OPAL Fuels (OPAL) - 2021 Q4 - Annual Report

PART I Business ArcLight Clean Transition Corp. II, a SPAC, is pursuing a business combination with OPAL Fuels LLC to form "Opal Fuels Inc." in the clean energy sector - The company is a blank check company focused on a business combination in the sustainable energy and natural resources sector[25][26] - A Business Combination Agreement was signed with OPAL Fuels LLC on December 2, 2021[29] - The transaction will form "Opal Fuels Inc." (New OPAL) under an "Up-C" structure[31][33] - The company must complete a business combination by March 25, 2023, or face liquidation of the Trust Account[132] Financial Position as of December 31, 2021 | Account | Value (USD) | | :--- | :--- | | Trust Account | ~$311.2 million | | Deferred Underwriting Commissions | $10.9 million | Risk Factors The company faces significant risks including the potential failure of the OPAL Fuels business combination, high shareholder redemptions, and liquidation risk - The OPAL Fuels Business Combination may not close due to unsatisfied conditions[160] - With no operating history or revenues, evaluating the company's ability to achieve objectives is difficult[161] - High shareholder redemptions could jeopardize the business combination or prevent meeting minimum cash conditions[166][167] - Failure to complete a business combination by March 25, 2023, will lead to liquidation and worthless public warrants[174] - A potential conflict of interest exists as sponsor and management lose their investment if no business combination is completed[252] Unresolved Staff Comments The company has no unresolved comments from the Securities and Exchange Commission staff - There are no unresolved staff comments as of the report date[323] Properties The company does not own real estate; executive offices are provided by a sponsor affiliate for a monthly fee - Executive offices are provided by a sponsor affiliate for a fee of $10,000 per month[324] Legal Proceedings A shareholder demand letter alleges material omissions in the S-4 registration statement for the OPAL Fuels transaction, which the company denies - A shareholder demand letter was received on February 14, 2022, alleging omissions in the S-4 for the OPAL Fuels transaction[325] Mine Safety Disclosures This section is not applicable to the company's business operations - Not applicable[327] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's securities trade on NASDAQ, and no cash dividends have been paid or are planned before a business combination NASDAQ Trading Information | Security | Symbol | | :--- | :--- | | Units | ACTDU | | Class A Ordinary Shares | ACTD | | Warrants | ACTDW | - The company has not paid and does not intend to pay cash dividends before completing a business combination[331] Selected Financial Data This section is not applicable because the company is a smaller reporting company - Not applicable[339] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a $16.2 million net loss for the period ended December 31, 2021, driven by non-cash warrant liabilities and administrative expenses, while maintaining sufficient liquidity for operations Financial Results for the period from Jan 13, 2021 (inception) to Dec 31, 2021 | Metric | Value (USD) | | :--- | :--- | | Net Loss | ~$16.2 million | | Change in Value of Derivative Warrant Liabilities | ~$10.8 million (loss) | | General and Administrative Costs | ~$4.9 million | | Gain on Investments in Trust Account | ~$12,000 | - As of December 31, 2021, the company held approximately $812,000 in cash and $1.4 million in working capital[359] - A $125 million PIPE Investment at $10.00 per share was secured concurrently with the Business Combination Agreement[353] - The company pays its sponsor $10,000 per month for office space and administrative services[367] Quantitative and Qualitative Disclosures about Market Risk This section is not required as the company is a smaller reporting company - Not applicable as the company is a smaller reporting company[385] Financial Statements and Supplementary Data Full audited financial statements and related notes are provided from pages F-1 to F-22 of the report - Full financial statements are located on pages F-1 through F-22 of the report[386] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants regarding accounting principles or financial disclosure - None[387] Controls and Procedures Management identified a material weakness in internal control over financial reporting related to complex accounting for Class A shares and warrants, leading to restated financials - A material weakness was identified in internal control over financial reporting[388] - This weakness, related to complex accounting for Class A ordinary shares and warrants, led to restatement of prior financial statements[388] Other Information No other information is reported in this section - None[393] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not applicable[394] PART III Directors, Executive Officers and Corporate Governance This section details the company's leadership, governance structure, board independence, committee compositions, and potential conflicts of interest with ArcLight Capital Key Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Daniel R. Revers | 59 | Chairman | | Jake F. Erhard | 47 | President and Chief Executive Officer | | Marco F. Gatti | 38 | Chief Financial Officer | | Christine M. Miller | 51 | General Counsel | - The board of directors is divided into three classes, with directors serving three-year terms[406] - Four directors (Arno Harris, Brian Goncher, Ja-Chin Audrey Lee, Steven Berkenfeld) are deemed independent[410] - Potential conflicts of interest exist due to officers' and directors' fiduciary duties to other ArcLight Capital-affiliated entities[428] Executive Compensation No cash compensation has been paid to executive officers or directors; the sponsor affiliate receives $10,000 monthly for administrative services - No cash compensation has been paid to executive officers or directors for their services[443] - A sponsor affiliate is reimbursed $10,000 per month for administrative services and office space[443] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ArcLight CTC Holdings, L.P., the sponsor, is the largest beneficial owner, holding 98.2% of Class B founder shares and 19.6% of total voting control Principal Shareholder Ownership | Name of Beneficial Owner | Class B Shares Owned | % of Class B | Approximate % of Total Voting Control | | :--- | :--- | :--- | :--- | | ArcLight CTC Holdings, L.P. (Sponsor) | 7,639,076 | 98.2% | 19.6% | - Founder shares are subject to a lock-up period, generally lasting one year post-business combination[454] Certain Relationships and Related Transactions, and Director Independence This section details related party transactions, including the sponsor's purchase of founder shares for $25,000 and private placement warrants for $9.2 million - The sponsor purchased founder shares for $25,000 to cover initial expenses[456] - The sponsor purchased 9,223,261 private placement warrants at $1.00 per warrant during the IPO[457] - The sponsor may provide up to $1.5 million in working capital loans, convertible into warrants at $1.00 per warrant[461] Principal Accounting Fees and Services Total audit fees paid to Marcum LLP from inception through December 31, 2021, amounted to $84,718 Fees Paid to Marcum LLP (Inception to Dec 31, 2021) | Fee Category | Amount (USD) | | :--- | :--- | | Audit Fees | $84,718 | | Audit-Related Fees | $0 | | Tax Fees | $0 | | All Other Fees | $0 | PART IV Exhibits, Financial Statements Schedules This section lists all Form 10-K exhibits, including the Business Combination Agreement, charter documents, and warrant agreement - Key exhibits include the Business Combination Agreement, charter documents, and warrant agreement[472] Form 10-K Summary This section is not applicable - Not applicable[473] Financial Statements Balance Sheet As of December 31, 2021, total assets were $312.8 million, liabilities $40.8 million, and a shareholders' deficit of $39.1 million Balance Sheet Highlights (as of December 31, 2021) | Account | Value (USD) | | :--- | :--- | | Assets | | | Cash | $811,526 | | Investments held in Trust Account | $311,175,471 | | Total Assets | $312,848,614 | | Liabilities & Shareholders' Deficit | | | Derivative warrant liabilities | $25,795,700 | | Deferred underwriting commissions | $10,890,707 | | Total Liabilities | $40,766,115 | | Class A ordinary shares subject to possible redemption | $311,163,050 | | Total Shareholders' Deficit | ($39,080,551) | Statement of Operations The company reported a net loss of $16.2 million from inception to December 31, 2021, driven by administrative expenses and non-cash warrant liabilities Statement of Operations (Jan 13, 2021 - Dec 31, 2021) | Line Item | Value (USD) | | :--- | :--- | | General and administrative expenses | ($4,944,523) | | Change in fair value of derivative warrant liabilities | ($10,799,940) | | Net gain on investments held in Trust Account | $12,421 | | Net Loss | ($16,194,662) |