OPAL Fuels Inc. quarterly report, Q1 FY2021

Full document

Business context and reporting period

Important entity mismatch: The supplied filing is ArcLight Clean Transition Corp. II’s Form 10-Q, not an OPAL Fuels Inc. filing. ArcLight was a blank-check SPAC incorporated in January 2021 to seek a business combination; it had not identified a target or begun operating as of March 31, 2021.

The financial statements cover January 13, 2021 (inception) through March 31, 2021. They are unaudited and have no comparable prior-year period.

Key financial metrics

  • Revenue and operations: No operating revenue; activity consisted of formation, the March IPO and the search for a business combination.
  • Profitability: Net loss was $319,783, including $128,476 of general and administrative expenses and $462,620 of warrant-related financing costs, partly offset by a $271,160 gain from changes in warrant fair value. Net loss per non-redeemable ordinary share was $0.04.
  • Cash flow: Operating cash use was $10,263; investing cash use was $311.2 million, principally the Trust Account deposit; financing cash provided was $314.0 million. Ending cash was $2.8 million.
  • Assets and liquidity: Total assets were $315.4 million, including $311.2 million in the Trust Account. Management reported approximately $2.4 million of working capital and believed available resources and potential sponsor borrowing would cover needs through a business combination or one year from the filing.
  • Liabilities and equity: Total liabilities were $27.4 million, including $14.7 million of derivative warrant liabilities and $10.9 million of deferred underwriting commissions. The Sponsor’s approximately $172,000 note had been repaid; no working-capital loans were outstanding. No long-term debt was reported.
  • Redemption shares: 28.3 million Class A shares, carried at $283.0 million, were classified as temporary equity and subject to possible redemption.

Material changes and unusual items

  • The SPAC completed its IPO on March 25, 2021, selling 31.1 million units at $10 each for approximately $311.2 million gross proceeds, and raised approximately $9.2 million through a private warrant placement.
  • After the SEC’s April 12, 2021 staff statement on SPAC warrants, the company revised its accounting: warrants previously treated as equity were classified as liabilities and remeasured at fair value. Management said the correction to the earlier March 25 balance sheet was not material, but the filing reports a material weakness in internal control over financial reporting related to warrant accounting.
  • There is no meaningful prior comparable operating period; results cover only the company’s initial months.

Outlook, risks and contingencies

  • The company expected to use funds outside the Trust Account for operating costs, due diligence and transaction expenses. Sponsor or insider working-capital loans were possible but not committed.
  • The SPAC had 24 months from the IPO closing, through March 25, 2023, to complete a business combination. If unsuccessful, it would redeem public shares and liquidate; warrants could expire worthless.
  • Management said the COVID-19 pandemic’s specific impact was not readily determinable. The financial statements included no adjustments for that uncertainty.
  • Other considerations include public-shareholder redemption rights, a $10.9 million deferred underwriting fee payable only upon a completed combination, warrant fair-value volatility, and the disclosed material weakness. No legal proceedings or material changes to previously disclosed risk factors were reported.
  • Management reported remediation steps focused on reviewing complex securities accounting, consulting specialists and considering additional experienced accounting staff.

Investor verification priorities

  1. Confirm the intended filing: this document is for ArcLight Clean Transition Corp. II, not OPAL Fuels Inc.
  2. Reconcile the Trust Account and IPO proceeds disclosures: the financial statements report $311.2 million in the Trust Account, while the use-of-proceeds section states $277.5 million was placed there.
  3. Reconcile offering-cost disclosures: the notes cite approximately $17.6 million, while the use-of-proceeds section cites approximately $15.9 million.
  4. Review the warrant-liability reclassification, the claimed immateriality of the prior-period correction, and progress in remediating the material weakness.
  5. Verify the SPAC’s subsequent business-combination status, redemption outcomes and any later financing; this filing identifies no target or operating-company outlook.