lfg-20210930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q/A


			(Amendment No. 1)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

______________________________

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number:

001-39644

_____________________________

Archaea Energy Inc.

(Exact name of Registrant as specified in its charter)

_____________________________


Delaware			85-2867266
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

4444 Westheimer Road, Suite G450

Houston, Texas 77027

(Address of principal executive offices and zip code)

(346) 708-8272

(Registrant's telephone number, including area code)

Rice Acquisition Corp.

102 East Main Street, Second Story

Carnegie, Pennsylvania 15106

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

LFG

The New York Stock Exchange

Warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share

LFG WS

The New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 8, 2021, there were 53,590,976 shares of Class A common stock and 62,281,735 shares of Class B common stock issued and outstanding.

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EXPLANATORY NOTE

References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q/A to “we,” “us,” "our," or the “Company” are to Archaea Energy Inc., formerly known as Rice Acquisition Corp., unless the context otherwise indicates.

This Amendment No. 1 (“Amendment No. 1”) to the Quarterly Report on Form 10-Q/A amends and restates the Quarterly Report on Form 10-Q of Archaea Energy Inc. (the “Company”) as of and for the period ended September 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on November 15, 2021. 

RESTATEMENT BACKGROUND

On November 15, 2021, the Company filed its Form 10-Q for the quarterly period ending September 30, 2021 (the “Original Filing”). Subsequent to filing, the Company identified an accounting error related to a duplicate entry recorded for the reverse recapitalization transaction. Specifically, an entry was recorded to both the subledger and general ledger as part of the movement of activity from Archaea Energy LLC to the newly formed Archaea Energy II LLC for the reverse recapitalization resulting in a duplicate entry error. The error caused an understatement of accounts payable - trade and general and administrative expenses of $2.8 million in our successor financial statements.

On December 28, 2021, the Company’s management and the audit committee of the Company’s board of directors concluded that the Company’s previously issued unaudited condensed financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 should no longer be relied upon to due to the impact on accounts payable - trade, general and administrative expenses, and our consolidated net loss.

Accordingly, we have restated our unaudited consolidated condensed financial statements as of and for the three and nine months ended September 30, 2021 to reflect the correct amount of general and administrative expenses and accounts payable - trade. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies for further discussion.

INTERNAL CONTROL CONSIDERATIONS

After re-evaluation, the Company’s management has concluded that in light of the errors described above, a material weakness existed in the Company’s internal control over financial reporting during the nine-month period ended September 30, 2021 and that the Company’s controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness is described in more detail in Item 4 to Part 1 of this Form 10-Q/A.

ITEMS AMENDED IN THIS AMENDMENT NO. 1

For the convenience of the reader, this Amendment No. 1 amends and restates the Q3 Form 10-Q in its entirety. As a result, this Amendment No. 1 includes both items that have been changed as a result of the restatement described above as well as items that are unchanged from the Q3 Form 10-Q. The following items have been amended in this Amendment No. 1 to reflect the restatement described above:

•Part I, Item 1. Consolidated Condensed Financial Statements

•Part I, Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations

•Part I, Item 4. Controls and Procedures

•Part II, Item 6. Exhibits

In addition, in accordance with applicable SEC rules, this Amendment No. 1 includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act from our Chief Executive Officer (as principal executive officer) and our Chief Financial Officer (as principal financial officer) dated as of the filing date of this Amendment No. 1.

Except as described above, this Amendment No. 1 does not amend, update or change any other items or disclosures in the Q3 Form 10-Q. This Amendment No. 1 does not purport to reflect any information or events subsequent to the filing date of the Q3 Form 10-Q. As such, this Amendment No. 1 speaks only as of the date the Q3 Form 10-Q was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Q3 Form 10-Q to give effect to any subsequent events. Accordingly, this Amendment No. 1 should be read in conjunction with our filings made with the SEC subsequent to the filing of the Q3 Form 10-Q.

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PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements

	Archaea Energy Inc.

	Consolidated Condensed Balance Sheets – As of September 30, 2021 and December 31, 2020 (as restated)	5

	Consolidated Condensed Statements of Operations – Three and nine months ended September 30, 2021 and 2020 (as restated)	6

	Consolidated Condensed Statements of Equity – Three and nine months ended September 30, 2021 and 2020 (as restated)	7

	Consolidated Condensed Statements of Cash Flows – Nine months ended September 30, 2021 and 2020 (as restated)	9

	Notes to Consolidated Condensed Financial Statements	10

	Aria Energy LLC (Predecessor)

	Consolidated Condensed Balance Sheet – As of December 31, 2020	38

	Consolidated Condensed Statements of Operations – For the periods from July 1, 2021 to September 14, 2021 and from January 1, 2021 to September 14, 2021 and for the three and nine months ended September 30, 2020	39

	Consolidated Condensed Statements of Comprehensive Income – For the periods from July 1, 2021 to September 14, 2021 and from January 1, 2021 to September 14, 2021 and for the three and nine months ended September 30, 2020	40

	Consolidated Condensed Statements of Equity – For the periods from July 1, 2021 to September 14, 2021 and from January 1, 2021 to September 14, 2021 and for the three and nine months ended September 30, 2020	41

	Consolidated Condensed Statements of Cash Flows – For the period from January 1, 2021 to September 14, 2021 and the nine months ended September 30, 2020	42

	Notes to Consolidated Condensed Financial Statements	43

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations (as restated)	56

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	73

Item 4.	Controls and Procedures (as restated)	73

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	75

Item 1A.	Risk Factors	75

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

Item 3.	Defaults Upon Senior Securities	75

Item 4.	Mine Safety Disclosures	75

Item 5.	Other Information	75

Item 6.	Exhibits (as restated)	75

	SIGNATURES	78

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Commonly Used Terms and Definitions

Unless the context otherwise requires, the terms “Archaea” and the “Company” refer to Archaea Energy Inc. and its consolidated subsidiaries. In addition, the following company or industry-specific terms and abbreviations are used throughout this report:

Archaea Merger Agreement: The Business Combination Agreement, dated April 7, 2021, as subsequently amended, pursuant to which, among other things, the Company acquired Legacy Archaea

Aria: Aria Energy LLC, a Delaware limited liability company, and its subsidiaries

Aria Holders: The members of Aria immediately prior to the Closing

Aria Merger: The transaction executed by the Archaea Merger Agreement

Aria Merger Agreement: The Business Combination Agreement, dated as of April 7, 2021, as subsequently amended, pursuant to which, among other things, the Company acquired Aria

Atlas: Atlas Point Energy Infrastructure Fund, LLC, a Delaware limited liability company

Btu: British thermal units

Business Combination Agreements: The Aria Merger Agreement and the Archaea Merger Agreement

Business Combinations: The transactions contemplated by the Business Combination Agreements

Class A Common Stock: Class A Common Stock, par value $0.0001 per share, of the Company

Class A Common Units: Class A Common Units of Opco

Class B Common Stock: Class B Common Stock, par value $0.0001 per share, of the Company

Class B Common Units: Class B Common Units of Opco

Closing: The closing of the Business Combinations

Closing Date: September 15, 2021, the closing date of the Business Combinations

Common Stock: Class A Common Stock and the Class B Common Stock

Environmental Attributes: Federal, state and local government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy.

FERC: The Federal Energy Regulatory Commission

Forward Purchase Warrants: The 250,000 warrants issued in a private placement that closed simultaneously with the consummation of the Business Combinations on September 15, 2021

GCES: Gulf Coast Environmental Services, LLC

Initial Public Offering: RAC’s initial public offering, which was consummated on October 26, 2020

ISO: Independent System Operator

Legacy Archaea: Archaea Energy LLC, a Delaware limited liability company, and its subsidiaries

Legacy Archaea Holders: The members of Legacy Archaea immediately prior to the Closing

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LCFS: Low Carbon Fuel Standard

LFG: Landfill gas

MMBtu: One million British thermal unit

MW: Megawatts

MWh: Megawatt hours

NYSE: The New York Stock Exchange

Opco: LFG Acquisition Holdings LLC, a Delaware limited liability company, which was formerly named Rice Acquisition Holdings LLC

PIPE Financing: The private placement of 29,166,667 shares of Class A Common Stock for gross proceeds to the Company of $300 million in connection with the Business Combinations

Private Placement Warrants: The 6,771,000 warrants originally issued to Sponsor and Atlas in a private placement that closed simultaneously with the consummation of the Initial Public Offering

Proxy Statement: The Company’s definitive proxy statement regarding the Business Combinations and related transactions filed with the SEC on August 12, 2021

Public Warrants: The 11,862,492 warrants originally sold as part of the units issued in the Initial Public Offering

RAC: Rice Acquisition Corp.

RAC Opco: Rice Acquisition Holdings LLC

RECs: Renewable Energy Credits

Redeemable Warrants: The Company's Public Warrants and Forward Purchase Warrants

RINs: Renewable Identification Numbers

RNG: Renewable natural gas

RTO: Regional transmission organization

SEC: U.S. Securities and Exchange Commission

Sponsor: Rice Acquisition Sponsor LLC, a Delaware limited liability company

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Cautionary Note Regarding Forward-Looking Statements

The information in this Amendment No. 1 on Quarterly Report on Form 10-Q/A (this "Report"), including, without limitation, statements under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “should,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other similar words. Forward-looking statements may relate to expectations for future financial performance, business strategies or expectations for the Company’s business. Specifically, forward-looking statements may include statements concerning market conditions and trends, earnings, performance, strategies, prospects and other aspects of the business of the Company. Forward looking statements are based on current expectations, estimates, projections, targets, opinions and/or beliefs of the Company, and such statements involve known and unknown risks, uncertainties and other factors.

The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward looking statements include, but are not limited to: (a) the ability to recognize the anticipated benefits of the Business Combinations and any transactions contemplated thereby, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably and retain its management and key employees; (b) the possibility that the Company may be adversely affected by other economic, business and/or competitive factors; (c) the Company’s ability to develop and operate new projects; (d) the reduction or elimination of government economic incentives to the renewable energy market; (e) delays in acquisition, financing, construction and development of new projects; (f) the length of development cycles for new projects, including the design and construction processes for the Company’s projects; (g) the Company’s ability to identify suitable locations for new projects; (h) the Company’s dependence on landfill operators; (i) existing regulations and changes to regulations and policies that affect the Company’s operations; (j) decline in public acceptance and support of renewable energy development and projects; (k) demand for renewable energy not being sustained; (l) impacts of climate change, changing weather patterns and conditions, and natural disasters; (m) the ability to secure necessary governmental and regulatory approvals; (n) the Company’s expansion into new business lines and (o) other risks and uncertainties indicated in the Registration Statement on Form S-1 (File No. 333-260094), originally filed by the Company with the SEC on October 6, 2021, as subsequently amended on October 18, 2021 and declared effective by the SEC on October 21, 2021 (the “Registration Statement”), including those under “Risk Factors” therein, and other documents filed or to be filed with the SEC by the Company.

Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ARCHAEA ENERGY INC.

Consolidated Condensed Balance Sheets

(Unaudited)

(As Restated)


(in thousands, except shares and per share data)	September 30, 2021		December 31, 2020
	(As Restated)
ASSETS
Current Assets
Cash and cash equivalents	$	153,644	$	1,496
Restricted cash	17,156		—
Accounts receivable, net	30,244		1,780
Inventory	9,285		—
Prepaid expenses and other current assets	29,311		4,730
Total Current Assets	239,640		8,006
Property, plant and equipment, net	281,610		52,368
Intangible assets, net	592,123		8,693
Goodwill	27,011		2,754
Equity method investments	237,265		—
Other non-current assets	9,596		2,460
Total Assets	$	1,387,245	$	74,281

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable - trade	$	6,466	$	14,845
Current portion of long-term debt, net	8,546		1,302
Accrued and other current liabilities	21,587		8,270
Total Current Liabilities	36,599		24,417
Long-term debt, net	329,254		14,773
Derivative liabilities	160,630		—
Below market contracts	108,392		—
Asset retirement obligations	3,904		306
Other long-term liabilities	8,009		3,294
Total Liabilities	646,788		42,790
Commitments and Contingencies
Redeemable Noncontrolling Interests	1,179,616		—
Equity
Members' Equity	—		34,930
Members' Accumulated Deficit	—		(4,156)
Stockholders' Equity
Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding	—		—
Class A common stock, $0.0001 par value; 900,000,000 shares authorized; 52,847,195 shares and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	5		—
Class B common stock, $0.0001 par value; 190,000,000 shares authorized; 62,281,735 shares and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	6		—
Additional paid in capital	—		—

Accumulated deficit	(439,297)		—
Total Stockholders' Equity	(439,286)		—
Nonredeemable noncontrolling interests	127		717
Total Equity	(439,159)		31,491
Total Liabilities, Redeemable Noncontrolling Interests and Equity	$	1,387,245	$	74,281

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Condensed Statements of Operations

(Unaudited)

(As Restated)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except shares and per share data)	2021		2020		2021		2020
	(As Restated)				(As Restated)
Revenues and Other Income
Energy revenue	$	10,916	$	—	$	13,975	$	—
Other revenue	865		1,904		4,588		4,496
Amortization of intangibles and below-market contracts	205		—		205		—
Total Revenue and Other Income	11,986		1,904		18,768		4,496
Equity Investment Income, Net	879		—		879		—
Cost of Operations
Cost of energy	9,478		52		12,625		87
Cost of other revenues	615		1,202		2,976		2,490
Depreciation, amortization and accretion	3,142		34		4,077		101
Total Cost of Operations	13,235		1,288		19,678		2,678
General and administrative expenses	11,889		1,205		22,933		3,652
Operating Income (Loss)	(12,259)		(589)		(22,964)		(1,834)
Other Income (Expense)
Interest expense, net	(1,586)		—		(1,606)		—
Gain (loss) on derivative contracts	(10,413)		—		(10,413)		—
Other income (expense)	81		(13)		377		15
Total Other Income (Expense)	(11,918)		(13)		(11,642)		15
Income (Loss) Before Income Taxes	(24,177)		(602)		(34,606)		(1,819)
Income tax benefit	—		—		—		—
Net Income (Loss)	(24,177)		(602)		(34,606)		(1,819)
Net income (loss) attributable to nonredeemable noncontrolling interests	(335)		258		(589)		386
Net income (loss) attributable to Legacy Archaea	(8,569)		(860)		(18,744)		(2,205)
Net income (loss) attributable to redeemable noncontrolling interests	(8,262)		—		(8,262)		—
Net Income (Loss) Attributable to Class A Common Stock	$	(7,011)	$	—	$	(7,011)	$	—
Net income (loss) per Class A common share:
Net income (loss) – basic (1)	$	(0.13)	$	—	$	(0.13)	$	—
Net income (loss) – diluted (1)	$	(0.13)	$	—	$	(0.13)	$	—
Weighted average shares of Class A Common Stock outstanding:
Basic (1)	52,847,195		—		52,847,195		—
Diluted (1)	52,847,195		—		52,847,195		—

(1) Class A Common Stock is outstanding beginning September 15, 2021 due to the reverse recapitalization transaction as described in Note 4.

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Condensed Statement of Equity

(Unaudited)

(As Restated)


			Total Equity
							Total Stockholders' Equity
(in thousands)	Redeemable Noncontrolling Interests		Members' Equity		Members' Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Accumulated Deficit		Nonredeemable Noncontrolling Interests		Total Equity
Balance - December 31, 2020	$	—	$	34,930	$	(4,156)	$	—	$	—	$	—	$	—	$	717	$	31,491
Net income (loss) prior to Closing	—		—		(18,744)		—		—		—		—		(534)		(19,278)
Members' equity contributions	—		70		—		—		—		—		—		—		70
Share-based compensation expense prior to Closing	—		2,349		—		—		—		—		—		—		2,349
Reclassification in connection with reverse recapitalization	—		(37,349)		22,900		—		3		37,346		(22,900)		—		—
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability	—		—		—		5		1		346,239		—		—		346,245
Issuance of Class B Common Stock in Aria Merger	—		—		—		—		2		394,908		—		—		394,910
Reclassification to redeemable noncontrolling interest	408,762		—		—		—		—		(431,662)		22,900		—		(408,762)
Net income (loss) after Closing	(8,262)		—		—		—		—		—		(7,011)		(56)		(7,067)
Adjustment of redeemable noncontrolling interest to redemption amount	779,116		—		—		—		—		(346,831)		(432,286)		—		(779,117)
Balance - September 30, 2021	$	1,179,616	$	—	$	—	$	5	$	6	$	—	$	(439,297)	$	127	$	(439,159)


			Total Equity
							Total Stockholders' Equity
(in thousands)	Redeemable Noncontrolling Interests		Members' Equity		Members' Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital(		Accumulated Deficit		Nonredeemable Noncontrolling Interests		Total Equity
Balance - December 31, 2019	$	—	$	2,470	$	(1,683)	$	—	$	—	$	—	$	—	$	—	$	787
Net income (loss)	—		—		(2,205)		—		—		—		—		386		(1,819)
Members' equity contributions	—		32,460		—		—		—		—		—		—		32,460
Noncontrolling interest in acquired business acquisition	—		—		—		—		—		—		—		480		480
Balance - September 30, 2020	$	—	$	34,930	$	(3,888)	$	—	$	—	$	—	$	—	$	866	$	31,908

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Condensed Statement of Equity

(Unaudited)

(As Restated)


			Total Equity
							Total Stockholders' Equity
(in thousands)	Redeemable Noncontrolling Interests		Members' Equity		Members' Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Accumulated Deficit		Nonredeemable Noncontrolling Interests		Total Equity
Balance - June 30, 2021	$	—	$	35,178	$	(14,331)	$	—	$	—	$	—	$	—	$	462	$	21,309
Net income (loss) prior to Closing	—		—		(8,569)		—		—		—		—		(279)		(8,848)
Share-based compensation expense prior to Closing	—		2,171		—		—		—		—		—		—		2,171
Reclassification in connection with reverse recapitalization	—		(37,349)		22,900		—		3		37,346		(22,900)		—		—
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability	—		—		—		5		1		346,239		—		—		346,245
Issuance of Class B Common Stock in Aria Merger	—		—		—		—		2		394,908		—		—		394,910
Reclassification to redeemable noncontrolling interest	408,762		—		—		—		—		(431,662)		22,900		—		(408,762)
Net income (loss) after Closing	(8,262)		—		—		—		—		—		(7,011)		(56)		(7,067)
Adjustment of redeemable noncontrolling interests to redemption amount	779,116		—		—		—		—		(346,831)		(432,286)		—		(779,117)
Balance - September 30, 2021	$	1,179,616	$	—	$	—	$	5	$	6	$	—	$	(439,297)	$	127	$	(439,159)


			Total Equity
							Total Stockholders' Equity
(in thousands)	Redeemable Noncontrolling Interests		Members' Equity		Members' Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interests		Total Equity
Balance - June 30, 2020	$	—	$	18,220	$	(3,028)	$	—	$	—	$	—	$	—	$	608	$	15,800
Net income (loss)	—		—		(860)		—		—		—		—		258		(602)
Members' equity contributions	—		16,710		—		—		—		—		—		—		16,710
Balance - September 30, 2020	$	—	$	34,930	$	(3,888)	$	—	$	—	$	—	$	—	$	866	$	31,908

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Condensed Statement of Cash Flows

(Unaudited)

(As Restated)


	Nine Months Ended September 30,
(in thousands)	2021		2020
	(As Restated)
Cash flows from operating activities
Net income (loss)	$	(34,606)	$	(1,819)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion expense	4,077		101
Amortization of debt issuance costs	627		—
Amortization of intangibles and below-market contracts	(6)		—
Bad debt expense	10		76
Return on investment in equity method investments	336		—
Equity in earnings of equity method investments	(879)		—
Change in fair value of derivative liabilities	10,413		—
Forgiveness of Paycheck Protection Loan	(201)		—
Stock-based compensation expense	2,887		—

Changes in operating assets and liabilities:
Accounts receivable	(692)		(1,124)
Inventory	(270)		—
Prepaid expenses and other current assets	(22,315)		(627)
Accounts payable - trade	(1,207)		(335)
Accrued and other liabilities	(7,475)		810
Other non-current assets	(3,490)		—
Other long-term liabilities	(1,919)		98
Net cash provided by (used in) operating activities	(54,710)		(2,820)
Cash flows from investing activities
Acquisition of Aria, net of cash acquired	(463,334)		—
Acquisition of assets and businesses, excluding Aria	(31,527)		(1,156)
Purchases of property, plant and equipment	(88,209)		(9,659)
Purchases of biogas rights	(202)		(7,892)
Contributions to equity method investments	(4,100)		—
Net cash used in investing activities	(587,372)		(18,707)
Cash flows from financing activities
Borrowings on line of credit agreement	12,478		—
Repayments on line of credit agreement	(12,478)		—
Proceeds from long-term debt, net of issuance costs	361,959		—
Repayments of long-term debt	(47,040)		—
Proceeds from PPP Loan	—		691
Proceeds from reverse recapitalization and PIPE Financing	496,397		—
Capital contributions	70		21,150
Distributions to noncontrolling interest	—		—
Net cash provided by financing activities	811,386		21,841
Net increase (decrease) in cash, cash equivalents and restricted cash	169,304		314
Cash, cash equivalents and restricted cash - beginning of period	1,496		423
Cash, cash equivalents and restricted cash - end of period	$	170,800	$	737
Supplemental cash flow information:
Cash paid for interest1	$	1,869	$	—
Non-cash investing activities:
Accruals of property, plant and equipment and biogas rights incurred but not paid	$	2,317	$	1,597

1Net of capitalized interest of $7.2 million and zero for the nine months ended September 30, 2021 and 2020, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(As Restated)

NOTE 1 - Organization and Description of Business

Archaea Energy Inc. ("Archaea" or the "Company"), a Delaware corporation (formerly named Rice Acquisition Corp.), is one of the largest RNG producers in the U.S., with an industry-leading RNG platform primarily focused on capturing and converting waste emissions from landfills and anaerobic digesters into low-carbon RNG and electricity. As of September 30, 2021, Archaea owns and operates a diversified portfolio of 23 LFG recovery and processing projects across 12 states, including 13 LFG to electric projects and 10 projects that produce pipeline-quality RNG.

On September 15, 2021, Archaea consummated the previously announced business combinations pursuant to (i) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Aria Merger Agreement”), by and among Rice Acquisition Corp., a Delaware corporation ("RAC"), Rice Acquisition Holdings LLC, a Delaware limited liability company and direct subsidiary of RAC (“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 direct subsidiary of RAC Intermediate (“RAC Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Aria Merger Sub”), Aria Energy LLC, a Delaware limited liability company (“Aria”), and Aria Renewable Energy Systems LLC, a Delaware limited liability company, pursuant to which, among other things, Aria Merger Sub was merged with and into Aria, with Aria surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Aria Merger Agreement, the “Aria Merger”), and (ii) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Archaea Merger Agreement” and, together with the Aria Merger Agreement, the “Business Combination Agreements”), by and among RAC, 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, a Delaware limited liability company, and Archaea Energy II LLC, a Delaware limited liability company (“Legacy Archaea”), pursuant to which, among other things, Archaea Merger Sub was merged with and into Legacy Archaea, with Legacy Archaea surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Archaea Merger Agreement, the “Archaea Merger” and, together with the Aria Merger, the “Business Combinations”). As further discussed in Note 4 - Business Combinations and Reverse Recapitalization, Legacy Archaea was determined to be the accounting acquirer of the Business Combinations, and Aria was the predecessor to the Company.

Archaea has retained its “up-C” structure, whereby all of the equity interests in Aria and Legacy Archaea are held by RAC Buyer, all of the equity interests in RAC Buyer are held by RAC Intermediate, all of the equity interests in RAC Intermediate are held by Opco and Archaea’s only assets are its equity interests in Opco. In connection with the consummation of the Business Combinations, Opco, or Rice Acquisition Holdings LLC was renamed LFG Acquisition Holdings LLC. In accordance with Accounting Standards Codification ("ASC") 810 - Consolidation, Opco is considered a variable interest entity ("VIE") where Archaea is the sole managing member of Opco, and therefore, the primary beneficiary. As such, Archaea consolidates Opco, and the remaining unitholders that hold economic interest directly at Opco are presented as redeemable noncontrolling interests on the Company’s financial statements.

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ARCHAEA ENERGY INC.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(As Restated)

Opco issued additional Class A Common Units as part of the consideration in the Business Combinations. The ownership structure of Opco upon closing of the Business Combinations, which gives rise to the redeemable noncontrolling interest at Archaea, is as follows:


Equity Holder	Class A Common Units	% Interest
Archaea	52,847,195	45.9	%
Total controlling interests	52,847,195	45.9	%
Aria Holders	23,000,000	20.0	%
Legacy Archaea Holders	33,350,385	29.0	%
Sponsor, Atlas and RAC independent directors	5,931,350	5.2	%
Total redeemable noncontrolling interests	62,281,735	54.1	%
Total	115,128,930	100.0	%

NOTE 2 - Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

These unaudited, interim, consolidated condensed financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and in accordance with the rules and regulations of the SEC. These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the results for the interim periods presented. The Company's accounting policies conform to US GAAP and have been consistently applied in the presentation of financial statements. The Company's consolidated condensed financial statements include all wholly-owned subsidiaries and all variable interest entities that the Company determined it is the primary beneficiary. Certain information and disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted.

The Archaea Merger with RAC was accounted for as a reverse recapitalization with Legacy Archaea deemed the accounting acquirer, and therefore, there was no step-up to fair value of any RAC assets or liabilities and no goodwill or other intangible assets were recorded. The Aria Merger was accounted for using the acquisition method of accounting with Aria deemed to be the acquiree for accounting purposes. The Company also determined that Aria is the Company's predecessor and therefore has included the historical financial statements of Aria as predecessor beginning on page 38. The Company recorded the fair value of the net assets acquired from Aria as of the Business Combination Closing Date, and goodwill was recorded. See Note 4 - Business Combinations and Reverse Recapitalization for additional information regarding the Archaea Merger and Aria Merger.

Restatement of Previously Issued Financial Statements

The Company restated its consolidated condensed balance sheet as of September 30, 2021, its consolidated condensed statements of operations and consolidated condensed statements of equity for the three and nine months ended September 30, 2021, and its consolidated condensed statement of cash flows for the nine months ended September 30, 2021 for the successor. The restatement only impacts the third quarter of 2021 and the nine months ended September 30, 2021, and has no effect on periods prior to the third quarter of 2021. The restatement corrects the error related to a duplicate entry recorded for the reverse recapitalization transaction. Specifically, an entry was recorded to both the subledger and general ledger as part of the movement of activity from Archaea Energy LLC to the newly formed Archaea Energy II LLC for the reverse recapitalization resulting in a duplicate entry error. The error caused an understatement of accounts payable - trade and general and administrative expenses of $2.8 million in our successor financial statements. This understatement also resulted in an understatement of the net loss attributable to Legacy Archaea and, as such, had no impact on net loss attributable to Class A common stock or related net loss per Class A common share. In addition, due to the adjustment of the redeemable noncontrolling interest to redemption value as discussed in Note 13 - Redeemable Noncontrolling Interest and Stockholders' Equity, the error correction impacted accumulated deficit. The error had no

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ARCHAEA ENERGY INC.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(As Restated)

impact on the predecessor financial statements. The Company has made necessary conforming changes in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” resulting from the correction of this error.

The table below presents the effect of the financial statement adjustments related to the restatement discussed above on the Company's previously reported unaudited balance sheet as of September 30, 2021:


	September 30, 2021
(in thousands)	As Previously Reported		Adjustment	As Restated
Accounts payable - trade	$	3,630	2,836	$	6,466
Total Liabilities	$	643,952	2,836	$	646,788
Accumulated deficit	$	(436,461)	(2,836)	$	(439,297)
Total Stockholders' Equity	$	(436,450)	(2,836)	$	(439,286)

The table below presents the effect of the financial statement adjustments related to the restatement discussed above on the Company's previously unaudited income statements for the three and nine months ended September 30, 2021: