References to the "Company," "our," "us" or "we" refer to
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our otherSecurities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated on
Our registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 9,223,261 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of
Upon the closing of the Initial Public Offering and the Private Placement,
approximately
If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, orMarch 25, 2023 (the "Combination Period"), we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay its income taxes, if any (less up to$100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders' rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to the Company's obligations underCayman Islands law to provide for claims of creditors and the requirements of other applicable law. 19
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Proposed Business Combination
On
The Business Combination Agreement and the transactions contemplated thereby (collectively, the "Business Combination") were unanimously approved by the boards of directors of Company andOpal Fuels , and also approved by Opal Holdco, the sole member ofOpal Fuels . The Business Combination Agreement provides for, among other things, the following transactions: (i) each outstanding Class B ordinary share, par value$0.0001 per share, of the Company will convert into one Class A ordinary share, par value$0.0001 per share, of the Company; (ii) the Company will change the jurisdiction of its incorporation by deregistering as an exempted company in theCayman Islands and domesticating to, and continuing as a corporation incorporated under the laws of, theState of Delaware (the "Domestication") and, in connection with the Domestication, (A) the Company's name will be changed to "Opal Fuels Inc. " ("New Opal"), (B) each outstanding Class A ordinary share of the Company will become one share of Class A common stock, par value$0.0001 per share, of New Opal (the "New Opal Class A Common Stock"), (C) each outstanding warrant to purchase one Class A ordinary share of the Company will become a warrant to purchase one share of New Opal Class A common stock and (D) New Opal will file its certificate of incorporation and adopt bylaws to serve as its governing documents in connection with the Domestication; and (iii) (A)Opal Fuels will cause its existing limited liability company agreement to be amended and restated, (B)Opal Fuels will cause all of its limited liability company interests existing immediately prior to the closing of the Business Combination (the "Closing") to be re-classified into a number of common units (collectively, the "Opal Units") based on a pre-transaction equity value for Opal equal to$1,501,870,000 , less all principal and accrued interest outstanding immediately after the Closing pursuant to that certain convertible promissory note, dated as ofMay 1, 2021 (as amended, including that certain First Amendment to Convertible Note, datedNovember 29, 2021 , the "Ares Note"), held byARCC Beacon LLC , aDelaware limited liability company ("Ares"), (C) the Company will contribute the (x) the amount of cash in the Trust Account established by the Company with the proceeds from its initial public offering as of immediately prior to the Closing (and before, for the avoidance of doubt, giving effect to the exercise of redemption rights by any of the Company's shareholders (the "Public Share Redemptions")), minus (y) the aggregate amount of cash required to fund the ACT Share Redemptions and any other obligations to be funded from the Trust Account, plus (z) the aggregate cash proceeds actually received in respect of thePIPE Investment (as defined below) and (E) New Opal will issue toOpal Fuels , andOpal Fuels will in turn distribute toOpal HoldCo and Hillman RNG Investments, LLC ("Hillman") a number of shares of Class D common stock, par value$0.0001 per share, of New Opal (the "NewOpal Class D Common Stock"), and distribute toAres (together with Opal HoldCo and Hillman, collectively, the "Opal Equityholders") shares of Class B common stock, par value$0.0001 per share, of New Opal (the "New Opal Class B Common Stock") (neither of which will have any economic value but will entitle the holder thereof to five votes per share or one vote per share, respectively), equal to the number of Opal Units held by each of the Opal Equityholders.
In addition, if New Opal's annual EBITDA for the calendar year 2023 exceeds
The Business Combination is expected to close late in the first half of 2022, following the receipt of the required approval by the Company's shareholders and the fulfillment of other customary closing conditions.
PIPE Financing (Private Placement)
Concurrently with the execution of the Business Combination Agreement, the
Company entered into the Subscription Agreements with the
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The closing of the
Investor Rights Agreement
The Business Combination Agreement contemplates that, at the Closing, each of
Results of Operations
Our entire activity since inception throughMarch 31, 2022 relates to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of interest income on cash and cash equivalents and non-operating income in the form of interest and investment income on investments held in Trust Account from the proceeds derived from the Initial Public Offering. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. Additionally, we recognize non-cash gains and losses within other income (expense) related to changes in recurring fair value measurement of our warrant liabilities at each reporting period.
For the three months ended
For the period from
Liquidity and Capital Resources
As of
Our liquidity needs up to
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors to meet our needs through the earlier of the consummation of a business combination or one year from this filing. Over this time period, we 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.
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We continue to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the condensed balance sheet. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than an administrative services agreement to pay our Sponsor
Registration and Shareholder Rights
The holders of the 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) are entitled to registration rights pursuant to a registration and shareholder rights agreement. At any time on or after the date the Company consummates a Business Combination, the holders of these securities will be entitled to make up to three demands, excluding short form demands, that we will register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the prospectus to purchase up to 4,125,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions. OnMarch 25, 2021 , the underwriters partially exercised the over-allotment option to purchase an additional 3,616,305 Units. The remaining unexercised over-allotment option expired at the conclusion of the 45-day option period.
The underwriters were entitled to an underwriting discount of
Administrative Services Agreement
On
In addition, the sponsor, officers and directors, or their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made by us to the sponsor, executive officers or directors, or their affiliates. Any such payments prior to an initial Business Combination will be made using funds held outside the Trust Account.
Deferred Legal Fees
We entered into an engagement letter to obtain legal advisory services, pursuant
to which our legal counsel agreed to defer the payment of their fees until the
closing of the initial Business Combination. As of
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles
generally accepted in
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Quarterly Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our unaudited condensed financial statements and require significant, difficult or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in our 2021 Annual Report on Form 10-K filed with theSEC onMarch 9, 2022 . There have been no significant changes in the application of our critical accounting policies during the three months endedMarch 31, 2022 .
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting pronouncements.
Off-Balance Sheet Arrangements As ofMarch 31, 2022 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier.
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