NET Power Inc

Previous wording

On December 13, 2022, NET Power, LLC entered into the Business Combination Agreement with RONI, RONI OpCo, Buyer and Merger Sub. Pursuant to the Business Combination Agreement, Merger Sub merged with and into NET Power, LLC with NET Power, LLC surviving the merger as a wholly owned subsidiary of Buyer. Upon the consummation of the Business Combination on June 8, 2023, RONI was renamed NET Power Inc.

Current wording

On December 13, 2022, NET Power, LLC entered into the Business Combination Agreement with RONI, RONI OpCo, Buyer and Merger Sub. Pursuant to the Business Combination Agreement, Merger Sub merged with and into NET Power, LLC with NET Power, LLC surviving the merger as a wholly owned subsidiary of Buyer. Upon the consummation of the Business Combination on June 8, 2023, RONI was renamed NET Power Inc. (“Net Power” or the“Company”).

Previous wording

As a result of the Business Combination, the Company's financial statement presentation distinguishes NET Power, LLC as the "Predecessor" through June 7, 2023 (the "Predecessor Period") and NET Power Inc. as the "Successor" for periods after the Closing Date (the "Successor Period"). Revenue and earnings after the date of the Business Combination are shown in the Successor Period on the condensed consolidated statements of operations and comprehensive loss. As a result of the application of the acquisition method of accounting in the Successor Period, the consolidated financial statements for the Successor Period are presented on a full step-up basis; therefore, Successor Period consolidated financial statements are not comparable to the consolidated financial statements of the Predecessor Period, which are not presented on the same full step-up basis.

Current wording

As discussed in Note 1 to the condensed consolidated financial statements, the Company's financial statement presentation distinguishes NET Power, LLC as the “Predecessor” through June 7, 2023 (the“Predecessor Period”) and Net Power as the“Successor” for periods after the Closing Date (the “Successor Period”). Revenue and earnings after the date of the Business Combination are shown in the Successor Period on the condensed consolidated statements of operations and comprehensive loss. As a result of the application of the acquisition method of accounting in the Successor Period, the consolidated financial statements for the Successor Period are presented on a full step-up basis; therefore, Successor Period consolidated financial statements are not comparable to the consolidated financial statements of the Predecessor Period, which are not presented on the same full step-up basis.

Previous wording

As a result of the Business Combination, NET Power Inc. became a publicly traded company with Class A Common Stock and Public Warrants trading on the NYSE, which has necessitated the hiring of additional personnel and the implementation of procedures and processes to address public company regulatory requirements and customary practices. We have incurred, and expect to continue to incur, material additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.

Current wording

As a result of the Business Combination, Net Power became a publicly traded company with Class A Common Stock and Public Warrants trading on the NYSE, which has necessitated the hiring of additional personnel and the implementation of procedures and processes to address public company regulatory requirements and customary practices. We have incurred, and expect to continue to incur, material additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.

Previous wording

Over the next several years, the Company plans to conduct additional research and testing campaigns at its Demonstration Plant and construct its first utility-scale plant. NET Power began purchasing and expects to make additional purchases of initial long-lead materials for the first utility-scale plant in 2024 and targets initial power generation between the second half of 2027 and the first half of 2028. We expect that the 300 MWe class plant will be a NET Power-led consortium project located at an OXY-hosted site in the Permian Basin of West Texas. We expect that the project will fully integrate power production with transportation and underground storage of carbon dioxide. We are focused on delivering a project that will catalyze future adoption for utility-scale customers.

Current wording

Over the next several years, the Company plans to conduct additional research and testing campaigns at its Demonstration Plant and construct its first utility-scale plant. Net Power began purchasing and expects to make additional purchases of initial long-lead materials for the first utility-scale plant in 2024 and targets initial power generation between the second half of 2027 and the first half of 2028. We expect that the 300 MWe class plant will be a Net Power-led consortium project located at an OXY-hosted site in the Permian Basin of West Texas. We also continue to evaluate other sites in North

Previous wording

Comparison of the Three Months Ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor) (In thousands)

Current wording

Comparison of the Three Months Ended June 30, 2024 (Successor) to the Periods from April 1, 2023 Through June 7, 2023 (Predecessor)and June 8, 2023 Through June 30, 2023 (Successor)

Previous wording

General and administrative expenses consist primarily of personnel-related expenses associated with our general and administrative organization and professional fees for legal, accounting, and other consulting services. Our general and administrative expenses increased by $736, or 13.0%, for the three months ended March 31, 2024, as compared to $5,673 for the three months ended March 31, 2023. This increase was primarily attributable to costs associated with growth in employee headcount.

Current wording

General and administrative expenses consist primarily of personnel-related expenses associated with our general and administrative organization and professional fees for legal, accounting, and other consulting services. Our general and administrative expenses decreased by $23,810, or 75%, for the three months ended June 30, 2024 (Successor), as compared toamounts for the combined periods from April 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through June 30, 2023 (Successor). This decreasewas primarily attributable to $16,644 in costs related to the Business Combination and $1,958 in costs incurred as a result of becoming a public company during 2023. This decrease was also due to decreased amounts paid for professional services partially offset by an increase in corporate headcount.

Previous wording

Our sales and marketing expenses consist primarily of personnel-related costs, consultants and information technology costs directly associated with our sales and marketing activities, which include general publicity efforts for the Company. Sales and marketing expenses increased by $411, or 120.9%, for the three months ended March 31, 2024, as compared to $340 for the three months ended March 31, 2023. This increase was primarily attributable to costs associated with growth in employee headcount.

Current wording

Our sales and marketing expenses consist primarily of personnel-related costs, consultants and information technology costs directly associated with our sales and marketing activities, which include general publicity efforts for the Company. Sales and marketing expenses increased by $192, or 28%, for the three months ended June 30, 2024 (Successor), as compared toamounts for the combined periods from April 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through June 30, 2023 (Successor). This increase was primarily attributable to costs associated with growth in employee headcount.

Previous wording

Our research and development ("R&D") expenses consist primarily of labor expenses and fees paid to third parties working on and testing specific aspects of our technology, including testing at our Demonstration Plant and development activities under the BHES JDA. R&D expenses increased by $3,676, or 48.6%, for the three months ended March 31, 2024, as compared to $7,566 for the three months ended March 31, 2023. This increase was primarily due to the commencement of development activities under the BHES JDA.

Current wording

Our research and development (“R&D”) expenses consist primarily of labor expenses and fees paid to third parties working on and testing specific aspects of our technology, including testing at our Demonstration Plant and development activities under the BHES JDA. R&D expenses increased by $2,889, or 23%, for the three months ended June 30, 2024(Successor), as compared to amounts for the combined periods from April 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through June 30, 2023 (Successor). This increase was primarily due to activities under the BHES JDA and increased activity at the Demonstration Plant.

Previous wording

Project development expenses consist of labor expenses and fees paid to third parties developing commercial scale projects. Our project development expenses increased by $146 for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. This increase was due to the initiation of activities related to the development of a utility-scale facility.

Current wording

Project development expenses consist of labor expenses and fees paid to third parties developing commercial scale projects. Our project development expenses increased by $568 or 189%, for the three months ended June 30, 2024 (Successor), as compared toamounts for the combined periods from April 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through June 30, 2023 (Successor). This increase was due to the initiation of activities related to the development of a utility-scale facility.

Previous wording

Our depreciation, amortization and accretion expenses consist primarily of depreciation on our Demonstration Plant and amortization of intangible assets. Depreciation, amortization and accretion expense increased by $16,725, or 502.0%, for the three months ended March 31, 2024, as compared to $3,332 for the three months ended March 31, 2023. As a result of the Business Combination, we adjusted the value of acquired assets to fair value, which resulted in a significant increase in intangible assets for internally developed technology and the fair value of our Demonstration Plant. These increases resulted in an increase in related amortization and depreciation expense in the Successor Period.

Current wording

Our depreciation, amortization and accretion expenses consist primarily of depreciation on our Demonstration Plant and amortization of intangible assets. Depreciation, amortization and accretion expense increased by $12,651, or 171%, for the three months ended June 30, 2024 (Successor), as compared to amounts for the combined periods from April 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through June 30, 2023 (Successor). As a result of the Business Combination, we adjusted the value of acquired assets to fair value, which resulted in a significant increase in intangible assets for internally developed technology and the fair value of our Demonstration Plant. These increases resulted in an increase in related amortization and depreciation expense in the Successor Period.

Previous wording

The change in Earnout Shares liability and Warrant liability was $14,577 for the three months ended March 31, 2024, predominately due to the change in the fair value of the Private Placement Warrants. The Earnout Shares and the Warrants were issued in connection with the Business Combination; therefore, there are no corresponding amounts in the three months ended March 31, 2023.

Current wording

The change in Earnout Shares liability and Warrant liability was $15,240, or 1,510%, for the three months ended June 30, 2024 (Successor), as compared toamounts for the combined periods from April 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through June 30, 2023 (Successor). The change in Earnout Shares liability and Warrant liability was predominately due to the change in the fair value of the Private Placement Warrants and Public Warrants which were issued in connection with the closing of the Business Combination.

Previous wording

We have not generated material revenue to date. We have historically generated revenue through various contracts with potential future license customers for access to testing results, other data and feasibility studies. We have also generated revenue for conducting syngas testing at our Demonstration Plant. Revenue decreased by $50, or 100.0%, for the three months ended March 31, 2024, as compared to $50 for the three months ended March 31, 2023. Revenue during these two periods was not significant.

Current wording

We have not generated material revenue to date. We have generated revenue through various contracts with potential future license customers for access to testing results, other data and feasibility studies. We have also generated revenue for conducting syngas testing at our Demonstration Plant. Revenue increased by $63, or 36%, for the six months ended June 30, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through June 30, 2023 (Successor). Revenue during these two periods was not significant.

Previous wording

Liquidity and Capital Resources (In thousands)

Current wording

Liquidity and Capital Resources

Previous wording

Our principal sources of liquidity are cash and investments on hand, which are short-term in duration and highly liquid. Historically, our sources of liquidity have also included raising additional capital through the sale of ownership interests. We may issue additional equity securities in the future. We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our near-term business operations, including our contractual obligations and other commitments. Our current liquidity needs primarily involve R&D activities for the ongoing development of our technology, general and administrative costs, and expenditures to purchase long-lead items related to our first commercial scale facility.

Current wording

Our principal sources of liquidity are cash, short-term investments and investments in highly liquid available-for-sale securities. Historically, our sources of liquidity have also included raising additional capital through the sale of equity. We may issue additional equity securities in the future. We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our near-term business operations, including our contractual obligations and other commitments. Our current liquidity needs primarily involve R&D activities for the ongoing development of our technology, general and administrative costs, and expenditures to purchase long-lead items related to our first commercial scale facility.

Previous wording

As of March 31, 2024, we had short-term investments totaling $100,000, which was comprised of a single six-month certificate of deposit custodied by a domestic banking institution and available-for-sale securities comprised of investment grade, fixed income securities totaling $96,983. Additionally, our current liabilities were $10,546 and $12,021 at March 31, 2024 (Successor) and December 31, 2023 (Successor), respectively.

Current wording

As of June 30, 2024, we had short-term investments totaling $100,000, which was comprised of a single six-month certificate of deposit custodied by a domestic banking institution and available-for-sale securities comprised of investment grade, fixed income securities totaling $101,653. Additionally, our current liabilities were $14,557 and $12,021 at June 30, 2024 (Successor) and December 31, 2023 (Successor), respectively.

Previous wording

We believe we have the ability to manage our operating costs, including R&D expenditures, such that our existing cash, cash equivalents and short-term investments will be sufficient to fund our obligations for the next 12 months following the filing of this Quarterly Report. We believe that our current sources of liquidity on hand should be sufficient to fund our general corporate operating expenses as we work to commercialize our technology, but certain costs are not reasonably estimable at this time and we may require additional funding. More specifically, we may require additional funding in order to successfully construct our first utility-scale plant and to originate additional NET Power plant opportunities.

Current wording

We believe we have the ability to manage our operating costs, including R&D expenditures, such that our existing liquidity will be sufficient to fund our obligations for the next 12 months following the filing of this Quarterly Report. We believe that our current sources of liquidity on hand should be sufficient to fund our general corporate operating expenses as we work to commercialize our technology, but certain costs are not reasonably estimable at this time and we may require additional funding. More specifically, we may require additional funding in order to successfully construct our first utility-scale plant and to originate additional Net Power plant opportunities.

Previous wording

Cash used in operating activities decreased by $2,481 for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Our net cash used in operating activities to date have been primarily comprised of payroll, material and supplies, facilities expense, and professional services related to R&D, including the BHES JDA, and general and administrative activities. As we continue to increase hiring and the build out of the Company, we expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from our operations.

Current wording

Cash used in operating activities was$10,837 for the six months ended June 30, 2024 compared to $46,115 for the six months ended June 30, 2023. Our net cash used in operating activities to date have been primarily comprised of payroll, material and supplies, facilities expense, and professional services related to R&D, including the BHES JDA, and general and administrative activities. This change was primarily due to costs associated with the completion of the Business Combination and our corresponding transition to operating as a public company during thesix months ended June 30, 2023, As we continue to increase hiring and build out the Company, we expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from our operations.

Previous wording

During the three months ended March 31, 2024, net cash used in investing activities increased by $105,054 compared to the three months ended March 31, 2023. Our cash used in investing activities for the three months ended March 31, 2024 primarily reflects the investment of a portion of the proceeds received from the PIPE Financing in investment grade fixed income securities and capital expenditures related to our Demonstration Plant and long-lead items for our first utility scale plant.

Current wording

During the six months ended June 30, 2024, net cash used in investing activities was$118,591 compared to cash provided by investing activities of $5,023 for the six months ended June 30, 2023. Our cash used in investing activities for the six months ended June 30, 2024 primarily reflects theinvestment of a portion of the proceeds received from the PIPE Financing in investment grade fixed income securities and capital expenditures related to our Demonstration Plant and long-lead items for our first utility scale plant.

Previous wording

Commitments and Contractual Obligations (In thousands)

Current wording

Commitments and Contractual Obligations

Previous wording

We hold a lease for the approximately 218,900 square feet of land under the Demonstration Plant from Air Liquide at a rate of one dollar per year. The lease expires on the earlier of (i) July 1, 2025 and (ii) the termination of our oxygen supply agreement with Air Liquide, pursuant to which Air Liquide supplies oxygen for our use at the Demonstration Plant. The term of the oxygen supply agreement is perpetual but may be terminated by us or by Air Liquide upon 30 days written notice. The underlying lease requires the removal of all equipment and the obligation to restore the land to post-clearing grade level, which has resulted in the recognition of an asset retirement obligation liability of $2,103 and $2,060 as of March 31, 2024 and December 31, 2023, respectively.

Current wording

We hold a lease for the approximately 218,900 square feet of land under the Demonstration Plant. In addition, we have an oxygen supply agreement with the lessor to supply oxygen to the Demonstration Plant. The lease expires on the earlier of (i) January 1, 2031 and (ii) the termination of our oxygen supply agreement with the lessor. The term of the oxygen supply agreement expires on January 1, 2030 with automatic 12-month renewal terms. The oxygen supply agreement may be terminated by us or by the lessor upon 24 months written notice prior to the expiration date of its current term. The underlying lease requires the removal of all equipment and the obligation to restore the land to post-clearing grade level, which has resulted in the recognition of an asset retirement obligation liability of $2,146 and $2,060 as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

As of March 31, 2024, future minimum lease payments attributable to the Company's lease arrangements are approximately $2,482.

Current wording

As of June 30, 2024, future minimum lease payments attributable to the Company's lease arrangements are approximately$2,378.

Previous wording

The Company leases corporate office space in Durham, North Carolina, and Houston, Texas. The lease for the Company's corporate office space in Houston, Texas, was executed on February 28, 2024, but the term of the lease has not yet commenced. The Company also entered into a land lease agreement with OXY, a related party, on March 8, 2024, for land in West Texas with commencement of the lease to occur no later than December 31, 2024. The term of the Company's land lease has not yet commenced.

Current wording

The Company leases corporate office space in Durham, North Carolina, and Houston, Texas. The lease for the Company's corporate office space in Houston, Texas, commenced July 11, 2024. The Company also entered into a land lease agreement with OXY, a related party, on March 8, 2024, for land in West Texas with commencement of the lease to occur no later than December 31, 2024. The term of the Company's land lease has not yet commenced.

Previous wording

As of March 31, 2024 and December 31, 2023, we have committed to funding a portion of the remaining development costs incurred under the BHES JDA through a combination of cash and equity. The BHES JDA's total value is $140,000. As of March 31, 2024, we recognized approximately $15,306 of inception-to-date cash expenses and approximately $15,306 of inception-to-date share-based expenses related to the BHES JDA. The share-based expense excludes $5,000 of realized loss on share issuance.

Current wording

As of June 30, 2024 and December 31, 2023, we have committed to funding a portion of the remaining development costs incurred under the BHES JDA through a combination of cash and equity. The BHES JDA's total value is $140,000. As of June 30, 2024, we recognized approximately $20,287 of inception-to-date cash expenses and approximately $20,287 of inception-to-date share-based expenses related to the BHES JDA. The share-based expense excludes$5,079 of realized loss on share issuance.

Previous wording

As of March 31, 2024, we have committed to purchase certain components of industrial machinery for use at our Demonstration Plant and at our first utility-scale plant. The total gross commitments, which were initially unrecognized on our balance sheet, totaled $26,009. We recognize portions of these commitments on our balance sheet as they become payable per contract milestones. We recognized $1,372 of these commitments on our balance sheet within the current period and $5,191 of these commitments in prior periods.

Current wording

As of June 30, 2024, we have committed to purchase certain components of industrial machinery for use at our Demonstration Plant and at our first utility-scale plant. The total gross commitments, which were initially unrecognized on our balance sheet, totaled $80,035. As of June 30, 2024, there was $55,635 remaining related to these commitments.

Previous wording

Section 102(b)(1) of the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies ("EGC's") from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-EGC's, and any such election to not take advantage of the extended transition period is irrevocable. We expect to be an

Current wording

Section 102(b)(1) of the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies (“EGC's”) from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-EGC's, and any such election to not take advantage of the extended transition period is irrevocable. We expect to be an EGC at least through the end of 2024 and will have the benefit of the extended transition period. We intend to take advantage of the benefits of this extended transition period.