PROSPECTUS SUPPLEMENT NO. 6
Filed pursuant to Rule 424(b)(3)
(To prospectus dated October 21, 2021)
Registration No. 333-260094

IMAGE1.JPG

ARCHAEA ENERGY INC.
110,334,394 SHARES OF CLASS A COMMON STOCK
7,021,000 WARRANTS TO PURCHASE SHARES OF CLASS A COMMON STOCK
This prospectus supplement is being filed to update and supplement the information contained in the prospectus dated October 21, 2021 (the “Prospectus”), with the information contained in our Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021 filed with the Securities and Exchange Commission (the “SEC”) on December 29, 2021 (the “Amended 10-Q”). Accordingly, we have attached the Amended 10-Q to this prospectus supplement.
The Prospectus and this prospectus supplement relate to the issuance by us of up to 18,883,492 shares of our Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), which consist of (i) 11,862,492 shares that may be issued upon the exercise of the 11,862,492 warrants (the “Public Warrants”) originally sold as part of the units issued in the initial public offering (the “IPO”) of Rice Acquisition Corp. (“RAC”), (ii) 6,771,000 shares of Class A Common Stock that may be issued upon the exercise of the 6,771,000 warrants originally issued to Rice Acquisition Sponsor LLC (the “Sponsor”) and Atlas Point Energy Infrastructure Fund, LLC (“Atlas”) in a private placement that closed simultaneously with the consummation of the IPO (the “Private Placement Warrants”) and (iii) 250,000 shares of Class A Common Stock that may be issued upon the exercise of the 250,000 warrants issued to Atlas in a private placement that closed simultaneously with the consummation of the Business Combinations (as defined in the Prospectus) (the “Forward Purchase Warrants” and, together with the Public Warrants and the Private Placement Warrants, the “Warrants”). Each Warrant is exercisable to purchase for $11.50 one share of Class A Common Stock, subject to adjustment.
In addition, the Prospectus and this prospectus supplement relate to the resale from time to time of 6,771,000 Private Placement Warrants, 250,000 Forward Purchase Warrants and 110,334,394 shares of Class A Common Stock by the selling security holders named in the Prospectus or their permitted transferees (each a “Selling Securityholder” and, collectively, the “Selling Securityholders”). The 110,334,394 shares of Class A Common Stock consist of (i) 29,166,667 shares of Class A Common Stock issued in a private placement that closed concurrently with the consummation of the Business Combinations, (ii) 2,500 shares of Class A Common Stock issued to the Sponsor in a private placement prior to the consummation of the IPO, (iii) 18,883,492 shares of Class A Common Stock issuable upon exercise of the Warrants, (iv) 5,931,350 shares of Class A Common Stock issuable upon redemption of the 5,931,350 Class A units of LFG Acquisition Holdings LLC (f/k/a Rice Acquisition Holdings LLC) (“Opco”) held by the initial stockholders of RAC, all of which were issued prior to the consummation of the IPO, (v) 23,000,000 shares of Class A Common Stock issuable upon redemption of the 23,000,000 Opco Class A units issued as partial consideration upon consummation of the Aria Merger (as defined in the Prospectus) and (vi) 33,350,385 shares of Class A Common Stock issuable upon redemption of the 33,350,385 Opco Class A units issued as consideration upon consummation of the Archaea Merger (as defined in the Prospectus).
This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any other amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.
The Class A Common Stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “LFG.” On December 28, 2021, the last sale price of the Class A Common Stock as reported on the NYSE was $17.66 per share.
_______________________


Investing in our securities involves certain risks, including those that are described in the “Risk Factors” section beginning on page 7 of the Prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
_______________________

The date of this prospectus supplement is December 29, 2021.


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q/A
(Amendment No. 1)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
______________________________
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number:
001-39644
_____________________________
Archaea Energy Inc.
(Exact name of Registrant as specified in its charter)
_____________________________
Delaware
85-2867266
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4444 Westheimer Road, Suite G450
Houston, Texas 77027
(Address of principal executive offices and zip code)
(346) 708-8272
(Registrant's telephone number, including area code)
Rice Acquisition Corp.
102 East Main Street, Second Story
Carnegie, Pennsylvania 15106
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
LFG
The New York Stock Exchange
Warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share
LFG WS
The New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No    
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No     
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No    
As of November 8, 2021, there were 53,590,976 shares of Class A common stock and 62,281,735 shares of Class B common stock issued and outstanding.






EXPLANATORY NOTE

References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q/A to “we,” “us,” "our," or the “Company” are to Archaea Energy Inc., formerly known as Rice Acquisition Corp., unless the context otherwise indicates.
This Amendment No. 1 (“Amendment No. 1”) to the Quarterly Report on Form 10-Q/A amends and restates the Quarterly Report on Form 10-Q of Archaea Energy Inc. (the “Company”) as of and for the period ended September 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on November 15, 2021. 
RESTATEMENT BACKGROUND
On November 15, 2021, the Company filed its Form 10-Q for the quarterly period ending September 30, 2021 (the “Original Filing”). Subsequent to filing, the Company identified an accounting error related to a duplicate entry recorded for the reverse recapitalization transaction. Specifically, an entry was recorded to both the subledger and general ledger as part of the movement of activity from Archaea Energy LLC to the newly formed Archaea Energy II LLC for the reverse recapitalization resulting in a duplicate entry error. The error caused an understatement of accounts payable - trade and general and administrative expenses of $2.8 million in our successor financial statements.
On December 28, 2021, the Company’s management and the audit committee of the Company’s board of directors concluded that the Company’s previously issued unaudited condensed financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 should no longer be relied upon to due to the impact on accounts payable - trade, general and administrative expenses, and our consolidated net loss.
Accordingly, we have restated our unaudited consolidated condensed financial statements as of and for the three and nine months ended September 30, 2021 to reflect the correct amount of general and administrative expenses and accounts payable - trade. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies for further discussion.
INTERNAL CONTROL CONSIDERATIONS
After re-evaluation, the Company’s management has concluded that in light of the errors described above, a material weakness existed in the Company’s internal control over financial reporting during the nine-month period ended September 30, 2021 and that the Company’s controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness is described in more detail in Item 4 to Part 1 of this Form 10-Q/A.
ITEMS AMENDED IN THIS AMENDMENT NO. 1
For the convenience of the reader, this Amendment No. 1 amends and restates the Q3 Form 10-Q in its entirety. As a result, this Amendment No. 1 includes both items that have been changed as a result of the restatement described above as well as items that are unchanged from the Q3 Form 10-Q. The following items have been amended in this Amendment No. 1 to reflect the restatement described above:
Part I, Item 1. Consolidated Condensed Financial Statements
Part I, Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations
Part I, Item 4. Controls and Procedures
Part II, Item 6. Exhibits
In addition, in accordance with applicable SEC rules, this Amendment No. 1 includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act from our Chief Executive Officer (as principal executive officer) and our Chief Financial Officer (as principal financial officer) dated as of the filing date of this Amendment No. 1.
Except as described above, this Amendment No. 1 does not amend, update or change any other items or disclosures in the Q3 Form 10-Q. This Amendment No. 1 does not purport to reflect any information or events subsequent to the filing date of the Q3 Form 10-Q. As such, this Amendment No. 1 speaks only as of the date the Q3 Form 10-Q was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Q3 Form 10-Q to give effect to any subsequent events. Accordingly, this Amendment No. 1 should be read in conjunction with our filings made with the SEC subsequent to the filing of the Q3 Form 10-Q.


TABLE OF CONTENTS
Page

Archaea Energy Inc.






Aria Energy LLC (Predecessor)

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

Exhibits (as restated)
1

Commonly Used Terms and Definitions
Unless the context otherwise requires, the terms “Archaea” and the “Company” refer to Archaea Energy Inc. and its consolidated subsidiaries. In addition, the following company or industry-specific terms and abbreviations are used throughout this report:
Archaea Merger Agreement: The Business Combination Agreement, dated April 7, 2021, as subsequently amended, pursuant to which, among other things, the Company acquired Legacy Archaea
Aria: Aria Energy LLC, a Delaware limited liability company, and its subsidiaries
Aria Holders: The members of Aria immediately prior to the Closing
Aria Merger: The transaction executed by the Archaea Merger Agreement
Aria Merger Agreement: The Business Combination Agreement, dated as of April 7, 2021, as subsequently amended, pursuant to which, among other things, the Company acquired Aria
Atlas: Atlas Point Energy Infrastructure Fund, LLC, a Delaware limited liability company
Btu: British thermal units
Business Combination Agreements: The Aria Merger Agreement and the Archaea Merger Agreement
Business Combinations: The transactions contemplated by the Business Combination Agreements
Class A Common Stock: Class A Common Stock, par value $0.0001 per share, of the Company
Class A Common Units: Class A Common Units of Opco
Class B Common Stock: Class B Common Stock, par value $0.0001 per share, of the Company
Class B Common Units: Class B Common Units of Opco
Closing: The closing of the Business Combinations
Closing Date: September 15, 2021, the closing date of the Business Combinations
Common Stock: Class A Common Stock and the Class B Common Stock
Environmental Attributes: Federal, state and local government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy.
FERC: The Federal Energy Regulatory Commission
Forward Purchase Warrants: The 250,000 warrants issued in a private placement that closed simultaneously with the consummation of the Business Combinations on September 15, 2021
GCES: Gulf Coast Environmental Services, LLC
Initial Public Offering: RAC’s initial public offering, which was consummated on October 26, 2020
ISO: Independent System Operator
Legacy Archaea: Archaea Energy LLC, a Delaware limited liability company, and its subsidiaries
Legacy Archaea Holders: The members of Legacy Archaea immediately prior to the Closing
2

LCFS: Low Carbon Fuel Standard
LFG: Landfill gas
MMBtu: One million British thermal unit
MW: Megawatts
MWh: Megawatt hours
NYSE: The New York Stock Exchange
Opco: LFG Acquisition Holdings LLC, a Delaware limited liability company, which was formerly named Rice Acquisition Holdings LLC
PIPE Financing: The private placement of 29,166,667 shares of Class A Common Stock for gross proceeds to the Company of $300 million in connection with the Business Combinations
Private Placement Warrants: The 6,771,000 warrants originally issued to Sponsor and Atlas in a private placement that closed simultaneously with the consummation of the Initial Public Offering
Proxy Statement: The Company’s definitive proxy statement regarding the Business Combinations and related transactions filed with the SEC on August 12, 2021
Public Warrants: The 11,862,492 warrants originally sold as part of the units issued in the Initial Public Offering
RAC: Rice Acquisition Corp.
RAC Opco: Rice Acquisition Holdings LLC
RECs: Renewable Energy Credits
Redeemable Warrants: The Company's Public Warrants and Forward Purchase Warrants
RINs: Renewable Identification Numbers
RNG: Renewable natural gas
RTO: Regional transmission organization
SEC: U.S. Securities and Exchange Commission
Sponsor: Rice Acquisition Sponsor LLC, a Delaware limited liability company

3


Cautionary Note Regarding Forward-Looking Statements
The information in this Amendment No. 1 on Quarterly Report on Form 10-Q/A (this "Report"), including, without limitation, statements under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “should,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other similar words. Forward-looking statements may relate to expectations for future financial performance, business strategies or expectations for the Company’s business. Specifically, forward-looking statements may include statements concerning market conditions and trends, earnings, performance, strategies, prospects and other aspects of the business of the Company. Forward looking statements are based on current expectations, estimates, projections, targets, opinions and/or beliefs of the Company, and such statements involve known and unknown risks, uncertainties and other factors.
The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward looking statements include, but are not limited to: (a) the ability to recognize the anticipated benefits of the Business Combinations and any transactions contemplated thereby, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably and retain its management and key employees; (b) the possibility that the Company may be adversely affected by other economic, business and/or competitive factors; (c) the Company’s ability to develop and operate new projects; (d) the reduction or elimination of government economic incentives to the renewable energy market; (e) delays in acquisition, financing, construction and development of new projects; (f) the length of development cycles for new projects, including the design and construction processes for the Company’s projects; (g) the Company’s ability to identify suitable locations for new projects; (h) the Company’s dependence on landfill operators; (i) existing regulations and changes to regulations and policies that affect the Company’s operations; (j) decline in public acceptance and support of renewable energy development and projects; (k) demand for renewable energy not being sustained; (l) impacts of climate change, changing weather patterns and conditions, and natural disasters; (m) the ability to secure necessary governmental and regulatory approvals; (n) the Company’s expansion into new business lines and (o) other risks and uncertainties indicated in the Registration Statement on Form S-1 (File No. 333-260094), originally filed by the Company with the SEC on October 6, 2021, as subsequently amended on October 18, 2021 and declared effective by the SEC on October 21, 2021 (the “Registration Statement”), including those under “Risk Factors” therein, and other documents filed or to be filed with the SEC by the Company.
Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
4

PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ARCHAEA ENERGY INC.
Consolidated Condensed Balance Sheets
(Unaudited)
(As Restated)
(in thousands, except shares and per share data)
September 30,
2021
December 31,
2020
 (As Restated)
ASSETS


Current Assets

Cash and cash equivalents
$ 153,644  $ 1,496 
Restricted cash
17,156  — 
Accounts receivable, net
30,244  1,780 
Inventory
9,285  — 
Prepaid expenses and other current assets 29,311  4,730 
Total Current Assets
239,640  8,006 
Property, plant and equipment, net
281,610  52,368 
Intangible assets, net
592,123  8,693 
Goodwill
27,011  2,754 
Equity method investments 237,265  — 
Other non-current assets 9,596  2,460 
Total Assets
$ 1,387,245  $ 74,281 
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable - trade
$ 6,466  $ 14,845 
Current portion of long-term debt, net
8,546  1,302 
Accrued and other current liabilities
21,587  8,270 
Total Current Liabilities
36,599  24,417 
Long-term debt, net
329,254  14,773 
Derivative liabilities
160,630  — 
Below market contracts 108,392  — 
Asset retirement obligations
3,904  306 
Other long-term liabilities
8,009  3,294 
Total Liabilities
646,788  42,790 
Commitments and Contingencies
Redeemable Noncontrolling Interests 1,179,616  — 
Equity
Members' Equity —  34,930 
Members' Accumulated Deficit —  (4,156)
Stockholders' Equity
Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding
—  — 
Class A common stock, $0.0001 par value; 900,000,000 shares authorized; 52,847,195 shares and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
— 
Class B common stock, $0.0001 par value; 190,000,000 shares authorized; 62,281,735 shares and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
— 
Additional paid in capital
—  — 
Accumulated deficit
(439,297) — 
Total Stockholders' Equity
(439,286) — 
Nonredeemable noncontrolling interests
127  717 
Total Equity
(439,159) 31,491 
Total Liabilities, Redeemable Noncontrolling Interests and Equity
$ 1,387,245  $ 74,281 
The accompanying notes are an integral part of these consolidated financial statements.

5



ARCHAEA ENERGY INC.
Consolidated Condensed Statements of Operations
(Unaudited)
(As Restated)

Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except shares and per share data)
2021 2020 2021 2020
(As Restated) (As Restated)
Revenues and Other Income




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

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

6

ARCHAEA ENERGY INC.
Consolidated Condensed Statement of Equity
(Unaudited)
(As Restated)

Total Equity


Total Stockholders' Equity
(in thousands)
Redeemable Noncontrolling
Interests
Members' Equity

Members' Accumulated Deficit
Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Nonredeemable Noncontrolling
Interests

Total
Equity
Balance - December 31, 2020
$ —  $ 34,930 

$ (4,156) $ — 

$ — 

$ — 

$ — 

$ 717 

$ 31,491 
Net income (loss) prior to Closing
—  — 

(18,744) — 

— 

— 

— 

(534)

(19,278)
Members' equity contributions —  70 

—  — 

— 

— 

— 

— 

70 
Share-based compensation expense prior to Closing
—  2,349 

—  — 

— 

— 

— 

— 

2,349 
Reclassification in connection with reverse recapitalization —  (37,349) 22,900  —  37,346  (22,900) —  — 
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability
—  — 

— 


346,239  — 

— 

346,245 
Issuance of Class B Common Stock in Aria Merger
—  — 

—  — 


394,908 

— 

— 

394,910 
Reclassification to redeemable noncontrolling interest
408,762  —  —  —  —  (431,662) 22,900  —  (408,762)
Net income (loss) after Closing (8,262) —  —  —  —  —  (7,011) (56) (7,067)
Adjustment of redeemable noncontrolling interest to redemption amount 779,116  —  —  —  —  (346,831) (432,286) —  (779,117)
Balance - September 30, 2021
$ 1,179,616  $ — 

$ —  $

$

$ — 

$ (439,297)

$ 127 

$ (439,159)
Total Equity

Total Stockholders' Equity




(in thousands)
Redeemable Noncontrolling
Interests
Members' Equity
Members' Accumulated Deficit

Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-in
Capital(

Accumulated
Deficit

Nonredeemable Noncontrolling
Interests

Total
Equity
Balance - December 31, 2019
$ —  $ 2,470  $ (1,683)

$ — 

$ — 

$ — 

$ — 

$ — 

$ 787 
Net income (loss)
—  —  (2,205)

— 

— 

— 

— 

386 

(1,819)
Members' equity contributions
—  32,460  — 

— 

— 

— 

— 

— 

32,460 
Noncontrolling interest in acquired business acquisition —  —  —  —  —  —  —  480  480 
Balance - September 30, 2020
$ —  $ 34,930  $ (3,888)

$ — 

$ — 

$ — 

$ — 

$ 866 

$ 31,908 



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

7

ARCHAEA ENERGY INC.
Consolidated Condensed Statement of Equity
(Unaudited)
(As Restated)

Total Equity

Total Stockholders' Equity



(in thousands)
Redeemable Noncontrolling Interests
Members' Equity
Members' Accumulated Deficit

Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Nonredeemable Noncontrolling
Interests

Total
Equity
Balance - June 30, 2021
$ —  $ 35,178  $ (14,331)

$ — 

$ — 

$ — 

$ — 

$ 462 

$ 21,309 
Net income (loss) prior to Closing
—  —  (8,569)

— 

— 

— 

— 

(279)

(8,848)
Share-based compensation expense prior to Closing
—  2,171  — 

— 

— 

— 

— 

— 

2,171 
Reclassification in connection with reverse recapitalization —  (37,349) 22,900  —  37,346  (22,900) —  — 
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability
—  —  — 



346,239 

— 

— 

346,245 
Issuance of Class B Common Stock in Aria Merger
—  —  — 

— 


394,908 

— 

— 

394,910 
Reclassification to redeemable noncontrolling interest
408,762  —  — 

— 

— 

(431,662)

22,900 

— 

(408,762)
Net income (loss) after Closing (8,262) —  —  —  —  —  (7,011) (56) (7,067)
Adjustment of redeemable noncontrolling interests to redemption amount 779,116  —  —  —  —  (346,831) (432,286) —  (779,117)
Balance - September 30, 2021
$ 1,179,616  $ —  $ — 

$

$

$ — 

$ (439,297)

$ 127 

$ (439,159)
Total Equity

Total Stockholders' Equity




(in thousands)
Redeemable Noncontrolling Interests Members' Equity

Members' Accumulated Deficit
Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Noncontrolling
Interests

Total
Equity
Balance - June 30, 2020
$ —  $ 18,220 

$ (3,028) $ — 

$ — 

$ —  $ — 

$ 608 

$ 15,800 
Net income (loss)
—  — 

(860) — 

— 

— 

— 

258 

(602)
Members' equity contributions
—  16,710 

—  — 

— 

— 

— 

— 

16,710 
Balance - September 30, 2020
$ —  $ 34,930 

$ (3,888) $ — 

$ — 

$ — 

$ — 

$ 866 

$ 31,908 


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

8

ARCHAEA ENERGY INC.
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(As Restated)

Nine Months Ended
September 30,
(in thousands)
2021

2020
(As Restated)
Cash flows from operating activities



Net income (loss)
$ (34,606)

$ (1,819)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation, amortization and accretion expense
4,077 

101 
Amortization of debt issuance costs
627 

— 
Amortization of intangibles and below-market contracts
(6)

— 
Bad debt expense
10 

76 
Return on investment in equity method investments
336 

— 
Equity in earnings of equity method investments
(879)

— 
Change in fair value of derivative liabilities
10,413 

— 
Forgiveness of Paycheck Protection Loan
(201)

— 
Stock-based compensation expense
2,887 

— 
Changes in operating assets and liabilities:

Accounts receivable
(692)

(1,124)
Inventory
(270)

— 
Prepaid expenses and other current assets
(22,315)

(627)
Accounts payable - trade
(1,207)

(335)
Accrued and other liabilities
(7,475)

810 
Other non-current assets (3,490) — 
Other long-term liabilities (1,919) 98 
Net cash provided by (used in) operating activities
(54,710)

(2,820)
Cash flows from investing activities

Acquisition of Aria, net of cash acquired
(463,334)

— 
Acquisition of assets and businesses, excluding Aria
(31,527)

(1,156)
Purchases of property, plant and equipment
(88,209)

(9,659)
Purchases of biogas rights
(202)

(7,892)
Contributions to equity method investments
(4,100)

— 
Net cash used in investing activities
(587,372)

(18,707)
Cash flows from financing activities

Borrowings on line of credit agreement
12,478 

— 
Repayments on line of credit agreement
(12,478)

— 
Proceeds from long-term debt, net of issuance costs
361,959 

— 
Repayments of long-term debt
(47,040)

— 
Proceeds from PPP Loan
— 

691 
Proceeds from reverse recapitalization and PIPE Financing
496,397 

— 
Capital contributions
70 

21,150 
Distributions to noncontrolling interest
— 

— 
Net cash provided by financing activities
811,386 

21,841 
Net increase (decrease) in cash, cash equivalents and restricted cash
169,304 

314 
Cash, cash equivalents and restricted cash - beginning of period
1,496 

423 
Cash, cash equivalents and restricted cash - end of period
$ 170,800 

$ 737 
Supplemental cash flow information:

Cash paid for interest1
$ 1,869 

$ — 
Non-cash investing activities:

Accruals of property, plant and equipment and biogas rights incurred but not paid
$ 2,317 

$ 1,597 
1Net of capitalized interest of $7.2 million and zero for the nine months ended September 30, 2021 and 2020, respectively.
The accompanying notes are an integral part of these consolidated financial statements.

9


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)

NOTE 1 - Organization and Description of Business
Archaea Energy Inc. ("Archaea" or the "Company"), a Delaware corporation (formerly named Rice Acquisition Corp.), is one of the largest RNG producers in the U.S., with an industry-leading RNG platform primarily focused on capturing and converting waste emissions from landfills and anaerobic digesters into low-carbon RNG and electricity. As of September 30, 2021, Archaea owns and operates a diversified portfolio of 23 LFG recovery and processing projects across 12 states, including 13 LFG to electric projects and 10 projects that produce pipeline-quality RNG.
On September 15, 2021, Archaea consummated the previously announced business combinations pursuant to (i) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Aria Merger Agreement”), by and among Rice Acquisition Corp., a Delaware corporation ("RAC"), Rice Acquisition Holdings LLC, a Delaware limited liability company and direct subsidiary of RAC (“RAC Opco”), LFG Intermediate Co, LLC, a Delaware limited liability company and direct subsidiary of RAC Opco (“RAC Intermediate”), LFG Buyer Co, LLC, a Delaware limited liability company and direct subsidiary of RAC Intermediate (“RAC Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Aria Merger Sub”), Aria Energy LLC, a Delaware limited liability company (“Aria”), and Aria Renewable Energy Systems LLC, a Delaware limited liability company, pursuant to which, among other things, Aria Merger Sub was merged with and into Aria, with Aria surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Aria Merger Agreement, the “Aria Merger”), and (ii) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Archaea Merger Agreement” and, together with the Aria Merger Agreement, the “Business Combination Agreements”), by and among RAC, RAC Opco, RAC Intermediate, RAC Buyer, Fezzik Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Archaea Merger Sub”), Archaea Energy LLC, a Delaware limited liability company, and Archaea Energy II LLC, a Delaware limited liability company (“Legacy Archaea”), pursuant to which, among other things, Archaea Merger Sub was merged with and into Legacy Archaea, with Legacy Archaea surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Archaea Merger Agreement, the “Archaea Merger” and, together with the Aria Merger, the “Business Combinations”). As further discussed in Note 4 - Business Combinations and Reverse Recapitalization, Legacy Archaea was determined to be the accounting acquirer of the Business Combinations, and Aria was the predecessor to the Company.
Archaea has retained its “up-C” structure, whereby all of the equity interests in Aria and Legacy Archaea are held by RAC Buyer, all of the equity interests in RAC Buyer are held by RAC Intermediate, all of the equity interests in RAC Intermediate are held by Opco and Archaea’s only assets are its equity interests in Opco. In connection with the consummation of the Business Combinations, Opco, or Rice Acquisition Holdings LLC was renamed LFG Acquisition Holdings LLC. In accordance with Accounting Standards Codification ("ASC") 810 - Consolidation, Opco is considered a variable interest entity ("VIE") where Archaea is the sole managing member of Opco, and therefore, the primary beneficiary. As such, Archaea consolidates Opco, and the remaining unitholders that hold economic interest directly at Opco are presented as redeemable noncontrolling interests on the Company’s financial statements.
10


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Opco issued additional Class A Common Units as part of the consideration in the Business Combinations. The ownership structure of Opco upon closing of the Business Combinations, which gives rise to the redeemable noncontrolling interest at Archaea, is as follows:
Equity Holder
Class A Common Units
% Interest
Archaea
52,847,195  45.9  %
Total controlling interests
52,847,195  45.9  %
Aria Holders
23,000,000  20.0  %
Legacy Archaea Holders
33,350,385  29.0  %
Sponsor, Atlas and RAC independent directors
5,931,350  5.2  %
Total redeemable noncontrolling interests
62,281,735  54.1  %
Total
115,128,930  100.0  %
NOTE 2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
These unaudited, interim, consolidated condensed financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and in accordance with the rules and regulations of the SEC. These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the results for the interim periods presented. The Company's accounting policies conform to US GAAP and have been consistently applied in the presentation of financial statements. The Company's consolidated condensed financial statements include all wholly-owned subsidiaries and all variable interest entities that the Company determined it is the primary beneficiary. Certain information and disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted.
The Archaea Merger with RAC was accounted for as a reverse recapitalization with Legacy Archaea deemed the accounting acquirer, and therefore, there was no step-up to fair value of any RAC assets or liabilities and no goodwill or other intangible assets were recorded. The Aria Merger was accounted for using the acquisition method of accounting with Aria deemed to be the acquiree for accounting purposes. The Company also determined that Aria is the Company's predecessor and therefore has included the historical financial statements of Aria as predecessor beginning on page 38. The Company recorded the fair value of the net assets acquired from Aria as of the Business Combination Closing Date, and goodwill was recorded. See Note 4 - Business Combinations and Reverse Recapitalization for additional information regarding the Archaea Merger and Aria Merger.
Restatement of Previously Issued Financial Statements
The Company restated its consolidated condensed balance sheet as of September 30, 2021, its consolidated condensed statements of operations and consolidated condensed statements of equity for the three and nine months ended September 30, 2021, and its consolidated condensed statement of cash flows for the nine months ended September 30, 2021 for the successor. The restatement only impacts the third quarter of 2021 and the nine months ended September 30, 2021, and has no effect on periods prior to the third quarter of 2021. The restatement corrects the error related to a duplicate entry recorded for the reverse recapitalization transaction. Specifically, an entry was recorded to both the subledger and general ledger as part of the movement of activity from Archaea Energy LLC to the newly formed Archaea Energy II LLC for the reverse recapitalization resulting in a duplicate entry error. The error caused an understatement of accounts payable - trade and general and administrative expenses of $2.8 million in our successor financial statements. This understatement also resulted in an understatement of the net loss attributable to Legacy Archaea and, as such, had no impact on net loss attributable to Class A common stock or related net loss per Class A common share. In addition, due to the adjustment of the redeemable noncontrolling interest to redemption value as discussed in Note 13 - Redeemable Noncontrolling Interest and Stockholders' Equity, the error correction impacted accumulated deficit. The error had no
11


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
impact on the predecessor financial statements. The Company has made necessary conforming changes in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” resulting from the correction of this error.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above on the Company's previously reported unaudited balance sheet as of September 30, 2021:
September 30, 2021
(in thousands) As Previously Reported Adjustment As Restated
Accounts payable - trade $ 3,630  2,836  $ 6,466 
Total Liabilities $ 643,952  2,836  $ 646,788 
Accumulated deficit $ (436,461) (2,836) $ (439,297)
Total Stockholders' Equity $ (436,450) (2,836) $ (439,286)
The table below presents the effect of the financial statement adjustments related to the restatement discussed above on the Company's previously unaudited income statements for the three and nine months ended September 30, 2021:
Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
(in thousands) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated
General and administrative expenses $ 9,053  2,836  $ 11,889  $ 20,097  2,836  $ 22,933 
Operating Income (Loss) $ (9,423) (2,836) $ (12,259) $ (20,128) (2,836) $ (22,964)
Net Income (Loss) $ (21,341) (2,836) $ (24,177) $ (31,770) (2,836) $ (34,606)
Net income (loss) attributable to Legacy Archaea $ (5,733) (2,836) $ (8,569) $ (15,908) (2,836) $ (18,744)
The Company's unaudited statements of equity have been restated to reflect the changes to the impacted equity activity as described above.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above on the Company's previously unaudited statement of cash flows for the nine months ended September 30, 2021:
Nine Months Ended September 30, 2021
(in thousands) As Previously Reported Adjustment As Restated
Net Income (Loss) $ (31,770) (2,836) $ (34,606)
Accounts payable - trade
$ (4,043) 2,836  $ (1,207)
Net cash provided by (used in) operating activities
$ (54,710) —  $ (54,710)
Principles of Consolidation
The consolidated condensed financial statements include the assets, liabilities and results of operations of the Company and its consolidated subsidiaries beginning on September 15, 2021, which includes 16 days of the combined results of the businesses of Legacy Archaea and Aria as operated by the Company after the Business Combination. The consolidated assets, liabilities and results of operations prior to the September 15, 2021 reverse recapitalization are those of Legacy Archaea, the accounting acquirer.
The Company has determined that Opco is a VIE and the Company is the primary beneficiary. Therefore, the Company consolidates Opco, and ownership interests of Opco not owned by the Company are reflected as redeemable noncontrolling interests due to certain redemption features. Entities that are majority-owned by Opco are consolidated. Certain
12


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
investments in entities are accounted for as equity method investments and included separately in the Company's Condensed Consolidated Balance Sheet.
All intercompany balances and transactions have been eliminated.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make the comparison of the Company’s consolidated condensed financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. The Company will re-evaluate its status as an emerging growth company in June 2022 and may no longer qualify as an emerging growth company.
Use of Estimates
The preparation of consolidated condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated condensed financial statements.
Noncontrolling and Redeemable Noncontrolling Interest
Noncontrolling interest represents the portion of equity ownership in subsidiaries that is not attributable to the stockholder's equity of the Company. Noncontrolling interests are initially recorded at the transaction price which is equal to their fair value, and the amount is subsequently adjusted for the proportionate share of earnings and other comprehensive income attributable to the noncontrolling interests and any dividends or distributions paid to the noncontrolling interests. Effective with the Business Combinations, noncontrolling interest includes the economic interest of Opco Class A units not owned by the Company, which has been classified as redeemable noncontrolling interest due to certain provisions that allow for cash settlement at the Company's election. See Note 4 - Business Combinations and Reverse Recapitalization.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are characterized according to a hierarchy that prioritizes
13


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
those inputs based on the degree to which they are observable. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company's own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.
The three input levels of the fair value hierarchy are as follows:
Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into account the characteristics of the asset.
The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.
The Company’s financial assets and liabilities are classified based on the lowest level of input that is significant for the fair value measurement. The Company reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original level. There were no transfers between fair value hierarchy levels for the periods ended September 30, 2021 and December 31, 2020.
As of September 30, 2021 and December 31, 2020, the fair value of other financial instruments including cash and cash equivalents, prepaid expenses, accounts payable, accrued and deferred expenses approximate the carrying values because of the short-term maturity of those items. There were no changes in the methods or assumptions used in the valuation techniques by the Company during the nine months ended September 30, 2021 or the year ended December 31, 2020.
Revenue Recognition
The Company generates revenues from the production and of sales of RNG, renewable electricity generation (“Power”), and associated Environmental Attributes, as well as the performance of other landfill energy operations and maintenance (“O&M”) services. The Company also manufactures and sells customized pollution control equipment and performs associated maintenance agreement services. Based on requirements of US GAAP, a portion of revenue is accounted for under ASC 840 - Leases and a portion under ASC 606 - Revenue from Contracts with Customers. Under ASC 840, lease revenue is recognized generally upon delivery of RNG, electricity and their related renewable Environmental Attributes. Under ASC 606, revenue is recognized when (or as) the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service either when (or as) its customer obtains control of the product or service. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring its products or services. Based on the terms of the related sales agreements, the amounts recorded under ASC 840 as lease revenue are generally consistent with revenue recognized under ASC 606. For the nine months ended September 30, 2021, approximately 82% of revenue was accounted for under ASC 606 and 18% under ASC 840. For the nine months ended September 30, 2020, 100% of revenue was accounted for under ASC 606.
RNG

The Company’s RNG production commenced in 2021 at its Boyd County facility and has expanded with the acquisition of Aria, which at the time of the Business Combinations owned or operated nine operating RNG facilities. The Company has
14


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
long-term off-take contracts with creditworthy counterparties for the sale of RNG and related Environmental Attributes. Certain long-term off-take contracts for current production are accounted for as operating leases and have no minimum lease payments. All of the rental income under these leases is recorded as revenue when the RNG is delivered to the customer. RNG not covered by off-take contracts is sold under short-term market-based contracts. When the performance obligation is satisfied through the delivery of RNG to the customer, revenue is recognized. The Company receives payments from the sale of RNG production within one month after delivery.
The Company also earns revenue by selling Environmental Attributes, including RINs and LCFS credits, which are generated when producing and selling RNG for use in certain transportation markets. The majority of RINs are generated by plants for which the Company has off-take agreements to sell all of the outputs and are therefore accounted for as operating leases, and revenue is recognized when the RNG is produced and the RNG and associated RIN is transferred to a third party. The remaining RIN and LCFS sales were under short-term contracts, and revenue is recognized when the RIN or LCFS is transferred to a third party.
Power
The Company’s Power production commenced in April 2021 following the acquisition of PEI Power LLC ("PEI") and has expanded as a result of the acquisition of Aria, which at the time of the Business Combinations owned or operated twelve operating landfill gas to electric facilities. A significant portion of the electricity generated is sold and delivered under the terms of Power Purchase Agreements (“PPAs”) or other contractual arrangements. Revenue is recognized based upon the amount of electricity delivered at rates specified under the contracts. Certain PPAs are accounted for as operating leases and have no minimum lease payments. All of the rental income under these leases is recorded as revenue when the electricity is delivered. Power not covered by PPAs is typically sold under a market-based contract with a regional transmission organization or in the wholesale markets. When the performance obligation is satisfied through the delivery of Power to the customer, revenue is recognized. The Company receives payments from the sale of power production within one month after delivery.
Another portion of electricity is also sold through energy wholesale markets (NYISO, ISO-NE, and PJM) into the day-ahead market. Revenue is recognized based upon the amount of electricity delivered into the day-ahead market and the day-ahead market’s clearing prices.
The Company also sells capacity into the month-ahead and three-year ahead markets in the wholesale markets noted above. Capacity revenues are recognized when contractually earned and consist of revenues billed to a third party at a negotiated contract price for making installed generation capacity available to satisfy system integrity and reliability requirements.
The Company also earns revenue by selling RECs, which are generated when producing and selling Power generated from renewable energy. For REC sales that are under contracts independent from Power sales, revenue is recognized when the REC is transferred to a third party. For REC sales that are bundled with Power sales, revenue is recognized at the time Power is produced when an active market and a sales agreement exist for the RECs.
Operation and Maintenance (“O&M”)
The Company also generates revenues by providing O&M services at projects owned by third parties which are also included in Energy revenue. In addition, the Company also provides O&M services at projects owned by its equity method investment, Mavrix, LLC ("Mavrix"). Revenue for these services is recognized upon the services being provided following contractual arrangements primarily based on the production of RNG or Power from the project.
Equipment and Associated Services
The Company’s performance obligations related to the sales of equipment are satisfied over time because the Company’s performance under each customer contract produces 1) an asset with no alternative future use to the entity, because each products solution is customized to the specific needs of each customer and 2) the Company has an enforceable right to payment under the customer termination provisions for convenience. The Company measures progress under these arrangements using an input method based on costs incurred.
15


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The Company’s performance obligations related to the sales of the associated services are satisfied over time because the customer simultaneously receives and consumes the benefits provided by the Company’s performance as it performs. The Company elected to recognize the sales of the associated services using the “right-to-invoice” practical expedient.
See Note 5 - Revenues for further discussion.
Business Combinations
For business combinations that meet the accounting definition of a business, the Company determines and allocates the purchase price of an acquired company to the tangible and intangible assets acquired, the liabilities assumed and noncontrolling interest, if applicable, as of the date of acquisition at fair value. Fair value may be estimated using comparable market data, a discounted cash flow method, or a combination of the two. In the discounted cash flow method, estimated future cash flows are based on management’s expectations for the future and can include estimates of future biogas production, commodity prices, operating and development costs, and a risk-adjusted discount rate. Revenues and costs of the acquired companies are included in the Company's operating results from the date of acquisition.
The Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, and these estimates and assumptions are inherently uncertain and subject to refinement during the measurement period not to exceed one year from the acquisition date. As a result, any adjustment identified subsequent to the measurement period is included in operating results in the period in which the amount is determined. The Company’s acquisitions are discussed in Note 4 - Business Combinations and Reverse Recapitalization.
Restricted Cash
The Company maintains escrow accounts under the terms of the Assai Energy 3.75% Senior Secured Notes and the Assai Energy 4.47% Senior Secured Notes. See Note 10 - Debt. The escrow accounts are legally restricted disbursement accounts for payment of construction-related costs for the Assai biogas project, as well as for future interest and principal payments to the secured investors and future royalty payments. Due to these arrangements, the Company has classified the amounts in escrow as restricted cash.
Accounts Receivable and Allowance for Doubtful Accounts
The Company recognizes accounts receivable at invoiced amounts and maintains a valuation allowance for accounts in which collectability is in question. The carrying amount of accounts receivable represents the amount management expects to collect from outstanding balances. Credit is extended to all qualified customers under various payment terms with no collateral required. There were no material credit allowances as of September 30, 2021 or December 31, 2020.
Inventory
Inventory is stated at the lower of weighted average cost or net realizable value. Inventory consists primarily of manufacturing parts and supplies used in the maintenance of production equipment.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and impairments. Depreciation is recognized using the straight-line method at rates based on the estimated useful lives of the various classes of property, plant and equipment. Estimates of useful lives are based upon a variety of factors including durability of the asset, the amount of usage that is expected from the asset and the Company’s business plans for the asset. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Subsequent changes in regulations, business strategies or other factors could lead to a change in the useful life of an asset.
Costs associated with the construction of biogas facilities are capitalized during the construction period. Capitalized costs include direct costs including engineering, pipeline and plant construction, wages and benefits, consulting, equipment, and
16


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
other overhead costs. When a biogas plant is placed in service, the costs associated with the biogas plant will be transferred from construction in progress to property and equipment and depreciated over its expected useful life.
Costs of improvements that extend the lives of existing properties are capitalized, whereas maintenance and repairs are expensed as incurred.
Impairment of Long-Lived Assets
Long-lived assets with finite useful lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset group to future undiscounted cash flows expected to be generated by the asset or asset group. Such estimates are based on certain assumptions, which are subject to uncertainty and may materially differ from actual results. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
The Company evaluates long-lived assets, such as property, plant and equipment, including construction in progress, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. When the Company believes an impairment condition may have occurred, it is required to estimate the undiscounted future cash flows associated with the long-lived asset or group of long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities for long-lived assets that are expected to be held and used. If the Company determines that the undiscounted cash flows from an asset to be held and used are less than the carrying amount of the asset, or if the Company has classified an asset as held for sale, the Company would evaluate fair value to determine the amount of any impairment charge.
Equity Method Investments
Investments in entities which the Company does not control or variable interest entities in which the Company is not the primary beneficiary are accounted for using the equity method of accounting. Under this method, the Company records its proportional share of equity earnings or losses in the consolidated condensed statements of operations. Investments are increased by additional contributions and earnings and are reduced by equity losses and distributions.
Goodwill
Goodwill is determined as the excess of the consideration transferred over the fair value of the acquired assets and assumed liabilities in a business combination. Goodwill is not amortized, but rather tested for impairment annually on October 1, or earlier if an event occurs, or circumstances change, that indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount including goodwill, the Company will then perform a quantitative goodwill impairment test.
Asset Retirement Obligations
The Company recognizes a liability for obligations which the Company has a legal or a contractual obligation to remove a long-lived asset. Liabilities are recorded at estimated fair value with the associated asset retirement costs being capitalized as a part of the carrying amount of the long-lived asset. Accretion expense is recognized over time as the discounted liabilities are accreted to their expected settlement value and is included in Depreciation, amortization and accretion in the consolidated condensed statement of operations. The Company has recognized asset retirement obligations ("AROs") arising from legal or regulatory requirements to perform certain asset retirement activities at the time that certain contracts terminate, including the costs of removing our facilities from the landfill property and returning the land to the state it was in prior to our facility construction.
The fair value of asset retirement obligations are measured using expected cash outflows associated with the ARO. ARO estimates are derived from historical costs and management’s expectations of future cost elements, and therefore, the Company has designated these liabilities as Level 3 financial liabilities. The significant inputs to this fair value
17


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
measurement include cost estimates of assets removal, site clean-up, transportation and remediation costs, inflation estimates, and the Company's credit-adjusted risk-free rate.
Postretirement Obligations
Postretirement benefits amounts recognized in consolidated condensed financial statements are determined on an actuarial basis. The Company obtains an independent actuary valuation of its postretirement obligation annually as of December 31. To calculate the present value of plan liabilities, the discount rate needs to be determined which is an estimate of the interest rate at which the retirement benefits could be effectively settled. The discount rate is determined using the average effective rate derived through matching of projected benefit payments with the discount rate curve published by Citigroup as of each reporting date.
Income Taxes
As a result of the Company’s up-C structure effective with the Business Combinations, the Company expects to be a tax-paying entity. However, as the Company has historically been loss-making, any deferred tax assets created as a result of net operating losses and other deferred tax assets for the excess of tax basis in Archaea Energy Inc.'s investment in Opco would be offset by a full valuation allowance. Prior to the Business Combinations, Legacy Archaea and its subsidiaries were organized as a limited liability company, with the exception of one partially-owned subsidiary which filed income tax returns as a C-Corporation.
The Company accounts for its income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.
Judgment is required in determining the provisions for income and other taxes and related accruals, and deferred tax assets and liabilities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. Additionally, the Company's various tax returns are subject to audit by various tax authorities. Although the Company believes that its estimates are reasonable, actual results could differ from these estimates.
Derivative Instruments
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 under US GAAP. Derivative instruments are recognized on the consolidated balance sheets at fair value, with subsequent changes included in earnings. Certain contracts that are used to manage exposure to commodity prices are accounted for as derivatives, unless they meet the normal purchase/normal sale criteria and are designated and documented as such.
Share-based Compensation
The Company accounts for share-based compensation at fair value. Restricted stock units are valued at the grant date using the market price of the Company’s Class A Common Stock. The Company records share-based compensation cost, net of actual forfeitures, on a straight-line basis over the requisite service period of the respective award.
NOTE 3 – Recently Issued and Adopted Accounting Standards
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02 “Leases (Topic 842)” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous generally accepted accounting principles and the new requirements under Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 is effective for the Company for fiscal years beginning after December 15, 2021 with early adoption permitted.
18


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The Company will adopt Topic 842 as of January 1, 2022, and it is not expected to have a material impact on the financial condition, results of operations, or cash flows.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes, to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocations, the methodology for calculating income taxes in an interim period, and recognition of the deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted. The Company adopted ASU No. 2019-12 as of January 1, 2021, and the adoption of this guidance did not have a material impact on the consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time to ease the transition from LIBOR to an alternative reference rate. The guidance intends to address certain concerns relating to accounting for contract modifications and hedge accounting. These optional expedients and exceptions to applying GAAP, assuming certain criteria are met, are allowed through December 31, 2022. The Company is currently evaluating the provisions of this update and has not yet determined whether it will elect the optional expedients. The Company does not expect the transition to an alternative rate to have a material impact on its business, operations or liquidity.
NOTE 4 – Business Combinations and Reverse Recapitalization
On September 15, 2021, Archaea consummated the previously announced Business Combinations with Aria and Legacy Archaea, as described in Note 1 - Organization and Description of Business.
Reverse Recapitalization
Legacy Archaea is considered the accounting acquirer of the Business Combinations because Legacy Archaea Holders have the largest portion of the voting power of the Company and Legacy Archaea’s senior management comprise the majority of the executive management of the Company. Additionally, the Legacy Archaea Holders appointed the majority of board members exclusive of the independent board members. The Archaea Merger represents a reverse merger and is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, RAC is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Archaea Merger is treated as the equivalent of Legacy Archaea issuing shares for the net assets of RAC, accompanied by a recapitalization. The net assets of RAC were stated at historical cost, no goodwill or other intangible assets were recorded.
The Archaea Closing Merger Consideration consisted of 33,350,385 newly issued Opco Class A units and 33,350,385 newly issued shares of Class B Common Stock.
In the reverse recapitalization, the Company received $236.9 million in gross cash proceeds from RAC upon Closing. For accounting purposes, these cash proceeds were treated as the equivalent of proceeds for issuance of the following outstanding shares and warrants at the time of Closing:
23,680,528 shares of Class A Common Stock, after redemptions
5,931,350 shares of Class B Common Stock
11,862,492 Public Warrants and 6,771,000 Private Placement Warrants, each exercisable at a price of $11.50 per share. See Note 11 - Derivatives for further discussion.
19


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
In connection with the Business Combinations, the Company incurred approximately $40.5 million of equity issuance costs, mainly consisting of underwriting, legal, consulting, and other professional fees, which are recorded to additional paid-in capital as a reduction of proceeds.
PIPE Financing
On April 7, 2021, in connection with its entry into the Business Combination Agreements, the Company entered into subscription agreements (each, an “Initial Subscription Agreement”) with certain investors (the “Initial PIPE Investors”) pursuant to which, among other things, the Initial PIPE Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Initial PIPE Investors, an aggregate of 30.0 million shares of the Company’s Class A Common Stock for an aggregate purchase price of $300.0 million ($10.00 per share), on the terms and subject to the conditions set forth therein (the “Initial PIPE Financing”).
Additionally, on April 7, 2021, RAC, RAC Opco, Sponsor and Atlas Point Energy Infrastructure Fund, LLC, a Delaware limited liability company (“Atlas”), entered into an Amendment to Forward Purchase Agreement (the “FPA Amendment”) pursuant to which the Forward Purchase Agreement, dated as of September 30, 2020 (the “Original FPA Agreement” and, together with the FPA Amendment, the “FPA”), by and among such parties was amended to provide that Atlas shall purchase a total of $20.0 million of Forward Purchase Securities (as defined in the Original FPA Agreement) and the Forward Purchase Warrants (as defined in the Original FPA Agreement) will consist of one-eighth of one redeemable warrant (where each whole redeemable warrant is exercisable to purchase one share of Class A Common Stock at an exercise price of $11.50 per share). Atlas satisfied its obligation to purchase the Forward Purchase Securities by participating in the PIPE Financing, and upon consummation of the Combinations, Atlas received 250,000 warrants (each exercisable for one share of Class A Common Stock at a price of $11.50).
On September 13, 2021, due to the expectation that one of the Initial PIPE Investors would not be able to fulfill its $25.0 million commitment for 2.5 million shares ($10.00 per share) in the Initial PIPE Financing, the Company entered into additional subscription agreements (each, a “Follow-On Subscription Agreement”) with certain investors (the “Follow-On PIPE Investors” and, together with the Initial PIPE Investors, the “PIPE Investors”) pursuant to which, among other things, the Follow-On PIPE Investors agreed to subscribe for and purchase from the Company, and the Company agreed to issue and sell to the Follow-On PIPE Investors, an aggregate of 1,666,667 newly issued shares of the Company’s Class A Common Stock for an aggregate purchase price of $25.0 million ($15.00 per share), on the terms and subject to the conditions set forth therein (the “Follow-On PIPE Financing” and, together with the Initial PIPE Financing, the “PIPE Financing”). Each Follow-On Subscription Agreement is substantially identical to the form of Initial Subscription Agreement.
On the Closing Date, gross consideration of $300 million was received under the PIPE Financing, including the proceeds under the FPA Amendment, in exchange for 29,166,667 shares of Class A Common Stock and 250,000 warrants (each warrant exercisable for one share of Class A Common Stock at a price of $11.50).
Aria Merger
Aria was acquired to complement Archaea's existing RNG assets and for its operational expertise in the renewable gas industry. Aria was determined to be a VIE immediately prior to the Business Combination. Concurrent with the Business Combinations, the Company became the primary beneficiary of Aria. The Aria Merger Consideration consisted of both cash consideration and consideration in the form of newly issued Opco Class A units and newly issued shares of the Company’s Class B Common Stock. The cash component of the Aria Merger Consideration paid upon Closing was $377.1 million paid to Aria Holders, subject to certain future adjustments set forth in the Aria Merger Agreement, and $91.1 million for repayment of Aria debt. The remainder of the Aria Closing Merger Consideration consisted of 23.0 million Opco Class A units and 23.0 million shares of Class B Common Stock.
20


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Total consideration was determined to be as follows:
(in thousands) At September 15, 2021
Issuance of Opco Class A units $ 394,910 
Cash consideration 377,122
Repayment of Aria debt at Closing 91,115 
Total Purchase Price Consideration $ 863,147 
The Aria Merger represented an acquisition of a business and was accounted for using the acquisition method, whereby all of the assets acquired, liabilities assumed and noncontrolling interests were recognized at their fair value on the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill. Certain data to complete the purchase price allocation is not yet available, including but not limited to final appraisals of certain assets acquired and liabilities assumed. The Company will finalize the purchase price allocation during the 12-month period following the Closing, during which time the value of the assets and liabilities may be revised as appropriate. The following table sets forth the preliminary allocation of the Aria Merger consideration.
(in thousands)
As of September 15,
2021
Fair value of assets acquired:

Cash and cash equivalents
$ 4,903 
Account receivable, net
27,331 
Inventory 9,015 
Prepaid expenses and other current assets
3,834 
Property, plant and equipment, net
120,517 
Intangible assets, net
585,398 
Equity method investments
232,619 
Other non-current assets
861 
Goodwill 24,257 
Amount attributable to assets acquired
$ 1,008,735 


Fair value of liabilities assumed:

Accounts payable
$ 2,760 
Accrued and other current liabilities
25,069 
Below-market contracts 108,880 
Other long-term liabilities
8,879 
Amount attributable to liabilities assumed
145,588 
Net assets acquired
863,147 
Total Aria Merger consideration
$ 863,147 
The goodwill is primarily attributable to the expected synergies Archaea believes will be created as a result of the combined companies, the ability to enhance Aria's current RNG assets, and the ability to convert certain of Aria's power assets to RNG assets. We expect a majority, if not all of the goodwill, to be assigned to the RNG reporting unit upon finalizing the purchase price allocation. Due the existence of cumulative losses, no deferred taxes are recorded for the Aria merger transaction.
Included in the consolidated statement of operations for both the three and nine months ending September 30, 2021 are revenues of $6.2 million and net income of $0.6 million related to results of Aria for the 16 day period from the Closing of
21


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
the Business Combinations through September 30, 2021. The Company recognized transaction costs of $2.7 million during the three and nine months ended September 30, 2021 related to the Business Combinations.
Unaudited Pro Forma Operating Results
The following unaudited pro forma combined financial information has been prepared as if the Aria Merger and other related transactions had taken place on January 1, 2020. The information reflects pro forma adjustments based on certain assumptions that the Company believes are reasonable, including depreciation of the Company's fair-value property, plant and equipment and landfill gas rights, amortization of fair value intangibles and below-market contracts, and that debt associated with the transaction was outstanding as of January 1, 2020. Additionally, pro forma net loss attributable to Class A Common Stock excludes $19.2 million of transaction costs. The pro forma combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the Aria Merger taken place on January 1, 2020; furthermore, the pro forma financial information is not intended to be a projection of future results.
(Unaudited Pro Forma)
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2021 2020 2021 2020
(As Restated) (As Restated)
Total Revenues $ 48,538  $ 37,474  $ 143,525  $ 115,237 
Net Income (Loss) $ (11,934) $ (3,825) $ 58,345  $ (9,017)
Stockholders’ Agreement
Pursuant to the terms of the Stockholders Agreement, the Company Holders (as defined in the Stockholders Agreement) were granted certain customary registration rights. Also, the Aria Holders (as defined in the Stockholders Agreement) are subject to a 180-day lock-up period on transferring their equity interests in the Company and Opco, while the Legacy Archaea Holders (as defined in the Stockholders Agreement) are subject to a lock-up period (i) ending on the date that is the two-year anniversary of the Closing Date solely with respect to the Company Interests distributed by Archaea Energy LLC after the one-year anniversary of the Closing Date to the Legacy Archaea Holders who are members of management of the Company as of the Closing or their Affiliates (as defined in the Stockholders Agreement) and (ii) ending on the date that is the one-year anniversary of the Closing Date with respect to all other Company Interests issued to the Legacy Archaea Holders at the Closing other than those described in the immediately foregoing clause (i).
The lock-up restrictions applicable to the Aria Holders are subject to early expiration based on the per share trading price of the Company’s Class A Common Stock, par value $0.0001, as set forth in the Stockholders Agreement. The Stockholders Agreement generally provides that if, following the Closing, the last sale price of the Class A Common Stock (as adjusted for the stock splits, stock dividends, reorganizations, recapitalizations and similar transactions) (the "trading share price") on the principal exchange on which such securities are then listed or quoted for any 10 trading days within any 15 trading-day period commencing 15 days after the Closing, exceeds (i) $13.50 per share, then the Aria Holders, together with their permitted transferees, may transfer the equity interests in the Company that they received pursuant to the Aria Merger Agreement (the "Aria Closing Shares) during the 180-day lock-up period without restriction in an amount up to one-third of the Aria Closing Shares, (ii) $16.00 per share, then the Aria Holders, together with their permitted transferees, may transfer up to an additional one-third of the Aria Closing Shares in excess of the Aria Closing Shares described in the foregoing clause (i) (i.e., up to two-thirds of the Aria Closing Shares in the aggregate) without restriction, and (iii) $19.00 per share, then the Aria Holders, together with their permitted transferees, may transfer any of the Aria Closing Shares without restriction. As of November 11, 2021, all of the Aria Closing Shares were no longer subject to the lock-up restrictions due to Class A Common Stock trading prices.
Predecessor Financial Statements
Archaea determined that Aria is the predecessor to the Company due to the relative fair values of the Company and legacy operations Aria had compared to Archaea. As such, we have included Aria's consolidated statements of operations for the periods from July 1 to September 14, 2021, from January 1 to September 14, 2021, and the three months and nine months
22


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
ended September 30, 2020, and the consolidated balance sheet as of December 31, 2020 following the Notes to the Company's Consolidated Condensed Financial Statements for comparative purposes.
Other Business Acquisitions
Gulf Coast Environmental Systems
On January 14, 2020, Legacy Archaea entered into a Membership Interest and Loan Purchase Agreement with NEI Ventures, LLC (“Noble”). Pursuant to this agreement, Legacy Archaea purchased 51% of the Class A membership interests of GCES for consideration of $0.5 million. Additionally, Legacy Archaea purchased a loan receivable held by Noble which was due from GCES for consideration of approximately $0.7 million. In February 2020, Legacy Archaea obtained additional Class A interests in consideration of waiving certain receivables, and thereby increasing its GCES ownership to 72.2%.
The acquisition of GCES was accounted for using the acquisition method, whereby all of the assets acquired, liabilities assumed and noncontrolling interests were recognized at their estimated fair value on the acquisition date, with the excess of the purchase price over the estimated fair value recorded as goodwill. The Company recorded goodwill of approximately $2.7 million.
NOTE 5 – Revenues
Revenue by Product Type
The following table disaggregates revenue by significant product type for the periods indicated:
(in thousands)
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
RNG, including RINs and LCFSs
$ 5,525  $ —  $ 6,346  $ — 
Gas O&M service
110  —  110  — 
Power, including RECs
5,125  —  7,363  — 
Electric O&M service
156  —  156  — 
Equipment and associated services
865  1,904  4,588  4,496 
Total
$ 11,781  $ 1,904  $ 18,563  $ 4,496 
Contract Assets and Contract Liabilities
The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to customers, as the amounts cannot be billed under the terms of the contracts. Contract liabilities from contracts arise when amounts invoiced to customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from customers on certain contracts. Contract liabilities decrease as revenue is recognized from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when such revenue is expected to be recognized.
Contract assets and liabilities consisted of the following as of September 30, 2021 and December 31, 2020:
(in thousands) September 30,
2021
December 31,
2020
Contract assets (included in Prepaid expenses and other current assets)
$ 104  $ 48 
Contract liabilities (included in Accrued and other current liabilities)
$ (520) $ (1,423)
23


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Transaction Price Allocated to Remaining Unsatisfied Performance Obligations
Remaining performance obligations at September 30, 2021 were approximately $2.3 million.
Projects are included within remaining performance obligations at such time the project is awarded and agreement on contract terms has been reached. Remaining performance obligations include amounts related to contracts for which a fixed price contract value is not assigned only when a reasonable estimate of total transaction price can be made. Remaining performance obligations include unrecognized revenues to be realized from uncompleted contracts and firm sales contracts with original terms in excess of one year.
NOTE 6 – Property, Plant and Equipment
Property, plant and equipment consist of the following as of September 30, 2021 and December 31, 2020:
(in thousands)
September 30,
2021
December 31,
2020
Machinery and equipment
$ 151,248  $ 376 
Buildings and improvements
16,827  88 
Furniture and fixtures
569  13 
Construction in progress
115,337  51,927 
Land
86 
Total cost
284,067  52,405 
Less: Accumulated depreciation
(2,457) (37)
Property, plant and equipment, net
$ 281,610  $ 52,368 
NOTE 7 – Equity Method Investments
As a result of the Aria Merger, the Company holds 50% interest in two joint ventures, Mavrix and Sunshine Gas Producers, LLC. ("SGP"), which are accounted for using the equity method. In addition, the Company also owns several other investments accounted for using the equity method of accounting.
Under the terms of the original Mavrix, LLC Contribution Agreement dated September 30, 2017, the Company is required to make an earn-out payment to its joint venture partner holding the other 50% membership in Mavrix in an amount up to $9.55 million. The earn-out payment represents additional consideration for the Company's equity interest in Mavrix and will be based on the performance of certain projects owned by Mavrix through the earn-out period which ends September 30, 2022. No earn-out payment is due until the completion of the earn-out period. The Company has estimated the earn-out payment to be $1.7 million at September 30, 2021, and this amount was reflected in the accompanying balance sheet in other long-term liabilities.

The summarized financial information for the Mavrix and SGP equity method investments following the Business Combinations is as follows: 
(in thousands)
September 30,
2021
Assets
$ 200,106 
Liabilities
20,531 
Net assets
$ 179,575 
Company's share of equity in net assets
$ 89,787 
24


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
(in thousands)
Three Months Ended
September 30, 2021
Nine Months Ended
September 30, 2021
Total revenues
$ 4,786  $ 4,786 
Net income
$ 2,259  $ 2,259 
Company's share of net income
$ 1,130  $ 1,130 
The Company's carrying values of the Mavrix and SGP investments also include basis differences totaling $145.5 million as of September 30, 2021 as a result of the fair value measurements recorded in the Aria Merger. Amortization of the basis differences reducing equity investment income was $0.4 million for the three and nine months ended September 30, 2021.
NOTE 8 – Goodwill and Intangible Assets
Goodwill
At September 30, 2021, the Company had $27.0 million of goodwill, all of which is allocated to the RNG segment. The goodwill is primarily associated with the acquisition of Aria in the Business Combinations.
Intangible Assets
Intangible assets consist of biogas rights agreements, off-take agreements, operations and maintenance contracts, an RNG purchase contract, customer relationships and trade names that were recognized as a result of the allocation of the purchase price under business acquisitions based on their future value to the Company, and such intangible assets will be amortized over their estimated useful lives. The biogas rights agreements have various renewal terms in their underlying contracts that are factored into the useful lives when amortizing the intangible asset.
Intangible assets consist of the following as of September 30, 2021 and December 31, 2020:
(in thousands)
September 30, 2021
Gross Carrying
Amount
Accumulated
Amortization
Net
Biogas rights agreements
$ 554,745  $ 1,560  $ 553,185 
Electricity off-take agreements 23,400  113  23,287 
Operations and maintenance contracts
8,620  11  8,609 
RNG purchase contract 6,920  199  6,721 
Customer relationships
350  125  225 
Trade names
150  54  96 
Total
$ 594,185  $ 2,062  $ 592,123 
(in thousands)
December 31, 2020
Gross Carrying
Amount
Accumulated
Amortization
Net
Biogas rights agreements
$ 8,293  $ —  $ 8,293 
Customer relationships
350  70  280 
Trade names
150  30  120 
Total
$ 8,793  $ 100  $ 8,693 
The biogas rights agreements, some of which are evergreen, are being amortized over their expected useful lives ranging from 4 years to 30 years, and the amortization period for each agreement begins once the associated facility commences operations. Total amortization expense was approximately $1.6 million for both the three and nine months ended
25


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
September 30, 2021. The annual amortization expense is expected to be approximately $35 million for each of the next 5 years.
Below-Market Contracts
As a result of the Aria Merger, the Company assumed certain fixed-price sales contracts that are below current and future market prices. The contracts were recorded at fair value and are classified as other long-term liabilities on the Company’s consolidated condensed balance sheet.
(in thousands)
September 30, 2021
Gross Liability
Accumulated
Amortization
Net
Gas off-take agreements
$ 108,880  $ 488  $ 108,392 
The below-market contract amortization was $0.5 million for both the three months and nine months ended September 30, 2021, and was recognized as an increase to revenues since it relates to the sale of RNG and related Environmental Attributes.
NOTE 9 – Commitments
Operating Leases
The Company has entered into warehouse and office leases with third parties for periods ranging from one to three years. The Company also entered into a related-party office lease as a result of its acquisition of interest GCES in 2020. During the nine months ended September 30, 2021, the Company paid $0.2 million under this related-party lease which expires in May 2022.
For the nine months ended September 30, 2021 and 2020, the Company recognized rent expense of $0.9 million and $0.2 million, respectively.
Future minimum lease payments under the Company’s non-cancellable operating leases are as follows:
(in thousands)

Remainder of 2021:
$ 207
2022 633 
2023 114 
2024 21 
2025
Thereafter
Total future minimum lease payments
$ 975
26


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Other Commitments
The Company has various long-term contractual commitments pertaining to its biogas rights agreements. These agreements expire at various dates through 2045. The following summarizes the aggregate minimum future payments under these contracts as of September 30, 2021:
(in thousands)

Remainder of 2021:
$ 794 
2022 7,085 
2023 2,975 
2024 2,975 
2025 2,975 
Thereafter
23,388 
Total future payments $ 40,192 
NOTE 10 – Debt
The Company's outstanding debt consists of the following as of September 30, 2021 and December 31, 2020:
(in thousands)
September 30,
2021
December 31,
2020
New Credit Agreement - Term Loan
$ 220,000  $ — 
Wilmington Trust – 4.47% Term Note
60,828  — 
Wilmington Trust – 3.75% Term Note
66,558  — 
Comerica Bank – Specific Advance Facility Note
—  4,319 
Comerica Term Loan
—  12,000 
Kubota Corporation – Term Notes
—  46 

347,386  16,365 
Less unamortized debt issuance costs
(9,586) (291)
Long-term debt less debt issuance costs
337,800  16,074 
Less current maturities, net
(8,546) (1,301)
Total long-term debt
$ 329,254  $ 14,773 
Scheduled future maturities of long-term debt principal amounts are as follows:
(in thousands)
Remainder of 2021
$ 1,375 
2022 12,752 
2023 17,108 
2024 17,371 
2025 17,598 
Thereafter
281,182 
Total
$ 347,386 
New Credit Facilities
On the Closing Date and upon consummation of the Business Combinations, Archaea Energy Operating LLC, a Delaware limited liability company (f/k/a LFG Buyer Co, LLC) (“Archaea Borrower”), entered into a $470 million Revolving Credit
27


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
and Term Loan Agreement (the “New Credit Agreement”) with a syndicate of lenders co-arranged by Comerica Bank. The New Credit Agreement provides for a senior secured revolving credit facility (the “Revolver”) with an initial commitment of $250 million and a senior secured term loan credit facility (the “Term Loan” and, together with the Revolver, the “Facilities”) with an initial commitment of $220 million. Pursuant to the New Credit Agreement, Archaea Borrower has the ability, subject to certain conditions, to draw upon the Revolver on a revolving basis up to the amount of the Revolver then in effect. On the Closing Date, Archaea Borrower received total proceeds of $220 million under Term Loan. Archaea Borrower has outstanding borrowings under the Term Loan of $220 million at an interest rate of 3.34% as of September 30, 2021. As of September 30, 2021, the Company issued letters of credit under the New Credit Agreement of $14.7 million that reduced the borrowing capacity of the Revolver to $235.3 million, and there were no borrowings under the Revolver. Additional letters of credit of $0.8 million were also issued and outstanding as of September 30, 2021.
The maturity date of the New Credit Agreement is the last to occur of (i) September 15, 2026, (ii) the date on which the commitments under the Revolver shall terminate in accordance with the New Credit Agreement (subject to any extensions, as applicable) and (iii) the date on which the commitments under the Term Loan shall terminate in accordance with the New Credit Agreement (subject to any extensions, as applicable). Interest on the Facilities is at a floating rate based on LIBOR, with a LIBOR floor of 0.00%, or the administrative agent’s prime rate, at Archaea Borrower’s election, plus a tiered rate of 1.75% to 3.25% based on the applicable rate and type of loan. The New Credit Agreement is secured by liens on substantially all of the assets of Archaea Borrower and certain of its subsidiaries and a pledge of the equity interests of Archaea Borrower and certain of its subsidiaries. The New Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default typical for a financing of this type, including a consolidated total leverage ratio covenant and a fixed charge coverage ratio, tested quarterly commencing December 31, 2021.
Assai Energy 3.75% and 4.47% Senior Secured Notes
On January 15, 2021, Assai Energy, LLC (“Assai”) entered into a senior secured note purchase agreement with certain investors for the purchase of $72.5 million in principal amount of 3.75% Senior Secured Notes (the "3.75% Notes"). Interest on the 3.75% Notes is payable quarterly in arrears on each payment date and mature on September 30, 2031. On April 5, 2021, Assai entered into an additional senior secured note purchase agreement with certain investors for the purchase of $60.8 million in principal amount of its 4.47% Senior Secured Notes (the "4.47% Notes" and, together with the 3.75% Notes, collectively the “Assai Notes”). Interest is payable quarterly in arrears on each payment date, and the 4.47% Notes mature on September 30, 2041. As of September 30, 2021, Assai received total proceeds of $127.4 million from the Assai Notes of which approximately $30.0 million was used to complete the acquisition of PEI. The remaining proceeds are expected to be used to fund the continued development of Project Assai.
Wilmington Trust, National Association is the collateral agent for the secured parties for the Assai Notes. The Assai Notes are secured by all Assai plant assets and plant revenues and a pledge of the equity interests of Assai. Cash received from the Assai Notes is restricted for use on Assai related costs and cannot be used for general corporate purposes.
Line of Credit
The Company had a revolving line of credit agreement with Comerica Bank ("Comerica") that provided for maximum borrowings of $8.0 million. The Company had no outstanding balance on the line of credit as of December 31, 2020, and the line of credit was paid off in full and terminated at the closing of the Business Combinations.
Secured Promissory Notes
On July 15 and July 26, 2021, Archaea Holdings LLC entered into several secured promissory notes with certain lenders, including related parties to the Company, in the aggregate principal amount of approximately $30.0 million. Promissory notes totaling approximately $16.5 million bear interest at 20% per annum, and promissory notes totaling approximately $13.5 million bear interest at 7.5% per annum. All unpaid principal and unpaid accrued interest of the foregoing promissory notes were due the earlier of (a) the one-year anniversary of the respective issuance date (July 15, 2022 or July 26, 2022), (b) closing date of the Business Combinations, or (c) the date on which all amounts under promissory notes shall become due and payable in the event of the Company’s default. The promissory notes bearing interest at 20% per annum
28


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
include a guaranteed minimum interest payment of approximately $1.0 million in aggregate. These promissory notes were repaid in full at the closing of the Business Combinations.
Boyd County Credit Agreement
On November 10, 2020, Archaea Holdings, LLC (“Archaea Holdings”) and Big Run Power Producers, LLC (“BRPP”), both wholly-owned subsidiaries of the Company, entered into certain promissory notes with Comerica pursuant to that certain credit agreement by and between Comerica, as the lender, and Archaea Holdings and BRPP, as the borrowers (the “Boyd County Credit Agreement”). Noble Environmental, Inc. (“Noble”) guaranteed the Boyd County Credit Agreement.
Pursuant to the Boyd County Credit Agreement, Comerica made available to the borrowers $5.0 million secured specific advance facility loan (the “SAF Loan”) and $12.0 million secured term loan (the “Comerica Term Loan”). The SAF Loan and the Comerica Term Loan bear interest at LIBOR plus 4.5%. In addition to the Comerica Term Loan and the SAF Loan, the Bank has also made available to the borrowers a corporate credit card program with a credit limit of $3.5 million for use by the borrowers in connection with the operation of the business (the “Corporate Credit Account”). As of September 30, 2021 and December 31, 2020, the Company received total proceeds under the SAF Loan and Comerica Term Loan of approximately $17.0 million and approximately $16.3 million, respectively. The Boyd County Credit Agreement, including the SAF Loan and the Comerica Term Loan, was repaid in full at the closing of the Business Combinations.
Noble Environmental, Inc. ("Noble Environmental"), which is a related party of Archaea, guaranteed Archaea Holding’s and BRPP's obligations under the Boyd County Credit Agreement (the "Noble Guaranty"). In consideration of Noble Environmental furnishing the Noble Guaranty, Noble Environmental required that Archaea Holdings and BRPP incur a guaranty fee. The guaranty fee is accrued on the face value of the guaranteed obligation, which shall accrue interest at a 20% interest rate subject to adjustments. The guaranty fee was evidenced by a promissory note dated November 10, 2020 made by Archaea Holding and BRPP payable to Noble Environmental (the "Noble Note"). The Noble Note aggregate balance of $3.2 million was repaid in full at the closing of the Business Combinations.
Paycheck Protection Program Loan
During 2020, the Company received a $0.2 million loan and GCES received a $0.5 million loan from the Small Business Administration (SBA) as provided for under the Paycheck Protection Program (Program) established in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES ACT) signed into law on March 27, 2020. The Company utilized the loan proceeds in accordance with established Program guidelines which would result in forgiveness of the full amount of the loan. The forgiveness of the loan resulted in no interest being charged to the Company.
In March 2021, the Company had received notification from the lending institution that the full amount of the loan had been forgiven, and the proceeds were recorded in other income in the first quarter of 2021. The amount of the proceeds received under this loan at December 31, 2020 was reflected in the accompanying balance sheets as other long-term liability.
In December 2020, GCES had received notification from the lending institution that the full amount of the loan had been forgiven, and the proceeds were recorded in other income in the fourth quarter of 2020.
NOTE 11 – Derivative Instruments
Warrant Liabilities
The Public Warrants, Forward Purchase Warrants, and Private Placement Warrants contain exercise and settlement features that preclude them from being classified within in shareholders’ equity, and therefore are recognized as derivative liabilities. The Company recognizes these warrant instruments as liabilities at fair value with changes in fair value included within other income (loss) in the Company’s consolidated condensed statements of operations. 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. As of September 30, 2021, the Company had 12,112,492 total Public Warrants and Forward Purchase Warrants (together the "Redeemable Warrants") and 6,771,000 Private Placement
29


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Warrants outstanding. Redeemable Warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire on September 15, 2026, or earlier upon redemption or liquidation. The Redeemable Warrants became exercisable on October 26, 2021, and the Company may redeem the outstanding Redeemable Warrants even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the last sale price of the Class A Common Stock equals or exceeds $10.00 per share on the last trading day before the notice of redemption is sent to the warrant holders, the Company may redeem the Redeemable Warrants for cash at a price of $0.10 per warrant. During the 30-day redemption period in this instance, warrant holders can elect to exercise their warrants on a cash or cashless basis.
If the last sale price of the Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day before the notice of redemption is sent to the warrant holders, the Company may redeem the outstanding Redeemable Warrants for cash at a price of $0.01 per warrant. If the Company calls the Redeemable Warrants for redemption for cash as described above, the Company will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering Redeemable Warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “fair market value” (as defined in the following sentence) by (y) the fair market value. The “fair market value” of shares of the Company's Class A Common Stock shall mean the volume weighted average price of our shares of Class A Common Stock as reported during the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of the Warrants; however, in no event will the Redeemable Warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A Common Stock per Redeemable Warrant (subject to adjustment).
Each Private Placement Warrant is exercisable to purchase one share of Class A Common Stock or, in certain circumstances, one Class A unit of Opco (and corresponding share of Class B Common Stock). The Private Placement Warrants expire on September 15, 2026 or earlier upon redemption or liquidation. Private Placement Warrants are nonredeemable so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees. There were no Private Placement Warrants transfers as of September 30, 2021.
The fair value of the Redeemable Warrants is based on observable listed prices on NYSE for such warrants (a Level 1 measurement). The fair value of the Private Placement Warrants was estimated using the Black-Scholes option pricing model (a Level 3 measurement).
The Company used the following assumptions to estimate the fair value of the Private Placement Warrants:
As of September 15,
2021
at Initial
Measurement
September 30,
2021
Stock price
$18.05 $18.94
Exercise price
$11.50 $11.50
Volatility
45.8  % 46.3  %
Expected term (years)
5.0 5.0
Risk-free interest rate
0.79  % 0.97  %
30


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The change in the fair value of the warrant liabilities is recognized in gain (loss) on derivative contracts in the Consolidated Condensed Statement of Operations. The changes of the Redeemable Warrants and Private Placement Warrants through September 30, 2021 is as follows:
(in thousands)

Warrant liabilities as of September 15, 2021 (Closing Date)
$ 150,153 
Change in fair value - Closing Date through September 30, 2021
10,477 
Warrant liabilities as of September 30, 2021
$ 160,630 

In November 2021, the Company issued a redemption notice to the holders of the Company's Redeemable Warrants. The Company will redeem all Public Warrants for Class A Common Stock that remain outstanding at 5:00 p.m., New York City time, on December 6, 2021 (the "Redemption Date") for a redemption price of $0.10 per Public Warrant. The Public Warrants were issued under the Warrant Agreement, dated October 21, 2020, by and among the Company, LFG Acquisition Holdings LLC and Continental Stock Transfer & Trust Company (as warrant agent), as part of the units sold in the IPO. In addition, the Company will redeem all of the Forward Purchase Warrants that remain outstanding on the Redemption Date at a redemption price of $0.10 per Forward Purchase Warrant. The Private Placement Warrants held by the initial holders or their permitted transferees are not subject to the redemption.
Natural Gas Swap
In conjunction with the Business Combinations, the Company assumed a natural gas variable to fixed priced swap agreement entered into by Aria. The swap agreement provides for a fixed to variable rate swap calculated monthly thorough the termination date of June 30, 2023. The agreement was intended to manage the risk associated with changing commodity prices. The agreement has a remaining notional of 382,800 MMBtu as of September 30, 2021. The Company made no cash payments for the natural gas swap for the period from the Closing Date through September 30, 2021.
Changes in the fair values of the natural gas swap are recognized in gain (loss) on derivative contracts and realized losses are recognized as a component of cost of energy expense in the Consolidated Condensed Statement of Operations. Valuation of the natural gas swap was calculated by discounting future net cash flows that were based on a forward price curve for natural gas over the remaining life of the contract (a Level 2 measurement), with an adjustment for each counterparty's credit rate risk.
The following summarizes the balance sheet classification and fair value of the Company’s derivative instruments:
(in thousands)
September 30,
2021
December 31,
2020
Natural gas swap asset (included in Other long-term assets)
$ 391  $ — 
Warrant liabilities (included in Derivative liabilities)
(160,630) — 
The following table summarizes the income statement effect of gains and losses related to derivative instruments:
(in thousands)
Three Months Ended Nine Months Ended
September 30,
2021
September 30,
2020
September 30,
2021
September 30,
2020
Cost of energy
$ —  $ —  $ —  $ — 
Gain (loss) on gas swap contracts
64  —  64  — 
Gain (loss) on warrant liabilities
(10,477) —  (10,477) — 
Total
$ (10,413) $ —  $ (10,413) $ — 
NOTE 12 – Asset Retirement Obligations
The Company has asset retirement obligations ("ARO") associated with the future environmental remediation responsibility to restore the land and remove biogas plants and related facilities within one year of the expiration of certain
31


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
operating lease agreements. The fair value of the ARO is measured using expected cash outflows associated with the ARO, adjusted for inflation and discounted at our credit-adjusted risk-free rate when the liability is initially recorded. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value.
The following summarizes changes in the Company’s ARO liabilities for the year-to-date periods ending September 30, 2021 and December 31, 2020:
(in thousands)
2021 2020
Balance at beginning of period
$ 306  $ — 
Liabilities acquired(1)
3,580  — 
Liabilities incurred
—  306 
Accretion expense
18  — 
Balance at end of period $ 3,904  $ 306 
(1) Liabilities acquired relate to asset retirement obligations assumed in the Aria Merger. See Note 4.

NOTE 13 – Redeemable Noncontrolling Interest and Stockholders’ Equity
Redeemable Noncontrolling Interest
The redeemable noncontrolling interest relates to Opco Class A units, including units issued in connection with the Business Combinations and units owned by the Sponsor, Atlas or Company directors. As of September 30, 2021, the Company directly owned approximately 45.9% of the interest in Opco and the redeemable noncontrolling interest was 54.1%. Owners of the redeemable Opco Class A units own an equal number of shares of Class B Common Stock. Due to certain cash redemption provisions of these Opco Class A units, the Company has accounted for the redeemable noncontrolling interest as temporary equity.
Stockholders' Equity

Preferred Stock
The Company is authorized to issue 10.0 million shares of preferred stock, par value $0.0001 per share. As of September 30, 2021 and December 31, 2020, no shares of preferred stock were issued or outstanding.
Class A Common Stock
The Company is authorized to issue 900.0 million shares of Class A Common Stock with a par value of $0.0001 per share. As of September 30, 2021, there were 52,847,195 shares of Class A Common Stock issued and outstanding.
Class B Common Stock
The Company is authorized to issue 190.0 million shares of Class B Common Stock with a par value of $0.0001 per share. As of September 30, 2021, there were 62,281,735 shares of Class B Common Stock issued and outstanding. Class B Common Stock represents a non-economic interest in the Company.
Voting Rights
Holders of the Class A Common Stock and holders of the Class B Common Stock will vote together as a single class on all matters submitted to a vote of the stockholders, except as required by law. Each share of common stock will have one vote on all such matters.
32


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Nonredeemable Noncontrolling Interest
Noncontrolling interest includes the portion of equity ownership in one partially-owned subsidiary that is not attributable to the unitholders of Opco.
NOTE 14 – Share-Based Compensation
In connection with Business Combinations, the Company adopted the 2021 Omnibus Incentive Plan (the "Plan"). The Company may grant restricted stock, restricted stock units, incentive and non-qualified stock options, stock appreciation rights, performance awards, stock awards and other stock-based awards to officers, directors, employees and consultants under the terms of the Plan. There are 11.3 million shares authorized under the plan as of September 30, 2021, and all authorized shares remain available for future issuance as of September 30, 2021.
Restricted Stock
The Company has plans to grant restricted stock units ("RSUs") to certain employees, including certain members of management, and non-employee directors. Until the RSUs vest and settle as shares of stock, holders of RSUs will not have voting rights and will not have any rights to receive dividends. RSUs will be subject to forfeiture restrictions and cannot be sold, transferred, or disposed of during the restriction period.
The Company recognized $0.5 million of share-based compensation expense during the three months and nine months ended September 30, 2021 related to liability classified RSUs for which the inception date preceded the grant date, and the grant date has not yet occurred.
Series A Incentive Plan
Legacy Archaea adopted a Series A Incentive Plan in 2018 to provide economic incentives to select employees and other service providers in order to align their interests with equity holders of Legacy Archaea. The Series A unit awards were determined to be equity classified. These Series A unit awards were granted by, and for equity interest in, Archaea Energy LLC. As of December 31, 2020, there were 4,000 vested and 4,500 unvested Series A unit awards. Under the original terms of the awards, all unvested Series A units outstanding were vested upon Closing of Business Combinations.
Series A Incentive Plan activities related to unvested units during the nine months ended September 30, 2021 were as follows:
Series A
Incentive Units

Weighted
Average Grant
Date
Fair Value
(per share)
Nonvested at December 31, 2020
4,500  $ — 
Granted
1,500  $ 1,566 
Forfeited (250) $ — 
Vested (5,750) $ 409 
Nonvested at September 30, 2021
—  $ — 
For the three and nine months ended September 30, 2021, Legacy Archaea recognized compensation costs of $2.1 million and $2.3 million, respectively, related to Series A units awards. The Company recognized no expense related to the Series A unit awards in 2020. As a result of the Business Combinations, the Series A Incentive Plan is no longer applicable to the Company.
33


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
NOTE 15 – Employee Benefit Plans
401(k) Plans
The Company maintains two separate qualified tax deferred 401(k) plans, which cover all employees who meet the one of 401(k) plan’s eligibility requirements. The Company matches up to 100% of each participant’s contribution up to a maximum of 5% of the participant’s eligible compensation.
Postretirement Obligations
Effective with the Business Combinations, the Company sponsors an unfunded defined benefit health care plan that provides postretirement medical benefits to certain legacy Aria full-time employees who meet minimum age and service requirements.
Net periodic benefit cost recognized in the consolidated statements of comprehensive loss following the Business Combinations was as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)
2021 2020 2021 2020
Service cost
$ 2 $ $ 2 $
Interest cost
—  — 
Net periodic benefit cost $ 6 $ $ 6 $
NOTE 16 – Risk and Uncertainties
The Company maintains at a financial institution cash and cash equivalents which may periodically exceed federally insured limits. It is the opinion of management that the solvency of the financial institution is not of particular concern currently. As such, management believes the Company is not exposed to any significant credit risk related to cash and cash equivalents.
NOTE 17 – Provision for Income Tax
The income tax provision for the three-and-nine months ended September 30, 2021 and 2020 is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2021 2020 2021 2020
Income tax provision $ —  $ —  $ —  $ — 
The Company recognized federal, and state income tax expense of $0 million and $0 million during the three and nine months ended September 30, 2021, respectively, compared to $0 million during the same periods in 2020. The effective tax rates for the three-and-nine months ended September 30, 2021 were 0% and 0%, respectively, and were 0% during the same periods in 2020. The difference between the Company’s effective tax rate for the period ended September 30, 2021 and the U.S. statutory tax rate of 21% was primarily due to a full valuation allowance recorded on the Company’s net U.S. deferred tax assets. The Company did not record a tax provision for the three-or-nine months ended September 30, 2020 primarily due to Archaea Energy LLC and Aria Energy LLC’s status as a pass-through entity for U.S. federal income tax purposes. The Company evaluates the realizability of the deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized.
No uncertain tax benefits have been recorded in 2021.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The
34


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Company analyzed the provisions of the CARES Act and determined there was no significant impact to its income tax for the nine months ended September 30, 2021. Future regulatory guidance under the CARES Act or additional legislation enacted by Congress could impact our tax provision in future periods.
Additionally, the CARES Act is an economic emergency aid package to help mitigate the impact of the COVID-19 pandemic. The Company implemented certain provisions of the CARES Act, specifically securing loans under the Paycheck Protection Program. Under the CARES Act, all provisions of the loans have been forgiven as of September 30, 2021.

NOTE 18 – Net Earnings (Loss) Per Share
The Archaea Merger was accounted for as a reverse recapitalization and is treated as the equivalent of Legacy Archaea receiving proceeds for the issuance of the outstanding Class A and Class B shares, as well as the warrants, of Rice Acquisition Corp. accompanied by a recapitalization. Therefore, Class A Common Stock is outstanding beginning at the Merger date due to the reverse recapitalization.
The Company’s basic earnings per share (EPS) of Class A Common Stock is computed using the weighted average number of Class A Common Stock outstanding during the period. Diluted EPS of Class A Common Stock includes the effect of the Company’s outstanding RSUs, Public Warrants, Forward Purchase Warrants and Private Placement Warrants, if inclusion of these items is dilutive. The dilutive effect of RSUs, Public Warrants, Forward Purchase Warrants and Private Placement Warrants is computed using the treasury stock method.
The following provides a reconciliation between basic and diluted EPS attributable to Class A Common Stock.

Three Months Ended Nine Months Ended
(in thousands, except per share amounts)
September 30,
2021
September 30,
2020
September 30,
2021
September 30,
2020
Net income (loss) attributable to Class A Common Stock
$ (7,011) $ —  $ (7,011) $ — 
Class A Common Stock
Average number of shares outstanding - basic
52,847,195  —  52,847,195  — 
Average number of shares outstanding - diluted
52,847,195  —  52,847,195  — 
Excluded due to anti-dilutive effect
7,804,055  —  7,804,055  — 
Net income (loss) per share of Class A Common Stock
Basic and diluted
$ (0.13) $ $ (0.13) $
NOTE 19 - Contingencies
Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of contingencies. The Company accrues an undiscounted liability for contingencies where a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. The Company does not believe the ultimate outcome of any currently pending lawsuit will have a material adverse effect upon the Company’s financial statements, and the liability is believed to be only reasonably possible or remote. In July 2021, Legacy Archaea settled certain lawsuits on confidential terms with the lawsuits being dismissed with prejudice.
NOTE 20 – Segment Information
The Company’s two reporting segments for the three and nine months ended September 30, 2021 and 2020 are RNG and Power. The Company’s chief operating decision maker evaluates the performance of its segments based on operational measures including revenues, net income and EBITDA. Below is a reconciliation of EBITDA to income (loss) before income taxes.
35


ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Three Months Ended Nine Months Ended
(in thousands)
September 30,
2021
September 30,
2020
September 30,
2021
September 30,
2020
(As Restated) (As Restated)
Income (loss) before income taxes
$ (24,177) $ (602) $ (34,606) $ (1,819)
Interest expense
1,586  —  1,606  — 
Depreciation, amortization and accretion
3,142  34  4,077  101 
EBITDA
$ (19,449) $ (568) $ (28,923) $ (1,718)
The following summarizes selected financial information for the Company’s reporting segments:
(in thousands)
RNG
Power
Corporate and Other
Total
(As Restated) (As Restated)
Three months ended September 30, 2021




Revenue
$ 5,963 $ 5,158 $ 865 $ 11,986
Intersegment revenue
12 (12)
Total revenue
$ 5,963 $ 5,170 $ 853 $ 11,986
Net income (loss)
$ 28 $ (320) $ (23,885) $ (24,177)
EBITDA
$ 1,916 $ 884 $ (22,249) $ (19,449)
Nine months ended September 30, 2021
Revenue
$ 6,785 $ 7,395 $ 4,588 $ 18,768
Intersegment revenue
—  12  (12) — 
Total revenue
$ 6,785 $ 7,407 $ 4,576 $ 18,768
Net income (loss)
$ (1,538) $ (2,150) $ (30,918) $ (34,606)
EBITDA
$ 585 $ (316) $ (29,192) $ (28,923)
September 30, 2021
Goodwill
$ 27,011 $ $ $ 27,011
Three months ended September 30, 2020
Revenue
$ $ $ 1,904 $ 1,904
Intersegment revenue
—  —  —  — 
Total revenue
$ $ $ 1,904 $ 1,904
Net income (loss)
$ (19) $ (5) $ (578) $ (602)
EBITDA
$ (19) $ (5) $ (544) $ (568)
Nine months ended September 30, 2020
Revenue
$ 34 $ $ 4,462 $ 4,496
Intersegment revenue
—  —  —  — 
Total revenue
$ 34 $ $ 4,462 $ 4,496
Net income (loss)
$ (102) $ (5) $ (1,712) $ (1,819)
EBITDA
$ (102) $ (5) $ (1,611) $ (1,718)
December 31, 2020
Goodwill
$ 2,754 $ $ $ 2,754


NOTE 21 – Related Party Transactions
36



ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Engineering, Procurement and Construction Contract
Assai Energy, LLC (a wholly owned subsidiary of the Company) entered into a construction service and project guarantee agreement with Noble Environmental Specialty Services, LLC ("NESS") (a wholly owned subsidiary of Noble Environmental). NESS is responsible for constructing an RNG plant located at the Keystone Landfill, near Scranton, PA. The total contract price for the engineering, procurement and construction ("EPC") contract is $19.9 million. As of September 30, 2021, there has been approximately $19.5 million advanced to NESS for this project, of which approximately $12.5 million has been included in prepaid expenses on the consolidated balance sheet. The Company has the right of first refusal to any additional landfill development projects or additional EPC contracts with Noble Environmental or NESS. This agreement is considered to be a related party transaction due to the owners of NESS also being certain employees of the Company.
NOTE 22 – Subsequent Events
In October 2021, the Company completed the acquisition of a package of four landfill to renewable electricity operations for $30.3 million. Additionally, the Company reached agreement to obtain the remaining Class A membership interest in GCES for a nominal amount.
37


Predecessor - Aria Energy LLC Financial Statements

Archaea determined that Aria is the predecessor to the Company due to the relative fair values of the Company and legacy operations Aria had compared to Archaea. As such, we have included Aria's consolidated statements of operations for the periods from July 1 to September 14, 2021, and from January 1 to September 14, 2021, and the three and nine months ended September 30, 2020, and the consolidated balance sheet as of December 31, 2020. See Archaea Energy Inc.'s Note 4 - Business Combinations and Reverse Recapitalization for additional information.
ARIA ENERGY LLC AND SUBSIDIARIES (Predecessor)
Consolidated Condensed Balance Sheets

(in thousands)
December 31, 2020
ASSETS

Current Assets
Cash and cash equivalents
$ 14,257 
Accounts receivable
20,727 
Inventory
7,770 
Prepaid expenses and other current assets
3,768 
Assets held for sale
70,034 
Total Current Assets
116,556 
Property and equipment, net
70,759 
Intangible assets, net
126,922 
Equity method investments
77,993 
Other noncurrent assets
689 
Total Assets
$ 392,919 
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable - trade
$ 1,570 
Current portion of long-term debt, net
102,831 
Accrued and other current liabilities
25,736 
<