S-1/A 1 fs12022a5_rhodium.htm AMENDMENT NO. 5

As filed with the Securities and Exchange Commission on January 13, 2022

Registration No. 333-260575

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

____________________________

Amendment No. 5 to
Form S
-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

____________________________

RHODIUM ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)

____________________________

Delaware

 

7374

 

87-1586290

(State or other jurisdiction of
incorporation or organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification No.)

Nathan Nichols
Chief Executive Officer
Rhodium Enterprises, Inc.
Address Not Applicable
1
(956) 746-3486
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

____________________________

Corporation Service Company
251 Little Falls Drive
Wilmington, Delaware 19808
(302) 636
-5401
(Name, address, including zip code, and telephone number, including area code, of agent for service)

____________________________

Matthew R. Pacey, P.C.

Anne G. Peetz

Kirkland & Ellis LLP

609 Main Street, Suite 4700

Houston, Texas 77002

(713) 836-3600

 

Jonathan H. Talcott

E. Peter Strand

Michael K. Bradshaw, Jr.

Nelson Mullins Riley & Scarborough LLP

101 Constitution Avenue NW, Suite 900

Washington, D.C. 20001

(202) 689-2806

____________________________

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 7(a)(2)(B) of the Securities Act. 

____________

1          We are considered a remote-first company. Accordingly, we do not maintain a headquarters. For purposes of compliance with applicable requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, any stockholder communication required to be sent to our principal executive offices may be directed to the agent for service of process named above, or to the email address: investors@rhdm.com.

 

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CALCULATION OF REGISTRATION FEE

Title of each Class of Securities to be Registered

 

Amount
to be
Registered
(1)

 

Proposed
Maximum
Aggregate
Offering
Price
(2)

 

Proposed 
Maximum 
Aggregate 
Offering 
Price
(1)(2)

 

Amount of 
Registration 
Fee

Class A common stock, par value $0.0001 per share

 

8,846,153

 

$

14.00

 

$

123,846,142

 

$

11,480.54

(3)

____________

(1)      Includes 1,153,846 additional shares of Class A common stock that the underwriters have the option to purchase.

(2)      Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(3)      Includes $9,270.00 previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities nor a solicitation of an offer to buy these securities in any jurisdiction where the offer and sale is not permitted.

Subject to Completion, dated January 13, 2022

PRELIMINARY PROSPECTUS

7,692,307 Shares

Rhodium Enterprises, Inc.

Class A Common Stock

____________________________

This is the initial public offering of the shares of Class A common stock of Rhodium Enterprises, Inc., a Delaware corporation. We are offering 7,692,307 shares of our Class A common stock. We are a holding company and the sole managing member of Rhodium Technologies LLC (“Rhodium Holdings”), and our principal asset consists of units of Rhodium Holdings (“Rhodium Units”). We intend to contribute the net proceeds of this offering to Rhodium Holdings in exchange for Rhodium Units. Rhodium Holdings will use such proceeds to repay our outstanding borrowings and accrued interest under the Bridge Loan (as defined below), to construct new sites and for general corporate purposes, including the purchase of miners. Please see “Use of Proceeds.”

Prior to this offering, there has been no public market for our Class A common stock. We have applied to list our Class A common stock on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “RHDM.” We anticipate that the initial public offering price will be between $12.00 and $14.00 per share.

We have two classes of common stock: Class A common stock and Class B common stock. Upon completion of this offering and the related reorganization, holders of shares of our Class A common stock and Class B common stock will be entitled to one vote for each share of Class A common stock and Class B common stock, respectively, held of record on all matters on which stockholders are entitled to vote generally. See “Description of Capital Stock.” Upon consummation of this offering, Imperium Investment Holdings LLC (“Imperium”), an entity controlled by certain members of our management, will hold 100% of the shares of Class B common stock that will entitle them to 54.3% of the combined voting power of our common stock (or 53.8% if the underwriters exercise their option to purchase additional shares of Class A common stock in full). Because Imperium will hold over 50% of the total voting stock outstanding, we will be a “controlled company” within the meaning of the Nasdaq rules. See “Management — Status as a Controlled Company.” This offering is being conducted through what is commonly referred to as an “Up-C” structure. The Up-C structure provides Imperium, as the existing owner of Rhodium Holdings, with the tax advantage of continuing to own interests in a pass-through structure and provides potential future tax benefits for both the public company and Imperium when Imperium ultimately exchanges its Rhodium Units (together with its shares of Class B common stock) for shares of Class A common stock. See “Corporate Reorganization.”

____________________________

Investing in our Class A common stock involves risks, including those described under “Risk Factors” beginning on page 18 of this prospectus.

 

Per share

 

Total

Price to the public

 

$

  

 

$

  

Underwriting discounts and commissions(1)

 

$

  

 

$

  

Proceeds to us (before expenses)

 

$

  

 

$

  

____________

(1)      See “Underwriting” for additional information regarding underwriter compensation.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as such, we have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings. “Risk Factors” and “Prospectus Summary — Emerging Growth Company Status” contain additional information about our status as an emerging growth company.

We have granted the underwriters the option to purchase up to 1,153,846 additional shares of Class A common stock at the initial public offering price, less the underwriting discount and commissions, for 30 days after the date of the final prospectus.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock on or about            , 2022.

____________________________

Bookrunners

B. Riley Securities

     

Cowen

   

Lead Manager

   
   

Needham & Company

   
   

Co-Managers

   

D.A. Davidson & Co.

     

Northland Capital Markets

Prospectus dated             , 2022

 

Table of Contents

TABLE OF CONTENTS

 

Page

PROSPECTUS SUMMARY

 

1

RISK FACTORS

 

18

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

55

USE OF PROCEEDS

 

57

REVERSE STOCK SPLIT

 

58

DIVIDEND POLICY

 

59

CAPITALIZATION

 

60

DILUTION

 

61

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

62

BUSINESS

 

83

MANAGEMENT

 

94

EXECUTIVE COMPENSATION

 

98

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

102

CORPORATE REORGANIZATION

 

103

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

107

DESCRIPTION OF CAPITAL STOCK

 

113

SHARES ELIGIBLE FOR FUTURE SALE

 

120

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK

 

123

UNDERWRITING

 

127

LEGAL MATTERS

 

134

EXPERTS

 

134

WHERE YOU CAN FIND MORE INFORMATION

 

134

INDEX TO FINANCIAL STATEMENTS

 

F-1

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on behalf of us or to the information which we have referred you. Neither we nor the underwriters have authorized anyone to provide you with information different from that contained in this prospectus and any free writing prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell shares of our Class A common stock and seeking offers to buy shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the Class A common stock. Our business, financial condition, results of operations and prospects may have changed since that date. We will update this prospectus as required by law, including with respect to any material change affecting us or our business prior to the completion of this offering.

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” contain additional information regarding these risks.

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Commonly Used Defined Terms

As used in this prospectus, unless the context indicates or otherwise requires, the terms listed below have the following meanings:

•        “Corporate Reorganization” means the reorganization of the company and its subsidiaries, effective June 30, 2021;

•        “Existing Holders” refers, collectively, to the holders of our Class A common stock and Class B common stock immediately prior to the completion of this offering;

•        “GAAP” means generally accepted accounting principles in the United States;

•        “Imperium” means Imperium Investments Holdings LLC, a Wyoming limited liability company;

•        “IPO” means the initial public offering of the Class A common stock of Rhodium Enterprises, Inc.;

•        “IPO Reorganization” means the transactions entered into in connection with the IPO pursuant to the Master Reorganization Agreement;

•        “Legacy Owners” refers to Imperium and the Management Members that own an equity interest in Imperium;

•        “Management Members” means certain individual officers and employees of Rhodium who own equity in Imperium;

•        “Master Reorganization Agreement” means that reorganization agreement entered into between Rhodium and Rhodium Holdings in connection with this offering;

•        “Reverse Stock Split” means the 1-for-2.679 reverse stock split immediately prior to and contingent upon the completion of this offering, pursuant to which each 2.679 shares of Class A common stock held of record by the holder thereof will be reclassified into one share of Class A common stock and the corresponding reverse unit split of the Rhodium Units such that there will be an equivalent number of Rhodium Units outstanding as the aggregate number of shares of Class A common stock and Class B common stock outstanding following this offering;

•        “Rhodium,” “we,” “us,” “our,” “the company” and other like terms (i) prior to the Corporate Reorganization described in this prospectus (unless otherwise disclosed), refer collectively to Rhodium Technologies LLC (formerly known as Rhodium Enterprises LLC) and Rhodium JV LLC on a combined basis, together with its consolidated subsidiaries, and (ii) following the Corporate Reorganization described in this prospectus, refer to Rhodium Enterprises, Inc. and its consolidated subsidiaries;

•        “Rhodium Holdings” refers to Rhodium Technologies LLC (formerly known as Rhodium Enterprises LLC);

•        “Rhodium Unitholders” means the holders of Rhodium Units following the closing of this offering;

•        “Rhodium Units” means units representing limited liability company interests in Rhodium Holdings issued pursuant to the Rhodium LLC Agreement;

•        “Rhodium LLC Agreement” means the amended and restated limited liability company agreement of Rhodium Holdings;

•        “SAFE Transactions” refers to the simple agreements for future equity entered into by the Company and certain investors as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments — SAFE Transactions”; and

•        “Tax Receivable Agreement” means the tax receivable agreement to be entered into in connection with the closing of this offering, by and between Imperium and Rhodium.

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Organizational Structure

On June 30, 2021, we effected our Corporate Reorganization, which we describe in “Prospectus Summary — Corporate Reorganization” and “Corporate Reorganization.” As part of our Corporate Reorganization, Rhodium Enterprises, Inc. was formed with a dual-class equity structure and Rhodium Enterprises, Inc. became a holding company for Rhodium Holdings. Although this structure currently has some features of an “Up-C” structure, we will not implement an Up-C structure until the completion of this offering. Unless otherwise stated or the context otherwise requires, all information in this prospectus reflects the consummation of the Corporate Reorganization, certain subsequent transactions, and this offering. This offering is being conducted through what is commonly referred to as an “Up-C” structure. See “Prospectus Summary — Corporate Reorganization,” “Corporate Reorganization” and “Certain Relationships and Related Party Transactions” for more information on this structure and the related agreements entered into in connection with the Up-C structure.

Presentation of Financial and Operating Data

Unless otherwise indicated, the summary historical consolidated financial information presented in this prospectus prior to the Corporate Reorganization is that of our accounting predecessor, Rhodium Enterprises LLC and Rhodium JV LLC on a combined basis, together with its consolidated subsidiaries, and the summary historical consolidated financial information presented in this prospectus following the Corporate Reorganization is that of Rhodium Enterprises, Inc. and its consolidated subsidiaries.

Industry and Market Data

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications and other published independent sources. Although we believe these third-party sources are reliable as of their respective dates, neither we nor the underwriters have independently verified the accuracy or completeness of this information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.

Trademarks and Trade Names

We have rights to various common law trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks and trade names.

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PROSPECTUS SUMMARY

This summary provides a brief overview of information contained elsewhere in this prospectus. Readers should consider this entire prospectus and other referenced documents before making an investment decision. Other material information can be found under “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and the related notes to those financial statements contained elsewhere in this prospectus.

Overview

We are an industrial-scale digital asset technology company utilizing our proprietary technologies to mine bitcoin. Our strategy is to create innovative technologies to be the most sustainable and cost-efficient producer of bitcoin in the industry. We believe we can achieve this through our fully integrated infrastructure platform, access to low-cost power and directly owning and operating a majority of the components of our own customized mining sites. Our fully integrated infrastructure platform includes our flagship liquid-cooling system, efficiency optimization software and end-to-end management software. Our uniquely designed infrastructure affords us the ability to maintain low operating costs and manage energy consumption, which provides significant advantages in driving profitability across a variety of bitcoin market conditions.

We strive to continuously develop and implement technological improvement into the bitcoin mining process. The cornerstone of our infrastructure platform is our proprietary liquid-cooling technology. Our founders spent the previous four years developing, testing and collecting field operational data to optimize the application of our liquid-cooling technology to mining bitcoin. We believe we are one of the largest liquid-cooled bitcoin mining sites in the world, with 100 megawatts (“MW”) of liquid-cooled miners online as of December 31, 2021.

We believe we have a competitive advantage through our design, build, operations and maintenance of industrial scale liquid-cooled bitcoin mining infrastructure. Our liquid-cooling technology has many advantages over traditional air-cooled systems. Our technology allows us to submerge our bitcoin miners in cooling fluid, allowing us to optimize the hash rate, or processing power, of our miners relative to air-cooled systems, which allows us to predictably and consistently mine more bitcoin with fewer miners. Our liquid-cooling technology protects our equipment from high temperatures, humidity, dust and vibration, all of which can lead to equipment damage and failure. We believe that our liquid-cooling technology extends the mechanical useful life of our miners by 30% to 50% relative to manufacturer specifications based on internal testing.

Additionally, we have developed and maintained proprietary software to optimize performance of our miners and infrastructure in real-time and provide critical security controls to our mining operations. We believe our software provides the proper control and flexibility to optimize the performance of our people, processes and technology. Specifically, our software allows us to make quicker, and data-informed, decisions, securely and rapidly put miners online and more effectively manage temperature and energy.

Our infrastructure platform provides an integrated, connected system for bitcoin mining operations. As of December 31, 2021, we owned and operated an infrastructure platform supported by approximately 125 MW of power capacity with the capability to power more than 33,600 miners at what we call our “initial Texas site,” with a total combined hash rate capacity of approximately 2.7 EH/s. We have procured low-cost power for our sites through long-term, fixed-cost energy contracts for an aggregate of 310 MW, with an additional 40 MW under a letter of intent. Additionally, we have entered into colocation agreements with our power provider at our initial Texas site whereby we agree to pay them a percentage of after-tax cash profit, which we refer to as “Colocation Payments.” See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our Business Model — Payments to Our Electricity Providers — Our Initial Texas Site.” On August 31, 2021, we entered into a lease agreement and an energy supply agreement for a second Texas site (our “second Texas site” and, together with our initial Texas site, our “sites”) where we expect to develop 225 MW of additional capacity. Under these agreements, we have agreed to pay a percentage of profits to our electricity provider in addition to the fixed costs. See “— Recent Developments — Lease and Electricity Supply Agreement at Second Texas Site” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our Business Model — Payments to Our Electricity Providers — Our Second Texas Site.” for more information. We expect to have our first miners online

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at our second Texas site in April 2022 and for such site to be completed by the end of 2022. We have already secured approximately 225 MW of miners at our second Texas site that are scheduled for delivery beginning in April 2022. Our second Texas site will utilize our infrastructure platform, including our proprietary liquid-cooling systems. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our Business Model — Payments to Our Electricity Providers — Our Second Texas Site.”

Our infrastructure platform allows us to mine bitcoin at a significantly lower cost compared to the industry average. For the period from January 1, 2021 to September 30, 2021, our average electricity cost to produce one bitcoin was approximately $2,507.

We are strategically locating our sites in Texas due to its independent power market and abundance of low-cost renewable energy resources. We believe our liquid-cooling technology provides us better access to Texas’s low-cost renewable energy because it allows us to operate more efficiently in the warmer region of the state, where significant renewable energy resources are located. Curtailment of power generation from renewable energy sources may occur in order to balance energy supply and demand or due to transmission constraints, which may limit the benefit of low-cost renewable energy. Our mining operations provide a consistent and flexible demand for such power. Additionally, through our contractual relationship with our power suppliers, during periods of high energy prices and demand volatility, we have the ability to curtail and adjust the power demand of our sites, creating flexibility in our revenue sources and providing grid stability for the region.

We generate substantially all of our revenue from bitcoin mining. As we produce bitcoin through our mining operations, we will from time to time exchange our bitcoin for fiat currency to fund our operations on an as-needed basis, based on a variety of market and operational conditions. Our intent is to hold bitcoin for investment purposes until such time that fiat currency is needed to fund operations. We intend to hold enough fiat currency to cover our projected near-term fiat currency needs, including liabilities and anticipated expenses and capital expenditures over the course of six to 18 months. In identifying our fiat currency needs, we assess market conditions and review our financial forecast on a daily basis. Although our core business is mining bitcoin, we believe that bitcoin represents an attractive, appreciating investment opportunity, and as a result, from time to time as market opportunities present, we have purchased and intend to continue to purchase bitcoin. We safeguard and keep private our digital assets by utilizing offline storage solutions, which require multi-factor authentication and third-party custody solutions. While we are confident in the security of our digital assets, we continue to evaluate additional protective measures.

We generated revenue, net income and Adjusted EBITDA of $82.1 million, $46.2 million and $74.4 million, respectively, during the nine months ended September 30, 2021. We generated revenue, net loss and Adjusted EBITDA of $5.15 million, $0.5 million and $2.7 million, respectively, in 2020. Adjusted EBITDA is a financial measure not presented in accordance with GAAP. For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure and a reconciliation of Adjusted EBITDA to net income (loss), see “— Summary Financial Statements — Non-GAAP Financial Metrics.”

Our Competitive Strengths

We believe the following attributes and capabilities provide us with competitive advantages that distinguish us from our peers:

•        One of the most efficient, lowest cost bitcoin mining companies in the industry.    We believe that we are one of the most efficient and low-cost large-scale bitcoin mining companies, achieved by leveraging our proprietary technology to operate our miners at the highest efficiency and utilizing low-cost power. We believe that our power arrangements combined with our liquid cooling technology and proprietary software, allows us to mine more bitcoin using fewer miners and causing less damage to those miners. Further, our technology enables our miners to operate with little to no down time, which reduces needed maintenance and replacement of our miners, further driving down costs. We have long-term, low-cost contracts in place for our electricity needs, resulting in an average electricity cost per bitcoin between January 1, 2021 and September 30, 2021 of approximately $2,507. The cost of power used by us in connection with our operations was under 2.0 cents per kilowatt-hour (“kWh”) for the nine months ended September 30, 2021.

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•        Wholly owned and integrated technology and infrastructure platform.    We have customized the design of our mining sites and developed our own cooling-technology infrastructure to optimize our mining operations. Our investment in our sites provides a significant long-term benefit to the efficiency of these operations. We do not license our proprietary technology or provide hosting services to third parties. We believe having control over the critical components of our mining value chain provides us long-term strategic and financial benefits, including reduced overall costs, better quality control and an improved ability to react to disruptions and market trends in an expedient manner. This strategy reinforces our belief that owning and controlling a majority of the components of our mining infrastructure and owning our software is a distinct competitive advantage that gives us the operational flexibility required to maximize our profitability and control to implement our growth initiatives.

•        Innovative technology company with proprietary liquid-cooling systems and software.    We design and develop state-of-the-art technology specifically for our miners and infrastructure, including our proprietary large-scale, liquid-cooling systems and optimization software. We believe our liquid-cooling technology increases the efficiency of our mining equipment, allowing us to produce more bitcoin per unit of power consumed per miner and prolongs the useful life of our equipment. Our proprietary software allows us, in real time, to adjust and manage our miners and infrastructure for peak optimal performance. We believe mining efficiency will be critical to our success and our continued investment in our liquid-cooling and software technologies will provide us with a significant advantage over our competitors.

•        Strategically located mining sites with significant room for near-term growth.    As of December 31, 2021, we operated our bitcoin mining site in Texas, representing approximately 125 MW of mining capacity at our initial Texas site. We have begun construction at our second Texas site, which we expect to be completed by the end of 2022. We expect to have 225 MW of additional mining capacity at our second Texas site. Our strategic goals include adding 300 MW of capacity at our second Texas site by the end of 2023. We believe the increased efficiency of our liquid-cooling technology compared to air-cooled systems provides us an advantage in high-heat and high-humidity regions such as Texas that have access to an abundance of renewable power generation. Texas’s power landscape provides us access to cheap and clean renewable energy while also providing meaningful flexibility to the regional power grid.

•        Flexibility to curtail operations and release capacity during emergencies and high demand periods. Through our contractual relationship with our power suppliers, we can curtail our operations, enabling our power suppliers to sell unused capacity back to the power market during periods of high demand and price volatility, creating a flexible demand response to the volatility of the Texas electricity market. Through this contractual relationship with our power suppliers, we can still generate revenue during such periods. For example, the North American winter storm in February 2021 resulted in widespread power outages throughout Texas. During this storm, we curtailed our operations to allow our power supplier at our initial Texas site to sell unused capacity back to the power market. We “recouped” what would have otherwise been lost revenue attributable to the curtailment, in the form of energy credits from our power supplier.

•        Access to and use of low cost power.    We are dedicated to helping support the environmentally friendly mining of bitcoin, as we firmly believe that this will be critical to the long-term adoption and success of bitcoin. Our current and planned future operations are located in Texas, which, according to the United States Energy Information Association, leads the United States in wind-powered electricity generation, producing almost 30% of the United States’ total wind generation in 2020. Texas is also recognized for its significant solar power potential, second only to California based on the cumulative amount of solar electric capacity installed through the first quarter of 2021. The significant penetration of intermittent renewable energy will often lead to its curtailment, which reduces the economic and environmental benefits of this clean energy. We can locate our sites to efficiently utilize renewable energy that would have otherwise been curtailed and also curb our operations when the electric grid needs to utilize these renewable resources due to high electricity demand. As a first step towards our goal of establishing environmentally friendly bitcoin mines, we intend to reach 100% net carbon neutrality by the end of 2022 through these efforts and the purchase of carbon offsets.

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Recent Developments

Lease and Electricity Supply Agreement at Second Texas Site

On August 31, 2021, we entered into a Datacenter Lease (the “Datacenter Lease”) with Temple Green Data LLC (“Temple Green”), pursuant to which Temple Green has agreed to provide data center site hosting and power supply services to us at our second Texas site. On October 8, 2021, we entered into Amendment No. 1 to the Datacenter Lease with Temple Green in order to update the legal description of the property. Under the Datacenter Lease, Temple Green has agreed to engineer and construct our site capable of hosting up to 225 MW (including 40 MW under a nonbinding letter of intent) of server and cooling load and associated electrical infrastructure in exchange for our promise to pay a fixed monthly lease and share a percentage of each building’s yearly profits, payment for which will begin on the date our site commences operations (subject to satisfactory credit support). The initial term of the Datacenter Lease is ten years and we have the sole option to extend for up to two five-year periods.

On August 31, 2021, we also entered into a master retail electricity supply agreement (the “Electricity Supply Agreement”) with an affiliate of NetZero Energy LLC (“NetZero”) to provide electricity to our second Texas site. NetZero has agreed to provide us with sufficient energy to operate our second Texas site at pre-determined maximum amounts during the term of the Datacenter Lease.

SAFE Transactions

Between June 2, 2021 and October 19, 2021, we entered into simple agreements for future equity, or SAFEs, with certain investors, pursuant to which we issued rights to such investors to receive shares of our Class A common stock upon the occurrence of a subsequent financing or listing event for an aggregate purchase price of $86.9 million. Each SAFE provides that, upon the closing of this offering, the rights will convert into shares of Class A common stock.

Corporate Reorganization

We were incorporated as a Delaware corporation on April 22, 2021. On June 30, 2021, we effected a series of transactions that reorganized our organization into a dual-class equity structure, which we refer to as the Corporate Reorganization. All share numbers presented in this section are historical and do not take into effect the Reverse Stock Split (unless otherwise noted).

Immediately prior to the Corporate Reorganization, Imperium held approximately 92% of the equity interests in Rhodium Holdings. As a result of the Corporate Reorganization, all non-controlling interest unit holders of Rhodium Holdings and certain of its subsidiaries (the “Corporate Reorganization Parties”) contributed their ownership interests in Rhodium Holdings and such subsidiaries to Rhodium in exchange for an aggregate 110,593,401 shares of Class A common stock (on a pre-Reverse Stock Split basis). Rhodium then transferred the ownership interests in such subsidiaries to Rhodium Holdings in exchange for Rhodium Units.

In connection with the Corporate Reorganization, (i) Imperium retained 180,835,811 Rhodium Units (on a pre-Reverse Stock Split basis), or approximately 62% of the economic interests in Rhodium Holdings, (ii) Rhodium acquired 110,593,401 Rhodium Units (on a pre-Reverse Stock Split basis), or approximately 38% of the economic interests in Rhodium Holdings, (iii) Rhodium became the managing member of Rhodium Holdings and became responsible for all operational, management and administrative decisions relating to Rhodium Holdings’ business and will consolidate financial results of Rhodium Holdings and its subsidiaries, (iv) Rhodium became a holding company whose only material asset consists of membership interests in Rhodium Holdings and (v) Rhodium Holdings directly or indirectly owns all of the outstanding equity interests in the subsidiaries through which we operate our assets.

In connection with this offering, Rhodium will enter into a Master Reorganization Agreement pursuant to which, among other things (i) Rhodium will amend its certificate of incorporation to allow for the Reverse Stock Split and increase its authorized Class A common stock, (ii) Rhodium will effect the Reverse Stock Split, (iii) Rhodium will issue 7,866,509 shares of Class A common stock on a post-Reverse Stock Split basis (assuming a public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus) to the investors in connection with the SAFE Transactions (iv) Rhodium will amend and restate its organizational documents to give the holders of shares of common stock of Rhodium one vote on all matters on which stockholders

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are entitled to vote generally for each share of Class A common stock and Class B common stock held of record, and (v) Rhodium will issue 67,500,311 shares of Class B common stock to Imperium (collectively, the “IPO Reorganization”). See “Certain Relationships and Related Party Transactions — Master Reorganization Agreement.”

Our organizational structure following this offering and the related IPO Reorganization is commonly referred to as an umbrella partnership-C corporation, or “Up-C” structure. Pursuant to this structure and following this offering, we will hold a number of Rhodium Units equal to the number of shares of Class A common stock issued and outstanding and Imperium will hold a number of Rhodium Units equal to the number of shares of Class B common stock issued and outstanding. The Up-C structure was selected in order to allow Imperium the option to continue to hold its economic ownership in Rhodium Holdings in a pass-through structure for U.S. federal income tax purposes through its ownership of Rhodium Units and potentially allows Imperium and Rhodium to benefit from net cash tax savings that Rhodium might realize as more fully described in “Certain Relationships and Related Party Transactions — Tax Receivable Agreement.”

After giving effect to the offering and the related IPO Reorganization contemplated by this prospectus, Rhodium will own an approximate 45.7% interest in Rhodium Holdings (or 46.2% if the underwriters’ option to purchase additional shares is exercised in full), Imperium will own an approximate 54.3% interest in Rhodium Holdings (or 53.8% if the underwriters’ option to purchase additional shares is exercised in full), and Imperium will own 67,500,411 shares of Class B common stock, which will represent an approximate 54.3% interest in the voting power of the outstanding common stock of Rhodium Enterprises, Inc. (or 53.8% if the underwriters’ option to purchase additional shares is exercised in full). See “Security Ownership of Certain Beneficial Owners and Management” for more information.

Each share of Class B common stock has no economic rights but entitles its holder to one vote on all matters to be voted on by stockholders generally. Holders of Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or by our amended and restated certificate of incorporation. Rhodium does not intend to list Class B common stock on any exchange.

Under the Rhodium LLC Agreement, Imperium, subject to certain limitations, has the right (the “Redemption Right”) to cause Rhodium Holdings to acquire all or a portion of its Rhodium Units for, at Rhodium Holdings’ election, (i) shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each Rhodium Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions or (ii) an approximately equivalent amount of cash (the “Cash Election”) as determined pursuant to the terms of the Rhodium LLC Agreement. Alternatively, upon the exercise of the Redemption Right, Rhodium (instead of Rhodium Holdings) has the right (the “Call Right”) to acquire each tendered Rhodium Unit directly from Imperium for, at its election, (x) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (y) an approximately equivalent amount of cash as determined pursuant to the terms of the Rhodium LLC Agreement. In addition, Rhodium has the right to require (i) upon the acquisition by Rhodium of substantially all of the Rhodium Units, certain minority unitholders or (ii) upon a change of control of Rhodium, Imperium, in each case, to exercise its Redemption Right with respect to some or all of such unitholder’s Rhodium Units. In connection with any redemption of Rhodium Units pursuant to the Redemption Right or the Call Right, the corresponding number of shares of Class B common stock will be cancelled. See “Certain Relationships and Related Party Transactions — Rhodium LLC Agreement.”

In connection with the Up-C structure, we will enter into a Tax Receivable Agreement with Imperium at the close of this offering. This agreement generally provides for the payment by Rhodium to Imperium of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that Rhodium Enterprises, Inc. actually realizes (or is deemed to realize in certain circumstances) in periods after this offering as a result of (i) the increase in our proportionate share of the tax basis of the assets of Rhodium Holdings resulting from the exchange of Rhodium Units, and the corresponding surrender of an equivalent number of shares of Class B common stock, by Imperium for shares of Class A common stock (or for cash pursuant to the Cash Election) pursuant to the Redemption Right, and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the Tax Receivable Agreement. Rhodium Enterprises, Inc. will retain the benefit of the remaining 15% of these cash savings.

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While the net cash savings are not expected to be material if Imperium exchanged all of its Rhodium Units at the time of this offering, such net cash savings and the payments arising therefrom are expected to significantly increase based on the future operations and activities of Rhodium Holdings. If we experience a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations) or the Tax Receivable Agreement terminates early (at our election or as a result of our breach), we could be required to make a substantial, immediate lump-sum payment. See “Certain Relationships and Related Party Transactions — Tax Receivable Agreement” for more information.

Estimating the amount and timing of Rhodium’s realization of tax benefits subject to the Tax Receivable Agreement is by its nature imprecise, and the amount and timing of such tax benefits are unknown at this time and will vary based on a number of factors, many of which are outside of our control. Assuming no material changes in the relevant tax law and a price of $13.00 per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), we expect that if we experienced a change of control or the Tax Receivable Agreement were terminated immediately after this offering, the estimated lump-sum payment would be approximately $48.6 million (calculated using a discount rate equal to the one-year London Interbank Offered Rate (or an agreed successor rate, if applicable) plus 100 basis points, applied against an undiscounted tax benefit of approximately $54.0 million). These amounts are estimates and have been prepared for informational purposes only. The actual amount of such lump-sum payment could vary significantly based on, among other things, the operations and activities of Rhodium Holdings in the period between this offering and an early termination or a change of control event.

See “Certain Relationships and Related Party Transactions — Tax Receivable Agreement” and “Corporate Reorganization” for more information on our organizational structure, including the Tax Receivable Agreement.

The diagram below depicts our simplified organizational structure immediately following this offering and the related IPO Reorganization assuming that the Underwriters do not exercise their option to purchase additional shares of Class A common stock:

____________

(1)      Includes the Existing Holders other than Imperium.

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Reverse Stock Split

We will effect a 1-for-2.679 reverse stock split immediately prior to and contingent upon the completion of this offering, pursuant to which each 2.679 shares of Class A common stock held of record by the holder thereof will be reclassified into one share of Class A common stock. No fractional shares will be issued. Pursuant to the Rhodium LLC Agreement, each 2.679 Rhodium Units will also be split on a corresponding 1-for-2.679 basis, such that there will be an equivalent number of Rhodium Units outstanding as the aggregate number of shares of Class A common stock and Class B common stock outstanding following the Reverse Stock Split. We refer to this collectively as the “Reverse Stock Split.”

Unless otherwise indicated, and other than the consolidated financial statements and the related notes included elsewhere in this prospectus, the number of our shares of common stock presented in this prospectus is adjusted to reflect the Reverse Stock Split.

Our Principal Stockholders

Following the completion of this offering and related IPO Reorganization, Imperium will own 100% of our Class B common stock, representing approximately 54.3% of the voting power of Rhodium Enterprises, Inc. (53.8% if the underwriters’ option to purchase additional shares is exercised in full).

Emerging Growth Company Status

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the JOBS Act. For as long as we are an emerging growth company, unlike other public companies that do not meet those qualifications, we are not required to:

•        provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (“SOX”);

•        provide more than two years of audited financial statements and related management’s discussion and analysis of financial condition and results of operations in a registration statement on Form S-1;

•        comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;

•        provide certain disclosure regarding executive compensation required of larger public companies or hold stockholder advisory votes on executive compensation required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”); or

•        obtain stockholder approval of any golden parachute payments not previously approved.

We will cease to be an “emerging growth company” upon the earliest of:

•        the last day of the year in which we have $1.07 billion or more in annual revenue;

•        the date on which we become a “large accelerated filer” (which means the year-end at which the total market value of our common equity securities held by non-affiliates is $700 million or more as of June 30);

•        the date on which we issue more than $1 billion of non-convertible debt securities over a three-year period; or

•        the last day of the year following the fifth anniversary of our initial public offering.

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In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period, which means that the financial statements included in this prospectus, as well as any financial statements that we file or furnish in the future, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as we remain an emerging growth company.

Corporate Information

We consider ourselves a remote-first company, meaning that for the vast majority of roles, our employees have the option to work remotely. Due to this, we do not currently have a principal executive office. Our website is located at www.rhdm.com. Our telephone number is (956) 746-3486. We expect to make our periodic reports and other information filed with or furnished to the SEC available free of charge through our website as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on, or otherwise accessible through, our website or any other website does not constitute a part of this prospectus.

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THE OFFERING

Class A common stock offered by us

 

7,692,307 shares.

Option to purchase additional shares of Class A common stock

 

We have granted the underwriters a 30-day option to purchase up to an aggregate of 1,153,846 additional shares of our Class A common stock.

Class A common stock to be outstanding after the offering

 

56,839,846 shares (or 57,993,692 shares, if the underwriters exercise in full their option to purchase additional shares), after giving effect to the Reverse Stock Split.

Class B common stock to be outstanding immediately after completion of this offering

 

67,500,411 shares (after giving effect to the Reverse Stock Split), or one share for each Rhodium Unit held by Imperium immediately following this offering. Class B shares are non-economic. In connection with any redemption of Rhodium Units pursuant to the Redemption Right or our Call Right, the corresponding number of shares of Class B common stock will be cancelled.

Use of proceeds

 

We expect to receive approximately $88.8 million of net proceeds (assuming a public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus) from the sale of the Class A common stock offered by us (or approximately $102.7 million, if the underwriters exercise in full their option to purchase additional shares) after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to contribute the net proceeds of this offering to Rhodium Holdings in exchange for Rhodium Units. Rhodium Holdings will use such proceeds to repay our outstanding borrowings and accrued interest under the Bridge Loan, totaling approximately $31.0 million as of September 30, 2021, to construct new sites and for general corporate purposes, including the purchase of miners. Please see “Use of Proceeds.”

Voting power of Class A common stock after giving effect to this offering

 

45.7% or (or 100% if all outstanding Rhodium Units held by Imperium are redeemed, along with a corresponding number of shares of our Class B common stock, for newly issued shares of Class A common stock on a one-for-one basis), after giving effect to the Reverse Stock Split.

Voting power of Class B common stock after giving effect to this offering

 

54.3% or (or 0% if all outstanding Rhodium Units held by Imperium are redeemed, along with a corresponding number of shares of our Class B common stock, for newly issued shares of Class A common stock on a one-for-one basis), after giving effect to the Reverse Stock Split.

Voting rights

 

Imperium will hold all of the outstanding shares of our Class B common stock. Each share of Class A common stock will entitle its holder to one vote on all matters to be voted on by stockholders generally. Each share of Class B common stock will entitle its holder to one vote on all matters to be voted on by stockholders generally. See “Description of Capital Stock” for more information.

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Controlled company

 

Upon completion of this offering, we will be a “controlled company” within the meaning of the Nasdaq corporate governance standards.

Dividend policy

 

We currently anticipate that we will retain all future earnings, if any, to finance the growth and development of our business. We do not intend to pay cash dividends.

Listing and trading symbol

 

We have applied to list our Class A common stock on Nasdaq under the symbol “RHDM.”

Redemption rights of Imperium

 

Under the Rhodium LLC Agreement, Imperium, subject to certain limitations, has the right, pursuant to the Redemption Right, to cause Rhodium Holdings to acquire all or a portion of its Rhodium Units for, at Rhodium Holdings’ election, (i) shares of our Class A common stock at a redemption ratio of one share of Class A common stock for each Rhodium Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions or (ii) an approximately equivalent amount of cash as determined pursuant to the terms of the Rhodium LLC Agreement. Alternatively, upon the exercise of the Redemption Right, Rhodium (instead of Rhodium Holdings) has the right, pursuant to the Call Right, to acquire each tendered Rhodium Unit directly from Imperium for, at its election, (x) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (y) an approximately equivalent amount of cash as determined pursuant to the terms of the Rhodium LLC Agreement. In addition, Rhodium has the right to require (i) upon the acquisition by Rhodium of substantially all of the Rhodium Units, certain minority unitholders or (ii) upon a change of control of Rhodium, Imperium, in each case, to exercise its Redemption Right with respect to some or all of such unitholder’s Rhodium Units. In connection with any redemption of Rhodium Units pursuant to the Redemption Right or the Call Right, the corresponding number of shares of Class B common stock will be cancelled. See “Certain Relationships and Related Party Transactions — Rhodium LLC Agreement.”

Tax receivable agreement

 

Future redemptions of Rhodium Units for shares of Class A common stock are expected to result in increases in the tax basis of the tangible and intangible assets of Rhodium Holdings (or our proportionate share of such tax basis). The anticipated basis adjustments are expected to increase (for tax purposes) our depreciation and amortization deductions and may also decrease our gains (or increase our losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. Such increased deductions and losses and reduced gains may reduce the amount of tax that we would otherwise be required to pay in the future. In connection with the completion of this offering, we will enter into a Tax Receivable Agreement with Imperium. This agreement generally provides for the payment by Rhodium to Imperium of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that Rhodium Enterprises, Inc. actually realizes (or is deemed to realize in certain circumstances) in periods after this offering as a result of (i) the tax basis increases resulting from the redemption of Rhodium Units, and the corresponding surrender of an equivalent number of shares of Class B common stock, by Imperium for

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shares of Class A common stock (or for cash pursuant to the Cash Election) pursuant to the Redemption Right or Call Right, and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the Tax Receivable Agreement. While the net cash savings are not expected to be material if Imperium exchanged all of its Rhodium Units at the time of this offering, such net cash savings and the payments arising therefrom are expected to significantly increase based on the future operations and activities of Rhodium Holdings. If we experience a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations) or the Tax Receivable Agreement terminates early (at our election or as a result of our breach), we could be required to make a substantial, immediate lump-sum payment. See “Certain Relationships and Related Party Transactions — Tax Receivable Agreement” for more information.

Risk factors

 

See the section entitled “Risk Factors” and other information included in this prospectus for a discussion of some of the factors you should consider before deciding to purchase shares of our Class A common stock.

The information above excludes 13,815,584 shares of Class A common stock (taking into account the Reverse Stock Split) reserved for issuance under the 2022 Omnibus Incentive Plan that we intend to adopt in connection with the completion of this offering (the “Omnibus Incentive Plan”).

Summary of Risk Factors Applicable to Our Business

An investment in our securities involves a high degree of risk. The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to:

Risks Related to Our Limited Operating History

•        We have a limited operating history and have grown significantly in a short period of time. If we fail to manage our growth effectively, our business could be materially adversely affected.

•        We have a history of operating losses and we may not be able to achieve or sustain profitability.

Risks Related to Our Bitcoin Mining Business

•        The price of new miners may be linked to the market price of bitcoin and other cryptocurrencies, and our costs of obtaining new and replacement miners may increase along with the market price of bitcoin and other cryptocurrencies, which may have a material and adverse effect on our financial condition and results of operations.

•        There are several new and existing competitors in our industry that are purchasing mining equipment at scale, which may cause delays or difficulty in us obtaining new miners, which could materially and adversely affect our business and results of operations.

•        We depend on a limited number of suppliers for our cooling liquid and, historically, have depended on one manufacturer for our miners, making us vulnerable to supply disruption and price fluctuation.

•        The cost of obtaining new and replacement miners and parts has historically been capital intensive, and is likely to continue to be very capital intensive, which may have a material and adverse effect on our business and results of operations.

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•        Our failure to timely complete the construction of our second Texas site and commence its full commercial operations could negatively affect our business operations.

•        Our lease arrangements with our power suppliers at our Texas sites are subject to power supply and counterparty risks.

•        The COVID-19 pandemic has disrupted and may continue to disrupt international shipping and manufacturing pipelines, and we may not be able to obtain new miners or replacement parts for our existing miner fleet in a timely or cost-effective manner, which could materially and adversely affect our business and results of operations.

•        We may be subject to risks in connection with acquisitions.

Risks Related to Bitcoin

•        The trading price of bitcoin, which may be subject to pricing risks, including volatility related risks, has historically been subject to wide swings. A material decrease in the price of bitcoin could have a materially adverse effect on our business and results of operations.

•        The markets for bitcoin may be underregulated. As a result, the market price of bitcoin may be extremely volatile. Rapid decreases in the price of bitcoin could have a materially adverse effect on our business and results of operations.

Risks Related to Governmental Regulation and Enforcement

•        Regulatory or tax law changes or actions may alter the nature of your investment or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects or operations.

•        We are subject to a highly evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our business, prospects or operations.

•        Bitcoin’s status in relevant jurisdictions is subject to a high degree of uncertainty and if we are unable to properly characterize it, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.

•        We are subject to risks associated with our need for significant electrical power. Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to bitcoin mining operations, such as ours.

•        Our mining business is subject to local government regulation.

•        Future developments regarding the treatment of bitcoin for U.S. federal income and foreign tax purposes could adversely affect our business.

•        Changes to applicable U.S. tax laws and regulations could affect our and Rhodium Holdings’ business and future profitability.

Risks Related to our Organizational Structure

•        We are a holding company. Our sole material asset after completion of this offering will be our equity interest in Rhodium Holdings, and we are accordingly dependent upon distributions from Rhodium Holdings to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other overhead expenses.

•        Imperium will hold a substantial majority of our common stock and will have the right to appoint a majority of our board members, and its interests may conflict with those of other stockholders.

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•        We will be required to make payments to Imperium under the Tax Receivable Agreement for certain tax benefits we may claim, and no such payments will be made to any holders of our Class A common stock. The amounts of such payments could be significant.

•        If Rhodium Holdings were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and Rhodium Holdings might be subject to potentially significant tax inefficiencies, and we would not be able to recover payments previously made by us under the Tax Receivable Agreement even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.

Risks Related to the Offering and Our Class A Common Stock

•        There is no existing market for our Class A common stock, and we do not know if one will develop.

•        The dual-class structure of our common stock may adversely affect the trading market for our Class A common stock.

•        Investors in this offering will experience immediate and substantial dilution of $8.40 per share.

•        Because we have no current plans to pay cash dividends on our Class A common stock, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it.

•        We will incur significantly increased costs and devote substantial management time to reporting requirements as a result of operating as a public company.

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION

Rhodium was incorporated in April 2021 and has limited historical financial operating results. The following table shows summary historical financial and other information and certain pro forma information for Rhodium and its subsidiaries and its accounting predecessor.

The summary historical financial information as of and for the period from April 1, 2020 (inception) to December 31, 2020 was derived from the audited historical financial statements of our accounting predecessor, Rhodium Holdings and Rhodium JV LLC on a combined basis, together with its consolidated subsidiaries included elsewhere in this prospectus. The summary historical financial information as of September 30, 2021 and 2020 and for the nine months ended September 30, 2021 and the period from April 1, 2020 (inception) to September 30, 2020 was derived from the unaudited historical financial statements of Rhodium and its subsidiaries included elsewhere in this prospectus.

The summary unaudited pro forma balance sheet as of September 30, 2021 has been prepared to give pro forma effect to (i) the Corporate Reorganization, (ii) the issuance of Class A common stock in accordance with the SAFE Transactions, (iii) the proceeds from the SAFE Transactions entered into after September 30, 2021, (iv) the IPO Reorganization (which includes the Reverse Stock Split) and (iv) this offering and the application of the net proceeds from this offering as if they had been completed as of September 30, 2021.

The summary unaudited pro forma statements of operations data for the year ended December 31, 2020 and the nine months ended September 30, 2021 have been prepared to give pro forma effect to (i) the issuance of Class A common stock in accordance with the SAFE Transactions, (ii) the proceeds from the SAFE Transactions, (iii) the IPO Reorganization (including the Reverse Stock Split) and (iv) this offering and the application of the net proceeds from this offering. The presentation of the unaudited pro forma financial information has been prepared in conformity with Article 11 of Regulation S-X and is based on currently available information and certain estimates and assumptions. Therefore, the actual adjustments may differ from the pro forma adjustments. This information is subject to and gives effect to the assumptions and adjustments described in the notes accompanying the unaudited pro forma financial statements included elsewhere in this prospectus.

The summary unaudited pro forma consolidated financial information and related notes are included for informational purposes only and do not purport to reflect our financial position or results of operations that would have occurred had we been in existence or operated as a public company or otherwise during the periods presented. If this offering and other transactions contemplated herein had occurred in the past, our operating results might have been materially different from those presented in the unaudited pro forma consolidated financial statements. The unaudited pro forma consolidated financial information should not be relied upon as being indicative of our financial position or results of operations had the described transactions occurred on the dates assumed. The summary unaudited pro forma consolidated financial information also does not project our financial position or results of operations for any future period or date. Future results may vary significantly from the results reflected in the unaudited pro forma consolidated statements of operations and should not be relied on as an indication of our results after the consummation of this offering and the other transactions contemplated by such unaudited pro forma consolidated financial statements.

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“Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Corporate Reorganization,” the historical financial statements and the unaudited pro forma financial statements included elsewhere in this prospectus contain additional information to be read in conjunction with the following table.

 

Rhodium Enterprises, Inc.

 

Rhodium Pro Forma

   

As of 
and for the 
nine months 
ended 
September 30, 

2021

 

As of 
and for the 
period from 
April 1, 2020 

(inception) to 
September 30, 
2020

 

As of 
and for the 
period 
from 
April 1, 2020 
(inception) to 
December 31, 
2020

 

As of 
and for the 
nine months 
ended 
September 30,
2021

 

As of 
and for the 
period from 
April 1, 2020 
(inception) to
 
December 31, 
2020

   

(in thousands, except share and per share data)

Statement of Operations Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue, net – digital asset mining

 

$

82,097

 

 

$

97

 

 

$

5,150

 

 

$

82,097

 

 

$

5,150

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue, excluding colocation expense, depreciation
and amortization

 

 

6,751

 

 

 

20

 

 

 

623

 

 

 

6,751

 

 

 

623

 

Cost of revenue – colocation payment expense

 

 

2,512

 

 

 

 

 

 

 

 

 

2,512

 

 

 

 

Selling, general and administrative

 

 

8,119

 

 

 

499

 

 

 

2,380

 

 

 

8,119

 

 

 

2,380

 

Depreciation and amortization

 

 

10,383

 

 

 

995

 

 

 

2,953

 

 

 

10,383

 

 

 

2,953

 

Impairment of digital assets

 

 

30,717

 

 

 

3

 

 

 

68

 

 

 

30,717

 

 

 

68

 

Total costs and expenses

 

 

58,482

 

 

 

1,517

 

 

 

6,024

 

 

 

58,482

 

 

 

6,024

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit (loss)

 

 

23,615

 

 

 

(1,420

)

 

 

(874

)

 

 

23,615

 

 

 

(874

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

(1,620

)

 

 

(193

)

 

 

16

 

 

 

(1,620

)

 

 

16

 

Realized gain on sale of digital assets

 

 

37,505

 

 

 

 

 

 

351

 

 

 

37,505

 

 

 

351

 

SAFE valuation gain (loss)

 

 

(2,618

)

 

 

 

 

 

(422

)

 

 

(2,618

)

 

 

 

Other income, net

 

 

2,603

 

 

 

145

 

 

 

217

 

 

 

2,603

 

 

 

217

 

Total other income (expense)

 

 

35,870

 

 

 

(48

)

 

 

(162

)

 

 

35,870

 

 

 

(162

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before provision for
income taxes

 

 

59,485

 

 

 

(1,468

)

 

 

(712

)

 

 

59,485

 

 

 

(712

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for (benefit from) income taxes

 

 

13,337

 

 

 

(409

)

 

 

181

 

 

 

13,337

 

 

 

181

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

46,148

 

 

 

(1,059

)

 

 

(531

)

 

 

46,148

 

 

 

(531

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to
non-controlling interest

 

 

33,335

 

 

 

(315

)

 

 

(244

)

 

 

33,335

 

 

 

(244

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Rhodium Enterprises, Inc.

 

$

12,813

 

 

$

(744

)

 

$

(287

)

 

$

12,813

 

 

$

(287

)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Class A
common stock per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

 

 

 

 

 

 

 

 

 

$

0.20

 

 

 

 

Diluted

 

$

0.10

 

 

 

 

 

 

 

 

 

 

$

0.20

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A
common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

110,593,401

 

 

 

 

 

 

 

 

 

 

 

56,839,846

 

 

 

 

Diluted

 

 

110,593,401

 

 

 

 

 

 

 

 

 

 

 

56,839,846

 

 

 

 

15

Table of Contents

 

Rhodium Enterprises, Inc.

 

Rhodium Pro Forma

   

As of
and for the
nine months
ended
September 30,
2021

 

As of
and for the
period from
April 1, 2020
(inception) to
September 30,
2020

 

As of 
and for the 
period from 
April 1, 2020 
(inception) to 
December 31, 
2020

 

As of
and for the
nine months
ended
September 30,
2021

 

As of
and for the
period from
April 1, 2020
(inception) to
December 31,
2020

   

(in thousands, except share and per share data)

Balance Sheet Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

Cash and cash equivalents

 

$

103,799

 

 

 

 

 

 

$

9,059

 

 

$

165,975

   

Digital assets

 

 

8,424

 

 

 

 

 

 

 

137

 

 

 

8,424

   

Total assets

 

 

272,134

 

 

 

 

 

 

 

45,264

 

 

 

332,449

   

Total liabilities

 

 

189,148

 

 

 

 

 

 

 

40,984

 

 

 

71,120

   

Total stockholders’ and members’ equity

 

 

82,986

 

 

 

 

 

 

 

4,280

 

 

 

261,322

   
   

 

 

 

 

 

 

 

 

 

 

 

 

 

     

Statement of Cash Flows Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

Net cash used in operating activities

 

$

(23,953

)

 

$

(1,360

)

 

$

(3,010

)

 

 

     

Net cash used in investing activities

 

 

(42,613

)

 

 

(25,903

)

 

 

(30,103

)

 

 

     

Net cash provided by financing activities

 

 

161,306

 

 

 

31,108

 

 

 

42,172

 

 

 

     
   

 

 

 

 

 

 

 

 

 

 

 

 

 

     

Other Financial Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

Adjusted EBITDA(1)

 

$

74,433

 

 

 

 

 

 

$

2,663

 

 

 

     

____________

(1)      Adjusted EBITDA is not a financial measure calculated or presented in accordance with GAAP. See “— Non-GAAP Reconciliation” for information regarding our use of this non-GAAP financial measure and a reconciliation to its most directly comparable GAAP equivalent.

Non-GAAP Reconciliation:

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) before interest expense, income taxes, depreciation and amortization, further adjusted by the removal of one-time transaction costs, SAFE discount, and expenses related to stock-based compensation.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this prospectus because it is a key measurement used internally by management to make operating decisions, including those related to operating expenses, evaluate performance and perform strategic and financial planning. However, you should be aware that when evaluating Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. The presentation of this measure should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Further, this non-GAAP financial measure should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We compensate for these limitations by relying primarily on GAAP results and using Adjusted EBITDA on a supplemental basis. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies because not all companies calculate this measure in the same fashion. You should review the reconciliation of net income (loss) to Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

16

Table of Contents

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for the period ended December 31, 2020 and for the nine months ended September 30, 2021:

 

For the
period from
April 1, 2020
(inception) to
December 31,
2020

 

For the
nine months ended September 30,
2021

   

(in thousands)