Item
1. Condensed Consolidated Financial Statements
RICE
ACQUISITION CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(unaudited)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
5,290
|
|
|
$
|
1,335,167
|
|
Prepaid expenses
|
|
|
469,693
|
|
|
|
662,865
|
|
Total current assets
|
|
|
474,983
|
|
|
|
1,998,032
|
|
Investments held in Trust Account
|
|
|
237,351,433
|
|
|
|
237,308,171
|
|
Total Assets
|
|
$
|
237,826,416
|
|
|
$
|
239,306,203
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
7,950,051
|
|
|
$
|
118,446
|
|
Accounts payable
|
|
|
71,571
|
|
|
|
217,918
|
|
Franchise tax payable
|
|
|
99,452
|
|
|
|
65,481
|
|
Total current liabilities
|
|
|
8,121,074
|
|
|
|
401,845
|
|
Deferred legal fees
|
|
|
187,500
|
|
|
|
187,500
|
|
Deferred underwriting commissions in connection with the initial public offering
|
|
|
7,610,750
|
|
|
|
7,610,750
|
|
Derivative warrant liabilities
|
|
|
138,965,647
|
|
|
|
42,588,487
|
|
Total liabilities
|
|
|
154,884,971
|
|
|
|
50,788,582
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Class A common stock; 7,794,144 and 18,351,762 shares subject to possible redemption at $10.00 per share as of June 30, 2021 and December 31, 2020, respectively
|
|
|
77,941,440
|
|
|
|
183,517,620
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|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
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|
Class A common stock, $0.0001 par value; 250,000,000 shares authorized; 15,933,356 and 5,375,738 shares issued and outstanding (excluding 7,794,144 and 18,351,762 shares subject to possible redemption) as of June 30, 2021 and December 31, 2020, respectively
|
|
|
1,594
|
|
|
|
538
|
|
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,931,350 shares issued and outstanding as of June 30, 2021 and December 31, 2020
|
|
|
593
|
|
|
|
593
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|
Additional paid-in capital
|
|
|
133,067,223
|
|
|
|
27,492,099
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|
Accumulated deficit
|
|
|
(123,144,622
|
)
|
|
|
(21,629,069
|
)
|
Total Rice Acquisition Corp. equity
|
|
|
9,924,788
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|
|
|
5,864,161
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|
|
|
|
|
|
|
|
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Non-controlling interest in subsidiary
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|
|
(4,924,783
|
)
|
|
|
(864,160
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
5,000,005
|
|
|
|
5,000,001
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
237,826,416
|
|
|
$
|
239,306,203
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
RICE
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
|
|
For The Three
Months Ended
June 30,
2021
|
|
|
For
The Six
Months Ended
June 30,
2021
|
|
General and administrative expenses
|
|
$
|
6,168,889
|
|
|
$
|
9,168,480
|
|
Franchise tax expense
|
|
|
33,973
|
|
|
|
73,799
|
|
Total operating expenses
|
|
|
(6,202,862
|
)
|
|
|
(9,242,279
|
)
|
Other income (expense)
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|
|
|
|
|
|
|
|
Change in fair value of derivative warrant liabilities
|
|
|
(108,151,160
|
)
|
|
|
(96,377,160
|
)
|
Interest earned on investments held in Trust Account
|
|
|
5,752
|
|
|
|
43,263
|
|
Net loss
|
|
|
(114,348,270
|
)
|
|
|
(105,576,176
|
)
|
Net loss attributable to non-controlling interest in subsidiary
|
|
|
(4,398,010
|
)
|
|
|
(4,060,622
|
)
|
Net loss attributable to Rice Acquisition Corp.
|
|
$
|
(109,950,260
|
)
|
|
$
|
(101,515,554
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of redeemable Class A common stock
|
|
|
23,725,000
|
|
|
|
23,725,000
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|
Basic and diluted net income per share, redeemable Class A common stock
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Weighted average shares outstanding of non-redeemable Class A and Class B common stock
|
|
|
5,933,850
|
|
|
|
5,933,850
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|
Basic and diluted net loss per share, non-redeemable Class A and Class B common stock
|
|
$
|
(19.27
|
)
|
|
$
|
(17.79
|
)
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
RICE
ACQUISITION CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
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Common Stock
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|
|
Additional
|
|
|
|
|
|
Non-controlling
|
|
|
Total
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Interest in
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
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Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Subsidiary
|
|
|
Equity
|
|
Balance - December 31, 2020
|
|
|
5,375,738
|
|
|
$
|
538
|
|
|
|
5,931,350
|
|
|
$
|
593
|
|
|
$
|
27,492,099
|
|
|
$
|
(21,629,069
|
)
|
|
$
|
(864,160
|
)
|
|
$
|
5,000,001
|
|
Change in common stock subject to possible redemption
|
|
|
(877,200
|
)
|
|
|
(88
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,772,002
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,772,090
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,434,707
|
|
|
|
337,387
|
|
|
|
8,772,094
|
|
Balance - March 31, 2021
|
|
|
4,498,538
|
|
|
|
450
|
|
|
|
5,931,350
|
|
|
|
593
|
|
|
|
18,720,097
|
|
|
|
(13,194,362
|
)
|
|
|
(526,773
|
)
|
|
|
5,000,005
|
|
Change in common stock subject to possible redemption
|
|
|
11,434,818
|
|
|
|
1,144
|
|
|
|
-
|
|
|
|
-
|
|
|
|
114,347,126
|
|
|
|
-
|
|
|
|
-
|
|
|
|
114,348,270
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(109,950,260
|
)
|
|
|
(4,398,010
|
)
|
|
|
(114,348,270
|
)
|
Balance - June 30, 2021
|
|
|
15,933,356
|
|
|
$
|
1,594
|
|
|
|
5,931,350
|
|
|
$
|
593
|
|
|
$
|
133,067,223
|
|
|
$
|
(123,144,622
|
)
|
|
$
|
(4,924,783
|
)
|
|
$
|
5,000,005
|
|
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 SIX MONTHS ENDED JUNE 30, 2021
Cash Flows from Operating Activities:
|
|
|
|
Net loss
|
|
$
|
(105,576,176
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Change in fair value of derivative warrant liabilities
|
|
|
96,377,160
|
|
Interest earned on securities held in Trust Account
|
|
|
(43,263
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Prepaid expenses
|
|
|
193,172
|
|
Accounts payable
|
|
|
(146,347
|
)
|
Accrued expenses
|
|
|
7,831,605
|
|
Franchise tax payable
|
|
|
33,972
|
|
Net cash used in operating activities
|
|
|
(1,329,877
|
)
|
|
|
|
|
|
Net change in cash
|
|
|
(1,329,877
|
)
|
|
|
|
|
|
Cash - beginning of the period
|
|
|
1,335,167
|
|
Cash - end of the period
|
|
$
|
5,290
|
|
|
|
|
|
|
Supplemental disclosure of noncash financing activities:
|
|
|
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
105,576,180
|
|
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 (“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 June 30, 2021, the Company had not commenced
any operations. All activity for the three and six months ended June 30, 2021 relates to the search for a prospective initial Business
Combination, including activities in connection with the proposed acquisitions of Aria Energy LLC, a Delaware limited liability company,
and Archaea Energy LLC, a Delaware limited liability company. The Company will not generate any operating revenues until after the completion
of its initial Business Combination, at the earliest. The Company will generate non-operating income in the 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.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net
assets held in the Trust Account (excluding the amount of any deferred underwriting discount held in Trust) at the time of the agreement
to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-business combination
company controls 50% or more of the voting securities of the target or is otherwise not required to register as an investment company
under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
Company will provide the holders of the Company’s Public Shares (the “Public Stockholders”) with the opportunity to
redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder
meeting called to approve the Business Combination or (ii) by means of a tender offer. Unless otherwise stated herein, the term “Public
Shares” includes the 2,500 shares of Class A common stock, par value $0.0001 per share, of the Company held by the Sponsor and
forming part of the Sponsor Shares. The decision as to whether the Company will seek stockholder approval of a Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then held in the Trust Account (initially anticipated to be $10.00 per Public Share).
The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting
commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares will be recorded at a redemption value
and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards
Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” The Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the
Business Combination. The Company will not redeem the Public Shares in an amount that would cause its net tangible assets to be less
than $5,000,001. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business
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.
The
Sponsor, Atlas Point Fund and the Company’s officers and directors (the “Initial Stockholders”) have agreed (i) that
any Founder Shares and Sponsor Shares held by them will not be entitled to redemption rights, and they will waive any such redemption
rights for any Public Shares held by them, in connection with the completion of the initial Business Combination, (ii) that any Founder
Shares and Sponsor Shares held by them will not be entitled to redemption rights, and they will waive any such redemption rights for
any Public Shares held by them, in connection with a stockholder vote to amend our amended and restated certificate of incorporation
in a manner that would affect the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company
have not consummated the initial Business Combination within the Combination Period, (iii) that any Founder Shares held by them are subject
to forfeiture, and thus will not be entitled to liquidating distributions from the Trust Account, and they will waive any such rights
to liquidating distributions for any Founder Shares, if the Company fails to complete the initial Business Combination within the Combination
Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares and Sponsor
Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period), and (iv) in certain
limited circumstances the Class B Units of RAC OpCo will have more limited rights to current or liquidating distributions from the Company.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
underwriters agreed to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust Account in the event
the Company does not complete a Business Combination within the Combination Period and subsequently liquidates and, in such event, such
amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares
and Sponsor Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available
for distribution (including Trust Account assets) will be only $10.00. In order to protect the amounts held in the Trust Account, the
Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent
registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which
the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”),
reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share or Class A Unit of RAC OpCo not held
by Rice and (ii) the actual amount per Public Share or Class A Unit of RAC OpCo not held by Rice held in the Trust Account as of the
date of the liquidation of the Trust Account, if less than $10.00 per Public Share or Class A Unit of RAC OpCo not held by Rice due to
reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third
party or Target that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable),
nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company will
seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to
have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target
businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest
or claim of any kind in or to monies held in the Trust Account.
Business Combination Agreements
On April 7, 2021, the Company entered into (i)
the Business Combination Agreement (as amended, supplemented or otherwise modified from time to time, the “Aria Merger Agreement”),
by and among the Company, RAC OpCo, LFG Intermediate Co, LLC, a Delaware limited liability company and direct subsidiary of RAC OpCo (“RAC
Intermediate”), LFG Buyer Co, LLC, a Delaware limited liability company and a direct subsidiary of RAC Intermediate (“RAC
Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and a direct subsidiary of RAC Buyer (“Aria Merger Sub”),
Aria Energy LLC, a Delaware limited liability company (“Aria”), and the Equityholder Representative (as defined therein),
pursuant to which, among other things, Aria Merger Sub will merge with and into Aria, with Aria surviving the merger and becoming a direct
subsidiary of RAC Buyer, and (ii) the Business Combination Agreement, dated as of April 7, 2021 (as amended, supplemented or otherwise
modified from time to time, the “Archaea Merger Agreement” and, together with the Aria Merger Agreement, the “Business
Combination Agreements”), by and among the Company, RAC OpCo, RAC Intermediate, RAC Buyer, Fezzik Merger Sub, LLC, a Delaware limited
liability company and direct subsidiary of RAC Buyer (“Archaea Merger Sub”), Archaea Energy, LLC (“Archaea Seller”),
a Delaware limited liability company, and Archaea Energy II, LLC, a Delaware limited liability company (“Archaea” and, together
with Archaea Seller and Aria, the “Companies”), pursuant to which, among other things, Archaea Merger Sub will merge with
and into Archaea, with Archaea surviving the merger and becoming a direct subsidiary of RAC Buyer, in each case, on the terms and subject
to the conditions therein (the transactions contemplated by the Business Combination Agreements, the “Business Combinations”).
Consideration
Pursuant to the terms of the Aria Merger Agreement
and at the Effective Time (as defined therein), (i) all Class A Units of Aria held by a holder of Aria’s Class A Units shall be
cancelled and converted into the right to receive (a) the number of Class A Units of RAC OpCo, (b) the number of Class B common stock,
par value $0.0001 (“Class B Common Stock”), of the Company and (c) the amount of cash as set forth in, and in accordance with,
the Aria Merger Agreement, (ii) all Class B Units of Aria held by a holder of Aria’s Class B Units shall be cancelled and converted
into the right to receive (A) the number of Class A Units of RAC OpCo, (B) the number of shares of Class B Common Stock and (C) the amount
of cash as set forth in, and in accordance with, the Aria Merger Agreement, and (iii) all Class C Units of Aria shall be cancelled and
extinguished without any conversion thereof.
Pursuant to the terms of the Archaea Merger Agreement
and at the Effective Time (as defined therein), all equity interests of Archaea will be cancelled and converted into the right to receive
(x) the number of Class A Units of RAC OpCo and (y) the number of shares of Class B Common Stock as set forth in, and in accordance with,
the Archaea Merger Agreement.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
Termination
Each of the Business Combination Agreements may
be terminated by the parties thereto under certain customary and limited circumstances at any time prior to the closing of the Business
Combinations, including, without limitation, by mutual written consent or if the Business Combinations have not been consummated within
150 days from the date of the Business Combination Agreements (subject to certain extensions for up to 30 days for delays as set forth
in the Business Combination Agreements).
Stockholders Agreement
In connection with the closing of the Business
Combinations, the Company, RAC Buyer, RAC OpCo, Sponsor, and certain other individuals affiliated with the Companies (the “Company
Holders”) will enter into a stockholders agreement (the “Stockholders Agreement”) pursuant to which, among other things,
(i) the board of directors of the Combined Company (the “Board”) will consist of seven members, (ii) the holders of a majority
of the Company Interests (as defined in the Stockholders Agreement) held by the RAC Sponsor Holders (as defined in the Stockholders Agreement)
will have the right to designate two directors (the “RAC Sponsor Directors”) for appointment or election to the Board during
the term of the Stockholders Agreement, (iii) the Ares Investors (as defined in the Stockholders Agreement) will have the right to designate
one director (the “Ares Director”) for appointment or election to the Board for so long as the Ares Investors hold at least
50% of the Registrable Securities (as defined in the Stockholders Agreement) held by them on the date that the Business Combinations are
consummated (the “Ares Fall-Away Date”), (iv) the Board shall take all necessary action to designate the person then serving
as the Chief Executive Officer of the Combined Company (the “CEO Director”) for appointment or election to the Board during
the term of the Stockholders Agreement and (v) the Board shall designate three independent directors (the “Independent Directors”)
to serve on the Board during the term of the Stockholders Agreement. The Ares Investors shall have the right to consult on the persons
to be designated as Independent Directors prior to the Ares Fall-Away Date.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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).
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 and six months ended June 30, 2021 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2021 or any future periods.
The
accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Amendment No.
1 to Annual Report on Form 10-K/A for the period 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/A for the period ended December 31, 2020.
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.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Risk
and Uncertainties
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus
(the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase
in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s
results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the
outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets
and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted
for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected.
Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant
governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown
of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or
affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial
Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent
on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market
downturn.
Liquidity
and Capital Resources
As
of June 30, 2021, we had approximately $5,000 in our operating bank account and a working capital deficit of approximately $7.6 million.
The
Company’s liquidity needs to date had been satisfied through the payment of $26,000 from the Sponsor to purchase the Founder Shares
and Sponsor Shares (see Note 4), the loan under the Note of approximately $290,000 (see Note 4), and the net proceeds from the consummation
of the Private Placement not held in the Trust Account. The Company repaid the Note in full on November 10, 2020. In addition, in order
to finance transaction costs in connection with a Business Combination, the Company’s officers, directors and initial stockholders
may, but are not obligated to, provide the Company Working Capital Loans (see Note 4). As of June 30, 2021, there were no amounts outstanding
under any Working Capital Loans.
Based
on the foregoing, management believes that the Company will have sufficient 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.
Note
2—Summary of Significant Accounting Policies
Principles
of Consolidation and Financial Statement Presentation
The
unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned and controlled operating
subsidiary after elimination of all intercompany transactions and balances as of June 30, 2021 and December 31, 2020. The ownership interest
of noncontrolling participants in the operating subsidiary is included as a separate component of stockholders’ equity. The noncontrolling
participants’ share of the net loss is included as “Net loss attributable to noncontrolling interest in subsidiary”
on the accompanying unaudited condensed consolidated statement of operations.
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. 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 June 30, 2021 and December 31, 2020.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Investments
Held in Trust Account
The
Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government
securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held
in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s
investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities
and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and
losses resulting from the change in fair value of these securities is included in income on investments held in the Trust Account in
the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments held in the Trust
Account are determined using available market information.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements
and Disclosures,” equal or approximate the carrying amounts represented in the condensed consolidated balance sheets.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly
related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant
liabilities were expensed as incurred and presented as non-operating expenses in the condensed statements of operations. Offering costs
associated with the Class A common stock issued were charged to stockholders’ equity upon the completion of the Initial Public
Offering. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current liabilities.
Derivative
Warrant Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC
815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as
equity, is re-assessed at the end of each reporting period.
The
Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly,
the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair
value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the
Initial Public Offering were estimated using a Monte Carlo simulation model. The fair value of the Public Warrants as of June 30, 2021
is based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of June 30, 2021 is determined
using Black-Scholes option pricing model. The determination of the fair value of the warrant liability may be subject to change as more
current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are
classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require
the creation of current liabilities.
Net
Income Per Share of Common Stock
The
Company’s condensed consolidated statements of operations include a presentation of net income (loss) per share for Class A common
stock subject to possible redemption in a manner similar to the two-class method of net income (loss) per common stock. Net income (loss)
per common stock, basic and diluted, for redeemable Class A common stock is calculated by dividing the interest income earned on the
Trust Account, less interest available to be withdrawn for the payment of taxes, by the weighted average number of redeemable Class A
common stock outstanding for the periods. Net income (loss) per common stock, basic and diluted, for non-redeemable Class A and Class
B common stock is calculated by dividing the net income (loss), adjusted for income attributable to redeemable Class A common stock,
by the weighted average number of non-redeemable Class A and Class B common stock outstanding for the periods. Non-redeemable Class A
common stock includes shares sold in the Private Placement Units and Class B common stock include the Founder Shares as these common
stocks do not have any redemption features and do not participate in the income earned on the Trust Account.
The
Company has not considered the effect of the warrants sold in the Public Offering (including the consummation of the over-allotment)
and Private Placement Warrants to purchase 18,633,500 shares of the Company’s Class A common stock in the calculation of diluted
income (loss) per share, since the exercise of the warrants and the conversion of the rights into shares of common stock is contingent
upon the occurrence of future events.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
following table reflects the calculation of basic and diluted net income (loss) per share of common stock:
|
|
For the Three
Months Ended
June 30,
2021
|
|
|
For the Six
Months Ended
June 30,
2021
|
|
Redeemable Class A common stock
|
|
|
|
|
|
|
Numerator: Income allocable to redeemable Class A common stock
|
|
|
|
|
|
|
Income from investments held in Trust Account
|
|
$
|
5,752
|
|
|
$
|
43,263
|
|
Less: Company’s portion available to be withdrawn to pay taxes
|
|
|
(5,752
|
)
|
|
|
(43,263
|
)
|
Net income attributable to redeemable Class A common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
Denominator: Weighted average redeemable Class A common stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, redeemable Class A common stock
|
|
|
23,725,000
|
|
|
|
23,725,000
|
|
Basic and diluted net income per share, redeemable Class A common stock
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable Class A and Class B common stock
|
|
|
|
|
|
|
|
|
Numerator: Net income (loss) minus net income allocable to redeemable Class A common stock
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(114,348,270
|
)
|
|
$
|
(105,576,176
|
)
|
Net income allocable to redeemable Class A common stock
|
|
|
-
|
|
|
|
-
|
|
Net income (loss) attributable to non-redeemable Class A and Class B common stock
|
|
$
|
(114,348,270
|
)
|
|
$
|
(105,576,176
|
)
|
Denominator: Weighted average non-redeemable Class A and Class B common stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, non-redeemable Class A and Class B common stock
|
|
|
5,933,850
|
|
|
|
5,933,850
|
|
Basic and diluted net loss per share, non-redeemable Class A and Class B common stock
|
|
$
|
(19.27
|
)
|
|
$
|
(17.79
|
)
|
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. As of June 30, 2021 and December 31, 2020, the Company had deferred tax assets of approximately $1,932,000 and $618,000,
respectively, with a full valuation allowance against them.
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 June 30, 2021. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the
payment of interest and penalties as of June 30, 2021. The Company is 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 de minimis for the three and six months ended June 30, 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 was 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. Subsequent to
the repayment, the facility was no longer available to the Company.
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. As of June 30, 2021 and December
31, 2020, 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. For the three
and six months ended June 30, 2021, the Company incurred expenses of $30,000 and $60,000 under this agreement, respectively. As of June
30, 2021 and December 31, 2020, the Company had $20,000 and $30,000 outstanding for services in connection with such agreement on the
accompanying condensed consolidated balance sheets, respectively.
Note
5—Commitments and Contingencies
Forward
Purchase Agreement
The
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—Stockholders’ Equity
Class A Common Stock — The Company
is authorized to issue 250,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of June 30, 2021 and December
31, 2020, there were 23,727,500 shares of Class A common stock issued and outstanding, of which 18,351,762 shares of Class A common stock
are subject to possible redemption and therefore classified outside of permanent equity in the accompanying condensed consolidated balance
sheets.
Class
B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001
per share. As of June 30, 2021 and December 31, 2020, there were 5,931,350 shares of Class B common stock issued and outstanding.
Holders
of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to
a vote of the stockholders, except as required by law. Each share of common stock will have one vote on all such matters. Prior to the
initial Business Combination, only holders of Class B common stock will have the right to vote on the election of directors.
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
As of June 30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
7—Warrants
As
of June 30, 2021 and December 31, 2020, the Company had 11,862,500 Public Warrants and 6,771,000 Private Placement Warrants outstanding,
respectively.
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):
|
●
|
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):
|
●
|
in whole
and not in part;
|
|
●
|
at $0.10
per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their
warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined by reference
to an agreed table based on the redemption date and the “fair market value” of Class A common stock;
|
|
●
|
if and only if, the last sale price of Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and
|
|
|
|
|
●
|
if, and only if, there is an effective registration statement covering the issuance of shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30- day period after written notice of redemption is given.
|
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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:
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions
for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis as of June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques that the Company
utilized to determine such fair value:
June
30, 2021
Description
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Other Unobservable Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account - U.S. Treasury securities
|
|
$
|
237,351,433
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public warrants
|
|
$
|
67,616,251
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Derivative warrant liabilities - Private placement warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71,349,396
|
|
December
31, 2020
Description
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Other Unobservable Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account - U.S. Treasury securities
|
|
$
|
237,308,171
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public warrants
|
|
$
|
27,046,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Derivative warrant liabilities - Private placement warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
15,541,987
|
|
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers to/from Levels 1, 2, and
3 during the three and six months ended June 30, 2021.
Level 1
assets include investments in U.S. treasury securities. The Company uses inputs such as actual trade data, quoted market prices from
dealers or brokers, and other similar sources to determine the fair value of its investments.
RICE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within derivative warrant liabilities on the
Company’s condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring
basis, with changes in fair value presented within change in fair value of warrant liabilities in the statement of operations.
For
periods where no observable traded price is available, the fair value of the Public Warrants was estimated using a Monte Carlo simulation
model. For periods subsequent to the detachment of the Public Warrants from the Units, the fair value of the Public Warrants is based
on the observable listed price for such warrants. The estimated fair value of the Private Placement Warrants, and the Public Warrants
prior to being separately listed and traded, is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions
related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility
of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants.
The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected
remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The
dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The
Warrants are measured at fair value on a recurring basis. The measurement of the Public Warrants as of June 30, 2021 and December 31,
2020 is classified as Level 1 due to the use of an observable market quote in an active market.
The
key Level 3 fair value measurement inputs into the Black-Scholes model for the Private Placement Warrants as of June 30, 2021 and December
31, 2020 are as follows:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
18.05
|
|
|
$
|
10.83
|
|
Volatility
|
|
|
52.0
|
%
|
|
|
22.7
|
%
|
Term (in years)
|
|
|
5.25
|
|
|
|
5.82
|
|
Risk-free rate
|
|
|
0.91
|
%
|
|
|
0.48
|
%
|
The
change in the fair value of the derivative warrant liabilities, measured using Level 3 inputs, for the three and six months ended
June 30, 2021 is summarized as follows:
Derivative warrant liabilities at January 1, 2021
|
|
$
|
15,541,987
|
|
Change in fair value of derivative warrant liabilities
|
|
|
(2,284,001
|
)
|
Derivative warrant liabilities at March 31, 2021
|
|
|
13,257,986
|
|
Change in fair value of derivative warrant liabilities
|
|
|
58,091,410
|
|
Derivative warrant liabilities at June 30, 2021
|
|
$
|
71,349,396
|
|
Level
3 financial liabilities consist of the Private Placement Warrant liability for which there is no current market such that the determination
of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair
value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
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 issued, require potential adjustment to or disclosure in the condensed consolidated financial statements and has concluded
that all such events, except as noted above, that would require recognition or disclosure have been recognized or disclosed.
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 (“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.
Proposed Business Combination
On
April 7, 2021, the Company entered into (i) the Business Combination Agreement (as amended, supplemented or otherwise modified from time
to time, the “Aria Merger Agreement”), by and among the Company, RAC OpCo, LFG Intermediate Co, LLC, a Delaware limited liability
company and direct subsidiary of RAC OpCo (“RAC Intermediate”), LFG Buyer Co, LLC, a Delaware limited liability company and
a direct subsidiary of RAC Intermediate (“RAC Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and a direct
subsidiary of RAC Buyer (“Aria Merger Sub”), Aria Energy LLC, a Delaware limited liability company (“Aria”), and
the Equityholder Representative (as defined therein), pursuant to which, among other things, Aria Merger Sub will merge with and into
Aria, with Aria surviving the merger and becoming a direct subsidiary of RAC Buyer, and (ii) the Business Combination Agreement, dated
as of April 7, 2021 (as amended, supplemented or otherwise modified from time to time, the “Archaea Merger Agreement” and,
together with the Aria Merger Agreement, the “Business Combination Agreements”), by and among the Company, RAC OpCo, RAC Intermediate,
RAC Buyer, Fezzik Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Archaea Merger Sub”),
Archaea Energy, LLC (“Archaea Seller”), a Delaware limited liability company, and Archaea Energy II, LLC, a Delaware limited
liability company (“Archaea” and, together with Archaea Seller and Aria, the “Companies”), pursuant to which,
among other things, Archaea Merger Sub will merge with and into Archaea, with Archaea surviving the merger and becoming a direct subsidiary
of RAC Buyer, in each case, on the terms and subject to the conditions therein, and certain related agreements, as further described in
Note 1 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
Results of Operations
Our entire activity for the three and six months
ended June 30, 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 from the proceeds from the IPO. 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 June 30, 2021, we had
a loss of approximately $131.8 million, which consisted of approximately $125.6 million of change in fair value of warrant liabilities,
approximately $6.2 million of general and administrative expenses, approximately $34,000 of franchise tax expense, partially offset by
approximately $6,000 in interest earned on investments held in Trust Account.
For the six months ended June 30, 2021, we had
a loss of approximately $123.0 million, which consisted of approximately $113.8 million of change in fair value of warrant liabilities,
approximately $9.2 million of general and administrative expenses, approximately $74,000 of franchise tax expense, partially offset by
approximately $43,000 in interest earned on investments held in Trust Account.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $5,000
in our operating bank account and a working capital deficiency of approximately $7.6 million.
Our liquidity needs to date had been satisfied
through the payment of $26,000 from our Sponsor to purchase the Founder Shares and Sponsor Shares, a loan under a note agreement with
our Sponsor of approximately $290,000 (the “Note”), and the net proceeds from the consummation of the Private Placement not
held in the Trust Account. The Note was paid in full as of November 10, 2020. In addition, in order to finance transaction costs in connection
with a Business Combination, our officers, directors and Sponsor may, but are not obligated to, provide us working capital loans. As of
June 30, 2021, there were no amounts outstanding under any working capital loans.
Based on the foregoing, management believes that
we will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business
Combination or one year from this filing. Over this time period, the Company will be using these funds held outside of the Trust Account
for paying existing accounts payable, and structuring, negotiating and consummating the Business 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/A 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 June 30, 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.