization and PIPE Financing | 496,397 | — | |||||||||
| Capital contributions | 70 | 21,150 | |||||||||
| Distributions to noncontrolling interest | — | — | |||||||||
| Net cash provided by financing activities | 811,386 | 21,841 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 169,304 | 314 | |||||||||
| Cash, cash equivalents and restricted cash - beginning of period | 1,496 | 423 | |||||||||
| Cash, cash equivalents and restricted cash - end of period | $ | 170,800 | $ | 737 | |||||||
| Supplemental cash flow information: | |||||||||||
Cash paid for interest1 | $ | 1,869 | $ | — | |||||||
| Non-cash investing activities: | |||||||||||
| Accruals of property, plant and equipment and biogas rights incurred but not paid | $ | 2,317 | $ | 1,597 | |||||||
RICE ACQUISITION CORP.
(AS RESTATED)
Note 1—Description of Organization, Business Operations and Basis of Presentation
Rice Acquisition Corp. is a blank check company incorporated in Delaware on September 1, 2020. As used herein, the “Company” or “Rice” refer to Rice Acquisition Corp. and its majority-owned and controlled operating subsidiary, Rice Acquisition Holdings LLC (“RAC OpCo”), unless the context indicates otherwise. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is onean emerging growth company and, as such, the Company is subject to all of the largest RNG producersrisks associated with emerging growth companies.
As of June 30, 2021, the Company had not commenced any operations. All activity for the three and six months ended June 30, 2021 relates to the search for a prospective initial Business Combination, including activities in connection with the proposed acquisitions of Aria Energy LLC, a Delaware limited liability company, and Archaea Energy LLC, a Delaware limited liability company. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the U.S.form of interest income on cash, cash equivalents and investments from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Rice Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on October 21, 2020. On October 26, 2020, the Company consummated its Initial Public Offering of 23,725,000 units (each, a “Unit” and collectively, the “Units”), including 2,225,000 additional Units that were issued pursuant to the underwriters’ partial exercise of their over-allotment option (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of approximately $237.3 million, and incurring offering costs of approximately $12.5 million, inclusive of $7.6 million in deferred underwriting commissions (Note 5).
Simultaneously with an industry-leading RNG platform primarily focused on capturing and converting waste emissions from landfills and anaerobic digesters into low-carbon RNG and electricity. Asthe closing of September 30, 2021, Archaea owns and operates a diversified portfolio of 23 LFG recovery and processing projects across 12 states, including 13 LFG to electric projects and 10 projects that produce pipeline-quality RNG.
Following the Initial Public Offering, the Public Stockholders (as defined below) hold a direct economic equity ownership interest in Rice in the form of shares of Class A common stock, and an indirect ownership interest in RAC OpCo through Rice’s ownership of Class A Units of RAC OpCo. By contrast, the Initial Stockholders (as defined below) own direct economic interests in RAC OpCo in the form of Class B Units and a corresponding non-economic voting equity interest in Rice in the form of shares of Class B common stock, as well as a small direct interest through the Sponsor Shares (as defined in Note 4). Sponsor Shares were purchased for $10.00 each and, in the absence of an initial Business Combination, will generally participate in liquidation or other payments on a pari passu basis with the Public Shares (as defined below). However, given the relatively de minimis number of Sponsor Shares relative to Public Shares, in many cases the economic, governance or other effects of the Sponsor Shares are not material to the holders of Class A common stock or warrants, and for simplicity, portions of this disclosure may not fully describe or reflect these immaterial effects.
Upon the closing of the Initial Public Offering and the Private Placement, approximately $237.3 million of the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act (as defined below) 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 direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the amount of any deferred underwriting discount held in Trust) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-business combination company controls 50% or more of the voting securities of the target or is otherwise not required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
The Company will provide the holders of the Company’s Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. Unless otherwise stated herein, the term “Public Shares” includes the 2,500 shares of Class A common stock, par value $0.0001 per share, of the Company held by the Sponsor and forming part of the Sponsor Shares. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares will be recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business combinationsor other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the Initial Stockholders (as defined below) have agreed to vote their Founder Shares (as defined below in Note 4), Sponsor Shares and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
The Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or October 26, 2022 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to pay franchise and income taxes of the Company or RAC OpCo (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares and Class A Units of RAC OpCo (other than those held by Rice), which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Sponsor, Atlas Point Fund and the Company’s officers and directors (the “Initial Stockholders”) have agreed (i) that any Founder Shares and Sponsor Shares held by them will not be entitled to redemption rights, and they will waive any such redemption rights for any Public Shares held by them, in connection with the completion of the initial Business Combination, (ii) that any Founder Shares and Sponsor Shares held by them will not be entitled to redemption rights, and they will waive any such redemption rights for any Public Shares held by them, in connection with a stockholder vote to amend our amended and restated certificate of incorporation in a manner that would affect the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company have not consummated the initial Business Combination within the Combination Period, (iii) that any Founder Shares held by them are subject to forfeiture, and thus will not be entitled to liquidating distributions from the Trust Account, and they will waive any such rights to liquidating distributions for any Founder Shares, if the Company fails to complete the initial Business Combination within the Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares and Sponsor Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period), and (iv) in certain limited circumstances the Class B Units of RAC OpCo will have more limited rights to current or liquidating distributions from the Company.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
The underwriters agreed to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and subsequently liquidates and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares and Sponsor Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share or Class A Unit of RAC OpCo not held by Rice and (ii) the actual amount per Public Share or Class A Unit of RAC OpCo not held by Rice held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share or Class A Unit of RAC OpCo not held by Rice due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable), nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Business Combination Agreements
On April 7, 2021, the Company entered into (i) the Business Combination Agreement dated April 7, 2021 (as amended, supplemented or otherwise modified from time to time, the “Aria Merger Agreement”), by and among Rice Acquisition Corp., a Delaware corporation ("RAC"), Rice Acquisition Holdings LLC, a Delaware limited liability company and direct subsidiary ofthe Company, RAC (“RAC Opco”),OpCo, LFG Intermediate Co, LLC, a Delaware limited liability company and direct subsidiary of RAC OpcoOpCo (“RAC Intermediate”), LFG Buyer Co, LLC, a Delaware limited liability company and a direct subsidiary of RAC Intermediate (“RAC Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and a direct subsidiary of RAC Buyer (“Aria Merger Sub”), Aria Energy LLC, a Delaware limited liability company (“Aria”), and Aria Renewable Energy Systems LLC, a Delaware limited liability company,the Equityholder Representative (as defined therein), pursuant to which, among other things, Aria Merger Sub was mergedwill merge with and into Aria, with Aria surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Aria Merger Agreement, the “Aria Merger”), and (ii) the Business Combination Agreement, dated as of April 7, 2021 (as amended, supplemented or otherwise modified from time to time, the “Archaea Merger Agreement” and, together with the Aria Merger Agreement, the “Business Combination Agreements”), by and among the Company, RAC RAC Opco,OpCo, RAC Intermediate, RAC Buyer, Fezzik Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Archaea Merger Sub”), Archaea Energy, LLC (“Archaea Seller”), a Delaware limited liability company, and Archaea Energy II, LLC, a Delaware limited liability company (“Legacy Archaea” and, together with Archaea Seller and Aria, the “Companies”), pursuant to which, among other things, Archaea Merger Sub was mergedwill merge with and into Legacy Archaea, with Legacy Archaea surviving the merger and becoming a direct subsidiary of RAC Buyer, in each case, on the terms and subject to the conditions therein (the transactions contemplated by the Business Combination Agreements, the “Business Combinations”).
Consideration
Pursuant to the terms of the Aria Merger Agreement and at the Effective Time (as defined therein), (i) all Class A Units of Aria held by a holder of Aria’s Class A Units shall be cancelled and converted into the right to receive (a) the number of Class A Units of RAC OpCo, (b) the number of Class B common stock, par value $0.0001 (“Class B Common Stock”), of the Company and (c) the amount of cash as set forth in, and in accordance with, the Aria Merger Agreement, (ii) all Class B Units of Aria held by a holder of Aria’s Class B Units shall be cancelled and converted into the right to receive (A) the number of Class A Units of RAC OpCo, (B) the number of shares of Class B Common Stock and (C) the amount of cash as set forth in, and in accordance with, the Aria Merger Agreement, and (iii) all Class C Units of Aria shall be cancelled and extinguished without any conversion thereof.
Pursuant to the terms of the Archaea Merger Agreement and at the Effective Time (as defined therein), all equity interests of Archaea will be cancelled and converted into the right to receive (x) the number of Class A Units of RAC OpCo and (y) the number of shares of Class B Common Stock as set forth in, and in accordance with, the Archaea Merger Agreement.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
Following the Business Combinations, holders of Class A Units of RAC OpCo (other than the Company) will have the right (an “exchange right”), subject to certain limitations, to exchange Class A Units of RAC OpCo (and a corresponding number of shares of Class B Common Stock) for, at the Company’s option, (i) shares of Class A Common Stock on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, or (ii) a corresponding amount of cash. the Company’s decision to make a cash payment or issue shares upon an exercise of an exchange right will be made by the Company’s independent directors, and such decision will be based on facts in existence at the time of the decision, which the Company expects would include the relative value of the Class A Common Stock (including trading prices for the Class A Common Stock at the time), the cash purchase price, the availability of other sources of liquidity (such as an issuance of preferred stock) to acquire the Class A Units of RAC OpCo and alternative uses for such cash.
Holders of Class A Units of RAC OpCo (other than the Company) will generally be permitted to exercise the exchange right on a quarterly basis, subject to certain de minimis allowances. In addition, additional exchanges may occur in connection with certain specified events, and any exchanges involving more than a specified number of Class A Units of RAC OpCo (subject to the Company’s discretion to permit exchanges of a lower number of units) may occur at any time upon ten business days’ advanced notice. The exchange rights will be subject to certain limitations and restrictions intended to reduce the administrative burden of exchanges upon the Company and ensure that RAC OpCo will continue to be treated as a partnership for U.S. federal income tax purposes.
Following any exchange of Class A Units of RAC OpCo (and a corresponding number of shares of Class B Common Stock), RAC will retain the Class A Units of RAC OpCo and cancel the shares of Class B Common Stock. As the holders of Class A Units of RAC OpCo (other than the Company) exchange their Class A Units of RAC OpCo, the Company’s membership interest in RAC OpCo will be correspondingly increased, the number of shares of Class A Common Stock outstanding will be increased, and the number of shares of Class B Common Stock outstanding will be reduced.
Conditions to Consummation of the Business Combinations
Consummation of the Business Combinations is generally subject to customary conditions of the respective parties, and conditions customary to special purpose acquisition companies, including (i) expiration or termination of all applicable waiting periods under HSR, (ii) the absence of any law or governmental order, threatened or pending, preventing the consummation of the Business Combinations, (iii) completion of the Company Share Redemptions (as defined in the Business Combination Agreements), (iv) receipt of requisite stockholder approval for consummation of the Business Combinations, (v) the consummation of the LES Sale (as defined in the Aria Merger Agreement) by Aria and (vi) the issuance by the Federal Energy Regulatory Commission of an order granting authorization for the Business Combinations pursuant to Section 203 of the Federal Power Act of 1935. In addition, the parties also have the right to not consummate the Business Combinations in the event that the cash on the balance sheet of the combined company following the closing of the Business Combinations (the “Combined Company”) would be less than $150,000,000, subject to the terms of the Business Combination Agreements. Furthermore, the closing of the transactions contemplated by the Aria Merger Agreement is expressly conditioned on the closing of the transactions contemplated by the Archaea Merger Agreement and vice versa.
Termination
Each of the Business Combination Agreements may be terminated by the parties thereto under certain customary and limited circumstances at any time prior to the closing of the Business Combinations, including, without limitation, by mutual written consent or if the Business Combinations have not been consummated within 150 days from the date of the Business Combination Agreements (subject to certain extensions for up to 30 days for delays as set forth in the Business Combination Agreements).
Stockholders Agreement
In connection with the closing of the Business Combinations, the Company, RAC Buyer, RAC OpCo, Sponsor, and certain other individuals affiliated with the Companies (the “Company Holders”) will enter into a stockholders agreement (the “Stockholders Agreement”) pursuant to which, among other things, (i) the board of directors of the Combined Company (the “Board”) will consist of seven members, (ii) the holders of a majority of the Company Interests (as defined in the Stockholders Agreement) held by the RAC Sponsor Holders (as defined in the Stockholders Agreement) will have the right to designate two directors (the “RAC Sponsor Directors”) for appointment or election to the Board during the term of the Stockholders Agreement, (iii) the Ares Investors (as defined in the Stockholders Agreement) will have the right to designate one director (the “Ares Director”) for appointment or election to the Board for so long as the Ares Investors hold at least 50% of the Registrable Securities (as defined in the Stockholders Agreement) held by them on the date that the Business Combinations are consummated (the “Ares Fall-Away Date”), (iv) the Board shall take all necessary action to designate the person then serving as the Chief Executive Officer of the Combined Company (the “CEO Director”) for appointment or election to the Board during the term of the Stockholders Agreement and (v) the Board shall designate three independent directors (the “Independent Directors”) to serve on the Board during the term of the Stockholders Agreement. The Ares Investors shall have the right to consult on the persons to be designated as Independent Directors prior to the Ares Fall-Away Date.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
PIPE Financing
On April 7, 2021, the Company entered into subscription agreements (each, a “Subscription Agreement”) with certain investors (the “PIPE Investors”) pursuant to which, among other things, the PIPE Investors have agreed to subscribe for and purchase, and Rice has agreed to issue and sell to the PIPE Investors, an aggregate of 30,000,000 shares of Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”), of the Company for an aggregate purchase price of $300,000,000 on the date of Closing (as defined in each Subscription Agreement), on the terms and subject to the conditions set forth therein (the transactions contemplated by the Archaea Merger“PIPE Financing”). Each Subscription Agreement the “Archaea Merger”contains customary representations and together with the Aria Merger, the “Business Combinations”). As further discussed in Note 4 - Business Combinations and Reverse Recapitalization, Legacy Archaea was determined to be the accounting acquirerwarranties of the Business Combinations,Company, on the one hand, and Aria was the predecessorPIPE Investor, on the other hand, and customary conditions to the Company.
Additionally, on April 7, 2021, the Company, RAC OpCo, Sponsor and Atlas Point Energy Infrastructure Fund, LLC, a Delaware limited liability company (“Atlas”), entered into an Amendment to Forward Purchase Agreement (the “FPA Amendment”) pursuant to which the Forward Purchase Agreement, dated as of September 30, 2020 (the “Original Agreement”), by and among such parties was renamed LFG Acquisition Holdings LLC. In accordance with Accounting Standards Codification ("ASC") 810 - Consolidation, Opco is consideredamended to provide that Atlas shall purchase a variable interest entity ("VIE") where Archaea istotal of $20,000,000 of Forward Purchase Securities (as defined in the sole managing member of Opco, and therefore, the primary beneficiary. As such, Archaea consolidates Opco,Original Agreement) and the remaining unitholders that hold economic interest directly at Opco are presented asForward Purchase Warrants (as defined in the Original Agreement) will consist of one-eighth of one redeemable noncontrolling interests on the Company’s financial statements.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the considerationCompany have been prepared in the Business Combinations. The ownership structureaccordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and Article 8 of Opco upon closingRegulation S-X. Accordingly, they do not include all of the Business Combinations,information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. The interim operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future periods.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Amendment No. 2 to Annual Report on Form 10-K/A for the period ended December 31, 2020 as filed with the SEC on December 28, 2021, which gives rise tocontains the redeemable noncontrolling interest at Archaea, is as follows:
| Equity Holder | Class A Common Units | % Interest | ||||||||||||
| Archaea | 52,847,195 | 45.9 | % | |||||||||||
| Total controlling interests | 52,847,195 | 45.9 | % | |||||||||||
| Aria Holders | 23,000,000 | 20.0 | % | |||||||||||
| Legacy Archaea Holders | 33,350,385 | 29.0 | % | |||||||||||
| Sponsor, Atlas and RAC independent directors | 5,931,350 | 5.2 | % | |||||||||||
| Total redeemable noncontrolling interests | 62,281,735 | 54.1 | % | |||||||||||
| Total | 115,128,930 | 100.0 | % | |||||||||||
The Archaea Merger with RAC was accounted for as a reverse recapitalization with Legacy Archaea deemed the accounting acquirer, and therefore, there was no step-up to fair value of any RAC assets or liabilities and no goodwill or other intangible assets were recorded. The Aria Merger was accounted for using the acquisition method of accounting with Aria deemed to be the acquiree for accounting purposes. The Company also determined that Aria is the Company's predecessor and therefore has included the historical financial statements of Aria as predecessor beginning on page 37. The Company recorded the fair value of the net assets acquired from Aria as of the Business Combination Closing Date, and goodwill was recorded. See Note 4 - Business Combinations and Reverse Recapitalization for additional information regarding the Archaea Merger and Aria Merger.
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make the comparison of the Company’s condensed consolidated condensed financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
Risk and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $5,000 in our operating bank account and a working capital deficit of approximately $7.6 million.
The Company’s liquidity needs to date had been satisfied through the payment of $26,000 from the Sponsor to purchase the Founder Shares and Sponsor Shares (see Note 4), the loan under the Note of approximately $290,000 (see Note 4), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Company repaid the Note in full on November 10, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s officers, directors and initial stockholders may, but are not obligated to, provide the Company Working Capital Loans (see Note 4). As of June 30, 2021, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that the Company will re-evaluatehave sufficient borrowing capacity to meet its statusneeds through the earlier of the consummation of a Business Combination or one year from this filing, and management has the intent and ability to support the Company through such time period. Over this time period, the Company will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Note 2—Summary of Significant Accounting Policies
Principles of Consolidation and Financial Statement Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned and controlled operating subsidiary after elimination of all intercompany transactions and balances as of June 30, 2021 and December 31, 2020. The ownership interest of noncontrolling participants in the operating subsidiary is included as a separate component of stockholders’ equity. The noncontrolling participants’ share of the net loss is included as “Net loss attributable to noncontrolling interest in subsidiary” on the accompanying unaudited condensed consolidated statement of operations.
Restatement of Previously Issued Financial Statements
In connection with the change in presentation of Class A common stock subject to possible redemption, the Company concluded it should restate its previously issued financial statements to classify all Class A common stock subject to redemption in temporary equity. In accordance with ASC 480-10-S99, redemption provisions not solely within the control of the Company require shares subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A common stock in permanent equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that the Company will not redeem its Public Shares in an emerging growth companyamount that would cause its net tangible assets to be less than $5,000,001. Previously, the Company did not consider redeemable shares classified as temporary equity as part of net tangible assets. The Company revised this interpretation to include temporary equity in net tangible assets.
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation differs from the previously presented method of earnings per share, which was similar to the two-class method.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 202230, 2021, filed with the SEC on August 13, 2021. Therefore, the Company, in consultation with its Audit Committee, concluded that the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 13, 2021, should be restated to present all Class A common stock subject to possible redemption as temporary equity, restate earnings per share and mayto recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering. The previously presented unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 13, 2021, should no longer qualifybe relied upon. The restatement does not have an impact on the Company’s cash position and cash held in the Trust Account.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
The change in the carrying value of the redeemable Class A common stock at June 30, 2021 resulted in a reclassification of approximately 15.9 million Class A common stock from permanent equity to temporary equity. The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited balance sheet as an emerging growth company.of June 30, 2021:
| As of June 30, 2021 | As Previously Reported | Adjustment | As Restated | |||||||||
| Total assets | $ | 237,826,416 | $ | - | $ | 237,826,416 | ||||||
| Total liabilities | $ | 154,884,971 | $ | - | $ | 154,884,971 | ||||||
| Class A common stock subject to possible redemption | 77,941,440 | 159,308,560 | 237,250,000 | |||||||||
| Preferred stock | - | - | - | |||||||||
| Class A common stock | 1,594 | (1,594 | ) | - | ||||||||
| Class B common stock | 593 | - | 593 | |||||||||
| Additional paid-in capital | 133,067,223 | (133,067,223 | ) | - | ||||||||
| Accumulated deficit | (123,144,622 | ) | (26,239,743 | ) | (149,384,365 | ) | ||||||
| Total Rice Acquisition Corp equity (deficit) | 9,924,788 | (159,308,560 | ) | (149,383,772 | ) | |||||||
| Non-controlling interest in subsidiary | (4,924,783 | ) | - | (4,924,783 | ) | |||||||
| Total stockholders’ equity (deficit) | $ | 5,000,005 | $ | (159,308,560 | ) | $ | (154,308,555 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit) | $ | 237,826,416 | $ | - | $ | 237,826,416 | ||||||
The Company’s unaudited statement of stockholders’ equity has been restated to reflect the changes to the impacted stockholders’ equity accounts described above.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited statement of cash flows for the period from January 21, 2021 (inception) through June 30, 2021:
For the three months ended June 30, 2021
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Change in value of Class A common stock subject to possible redemption | $ | 105,576,180 | $ | (105,576,180 | ) | $ | - | |||||
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company has revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares participate pro rata in the income and losses of the Company. The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per common share is presented below for the Affected Quarterly Periods:
| Earnings Per Share for Class A common stock | ||||||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| For the three months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (114,348,270 | ) | $ | - | $ | (114,348,270 | ) | ||||
| Weighted average shares outstanding | 23,725,000 | 2,500 | 23,727,500 | |||||||||
| Basic and diluted earnings per share | $ | - | $ | (3.86 | ) | $ | (3.86 | ) | ||||
| For the six months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (105,576,176 | ) | $ | - | $ | (105,576,176 | ) | ||||
| Weighted average shares outstanding | 23,725,000 | 2,500 | 23,727,500 | |||||||||
| Basic and diluted earnings per share | $ | - | $ | (3.56 | ) | $ | (3.56 | ) | ||||
| Earnings Per Share for Class B common stock | ||||||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| For the three months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (114,348,270 | ) | $ | - | $ | (114,348,270 | ) | ||||
| Weighted average shares outstanding | 5,933,850 | (2,500 | ) | 5,931,350 | ||||||||
| Basic and diluted earnings per share | $ | (0.47 | ) | $ | (3.39 | ) | $ | (3.86 | ) | |||
| For the six months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (105,576,176 | ) | $ | - | $ | (105,576,176 | ) | ||||
| Weighted average shares outstanding | 5,933,850 | (2,500 | ) | 5,931,350 | ||||||||
| Basic and diluted earnings per share | $ | (0.05 | ) | $ | (3.51 | ) | $ | (3.56 | ) | |||
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
Use of Estimates
The preparation of consolidated condensed financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities revenue and expenses, as well asdisclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as ofliabilities at the date of the financial statements. Actual results may differ fromMaking estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimates and assumptions used in preparing the accompanying consolidated condensed financial statements.
Cash and Reverse Recapitalization.Cash Equivalents
Investments Held in Trust Account
The Company’s portfolio of September 30, 2021investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and December 31, 2020,generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of otherthese securities is included in income on investments held in the Trust Account in the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments including cashunder ASC 820, “Fair Value Measurements and cash equivalents, prepaid expenses, accounts payable, accrued and deferred expensesDisclosures,” equal or approximate the carrying values because of the short-term maturity of those items. There were no changesamounts represented in the methods or assumptions used in the valuation techniques by the Company during the nine months ended September 30, 2021 or the year ended December 31, 2020.condensed consolidated balance sheets.
The Company generates revenues from the production and of sales of RNG, renewable electricity generation (“Power”), and associated Environmental Attributes, as well as the performance of other landfill energy operations and maintenance (“O&M”) services. The Company also manufactures and sells customized pollution control equipment and performs associated maintenance agreement services. Based on requirements of US GAAP, a portion of revenue is accounted for under ASC 840 - Leases and a portion under ASC 606 - Revenue from Contracts with Customers. Under ASC 840, lease revenue is recognized generally upon delivery of RNG, electricity and their related renewable Environmental Attributes. Under ASC 606, revenue is recognized when (or as) the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service either when (or as) its customer obtains control of the product or service. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring its products or services. Based on the terms of the related sales agreements, the amounts recorded under ASC 840 as lease revenue are generally consistent with revenue recognized under ASC 606. For the nine months ended September 30, 2021, approximately 82% of revenue was accounted for under ASC 606 and 18% under ASC 840. For the nine months ended September 30, 2020, 100% of revenue was accounted for under ASC 606.
Offering costs consisted of Aria, which at the time of the Business Combinations owned or operated nine operating RNG facilities. The Company has long-term off-take contracts with creditworthy counterparties for the sale of RNGlegal, accounting, underwriting fees and related Environmental Attributes. Certain long-term off-take contracts for current production are accounted for as operating leases and have no minimum lease payments. All of the rental income under these leases is recorded as revenue when the RNG is delivered to the customer. RNG not covered by off-take contracts is sold under short-term market-based contracts. When the performance
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its 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 FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recoverable. Recoverabilityrecorded as liabilities or as equity, is re-assessed at the end of assets to be heldeach reporting period.
The Public Warrants and used is measured by comparingthe Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying amountvalue of an asset or asset groupthe instruments to future undiscounted cash flows expected to be generated byfair value at each reporting period until they are exercised. The initial fair value of the asset or asset group. Such estimates arePublic Warrants issued in connection with the Initial Public Offering were estimated using a Monte Carlo simulation model. The fair value of the Public Warrants as of June 30, 2021 is based on certain assumptions, which are subject to uncertainty and may materially differ from actual results. Ifobservable listed prices for such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amountwarrants. The fair value of the assets exceedsPrivate Placement Warrants as of June 30, 2021 is determined using Black-Scholes option pricing model. The determination of the fair value of the assets.
RICE ACQUISITION CORP.
(AS RESTATED)
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company issued 2,500 shares of Class A common stock to the Sponsor. These Sponsor Shares will not be transferable and will only be exchangeable into Class A common stock after the initial business combination, as such are considered non-redeemable and presented as permanent equity in the Company’s condensed balance sheet. Excluding the Sponsor Shares, the Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of the Initial Public Offering, 23,725,000 shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. Effective with the closing of the Initial Public Offering, the Company 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 Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has 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. Net income taxes using(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.
The calculation of diluted net income (loss) per share does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the over-allotment) and the private placement warrants to purchase an aggregate of 18,633,500 shares of Class A common stock, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and six months ended June 30, 2021. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per share for each class of common stock:
| For the Three Months Ended June 30, 2021 | For the Six Months Ended June 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income per common share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss | $ | (91,480,235 | ) | $ | (22,868,035 | ) | $ | (84,462,436 | ) | $ | (21,113,740 | ) | ||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average common shares outstanding | 23,727,500 | 5,931,350 | 23,727,500 | 5,931,350 | ||||||||||||
| Basic and diluted net income per common share | $ | (3.86 | ) | $ | (3.86 | ) | $ | (3.56 | ) | $ | (3.56 | ) | ||||
Income Taxes
The Company follows the asset and liability method.method of accounting for income taxes under ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amountamounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards.bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the yearyears in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earningsincome in the period that includesincluded the enactment date.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
FASB ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the ultimatefinancial statement recognition and measurement of tax outcomepositions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of June 30, 2021. The Company is uncertain. Additionally, the Company's various tax returns arecurrently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to auditincome tax examinations by various tax authorities. Althoughmajor taxing authorities since inception.
The provision for income taxes was de minimis for the Company believes that its estimates are reasonable, actual results could differ from these estimates.
Recent Accounting StandardsPronouncements
In February 2016,August 2020, the FASB issued Accounting StandardsStandard Update (ASU)(the “ASU”) No. 2016-02 “Leases (Topic 842)”2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous generally accepted accounting principles and the new requirements under Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 is effectivequalify for the Company for fiscal years beginning after December 15, 2021 with early adoption permitted.
Management does not believe that any other recently issued, ASU No. 2019-12, Income Taxes, to simplify thebut not yet effective, accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocations, the methodology for calculating income taxes in an interim period, and recognition of the deferred tax liabilities for outside basis differences
Note 3—Initial Public Offering
On October 26, 2020, the FASBCompany consummated its Initial Public Offering of 23,725,000 Units, including 2,225,000 Over-Allotment Units that were issued ASU 2020-04, Reference Rate Reform (ASC 848): Facilitationpursuant to the underwriters’ partial exercise of their over-allotment option, at $10.00 per Unit, generating gross proceeds of approximately $237.3 million, and incurring offering costs of approximately $12.5 million, inclusive of $7.6 million in deferred underwriting commissions. Of the 23,725,000 Units sold, affiliates of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time to ease the transition from LIBOR to an alternative reference rate. The guidance intends to address certain concerns relating to accounting for contract modificationsSponsor and hedge accounting. These optional expedientsAtlas Point Fund had purchased 1,980,000 Units (the “Affiliated Units”) and exceptions to applying GAAP, assuming certain criteria are met, are allowed through December 31, 2022. The Company is currently evaluating the provisions of this update and has not yet determined whether it will elect the optional expedients. The Company does not expect the transition to an alternative rate to have a material impact on its business, operations or liquidity.
Each Unit consists of Closing:
Note 4—Related Party Transactions
Founder Shares and Sponsor Shares
In September 2020, the Sponsor paid $25,000 to cover for certain of expenses of the Company in exchange for issuance of (i) 5,750,100 shares of Rice’s Class B common stock, par value $0.0001 per share, and (ii) 2,500 shares of Rice’s Class A common stock, par value $0.0001 per share. See Note 11 - DerivativesIn September 2020, the Sponsor received 5,750,000 Class B Units of RAC OpCo (which are profits interest units only). In October 2020, the Sponsor forfeited 90,000 Class B Units of RAC OpCo, and 30,000 Class B Units of RAC OpCo were issued to each of the independent director nominees. The Sponsor transferred a corresponding number of shares of Class B common stock to the independent director nominees. In October 2020, the Company effected a dividend, resulting in an aggregate of (i) 6,181,350 shares of Rice’s Class B common stock, and (ii) 2,500 shares of Rice’s Class A common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the dividend. Upon a liquidation of RAC OpCo, distributions generally will be made to the holders of RAC OpCo Units on a pro rata basis, subject to certain limitations with respect to the Class B Units of RAC OpCo, including that, prior to the completion of the initial Business Combination, such Class B Units will not be entitled to participate in a liquidating distribution.
Also, in September 2020, Rice paid $25,000 to RAC OpCo in exchange for issuance of 2,500 Class A Units of RAC OpCo. In September 2020, the Sponsor received 100 Class A Units of RAC OpCo in exchange for $1,000.
The Company refers to the 6,181,250 shares of Class B common stock and corresponding number of Class B Units of RAC OpCo (or the Class A Units of RAC OpCo into which such Class B Units will convert) collectively as the “Founder Shares”. The Founder Shares consist of Class B Units of RAC OpCo (and any Class A Units of RAC OpCo into which such Class B Units are converted) and a corresponding number of shares of Class B common stock, which together will be exchangeable for shares of Rice’s Class A common stock after the time of the initial Business Combination on a one-for-one basis, subject to adjustment as provided herein. The Company refers to the 2,500 shares of Rice’s Class A common stock and the 100 Class A Units of RAC OpCo and a corresponding number of shares of Rice’s non-economic Class B common stock (which together will be exchangeable into shares of Class A common stock after the initial Business Combination on a one-for-one basis) collectively as the “Sponsor Shares”.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
Upon the closing of the Initial Public Offering, the Sponsor forfeited 309,063 Class B Units of RAC OpCo, and 309,063 Class B Units of RAC OpCo were issued to Atlas Point Fund. The Sponsor transferred a corresponding number of shares of Class B common stock to Atlas Point Fund.
The Initial Stockholders agreed to forfeit up to 806,250 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters, so that the Founder Shares will represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering (excluding the Sponsor Shares). On October 26, 2020, the underwriters partially exercised the over-allotment option to purchase as additional 2,225,000 Units; thus, only 250,000 Founder Shares remained subject to forfeiture. On December 5, 2020, the remaining unexercised over-allotment expired unused and therefore the remaining 250,000 shares of Class B common stock were forfeited.
The Class B Units of RAC OpCo will convert into Class A Units of RAC OpCo in connection with the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to further discussion.
On September 13, 2021, dueThe Initial Stockholders agreed, subject to the expectation that onelimited exceptions, not to transfer, assign or sell any of the Initial PIPE Investors would not be able to fulfill its $25.0 million commitment for 2.5 million shares ($10.00 per share) in the Initial PIPE Financing, the Company entered into additional subscription agreements (each, a “Follow-On Subscription Agreement”) with certain investors (the “Follow-On PIPE Investors” and, together with the Initial PIPE Investors, the “PIPE Investors”) pursuant to which, among other things, the Follow-On PIPE Investors agreed to subscribe for and purchase from the Company, and the Company agreed to issue and sell to the Follow-On PIPE Investors, an aggregate of 1,666,667 newly issued shares of the Company’s Class A Common Stock for an aggregate purchase price of $25.0 million ($15.00 per share), on the terms and subject to the conditions set forth therein (the “Follow-On PIPE Financing” and, together with the Initial PIPE Financing, the “PIPE Financing”). Each Follow-On Subscription Agreement is substantially identical to the form of Initial Subscription Agreement.
| (Unaudited Pro Forma) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Total Revenues | $ | 48,538 | $ | 37,474 | $ | 143,525 | $ | 115,237 | |||||||||||||||
| Net Income (Loss) | $ | (9,098) | $ | (3,825) | $ | 61,181 | $ | (9,017) | |||||||||||||||
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 6,771,000 Private Placement Warrants to the lock-up restrictions due to Class A Common Stock trading prices.
Each whole Private Placement Warrant is exercisable for a price of $11.50 to purchase one share of Rice’s Class A common stock or, in certain circumstances, one Class A Unit of RAC OpCo together with a corresponding number of shares of Rice’s non-economic Class B common stock. A portion of the proceeds from the sale of the Private Placement Warrants was added to the relative fair values ofproceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and legacy operations Aria had compared to Archaea. As such, we have included Aria's consolidated statements of operations forexercisable on a cashless basis so long as they are held by the periods from July 1 to September 14, 2021, from January 1 to September 14, 2021,Sponsor, Atlas Point Fund or their permitted transferees.
With certain limited exceptions, the Private Placement Warrants and the three months and nine months ended Septembersecurities underlying such warrants will not be transferable, assignable or saleable until 30 2020, and the consolidated balance sheet as of December 31, 2020 following the Notes to the Company's Consolidated Condensed Financial Statements for comparative purposes.
| (in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| RNG, including RINs and LCFSs | $ | 5,525 | $ | — | $ | 6,346 | $ | — | |||||||||||||||
| Gas O&M service | 110 | — | 110 | — | |||||||||||||||||||
| Power, including RECs | 5,125 | — | 7,363 | — | |||||||||||||||||||
| Electric O&M service | 156 | — | 156 | — | |||||||||||||||||||
| Equipment and associated services | 865 | 1,904 | 4,588 | 4,496 | |||||||||||||||||||
| Total | $ | 11,781 | $ | 1,904 | $ | 18,563 | $ | 4,496 | |||||||||||||||
| (in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
| Contract assets (included in Prepaid expenses and other current assets) | $ | 104 | $ | 48 | |||||||
| Contract liabilities (included in Accrued and other current liabilities) | $ | (520) | $ | (1,423) | |||||||
| (in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
| Machinery and equipment | $ | 151,248 | $ | 376 | |||||||
| Buildings and improvements | 16,827 | 88 | |||||||||
| Furniture and fixtures | 569 | 13 | |||||||||
| Construction in progress | 115,337 | 51,927 | |||||||||
| Land | 86 | 1 | |||||||||
| Total cost | 284,067 | 52,405 | |||||||||
| Less: Accumulated depreciation | (2,457) | (37) | |||||||||
| Property, plant and equipment, net | $ | 281,610 | $ | 52,368 | |||||||
2021 | |||||
| (in thousands) | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||||
| Total revenues | $ | 4,786 | $ | 4,786 | |||||||
| Net income | $ | 2,259 | $ | 2,259 | |||||||
| Company's share of net income | $ | 1,130 | $ | 1,130 | |||||||
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(AS RESTATED)
Related Party Loans
On September 30, 2021,1, 2020, the Sponsor agreed to loan the Company had $27.0 millionan aggregate of goodwill, allup to $300,000 pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the completion of which is allocatedthe Initial Public Offering. The Company borrowed an aggregate of approximately $290,000 under the Note. The outstanding balance of the Note was paid in full as of November 10, 2020. Subsequent to the RNG segment. The goodwill is primarily associatedrepayment, the facility was no longer available to the Company.
In addition, in order to finance transaction costs in connection with a Business Combination, the acquisitionSponsor or an affiliate of Ariathe Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Business Combinations.
| (in thousands) | September 30, 2021 | |||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||
| Biogas rights agreements | $ | 554,745 | $ | 1,560 | $ | 553,185 | ||||||||||||||
| Electricity off-take agreements | 23,400 | 113 | 23,287 | |||||||||||||||||
| Operations and maintenance contracts | 8,620 | 11 | 8,609 | |||||||||||||||||
| RNG purchase contract | 6,920 | 199 | 6,721 | |||||||||||||||||
| Customer relationships | 350 | 125 | 225 | |||||||||||||||||
| Trade names | 150 | 54 | 96 | |||||||||||||||||
| Total | $ | 594,185 | $ | 2,062 | $ | 592,123 | ||||||||||||||
| (in thousands) | December 31, 2020 | ||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||
| Biogas rights agreements | $ | 8,293 | $ | — | $ | 8,293 | |||||||||||
| Customer relationships | 350 | 70 | 280 | ||||||||||||||
| Trade names | 150 | 30 | 120 | ||||||||||||||
| Total | $ | 8,793 | $ | 100 | $ | 8,693 | |||||||||||
| (in thousands) | September 30, 2021 | ||||||||||||||||
| Gross Liability | Accumulated Amortization | Net | |||||||||||||||
| Gas off-take agreements | $ | 108,880 | $ | 488 | $ | 108,392 | |||||||||||
| (in thousands) | |||||
| Remainder of 2021: | $ | 207 | |||
| 2022 | 633 | ||||
| 2023 | 114 | ||||
| 2024 | 21 | ||||
| 2025 | — | ||||
| Thereafter | — | ||||
| Total future minimum lease payments | $ | 975 | |||
| (in thousands) | |||||
| Remainder of 2021: | $ | 794 | |||
| 2022 | 7,085 | ||||
| 2023 | 2,975 | ||||
| 2024 | 2,975 | ||||
| 2025 | 2,975 | ||||
| Thereafter | 23,388 | ||||
| Total future payments | $ | 40,192 | |||
| (in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
| New Credit Agreement - Term Loan | $ | 220,000 | $ | — | |||||||
| Wilmington Trust – 4.47% Term Note | 60,828 | — | |||||||||
| Wilmington Trust – 3.75% Term Note | 66,558 | — | |||||||||
| Comerica Bank – Specific Advance Facility Note | — | 4,319 | |||||||||
| Comerica Term Loan | — | 12,000 | |||||||||
| Kubota Corporation – Term Notes | — | 46 | |||||||||
| 347,386 | 16,365 | ||||||||||
| Less unamortized debt issuance costs | (9,586) | (291) | |||||||||
| Long-term debt less debt issuance costs | 337,800 | 16,074 | |||||||||
| Less current maturities, net | (8,546) | (1,301) | |||||||||
| Total long-term debt | $ | 329,254 | $ | 14,773 | |||||||
| (in thousands) | |||||
| Remainder of 2021 | $ | 1,375 | |||
| 2022 | 12,752 | ||||
| 2023 | 17,108 | ||||
| 2024 | 17,371 | ||||
| 2025 | 17,598 | ||||
| Thereafter | 281,182 | ||||
| Total | $ | 347,386 | |||
The Sponsor, officers and Comerica Term Loandirectors, or any of approximately $17.0 milliontheir respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and approximately $16.3 million,performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made to the Sponsor, officers or directors, or their affiliates.
Administrative Support Agreement
Commencing on the date the Company’s securities are first listed on NYSE, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial support and administrative services provided to members of the management team. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and six months ended June 30, 2021, the Company incurred expenses of $30,000 and $60,000 under this agreement, respectively. As of June 30, 2021 and December 31, 2020, the Company had $20,000 and $30,000 outstanding for services in connection with such agreement on the accompanying condensed consolidated balance sheets, respectively.
Note 5—Commitments and Contingencies
Forward Purchase Agreement
The Boyd County Credit
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
Registration Rights
The guaranty fee was evidenced byholders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a promissory note dated November 10,registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. Additionally, pursuant to the Forward Purchase Agreement, the Company agreed to grant certain registration rights to Atlas Point Fund in connection with the issuance of any forward purchase units upon the completion of the Company’s Business Combination. The Company will bear the expenses incurred in connection with the registration of such securities.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 3,225,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On October 26, 2020, made by Archaea Holding and BRPP payablethe underwriters partially exercised the over-allotment option to Noble Environmental (the "Noble Note")purchase an additional 2,225,000 Units.
The underwriters were entitled to an underwriting discount of $0.20 per Unit (excluding the Affiliated Units purchased). The Noble NoteAs a result of affiliates of the Sponsor purchasing 1,980,000 Units, the Company paid an underwriting discount of approximately $4.3 million in the aggregate balance of $3.2 million was repaid in full atupon the closing of the Initial Public Offering. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Unit (excluding the Affiliated Units), or approximately $7.6 million in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combinations.Combination, subject to the terms of the underwriting agreement.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 6—Stockholders’ Deficit
Class A Common Stock — The Company is authorized to issue 250,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of June 30, 2021 and December 31, 2020, there were 23,727,500 shares of Class A common stock issued and outstanding, of which 23,725,000 shares of Class A common stock are subject to possible redemption and therefore classified outside of permanent equity in the accompanying condensed consolidated balance sheets.
Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of June 30, 2021 and December 31, 2020, there were 5,931,350 shares of Class B common stock issued and outstanding.
Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders, except as required by law. Each share of common stock will have one vote on all such matters. Prior to the initial Business Combination, only holders of Class B common stock will have the right to vote on the election of directors.
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
Note 7—Warrants
As of June 30, 2021 and December 31, 2020, the Company received a $0.2 million loan and GCES received a $0.5 million loan from the Small Business Administration (SBA) as provided for under the Paycheck Protection Program (Program) established in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES ACT) signed into law on March 27, 2020. The Company utilized the loan proceeds in accordance with established Program guidelines which would result in forgiveness of the full amount of the loan. The forgiveness of the loan resulted in no interest being charged to the Company.
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, it will use its best efforts to file with the SEC and have an effective registration statement covering the shares of the Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of the Class A common stock until the warrants expire or are redeemed. If a registration statement covering the shares of the Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire on September 15, 2026,five years after the completion of a Business Combination or earlier upon redemption or liquidation. The Redeemable Warrants becameIn addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the board and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the Newly Issued Price.
Redemption of warrants when our Class A common stock equals or exceeds $18.00 per share:
Once the warrants become exercisable, on October 26, 2021, and the Company may redeem the outstanding Redeemable Warrants evenwarrants for cash (except as described herein with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption; and |
| ● | if, and only if, |
The Company will not redeem the warrants for cash unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A Common Stock equals or exceeds $10.00 per share on the last trading day before the notice of redemptioncommon stock is sent to the warrant holders, the Company may redeem the Redeemable Warrants for cash at a price of $0.10 per warrant. Duringavailable throughout the 30-day redemption period, in this instance, warrant holders can elect to exercise theirexcept if the warrants may be exercised on a cash or cashless basis.
Redemption of shares ofwarrants when our Class A Common Stock equalcommon stock equals or exceeds $10.00 per share:
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the Warrants,Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A common stock; |
| ● | if and only if, the last sale price of Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and | |
| ● | if, and only if, there is an effective registration statement covering the issuance of shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30- day period after written notice of redemption is given. |
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(AS RESTATED)
multiplied by the difference between the exercise price of the Warrants and the “fair market value” (as defined in the following sentence) by (y) the fair market value. The “fair market value” of shares of the Company's Class A Common Stockcommon stock shall mean the volume weighted average price of our shares ofthe Class A Common Stockcommon stock as reported during the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of the Warrants; however, in no event will the Redeemable Warrants be exercisable in connection with this redemption feature for more than 0.361warrants.
sharesNone of Class A Common Stock per Redeemable Warrant (subject to adjustment).
In no Private Placement Warrants transfers asevent will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of September 30, 2021.warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 8—Fair Value Measurements
The fair value of the RedeemableCompany’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
June 30, 2021
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - U.S. Treasury securities | $ | 237,351,433 | $ | - | $ | - | ||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - Public warrants | $ | 67,616,251 | $ | - | $ | - | ||||||
| Derivative warrant liabilities - Private placement warrants | $ | - | $ | - | $ | 71,349,396 | ||||||
December 31, 2020
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - U.S. Treasury securities | $ | 237,308,171 | $ | - | $ | - | ||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - Public warrants | $ | 27,046,500 | $ | - | $ | - | ||||||
| Derivative warrant liabilities - Private placement warrants | $ | - | $ | - | $ | 15,541,987 | ||||||
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers to/from Levels 1, 2, and 3 during the three and six months ended June 30, 2021.
Level 1 assets include investments in U.S. treasury securities. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within derivative warrant liabilities on the Company’s condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statement of operations.
For periods where no observable traded price is available, the fair value of the Public Warrants was estimated using a Monte Carlo simulation model. For periods subsequent to the detachment of the Public Warrants from the Units, the fair value of the Public Warrants is based on the observable listed prices on NYSEprice for such warrants (a Level 1 measurement).warrants. The estimated fair value of the Private Placement Warrants, was estimatedand the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The Warrants are measured at fair value on a recurring basis. The measurement of the Public Warrants as of June 30, 2021 and December 31, 2020 is classified as Level 1 due to the use of an observable market quote in an active market.
The key Level 3 fair value measurement inputs into the Black-Scholes option pricing model (a Level 3 measurement).
| June 30, 2021 | December 31, 2020 | ||||||||||||||||||
As of September 15, 2021 at Initial Measurement | September 30, 2021 | ||||||||||||||||||
| Exercise price | $ | 11.50 | $ | 11.50 | |||||||||||||||
| Stock price | Stock price | $18.05 | $18.94 | $ | 18.05 | $ | 10.83 | ||||||||||||
| Exercise price | $11.50 | $11.50 | |||||||||||||||||
| Volatility | Volatility | 45.8 | % | 46.3 | % | 52.0 | % | 22.7 | % | ||||||||||
| Expected term (years) | 5.0 | 5.0 | |||||||||||||||||
| Risk-free interest rate | 0.79 | % | 0.97 | % | |||||||||||||||
| Term (in years) | 5.25 | 5.82 | |||||||||||||||||
| Risk-free rate | 0.91 | % | 0.48 | % | |||||||||||||||
The change in the fair value of the derivative warrant liabilities, is recognized in gain (loss) on derivative contracts in the Consolidated Condensed Statement of Operations. The changes of the Redeemable Warrants and Private Placement Warrants through September 30, 2021 is as follows:
2021 | 2020 | ||||||||||
| (in thousands) | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||||||||||||||||
| Cost of energy | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Gain (loss) on gas swap contracts | 64 | — | 64 | — | |||||||||||||||||||
| Gain (loss) on warrant liabilities | (10,477) | — | (10,477) | — | |||||||||||||||||||
| Total | $ | (10,413) | $ | — | $ | (10,413) | $ | — | |||||||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
| Balance at beginning of period | $ | 306 | $ | — | |||||||
Liabilities acquired(1) | 3,580 | — | |||||||||
| Liabilities incurred | — | 306 | |||||||||
| Accretion expense | 18 | — | |||||||||
| Balance at end of period | $ | 3,904 | $ | 306 | |||||||
Series A Incentive Units | Weighted Average Grant Date Fair Value (per share) | ||||||||||
| Nonvested at December 31, 2020 | 4,500 | $ | — | ||||||||
| Granted | 1,500 | $ | 1,566 | ||||||||
| Forfeited | (250) | $ | — | ||||||||
| Vested | (5,750) | $ | 409 | ||||||||
| Nonvested at September 30, 2021 | — | $ | — | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Service cost | $ | 2 | $ | — | $ | 2 | $ | — | |||||||||||||||
| Interest cost | 4 | — | 4 | — | |||||||||||||||||||
| Net periodic benefit cost | $ | 6 | $ | — | $ | 6 | $ | — | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Income tax provision | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in thousands, except per share amounts) | September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||||||||
| Net income (loss) attributable to Class A Common Stock | $ | (7,011) | $ | — | $ | (7,011) | $ | — | |||||||||||||||
| Class A Common Stock | |||||||||||||||||||||||
| Average number of shares outstanding - basic | 52,847,195 | — | 52,847,195 | — | |||||||||||||||||||
| Average number of shares outstanding - diluted | 52,847,195 | — | 52,847,195 | — | |||||||||||||||||||
| Excluded due to anti-dilutive effect | 7,804,055 | — | 7,804,055 | — | |||||||||||||||||||
| Net income (loss) per share of Class A Common Stock | |||||||||||||||||||||||
| Basic and diluted | $ | (0.13) | $ | — | $ | (0.13) | $ | — | |||||||||||||||
| Derivative warrant liabilities at January 1, 2021 | $ | 15,541,987 | ||
| Change in fair value of derivative warrant liabilities | (2,284,001 | ) | ||
| Derivative warrant liabilities at March 31, 2021 | 13,257,986 | |||
| Change in fair value of derivative warrant liabilities | 58,091,410 | |||
| Derivative warrant liabilities at June 30, 2021 | $ | 71,349,396 |
Level 3 financial liabilities consist of the Private Placement Warrant liability for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are RNG and Power. The Company’s chief operating decision maker evaluates the performance of its segmentsanalyzed each period based on operational measures including revenues, net incomechanges in estimates or assumptions and EBITDA. Below is a reconciliation of EBITDArecorded as appropriate.
Note 9—Subsequent Events
Management has evaluated subsequent events to income (loss) before income taxes.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in thousands) | September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||||||||
| Income (loss) before income taxes | $ | (21,341) | $ | (602) | $ | (31,770) | $ | (1,819) | |||||||||||||||
| Interest expense | 1,586 | — | 1,606 | — | |||||||||||||||||||
| Depreciation, amortization and accretion | 3,142 | 34 | 4,077 | 101 | |||||||||||||||||||
| EBITDA | $ | (16,613) | $ | (568) | $ | (26,087) | $ | (1,718) | |||||||||||||||
| (in thousands) | RNG | Power | Corporate and Other | Total | ||||||||||||||||||||||
| Three months ended September 30, 2021 | ||||||||||||||||||||||||||
| Revenue | $ | 5,963 | $ | 5,158 | $ | 865 | $ | 11,986 | ||||||||||||||||||
| Intersegment revenue | — | 12 | (12) | — | ||||||||||||||||||||||
| Total revenue | $ | 5,963 | $ | 5,170 | $ | 853 | $ | 11,986 | ||||||||||||||||||
| Net income (loss) | $ | 28 | $ | (320) | $ | (21,049) | $ | (21,341) | ||||||||||||||||||
| EBITDA | $ | 1,916 | $ | 884 | $ | (19,413) | $ | (16,613) | ||||||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||||||||||||||
| Revenue | $ | 6,785 | $ | 7,395 | $ | 4,588 | $ | 18,768 | ||||||||||||||||||
| Intersegment revenue | — | 12 | (12) | — | ||||||||||||||||||||||
| Total revenue | $ | 6,785 | $ | 7,407 | $ | 4,576 | $ | 18,768 | ||||||||||||||||||
| Net income (loss) | $ | (1,538) | $ | (2,150) | $ | (28,082) | $ | (31,770) | ||||||||||||||||||
| EBITDA | $ | 585 | $ | (316) | $ | (26,356) | $ | (26,087) | ||||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||||||||
| Goodwill | $ | 27,011 | $ | — | $ | — | $ | 27,011 | ||||||||||||||||||
| Three months ended September 30, 2020 | ||||||||||||||||||||||||||
| Revenue | $ | — | $ | — | $ | 1,904 | $ | 1,904 | ||||||||||||||||||
| Intersegment revenue | — | — | — | — | ||||||||||||||||||||||
| Total revenue | $ | — | $ | — | $ | 1,904 | $ | 1,904 | ||||||||||||||||||
| Net income (loss) | $ | (19) | $ | (5) | $ | (578) | $ | (602) | ||||||||||||||||||
| EBITDA | $ | (19) | $ | (5) | $ | (544) | $ | (568) | ||||||||||||||||||
| Nine months ended September 30, 2020 | ||||||||||||||||||||||||||
| Revenue | $ | 34 | $ | — | $ | 4,462 | $ | 4,496 | ||||||||||||||||||
| Intersegment revenue | — | — | — | — | ||||||||||||||||||||||
| Total revenue | $ | 34 | $ | — | $ | 4,462 | $ | 4,496 | ||||||||||||||||||
| Net income (loss) | $ | (102) | $ | (5) | $ | (1,712) | $ | (1,819) | ||||||||||||||||||
| EBITDA | $ | (102) | $ | (5) | $ | (1,611) | $ | (1,718) | ||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||
| Goodwill | $ | 2,754 | $ | — | $ | — | $ | 2,754 | ||||||||||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | |||||||||||||||||||
| Revenue and Other Income | |||||||||||||||||||||||
| Energy revenue | $ | 35,765 | $ | 33,376 | $ | 120,250 | $ | 96,025 | |||||||||||||||
| Construction revenue | 8 | 2,705 | 32 | 9,950 | |||||||||||||||||||
| Amortization of intangibles and below-market contracts | (785) | (917) | (2,693) | (2,752) | |||||||||||||||||||
| Total Revenue and Other Income | 34,988 | 35,164 | 117,589 | 103,223 | |||||||||||||||||||
| Equity Investment Income, net | 6,451 | 2,558 | 19,777 | 6,005 | |||||||||||||||||||
| Cost of Operations | |||||||||||||||||||||||
| Cost of energy | 15,175 | 17,006 | 56,291 | 53,020 | |||||||||||||||||||
| Cost of other revenues | 8 | 2,576 | 30 | 9,476 | |||||||||||||||||||
| Depreciation, amortization and accretion | 4,634 | 7,801 | 15,948 | 23,381 | |||||||||||||||||||
| Total Cost of Operations | 19,817 | 27,383 | 72,269 | 85,877 | |||||||||||||||||||
| Gain on disposal of assets | — | — | (1,347) | — | |||||||||||||||||||
| General and administrative expenses | 20,678 | 5,303 | 33,737 | 14,934 | |||||||||||||||||||
| Operating Income (Loss) | 944 | 5,036 | 32,707 | 8,417 | |||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Interest expense, net | (2,053) | (4,765) | (10,729) | (14,429) | |||||||||||||||||||
| Gain (loss) on derivative contracts | 574 | 261 | 1,129 | (61) | |||||||||||||||||||
| Gain on extinguishment of debt | — | — | 61,411 | — | |||||||||||||||||||
| Other income | 1 | — | 2 | 2 | |||||||||||||||||||
| Total Other Income (Expense) | (1,478) | (4,504) | 51,813 | (14,488) | |||||||||||||||||||
| Net Income (Loss) | (534) | 532 | 84,520 | (6,071) | |||||||||||||||||||
| Net income attributable to noncontrolling interest | — | 22 | 289 | 61 | |||||||||||||||||||
| Net Income (Loss) Attributable to Controlling Interest | $ | (534) | $ | 510 | $ | 84,231 | $ | (6,132) | |||||||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | |||||||||||||||||||
| Net Income (Loss) | $ | (534) | $ | 532 | $ | 84,520 | $ | (6,071) | |||||||||||||||
| Other Comprehensive Income (Loss) | |||||||||||||||||||||||
| Net actuarial income | 19 | 25 | 213 | 75 | |||||||||||||||||||
| Other Comprehensive Income (Loss) | (515) | 557 | 84,733 | (5,996) | |||||||||||||||||||
| Comprehensive income attributable to noncontrolling interest | — | 22 | 289 | 61 | |||||||||||||||||||
| Comprehensive Income (Loss) Attributable to Controlling Interest | $ | (515) | $ | 535 | $ | 84,444 | $ | (6,057) | |||||||||||||||
| Controlling Interest | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Class A Units | Class B Units | Class C Units | Retained Earnings (Loss) | Accumulated Other Comprehensive (Loss) Income | Total Controlling Interest | Noncontrolling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2021 | $ | 299,327 | $ | 19,327 | $ | 1 | $ | (218,957) | $ | (1,349) | $ | 98,349 | $ | (289) | $ | 98,060 | |||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 84,231 | — | 84,231 | 289 | 84,520 | |||||||||||||||||||||||||||||||||||||||
| Adjustments for postretirement plan | — | — | — | — | 213 | 213 | — | 213 | |||||||||||||||||||||||||||||||||||||||
| Balance – September 14, 2021 | $ | 299,327 | $ | 19,327 | $ | 1 | $ | (134,726) | $ | (1,136) | $ | 182,793 | $ | — | $ | 182,793 | |||||||||||||||||||||||||||||||
| Controlling Interest | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Class A Units | Class B Units | Class C Units | Retained Earnings (Loss) | Accumulated Other Comprehensive (Loss) Income | Total Controlling Interest | Noncontrolling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2020 | $ | 299,327 | $ | 19,327 | $ | 1 | $ | (188,956) | $ | (1,304) | $ | 128,395 | $ | (266) | $ | 128,129 | |||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | (6,132) | — | (6,132) | 61 | (6,071) | |||||||||||||||||||||||||||||||||||||||
| Adjustments for postretirement plan | — | — | — | — | 75 | 75 | — | 75 | |||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interest | — | — | — | — | — | — | (76) | (76) | |||||||||||||||||||||||||||||||||||||||
| Balance – September 30, 2020 | $ | 299,327 | $ | 19,327 | $ | 1 | $ | (195,088) | $ | (1,229) | $ | 122,338 | $ | (281) | $ | 122,057 | |||||||||||||||||||||||||||||||
| (in thousands) | January 1 to September 14, 2021 | January 1 to September 30, 2020 | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income (loss) | $ | 84,520 | $ | (6,071) | ||||||||||
| Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: | ||||||||||||||
| Depreciation, amortization and accretion | 15,948 | 23,381 | ||||||||||||
| Gain on disposal of assets | (1,573) | — | ||||||||||||
| Amortization of debt origination costs | 699 | 1,181 | ||||||||||||
| Amortization of intangibles and below-market contracts | 859 | 918 | ||||||||||||
| Return on investment in equity method investments | 19,518 | 9,295 | ||||||||||||
| Equity in earnings of equity method investments | (19,777) | (6,005) | ||||||||||||
| Change in fair value of derivatives | (1,268) | (1,113) | ||||||||||||
| Gain on extinguishment of debt | (61,411) | — | ||||||||||||
| Net periodic postretirement benefit cost | 106 | 79 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | (4,728) | (6,338) | ||||||||||||
| Inventory | (1,318) | (656) | ||||||||||||
| Prepaid expenses and other assets | (143) | (625) | ||||||||||||
| Other non-current assets | (196) | 295 | ||||||||||||
| Trade accounts payable | 478 | 882 | ||||||||||||
| Accrued and other current liabilities | 19,231 | 4,475 | ||||||||||||
| Net cash provided by operating activities | 50,945 | 19,698 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchase of property and equipment | (2,318) | (1,558) | ||||||||||||
| Contributions to equity method investments | (8,430) | (9,900) | ||||||||||||
| Net cash used in investing activities | (10,748) | (11,458) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Payments on note payable and revolving credit agreement | — | (10,408) | ||||||||||||
| Proceeds from revolving credit agreement | — | 4,000 | ||||||||||||
| Payments on long-term debt | (49,551) | — | ||||||||||||
| Distributions to noncontrolling interest | — | (76) | ||||||||||||
| Net cash used in financing activities | (49,551) | (6,484) | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | (9,354) | 1,756 | ||||||||||||
| Cash and cash equivalents – beginning of period | 14,257 | 7,081 | ||||||||||||
| Cash and cash equivalents – end of period | $ | 4,903 | $ | 8,837 | ||||||||||
| Supplemental cash flow information: | ||||||||||||||
| Cash paid for interest | $ | 5,940 | $ | 9,339 | ||||||||||
| Noncash investing activities: | ||||||||||||||
| Accruals of property and equipment incurred but not yet paid | $ | 25 | $ | 50 | ||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | |||||||||||||||||||
| RNG, including RINs and LCFSs | $ | 28,125 | $ | 18,925 | $ | 83,848 | $ | 51,818 | |||||||||||||||
| Gas O&M service | 268 | 309 | 974 | 791 | |||||||||||||||||||
| Power, including RECs | 6,591 | 11,323 | 31,217 | 36,280 | |||||||||||||||||||
| Electric O&M service | 781 | 2,819 | 4,211 | 7,136 | |||||||||||||||||||
| Other | 8 | 2,705 | 32 | 9,950 | |||||||||||||||||||
| Total | $ | 35,773 | $ | 36,081 | $ | 120,282 | $ | 105,975 | |||||||||||||||
| Operating segments | |||||||||||||||||||||||
| RNG | $ | 28,402 | $ | 21,939 | $ | 84,853 | $ | 62,559 | |||||||||||||||
| Power | 7,371 | 14,142 | 35,429 | 43,416 | |||||||||||||||||||
| Total | $ | 35,773 | $ | 36,081 | $ | 120,282 | $ | 105,975 | |||||||||||||||
NOTE 3 - Property, Plant and Equipment - Predecessor
| December 31, 2020 | |||||||||||||||||
| (in thousands) | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||
| Gas rights agreements | $ | 217,285 | $ | 102,944 | $ | 114,341 | |||||||||||
| Operations and maintenance contracts | 3,500 | 2,475 | 1,025 | ||||||||||||||
| Gas sales agreements | 32,059 | 20,503 | 11,556 | ||||||||||||||
| Total | $ | 252,844 | $ | 125,922 | $ | 126,922 | |||||||||||
| Expense | ||||||||||||||||||||||||||||||||||||||
| Type of Contract | Amortization Line Item | Remaining Lives | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | ||||||||||||||||||||||||||||||||
| Gas rights | Depreciation, amortization and accretion | 4 to 16 years | $ | 1,892 | $ | 3,777 | $ | 6,494 | $ | 11,331 | ||||||||||||||||||||||||||||
| Operation and maintenance | Amortization of intangibles and below-market contracts | 5 years | $ | 52 | $ | 145 | $ | 178 | $ | 434 | ||||||||||||||||||||||||||||
| Gas sales | Amortization of intangibles and below-market contracts | 1 to 8 years | $ | 733 | $ | 891 | $ | 2,515 | $ | 2,674 | ||||||||||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||
| Gross | Accumulated | ||||||||||||||||
| (in thousands) | Liability | Amortization | Net | ||||||||||||||
| Gas purchase agreements | $ | 19,828 | $ | 14,059 | $ | 5,769 | |||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | |||||||||||||||||||
| Revenue | $ | 25,223 | $ | 16,307 | $ | 78,125 | $ | 41,199 | |||||||||||||||
| Net income | $ | 13,237 | $ | 5,226 | $ | 38,512 | $ | 12,338 | |||||||||||||||
| Aria's share of net income | $ | 6,451 | $ | 2,558 | $ | 19,777 | $ | 6,005 | |||||||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | |||||||||||||||||||
| Natural gas swap - unrealized gain (loss) | $ | 574 | $ | 261 | $ | 1,129 | $ | (61) | |||||||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | |||||||||||||||||||
| Service cost | $ | 8 | $ | 12 | $ | 27 | $ | 36 | |||||||||||||||
| Interest cost | 19 | 26 | 64 | 77 | |||||||||||||||||||
| Amortization of prior service cost | 2 | 3 | 8 | 9 | |||||||||||||||||||
| Recognition of net actuarial loss | 17 | 22 | 57 | 66 | |||||||||||||||||||
| Net periodic benefit cost | $ | 46 | $ | 63 | $ | 156 | $ | 188 | |||||||||||||||
| (in thousands, except price per share) | December 31, 2020 | |||||||||||||||||||
| Price per share | Class A | Class B | Class C | |||||||||||||||||
| $1.00 | 441,482 | 27,120 | — | |||||||||||||||||
| $0.10 | — | — | 9 | |||||||||||||||||
| $0.88 | 11,364 | — | — | |||||||||||||||||
| Total shares outstanding | 452,846 | 27,120 | 9 | |||||||||||||||||
| (in thousands) | January 1 to September 14, 2021 | January 1 to December 31, 2020 | ||||||||||||
| Balance at beginning of period | $ | 3,408 | $ | 6,536 | ||||||||||
| Accretion expense | 172 | 456 | ||||||||||||
| Revision to estimated cash flows | — | — | ||||||||||||
| Transfer to liabilities classified as held for sale | — | (3,584) | ||||||||||||
| Settlement of asset retirement obligation | — | — | ||||||||||||
| Balance at end of period | $ | 3,580 | $ | 3,408 | ||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | |||||||||||||||||||
| Sales of construction services | $ | 8 | $ | 2,705 | $ | 32 | $ | 9,950 | |||||||||||||||
| Sales of operations and maintenance services | $ | 214 | $ | 482 | $ | 1,215 | $ | 1,332 | |||||||||||||||
| Sales of administrative and other services | $ | 25 | $ | 105 | $ | 221 | $ | 305 | |||||||||||||||
| For the year-to-date period ended September 14, 2021 | |||||||||||||||||||||||
| (in thousands) | RNG | Power | Corporate and Other | Total | |||||||||||||||||||
| Net income (loss) | $ | 59,066 | $ | 66,431 | $ | (40,977) | $ | 84,520 | |||||||||||||||
| Depreciation, amortization and accretion | 6,447 | 9,467 | 34 | 15,948 | |||||||||||||||||||
| Interest expense | — | — | 10,729 | 10,729 | |||||||||||||||||||
| EBITDA | $ | 65,513 | $ | 75,898 | $ | (30,214) | $ | 111,197 | |||||||||||||||
| Amortization of intangibles and below-market contracts | 2,516 | 177 | — | 2,693 | |||||||||||||||||||
| Gain on disposal of assets | — | (1,347) | — | (1,347) | |||||||||||||||||||
| Net derivative activity | (1,129) | — | — | (1,129) | |||||||||||||||||||
| Debt forbearance costs | — | — | 990 | 990 | |||||||||||||||||||
| Gain on extinguishment of debt | — | (61,411) | — | (61,411) | |||||||||||||||||||
| Costs related to sale of equity | — | — | 18,629 | 18,629 | |||||||||||||||||||
| Adjusted EBITDA | $ | 66,900 | $ | 13,317 | $ | (10,595) | $ | 69,622 | |||||||||||||||
| For the nine months ended September 30, 2020 | |||||||||||||||||||||||
| (in thousands) | RNG | Power | Corporate and Other | Total | |||||||||||||||||||
| Net income (loss) | $ | 19,308 | $ | (161) | $ | (25,218) | $ | (6,071) | |||||||||||||||
| Depreciation, amortization and accretion | 6,729 | 16,592 | 60 | 23,381 | |||||||||||||||||||
| Interest expense | — | — | 14,429 | 14,429 | |||||||||||||||||||
| EBITDA | $ | 26,037 | $ | 16,431 | $ | (10,729) | $ | 31,739 | |||||||||||||||
| Amortization of intangibles and below-market contracts | 2,674 | 78 | — | $ | 2,752 | ||||||||||||||||||
| Net derivative activity | 61 | — | — | 61 | |||||||||||||||||||
| Debt forbearance costs | — | — | 907 | 907 | |||||||||||||||||||
| Costs related to sale of equity | — | — | 196 | 196 | |||||||||||||||||||
| Adjusted EBITDA | $ | 28,772 | $ | 16,509 | $ | (9,626) | $ | 35,655 | |||||||||||||||
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Rice Acquisition Corp. and its majority-owned and controlled operating subsidiary, Rice Acquisition Holdings LLC (“RAC OpCo”), unless the context indicates otherwise. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and relatedthe notes includedthereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated in Delaware on September 1, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Our sponsor is Rice Acquisition Sponsor LLC, a Delaware limited liability company (“Sponsor”).
The registration statement for our initial public offering (“Initial Public Offering”) was declared effective on October 21, 2020. On October 26, 2020, we consummated the Initial Public Offering of 23,725,000 units (each, a “Unit” and collectively, the “Units”), including 2,225,000 additional Units that were issued pursuant to the underwriters’ partial exercise of their over-allotment option (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of approximately $237.3 million, and incurring offering costs of approximately $12.5 million, inclusive of $7.6 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,771,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) to our Sponsor and Atlas Point Energy Infrastructure Fund, LLC (“Atlas Point Fund”), at a price of $1.00 per Private Placement Warrant, generating gross proceeds of approximately $6.8 million. Each Private Placement Warrant is exercisable to purchase one share of Rice’s Class A common stock or, in certain circumstances, one Class A Unit of RAC OpCo together with a corresponding number of shares of Rice’s non-economic Class B common stock.
Following the Initial Public Offering, our public stockholders hold a direct economic equity ownership interest in Rice in the form of shares of Class A common stock, and an indirect ownership interest in RAC OpCo through Rice’s ownership of Class A Units of RAC OpCo. By contrast, the Initial Stockholders (our Sponsor, Atlas Point Fund and our officers and directors) own direct economic interests in RAC OpCo in the form of Class B Units and a corresponding non-economic voting equity interest in Rice in the form of shares of Class B common stock, as well as a small direct interest through the Sponsor Shares (as defined below). Sponsor Shares were purchased for $10.00 each and, in the absence of an initial Business Combination, will generally participate in liquidation or other payments on a pari passu basis with the Public Shares (as defined below). However, given the relatively de minimis number of Sponsor Shares relative to Public Shares, in many cases the economic, governance or other effects of the sponsor shares are not material to the holders of Class A common stock or warrants, and for simplicity, portions of this disclosure may not fully describe or reflect these immaterial effects.
Upon the closing of the Initial Public Offering and the Private Placement, approximately $237.3 million of the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.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 direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account.
If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or October 26, 2022, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares and Class A Units of RAC OpCo (other than those held by Rice), which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Proposed Business Combination
On April 7, 2021, the Company entered into (i) the Business Combination Agreement (as amended, supplemented or otherwise modified from time to time, the “Aria Merger Agreement”), by and among the Company, RAC OpCo, LFG Intermediate Co, LLC, a Delaware limited liability company and direct subsidiary of RAC OpCo (“RAC Intermediate”), LFG Buyer Co, LLC, a Delaware limited liability company and a direct subsidiary of RAC Intermediate (“RAC Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and a direct subsidiary of RAC Buyer (“Aria Merger Sub”), Aria Energy LLC, a Delaware limited liability company (“Aria”), and the Equityholder Representative (as defined therein), pursuant to which, among other things, Aria Merger Sub will merge with and into Aria, with Aria surviving the merger and becoming a direct subsidiary of RAC Buyer, and (ii) the Business Combination Agreement, dated as of April 7, 2021 (as amended, supplemented or otherwise modified from time to time, the “Archaea Merger Agreement” and, together with the Aria Merger Agreement, the “Business Combination Agreements”), by and among the Company, RAC OpCo, RAC Intermediate, RAC Buyer, Fezzik Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Archaea Merger Sub”), Archaea Energy, LLC (“Archaea Seller”), a Delaware limited liability company, and Archaea Energy II, LLC, a Delaware limited liability company (“Archaea” and, together with Archaea Seller and Aria, the “Companies”), pursuant to which, among other things, Archaea Merger Sub will merge with and into Archaea, with Archaea surviving the merger and becoming a direct subsidiary of RAC Buyer, in each case, on the terms and subject to the conditions therein, and certain related agreements, as further described in Note 1 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations, estimates,
Results of Operations
Our entire activity for the three and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" appearing elsewhere in this Quarterly Report.
For the three months ended June 30, 2021, we had a loss of approximately $131.8 million, which consisted of approximately $125.6 million of change in fair value of warrant liabilities, approximately $6.2 million of general and administrative expenses, approximately $34,000 of franchise tax expense, partially offset by approximately $6,000 in interest earned on investments held in Trust Account.
For the six months ended June 30, 2021, we had a loss of approximately $123.0 million, which consisted of approximately $113.8 million of change in fair value of warrant liabilities, approximately $9.2 million of general and administrative expenses, approximately $74,000 of franchise tax expense, partially offset by approximately $43,000 in interest earned on investments held in Trust Account.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $5,000 in our operating bank account and a working capital deficiency of approximately $7.6 million.
Our liquidity needs to date had been satisfied through the payment of $26,000 from our Sponsor to purchase the Founder Shares and Sponsor Shares, a loan under a note agreement with our Sponsor of approximately $290,000 (the “Note”), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Note was paid in full as of November 10, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, our officers, directors and Sponsor may, but are not obligated to, provide us working capital loans. As of June 30, 2021, there were no amounts outstanding under any working capital loans.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds held outside of the Trust Account for paying existing accounts payable, and structuring, negotiating and consummating the Business CombinationsCombination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
On October 21, 2020, we entered into an Administrative Services Agreement pursuant to which we have agreed to cause RAC OpCo to pay the Sponsor a total of $10,000 per month for office space, utilities and administrative support. Upon completion of the Company's ongoing development activities. Our results priorInitial Business Combination or our liquidation, the agreement will terminate.
The underwriters of the Initial Public Offering were entitled to underwriting discounts and commissions of 5.5%, of which 2.0% (approximately $4.3 million) was paid at the closing of the Business Combinations on September 15, 2021 only include Legacy Archaea, the accounting acquirer, whereas our results beginning on September 15, 2021 include the combined operations of Legacy ArchaeaInitial Public Offering and Aria as managed by the Company. In addition, both Legacy Archaea3.5% (approximately $7.6 million) was deferred. The deferred underwriting discounts and Aria have experienced significant growth and expansion over the last two years.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| RNG sold (MMBtu) | 320,265 | — | 378,730 | — | |||||||||||||||||||
| Electricity sold (MWh) | 77,228 | — | 164,307 | — | |||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | $ Change | 2021 | 2020 | $ Change | |||||||||||||||||||||||||||||
| Revenues | $ | 11,986 | $ | 1,904 | $ | 10,082 | $ | 18,768 | $ | 4,496 | $ | 14,272 | |||||||||||||||||||||||
| Costs of operations | 13,235 | 1,288 | 11,947 | 19,678 | 2,678 | 17,000 | |||||||||||||||||||||||||||||
| Equity investment income (loss) | 879 | — | 879 | 879 | — | 879 | |||||||||||||||||||||||||||||
| General and administrative expenses | 9,053 | 1,205 | 7,848 | 20,097 | 3,652 | 16,445 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | (9,423) | $ | (589) | $ | (8,834) | $ | (20,128) | $ | (1,834) | $ | (18,294) | |||||||||||||||||||||||
| Other income (expense), net | (11,918) | (13) | (11,905) | (11,642) | 15 | (11,656) | |||||||||||||||||||||||||||||
| Net income (loss) | $ | (21,341) | $ | (602) | $ | (20,739) | $ | (31,770) | $ | (1,819) | $ | (29,951) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net income (loss) | $ | (21,341) | $ | (602) | $ | (31,770) | $ | (1,819) | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Interest expense | 1,586 | — | 1,606 | — | |||||||||||||||||||
| Depreciation, amortization and accretion | 3,142 | 34 | 4,077 | 101 | |||||||||||||||||||
| EBITDA | $ | (16,613) | $ | (568) | $ | (26,088) | $ | (1,718) | |||||||||||||||
| Net derivative activity | 10,413 | — | 10,413 | — | |||||||||||||||||||
| Amortization of intangibles and below-market contracts | (205) | — | (205) | — | |||||||||||||||||||
| Amortization of equity method investments basis difference | 428 | — | 428 | — | |||||||||||||||||||
| Share-based compensation | 2,708 | — | 2,886 | — | |||||||||||||||||||
| Acquisition transaction costs | 2,748 | — | 2,748 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | (521) | $ | (568) | $ | (9,818) | $ | (1,718) | |||||||||||||||
| July 1 to September 14, 2021 | July 1 to September 30, 2020 | January 1 to September 14, 2021 | January 1 to September 30, 2020 | ||||||||||||||||||||
| RNG sold (MMBtu) | 1,713,637 | 1,547,966 | 5,020,959 | 4,407,358 | |||||||||||||||||||
| Electricity sold (MWh) | 144,361 | 285,164 | 650,286 | 881,383 | |||||||||||||||||||
| (in thousands) | July 1 to September 14, 2021 | July 1 to September 30, 2020 | $ Change | January 1 to September 14, 2021 | January 1 to September 30, 2020 | $ Change | |||||||||||||||||||||||||||||
| Revenues | $ | 34,988 | $ | 35,164 | $ | (176) | $ | 117,589 | $ | 103,223 | $ | 14,366 | |||||||||||||||||||||||
| Costs of operations | 19,817 | 27,383 | (7,566) | 72,269 | 85,877 | (13,608) | |||||||||||||||||||||||||||||
| Equity investment income (loss) | 6,451 | 2,558 | 3,893 | 19,777 | 6,005 | 13,772 | |||||||||||||||||||||||||||||
| General and administrative expenses | 20,678 | 5,303 | 15,375 | 33,737 | 14,934 | 18,803 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 944 | $ | 5,036 | $ | (4,092) | $ | 32,707 | $ | 8,417 | $ | 24,290 | |||||||||||||||||||||||
| Other income (expense), net | (1,478) | (4,504) | 3,026 | 51,813 | (14,488) | 66,301 | |||||||||||||||||||||||||||||
| Net income (loss) | $ | (534) | $ | 532 | $ | (1,066) | $ | 84,520 | $ | (6,071) | $ | 90,591 | |||||||||||||||||||||||
| Nine months Ended September 30, | |||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
| Cash used in operating activities | $ | (54,710) | $ | (2,820) | |||||||
| Cash used in investing activities | $ | (587,372) | $ | (18,707) | |||||||
| Cash provided by financing activities | $ | 811,386 | $ | 21,841 | |||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 169,304 | $ | 314 | |||||||
| (in thousands) | December 31, 2020 | Borrowings | Repayments | September 30, 2021 | |||||||||||||||||||
| Comerica Bank - Specific Advance Facility Note | $ | 4,319 | $ | 675 | $ | (4,994) | $ | — | |||||||||||||||
| Comerica Bank - Previous Revolver | — | 12,478 | (12,478) | — | |||||||||||||||||||
| Comerica Term Loan | 12,000 | — | (12,000) | — | |||||||||||||||||||
| New Credit Agreement - Term Loan | — | 220,000 | — | 220,000 | |||||||||||||||||||
| New Credit Agreement - Revolver | — | — | — | — | |||||||||||||||||||
Wilmington Trust - 4.47% Term Note (1) | — | 60,828 | — | 60,828 | |||||||||||||||||||
Wilmington Trust - 3.75% Term Note (1) | — | 66,558 | — | 66,558 | |||||||||||||||||||
| Promissory Notes | — | 30,000 | (30,000) | — | |||||||||||||||||||
| Kubota Corporation - Term Notes | 46 | — | (46) | — | |||||||||||||||||||
| Total | $ | 16,365 | $ | 390,539 | $ | (59,518) | $ | 347,386 | |||||||||||||||
| Payments Due by Periods | |||||||||||||||||||||||||||||
| (in thousands) | Total | Remainder 2021 | 2022 - 2023 | 2024 - 2025 | Thereafter | ||||||||||||||||||||||||
| Operating leases | $ | 975 | $ | 207 | $ | 747 | $ | 21 | $ | — | |||||||||||||||||||
| Biogas rights and contracts commitments | 40,192 | 794 | 10,060 | 5,950 | 23,388 | ||||||||||||||||||||||||
| Long-term debt | 347,386 | 1,375 | 29,860 | 34,969 | 281,182 | ||||||||||||||||||||||||
| Total contractual obligations | $ | 388,553 | $ | 2,376 | $ | 40,667 | $ | 40,940 | $ | 304,570 | |||||||||||||||||||
Critical Accounting Policies
This management'smanagement’s discussion and analysis of our financial condition and results of operations areis based on our unaudited condensed consolidated financial statements. Our financial statements, which have been prepared in conformityaccordance with GAAP. For a discussion of our significantUnited States generally accepted accounting policies, see Note 2 - Basis of Presentation and Summary of Significant Accounting Policies.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standard Update (the “ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the most pervasivederivative scope exception and important toit also simplifies the portrayaldiluted earnings per share calculation in certain areas. The Company early adopted the ASU on January 1, 2021. Adoption of ourthe ASU did not impact the Company’s financial position, and results of operations and that require the most difficult, subjective and/or complex judgments by management regarding estimates about matters that are inherently uncertain. Our critical accounting policies are associated with revenue recognition, acquisition accounting, and the judgment used in determining the fair value of identified assets acquired and liabilities assumed.
Off-Balance Sheet Arrangements
As of SeptemberJune 30, 2021, the Companywe did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Company doesJumpstart Our Business Startups Act of 2012 (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 believecomply 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 condensed consolidated financial statements may not be comparable to companies that inflation had a material impactcomply 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 business, revenuessystem 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 PCAOB regarding mandatory audit firm rotation or operating results duringa supplement to the periods presented.auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company weas defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required byunder this Item. However, we note that we are exposed to market risks in the ordinary course of our business. Market risk is the potential loss that may result from market changes associated with our power generation or with an existing or forecasted financial or commodity transaction. These risks primarily consist of commodity price risk, specifically electricity and renewable natural gas, counterparty credit risk and interest rate risk.item.
Item 4. CONTROLS AND PROCEDURESControls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, we evaluatedconducted an evaluation of the effectiveness of our disclosure controls and procedures (asas of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2021.Act. Based upon thaton this evaluation, our Chief Executive Officerprincipal executive officer and Chief Financial Officerprincipal financial officer have concluded that our disclosure controls and procedures were not effective as of the endJune 30, 2021, because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the period coveredCompany’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex equity and equity-linked instruments issued by this report.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting commencedthat occurred during the period covered by this report and after willfiscal quarter ended June 30, 2021 that has materially affect,affected, or areis reasonably likely to materially affect, our internal control over financial
Our principal executive officer and principal financial officer performed additional accounting and financial analyses and other post-closing procedures appropriateincluding consulting with subject matter experts related to the operating businessaccounting for certain complex equity and equity-linked instruments issued by the Company, and presentation of earnings per share. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have become as a resultprocesses to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the Business Combinations.increasingly complex accounting standards.
PART II.II – OTHER INFORMATION
Item 1. LEGAL PROCEEDINGSLegal Proceedings
None.
Item 1A. RISK FACTORSRisk Factors.
As a smaller reporting company, we are not required to disclose any material changes from risk factors as previously disclosed in RAC’sour Annual Report on Form 10-K/A. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:
| ● | we may not be able to complete our initial business combination in the prescribed time frame; |
| ● | our expectations around the performance of a prospective target business or businesses may not be realized; |
| ● | we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination; |
| ● | our officers and directors may have difficulties allocating their time between the Company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination; |
| ● | we may not be able to obtain additional financing to complete our initial business combination or reduce the number of shareholders requesting redemption; |
| ● | trust account funds may not be protected against third party claims or bankruptcy; |
| ● | an active market for our public securities may not develop and you will have limited liquidity and trading; and |
| ● | the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination. |
For more information about our risk factors, see Item 1A of Part I in Amendment No. 1 to our Annual Report on Form 10-K/A for the period ended December 31, 2020. However, for2020 and the section titled “Risk Factors” contained in our definitive proxy statement filed with the SEC on August 12, 2021, as the same may be amended or supplemented, with respect to our initial business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
On October 26, 2020, we consummated the Initial Public Offering of 23,725,000 Units, including the Over-Allotment Units. The Units were sold at a discussionprice of risk factors applicable to us, please refer$10.00 per Unit, generating gross proceeds of $237,250,000. The underwriters were granted a 45-day option from the date of the final prospectus relating to the Registration StatementInitial Public Offering to purchase up to 3,225,000 additional Units to cover over-allotments, if any, at $10.00 per Unit, less underwriting discounts and commissions. On October 23, 2020, the underwriters partially exercised the over-allotment option and, on October 26, 2020, the underwriters purchased the Over-Allotment Units.
Barclays Capital Inc., AmeriVet Securities Inc. and Academy Securities Inc. served as underwriters for the Initial Public Offering. The securities sold in the Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-260094), originally filed by333-249340). The SEC declared the Company with the SEC on October 6, 2021, as subsequently amended on October 18, 2021 and declaredregistration statement effective by the SEC on October 21, 2021. As a result of2020.
In connection with the closing of the Initial Public Offering, we paid a total of approximately $4.3 million in underwriting discounts and commissions. In addition, the underwriters agreed to defer approximately $7.6 million in underwriting discounts and commissions, which amount will be payable upon consummation of the Initial Business Combinations on September 15, 2021,Combination. Prior to the risk factors previously discussedclosing of the Initial Public Offering, the Sponsor loaned RAC OpCo approximately $300,000 under the Note.
In connection with the Initial Public Offering, we incurred offering costs of approximately $12.5 million, inclusive of approximately $7.6 million in Part I, Item 1A. “Risk Factors”deferred underwriting commissions. Other incurred offering costs consisted principally of RAC’s Annual Report Form 10-K/A forpreparation fees related to the period ended December 31, 2020 no longer apply.
On October 26, 2020, simultaneously with the closing of the Initial Public Offering and pursuant to separate Private Placement Warrants and Warrant Rights Agreements, dated September 21, 2020, by and among the Company and RAC OpCo, and each of the Sponsor and Atlas Point Fund, the Company completed the private sale of an aggregate of 6,771,000 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant to the Sponsor and Atlas Point Fund, generating gross proceeds of $6,771,000.
There has been no material change in a Current Report on Form 8-K.the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering.
Item 3. DEFAULTS UPON SENIOR SECURITIESDefaults Upon Senior Securities
None.
Item 4. MINE SAFETY DISCLOSURESMine Safety Disclosures
Not applicable.
Item 5. OTHER INFORMATIONOther Information
None.
Item 6. EXHIBITSExhibits.
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS | Inline XBRL Instance Document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
| † | Certain schedules and similar attachments have been omitted. The Company agrees to furnish supplementally a copy of any omitted schedule or attachment to the SEC upon its request. |
| * | Filed herewith. |
| ** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ARCHAEA ENERGY INC. | |||||||||
| Date: December 28, 2021 | |||||||||
| By: | /s/ Chad Bellah | ||||||||
| Name: | Chad Bellah | ||||||||
| Title: | Chief Accounting Officer | ||||||||
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