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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 001-40503
NET Power Inc.
(Exact name of registrant as specified in its charter)
Delaware
98-1580612
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
320 Roney St.
Suite 200
Durham, North Carolina
27701
(Address of Principal Executive Offices)(Zip Code)
(919) 287-4750
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock
NPWR
The New York Stock Exchange
Warrants, each exercisable for one share of
Class A Common Stock at a price of $11.50
NPWR-WT
The New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
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 fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The registrant had outstanding 75,248,435 shares of Class A Common Stock and 140,170,864 shares of Class B Common Stock as of November 8, 2024.


TABLE OF CONTENTS
Page
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations and Comprehensive Loss
Condensed Consolidated Statements of Shareholders' Equity and Non-Controlling Interest
Condensed Consolidated Statements of Members' Equity
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements


Table of Contents
Certain Defined Terms
For the definitions of certain defined terms used throughout this Quarterly Report on Form 10-Q (this “Report”), please refer to the section entitled “Certain Defined Terms” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”).
1
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “opportunity,” “plan,” “project,” “seek,” “should,” “strategy,” “will,” “will likely result,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may relate to the development of the Company's technology, the anticipated demand for the Company's technology and the markets in which the Company operates, the timing of the deployment of plant deliveries, and the Company's business strategies, capital requirements, potential growth opportunities and expectations for future performance (financial or otherwise). Forward-looking statements are based on current expectations, estimates, projections, targets, opinions and/or beliefs of the Company, and such statements involve known and unknown risks, uncertainties and other factors.

The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to: (i) risks relating to the uncertainty of the projected financial information with respect to the Company and risks related to the Company's ability to meet its projections; (ii) the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, and the ability of the Company retain its management and key employees; (iii) the Company's ability to utilize its net operating loss and tax credit carryforwards effectively; (iv) the capital-intensive nature of the Company's business model, which will likely require the Company to raise additional capital in the future; (v) barriers the Company may face in its attempts to deploy and commercialize its technology; (vi) the complexity of the machinery the Company relies on for its operations and development; (vii) potential changes and/or delays in site selection and construction that result from regulatory, logistical, and financing challenges; (viii) the Company's ability to establish and maintain supply relationships; (ix) risks related to the Company's arrangements with third parties for the development, commercialization and deployment of technology associated with the Company's technology; (x) risks related to the Company's other strategic investors and partners; (xi) the Company's ability to successfully commercialize its operations; (xii) the availability and cost of raw materials; (xiii) the ability of the Company's supply base to scale to meet the Company's anticipated growth; (xiv) the Company's ability to expand internationally; (xv) the Company's ability to update the design, construction and operations of its technology; (xvi) the impact of potential delays in discovering manufacturing and construction issues; (xvii) the possibility of damage to the Company's Texas facilities as a result of natural disasters; (xviii) the ability of commercial plants using the Company's technology to efficiently provide net power output; (xix) the Company's ability to obtain and retain licenses; (xx) the Company's ability to establish an initial commercial scale plant; (xxi) the Company's ability to license to large customers; (xxii) the Company's ability to accurately estimate future commercial demand; (xxiii) the Company's ability to adapt to the rapidly evolving and competitive natural and renewable power industry; (xxiv) the Company's ability to comply with all applicable laws and regulations; (xxv) the impact of public perception of fossil fuel-derived energy on the Company's business; (xxvi) any political or other disruptions in gas producing nations; (xxvii) the Company's ability to protect its intellectual property and the intellectual property it licenses; (xxviii) risks relating to data privacy and cybersecurity, including the potential for cyberattacks or security incidents that could disrupt our or our service providers' operations; (xxix) potential litigation that may be instituted against the Company; and (xxx) other risks and uncertainties indicated in Part I, Item 1A of the Annual Report and other documents subsequently filed with the SEC by the Company.

Should one or more of these risks or uncertainties materialize, or should any of the assumptions made by our management prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements contained in this Report. Accordingly, you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities.

Forward-looking statements speak only as of the date they are made. Except to the extent required by applicable law or regulation, we undertake no obligation to update the forward-looking statements contained herein to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events. The Company gives no assurance that it will achieve its expectations.

2
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
NET Power Inc.
Condensed Consolidated Balance Sheets (Unaudited)
In thousands, except share and unit amounts
September 30, 2024 (Successor)December 31, 2023 (Successor)
ASSETS
Current assets
Cash and cash equivalents$386,257 $536,927 
Short-term investments100,000 100,000 
Investments in securities, available-for-sale72,868 — 
Accounts receivable, net— 58 
Interest receivable2,358 1,942 
Prepaid expenses2,407 1,777 
Other current assets184 93 
Total current assets564,074 640,797 
Long-term assets
Restricted cash2,432 — 
Investments in securities, available-for-sale18,411 — 
Intangible assets, net1,257,589 1,307,265 
Goodwill359,847 423,920 
Property, plant and equipment, net130,849 96,856 
Operating lease right-of-use assets2,763 2,212 
Other long-term assets583 — 
Total assets$2,336,548 $2,471,050 
LIABILITIES AND EQUITY
Current liabilities
Accounts payable$3,642 $617 
Accrued liabilities18,061 10,915 
Due to related parties404 142 
Operating lease liabilities, current portion491 347 
Finance lease liabilities, current portion187 — 
Tax-related partnership distribution liability4,130 — 
Total current liabilities26,915 12,021 
Long-term liabilities
Earnout Shares liability460 1,671 
Warrant liability27,768 55,920 
Asset retirement obligation2,191 2,060 
Noncurrent operating lease liabilities2,324 1,808 
Noncurrent finance lease liabilities166 — 
Tax Receivable Agreement liability14,661 8,937 
Deferred taxes16,352 57,719 
Total liabilities90,837 140,136 
Commitments and contingencies (Note 15)
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents
NET Power Inc.
Condensed Consolidated Balance Sheets (continued)
In thousands, except share and unit amounts
September 30, 2024 (Successor)December 31, 2023 (Successor)
Mezzanine shareholders' equity
Redeemable non-controlling interests in subsidiary1,478,236 1,545,905 
Shareholders' equity
Preferred Stock, $.0001 par value; 1,000,000 shares authorized; no shares issued or outstanding as of September 30, 2024 (Successor) and December 31, 2023 (Successor)
— — 
Class A Common Stock, $.0001 par value; 520,000,000 shares authorized; 75,244,708 shares issued and outstanding as of September 30, 2024 (Successor) and 71,277,906 shares issued and outstanding as of December 31, 2023 (Successor)
7 7 
Class B Common Stock, $.0001 par value; 310,000,000 shares authorized; 140,170,864 shares issued and outstanding as of September 30, 2024 (Successor) and 141,787,429 shares issued and outstanding as of December 31, 2023 (Successor)
14 14 
Additional paid-in capital849,066 851,841 
Accumulated other comprehensive loss112 — 
Accumulated deficit(81,724)(66,853)
Total shareholders' equity767,475 785,009 
Total liabilities, mezzanine shareholders' equity and shareholders' equity$2,336,548 $2,471,050 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents
NET Power Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
In thousands, except share and unit amounts
Period fromPeriod from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Revenue$12 $— $250 $— $175 
Cost of revenue1 — 31 — 3 
Gross profit11 — 219 — 172 
Operating expenses
General and administrative8,418 8,351 22,561 32,836 12,684 
General and administrative – related party30 38 82 51 177 
Sales and marketing1,032 931 2,660 1,087 869 
Research and development17,173 8,686 43,058 14,437 2,068 
Research and development – related party160 346 1,025 433 12,243 
Project development233 289 1,426 219 479 
Option settlement – related party— — — 79,054 — 
Depreciation, amortization and accretion20,210 20,027 60,289 24,945 5,802 
Total operating expenses47,256 38,668 131,101 153,062 34,322 
Operating loss(47,245)(38,668)(130,882)(153,062)(34,150)
Other income (expense)
Interest income (expense)7,992 8,675 24,712 10,800 (30)
Change in Earnout Shares liability and Warrant liability27,690 (61,984)29,361 (60,975)— 
Other income3 1 10 5 4 
Net other income (expense)35,685 (53,308)54,083 (50,170)(26)
Net loss before income tax(11,560)(91,976)(76,799)(203,232)(34,176)
Income tax benefit4,746 10 11,137 681 — 
Net loss after income tax(6,814)(91,966)(65,662)(202,551)(34,176)
Net loss attributable to non-controlling interests(7,632)(61,402)(50,791)(136,987)— 
Net income (loss) attributable to NET Power Inc.818 (30,564)(14,871)(65,564)(34,176)
Other comprehensive income (loss)
Unrealized gain on investments528 — 461 — — 
Foreign currency translation gain— 1 — — — 
Total other comprehensive income528 1 461 — — 
Comprehensive loss(6,286)(91,965)(65,201)(202,551)(34,176)
Comprehensive loss attributable to non-controlling interests(7,284)(61,402)(50,487)(136,987)— 
Comprehensive income (loss) attributable to NET Power Inc.$998 $(30,563)$(14,714)$(65,564)$(34,176)
Earnings (loss) per share of Class A Common Stock (Successor) or per membership interest (Predecessor), basic and diluted$0.01 $(0.44)$(0.21)$(0.96)$(9.07)
Weighted average shares of Class A Common Stock or membership interests, basic and diluted73,536,69768,966,97272,540,87868,644,0323,766,871
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NET Power Inc.
Condensed Consolidated Statements of Shareholders' Equity and Non-Controlling Interest (Unaudited)
In thousands, except share and unit amounts
Class A Common StockClass B Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Shareholders' EquityNon-controlling Interests - Mezzanine Equity
SharesAmountSharesAmount
Balance at December 31, 2023 (Successor)71,277,906 $7 141,787,429 $14 $851,841 $— $(66,853)$785,009 $1,545,905 
Redemption of Class B Common Stock679,559 — (679,559)— 74 — — 74 (74)
Issuance of Class A Common Stock12,587 — — — 4,032 — — 4,032 (4,005)
Tax Receivable Agreement, net of deferred taxes— — — — (567)— — (567)— 
Unrealized gain on investments— — — — — 224 — 224 438 
Amortization of share-based payments— — 693,941 — 647 — — 647 5,622 
Adjustment of redeemable non-controlling interest to redemption value, net of deferred taxes— — — — (118,225)— — (118,225)118,225 
Net loss— — — — — — (11,421)(11,421)(30,211)
Balance at March 31, 2024 (Successor)71,970,052 $7 141,801,811 $14 $737,802 $224 $(78,274)$659,773 $1,635,900 
Redemption of Class B Common Stock611,455 — (611,455)— 708 — — 708 (708)
Issuance of Class A Common Stock2,129 — — — 29 — — 29 (3)
Exercise of Warrants700 — — — 10 — — 10 — 
Tax Receivable Agreement, net of deferred taxes— — — — 674 — — 674 — 
Unrealized loss on investments— — — — — (291)— (291)(568)
Amortization of share-based payments— — 650,248 — 1,114 — — 1,114 7,417 
Adjustment of redeemable non-controlling interest to book value, net of deferred taxes— — — — 72,746 — — 72,746 (118,225)
Net loss— — — — — — (4,268)(4,268)(12,949)
Balance at June 30, 2024 (Successor)72,584,336 $7 141,840,604 $14 $813,083 $(67)$(82,542)$730,495 $1,510,864 
Redemption of Class B Common Stock2,611,917 — (2,611,917)— 28,447 — — 28,447 (28,447)
Issuance of Class A Common Stock48,455 — — — 425 — — 425 (529)
Tax Receivable Agreement, net of deferred taxes— — — — 5,803 — — 5,803 — 
Tax-related partnership distribution payable— — — — — — — — (4,130)
Unrealized gain on investments— — — — — 179 — 179 349 
Amortization of share-based payments— — 942,177 — 1,308 — — 1,308 7,761 
Net income (loss)— — — — — — 818 818 (7,632)
Balance at September 30, 2024 (Successor)75,244,708 $7 140,170,864 $14 $849,066 $112 $(81,724)$767,475 $1,478,236 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NET Power Inc.
Condensed Consolidated Statements of Shareholders' Equity and Non-Controlling Interest (Continued) (Unaudited)
In thousands, except share and unit amounts
Class A Common StockClass B Common StockClass A Ordinary SharesClass B Ordinary SharesAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Shareholders' EquityNon-controlling Interests - Mezzanine EquityClass A Ordinary Shares Total Mezzanine Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at June 8, 2023 (Successor)— $— — $— 2,500 $— 8,625,000 $1 $— $— $(98,966)$(98,965)$— 34,500,000 $356,318 $356,318 
 Sponsor forfeiture of RONI Class B ordinary shares and reservation of Earnout shares— — — — — — (1,986,775)— — — — — — — — — 
Redemption of Class A ordinary shares by RONI public shareholders— — — — — — — — — — — — — (21,195,224)(218,983)(218,983)
 Conversion of RONI Class A and Class B ordinary shares into NET Power, Inc. Class A and Class B Common Stock, respectively 13,307,276 1 6,638,225 1 (2,500)— (6,638,225)(1)60,045 — — 60,046 87,094 (13,304,776)(137,335)(50,241)
Issuance of RONI Class A Common Stock to PIPE Investors54,044,995 6 — — — — — — 540,445 — — 540,451 — — — — 
Equity awards vested due to Business Combination— — 8,356,635 1 — — — — 542 — (542)1 109,639 — — 109,639 
Issuance of RONI Class B Common Stock to Former NET Power, LLC Unitholders— — 127,716,730 12 — — — — (12)— 75,711 75,711 1,676,618 — — 1,676,618 
Foreign currency translation gain— — — — — — — — — 1 — 1 — — — — 
Amortization of share-based payments— — — — — — — — — — — — 752 — — 752 
Carrying value adjustment of redeemable non-controlling interest— — — — — — — — (86,801)— — (86,801)86,801 — — 86,801 
Net loss— — — — — — — — — — (35,001)(35,001)(75,585)— — (75,585)
Balance at June 30, 2023 (Successor)67,352,271 $7 142,711,590 $14 — $— — $— $514,219 $1 $(58,798)$455,443 $1,885,319 — $— $1,885,319 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NET Power Inc.
Condensed Consolidated Statements of Shareholders' Equity and Non-Controlling Interest (Continued) (Unaudited)
In thousands, except share and unit amounts


Class A Common StockClass B Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Shareholders' EquityNon-controlling Interests - Mezzanine Equity
SharesAmountSharesAmount
Balance at July 1, 2023 (Successor)67,352,271 $7 142,711,590 $14 $514,219 $1 $(58,798)$455,443 $1,885,319 
Exercise of Warrants2,739 — — — 47 — — 47 — 
Issuance of Class A Common Stock52,523 — — — — — — — — 
Issuance of RONI Class B Common Stock to former NET Power, LLC unitholders— — 2,105,973 — (928)— — (928)928 
Redemption of Class A Common Stock3,606,657 — (3,606,657)— 50,526 — — 50,526 (50,526)
Distributions to members— — — — — — — — (181)
Tax Receivable Agreement, net of deferred taxes— — — — (2,207)— — (2,207)— 
Vesting of Earnout Shares— — — — — — — — 9,055 
Amortization of share-based payments— — 318,607 — 261 — — 261 5,560 
Adjustment of redeemable non-controlling interest to redemption value— — — — (368,557)— — (368,557)368,557 
Net loss— — — — — — (30,564)(30,564)(61,402)
Balance at September 30, 2023 (Successor)71,014,190 $7 141,529,513 $14 $193,361 $1 $(89,362)$104,021 $2,157,310 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NET Power Inc.
Condensed Consolidated Statements of Members' Equity (Unaudited)
In thousands, except unit amounts

Membership InterestsAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Members' Equity
UnitsAmount
Balance at December 31, 2022 (Predecessor)3,722,355 $262,622 $26,288 $17 $(224,525)$64,402 
Issuance of shares to:
Occidental Petroleum5,824 1,859 — — — 1,859 
Constellation28,764 9,181 — — — 9,181 
BHES (Bonus shares)— — 2,688 — — 2,688 
BHES (In-kind shares)6,281 1,325 618 — — 1,943 
Vesting of profits interests— — 1,747 — — 1,747 
Comprehensive loss— — — — (17,067)(17,067)
Balance at March 31, 2023 (Predecessor)3,763,224 $274,987 $31,341 $17 $(241,592)$64,753 
Issuance of shares to:
Occidental Petroleum31,328 10,000 — — — 10,000 
BHES (Bonus shares)— — 2,001 — — 2,001 
BHES (In-kind shares)9,210 1,943 16 — — 1,959 
Vesting of profits interests— — 1,119 — — 1,119 
Comprehensive loss— — — — (17,109)(17,109)
Balance at June 7, 2023 (Predecessor)3,803,762 $286,930 $34,477 $17 $(258,701)$62,723 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NET Power Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Period from
January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Cash flows from operating activities:
Net loss after income tax$(65,662)$(202,551)$(34,176)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization, and accretion60,289 24,945 5,802 
Non-cash interest (income) expense(2,164)— 30 
Non-cash lease expense118 31 13 
Conversion of equity awards— 86,585 — 
Allowance for doubtful accounts— — 352 
Deferred taxes(11,137)(681)— 
Change in fair value of Earnout Shares liability(1,211)1,497 — 
Change in fair value of Warrant liability(28,150)58,344 — 
Vesting of profits interests— — 2,864 
Vesting of Earnout Shares— 1,118 — 
Share-based payments23,795 6,572 8,593 
Changes in operating assets and liabilities:
Accounts receivable, net58 — — 
Interest receivable113 (2,903)— 
Prepaid expenses(630)(2,026)(453)
Other current assets(91)91 1,765 
Other long-term assets(583)— — 
Accounts payable3,024 (887)1,768 
Accrued liabilities3,289 (5,796)(384)
Due to related parties262 288 3,203 
Net cash used in operating activities(18,680)(35,373)(10,623)
Cash flows from investing activities:
Cash acquired as part of Business Combination — 7,947 — 
Purchase of short-term investments— (100,000)— 
Purchases of available-for-sale securities(131,564)— — 
Maturities of available-for-sale securities42,250 — — 
Capitalized software(592)— — 
Purchase of property, plant and equipment(39,561)(3,875)(2,431)
Net cash used in investing activities(129,467)(95,928)(2,431)
The accompanying notes are an integral part of these condensed consolidated financial statements
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NET Power Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(In thousands)
Period from
January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Cash flows from financing activities:
Repurchase of redeemed Class A Ordinary Shares$— $(218,983)$— 
Issuance of Class A Common Stock, including exercise of Warrants8 47 — 
Payment of income taxes on vested share-based payment awards(99)— — 
Distributions to members— (181)— 
Proceeds from PIPE financing, net of issuance costs— 540,451 — 
Issuance of equity under JDA as a result of Business Combination — 9,917 — 
Payment of transaction expenses — (11,722)— 
Proceeds from share issuances— — 15,836 
Net cash (used in) provided by financing activities(91)319,529 15,836 
Net (decrease) increase in cash, cash equivalents, and restricted cash(148,238)188,228 2,782 
Effect of foreign currency exchange rate changes on cash— 1 — 
Cash, cash equivalents, and restricted cash, beginning of period536,927 357,019 5,164 
Cash, cash equivalents, and restricted cash, end of period388,689 545,248 7,946 
Supplemental non-cash investing and financing activities:
Change in accruals for capital expenditures$3,826 $— $— 
Remeasurement of lease liabilities and right-of-use assets due to lease modification— (672)— 
Operating lease right-of use asset acquired897 — — 
Finance lease right-of-use asset acquired349 — — 
Tax-related partnership distribution4,130 — — 
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheet:
Cash and cash equivalents386,257 545,248 7,946 
Restricted cash2,432 — — 
Total cash, cash equivalents, and restricted cash$388,689 $545,248 $7,946 
The accompanying notes are an integral part of these condensed consolidated financial statements
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NET Power Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands, except share, per share and unit amounts, unless otherwise noted)
NOTE 1 — Nature of Business and Basis of Presentation
Nature of Business
NET Power Inc. (“Net Power” or the “Company”) is a clean energy technology company that has developed a proprietary process for producing electricity using a predominantly carbon dioxide working fluid that involves the capture and reuse, sale and sequestration of carbon dioxide (the “Net Power Cycle”). The Net Power Cycle is the subject of U.S. and foreign patents, as well as additional applications and provisional applications on file with the United States Patent and Trademark Office and international patent authorities.
Business Combination
On December 13, 2022, NET Power, LLC entered into a Business Combination Agreement with Rice Acquisition Corp. II (“RONI”), Rice Acquisition Holdings II LLC (“RONI OpCo”), Topo Buyer Co, LLC (“Buyer”) and Topo Merger Sub, LLC (“Merger Sub”). On June 8, 2023 (the “Closing Date”), Merger Sub merged with and into NET Power, LLC, with NET Power, LLC continuing as the surviving entity, resulting in it becoming a majority-owned, direct subsidiary of Buyer. RONI OpCo, a subsidiary of RONI, renamed itself NET Power Operations LLC (“OpCo”) and RONI renamed itself NET Power Inc. upon completion of the merger (the “Business Combination”). The Business Combination resulted in an umbrella partnership, C corporation or “Up-C” structure.
OpCo is a variable interest entity (“VIE”) in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”); therefore, RONI represented the accounting acquirer within the Business Combination structure. The Company elected push-down accounting for the Business Combination and recorded the push-down entries at OpCo. ASC 810 requires that a reporting entity that possesses a controlling financial interest in a VIE consolidate that VIE. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities that most significantly impact the VIE's economic performance; and (b) the obligation to absorb the VIE's losses and the right to receive benefits that are significant to the VIE. The Company determined that OpCo continued to meet the definition of a VIE after the Business Combination and that the Company became the primary beneficiary of OpCo beginning on the Closing Date of the Business Combination; therefore, the Company has consolidated OpCo from the date of the Business Combination.
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 as the “Successor” for periods beginning on or 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, the 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.
The condensed consolidated financial statements include the accounts of subsidiaries that Net Power consolidates in accordance with the guidance in ASC 810. The Company consolidates all wholly-owned subsidiaries and subsidiaries in which it owns a 50% or greater ownership interest and all VIE's to which it is deemed to represent the primary beneficiary, as described above. These condensed consolidated financial statements include the accounts of all wholly-owned subsidiaries and consolidated VIE's. Intercompany balances have been eliminated through the consolidation process.
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, 2023 and include all adjustments, which consist of only normal and recurring adjustments, necessary for fair statement.
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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 our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024 (the “2023 Annual Report”).
Reclassification of Prior Period Amounts
Certain prior period financial information has been reclassified to conform to current period presentation.
NOTE 2 — Significant Accounting Policies
In the opinion of the Company’s management, 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, 2023. Accordingly, reference Note 2 to the consolidated financial statements in the 2023 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 and share-based compensation were 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. Actual results could differ from those estimates.
Restricted Cash
Restricted cash includes cash held to secure a letter of credit. As of September 30, 2024, the Company had restricted cash of $2,432 included in the condensed consolidated balance sheets. As of December 31, 2023, the Company had no restricted cash.
Investment Securities
We hold investment securities that are classified as available-for-sale securities and are available to be sold in the future as needed.
Accounting Standards Not Yet Adopted
During December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires public business entities 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 is evaluating the effect ASU 2023-09 will have on its consolidated financial statements.
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NOTE 3 — Goodwill and Intangible Assets
Goodwill
Goodwill represents the future economic benefits derived from the Company's unique market position, the growth attributable to the Net Power Cycle and the Company's assembled workforce, none of which are individually and separately recognized as intangible assets. Goodwill is allocated to the Company's sole reportable segment and reporting unit.
The following table presents the Company's goodwill included in the condensed consolidated balance sheets:
Goodwill at December 31, 2023 (Successor)$423,920 
Measurement adjustments(64,073)
Goodwill at September 30, 2024 (Successor)$359,847 
During the second quarter of 2024, the Company completed its estimate of deferred taxes as of the Closing Date and finalized its purchase price allocation, which resulted in a measurement adjustment to goodwill.
During the third quarter of 2024, the Company performed a quantitative goodwill impairment assessment due to a sustained decrease in the Company’s market capitalization. The Company applied the income approach to estimate the fair value of this reporting unit using a discounted cash flow model. Key assumptions used in this model included revenue and operating expense projections, a terminal cash flow growth rate of 7.5%, a discount rate of 26%, and a tax rate of 25%. The Company determined the fair value of the reporting unit exceeds its carrying value and no impairment was indicated.
Definite-Lived Intangible Assets
The following tables summarize the Company's definite-lived intangible assets included in the condensed consolidated balance sheets:
September 30, 2024 (Successor)December 31, 2023 (Successor)
Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Developed technology$1,345,000 $(88,172)$1,256,828 $1,345,000 $(37,735)$1,307,265 
Software740 (40)700 — — — 
Software work-in-progress61 — 61 — — — 
Total definite-lived intangible assets$1,345,801 $(88,212)$1,257,589 $1,345,000 $(37,735)$1,307,265 
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The following table presents the Company’s amortization expense for the following periods:
Period fromPeriod from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Amortization expense
$16,837 $16,813 $50,477 $20,922 $— 
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:
Remainder of 2024$16,854 
202567,414 
202667,414 
202767,414 
202867,414 
202967,312 
2030 and thereafter903,767 
Total$1,257,589 
NOTE 4 — Property, Plant and Equipment
The following table summarizes the key classifications of property, plant and equipment included in the condensed consolidated balance sheets:
September 30, 2024 (Successor)December 31, 2023 (Successor)
Demonstration Plant, gross$97,710 $89,239 
Furniture and equipment, gross996 320 
Assets acquired under finance lease349 — 
Work-in-progress48,607 14,443 
Total property, plant and equipment, gross147,662 104,002 
Accumulated depreciation and amortization 1
(16,813)(7,146)
Total property, plant and equipment, net$130,849 $96,856 
___________
(1) $5 of accumulated depreciation and amortization is related to amortization of the finance lease right-of-use assets.

The following table presents the Company’s depreciation expense for the following periods:
Period fromPeriod from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Depreciation expense
$3,328 $3,173 $9,681 $3,972 $5,700 
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NOTE 5 — Accrued Liabilities
Accrued liabilities consist of the following components included in the condensed consolidated balance sheets:
September 30, 2024 (Successor)December 31, 2023 (Successor)
Incentive compensation$2,694 $2,016 
Cash-based expense of BHES JDA5,446 3,669 
Capital expenditures7,431 3,605 
Professional fees1,380 682 
Other accrued liabilities1,110 943 
Total accrued liabilities$18,061 $10,915 
NOTE 6 — Revenue and Accounts Receivable
Revenue
The following table disaggregates the revenue included in the condensed consolidated statements of operations and comprehensive loss into its major components:
Period fromPeriod from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Feasibility studies$12 $— $250 $— $175 
Total revenue$12 $— $250 $— $175 
Performance Obligations
Revenue recognized under contracts with customers exclusively includes the performance obligations satisfied in the applicable reporting period.
Allowance for Doubtful Accounts
During the period from July 1, 2024 through September 30, 2024 (Successor), the period from January 1, 2024 through September 30, 2024 (Successor), the period from July 1 through September 30, 2023 (Successor), and the period from June 8, 2023 through September 30, 2023 (Successor), the Company did not record any provision for credit losses within General and administrative expense on the condensed consolidated statements of operations and comprehensive loss associated with its accounts receivable. During the period from January 1, 2023 through June 7, 2023 (Predecessor), the Company recorded an allowance for doubtful accounts equal to $352 within General and administrative expense on the condensed consolidated statements of operations and comprehensive loss associated with its accounts receivable.
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NOTE 7 — Related Party Transactions
The following table summarizes the related party transactions included in the condensed consolidated statements of operations and comprehensive loss:
Period fromPeriod from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Master services agreement administrative costs$30 $38 $82 $51 $80 
Engineering support provided by former board member— — — — 97 
General and administrative – related party$30 $38 $82 $51 $177 
Master services agreement costs for Demonstration Plant$160 $346 $1,025 $433 $530 
BHES JDA
— — — — 11,713 
Research and development – related party$160 $346 $1,025 $433 $12,243 
Option settlement – related party$— $— $— $79,054 $— 
Master Services Agreements
A significant shareholder has provided the Company with marketing services, patent administration services and technology maintenance services related to the development of the Net Power Cycle. These totals are included in General and administrative – related party 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 Demonstration Plant. These totals are reflected in Research and development – related party on the condensed consolidated statements of operations and comprehensive loss.
The Company had $404 and $142 in current liabilities payable to related parties as of September 30, 2024 (Successor) and December 31, 2023 (Successor), respectively, on the condensed consolidated balance sheets related to these services. These related party payables are unsecured and are due on demand.
Engineering Support Provided by Former Board Member
A shareholder, who is also a former board member, supported the Company with regard to general business oversight and with the operation of the Demonstration Plant. These expenses are reflected in Research and development – related party on the condensed consolidated statements of operations and comprehensive loss prior to the Business Combination. The counterparty ceased being a related party on June 8, 2023 upon completion of the Business Combination.
BHES JDA
On February 3, 2022, the Company entered into a Joint Development Agreement with affiliates of Baker Hughes Energy Services LLC (“BHES”), which is a shareholder of the Company (the “Original JDA”). The Original JDA's counterparties subsequently amended the agreement's terms on June 30, 2022 and December 13, 2022 (the “Amended and Restated JDA”, and collectively with the Original JDA, the “BHES JDA”). The Amended and Restated JDA represents a contract that engages BHES to invest in, develop, and deploy the Net Power Cycle in collaboration with the Company. The Amended and Restated JDA entitles BHES to payments of cash and issuances of equity in exchange for services related to the development and commercialization of the technology. Subsequent to the Business Combination, the Company records the measurement of services provided by BHES within Research and development on the condensed consolidated statements of operations and comprehensive loss. Prior to June 8, 2023 (Successor), the Company recorded costs incurred under the BHES within Research and development – related party on the condensed consolidated statements of operations and comprehensive loss due to the size of their ownership of the Company and because an employee of BHES served on the Company's Board of Directors. Subsequent to the Business Combination, neither BHES nor its affiliates occupy seats on the Company's Board of Directors and its percentage of ownership fell below 5%; therefore, BHES no longer qualifies as a related party after June 7, 2023 (Predecessor).
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Lease
Reference Note 13 — Leases for a discussion of the lease with a subsidiary of Occidental Petroleum Corporation (“Occidental Petroleum”).
Option Settlement
One of the Company's shareholders owned an option to purchase up to 711,111 membership interests from NET Power, LLC if NET Power, LLC met certain performance conditions, which it did not achieve prior to the close of the Business Combination. Immediately prior to the close of the Business Combination, the option holder received 247,655 NET Power, LLC membership interests with a value of approximately $79,054 in exchange for retiring the purchase option. The membership interests converted into 7,905,279 Class A OpCo Units and a corresponding quantity of shares of Class B Common Stock in conjunction with the Business Combination. The loss generated from the settlement of the share purchase option is recorded as Option settlement – related party expense on the condensed consolidated statements of operations and comprehensive loss.
NOTE 8 — Investments
The Company has two types of investments, a certificate of deposit, which is classified as a short-term investment, and investments in securities, which are classified as available-for-sale.
The entire balance of $100,000 of the certificate of deposit is shown within short-term investments on the condensed consolidated balance sheets as of September 30, 2024 (Successor) and December 31, 2023 (Successor). The interest receivable on the certificate of deposit was $1,578 and $1,886 at September 30, 2024 (Successor) and December 31, 2023 (Successor), respectively, and is included in Interest receivable on the condensed consolidated balance sheets.
The following table presents the Company's available-for-sale investments included in the condensed consolidated balance sheets:
September 30, 2024
Current assetsAmortized CostUnrealized Gain (Loss)Fair Value
Corporate bonds$12,208 $33 $12,241 
Commercial paper11,493 — 11,493 
U.S. treasuries49,034 100 49,134 
Total$72,735 $133 $72,868 
Long-term assetsAmortized CostUnrealized Gain (Loss)Fair Value
Corporate bonds$494 $2 $496 
U.S. treasuries17,721 194 17,915 
Total$18,215 $196 $18,411 
The cost of securities sold is based on the specific-identification method. During the period from July 1, 2024 through September 30, 2024 (Successor) and the period from January 1, 2024 through September 30, 2024 (Successor), there were no securities sold. There were no credit losses recognized during the period from July 1, 2024 through September 30, 2024 (Successor) and the period from January 1, 2024 through September 30, 2024 (Successor). The Company established no allowances for credit losses as of September 30, 2024 (Successor). The Company did not have any available-for-sale investments as of December 31, 2023 (Successor).
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NOTE 9 — 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:
LevelSeptember 30, 2024 (Successor)December 31, 2023 (Successor)
Assets
Available-for-sale investments 1
1$91,279 $— 
Short-term investments2100,000 100,000 
Total assets$191,279 $100,000 
Liabilities
Public Warrants1$10,001 $18,969 
Private Placement Warrants317,767 36,951 
Earnout Shares3460 1,671 
Total liabilities$28,228 $57,591 
___________
(1) $18,411 of these investments are classified as long-term on our consolidated balance sheet.
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:
Period FromPeriod from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Balance of recurring Level 3 liabilities at beginning of period$36,175 $63,187 $38,622 $63,851 $5,174 
Change in Earnout Shares liability and Warrant liability(17,948)52,352 (20,395)51,688 — 
Change in Option liability— (7,879)— (7,879)— 
Payments— — — — (5,174)
Balance of recurring Level 3 liabilities at end of period$18,227 $107,660 $18,227 $107,660 $— 
Earnout Shares
The Company has Class A OpCo Units and corresponding shares of Class B Common Stock that, pursuant to an agreement with Sponsor and certain of its affiliates, are or were subject to forfeiture, with vesting occurring in three tranches based on the trading share price of the Class A Common Stock on the NYSE (the “Earnout Shares”). The fair value of the Earnout Shares is estimated using a Monte Carlo simulation. The Monte Carlo simulation considers daily simulated stock prices as a proxy for the Company's daily volume-weighted average share price. The key inputs into the valuation of the Earnout Shares are an expected remaining term of 1.68 years, a risk-free rate of 3.7% and estimated equity volatility of 44.8%. The estimated equity volatility assumption is based on a blended average of asset and equity volatility measurements of publicly traded companies within the Company's peer group along with the volatility of the Class A Common Stock.
Warrants
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 measurement.
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 $7.01 as of September 30, 2024 (Successor), a risk-free rate of 3.5%, volatility of 46.5%, a term of 3.69 years and a strike price of $11.50 per share. The volatility assumption is based on a blended average of operating and equity volatility of publicly traded companies within
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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 to be Level 3 fair value instruments.
Short-term Investments
Short-term investments are valued at cost, which approximates fair value. The fair value of the short-term investments is considered a Level 2 fair value measurement because cost basis is not observable in a public market.
Investment Securities
The fair value of the available-for-sale investments is classified as Level 1 because the investments are valued using the most recent quoted prices for identical assets in active markets.
Option Liability
The Company's option liability was issued in conjunction with member loans on October 15, 2021. The loans were fully repaid on February 3, 2022; however, the members had one year to exercise their options subsequent to the repayment of the loans. The interest expense related to these loan options was $30 during the period from January 1, 2023 through June 7, 2023 (Predecessor). These measurements were reported in Interest income (expense) on the condensed consolidated statements of operations and comprehensive loss. In early 2023, two option holders exercised their options to purchase an aggregate of 34,588 membership units in NET Power, LLC for total proceeds of $5,836. There were no loan options outstanding at the time of the Business Combination.
NOTE 10 — Earnings (loss) per Share/Unit
Basic earnings (loss) per share attributable to shareholders is calculated by dividing net income (loss) attributable to shareholders by the weighted-average number of shares outstanding during the period. Diluted earnings (loss) per share attributable to shareholders includes the effect of potentially dilutive common shares outstanding.
Successor Period
The following table sets forth the computation of the Company's basic and diluted earnings (loss) per share for the following periods:
Period from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)
Numerator
Net loss after income tax$(6,814)$(91,966)$(65,662)$(202,551)
Net income (loss) attributable to shareholders$818 $(30,564)$(14,871)$(65,564)
Denominator
  Weighted-average number shares outstanding, basic and diluted73,536,697 68,966,972 72,540,878 68,644,032
 Earnings (loss) per share attributable to shareholders, basic and diluted$0.01 $(0.44)$(0.21)$(0.96)
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Based on the amounts outstanding at September 30, 2024 (Successor) and September 30, 2023 (Successor), the Company excluded the following financial instruments from the computation of diluted earnings (loss) per share because their inclusion would be anti-dilutive:
Anti-Dilutive InstrumentSeptember 30, 2024 (Successor)September 30, 2023 (Successor)
Public Warrants8,621,5358,622,235
Private Placement Warrants10,900,00010,900,000
Earnout Shares328,925328,925
BHES Bonus Shares2,068,4162,068,416
Unvested Class A OpCo Units241,670972,522
Vested Class A OpCo Units140,630,423140,747,943
Unvested RSUs871,356440,423
Unvested PSUs127,710—
Make-Whole Awards1,179,067—
Stock Options2,459,893—
Total167,428,995164,080,464
    
In the Successor Period, 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 period from July 1, 2024 through September 30, 2024 (Successor) and the period from January 1, 2024 through September 30, 2024 (Successor).
Predecessor Period
For the period from January 1, 2023 through June 7, 2023 (Predecessor), the Company excluded 119,076 unvested profit interests from the computation of diluted net loss per unit because their inclusion would be anti-dilutive.
The following table sets forth the computation of the Company's basic and diluted net loss per unit for the following period:
Period from
January 1 - June 7, 2023 (Predecessor)
Numerator
Net loss after income tax$(34,176)
Net loss attributable to membership interest holders$(34,176)
Denominator
Weighted-average number membership interests outstanding, basic and diluted3,766,871 
Net loss per unit attributable to membership interest holders, basic and diluted$(9.07)
NOTE 11 — Shareholders' Equity
As of September 30, 2024 and December 31, 2023, the Company owned 35.0% and 33.6% of the membership interests in OpCo, respectively, and non-controlling interest (“NCI”) holders owned 65.0% and 66.4% of the membership interests in OpCo, respectively. The Company measures redeemable NCIs each quarter at the higher of its book value or its redemption value. For the period from July 1, 2024 through September 30, 2024 (Successor), the Company measured redeemable NCI at book value. For the period from June 8, 2023 through September 30, 2023 (Successor), the Company measured redeemable NCI at redemption value. The adjustment to redeemable NCI is recorded through Additional paid-in capital on the condensed consolidated statement of shareholders' equity and non-controlling interest.
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The table below sets forth the calculation of net loss before income tax attributable to redeemable NCI holders for the following periods:
Period from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)
Net loss before income tax$(11,560)$(91,976)$(76,799)
Redeemable non-controlling interest percentage — Class A OpCo Units65.7 %68.0 %66.0 %
Net loss before income tax attributable to Class A OpCo Units$(7,632)$(61,402)$(50,791)

Under the Second Amended and Restated Limited Liability Company Agreement of OpCo, OpCo is required, when cetain conditions are met, to make tax-related distributions to the Class A OpCo Unit holders. As of September 30, 2024, the Company accrued a tax-related partnership distribution liability of $4,130, which is included in current liabilities on the condensed consolidated balance sheets. The partnership distributions are recorded as a reduction of Redeemable non-controlling interest in subsidiary on the condensed consolidated balance sheets.
NOTE 12 — Share-Based Payments
OpCo Unit Awards (Predecessor and Successor)
As of September 30, 2024 (Successor), there was $718 of unrecognized share-based compensation expense related to unvested Class A OpCo Units granted under previous programs, which the Company expects to recognize over a weighted average period of three years.
The following table summarizes the activity of employee equity awards comprised of Class A OpCo Units and the corresponding quantity of shares of Class B Common Stock for the periods presented:
QuantityCalculated Value
January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Unvested, beginning of period848,4151,895,179226,494$5.21 $4.95 $63.25 
Granted———$— $— $— 
Forfeited—(324,625)—$— $5.66 $— 
Vested(606,745)(598,032)(107,418)$5.03 $4.32 $63.18 
Unvested, end of period241,670972,522119,076$5.66 $4.45 $63.32 
Restricted Stock Units (Successor)
During the period from January 1, 2024 through September 30, 2024 (Successor), there were 531,705 restricted stock units (“RSU”) awarded under the terms of the NET Power Inc. 2023 Omnibus Incentive Plan. As of September 30, 2024 (Successor), there was $7,798 of unrecognized share-based compensation expense related to unvested RSUs, which the Company expects to recognize over a weighted average period of three years. Generally, RSUs granted to employees and the majority of executives either cliff-vest on the three-year anniversary of the date of grant or vest ratably on each anniversary of the date of grant over a three-year period. Annual awards granted to independent directors cliff-vest on the first anniversary of each award's grant date.
Additionally, there were 1,257,467 RSUs awarded to certain legacy employees as permitted by the business combination agreement (the “Make-Whole Awards”). These RSUs vest upon occurrence of the following events, which are considered performance conditions: (i) commercial operations achieved by the Company’s first utility-scale power plant, and (ii) a fully-executed license agreement and final investment decision achieved for another utility-scale power plant. The Make Whole Awards expire ten years from the grant date. The Company will record compensation expense related to the Make-Whole Awards from the date the performance conditions are considered probable through the expected vesting dates. As of September 30, 2024 (Successor), the performance conditions are not considered probable, therefore, no compensation cost has been recognized related to the Make-Whole Awards.
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The following table presents a summary of RSU activity during the period from January 1, 2024 through September 30, 2024 (Successor):
QuantityFair Value
Unvested, beginning of period443,221$13.13 
Granted1,789,172$10.65 
Forfeited(34,723)$11.73 
Vested(68,846)$13.48 
Unvested, end of period2,128,824$11.13 
Performance Stock Units (Successor)
On April 2, 2024, there were 127,710 performance stock units (“PSUs”) awarded to certain executives for which the vesting occurs upon the achievement of specific market-based conditions related to the Company's financial performance over a three-year period, modified based on the Company's Relative Total Shareholder Return (“TSR”) and subject to final vesting based on the participant’s continued employment through the end of the requisite service period. The amount of awards that will ultimately vest for the PSU can range from 0% to 200% based on the TSR calculated over a three-year period. The fair value of the PSUs was determined using the Monte Carlo Simulation model and is being expensed over the three-year vesting period. The assumptions used to calculate the fair value of these awards were:
Weighted average expected life3 years
Risk-free interest rates4.4 %
Expected volatility68.0 %
The following table presents a summary of PSU activity as of September 30, 2024 and the changes during the period from January 1, 2024 through September 30, 2024 (Successor):
QuantityFair Value
Unvested, beginning of period—$— 
Granted127,71016.24 
Forfeited—— 
Vested—— 
Unvested, end of period127,710$16.24 
As of September 30, 2024 (Successor), there was $1,731 of unrecognized share-based compensation expense related to unvested PSUs.
Stock Options (Successor)
On April 2, 2024, the Company granted stock options to its Chief Executive Officer to purchase 2,459,893 shares of common stock of the Company with an exercise price of $11.30 per share and an expiration date of April 2, 2034. The stock options vest and become exercisable upon satisfaction of the following performance and market conditions: (i) commercial operations achieved by the Company’s first utility-scale power plant, (ii) a fully-executed license agreement and final investment decision achieved for another utility-scale power plant, and (iii) a closing share price above $30 per share for 60 consecutive trading days (or the equivalent when adjusted for any stock splits, reverse stock splits, and cumulative dividends paid per share until the vesting date). The Company will recognize compensation expense from the date the performance conditions become probable through the expected vesting date. As of September 30, 2024 (Successor), the performance conditions are not considered probable; therefore, no expense has been recognized related to these stock options.
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The grant date fair value of stock options granted was $20,958 and was estimated using the Monte Carlo Simulation model. The fair value of the Company’s stock option grants was estimated utilizing the following assumptions:
Weighted average expected life3.35 years
Risk-free interest rates4.27 %
Expected volatility80 %
BHES JDA (Predecessor and Successor)
The following table presents the quantity and value of equity issued to BHES as payment for costs incurred pursuant to the BHES JDA (Note 7). The portion of BHES JDA costs that the Company pays with Class A OpCo Units and shares of Class B Common Stock is recorded within Additional paid-in capital on the condensed consolidated balance sheets and the condensed consolidated statement of shareholders' equity and non-controlling interest. The following table displays the fair value of shares distributed as payment for services rendered by BHES under the terms of the BHES JDA during the periods described below:
QuantityTotal Fair Value
January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Equivalent Value per Unit or per Share (1)
Membership Interests——9,210$— $— $1,943 $168.75 
Class A OpCo Units2,622,579542,324296,16017,336 3,585 1,958 $5.29 
Class B Common Stock2,622,579542,324296,160— — — $— 
Total$17,336 $3,585 $3,901 
___________
(1) The Equivalent Value per Unit is the discounted price per membership interest or per share stipulated in the BHES JDA.
Shares used as payment under the terms of the Amended and Restated JDA are issued at a discount expected to cause a total loss of approximately $17,500 to the Company over the term of the agreement. The Company has incurred inception-to-date losses of $5,079 related to such issuances.
BHES may earn additional shares under the terms of the Amended and Restated JDA (“BHES Bonus Shares”) if it meets certain contractually stipulated project milestones related to the development of our technology. The Company determined that BHES’s achievement of each of these milestones is probable in accordance with the guidance in ASC Topic 718, Share-Based Payments; therefore, the Company recognizes the compensation cost associated with milestone share-based payments ratably over the expected service period. The following table disaggregates the variable compensation payable to BHES should it meet its milestone objectives:
Performance Period End DateCompensation Cost Incurred To DateRemaining Compensation CostTotal Compensation Cost
BHES JDA - variable share-based paymentsJanuary 2027$22,997 $4,348 $27,345 
Additionally, BHES received 1,500,265 Class A OpCo Units and a corresponding number of shares of Class B Common Stock in conjunction with the consummation of the Business Combination.
Reference Note 15 for additional disclosures related to the BHES JDA.
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NOTE 13 — Leases
The following table presents the future minimum lease payments that the Company expects to make under its operating and finance leases as of September 30, 2024 (Successor):
YearOperating leasesFinance leases
Remainder of 2024$130 $50 
2025708 199 
2026760 133 
2027780 — 
2028768 — 
2029 and thereafter301 — 
Total$3,447 $382 

The following table presents the Company's lease costs by period presented and the classification on the condensed consolidated statements of operations and comprehensive loss:
Period fromPeriod from
ClassificationJuly 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Operating lease costsGeneral and administrative$182 $53 $438 $66 $85 
Financing lease costs:
Amortization of right-of-use assetsDepreciation, amortization and accretion$5 $— $5 $— $— 
Interest on lease liabilitiesInterest income (expense)4 — 4 — — 
Total finance lease costs$9 $— $9 $— $— 
Office Leases
As of September 30, 2024 (Successor), the Company had $2,775 in lease liabilities and $2,619 in right-of-use assets attributable to office operating leases on its condensed consolidated balance sheets.
On June 6, 2022, the Company entered into an office space lease agreement for commercial office space in Durham, North Carolina (the “Measurement Building Lease”), which became effective on November 1, 2022 and had an original lease term of 60 months from the signing date. The lease was classified as an operating lease and the lease liability was calculated using an incremental borrowing rate of 8.0%.
On August 11, 2023, the Company agreed to terminate the Measurement Building Lease effective October 6, 2023 and entered into a new office lease agreement (the “Roney St. Lease”). The Roney St. Lease commenced on October 6, 2023 and has an original lease term of 62 months from the commencement date. The lessors of the Measurement Building Lease and the Roney St. Lease have common ownership and are considered related parties to each other; therefore, the simultaneous termination of the Measurement Building Lease and execution of the Roney St. Lease represent a single transaction accounted for as a modification of the Measurement Building Lease. As such, the Company remeasured the lease liabilities and right-of-use asset associated with the Measurement Building Lease and recognized those balances over the amended, remaining lease term. In addition, the Roney St. Lease includes an early termination option that enables the Company to end the lease on or after its 50th month.
On February 28, 2024, the Company entered into an office space lease agreement for commercial office space in Houston, Texas (the “Atlas Tower Lease”), which became effective in July of 2024 and has an original lease term of 68 months from the commencement date and includes an early termination option that enables the Company to end the lease at the end of
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its 44th month. The Company measured the lease liabilities and right-of-use asset associated with the Atlas Tower Lease upon commencement of the lease and recognized those balances over the lease term.
As of September 30, 2024 (Successor), the Company determined that it is unlikely to exercise the termination option associated with the Atlas Tower Lease; therefore, the above minimum lease payments do not consider the effects of the termination option on the lease term.
Land Leases
On March 8, 2024, the Company entered into a land lease with a subsidiary of Occidental Petroleum, a related party, which becomes effective no later than December 31, 2024. The lease has an initial term of 60 months from the commencement date. Additionally, the term may be extended for up to three consecutive periods of ten years. The Company will measure the lease liabilities and right-of-use asset upon commencement of the lease and will recognize those balances over the lease term.
The Company leases the land under the Demonstration Plant in LaPorte, Texas. During the second quarter of 2024, the Company entered into a lease amendment extending the lease term. The amended lease expires on the earlier of (i) January 1, 2031 or (ii) the termination of the Company's oxygen supply agreement with the lessor. Lease payments for the land equal one dollar per year. As of September 30, 2024 (Successor), the value of the right-of-use asset attributable to the Demonstration Plant land lease was $105.
Reference Note 15 — Commitments and Contingencies for discussion on the Company’s asset retirement and unconditional purchase obligations related to the Demonstration Plant.
Office Trailer Leases
On June 26, 2024, the Company entered into a lease agreement for two office trailers at the Demonstration Plant in LaPorte, Texas, with an effective date of September 1, 2024. The lease has a term of 24 months and contains a purchase option where the Company may purchase the trailers at the end of the lease term; therefore, the Company classified the lease as a finance lease and recorded the right-of lease asset within Property, plant and equipment, net in the condensed consolidated balance sheets. The Company recorded the lease liability on the condensed consolidated balance sheets using the 14% discount rate implicit in the lease.
NOTE 14 — Income Taxes
As of September 30, 2024 (Successor), the Company estimated its annual effective tax rate to be 11.8%, and recorded a deferred income tax benefit of $4,746 and $11,137, for the period from July 1, 2024 through September 30, 2024 (Successor) and the period from January 1, 2024 through September 30, 2024 (Successor), respectively. The annual effective tax rate varies from the statutory federal income tax rate due to amounts allocated to NCI, state income taxes and other permanent items. The income tax benefit recorded through September 30, 2024 (Successor) includes a cumulative adjustment of $1,647 related to finalizing deferred taxes as of the Closing Date of the Business Combination. Reference Note 3 — Goodwill and Intangible Assets for additional discussion.
Tax Receivable Agreement - As of September 30, 2024 (Successor), the Company recorded a liability of $14,661 related to its projected obligations under the TRA, which is recorded as Tax Receivable Agreement liability in the condensed consolidated balance sheets. This obligation arose because of qualifying exchanges of Class A OpCo Units that occurred through September 30, 2024.
NOTE 15 — Commitments and Contingencies
Asset Retirement Obligation
The Company's valuation of the asset retirement obligation related to the Demonstration Plant encompasses an estimate for the cost to restore the site as required by lease terms.
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The following table reconciles the beginning and ending balances of the asset retirement obligation as of the dates presented:
Period fromPeriod from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Asset retirement obligation, beginning of period$2,146 $1,977 $2,060 $1,967 $2,416 
Accretion expense45 41 131 51 102 
Asset retirement obligation, end of period$2,191 $2,018 $2,191 $2,018 $2,518 
Unconditional Purchase Obligations
The Company has committed to purchase industrial components for installation at its Demonstration Plant and its first commercial power plant. 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 September 30, 2024, the Company had $88,335 of remaining purchase obligations through February 2027 related to the BHES JDA, which is expected to be settled 50% in cash and 50% in common stock. In addition, the Company had $106,831 of additional remaining asset purchase obligations through 2025.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands, except share and unit amounts, unless otherwise noted)
The following management's discussion and analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition and includes forward-looking statements that involve risks, uncertainties and assumptions, including those described in “Cautionary Note Regarding Forward-Looking Statements” included in the forepart of this Quarterly Report on Form 10-Q (our “Quarterly Report”) and included in Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “Annual Report”), as filed with the SEC on March 11, 2024.
The following MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included in Part 1, Item 1 in this Quarterly Report and our audited consolidated financial statements and related notes included in our Annual Report.
Overview
We are a clean energy technology company that has developed a unique power generation system (the “Net Power Cycle”) that can produce clean, reliable, and low-cost electricity from natural gas while capturing virtually all atmospheric emissions. The Net Power Cycle is designed to inherently capture CO2 and eliminate air pollutants such as SOX, NOX, and particulates.
The Business Combination
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”).
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.
Key Factors Affecting Our Prospects and Future Results
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.
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including, but not limited to, cost over-runs in the testing and operation of the Demonstration Plant, technical problems with the Net Power Cycle, potential supply chain issues, our ability to finance the construction of our first utility-scale plant, and development of competing clean-energy technology sooner or at a lesser cost than the Net Power Cycle. Supply chain issues related to the manufacturing and transportation of key equipment may lead to a delay in our commercialization efforts, which could impact our results of operations.
Commencing Commercial Operations
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 2025 and targets initial power generation between the second half of 2027 and the first half of 2028. We expect that the plant will be a Net Power-led consortium project located at a site hosted by Occidental Petroleum in the Permian Basin of West Texas. We also continue to evaluate other sites in
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North America for Net Power plants. 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.
Major remaining development activities relating to completing construction of our first utility-scale plant are similar to the activities we previously undertook to design, build, and commission the Demonstration Plant. These activities include but are not limited to: finalizing a siting study, completion of permitting, conducting a front-end engineering design (“FEED”) study, originating all required supply and off-take contracts, structuring the project to attract any required third party equity and debt financing and achieving final investment decision, initiating the engineering, procurement and construction (“EPC”) process, and constructing and commissioning the facility.
Key Components of Results of Operations
We are a development stage company and our historical results may not be indicative of our future results. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or future results of operations.
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Results of Operations
Comparison of the Three Months Ended September 30, 2024 (Successor) to the Three Months Ended September 30, 2023 (Successor)
The following table sets forth our condensed results of operations data for the periods presented:
Period from
July 1 - September 30, 2024 (Successor)July 1 - September 30, 2023 (Successor)
Revenue$12 $— 
Cost of revenue1 — 
Gross profit11 — 
Operating expenses
General and administrative8,448 8,389 
Sales and marketing1,032 931 
Research and development17,333 9,032 
Project development233 289 
Depreciation, amortization and accretion20,210 20,027 
Total operating expenses47,256 38,668 
Operating loss(47,245)(38,668)
Other income (expense)
Interest income7,992 8,675 
Change in Earnout Shares liability and Warrant liability27,690 (61,984)
Other income3 1 
Net other income (expense)35,685 (53,308)
Net loss before income tax(11,560)(91,976)
Income tax benefit4,746 10 
Net loss after income tax(6,814)(91,966)
Net loss attributable to non-controlling interests(7,632)(61,402)
Net income (loss) attributable to NET Power Inc.$818 $(30,564)

Revenue
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 $12, or 100%, for the three months ended September 30, 2024 (Successor), as compared to three months ended September 30, 2023 (Successor).
General and administrative
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 $59, or 1%, for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor). This increase was due to increases in corporate headcount and information technology costs, partially offset by lower SEC filing fees and insurance costs.
Sales and marketing
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 $101, or 11%, for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor). This increase was primarily attributable to costs associated with growth in employee headcount, partially offset by lower information technology costs and conference fees.
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Research and development
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 $8,301, or 92%, for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor). This increase was primarily due to activities under the BHES JDA and increased activity at the Demonstration Plant in preparation for testing which is scheduled to commence in the fourth quarter of 2024.
Project development
Project development expenses consist of labor expenses and fees paid to third parties developing commercial scale projects. Our project development expenses were fairly consistent, for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor).
Depreciation, amortization and accretion
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 $183, or 1%, for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor).
Interest income
Our interest income (expense) decreased by $683, or 8%, for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor). Interest income decreased due to decreased investments, partially offset by investment accretion.
Change in Earnout Shares liability and Warrant liability
The change in Earnout Shares liability and Warrant liability was $89,674, or 145%, for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor). The change was due to the changes in the market price of our Class A Common Stock, which correlates to the change in value of our Warrants.
Income tax benefit
Our income tax benefit increased by $4,736 for the three months ended September 30, 2024 (Successor), as compared to the three months ended September 30, 2023 (Successor). This increase was due to a lower effective tax rate for the three months ended September 30, 2023 (Successor) due to permanent differences for expenses associated with the closing of the Business Combination.

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Comparison of the Nine Months Ended September 30, 2024 (Successor) to the Periods from January 1, 2023 Through June 7, 2023 (Predecessor) and June 8, 2023 Through September 30, 2023 (Successor)
The following table sets forth our condensed results of operations data for the periods presented:
Period from
January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Revenue$250 $— $175 
Cost of revenue31 — 3 
Gross profit219 — 172 
Operating expenses
General and administrative22,643 32,887 12,861 
Sales and marketing2,660 1,087 869 
Research and development44,083 14,870 14,311 
Project development1,426 219 479 
Option settlement - related party— 79,054 — 
Depreciation, amortization and accretion60,289 24,945 5,802 
Total operating expenses131,101 153,062 34,322 
Operating loss(130,882)(153,062)(34,150)
Other income (expense)
Interest income24,712 10,800 (30)
Change in Earnout Shares liability and Warrant liability29,361 (60,975)— 
Other income10 5 4 
Net other income (expense)54,083 (50,170)(26)
Net loss before income tax(76,799)(203,232)(34,176)
Income tax benefit11,137 681 — 
Net loss after income tax(65,662)(202,551)(34,176)
Net loss attributable to non-controlling interests(50,791)(136,987)— 
Net loss attributable to NET Power Inc.$(14,871)$(65,564)$(34,176)

Revenue
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 $75, or 43%, for the nine months ended September 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 September 30, 2023 (Successor).

General and administrative
General and administrative expenses decreased by $23,105, or 51%, for the nine months ended September 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 September 30, 2023 (Successor). This decrease was primarily due to $16,644 in costs related to the Business Combination and $1,958 in costs incurred in the Successor Period as a result of becoming a public company during the nine months ended September 30, 2023. This decrease was also due to decreased amounts paid for professional services, partially offset by an increase in corporate headcount.

Sales and marketing
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 $704, or 36%, for the nine months ended September 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 September 30, 2023 (Successor). This increase was primarily attributable to increased headcount and engagement of external consultants to support increased marketing activities.

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Research and development
Our 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 increased by $14,902, or 51%, for the nine months ended September 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 September 30, 2023 (Successor). This increase was primarily due to timing of development activities under the BHES JDA.

Project development
Project development expenses consist of labor expenses and fees paid to third parties developing commercial scale projects. Project development expenses increased by $728, or 104%, for the nine months ended September 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 September 30, 2023 (Successor). This increase was due to the initiation of activities related to development of a utility-scale facility and costs related to future projects.

Option settlement - related party
Option settlement expense of $79,054 for the period from June 8, 2023 through September 30, 2023 (Successor) was due to a one-time cost for settlement of an option agreement in connection with the close of the Business Combination.

Depreciation, amortization and accretion
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 $29,542, or 96%, for the nine months ended September 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 September 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 Demonstration Plant. These increases resulted in an increase in related amortization and depreciation expense in the Successor Period.

Interest income
Interest income (expense) increased by $13,942, or 129%, for the nine months ended September 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 September 30, 2023 (Successor). Interest income increased due to the deployment of cash into fixed income securities and interest-bearing short-term investments subsequent to the Business Combination.

Change in Earnout Shares liability and Warrant liability
The change in Earnout Shares liability and Warrant liability was $90,336, for the nine months ended September 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 September 30, 2023 (Successor). This increase is primarily due to the change in the fair value of the Private Placement Warrants and Public Warrants which was driven by changes in our stock price.
Income tax benefit
Our income tax benefit increased by $10,456 for the nine months ended September 30, 2024, as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through September 30, 2023 (Successor). The increase is due to favorable permanent items and a cumulative tax benefit of $1,647 related to finalizing deferred taxes as of the Closing Date of the Business Combination in the nine months ended September 30, 2024 (Successor) and a lower effective tax rate for the nine months ended September 30, 2024 (Successor) due to unfavorable permanent differences for expenses associated with the closing of the Business Combination.
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Liquidity and Capital Resources
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 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.
The following table summarizes our liquidity position:
September 30, 2024 (Successor)
Cash and cash equivalents$386,257 
Available-for-sale securities91,279 
Short-term investments100,000 
Total liquidity$577,536 
As of September 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 $91,279. Additionally, our current liabilities were $26,915 at September 30, 2024 (Successor).
We believe we have the ability to manage our operating costs, including R&D expenditures, such that our existing liquidity will be sufficient to fund our obligations for the next 12 months following the filing of this Report. We believe that our current sources of liquidity on hand should be sufficient to fund our general corporate operating expenses as we work to commercialize our technology, but certain costs are not reasonably estimable at this time and we may require additional funding. More specifically, we will require additional funding in order to successfully construct our first utility-scale plant and to originate additional Net Power plant opportunities.
Cash Flow Summary
The following table shows our cash flows from operating activities, investing activities and financing activities for the presented periods:
Period from
January 1 - September 30, 2024 (Successor)June 8 – September 30, 2023 (Successor)January 1 – June 7, 2023 (Predecessor)
Net cash used in operating activities$(18,680)$(35,373)$(10,623)
Net cash used in investing activities$(129,467)$(95,928)$(2,431)
Net cash (used in) provided by financing activities$(91)$319,529 $15,836 
Operating Activities
Cash used in operating activities decreased 59.4% for the nine months ended September 30, 2024 as compared to the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through September 30, 2023 (Successor). 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 the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through September 30, 2023 (Successor). 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.
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Investing Activities
During the nine months ended September 30, 2024 (Successor), net cash used in investing activities increased 31.6% as compared to the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through September 30, 2023 (Successor). Our cash used in investing activities for the nine months ended September 30, 2024 (Successor) 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.
Financing Activities
Our cash provided by financing activities decreased 100.0% for the nine months ended September 30, 2024 (Successor) compared to the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through September 30, 2023 (Successor). This change was driven by proceeds from the PIPE Financing, fewer transaction expenses, and a reduction in the number of shareholder redemptions during the period from June 8, 2023 through September 30, 2023 (Successor).
Commitments and Contractual Obligations
Asset Retirement Obligation
We hold a lease for 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 $2,191 and $2,060 as of September 30, 2024 and December 31, 2023, respectively.
Leases
As of September 30, 2024, future minimum lease payments attributable to the Company's operating and finance lease arrangements are approximately $3,447 and $382, respectively.
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 a subsidiary of Occidental Petroleum, 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.
Joint Development Agreement
As of September 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 September 30, 2024, we recognized approximately $25,733 of inception-to-date cash expenses and approximately $25,932 of inception-to-date share-based expenses related to the BHES JDA. The share-based expense excludes $6,442 of realized loss on share issuance.
Off-Balance Sheet Arrangements
As of September 30, 2024 and December 31, 2023, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Capital Commitments
As of September 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 $133,780. As of September 30, 2024, there was $106,831 remaining related to these commitments.
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Critical Accounting Policies and Estimates
There have been no material changes to our discussion of critical accounting estimates from those set forth in our Annual Report.
Emerging Growth Company Accounting Election

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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the fiscal quarter ended September 30, 2024. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting occurred during the fiscal quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
From time to time, the Company is party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not currently expect these matters to have a materially adverse effect on the financial position or results of operations of the Company.
Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide the information called for by this Item. However, for a discussion of the material risks, uncertainties and other factors that could have a material effect on us, please refer to Part I, Item 1A. “Risk Factors” in our Annual Report.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Unregistered Sales of Equity Securities
On July 22, 2024, the Company issued 942,177 shares of Class B Common Stock and OpCo issued 942,177 Class A units to BHES as payment for costs incurred pursuant to the Amended and Restated JDA during the second quarter of 2024. The issuances by the Company and OpCo were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the Securities Act. These transactions did not involve any public offering, any underwriters, any underwriting discounts or commissions, or any general solicitation or advertising.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information

Insider Trading Arrangements

On August 26, 2024, Akash Patel, our Chief Financial Officer, adopted a “Rule 10b5-1 trading arrangement” (as such term is defined in Item 408(a) of Regulation S-K) (the “Patel 10b5-1 Plan”) that provides for the sale of up to the total of (a) 150,000 shares of Class A shares Common Stock plus (b) the net number of shares of Class A common stock to be issued upon the vesting of 11,151 RSUs in April 2025. Sales under the Patel 10b5-1 Plan may be made during the period beginning November 22, 2024 through November 22, 2025.

During the three months ended September 30, 2024, none of our other directors or “officers” (as such term is defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408(a) of Regulation S-K).


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Item 6. Exhibits
Exhibit NumberDescription
2.1+
2.2
3.1
3.2
10.1+
31.1
31.2
32.1
32.2
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
0.104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
+Certain schedules or similar attachments to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to provide a copy of any omitted schedule or similar attachment to the SEC upon request.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: November 12, 2024                        NET Power Inc.     
    
                                By:      /s/ Kelly Rosser        
                                Name:     Kelly Rosser
                                Title:    Chief Accounting Officer
(Principal Accounting Officer)

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