Net Power Inc.

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)

In thousands, except par value

Condensed Consolidated Balance Sheets (Unaudited) (Continued)

In thousands, except par value

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

In thousands, except per share data

Condensed Consolidated Statements of Shareholders' Equity and Mezzanine Shareholders' Equity (Unaudited)

Condensed Consolidated Statements of Cash Flows (Unaudited)

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 — Nature of Business and Basis of Presentation

Nature of Business

NET Power Inc. (“Net Power” or the “Company”) is an energy technology and project development company focused on the development of natural gas power generation projects to meet growing demand for reliable power. The Company’s near-term development activities are focused on delivering natural gas power generation, with equipment designed to accommodate carbon capture in later phases.

The Company’s first project under this strategy is being developed at its Project Permian site in West Texas (“Project Permian”), the first phase of which is referred to as “Project Permian Phase I”. Project Permian is being designed to accommodate up to approximately 1 GW of power generation capacity, to be developed in multiple phases on land leased from a subsidiary of Occidental Petroleum. The Company’s existing leasehold supports the initial phase, and subsequent phases would require additional land rights that the Company has not yet obtained. Net Power has developed a reference design for a modular, standardized natural gas power plant product intended to accommodate PCC technology (the “Gas Power Product”, previously referred to as the “Clean Gas Product”). Development of the carbon capture elements of that product are in process and the Company remains in active negotiations to potentially deploy the Entropy PCC Technology for potential use in the Gas Power Product but has not entered into a definitive agreement with Entropy to deploy or license the Entropy PCC technology. The parties’ prior letter of intent has expired by its terms and has not been replaced. The configuration, generation capacity, carbon capture scope and timeline of each phase of the Company’s projects, including Project Permian Phase I, will depend on customer requirements, commercial arrangements, equipment availability, and financing, and each phase may include natural gas generation deployed in advance of, or without, carbon capture. The Company does not currently expect the initial phase of Project Permian to include carbon capture, and may evaluate carbon capture for later phases as supported by customer requirements, commercial arrangements, and financing.

Net Power’s technology portfolio also includes the Oxy-Combustion Cycle (also known as the Allam-Fetvedt cycle), a patented oxy-combustion and supercritical CO 2 power generation system that was designed to produce reliable and affordable electricity from natural gas while capturing virtually all atmospheric emissions. Development of the Oxy-Combustion Cycle has been indefinitely suspended, and the Company has no current plans to resume development. The Company retains the related intellectual property and its interests in the La Porte Demonstration Facility, which were fully impaired during the second quarter of 2026 and are carried at no value. Any future recovery of value would depend on a sale of all or part of those assets, as to which there can be no assurance. See Note 5 — Goodwill and Intangible Assets.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information; however, certain information or footnote disclosures normally included in complete financial statements prepared in accordance with US GAAP may have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements for the year ended December 31, 2025 and include all adjustments, which consist of only normal and recurring adjustments, necessary for fair statement. Certain prior period financial information has been reclassified to conform to current period presentation.

The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the annual financial statements and notes thereto included in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 9, 2026 (the “2025 Annual Report”).

NOTE 2 — Significant Accounting Policies

The Company’s significant accounting policies used to prepare these condensed consolidated financial statements, unless otherwise noted below, are consistent with those used for the fiscal year ended December 31, 2025. Accordingly, refer to Note 2 to the consolidated financial statements in the 2025 Annual Report for the Company’s significant accounting policies.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make certain estimates, judgments and assumptions. The estimates, judgments and assumptions made by the Company when accounting for items and matters such as, but not limited to, depreciation, amortization, asset valuations, long-lived asset impairment, warrants, and share-based compensation were reasonable based on information available at the time they were made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, as well as amounts reported on the condensed consolidated statements of operations and comprehensive loss during the periods presented. To the extent there are differences between these estimates and actual results, the Company’s condensed consolidated financial statements may be materially affected.

Segment Reporting

In accordance with ASC Topic 280, Segment Reporting (“ASC 280”), the Company has determined that it hasone operating segment andone reportable segment, which includes all of the Company’s consolidated accounts. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer. The CODM focuses on consolidated operating income (loss), with a focus on research and development and general and administrative expenses, along with interest income to assess the Company’s performance and allocate resources. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the condensed consolidated financial statements. The measure of segment assets is reported on the Company’s condensed consolidated balance sheet as total assets.

Accounting Standards Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires companies to provide annually a tabular reconciliation of the reported income tax expense (or benefit) from continuing operations to the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate using specified categories and to disclose separately reconciling items within certain categories with absolute values equal to or greater than five percent of the product of the income (or loss) from continuing operations before tax and the applicable statutory tax rate. Additionally, ASU 2023-09 requires a public business entity to disclose the year-to-date amount of income taxes paid, net of refunds received, to federal, state, and foreign jurisdictions. If a payment to a single federal, state or foreign jurisdiction equals or exceeds five percent of total income taxes paid, ASU 2023-09 requires separate disclosure of that payment. Finally, ASU 2023-09 requires a public business entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign jurisdictions and to disclose income tax expense (or benefit) from continuing operations disaggregated between federal, state, and foreign jurisdictions. ASU 2023-09 removes the requirement to disclose the nature and estimate of the range of reasonably possible increases or decreases in the unrecognized tax benefits balance in the next 12 months, or to make a statement that an estimate of the range cannot be made. ASU 2023-09 is effective for the Company for calendar years beginning after December 15, 2025. Early adoption is permitted. The Company has evaluated the impact of adoption of ASU 2023-09 and does not expect any material impacts on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses(“ASU 2024-03”), which requires new tabular disclosures in the notes to consolidated financial statements, disaggregating certain cost and expense categories within relevant captions on the consolidated statements of operations. The prescribed cost and expense categories requiring disaggregated disclosures include purchases of inventory, employee compensation, depreciation, and intangible asset amortization, along with certain other expense disclosures already required by U.S. GAAP that would need to be integrated within the new tabular disaggregated expense disclosures. Additionally, the amendments also require the disclosure of total selling expenses and an entity's definition of those expenses. The amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026 and for interim periods beginning after December 15, 2027. Early adoption is permitted and the amendments should be applied on a prospective basis, although retrospective application is permitted. The Company is evaluating the impact of adoption of ASU 2024-03 to its expense disclosures.

NOTE 3 — Investments

The Company is currently invested inavailable-for-sale securities. The following tables present the Company’s available-for-sale investments included in the condensed consolidated balance sheets:

The cost of securities sold, if any, is based on the specific-identification method. During the three and six months ended June 30, 2026 and 2025, there were no securities sold. There were no credit losses recognized during the three and six months ended June 30, 2026 and 2025. The Company hadno allowances for credit losses as of June 30, 2026 and December 31, 2025.

NOTE 4 — Fair Value Measurements

The following table presents the assets and liabilities that the Company measures at fair value on a recurring basis included in the condensed consolidated balance sheets and indicates the level of the valuation inputs the

Company utilized to determine the fair value:

The following table contains a reconciliation of the beginning and ending balances of recurring Level 3 fair value measurements included in the condensed consolidated statements of operations and comprehensive loss:

Available-for-sale Securities

The fair value of the available-for-sale investments is classified as a Level 1 fair value measurement, because the investments are valued using the most recent quoted prices for identical assets in active markets.

Warrants

The Public Warrants are exercisable for 8,620,535 shares of Class A Common Stock at a price of $11.50 per share. The Company may redeem the Public Warrants for $0.01 if the last reported trading price of the Company’s Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period. Additionally, the Public Warrants may be redeemed if the last reported trading price of the Company’s Class A Common Stock equals or exceeds $10.00 and is below $18.00 by paying a make-whole premium. The Public Warrants expire June 8, 2028. The Public Warrants are valued using their quoted and publicly available market prices. Since their fair value is predicated on quoted prices in an active market for identical instruments, the fair value of the Public Warrants is considered a Level 1 fair value measurement.

The Private Placement Warrants are exercisable for 10,900,000 shares of Class A Common Stock at a price of $11.50 per share. The Private Placement Warrants expire June 8, 2028. The Private Placement Warrants are exercisable on a cashless basis and are non-redeemable as long as they are held by the initial purchasers or their permitted transferees. The Private Placement Warrants and Class A Common Stock issuable upon exercise of the Private Placement Warrants are entitled to registration rights.

The Company uses a Black-Scholes Merton Model to value the Private Placement Warrants. Key inputs into the Black-Scholes Merton Model include the last Class A Common Stock closing price of $1.67 as of June 30, 2026 with a strike price of $11.50 per share. The volatility assumption is based on the Company's own historical volatility and the implied volatility of the Public Warrants. For the valuation as of December 31, 2025, the volatility assumption was based on a blended average of equity volatility of publicly traded companies within the Company’s peer group, the Company's own historical volatility, and the implied volatility of the Public Warrants. The fair value of the Private Placement Warrants is considered a Level 3 fair value measurement.

The following table contains the key inputs used in the valuations of the Private Placement Warrants:

Earnout Shares

On June 8, 2026, the transfer restrictions on the Earnout Shares (as defined in Note 9 to the consolidated financial statements included in the 2025 Annual Report) expired. All previously restricted Earnout Shares became freely transferrable during the three months ended June 30, 2026.

NOTE 5 — Goodwill and Intangible Assets

Goodwill

Goodwill represented the future economic benefits derived from the Company’s unique market position, the growth attributable to the Oxy-Combustion Cycle technology, and the Company’s assembled workforce, none of which are individually and separately recognized as intangible assets. Goodwill was allocated to the Company’s sole reportable segment and reporting unit.

As of June 30, 2026 and December 31, 2025, the Company hadno goodwill. In March 2025, the Company assessed its goodwill for impairment. Due to a change in the Company’s business plans in the first quarter of 2025, and the related sustained decrease in the Company’s market capitalization, the Company concluded that it was more likely than not that the fair value of its goodwill was less than its carrying amount as of March 31, 2025. As a result, the Company fully impaired its goodwill and recognized an impairment of $359.8 million during the first quarter of 2025, which is included in impairment and other charges on the condensed consolidated statements of operations and comprehensive loss.

Definite-Lived Intangible Assets

The following tables summarize the Company’s definite-lived intangible assets included in the condensed consolidated balance sheets:

During the second quarter of 2026, the Company identified indicators of impairment for its definite-lived intangible assets, the La Porte Demonstration Facility, and certain other assets (the “Developed Technology Asset Group”).

As discussed in Note 12 — Related Party Transactions, during the first half of 2026, the Company and Baker Hughes agreed to temporarily suspend development activities under the BHES JDA (as defined in Note 12) while Baker Hughes evaluated the development and commercialization of the industrial-scale Oxy-Combustion Cycle technology. During the suspension period, the Company and Baker Hughes engaged in negotiations related to the future development and commercialization of the industrial-scale Oxy-Combustion Cycle technology. As of June 30, 2026, the terms of the indefinite suspension of the BHES JDA were substantially negotiated, giving rise to the impairment and other effects described in Note 6 — Property, Plant, and Equipment, Note 12 — Related Party Transactions, and Note 14 — Commitments and Contingencies. As of the date these condensed consolidated financial statements were issued, the Company and BHES had not executed definitive amendments to the BHES JDA or the related Commercial Agreement or License Agreement. Development activities under the BHES JDA remain suspended, and the parties have continued to operate consistent with the suspension arrangements while negotiating. Baker Hughes’ exclusive rights with respect to the La Porte Demonstration Facility remain in effect.

The Company determined that triggering events had occurred requiring an impairment assessment of its Developed Technology Asset Group as a result of (i) the Company’s determination during the second quarter of 2026 that development of the Oxy-Combustion Cycle under the BHES JDA would not resume, which the parties had not formalized in definitive agreements as of the date these condensed consolidated financial statements were issued, and (ii) the Company had no current plans as of June 30, 2026, and has no current plans, to continue development of the Oxy-Combustion Cycle technology. Accordingly, any recovery of the carrying value would be contingent upon a sale of all or part of the Oxy-Combustion Cycle intellectual property and the Company’s improvements, equipment and lease interests at the La Porte Demonstration Facility. There can be no assurance that any transaction will be agreed or consummated, or as to its terms or timing.

Management determined that no value should be ascribed to the Developed Technology Asset Group based on the following factors: (i) the indefinite suspension of further development of the Oxy-Combustion Cycle technology under the BHES JDA, (ii) there are no current plans to resume development of the Company’s Oxy-Combustion Cycle technology, and (iii) uncertainty as to whether any disposal transaction to sell all or part of the Developed Technology Asset Group will be consummated. Accordingly, the Company recognized a full impairment of the Developed Technology Asset Group of $193.7 million during the three and six months ended June 30, 2026. The impairment loss is included in impairment and other charges on the condensed consolidated statements of operations and comprehensive loss.

The following table details the recognition of long-lived asset impairment for thethree and six months ended June 30, 2026:

The following table presents the Company’s estimated amortization expense for the following periods:

The Company does not own or control any intangible assets with indefinite useful lives. The following table presents estimated amortization expense for the next five years and thereafter (in thousands):

The Company regularly evaluates whether events or changes in circumstances warrant a revision to the remaining estimated useful lives of its long-lived assets.

NOTE 6 — Property, Plant, and Equipment

The following table summarizes the key classifications of property, plant, and equipment included in the condensed consolidated balance sheets:

As of June 30, 2026, construction-in-progress consisted primarily of deposits on gas turbine equipment for Project Permian Phase I. Of the impairment recognized during the second quarter of 2026, $17.4 million was allocated to property, plant, and equipment of the Developed Technology Asset Group. Refer to Note 5 — Goodwill and Intangible Assetsfor discussion of the impairment of the Developed Technology Asset Group recognized during the second quarter of 2026.

During the first quarter of 2025, as a result of management’s assessment of the probability of the construction of the first utility-scale plant incorporating of the Oxy-Combustion Cycle (“SN1”),$56.1 millionof costs previously included in Construction-in-progress were expensed. This amount is included in impairment and other charges in thecondensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2025.

The following table presents the Company’s depreciation and amortization expense for the following periods:

The Company regularly evaluates whether events or changes in circumstances warrant a revision to the remaining estimated useful lives of its long-lived assets.

NOTE 7 — Accrued Liabilities

Accrued liabilities in the condensed consolidated balance sheets consist of the following:

NOTE 8 — Redeemable Non-Controlling Interests in Subsidiary

The following table presents the Company and the non-controlling interest (“NCI”) ownership percentage of the membership interests in OpCo as of the following periods:

The Company measures redeemable NCI each quarter at the higher of its book value or its redemption value. As of June 30, 2026, the Company measured redeemable NCI at redemption value. As of December 31, 2025, the Company measured redeemable NCI at book value. The adjustment to record redeemable NCI at book or redemption value is recorded through additional paid-in capital on the condensed consolidated statements of shareholders' equity and mezzanine shareholders' equity.

OpCo’s net loss before income tax was attributed to redeemable NCI holders at 60.6% and 61.2% for thethree and six months ended June 30, 2026. OpCo’s net loss before income tax was attributed to redeemable NCI holders at 64.4% and 64.4% for thethree and six months ended June 30, 2025.

NOTE 9 — Share-Based Compensation

The 2023 Omnibus Incentive Plan reserved 20,468,545 shares of Class A Common Stock for issuance as equity awards. The quantity of shares of Class A Common Stock reserved for grants under the 2023 Omnibus Incentive Plan will be subject to an annual increase on the first day of each calendar year beginning January 1, 2024, and ending and including January 1, 2033, equal to the lesser of (i)5% of the aggregate number of shares outstanding on December 31 of the immediately preceding calendar year and (ii) any such smaller number of shares as is determined by the Board.

The following table presents the aggregate share-based compensation expense, net of forfeitures, for the following periods:

During the first quarter of 2026, the Company modified certain unvested restricted stock units and unvested stock options to accelerate vesting in connection with employee terminations, which would have otherwise been forfeited upon separation (refer to Note 13 — One-time Employee Termination Costs). The Company determined the acceleration of the unvested awards constituted a Type III modification, as defined in ASC Topic 718, Share-Based Payments (“ASC 718”), as the expectation of the awards’ vesting changed from improbable to probable, resulting in a new measurement of compensation expense. During the three and six months ended June 30, 2026, the Company recognized additional share-based compensation expense of $0.2 million and $1.4 million related to the accelerated vesting of awards as a result of employee terminations.

Restricted Stock Units

As of June 30, 2026, there was $5.1 million of unrecognized share-based compensation expense related to unvested restricted stock units (“RSUs”), which the Company expects to recognize over a weighted-average period of 2.3 years.

The following table presents a summary of RSU activity during the six months ended June 30, 2026:

Performance Stock Units

As of June 30, 2026, there was $1.2 million of unrecognized share-based compensation expense related to unvested performance stock units (“PSUs”), which the Company expects to be recognized over a weighted-average period of 2.5 years.

The following table presents a summary of PSU activity as of June 30, 2026 and the changes during the six months ended June 30, 2026:

A portion of payments for services under the BHES JDA is settled in equity; refer to Note 12 — Related Party Transactions for additional information.

NOTE 10 — Loss per Share

Basic loss per share attributable to shareholders is calculated by dividing net loss attributable to shareholders by the weighted-average number of shares outstanding during the period. Diluted loss per share attributable to shareholders includes the effect of potentially dilutive common shares outstanding.

The following table sets forth the computation of the Company’s basic and diluted loss per share for the following periods:

Only shares of Class A Common Stock participate in the Company’s undistributed earnings. As such, the Company’s undistributed earnings are allocated entirely to the Class A Common Stock based on the weighted-average number of shares of Class A Common Stock outstanding for the three and six months ended June 30, 2026 and 2025.

Based on the amounts outstanding at June 30, 2026 and 2025, the Company excluded the following financial instruments from the computation of diluted loss per share because their inclusion would be anti-dilutive:

NOTE 11 — Income Taxes

The Company recognized income tax expense of less than $0.1 million for the three and six months ended June 30, 2026, resulting in an effective tax rate (“ETR”) of 0%, compared to a deferred income tax benefit of $1.6 million and $1.2 million based on an annualized ETR of 2.0% for the three and six months ended June 30, 2025.

The 0% ETR for the current quarter reflects the Company’s net loss position, for which a full valuation allowance has been established against deferred tax assets, as the Company has determined it is more likely than not that such assets will not be realized. Accordingly, no tax benefit has been recognized on current-period losses.

The decrease in the ETR compared to the prior year period is primarily attributable to the establishment of a full valuation allowance on deferred tax assets after the Company moved out of a deferred tax liability and into an overall deferred tax asset position due to non-deductible book impairments during 2025.

Tax Receivable Agreement

In March 2025, due to the Company’s decision to pause new purchase commitments for Project Permian’s long-lead equipment and commencement of a value engineering exercise to determine project cost reductions and better understand Project Permian’s expected economic feasibility, the Company determined it was not more likely than not that its deferred tax assets subject to the Tax Receivable Agreement (“TRA”) would be realized and therefore reduced the TRA liability tozero as payments under the TRA were not considered probable. Accordingly, in March 2025, the Company recognized a $21.3 million reduction in the Tax Receivable Agreement liability, which is recorded in Change in Tax Receivable Agreement liability in the condensed consolidated statements of operations for thesix months ended June 30, 2025.

On May 12, 2025, pursuant to its rights under the TRA, the Company delivered to the agent of the TRA holders notice of the Company’s intent to terminate the TRA (the “Early Termination Notice”). No early termination payment was payable to any TRA holder. The Early Termination Notice became final and binding on June 12, 2025.

NOTE 12 — Related Party Transactions

The following table summarizes the related party transactions included in the condensed consolidated statements of operations and comprehensive loss:

The Company had $7.0 million and $37.3 million in current liabilities payable to related parties as of June 30, 2026 and December 31, 2025, respectively, on the condensed consolidated balance sheets related to the following services. These related party payables are unsecured and are due on demand.

Master Services Agreements

A significant shareholder provides the Company with patent administration services related to the development of the Oxy-Combustion Cycle technology. These totals are included in general and administrative on the condensed consolidated statements of operations and comprehensive loss.

Another shareholder supports the Company with regard to general business oversight and with the operation of the La Porte Demonstration Facility. On June 30, 2026, this shareholder notified the Company that it is terminating all outstanding work orders under the related master services agreement, effective December 26, 2026. These totals are reflected in research and development on the condensed consolidated statements of operations and comprehensive loss.

BHES JDA

On February 3, 2022, the Company and BHES entered into the Original JDA, which was subsequently amended and restated on June 30, 2022 and December 13, 2022 with BHES to invest in, develop, and deploy the Oxy-Combustion Cycle technology in collaboration with the Company (as amended and restated, the “BHES JDA”). The BHES JDA is settled in cash and issuances of equity in exchange for services related to the development and commercialization of the Oxy-Combustion Cycle technology. The Company records the expense for services provided by BHES within research and development on the condensed consolidated statements of operations and comprehensive loss.

In January 2026, the Company agreed to temporarily suspend development activities under the BHES JDA, which covered joint development of turboexpander equipment for utility-scale application of the Oxy-Combustion Cycle, from the December 31, 2025 effective date through March 31, 2026 (the “BHES JDA Suspension Agreement”), which was subsequently extended through June 30, 2026 pursuant to the BHES JDA Variation Agreement No. 1 and BHES JDA Variation Agreement No. 2. During the suspension period, the Company and BHES engaged in negotiations regarding potential amendments to the BHES JDA. The Company is obligated to reimburse BHES for costs incurred to terminate certain third-party supplier and subcontractor purchase orders and, subject to a $3.0 million cap, for certain other costs resulting or arising from the suspension.

As of June 30, 2026, the terms of the indefinite suspension of the BHES JDA were substantially negotiated, giving rise to the impairment and other effects described in Note 5 — Goodwill and Intangible Assets, Note 6 — Property, Plant, and Equipment, and Note 14 — Commitments and Contingencies. As of the date these condensed consolidated financial statements were issued, the Company and BHES had not executed definitive amendments to the BHES JDA or the related Commercial Agreement or License Agreement. Development activities under the BHES JDA remain suspended, and the parties have continued to operate consistent with the suspension arrangements while negotiating. Baker Hughes’ exclusive rights with respect to the La Porte Demonstration Facility remain in effect.

The portion of BHES JDA costs that the Company pays with Class A OpCo Units and shares of Class B Common Stock is recorded within additional paid-in capital on the condensed consolidated balance sheets and the condensed consolidated statements of shareholders' equity and mezzanine shareholders' equity. The following table displays the expense recognized in the condensed consolidated statements of operations and comprehensive loss for shares distributed as payment for services rendered under the terms of the BHES JDA during the periods described below:

Shares issued as payment under the terms of the BHES JDA were issued at a discount that resulted in inception-to-date losses to the Company of $16.2 million. Following the suspension arrangements, the Company does not expect to make additional equity issuances under the BHES JDA other than in respect of final billings and other surviving obligations under those arrangements.

During the first quarter of 2026, the Company incurred $9.6 million related to reimbursement of costs incurred by BHES to terminate certain third-party supplier and subcontractor purchase orders entered into by BHES in furtherance of the BHES JDA scope. As of June 30, 2026, the amounts due to BHES related to these reimbursements remained outstanding.

If the volume-weighted average price of the Company’s stock forten consecutive trading days (“10-Day VWAP”) immediately preceding the payment date for services under the BHES JDA is less than $4.00 per share (the “Floor Price”), an incremental cash payment is required for the difference between the 10-Day VWAP and the Floor Price (the “BHES JDA Make-Whole Payment”). As of June 30, 2026 and December 31, 2025, the Company had $2.1 million and $2.8 million in current liabilities payable to related parties on the condensed consolidated balance sheets related to the BHES JDA Make-Whole Payment. During the three months ended June 30, 2026, the Company didnot incur expenses related to the BHES JDA Make-Whole Payment. During thesix months ended June 30, 2026, the Company incurred expenses of$2.1 million related to the BHES JDA Make-Whole Payment. During the three and six months ended June 30, 2025, the Company incurred expenses of$1.4 million and $3.9 million related to the BHES JDA Make-Whole Payment.

NOTE 13 — One-time Employee Termination Costs

During the three and six months ended June 30, 2026, the Company recognized $0.3 million and $4.8 million of employee termination costs related to workforce reductions, the six-month amount consisting of $3.4 million of severance costs and $1.4 million of accelerated share-based compensation expense. For the six months ended June 30, 2026, these costs are included in general and administrative, research and development, and sales and marketing expenses in the condensed consolidated statements of operations and comprehensive loss, totaling $3.1 million, $1.2 million, and $0.5 million, respectively.

In April 2025, the Company terminated certain members of its management team. As a result of these terminations, the Company recognized $3.1 million in severance costs and approximately$1.1 million of costs related to the accelerated vesting of stock-based compensation during the second quarter of 2025.

NOTE 14 — Commitments and Contingencies

Litigation

From time to time, the Company is party to certain legal actions and claims. Other than any such ordinary routine litigation incidental to the business and except as described below, the Company is not currently a party to, nor is its property currently subject to, any material legal proceedings, and the Company is not aware of any such proceedings contemplated by governmental authorities.

On April 18, 2025, an alleged stockholder, individually and on behalf of all others similarly situated, filed a putative class action complaint for violation of federal securities laws against the Company, its Chief Executive Officer, President and Interim Chief Financial Officer, its former Chief Financial Officer and its former President and Chief Operating Officer (collectively, the “Defendants”) in the United States District Court for the Middle District of North Carolina (the “Complaint”). The Complaint purports to bring a federal securities class action on behalf of a class of persons and entities other than the Defendants who acquired the Company’s securities between June 9, 2023 and March 7, 2025 and asserts violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. On April 23, 2026, the Court appointed a lead plaintiff (the “Plaintiff”) to represent the putative class and the Plaintiff filed an amended complaint with the Court on June 22, 2026 (the “Amended Complaint”). The Amended Complaint alleges, among other things, that the Defendants made materially false and misleading statements related to the Company’s business, operations and prospects, including the timing and costs of developing Project Permian. The Plaintiff seeks, among other things, certification of a class, an award of unspecified compensatory damages, interest, costs and expenses, including attorneys’ fees and expert fees. On August 6, 2026, the Company filed a motion to dismiss the Amended Complaint. As of the date of this Report, the motion has not been decided by the Court.

On May 29, 2025, an alleged stockholder of the Company filed a derivative suit on behalf of the Company against the Company’s Chief Executive Officer, President and Interim Chief Financial Officer, its former Chief Financial Officer, its former President and Chief Operating Officer and its board of directors in the United States District Court for the Middle District of North Carolina, asserting claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of federal securities laws (the “Derivative Complaint”). These claims are predicated on the same allegedly false and misleading statements regarding the time and capital needed to complete Project Permian that are the subject of the Amended Complaint outlined above. The Derivative Complaint has been stayed pending the resolution of the Amended Complaint.

The Company intends to vigorously defend against the claims brought in both matters. These matters are at an early stage. A lead plaintiff was appointed on April 23, 2026 and filed the Amended Complaint on June 22, 2026. As of the date of this Report, the Company's motion to dismiss the Amended Complaint is pending and has not been decided, discovery has not commenced, and no class has been certified. The Plaintiff has not specified an amount of alleged damages, and the Derivative Complaint has been stayed pending resolution of the Amended Complaint. For these reasons, and given the inherent uncertainty of litigation, the Company is unable to estimate a reasonably possible loss or range of loss, if any, that it may incur to resolve or settle these matters.

Asset Retirement Obligation

Under the terms of the lease for the La Porte Demonstration Facility, the Company is required to remove the La Porte Demonstration Facility and restore the land to post-clearing grade level. During the second quarter of 2026, the Company revised its expected decommissioning timing for the La Porte Demonstration Facility from June 2030 to June 2027, based on management’s expectations regarding the Company’s continued ownership and use of the Oxy-Combustion Cycle technology and the La Porte Demonstration Facility, as described in Note 5 — Goodwill and Intangible Assets. The revised estimate does not reflect any potential proceeds from, or transfer of obligations in, a possible sale transaction because no binding agreement had been executed as of June 30, 2026. As a result, the Company recognized an upward revision to the asset retirement obligation of $0.7 million as of June 30, 2026.

The following table reconciles the beginning and ending balances of the asset retirement obligation as of the dates presented:

Unconditional Purchase Obligations

The Company has committed to purchase certain components and industrial machinery for use at Project Permian Phase I. The Company pays for these components in installments aligned to contractual milestones. In accordance with ASC Topic 440, Commitments, the Company does not recognize these commitments on the condensed consolidated balance sheets. As of June 30, 2026, the Company had $55.8 million of remaining asset purchase obligations, primarily for gas turbine equipment, through 2028.