NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Description of Organization and Business
Operations
Organization and General
Rice Acquisition Corp. II is a blank check company
incorporated as a Cayman Islands exempted company on February 2, 2021. As used herein, “the Company” refers to Rice Acquisition
Corp. II and its majority-owned and controlled operating subsidiary, Rice Acquisition Holdings II LLC (“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 early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early
stage and emerging growth companies.
As of September 30, 2021, the Company had not
commenced any operations. All activity for the period from February 2, 2021 (inception) through September 30, 2021 relates to the Company’s
formation and the preparation for initial public offering (the “Initial Public Offering”), described below, and, subsequent
to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues
until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the
form of interest income on investments from the proceeds derived from the Initial Public Offering (as defined below). The Company has
selected December 31 as its fiscal year end.
The Company’s sponsor is Rice Acquisition
Sponsor II LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial
Public Offering was declared effective on June 15, 2021. On June 18, 2021, the Company consummated its Initial Public Offering of 34,500,000
units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public
Shares”), which included the full exercise of the underwriters’ option to purchase an additional 4,500,000 Units to cover
over-allotments, at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.1
million, of which approximately $11.7 million and approximately $593,000 was for deferred underwriting commissions (see Note 5) and offering
costs allocated to the derivative warrant liabilities, respectively.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the private placement (“Private Placement”) of 10,900,000 warrants (each, a “Private
Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant
to the Sponsor, generating proceeds of $10.9 million (see Note 4). Each Private Placement Warrant is exercisable to purchase one of the
Company’s Class A ordinary shares or one Class A Unit of OpCo together with a corresponding non-economic Class B ordinary share
of the Company.
Following the Initial Public Offering, the Public
Shareholders (as defined below) will hold a direct economic equity ownership interest in the Company in the form of Class A ordinary shares,
and an indirect ownership interest in Opco through the Company’s ownership of Class A Units of Opco. By contrast, the holders of
our Founder Shares and Sponsor Shares (each as defined below in Note 4), including our officers and directors to the extent they hold
such shares (the “Initial Shareholders”) will own direct economic interests in Opco in the form of Class B Units and a corresponding
non-economic voting equity interest in the Company in the form of Class B ordinary shares, as well as a small direct interest through
the Sponsor Shares (see Note 4).
Upon the closing of the Initial Public Offering
and the Private Placement, $345,026,000 of the net proceeds of the sale of the Units in the Initial Public Offering and 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 will be 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 of 1940, as amended (the “Investment Company Act”),
which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion
of a Business Combination and (ii) the distribution of the Trust Account as described below.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial
Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts
disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting discount held
in the Trust Account) 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 owns or acquires 50% or more of the voting securities of the target or
otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under
the Investment Company Act.
The Company will provide the holders of the Company’s
outstanding Class A ordinary shares, par value $0.0001 per share (the “Public Shareholders”) 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 shareholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially at $10.00
per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company
to pay its tax obligations). The per-share amount to be distributed to Public Shareholders 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
were 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 shareholder vote is not required by law and the Company does not decide to hold a
shareholder vote for business or other reasons, the Company will, pursuant to its amended and restated memorandum and articles of association,
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, shareholder approval of the transaction is
required by law, or the Company decides to obtain shareholder 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 Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks shareholder approval in connection with a Business Combination, the Initial Shareholders agreed to vote their Founder
Shares and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the
Initial Shareholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with
the completion of a Business Combination.
If the Company is unable to complete a Business
Combination within 24 months from the closing of the Initial Public Offering, or June 18, 2023 (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 the Company to pay
taxes of the Company or Opco, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then-outstanding
Public Shares and Class A Units of Opco (other than those held by the Company), which redemption will completely extinguish Public Shareholders’
rights as shareholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the Company’s remaining shareholders and the Company’s board
of directors, liquidate and dissolve, subject in each case, to the Company’s obligations under Cayman Islands law to provide for
claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with
respect to the warrants, which will expire worthless if the Company fails to consummate an initial Business Combination within 24 months
from the closing of the Initial Public Offering.
Pursuant to the Opco LLC Agreement and a letter
agreement that the Sponsor, and the Company’s officers and directors have entered into with the Company, the Sponsor, and the Company’s
officers and directors agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares
they hold if we fail to consummate an initial Business Combination within 24 months from the closing of the Initial Public Offering (although
they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails
to complete an initial Business Combination within the prescribed time frame).
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
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 the unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Going Concern
As of September 30, 2021, the Company had approximately
$2.8 million in its operating bank account and working capital of approximately $3.1 million.
The Company’s liquidity needs through September
30, 2021 have been satisfied through a payment of $25,000 from Sponsor to cover for certain expenses in exchange for the issuance of the
Founder Shares (as defined in Note 4), the loan of approximately $126,000 from the Sponsor pursuant to the Note (see Note 4), and the
proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note balance upon
closing of the Initial Public Offering. 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, provide
the Company Working Capital Loans (see Note 4). As of September 30, 2021, there were no amounts outstanding under any Working Capital
Loan.
Based on the foregoing, management believes that
the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of
the Company’s officers and directors 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 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. Basis of Presentation and Summary of
Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X
and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by
GAAP. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only
normal recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results
for the three months ended September 30, 2021 and for the period from February 2, 2021 (inception) through September 30, 2021 are not
necessarily indicative of the results that may be expected through December 31, 2021 or any future period.
The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the audited financial statements and notes thereto included in the final prospectus
and the Current Report on Form 8-K filed by the Company with the SEC on June 17, 2021 and June 24, 2021, respectively.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Restatement of Previously Reported Financial
Statements
Subsequent to the Company’s initial Form
10-Q for the quarterly period ended September 30, 2021, as filed with the SEC on November 12, 2021, the Company concluded it should restate
its previously issued financial statements to classify all Class A ordinary shares subject to redemption in temporary equity. In accordance
with ASC 480-10-S99, redemption provisions not solely within the control of the Company require shares subject to redemption to be classified
outside of permanent equity. The Company had previously classified a portion of its Class A ordinary shares in permanent equity. Although
the Company did not specify a maximum redemption threshold, its amended and restated memorandum and articles of association currently
provides that the Company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001.
Previously, the Company did not consider redeemable shares classified as temporary equity as part of net tangible assets. Effective with
these condensed financial statements, the Company revised this interpretation to include temporary equity in net tangible assets.
In accordance with SEC Staff Accounting Bulletin
No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that
the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s
Form 10-Q for the quarterly period ended and June 30, 2021 (the “Affected Quarterly Period”). Therefore, the Company, in consultation
with its Audit Committee, concluded that the Affected Quarterly Period should be restated to present all Class A ordinary shares subject
to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its
Initial Public Offering. As such, the Company is reporting these restatements to the Affected Quarterly Period in this quarterly report.
The previously presented Affected Quarterly Period should no longer be relied upon.
The change in the carrying value of the redeemable
Class A ordinary shares at June 30, 2021 resulted in a reclassification of approximately 4.0 million Class A ordinary shares from permanent
equity to temporary equity. The table below presents the effect of the financial statement adjustments related to the restatement discussed
above of the Company’s previously reported balance sheet as of June 30, 2021:
As of June 30, 2021 (unaudited) | |
As Previously Reported | | |
Adjustment | | |
As Restated | |
Total assets | |
$ | 350,154,732 | | |
$ | - | | |
$ | 350,154,732 | |
Total liabilities | |
$ | 40,368,422 | | |
$ | - | | |
$ | 40,368,422 | |
Class A ordinary shares subject to redemption | |
| 304,786,300 | | |
| 40,213,700 | | |
$ | 345,000,000 | |
Preferred shares | |
| - | | |
| - | | |
| - | |
Class A ordinary shares | |
| 402 | | |
| (402 | ) | |
| - | |
Class B ordinary shares | |
| 863 | | |
| - | | |
| 863 | |
Additional paid-in capital | |
| 11,451,473 | | |
| (11,451,473 | ) | |
| - | |
Accumulated deficit | |
| (6,205,508 | ) | |
| (28,761,825 | ) | |
| (34,967,333 | ) |
Non-controlling interest in subsidiary | |
| (247,220 | ) | |
| - | | |
| (247,220 | ) |
Total shareholders’ equity (deficit) | |
$ | 5,000,010 | | |
$ | (40,213,700 | ) | |
$ | (35,213,690 | ) |
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Equity (Deficit) | |
$ | 350,154,732 | | |
$ | - | | |
$ | 350,154,732 | |
The Company’s statement of shareholders’
equity has been restated to reflect the changes to the impacted shareholders’ equity accounts described above.
The table below presents the effect of the financial
statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for
the period from February 2, 2021 (inception) through June 30, 2021.
For the period from February 2, 2021 (inception) through June 30, 2021 (unaudited) |
| |
As Previously Reported | | |
Adjustment | | |
As Restated | |
Supplemental Disclosure of Noncash Financing Activities: | |
| | |
| | |
| |
Initial value of Class A ordinary shares subject to possible redemption | |
$ | 308,368,190 | | |
$ | (308,368,190 | ) | |
$ | - | |
Change in value of Class A common stock subject to possible redemption | |
$ | 3,581,890 | | |
$ | (3,581,890 | ) | |
$ | - | |
RICE ACQUISITION CORP.
II
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
In connection with the change in presentation
for the Class A ordinary shares subject to possible redemption, the Company has restated its earnings per share calculation to allocate
income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most
likely outcome, in which case, both classes of shares participate pro rata in the income and losses of the Company. The impact to the
reported amounts of weighted average shares outstanding and basic and diluted earnings per ordinary share is presented below for the Affected
Quarterly Period:
| |
Income(Loss) Per Share | |
| |
As Previously Reported | | |
Adjustment | | |
As Restated | |
For the three months ended June 30, 2021 (unaudited) | |
| | |
| | |
| |
Net loss | |
$ | (6,171,577 | ) | |
$ | - | | |
$ | (6,171,577 | ) |
Weighted average shares outstanding - Class A ordinary shares | |
| 34,500,000 | | |
| (29,568,929 | ) | |
| 4,931,071 | |
Basic and diluted loss per share - Class A ordinary shares | |
$ | 0.00 | | |
$ | (0.49 | ) | |
$ | (0.49 | ) |
Weighted average shares outstanding - Class B ordinary shares | |
| 7,661,071 | | |
| (2,500 | ) | |
| 7,658,571 | |
Basic and diluted loss per share - Class B ordinary shares | |
$ | (0.81 | ) | |
$ | 0.32 | | |
$ | (0.49 | ) |
For the period from February 2, 2021 (inception) through June 30, 2021 (unaudited) | |
| | | |
| | | |
| | |
Net loss | |
$ | (6,205,508 | ) | |
$ | - | | |
$ | (6,205,508 | ) |
Weighted average shares outstanding - Class A ordinary shares | |
| 34,500,000 | | |
| (31,316,649 | ) | |
| 3,183,351 | |
Basic and diluted loss per share - Class A ordinary shares | |
$ | 0.00 | | |
$ | (0.58 | ) | |
$ | (0.58 | ) |
Weighted average shares outstanding - Class B ordinary shares | |
| 7,603,954 | | |
| (2,500 | ) | |
| 7,601,454 | |
Basic and diluted loss per share - Class B ordinary shares | |
$ | (0.82 | ) | |
$ | 0.24 | | |
$ | (0.58 | ) |
Emerging Growth Company
As an emerging growth company, the Company 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 shareholder approval of any golden
parachute payments not previously approved.
Further, Section 102(b)(1) of the Jumpstart Our
Business Startups Act of 2012 (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 of 1933, as amended
(the “Securities Act”), registration statement declared effective or do not have a class of securities registered under the
Securities Exchange Act of 1934, as amended (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 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 unaudited condensed consolidated
financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has
opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards
used.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
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 September 30, 2021. The ownership interest of noncontrolling participants in the operating subsidiary
is included as a separate component of shareholders’ equity.
Use of Estimates
The preparation of unaudited condensed consolidated
financial statements in conformity with GAAP requires 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 unaudited condensed consolidated financial
statements and the reported amounts of income and expenses during the reporting period. 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 unaudited 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.
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 ordinary shares
issued were charged against the carrying value of the Class A ordinary shares 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.
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. The Company had no cash equivalents as of September
30, 2021.
Investments Held in the 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 statement of operations.
The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Corporation coverage limit of $250,000. As of September 30, 2021, the Company had not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements,” equal or approximate
the carrying amounts represented in the unaudited condensed consolidated balance sheet due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would
be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement
date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
|
● |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
● |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
● |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure
fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is
categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
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 fair value of the Public Warrants and the Private Placement Warrants are estimated using Black-Scholes option pricing model with the
volatility calculated by back solving in a Monte Carlo simulation. 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.
Class A Ordinary Shares Subject to Possible
Redemption
The Company accounts for its ordinary shares subject
to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class
A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary
shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that
are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Although the Company
did not specify a maximum redemption threshold, its amended and restated memorandum and articles of association provides that currently,
the Company will not redeem its Public Shares in an amount that would cause its net tangible assets (shareholders’ equity) to be
less than $5,000,001. Accordingly, as of the Initial Public Offering, 34,500,000 Class A ordinary shares subject to possible redemption
at the redemption amount were presented at redemption value as temporary equity, outside of the shareholders’ equity section of
the Company’s unaudited condensed consolidated balance sheet.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Under ASC 480-10-S99, the Company has elected
to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption
value at the end of the reporting period. This method would view the end of the reporting period as if it were also the redemption date
of the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value
to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income (Loss) per Ordinary Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income
(loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average shares of ordinary shares outstanding
for the respective period.
The calculation of diluted net income (loss) per
ordinary share does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement
to purchase an aggregate of 19,525,000 ordinary shares in the calculation of diluted income (loss) per share, because their exercise is
contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net
income (loss) per share is the same as basic net income (loss) per share for the three months ended September 30, 2021 and the period
from February 2, 2021 (inception) through September 30, 2021. Accretion associated with the redeemable Class A ordinary shares is excluded
from earnings per share as the redemption value approximates fair value.
The following table presents a reconciliation
of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary shares:
| |
For the Three
Months Ended September 30,
2021 | | |
For the Period from February 2,
2021 (Inception) through September 30, 2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per ordinary share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net loss | |
$ | (4,282,755 | ) | |
$ | (1,070,611 | ) | |
$ | (7,630,430 | ) | |
$ | (3,928,444 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average ordinary shares outstanding | |
| 34,502,500 | | |
| 8,625,000 | | |
| 15,549,710 | | |
| 8,005,601 | |
Basic and diluted net loss per ordinary share | |
$ | (0.12 | ) | |
$ | (0.12 | ) | |
$ | (0.49 | ) | |
$ | (0.49 | ) |
Income taxes
FASB ASC Topic 740 “Income Taxes”
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 September 30, 2021. The Company’s
management determined that the Cayman Islands is the Company’s only major tax jurisdiction. 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
for the period from February 2, 2021 (inception) through September 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. There is currently no taxation imposed on income by the Government of the Cayman Islands.
In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected
in the Company’s consolidated financial statements. The Company’s management does not expect that the total amount of unrecognized
tax benefits will materially change over the next twelve months.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Recent accounting standards
In August 2020, the FASB issued 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 (“ASU 2020-06”), 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 simplifies the diluted
earnings per share calculation in certain areas. The Company is currently assessing the impact of electing this standard on its consolidated
financial statements and related disclosures and does not expect the impact to be material.
Management does not believe that any other recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited
condensed consolidated financial statements.
Note 3. Initial Public Offering
On June 18, 2021, the Company consummated its
Initial Public Offering of 34,500,000 Units, which included the full exercise of the underwriters’ option to purchase an additional
4,500,000 Units to cover over-allotments, at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs
of approximately $19.1 million, of which approximately $11.7 million and approximately $593,000 was for deferred underwriting commissions
and offering costs allocated to the derivative warrant liabilities, respectively. Of the 34,500,000 Units sold, affiliates of Rice Investment
Group had purchased 1,010,000 Units (the “Affiliated Units”) at the Initial Public Offering price. The underwriters did not
receive any underwriting discounts or commissions on the 1,010,000 Affiliated Units.
Each Unit consists of one Class A ordinary share,
and one-fourth of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one
Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 7).
Note 4. Related Party Transactions
Founder Shares and Sponsor Shares
On February 10, 2021, the Sponsor received 7,187,500
Class B Units of Opco for no consideration and purchased 7,187,600 of the Company’s Class B ordinary shares, par value $0.0001,
2,500 of the Company’s Class A ordinary shares and 100 Class A Units of Opco for aggregate consideration of $26,000. Of the aggregate
consideration, Opco received $1,000 for the Class A Units and the Company received $25,000 for the Class A ordinary shares and the Class
B ordinary shares. The Company then subscribed for 2,500 Class A Units of Opco for $25,000.
In June 2021, the Sponsor forfeited 90,000 Class
B Units of Opco, and 30,000 Class B Units of Opco were issued to each of the Company’s independent director nominees. The Sponsor
transferred a corresponding number of shares of the Company’s Class B ordinary shares to the Company’s independent director
nominees. In June 2021, the Company effected a dividend, and Opco effected a distribution, resulting in an aggregate of 8,625,000 Class
B ordinary shares and 8,624,900 Class B Units of Opco outstanding, of which the Sponsor owned 8,535,000 of the Company’s Class B
ordinary shares and 8,534,900 Class B Units of Opco.
The Sponsor agreed to forfeit up to 1,127,500
Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriter, so that the Founder Shares would
represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriters fully exercised
the over-allotment on June 16, 2021; thus, these 1,127,500 Founder Shares were no longer subject to forfeiture.
The Initial Shareholders agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion
of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A ordinary
shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share 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 (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all
of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The Company refers to the 8,624,900 Class B ordinary
shares and corresponding number of Class B Units of Opco (or the Class A Units of Opco into which such Class B Units will convert) collectively
as the “Founder Shares”. The Founder Shares consist of Class B Units of Opco (and any Class A Units of Opco into which such
Class B Units are converted) and a corresponding number of Class B ordinary shares, which together will be exchangeable for shares of
the Company’s Class A ordinary shares 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 Class A ordinary shares and the 100 Class A Units of Opco and a corresponding number
of shares of the Company’s non-economic Class B ordinary shares (which together will be exchangeable into Class A ordinary shares
after the initial Business Combination on a one-for-one basis) collectively as the “Sponsor Shares”. The Sponsor Shares are
considered non-redeemable and presented as permanent equity in the Company’s unaudited condensed consolidated balance sheet.
The Class B Units of Opco will convert into Class
A Units of 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 Opco (and any Class A Units of Opco into which such Class B Units are converted) and a corresponding number of Class
B ordinary shares, which together will be exchangeable for Class A ordinary shares 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 Class A ordinary shares, 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,
the number of Class A Units of Opco into which the Class B Units of 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 Class A ordinary shares 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 the Company’s ordinary shares upon completion of the Initial Public Offering, plus all
Class A ordinary shares 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 Class B ordinary shares will be adjusted through a stock split
or stock dividend so that the total number of outstanding Class B ordinary shares corresponds to the total number of Class A Units of
Opco outstanding (other than those held by the Company) plus the total number of Class A Units Opco into which the Class B Units of Opco
are entitled to convert.
The Initial Shareholders agreed, subject to limited
exceptions, not to transfer, assign or sell any of the Founder Shares held by them (and any Class A ordinary shares 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 ordinary shares 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 shareholders having the right to exchange their ordinary shares
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 10,900,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant to the Sponsor, generating proceeds of $10.9 million.
Each whole Private Placement Warrant is exercisable
for one whole Class A ordinary share at a price of $11.50 per share. A portion of the proceeds from 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 or its permitted transferees.
The Sponsor and the Company’s officers and
directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days
after the completion of the initial Business Combination.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Related Party Loans
On February 10, 2021, the Sponsor agreed to loan
the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the
“Note”). This Note was non-interest bearing and payable upon the completion of the Initial Public Offering. As of September
30, 2021, the Company borrowed approximately $167,000 under the Note. The Note is still outstanding and is due on demand.
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 the 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, without interest, 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 September 30, 2021, the Company had
no borrowings under the Working Capital Loans.
Administrative Services Agreement
Commencing on June 15, 2021, the date that the
Company’s securities were first listed on the New York Stock, the Company agreed to pay the Sponsor a total of $10,000 per month
for office space, secretarial and administrative services provided to the Company. Upon completion of the initial Business Combination
or the Company’s liquidation, the Company will cease paying these monthly fees. As of September 30, 2021, there were $35,000 in
fees incurred and paid under this agreement.
In addition, 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 audit committee will review on a quarterly basis all payments that were made by the Company to the Sponsor, officers or directors,
or the Company’s or their affiliates. Any such payments prior to an initial Business Combination will be made from funds held outside
the Trust Account. No such amounts were reimbursed or accrued for as of September 30, 2021.
Note 5. Commitments and Contingencies
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise
of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration
rights pursuant to a registration rights agreement signed upon consummation of the Initial Public Offering. These holders are entitled
to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company
will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable
lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such
registration statements.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Underwriting Agreement
The Company granted the underwriter a 45-day option
from the final prospectus relating to the Initial Public Offering to purchase up to 4,500,000 additional Units to cover over-allotments,
if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters fully exercised the over-allotment
on June 16, 2021.
The underwriters did not earn any commissions
on the 1,010,000 Affiliated Units. The underwriters were entitled to an underwriting discount of $0.20 per unit, or approximately $6.7
million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $11.7 million
in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the
underwriter 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.
Note 6. Class A Ordinary Shares Subject to
Possible Redemption
The Company’s Class A ordinary shares feature
certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events.
The Company is authorized to issue 300,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s
Class A ordinary shares are entitled to one vote for each share. As of September 30, 2021, there were 34,502,500 Class A ordinary shares
outstanding, of which 34,500,000 were subject to possible redemption and are classified outside of permanent equity in the unaudited condensed
consolidated balance sheet.
The Class A ordinary shares subject to possible
redemption reflected on the unaudited condensed consolidated balance sheet is reconciled on the following table:
Gross proceeds from Initial Public Offering | |
$ | 345,000,000 | |
Less: | |
| | |
Fair value of Public Warrants at issuance | |
| (10,260,000 | ) |
Offering costs allocated to Class A ordinary shares subject to possible redemption | |
| (18,525,962 | ) |
Plus: | |
| | |
Accretion on Class A ordinary shares subject to possible redemption amount | |
| 28,785,962 | |
Class A ordinary shares subject to possible redemption | |
$ | 345,000,000 | |
Note 7. Shareholders’ Deficit
Class A Ordinary Shares - The Company
is authorized to issue 300,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of September 30, 2021, there were
34,502,500 Class A ordinary shares issued and outstanding, of which 34,500,000 Class A ordinary shares were subject to possible redemption
that are classified as temporary equity in the accompanying unaudited condensed consolidated balance sheet (see Note 6).
Class B Ordinary Shares - The Company
is authorized to issue 30,000,000 Class B ordinary shares with a par value of $0.0001 per share. As of September 30, 2021, 8,625,000 Class
B ordinary shares were issued and outstanding.
Ordinary shareholders of record are entitled to
one vote for each share held on all matters to be voted on by shareholders. Holders of the Class A ordinary shares and holders of the
Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders, except
as required by law. The Class B ordinary shares will automatically convert into Class A ordinary shares on the first business day immediately
following the consummation of the initial Business Combination at a ratio such that the number of Class A ordinary shares issuable upon
conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of Class
A ordinary shares issued and outstanding upon completion of the Initial Public Offering, plus (ii) the sum of the total number of Class
A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or
deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any
Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued,
to any seller in the initial Business Combination and any private placement warrants issued to the Sponsor upon conversion of Working
Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one to one.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Preference Shares - The Company
is authorized to issue 1,000,000 preference shares, with a par value of $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 September 30, 2021, there were
no preference shares issued or outstanding.
Class A and Class B Units of Opco
- For each Class B ordinary share there is a corresponding Class A or Class B Unit of Opco. In connection with an initial business combination,
or in certain circumstances described in the Opco LLC Agreement, at specified times after, the Class B Units of Opco are expected to convert
into Class A Units of Opco on a one-for-one basis, subject to adjustment. The Class A Units will be exchangeable (together with the cancellation
of a corresponding number of the Company’s Class B ordinary shares) for cash or into the Company’s Class A ordinary shares
after the time of an initial business combination on a one-for-one basis. The Company’s Class B ordinary shares comprising the Founder
Shares and Sponsor Shares cannot be transferred without transferring a corresponding number of Class A Units or Class B Units of Opco,
as applicable, and vice versa. As of September 30, 2021, there were 2,600 Class A Units of Opco issued and outstanding and 7,187,500 Class
B Units of Opco issued and outstanding. In June 2021, Opco effected a distribution, resulting in an aggregate of 8,624,900 Class B Units
of Opco issued and outstanding.
Note 8. Derivative Warrant Liabilities
As of September 30, 2021, the Company had 8,625,000
Public Warrants and 10,900,000 Private Placement Warrants outstanding.
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 30 days after the completion of a Business Combination; provided that the Company has an effective
registration statement under the Securities Act covering the Class A ordinary shares 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 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 commercially reasonable
efforts to file with the SEC and have an effective registration statement covering the Class A ordinary shares issuable upon exercise
of the warrants and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed.
If a registration statement covering the Class A ordinary shares 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 Class A ordinary shares 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 Class A ordinary share (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.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Redemption of warrants for cash:
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 ordinary shares 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 Class A ordinary shares issuable upon exercise of the warrants is
effective and a current prospectus relating to those Class A ordinary shares 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 for Class A ordinary
shares:
Commencing 90 days after the warrants become exercisable,
the Company may redeem the outstanding warrants for Class A ordinary shares (except as described herein with respect to the Private Placement
Warrants):
|
● |
in whole and not in part; |
|
● |
at a price equal to a number of Class A ordinary shares to be determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A ordinary shares; |
|
● |
upon a minimum of 30 days’ prior written notice of redemption; and |
| ● | if and only if, the last sale price of a Class A ordinary share 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. |
The “fair market value” of a Class
A ordinary share shall mean the average reported last sale price of Class A ordinary shares for the 10 trading days immediately following
the date on which the notice of redemption is sent to the holders of warrants.
The Private Placement Warrants shall be identical
to the Public Warrants, except that so long as they are held by the Sponsor or any of its respective permitted transferees, the Private
Placement Warrants: (i) may be exercised for cash or on a cashless basis, pursuant to subsection 3.3.1(c) of that certain Warrant Agreement,
dated June 15, 2021, between Continental Stock Transfer & Trust Company, the Company and Opco (the “Warrant Agreement”),
(ii) will terminate as of the close initial Business Combination if any holder, other than the Company (or any of its subsidiaries), of
the Class A Units of Opco associated with such Opco Warrant Rights (as defined in the Warrant Agreement) continues to hold any Class A
Units of Opco (or of any successor to Opco) immediately after the close of the initial Business Combination, in which case the associated
Opco Warrant Rights will not terminate, (iii) may not be transferred, assigned or sold until thirty (30) days after the completion by
the Company of an initial Business Combination, and (iv) shall not be redeemable by the Company for cash pursuant to Section 6.1 of the
Warrant Agreement; provided, however, that in the case of (iii), the Private Placement Warrants and any Class A ordinary shares held by
the Sponsor or any of its respective permitted transferees and issued upon exercise of the Private Placement Warrants or upon exchange
of any Class A Units of Opco issued upon exercise of any warrants of Opco may be transferred by the holders. 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.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 9. - Fair Value Measurements
The following table presents information about
the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021, by
level within the fair value hierarchy:
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 - money market fund | |
$ | 345,035,643 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative warrant liabilities - Public | |
$ | 13,800,000 | | |
$ | - | | |
$ | - | |
Derivative warrant liabilities – Private Placement | |
$ | - | | |
$ | - | | |
$ | 18,354,510 | |
Transfers to/from Levels 1, 2 and 3 are recognized
at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a
Level 1 measurement as the Public Warrants were separately traded beginning in August 2021. There were no other transfers to/from Levels
1, 2, and 3 during the three months ended September 30, 2021 and during the period from February 2, 2021 (inception) through September
30, 2021.
Level 1 assets include investments in money market
funds invested in government securities and Level 1 liabilities include Public Warrants. The Company uses inputs such as actual trade
data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The Public Warrants issued in connection with
the Public Offering and the Private Placement Warrants were initially measured at fair value using a Black-Scholes option pricing model
with the volatility calculated by back solving in a Monte Carlo simulation. As of September 30, 2021, the fair value of the Public Warrants
was estimated at their listed public trading price. For the three months ended September 30, 2021 and the period from February 2, 2021
(inception) through September 30, 2021, the Company recognized a loss in the unaudited condensed consolidated statements of operations
resulting from an increase in the fair value of derivative warrant liabilities of $5.3 million and $8.8 million, respectively, presented
as a change in fair value of derivative warrant liabilities on the accompanying unaudited condensed consolidated statements of operations.
The estimated fair value of the Private Placement
Warrants is determined using Level 3 inputs. Inherent in a Black-Scholes option pricing model with the volatility calculated by back solving
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 warrants based on implied volatility from the Company’s traded warrants and from
historical volatility of select peer company’s ordinary shares 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. Any changes in these assumptions can change the
valuation significantly.
RICE ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The following table provides quantitative information
regarding Level 3 fair value measurements inputs as their measurement dates:
| |
September 30,
2021 | | |
At initial
issuance | |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
Stock price | |
$ | 9.91 | | |
$ | 9.70 | |
Volatility | |
| 23.38 | % | |
| 16.82% - 17.02% | |
Term | |
| 5.71 | | |
| 6.00 | |
Risk-free rate | |
| 1.14 | % | |
| 1.05% - 1.09% | |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % |
The change in the fair value of the derivative
warrant liabilities, measured using Level 3 inputs, for the three months ended September 30, 2021 and for the period February 2, 2021
(inception) through September 30, 2021, is summarized as follows:
Derivative warrant liabilities at February 2, 2021 | |
$ | - | |
Issuance of Public and Private Warrants | |
| 21,160,000 | |
Loss upon issuance of Private Warrants | |
| 2,175,000 | |
Change in fair value of derivative warrant liabilities | |
| 3,505,250 | |
Derivative warrant liabilities at June 30, 2021 (Unaudited) | |
$ | 26,840,250 | |
Transfer of Public Warrants to Level 1 | |
| (11,471,250 | ) |
Change in fair value of derivative warrant liabilities | |
| 2,985,510 | |
Derivative warrant liabilities at September 30, 2021 (Unaudited) | |
$ | 18,354,510 | |
Note 10. Subsequent Events
The Company evaluated subsequent events and transactions
that occurred up to the date unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did
not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial
statements.