Item 1.
Condensed Consolidated Financial Statements.
RICE
ACQUISITION CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
MARCH
31, 2021
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|
March 31,
2021
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December 31,
2020
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|
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|
(unaudited)
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|
|
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Assets:
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|
|
|
|
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Current assets:
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|
|
|
|
|
|
Cash
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$
|
1,027,243
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|
|
$
|
1,335,167
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|
Prepaid expenses
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|
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662,865
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|
|
|
662,865
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|
Total current assets
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1,690,108
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|
|
|
1,998,032
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|
Investments held in Trust Account
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237,345,682
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|
|
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237,308,171
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Total Assets
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$
|
239,035,790
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|
|
$
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239,306,203
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|
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|
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Liabilities and Stockholders’ Equity:
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Current liabilities:
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Accrued expenses
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$
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3,064,809
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|
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$
|
118,446
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Accounts payable
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|
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3,049
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|
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217,918
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|
Franchise tax payable
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|
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65,481
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|
|
|
65,481
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|
Total current liabilities
|
|
|
3,133,339
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|
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|
401,845
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Warrant Liabilities
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30,814,486
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42,588,487
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Deferred legal fees
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187,500
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187,500
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Deferred underwriting commissions in connection with the initial public offering
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7,610,750
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|
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7,610,750
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Total liabilities
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41,746,075
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|
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50,788,582
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Commitments and Contingencies
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Class A common stock; 18,351,762 shares subject to possible redemption at $10.00 per share
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192,289,710
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183,517,620
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Stockholders’ Equity:
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
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-
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-
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Class A common stock, $0.0001 par value; 250,000,000 shares authorized; 4,498,538 shares issued and outstanding (excluding 19,228,962 shares subject to possible redemption)
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450
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|
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|
538
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Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,931,350 shares issued and outstanding
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593
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593
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Additional paid-in capital
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18,720,097
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27,492,099
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Accumulated deficit
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(13,194,362
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)
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(21,629,069
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)
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Total Rice Acquisition Corp equity
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5,526,778
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5,864,161
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Non-controlling interest in subsidiary
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(526,773
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)
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(864,160
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)
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Total stockholders’ equity
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5,000,006
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5,000,001
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Total Liabilities and Stockholders’ Equity
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$
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239,035,790
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|
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$
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239,306,203
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|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
RICE
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR
THE THREE MONTHS ENDED MARCH 31, 2021
General and administrative expenses
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$
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2,999,591
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Franchise tax expense
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39,827
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Loss from operations
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(3,039,418
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)
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Other income/(expense)
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Interest income
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37,511
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Change in fair value of warrant liabilities
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11,774,001
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Net income
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8,772,094
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Net income attributable to non-controlling interest in subsidiary
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337,387
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Net income attributable to Rice Acquisition Corp.
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8,434,707
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Weighted average shares outstanding of redeemable Class A common stock
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23,725,000
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Basic and diluted net income per share, redeemable Class A
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$
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-
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Weighted average shares outstanding of nonredeemable Class A and Class B common stock
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5,931,350
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Basic and diluted net income per share, nonredeemable Class A and Class B
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$
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1.47
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The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
RICE
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR
THE THREE MONTHS ENDED MARCH 31, 2021
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Common Stock
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Additional
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Non-controlling
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Total
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Class A
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Class B
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Paid-In
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Accumulated
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Interest in
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Stockholders’
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Shares
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Amount
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Shares
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Amount
|
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Capital
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Deficit
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subsidiary
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Equity
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Balance - December 31, 2020
|
|
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5,375,738
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$
|
538
|
|
|
|
5,931,350
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$
|
593
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$
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27,492,099
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|
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$
|
(21,629,069
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)
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$
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(864,160
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)
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$
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5,000,001
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Change in Class A Common stock subject to redemption
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(877,200
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)
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88
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|
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(8,772,002
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)
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(8,772,090
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)
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Net income
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8,434,707
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337,387
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$
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8,772,094
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|
Balance - March 31, 2021
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|
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4,498,538
|
|
|
$
|
450
|
|
|
|
5,931,350
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|
|
$
|
593
|
|
|
$
|
18,720,097
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|
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$
|
(13,194,362
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)
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|
$
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(526,773
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)
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|
$
|
5,000,006
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|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
RICE
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR
THE THREE MONTHS ENDED MARCH 31, 2021
Cash Flows from Operating Activities:
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|
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Net income
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$
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8,772,094
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
Change in fair value of warrant liabilities
|
|
|
(11,774,001
|
)
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Interest earned on securities held in Trust Account
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|
(37,511
|
)
|
Changes in operating assets and liabilities:
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|
|
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|
Accounts payable
|
|
|
(214,869
|
)
|
Accrued expenses
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|
|
2,946,363
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|
Net cash used in operating activities
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(307,924
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)
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Net change in cash
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|
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(307,924
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)
|
Cash - beginning of the period
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1,335,167
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|
Cash - end of the period
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|
$
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1,027,243
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|
Supplemental disclosure of noncash financing activities:
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|
|
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Change in value of Class A common stock subject to redemption
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$
|
8,772,090
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|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 (the “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 an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As
of March 31, 2021, the Company had not commenced any operations. All activity for the three months ended March 31, 2021 relates
to the search for a prospective initial Business Combination. 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 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 the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”)
of 6,771,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”)
to the Sponsor and Atlas Point Energy Infrastructure Fund, LLC (“Atlas Point Fund”), at a price of $1.00 per Private
Placement Warrant, generating gross proceeds to the Company of approximately $6.8 million (Note 4). 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, 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.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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”).
The
Company will provide the holders (the “Public Stockholders”) of the Company’s Public Shares 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 or 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.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United
States generally accepted accounting principles (“GAAP”) for interim financial information and Article 8 of Regulation
S-X. Accordingly, they do not include all of the 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 months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2021 or any future interim periods.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company’s Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2020
as filed with the SEC on May 13, 2021, which contains the audited financial statements and notes thereto. The financial information as
of December 31, 2020 is derived from the audited financial statements presented in the Company’s Amendment No. 1 to Annual Report
on Form 10-K for the year ended December 31, 2020.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Emerging
Growth Company
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 comparison of the Company’s condensed consolidated 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.
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 March 31, 2021, we had approximately $1.0
million in our operating bank account and a working capital deficit of approximately $1.4 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 March 31,
2021, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing,
management believes that the Company 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, 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.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 March 31, 2021. The ownership interest
of noncontrolling participants in the operating subsidiary is included as a separate component of stockholders’ deficit.
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.
Use
of Estimates
The preparation of financial statements in conformity
with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements. Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in
these financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ
significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. There are no cash equivalents as of March 31,
2021.
Investments Held in Trust Account
Upon the closing of the Initial Public Offering
and the Private Placement, the Company was required to place net proceeds of the Initial Public Offering and certain of the proceeds of
the Private Placement in a Trust Account, which may be invested in 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 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 management of the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust
Account. Investments held in Trust Account are classified as trading securities, which are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are
included in gain on marketable securities, dividends and interest held in Trust Account in the accompanying statement of operations. The
estimated fair values of investments held in Trust Account are determined using available market information, other than for investments
in open-ended money market funds with published daily net asset values (“NAV”), in which case the Company uses NAV as a practical
expedient to fair value. The NAV on these investments is typically held constant at $1.00 per unit.
Fair
Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the balance sheet.
Deferred Offering Costs Associated with the
Initial Public Offering
Deferred
offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that
were directly related to the Initial Public Offering and that were charged to shareholder’s deficit upon the completion
of the Initial Public Offering on October 26, 2020.
Net Income Per Share of Common Stock
The Company complies with accounting and disclosure
requirements of ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. As of March 31 2021, the Company did not have any dilutive securities
and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the
Company. As a result, diluted income per share is the same as basic income per share for the period presented.
Income
Taxes
The Company follows the asset and liability 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 differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years 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 income in the period that included the enactment date. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets were immaterial
as of March 31, 2021.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FASB
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions 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 March 31,
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 March 31, 2021. The Company is currently 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 income tax examinations by major taxing authorities since inception.
The
provision for income taxes was immaterial for the three months ended March 31, 2021.
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 derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The Company early
adopted the ASU on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations
or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncement if currently adopted would have a material effect on the Company’s condensed consolidated financial
statements.
Note 3—Initial
Public Offering
On
October 26, 2020, the Company consummated its Initial Public Offering of 23,725,000 Units, including 2,225,000 Over-Allotment
Units that were issued pursuant 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 Sponsor and Atlas Point
Fund had purchased 1,980,000 Units (the “Affiliated Units”) and 2,128,500 Units (the “Atlas Units”), respectively,
at the Initial Public Offering price. The underwriters did not receive any underwriting discounts or commissions on the 1,980,000
Affiliated Units.
Each
Unit consists of one share of Class A common stock and one-half of one redeemable warrant (each, a “Public Warrant”).
Each whole Public Warrant entitles the holder to purchase one share of Rice’s Class A common stock at a price of $11.50
per share, subject to adjustment (see Note 6).
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. In 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
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 adjustment as provided herein. 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 Class A common stock after the time of 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
adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued
or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of the Business Combination
(other than the forward purchase securities), the number of Class A Units of RAC OpCo into which the Class B Units of RAC OpCo
will convert may be adjusted (unless the holders of a majority of the outstanding Founder Shares agree to waive such adjustment
with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon exchange
of all Founder Shares will equal, in the aggregate, on an as-exchanged basis, 20% of the sum of the total outstanding shares of
Rice’s common stock upon completion of the Initial Public Offering, plus all shares of Class A common stock and equity-linked
securities issued or deemed issued in connection with the Business Combination (excluding the forward purchase securities and
any shares or equity-linked securities issued, or to be issued, to any seller in the Business Combination and excluding the Sponsor
Shares). In addition, the number of outstanding shares of Class B common stock will be adjusted through a stock split or stock
dividend so that the total number of outstanding shares of Class B common stock corresponds to the total number of Class A Units
of RAC OpCo outstanding (other than those held by Rice) plus the total number of Class A Units RAC OpCo into which the Class B
Units of RAC OpCo are entitled to convert.
The
Initial Stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares held by
them (and any shares of Class A common stock acquired upon exchange of Founder Shares) until one year after the date of the consummation
of the initial Business Combination or earlier if, subsequent to the initial Business Combination, (i) the last sale price of
the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business
Combination or (ii) the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which
results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
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 Sponsor and Atlas Point Fund, at a price of $1.00 per Private Placement Warrant, generating gross proceeds to
the Company of approximately $6.8 million.
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 proceeds 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 exercisable
on a cashless basis so long as they are held by the Sponsor, Atlas Point Fund or their permitted transferees.
With
certain limited exceptions, the Private Placement Warrants and the securities underlying such warrants will not be transferable,
assignable or saleable until 30 days after the completion of the initial Business Combination.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Related
Party Loans
On
September 1, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 pursuant to a promissory note (the “Note”).
This loan is non-interest bearing and payable upon the completion of the 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.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the
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 Trust
Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of
a Business Combination or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible
into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the
Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined
and no written agreements exist with respect to such loans. To date, the Company had no borrowings under the Working Capital Loans.
The
Sponsor, officers and directors, or any of their 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 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.
Note
5—Commitments and Contingencies
Forward
Purchase Agreement
The
Company entered into an amended and restated forward purchase agreement (the “Forward Purchase Agreement”) with Atlas
Point Fund, pursuant to which Atlas Point Fund, which is a fund managed by CIBC National Trust but is not affiliated with the
Company or sponsor, agreed to purchase up to $75,000,000 of either (i) a number of units (the “forward purchase units”),
consisting of one share of Class A common stock (the “forward purchase shares”) and one-third of one warrant (the
“forward purchase warrants”), for $10.00 per unit or (ii) a number of forward purchase shares for $9.67 per share
(such forward purchase shares valued at $9.67 per share or the forward purchase units, as the case may be, the “forward
purchase securities”), in a private placement that will close simultaneously with the closing of the Initial Business Combination.
The forward purchase warrants will have the same terms as the public warrants and the forward purchase shares will be identical
to the shares of Class A common stock included in the units being sold in this offering, except the forward purchase shares and
the forward purchase warrants will be subject to transfer restrictions and certain registration rights and the forward purchase
units will consist of only one-third of one forward purchase warrant. The funds from the sale of the forward purchase securities
may be used as part of the consideration to the sellers in the Initial Business Combination, and any excess funds may be used
for the working capital needs of the post-transaction company. This agreement is independent of the percentage of stockholders
electing to redeem their public shares and may provide the Company with an increased minimum funding level for the Initial Business
Combination. The forward purchase agreement is subject to conditions, including Atlas Point Fund giving the Company its irrevocable
written consent to purchase the forward purchase securities no later than five days after the Company notifies it of the Company’s
intention to meet to consider entering into a definitive agreement for a proposed Business Combination. Atlas Point Fund may grant
or withhold its consent to the purchase entirely within its sole discretion. Accordingly, if Atlas Point Fund does not consent
to the purchase, it will not be obligated to purchase the forward purchase securities.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Registration
Rights
The
holders 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 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, the underwriters partially exercised the over-allotment option to 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). As 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 upon 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 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—Shareholders’ Deficit
Class
A Common Stock — As of March 31, 2021, 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 March 31, 2021, there were 23,737,500 shares of Class A common stock outstanding, of which 18,351,762
shares are subject to possible redemption and therefore classified outside of permanent equity in the accompanying consolidated balance
sheet.
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. On September 2, 2020, the Company issued 5,750,100 shares of Class B common stock. In October 2020, the Company effected a
dividend, resulting in an aggregate of 6,181,350 shares of Rice’s Class B common stock outstanding. All shares and associated amounts
have been retroactively restated to reflect the dividend. Of these, up to 806,250 shares of Class B common stock are subject to forfeiture
to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the Initial Stockholders
will collectively own 20% of the Company’s issued and outstanding common stock after the Initial Public Offering (excluding the
Sponsor Shares). On October 26, 2020, the underwriters partially exercised the over-allotment option to purchase an additional 2,225,000
Units; thus, only 250,000 Founder Shares remained subject to forfeiture to the extent the over-allotment option was fully exercised.
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. As of March 31, 2021, there were 5,931,350 shares of Class B common stock issued and outstanding.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 March 31, 2020, there were no shares of preferred stock issued or outstanding.
Warrants
— 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 five years after the completion of
a Business Combination or earlier upon redemption or liquidation. In 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, the Company may redeem the outstanding warrants for cash (except as described herein with respect
to the Private Placement Warrants):
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●
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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 last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third
trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
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 is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless
basis and such cashless exercise is exempt from registration under the Securities Act. If the Company calls the warrants for redemption
for cash as described above, the management will have the option to require all holders that wish to exercise warrants to do so
on a “cashless basis.”
Redemption
of warrants when our Class A common 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
Private Placement Warrants):
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●
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in whole and not
in part;
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●
|
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;
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●
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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
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RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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●
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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.
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The
“fair market value” of the Class A common stock shall mean the volume weighted average price of the Class A common
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 warrants.
None
of the Private Placement Warrants will be redeemable by the Company so long as they are held by the initial purchasers of the
Private Placement Warrants or their permitted transferees.
In
no event 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 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 Company’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:
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Level 1:
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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.
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Level 2:
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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.
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Level 3:
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Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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The Company
classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt
and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until
maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization
or accretion of premiums or discounts.
At March 31, 2021, assets held in the Trust Account
were comprised of $237,308,171 in U.S. Treasury securities. For the three months ended March 31, 2021, the Company did not withdraw any
interest income from the Trust Account.
The following table presents information about
the Company’s held-to-maturity assets that are measured at fair value on a recurring basis at March 31, 2021, and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The gross holding gains and fair value
of held-to-maturity securities at March 31, 2021, are as follows:
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Fair Value Measured as of December 31, 2020
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Level 1
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Level 2
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Level 3
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Total
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Assets
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Investments held in Trust Account - U.S. Treasury Securities
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$
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237,308,171
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$
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-
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$
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-
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$
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237,308,171
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Liabilities:
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Warrant Liability - Public Warrants
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-
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-
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17,556,500
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17,556,500
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Warrant Liability - Private Warrants
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-
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-
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13,258,000
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13,258,000
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Total fair value
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$
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237,308,171
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$
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-
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$
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30,814,500
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$
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268,122,671
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The Warrants
were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s balance
sheet. 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.
Initial Measurement
The Company
established the initial fair value for the Warrants on October 26, 2020, the date of the Company’s Initial Public Offering, using
a Monte Carlo simulation model for the Public Warrants and a Black-Scholes model for the Private Placement Warrants. The Company allocated
the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A ordinary shares and one-half of one Public
Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of Class B ordinary shares, first to the Warrants based
on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A ordinary shares subject to
possible redemption, Class A ordinary shares and Class B ordinary shares based on their relative fair values at the initial measurement
date. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
Subsequent Measurement
The Warrants are measured at fair value on a recurring
basis. The subsequent measurement of the Public Warrants as of March 31, 2021 is classified as Level 1 due to the use of an observable
market quote in an active market.
The key inputs into the Black-Scholes model for
the Private Placement Warrants were as follows as of March 31, 2021:
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As of March 31,
2021
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Exercise price
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$
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11.50
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Stock price
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$
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10.11
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Term (in years)
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5.57
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Volatility
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23
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Risk-free interest rate
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1.05
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%
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Dividend yield
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-
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The key inputs into the Black-Scholes model for
the Private Placement Warrants were as follows as of December 31, 2020:
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As of December 31,
2020
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Exercise price
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$
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11.50
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Stock price
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$
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10.83
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Term (in years)
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5.82
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Volatility
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22.68
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Risk-free interest rate
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0.48
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Dividend yield
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-
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As
of March 31, 2021, the derived fair value of the Private Placement Warrants was determined to be $2.30 per warrant for an aggregate value
of $15.5 million. The observable fair value of the Public Warrants was $2.20 per warrant for an aggregate value of $27.0 million.
The following
table presents the changes in the fair value of warrant liabilities:
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Private
Placement
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Level
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Public
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Level
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Warrant
Liabilities
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Fair Value as of December 31, 2020
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$
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15,541,987
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3
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$
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27,046,500
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1
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$
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42,588,487
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Change in fair value
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$
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(2,284,001
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)
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$
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(9,490,000
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)
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$
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(11,774,001
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)
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Fair Value as of March 31, 2021
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$
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13,257,986
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3
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$
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17,556,500
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1
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$
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30,814,486
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Level
3 financial liabilities consist of the Private Placement Warrant liability for which there is no current market for these securities 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 analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
During the three months ended March 31, 20201,
there were transfers out of level 3 of $17,556,500. Transfers out of level 3 are measured at the end of the period.
Note
9—Subsequent Events
Management
has evaluated subsequent events to determine if events or transactions occurring through the date the condensed consolidated financial
statements were available for issuance, require potential adjustment to or disclosure in the condensed consolidated financial
statements and has concluded that all such events, except as noted in Notes 1, 3, 4 and 5, that would require recognition or disclosure
have been recognized or disclosed.
Business
Combination Agreements
On
April 7, 2021, the Company, entered into (i) the Business Combination Agreement (as may be amended, supplemented or otherwise
modified from time to time, the “Aria Merger Agreement”), by and among the Company Rice Acquisition Holdings LLC,
a Delaware limited liability company and direct subsidiary of 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 may be 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 (the transactions contemplated
by the Business Combination Agreements, the “Business Combinations”).
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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
shareholder 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.
RICE
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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 “PIPE Financing”). Each Subscription Agreement contains customary representations and warranties of the Company,
on the one hand, and the PIPE Investor, on the other hand, and customary conditions to closing, including the consummation of
the Business Combinations.
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 amended to provide that Atlas shall purchase a total of $20,000,000 of Forward Purchase Securities (as defined in
the Original Agreement) and the Forward Purchase Warrants (as defined in the Original Agreement) will consist of one-eighth of
one redeemable warrant (where each whole redeemable warrant is exercisable to purchase one share of Class A Common Stock at an
exercise price of $11.50 per share).
Item
2. Management’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 (the “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 the notes thereto 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.
Results
of Operations
Our
entire activity for the three months ended March 31, 2021, has been related to identifying a target company for our initial Business
Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating
revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of interest
income on cash and cash equivalents. We expect to incur increased expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2021, we had
income of approximately $8.7 million, which consisted of approximately $11.7 million of change in fair value of warrant liabilities offset
by approximately $3.0 million of general and administrative expenses.
Liquidity
and Capital Resources
As of March 31, 2021, we had approximately $1.0
million in our operating bank account and a working capital deficiency of approximately $1.4 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 March 31, 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 Combination.
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 Initial
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 Initial Public Offering and 3.5% (approximately $7.6 million) was deferred. The deferred
underwriting discounts and commissions will become payable to the underwriters upon the consummation of the Initial Business Combination
and will be paid from the amounts held in the Trust Account. The underwriters are not entitled to any interest accrued on the
deferred underwriting discounts and commissions.
Critical
Accounting Policies
This management’s discussion and analysis of our financial condition
and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance
with United States generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires
us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities in our condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience,
known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions. There have been no significant changes in our critical
accounting policies as discussed in the Company’s Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31,
2020 as filed with the SEC on May 13, 2021.
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 derivative scope exception and it also simplifies the diluted earnings
per share calculation in certain areas. The Company early adopted the ASU on January 1, 2021. Adoption of the ASU did not impact the Company’s
financial position, results of operations or cash flows.
Off-Balance
Sheet Arrangements
As
of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS
Act
The
Jumpstart 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 comply
with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging
growth companies. As a result, the condensed consolidated financial statements may not be comparable to companies that comply
with new or revised accounting pronouncements as of public company effective dates.
Additionally,
we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.
Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on
such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system
of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may
be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii)
comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the 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.