NET Power Inc. (NPWR)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition and includes forward-looking statements that involve risks, uncertainties and assumptions. This section should be read in conjunction with Part I of this Annual Report on Form 10-K, the consolidated financial statements and related notes included in Part II Item 8 in this Annual Report on Form 10-K and the section titled “Cautionary Note Regarding Forward-Looking Statements” included in the forepart in this Annual Report on Form 10-K.

Unless the context otherwise requires, all references in this section to “Net Power,” “we,” “us,” or “our” and the “Company” refer to the business of Net Power Inc. and its subsidiaries. Additional terms used herein are defined in the section entitled “Certain Defined Terms” and elsewhere in this 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 affordable 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. Following the Closing, Net Power Inc. is considered an umbrella partnership, C corporation or “Up-C” structure, whereby all of the equity interests in Net Power, LLC are held by OpCo, and Net Power Inc.’s only assets are its equity interests in OpCo.

OpCo is considered a variable interest entity with Net Power Inc. serving as its primary beneficiary. Net Power Inc. was determined to be the primary beneficiary of Net Power, LLC because it is the sole managing member of OpCo with the power to control the most significant activities of Net Power, LLC, while also having an economic interest that provides it with the ability to participate significantly in Net Power, LLC’s benefits and losses. As a result, Net Power, LLC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination represents an acquisition of a business and Net Power, LLC’s identifiable assets acquired, liabilities assumed, and any non-controlling interests were measured at their estimated fair value on the acquisition date.

As a result of the Business Combination, the Company’s financial statement presentation distinguishes Net Power, LLC as the “Predecessor” through June 7, 2023 (the “Predecessor Period”) and Net Power Inc. as the “Successor” for periods after the Closing Date (the “Successor Period”). Revenue and earnings after the date of the Business Combination are shown in the Successor Period on the 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

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 and future utility-scale plants, technical problems with the Net Power Cycle, that could impact performance, potential supply chain issues, 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, Net Power plans to conduct additional research and equipment validation testing campaigns at its Demonstration Plant. Additionally, Net Power began purchasing initial long-lead materials for SN1 in 2024 with the intention of locating SN1 in the Permian Basin of West Texas (“Project Permian”). However, after completing the FEED process in December 2024, the initial cost estimates were higher than originally anticipated, In response, during the first quarter of 2025, Net Power commenced a post-FEED optimization and value engineering process. In March 2025, the

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Company suspended further long lead equipment releases but value engineering and certain development work remains in progress. Provided we are successful in our value engineering process, the project would come online no earlier than 2029. 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: finalizing all permitting, supply and off-take contracts, and obtaining the financing required to achieve FID, initiating the 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

Results of Operations

Comparison of the Year Ended December 31, 2024 (Successor) to the Periods From January 1, 2023 Through June 7, 2023 (Predecessor) and June 8, 2023 Through December 31, 2023 (Successor)

The following table sets forth our condensed results of operations data for the periods presented:

Revenue

We have generated small amounts of 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 thousand, or 43%, for the year ended December 31, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor).

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General and administrative

General and administrative expenses decreased by $23.9 million, or 44%, for the year ended December 31, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor). This decrease was primarily due to $16.6 million in costs related to the Business Combination along with additional one-time professional service fees as a result of becoming a public company as these costs did not recur in 2024. This decrease was partially offset by an increase in corporate headcount.

Sales and marketing

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 $1.2 million, or 45%, for the year ended December 31, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor). This increase was primarily attributable to increased headcount and engagement of external consultants to support increased marketing activities.

Research and development

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 $23.8 million, or 60%, for the year ended December 31, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor). This increase was primarily due to the timing of development activities under the BHES JDA and increased activity at the Demonstration Plant due to the commencement of testing campaign 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. Project development expenses increased by $0.8 million, or 75%, for the year ended December 31, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor). This increase was due to increased headcount related to the development of a utility-scale facility and costs related to future projects.

Option settlement - related party

Option settlement expense of $79.1 million for the period from June 8, 2023 through December 31, 2023 (Successor) was related 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 $30.8 million, or 61%, for the year ended December 31, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 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 (expense)

Interest income (expense) increased by $11.9 million, or 61%, for the year ended December 31, 2024 (Successor), as compared to amounts for the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor). Interest income increased due to a higher average cash balance in the Successor Period as a result of the Business Combination which was deployed into fixed income securities and interest-bearing short-term investments. The higher cash and investment balances were outstanding for a longer period during the year ended December 31, 2024 (Successor) as compared to prior periods.

Change in Earnout Shares liability and Warrant liability

The change in Earnout Shares liability and Warrant liability was $52.2 million, for the year ended December 31, 2024 (Successor), as compared to the period from June 8, 2023 through December 31, 2023 (Successor). This decrease is

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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. Our stock price decreased from $13.12 per share at June 8, 2023 to $10.10 per share at December 31, 2023, and then increased to $10.59 per share at December 31, 2024. The valuations were also impacted by increasing volatility assumptions. These changes were partially offset by fewer Earnout Shares outstanding during 2024 as the first two tranches were earned in 2023.

Income tax benefit

Our income tax benefit increased by $4.9 million for the year ended December 31, 2024 (Successor), as compared to amounts for the period from June 8, 2023 through December 31, 2023 (Successor). The increase in the income tax benefit is due to a higher net loss, a higher research and development tax credit in 2024 and finalizing deferred taxes as of the Closing Date of the Business Combination during the year ended December 31, 2024 (Successor). There was no tax provision for the period from January 1, 2023 through June 7, 2023 (Predecessor) as the entity was considered a pass-through entity for tax purposes.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and investments on hand, which are short-term in duration and highly liquid. Historically, our sources of liquidity have also included raising additional capital through the sale of ownership interests. We will need to raise additional capital to fund our first utility-scale project, which may include project-level debt and equity securities as well as corporate-level equity securities. 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 as of the dates indicated:

___________

(1) $22.6 million of these investments are classified as long-term on our consolidated balance sheet.

As of December 31, 2024, we had short-term investments totaling $100 million, which was comprised of a single three-month certificate of deposit custodied by a domestic banking institution. Additionally, our current liabilities were $17.9 million and $12.0 million at December 31, 2024 and December 31, 2023, respectively. The decrease in our liquidity position is primarily a result of cash used to prepare the Demonstration Facility for the testing campaign that commenced in the fourth quarter 2024, progress on our first commercial-scale facility as we continued FEED and released long-lead items, R&D expenses, and general corporate expenses.

We believe we have the ability to manage our operating costs, including R&D expenses, such that our existing cash, cash equivalents and short-term investments will be sufficient to fund our obligations for the next 12 months following the filing of this Annual Report on Form 10-K. 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 will likely require additional funding. More specifically, we will likely require additional funding in order to successfully construct our first utility-scale plant and to originate additional Net Power plant opportunities.

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Cash Flow Summary

The following table shows our cash flows from operating activities, investing activities and financing activities for the presented periods:

Operating Activities

Cash used in operating activities decreased by $17.4 million for the year ended December 31, 2024 compared to the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 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 and general and administrative activities. In 2023, we experienced an increase in costs associated with achieving and maintaining our public company status. Excluding the one-time costs associated with becoming a public company, our operating expenses have been increasing over time due to growing headcount and advancing our technology towards commercialization. As we continue to add employees and further advance our technology towards commercialization, we expect our cash used in operating and investing activities to continue to increase before we start to generate any material cash inflows from our operations.

Investing Activities

During the year ended December 31, 2024, net cash used in investing activities decreased by $65.0 million compared to the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor). Our cash used in investing activities for the year ended December 31, 2024 primarily reflects the investment of a portion of the proceeds received from the PIPE financing in investment grade fixed income securities and capital expenditures related to our Demonstration Plant and long-lead items for our first utility scale plant.

Financing Activities

Our cash from financing activities decreased by $340 million for the year ended December 31, 2024 compared to the combined periods from January 1, 2023 through June 7, 2023 (Predecessor) and June 8, 2023 through December 31, 2023 (Successor). The decrease was driven by proceeds from the PIPE Financing, less transaction expenses and shareholder redemptions during 2023. In addition, during the fourth quarter of 2024, the Company made a tax-related partnership distribution of $4.8 million.

Commitments and Contractual Obligations

Asset Retirement Obligation

We hold a lease for the approximately 218,900 square feet of land under the Demonstration Plant from Air Liquide at a rate of one dollar per year. 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 $3.3 million and $2.1 million as of December 31, 2024 and 2023, respectively. During the year ended December 31, 2024, the Company made a $996 thousand revision to the estimate related to this asset retirement obligation.

Leases

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 executed a land lease agreement

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with a subsidiary of Occidental Petroleum, a related party, on March 8, 2024 for land in West Texas. The land lease commenced on December 1, 2024.

On June 26, 2024, the Company entered into a lease agreement for two office trailers at the Demonstration Plant in La Porte, Texas, with an effective date of September 1, 2024. The lease has a term of 24 months and contains a purchase option whereby the Company may purchase the trailers at the end of the lease term; therefore, the Company classified the lease as a finance lease.

During August 2023, we agreed with our landlord to terminate our prior office space agreement in Durham, North Carolina ahead of its scheduled term and enter into a lease for a new office space, also located in Durham, North Carolina. The lessors of both office spaces have common ownership and are considered related parties to each other; therefore, the simultaneous termination of the old lease and execution of the new lease represent a single transaction accounted for as a modification of the original office lease, which resulted in the re-measurement of the original lease over its amended term. On October 6, 2023, the Company formally relocated to the office space governed by the new lease arrangement. As of December 31, 2024, future minimum lease payments attributable to our operating and finance lease arrangements are expected to equal $3.4 million and $331 thousand, respectively.

Joint Development Agreement

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 million. As of December 31, 2024, we recognized approximately $31.9 million of inception-to-date cash expenses and approximately $31.9 million of inception-to-date share-based expenses related to the BHES JDA. The share-based expense excludes $8.0 million of realized loss on share issuance.

Off-Balance Sheet Arrangements

As of December 31, 2024 and 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 December 31, 2024, we have gross purchase commitments of $134 million related to certain components of industrial machinery for use at our Demonstration Plant and at our first utility-scale plant. We recognize portions of these commitments on our balance sheet as portions become payable per contract milestones.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“US GAAP”). Preparation of the financial statements requires our management to make a number of judgments, estimates and assumptions relating to the reported amounts of expenses, assets, and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates, and assumptions could have a material impact on our financial statements. Our significant accounting policies are described in Note 2 — Significant Accounting Policies in our consolidated financial statements included in Part II, Item 8 of this Annual Report.

Business Combinations

We account for business acquisitions in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. We measure the cost of an acquisition as the aggregate of the acquisition date fair values of the assets acquired and liabilities assumed and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. We record goodwill for the excess of (i) the total costs of acquisition, fair value of any non-controlling interests and acquisition date fair value of any previously held equity interest in the acquired business over (ii) the fair value of the identifiable net assets of the acquired business.

We believe accounting for business combinations is a critical accounting estimate because the acquisition method of accounting requires management to exercise significant judgment and make estimates and assumptions based on available information regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets. We refine these estimates over a one-year measurement period, to reflect any new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If we are required to retroactively adjust provisional

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amounts that we have recorded for the fair value of assets and liabilities in connection with an acquisition, these adjustments could materially impact our results of operations and financial position in the period the amounts are finalized.

Estimates and assumptions that we made in estimating the fair value of acquired developed technology include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense applicable to those assets. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or decelerated, which could materially impact our results of operations. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Goodwill

We recognize goodwill in accordance with ASC Topic 350, Goodwill and Other Intangible Assets. Goodwill represents the excess cost of an acquired entity over the fair value amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized, but rather tested for impairment annually on October 1 or whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. Among the factors that could trigger an impairment review are current operating results that do not align with our annual plan or historical performance; changes in our strategic plans or the use of our assets; restructuring charges or other changes in our reporting units; competitive pressures and changes in the general economy or in the markets in which we operate; or a sustained significant decline in our stock price and market capitalization. An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount. As of December 31, 2024, no impairment charges for goodwill have been recognized.

We believe evaluating the recoverability of goodwill is a critical accounting estimate because it requires management to make judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of our estimates are subject to uncertainty. Among the factors that we consider in our qualitative assessment are general economic conditions and the competition present within our business environment; actual and projected reporting unit financial performance; forward-looking business measurements; and external market assessments. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Earnout Shares and Public Warrants

The fair values of the liabilities for the Earnout Shares and the Public Warrants were determined using Monte Carlo simulations that have various significant unobservable inputs. We believe these valuations are critical accounting estimates because management is required to make assumptions that could have a material impact on the valuation of these liabilities, which include our best estimate of expected volatility and expected holding periods. When estimating expected volatility, management incorporates volatility of comparable public companies and the Company’s own volatility. Changes in the estimated fair values of these liabilities may have material impacts on our results of operations in any given period, as any increases in these liabilities have a corresponding negative impact on our results of operations in the period in which the changes occur and vice versa. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Income Taxes

We believe income taxes are critical accounting estimates because significant judgment is required in assessing the recoverability of our deferred tax assets from future taxable income and the timing of reversing temporary differences. Additionally, accounting for uncertain tax positions requires management to make judgements regarding the likelihood the position will be sustained based on its technical merits.

As managing member of OpCo, Net Power Inc. consolidates the financial results of OpCo in its consolidated financial statements. OpCo represents a pass-through entity for income tax purposes. As a pass-through entity, OpCo is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by OpCo is passed through to its members, including Net Power Inc., which is taxed as a corporation that pays corporate federal, state and local taxes with respect to income allocated from OpCo. A change to future taxable income or tax planning strategies could impact our ability to utilize deferred tax assets, which would increase or decrease our income tax expense and taxes paid. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

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Equity-Based Compensation and Fair Value of Shares

We believe that equity-based compensation is a critical accounting estimate because the assumptions underlying management’s estimates involve inherent uncertainties and require the application of significant judgment.

We recognize the cost of equity-based awards granted to our employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award.

Predecessor Period

Prior to the Business Combination, we determined the fair value of equity awards using the Black-Scholes option pricing model, which was impacted by the following assumptions:

•Expected Term—We used the expected term to liquidity, which was generally the vesting period of the award.

•Expected Volatility—Volatility was based on a benchmark of comparable companies.

•Expected Dividend Yield—The dividend rate used was zero as we have never paid any cash dividends and did not anticipate doing so in the foreseeable future.

•Risk-Free Interest Rate—The interest rates used were based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

Prior to the Business Combination, there was no public market for our equity instruments and, as a result, the estimated fair value of our equity has historically been determined by the Net Power, LLC board of directors as of the grant date with input from management, considering our most recently available third-party valuations of equity and the Net Power, LLC board of directors' assessment of additional objective and subjective factors that the Net Power, LLC board believed were relevant and that may have changed from the date of the most recent valuation through the date of grant. We engaged an independent third-party valuation specialist to perform contemporaneous valuations of our equity. The valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants (“AICPA”), Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. The independent third-party valuation specialist considered all objective and subjective factors that it believed to be relevant for each valuation conducted in accordance with AICPA’s Practice Aid, including our best estimate of our business condition, prospects, and operating performance at each valuation date. Other significant factors included:

•Our results of operations and financial position;

•Our stage of development and business strategy and the material risks related to our business and industry;

•The lack of liquidity of our equity;

•The valuation of publicly traded peer companies; and

•The likelihood of achieving a liquidity event for the holders of our ownership shares and equity awards, given prevailing market conditions.

An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Successor Period

We measure share-based awards at their grant-date fair value and record compensation expense on a straight-line basis over the vesting periods of the awards. Share-based compensation expense is adjusted for actual forfeitures of unvested awards as they occur.

The estimated grant date fair value of our stock options and market-based awards are determined using the Monte Carlo Simulation. The assumptions used to calculate the fair value of these awards were:

•Expected Term—We used the expected term to liquidity, which was generally the vesting period of the award.

•Expected Volatility—Volatility was based on a benchmark of comparable companies.

•Risk-Free Interest Rate—The interest rates used were based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

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Emerging Growth Company Accounting Election

Section 102(b)(1) of the JOBS Act exempts emerging growth companies (“EGCs”) 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-EGCs, 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 2025 and will have the benefit of the extended transition period. We intend to take advantage of the benefits of this extended transition period.

Item 7. 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 consolidated results of operations and financial condition and includes forward-looking statements that involve risks, uncertainties and assumptions. This section should be read in conjunction with Part I of this Annual Report on Form 10-K, the consolidated financial statements and related notes included in Part II Item 8 in this Annual Report on Form 10-K and the section titled "Cautionary Note Regarding Forward-Looking Statements" included in the forepart in this Annual Report on Form 10-K.

Unless the context otherwise requires, all references in this section to "NET Power," "we," "us," or "our" and the "Company" refer to the business of NET Power Inc. and its subsidiaries. Additional terms used herein are defined in the section entitled "Certain Defined Terms" and elsewhere in this 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.

Pursuant to the Business Combination Agreement, the aggregate consideration payable upon closing of the Business Combination to Legacy NET Power Holders consisted of 136,073,365 vested Class A OpCo Units and a corresponding number of vested shares of Class B Common Stock, 1,119,198 unvested Class A OpCo Units and 1,119,198 unvested shares of Class B Common Stock. Following the Closing, NET Power Inc. retained its umbrella partnership, C corporation or "Up-C" structure, whereby all of the equity interests in NET Power, LLC are held by OpCo, and NET Power Inc.'s only assets are its equity interests in OpCo.

OpCo is considered a variable interest entity with NET Power Inc. serving as its primary beneficiary. NET Power Inc. was determined to be the primary beneficiary of NET Power, LLC because it is the sole managing member of OpCo with the power to control the most significant activities of NET Power, LLC, while also having an economic interest that provides it with the ability to participate significantly in NET Power, LLC's benefits and losses. As a result, NET Power, LLC was treated as the "acquired" company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination represents an acquisition of a business and NET Power, LLC's identifiable assets acquired, liabilities assumed, and any non-controlling interests were measured at their estimated fair value on the acquisition date.

As a result of the Business Combination, the Company's financial statement presentation distinguishes NET Power, LLC as the "Predecessor" through June 7, 2023 (the "Predecessor Period") and NET Power Inc. as the "Successor" for periods after the Closing Date (the "Successor Period"). Revenue and earnings after the date of the Business Combination are shown in the Successor Period on the consolidated statement 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 Inc. became a publicly traded company with Class A Common Stock and Public Warrants trading on the NYSE, which has necessitated the hiring of additional personnel and the implementation of procedures and processes to address public company regulatory requirements and customary practices. We have incurred, and expect to continue to incur, material additional annual expenses as a public company for, among

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Table of Contents

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, 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 expects to purchase initial long-lead materials for the first utility-scale plant in 2024 and targets initial power generation between the second half of 2027 and the first half of 2028. We expect that the 300 MWe Class plant will be a NET Power-led consortium project located at an OXY-hosted site in the Permian Basin of West Texas. We expect that the project will fully integrate power production with transportation and underground storage of carbon dioxide. We are focused on delivering a project that will catalyze future adoption for utility-scale customers.

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, initiating all permitting required, conducting a 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 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 Years Ended December 31, 2023 and 2022 (In thousands)

As it relates to the results of operations, while the January 1, 2023 through June 7, 2023 (Predecessor) period and the June 8, 2023 through December 31, 2023 (Successor) period are distinct reporting periods, the effects of the Business Combination did not have a material impact on the comparability of our results of operations between the periods, unless otherwise noted related to the impact from pushdown accounting. Please reference Note 1 — Organization and Operations and Note 3 — Business Combination to our consolidated financial statements for additional information about the Business Combination.

The following table sets forth our condensed results of operations data for the periods presented:

Revenue

We have not generated material revenue to date. We have historically generated revenue through various contracts with potential future license customers for access to testing results, other data and feasibility studies. We have also generated revenue for conducting syngas testing at our Demonstration Plant. Revenue decreased by $405, or 69.8%, for the year ended December 31, 2023, as compared to $580 for the year ended December 31, 2022. Revenue during these two periods was not significant.

Cost of revenue

Cost of revenue primarily includes the cost of subcontractor labor, as well as supplies and materials directly associated with conducting the syngas testing. Our cost of revenue decreased by $272, or 98.9%, for the year ended December 31, 2023, as compared to $275 for the year ended December 31, 2022 as the Company did not conduct syngas testing in 2023.

General and administrative

General and administrative expenses consist primarily of personnel-related expenses associated with our general and administrative organization, professional fees for legal, accounting, and other consulting services. Our general and administrative expenses increased by $37,016, or 215.3%, for the year ended December 31, 2023, as compared to $17,189 for the year ended December 31, 2022. The majority of the increase is due to $16,644 in costs related to the Business

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Combination and $1,958 in costs incurred in the Successor Period as a result of becoming a public company. This increase was also attributable to overall increases in corporate activity, including staffing. These increases were partially offset by a reduction in equity-based compensation.

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 $1,859, or 232.1%, for the year ended December 31, 2023, as compared to $801 for the year ended December 31, 2022. This increase was primarily attributable to increased engagement of external consultants and systems to support increased marketing activities.

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 costs have been expensed as incurred. Research and development expenses increased by $21,028, or 111.0%, for the year ended December 31, 2023, as compared to $18,938 for the year ended December 31, 2022. This increase was primarily due to the commencement 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. Our project development increased by $1,089 for the year ended December 31, 2023, as compared to the year ended December 31, 2022. This increase was due to the initiation of activities related to the development of a utility-scale facility.

Option settlement

Option settlement expense increased by 79,054 for the year ended December 31, 2023 due to a one-time cost to settle an option agreement in association with the close of the Business Combination. There were no corresponding charges in the year ended December 31, 2022.

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 $37,456, or 279.8%, for the year ended December 31, 2023, as compared to $13,387 for the year ended December 31, 2022. As a result of the Business Combination, we adjusted the value of acquired assets to fair value, which resulted in a significant increase in intangible assets for internally developed technology and the fair value of our Demonstration Plant. These increases resulted in an increase in related amortization and depreciation expense in the Successor Period. See Note 3 — Business Combination to our consolidated financial statements for additional information.

Interest income (expense)

Our interest income (expense) increased by $24,268 for the year ended December 31, 2023 compared to $(4,791) for the year ended December 31, 2022. Interest income grew in 2023 because a higher cash balance and new short-term investment generated more interest revenue than in the prior year. Interest expense in 2022 was attributable to expensing of the loan discount associated with the option liability relating to the member loans, as well as adjustment of the option liability to fair market value.

Change in Earnout Shares liability and Warrant liability

The change in Earnout Shares liability and Warrant liability increased by $26,515 for the year ended December 31, 2023, predominately due to the change in the fair value of the Private Placement Warrants. The Earnout Shares and the Warrants were issued in connection with the Business Combination; therefore, there are no corresponding amounts in the period from January 1 – June 7, 2023 (Predecessor) and the year ended December 31, 2023 (Predecessor).

Income tax benefit

Our income tax benefit increased by $5,707 for the year ended December 31, 2023. There was no income tax benefit for the year ended December 31, 2022 as, prior to the Business Combination, the Company was organized as a limited liability company and therefore was a pass-through entity.

Liquidity and Capital Resources (In thousands)

Our principal sources of liquidity are cash and investments on hand, which are short-term in duration and highly liquid. Historically, our sources of liquidity have also included raising additional capital through the sale of ownership interests. We may issue additional equity securities in the future. We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our near-term business operations, including our contractual obligations and other

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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 as of the dates indicated:

As of December 31, 2023, 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. Additionally, our current liabilities were $12,021 and $8,451 at December 31, 2023 (Successor) and December 31, 2022 (Predecessor), respectively. The increase in our liquidity position is primarily a result of cash received in connection with the Business Combination of approximately $661,623. See Note 3 — Business Combination to our consolidated financial statements for additional information.

We believe we have the ability to manage our operating costs, including R&D expenditures, such that our existing cash, cash equivalents and short-term investments will be sufficient to fund our obligations for the next 12 months following the filing of this Annual Report on Form 10-K. We believe that our current sources of liquidity on hand should be sufficient to fund our general corporate operating expenses as we work to commercialize our technology, but certain costs are not reasonably estimable at this time and we may require additional funding. More specifically, we may require additional funding in order to successfully construct our first utility-scale plant and to originate additional NET Power plant opportunities.

Cash Flow Summary (In thousands)

The following table shows our cash flows from operating activities, investing activities and financing activities for the presented periods:

Operating Activities

Cash used in operating activities increased by $32,372 for the year ended December 31, 2023 compared to the year ended December 31, 2022. 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 and general and administrative activities. These costs have been increasing over time as the Company has grown and development of our technology has progressed. Additionally, we experienced an increase in costs associated with achieving and maintaining our public company status. As we continue to increase hiring and the build out of the Company, we expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from our operations.

Investing Activities

During the year ended December 31, 2023, net cash used in investing activities increased by $103,585 compared to the year ended December 31, 2022. Our cash used in investing activities for the year ended December 31, 2023 primarily reflects the investment of a portion of the proceeds received from the PIPE financing in an interest-bearing, short-term certificate of deposit. Additionally, there continues to be cash used for equipment and equipment upgrades, which is partially offset by cash acquired as part of the Business Combination.

Financing Activities

Our cash provided by financing activities for the year ended December 31, 2023 increased by $313,925 compared to the year ended December 31, 2022. The increase was driven by proceeds from the PIPE Financing, less transaction expenses and shareholder redemptions.

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Commitments and Contractual Obligations (In thousands)

Leases

We hold a lease for the approximately 218,900 square feet of land under the Demonstration Plant from Air Liquide at a rate of one dollar per year. The lease expires on the earlier of (i) July 1, 2025 and (ii) the termination of our oxygen supply agreement with Air Liquide, pursuant to which Air Liquide supplies oxygen for our use at the Demonstration Plant. The term of the oxygen supply agreement is perpetual but may be terminated by us or by Air Liquide upon 30 days written notice. The underlying lease requires the removal of all equipment and the obligation to restore the land to post-clearing grade level, which has resulted in the recognition of an asset retirement obligation liability of $2,060 and $2,416 as of December 31, 2023 and December 31, 2022, respectively.

We lease our primary office space in Durham, North Carolina. During August 2023, we agreed with our landlord to terminate our prior office space agreement ahead of its scheduled term and enter into a lease for a new office space, also located in Durham, North Carolina. We accounted for the early termination of the existing commercial lease and the execution of the new commercial lease as a modification of the original office lease, which resulted in the re-measurement of the original lease over its amended term.

On October 6, 2023, the Company formally relocated to the office space governed by the new lease arrangement. As of December 31, 2023, future minimum lease payments attributable to the new lease arrangement are expected to equal $2,608.

Joint Development Agreement

As of December 31, 2023 and December 31, 2022, 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 December 31, 2023, we recognized approximately $11,868 of inception-to-date cash expenses and approximately $11,868 of inception-to-date share-based expenses related to the BHES JDA. The share-based expense excludes $2,971 of realized loss on share issuance.

Off-Balance Sheet Arrangements

As of December 31, 2023 and December 31, 2022, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Capital Commitments

As of December 31, 2023, 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 commitments, which were initially unrecognized on our balance sheet, totaled $26,009. We recognize portions of these commitments on our balance sheet as portions become payable per contract milestones. We recognized $5,191 of these commitments on our balance sheet within the current period.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“US GAAP”). Preparation of the financial statements requires our management to make a number of judgments, estimates and assumptions relating to the reported amount of expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our financial statements. Our significant accounting policies are described in our consolidated financial statements included elsewhere in this Annual Report.

Business Combinations

We account for business acquisitions in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. We measure the cost of an acquisition as the aggregate of the acquisition date fair values of the assets acquired and liabilities assumed and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. We record goodwill for the excess of (i) the total costs of acquisition, fair value of any non-controlling interests and acquisition date fair value of any previously held equity interest in the acquired business over (ii) the fair value of the identifiable net assets of the acquired business.

We believe accounting for business combinations is a critical accounting estimate because the acquisition method of accounting requires management to exercise significant judgment and make estimates and assumptions based on available information regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets. We refine these estimates over a one-year measurement period, to reflect any new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have

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affected the measurement of the amounts recognized as of that date. If we are required to retroactively adjust provisional amounts that we have recorded for the fair value of assets and liabilities in connection with an acquisition, these adjustments could materially impact our results of operations and financial position.

Estimates and assumptions that we must make in estimating the fair value of acquired developed technology include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense applicable to those assets. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or decelerated, which could materially impact our results of operations. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Goodwill

We recognize goodwill in accordance with ASC Topic 350, Goodwill and Other Intangible Assets. Goodwill represents the excess cost of an acquired entity over the fair value amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized.

Goodwill is tested for impairment annually and is tested for impairment between annual tests whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. Among the factors that could trigger an impairment review are current operating results that do not align with our annual plan or historical performance; changes in our strategic plans or the use of our assets; restructuring charges or other changes in our business segments; competitive pressures and changes in the general economy or in the markets in which we operate; and a significant decline in our stock price and our market capitalization relative to our net book value. An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount. As of December 31, 2023, no impairment charges for goodwill have been recognized.

We believe evaluating the recoverability of goodwill is a critical accounting estimate because it requires management to make judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of our estimates are subject to uncertainty. Among the factors that we consider in our qualitative assessment are general economic conditions and the competition present within our business environment; actual and projected reporting unit financial performance; forward-looking business measurements; and external market assessments. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Earnout Shares and Warrants

The fair values of the Earnout Shares liability and Warrant liability were determined using Monte Carlo simulations that have various significant unobservable inputs. We believe these valuations are critical accounting estimates because management is required to make assumptions that could have a material impact on the valuation of these liabilities, which include our best estimate of expected volatility and expected holding periods. Changes in the estimated fair values of these liabilities may have material impacts on our results of operations in any given period, as any increases in these liabilities have a corresponding negative impact on our results of operations in the period in which the changes occur and vice versa. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Income Taxes

We believe income taxes are critical accounting estimates because significant judgment is required in assessing the recoverability of our deferred tax assets from future taxable income and the timing of reversing temporary differences. Additionally, accounting for uncertain tax positions requires management to make judgements regarding the likelihood the position will be sustained based on its technical merits.

As managing member of OpCo, NET Power Inc. consolidates the financial results of OpCo in its consolidated financial statements. OpCo represents a pass-through entity for income tax purposes. As a pass-through entity, OpCo is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by OpCo is passed through to its members, including NET Power Inc., which is taxed as a corporation that pays corporate federal, state and local taxes with respect to income allocated from OpCo. A change to future taxable income or tax planning strategies could impact our ability to utilize deferred tax assets, which would increase or decrease our income tax expense and taxes paid. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

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Equity-Based Compensation and Fair Value of Shares

We believe that equity-based compensation is a critical accounting estimate because the assumptions underlying management's estimates involve inherent uncertainties and require the application of significant judgment.

We recognize the cost of equity-based awards granted to our employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. Prior to the Business Combination, we determined the fair value of equity awards using the Black-Scholes option pricing model, which is impacted by the following assumptions:

•Expected Term—We use the expected term to liquidity, which is generally to vesting period of the award.

•Expected Volatility—Volatility is based on a benchmark of comparable companies.

•Expected Dividend Yield—The dividend rate used is zero as we have never paid any cash dividends and we do not anticipate doing so in the foreseeable future.

•Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

Prior to the Business Combination, there was no public market for our equity instruments and, as a result, the estimated fair value of our equity has historically been determined by the NET Power, LLC board of directors as of the grant date with input from management, considering our most recently available third-party valuations of equity and the NET Power, LLC board of directors' assessment of additional objective and subjective factors that the NET Power, LLC board believed were relevant and which may have changed from the date of the most recent valuation through the date of grant. We engaged an independent third-party valuation specialist to perform contemporaneous valuations of our equity. The valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants ("AICPA"), Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. The independent third-party valuation specialist considered all objective and subjective factors that it believed to be relevant for each valuation conducted in accordance with AICPA's Practice Aid, including our best estimate of our business condition, prospects, and operating performance at each valuation date. Other significant factors included:

•Our results of operations and financial position;

•Our stage of development and business strategy and the material risks related to our business and industry;

•The lack of liquidity of our equity;

•The valuation of publicly traded peer companies; and

•The likelihood of achieving a liquidity event for the holders of our ownership shares and equity awards, given prevailing market conditions.

An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.

Emerging Growth Company Accounting Election

Section 102(b)(1) of 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
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a blank check company
incorporated as a Cayman Islands exempted company on February 2, 2021. As used herein, “we” or the “Company” refers
to Rice Acquisition Corp. II and our majority-owned and controlled operating subsidiary, Rice Acquisition Holdings II LLC (“OpCo”),
unless the context indicates otherwise. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization, or similar business combination with one or more businesses (the “Business Combination”).
We are an early stage and emerging growth company and, as such, we are subject to all of the risks associated with early stage and emerging
growth companies.

As of December 31, 2022, we had
not commenced any operations. All activity to date relates to our formation and the preparation for initial public offering (the “Initial
Public Offering”), described below. We will not generate any operating revenues until after the completion of our initial Business
Combination, at the earliest. We generate non-operating income in the form of interest income on investments from the proceeds derived
from the Initial Public Offering (as defined below). We have selected December 31 as its fiscal year end.

Our sponsor is Rice Acquisition
Sponsor II LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering
was declared effective on June 15, 2021. On June 18, 2021, we consummated our Initial Public Offering of 34,500,000 units (the “Units”
and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), which included
the full exercise of the underwriters’ option to purchase an additional 4,500,000 Units to cover over-allotments, at $10.00 per
Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.1 million, of which approximately
$11.7 million and approximately $593,000 was for deferred underwriting commissions and offering costs allocated to the derivative warrant
liabilities, respectively.

Simultaneously with the closing
of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 10,900,000 warrants (each, a
“Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private
Placement Warrant to our Sponsor, generating proceeds of $10.9 million. Each Private Placement Warrant is exercisable to purchase one
of our Class A ordinary shares or one Class A Unit of OpCo together with a corresponding non-economic Class B ordinary share of the Company.

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Following the Initial Public
Offering, the Public Shareholders (as defined below) hold a direct economic equity ownership interest in us in the form of Class A ordinary
shares, and an indirect ownership interest in Opco through our ownership of Class A Units of Opco. By contrast, the holders of our Founder
Units and Sponsor Units (each as defined below), including our officers and directors to the extent they hold such shares (the “Initial
Shareholders”), own direct economic interests in Opco in the form of Class B Units and a corresponding non-economic voting equity
interest in us in the form of Class B ordinary shares, as well as a small direct interest through the Sponsor Units. We refer to the 8,624,900
Class B ordinary shares and corresponding number of Class B Units of Opco (or the Class A Units of Opco into which such Class B Units
will convert) collectively as the “Founder Units”. We refer to the 2,500 Class A ordinary shares and the 100 Class A Units
of Opco and a corresponding number of shares of the Company’s non-economic Class B ordinary shares (which together will be exchangeable
into Class A ordinary shares after the initial Business Combination on a one-for-one basis) collectively as the “Sponsor Units”.

Upon the closing of the Initial
Public Offering and the Private Placement, $345,026,000 of the net proceeds of the sale of the Units in the Initial Public Offering and
of the Private Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the
United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended (the “Investment
Company Act”), which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i)
the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

Our management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations
having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management
for working capital purposes, if permitted, and excluding the amount of any deferred underwriting discount held in the Trust Account)
at the time of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if
the post-business combination company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

We will provide the holders
of our outstanding Class A ordinary shares, par value $0.0001 per share (the “Public Shareholders”) with the opportunity to
redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder
approval of a Business Combination or conduct a tender offer will be made by us, solely in our discretion. The Public Shareholders will
be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially at $10.00 per
Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to us to pay our tax
obligations). The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the
deferred underwriting commissions we will pay to the underwriters. These Public Shares were recorded at a redemption value and classified
as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
We will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination. We will
not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. If a shareholder vote is
not required by law and we do not decide to hold a shareholder vote for business or other reasons, we will, pursuant to its amended and
restated memorandum and articles of association, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender
offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transaction is required
by law, or we decide to obtain shareholder approval for business or legal reasons, we will offer to redeem shares in conjunction with
a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may
elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If we seek shareholder
approval in connection with a Business Combination, the Initial Shareholders agreed to vote their Founder Shares and any Public Shares
purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Shareholders agreed
to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business
Combination.

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If we are unable to complete
a Business Combination within 24 months from the closing of the Initial Public Offering, or June 18, 2023 (the “Combination Period”),
we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our or Opco’s
taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then-outstanding Public Shares
and Class A Units of Opco (other than those held by us), which redemption will completely extinguish Public Shareholders’ rights
as shareholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject
in each case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if we fail
to consummate an initial Business Combination within 24 months from the closing of the Initial Public Offering.

Pursuant to the Opco LLC Agreement
and a letter agreement that our Sponsor and our officers and directors have entered into with us, our Sponsor, and our officers and directors
agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if we fail
to consummate an initial Business Combination within 24 months from the closing of the Initial Public Offering (although they will be
entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if we fail to complete an initial
Business Combination within the prescribed time frame).

Proposed Business Combination

On December 13, 2022, we entered
into a Business Combination Agreement (as may be amended, supplemented or otherwise modified from time to time, the “Business Combination
Agreement” and the transactions contemplated thereby, collectively, the “Business Combination”), by and among RONI,
Opco, Topo Buyer Co, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of Opco (“RONI Buyer”),
Topo Merger Sub, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of RONI Buyer (“Merger Sub”)
and NET Power.

The Business Combination Agreement
and the Business Combination were unanimously approved by the boards of directors of each of RONI and NET Power. Pursuant to the Business
Combination Agreement, among other things:

24

Following the Business Combination,
holders of Class A Units of Opco (other than RONI) will have the right (an “exchange right”), subject to certain limitations,
to exchange RONI Interests for, at RONI’s option, (i) shares of Class A Common Stock on a one-for-one basis, subject to adjustment
for stock splits, stock dividends, reorganizations, recapitalizations and the like, or (ii) a corresponding amount of cash. RONI’s
decision to make a cash payment or issue shares upon an exercise of an exchange right will be made by RONI’s independent directors,
and such decision will be based on facts in existence at the time of the decision, which RONI expects would include the relative value
of the Class A Common Stock (including trading prices for the Class A Common Stock at the time), the cash purchase price, the availability
of other sources of liquidity (such as an issuance of preferred stock) to acquire the Class A Units of Opco and alternative uses for such
cash, among other considerations.

Holders of Class A Units of
Opco (other than RONI) will generally be permitted to exercise the exchange right on a quarterly basis, subject to certain de minimis
allowances. In addition, additional exchanges may occur in connection with certain specified events, and any exchanges involving more
than a specified number of Class A Units of Opco (subject to RONI’s discretion to permit exchanges of a lower number of units) may
occur at any time upon ten business days’ advanced notice. The exchange rights will be subject to certain limitations and restrictions
intended to reduce the administrative burden of exchanges upon RONI and ensure that Opco will continue to be treated as a partnership
for U.S. federal income tax purposes.

For additional information
regarding NET Power, the Business Combination and the transactions contemplated thereby, see the registration statement on Form S-4 containing
a preliminary proxy statement and a preliminary prospectus of RONI initially filed with the U.S. Securities and Exchange Commission (the
“SEC”) on December 22, 2022.

Other than as specifically
discussed, this Report does not assume the closing of the Business Combination.

PIPE Financing (Private Placement)

Concurrently with the execution
of the Business Combination Agreement, the Company entered into subscription agreements (the “Subscription Agreements”) with
certain investors. Pursuant to the Subscription Agreements, each investor agreed to subscribe for and purchases, and the Company agreed
to issue and sell to such investors, immediately prior to the closing of the Business Combination, an aggregate of 22,545,000 newly issued
shares of Class A Common Stock for an aggregate purchase price of $225,450,000, on the terms and subject to the conditions set forth in
the Subscription Agreements.

25

Liquidity and Going Concern

As of December 31, 2022, we
had approximately $1.6 million in our operating bank account and a working capital deficit of approximately $3.1 million.

Our liquidity needs through
December 31, 2021 have been satisfied through a payment of $25,000 from our Sponsor to cover for certain expenses in exchange for the
issuance of the Founder Shares, the loan of approximately $126,000 from our Sponsor pursuant to the Note, and the proceeds from the consummation
of the Private Placement not held in the Trust Account. We fully repaid the Note balance upon closing of the Initial Public Offering.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor,
or certain of our officers and directors may, but are not obligated to, provide us with Working Capital Loans. As of December 31, 2022
and 2021, there were no amounts outstanding under any Working Capital Loans.

In connection with the
Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has
determined that the liquidity needs, mandatory liquidation and subsequent dissolution raises substantial doubt about the
Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after June 18, 2023. The consolidated financial statements do not include
any adjustment that might be necessary if the Company is unable to continue as a going concern. The Company intends to complete a
Business Combination before the mandatory liquidation date. Over this time period, we will be using these funds for paying existing
accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business Combination.

Our management continues to
evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could
have a negative effect on our financial position, results of its operations, and/or search for a target company, the specific impact is
not readily determinable as of the date of the consolidated financial statements. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian
Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including
the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and
related sanctions on the world economy are not determinable as of the date of these consolidated financial statements.

Results of Operations

Our entire activity to date
was in preparation for our formation and the Initial Public Offering, and, subsequent to the Initial Public Offering, identifying a target
company for a Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business
Combination at the earliest.

For the year ended December
31, 2022, we had net income of approximately $4.2 million, which consisted of approximately $5.2 million in non-operating gain resulting
from the change in fair value of derivative warrant liabilities and approximately $4.9 million of interest earned on investments held
in the trust account, partially offset by approximately $5.8 million in general and administrative expenses and $120,000 in general and
administrative related party expenses. Of the approximately $4.2 million net income, approximately $4.1 million of it is attributable
to Rice Acquisition Corp. II while the remaining approximately $163,000 is attributable to a non-controlling interest in a subsidiary.

For the period from February
2, 2021 (inception) through December 31, 2021, we had net loss of approximately $10.2 million, which consisted of approximately $6.7 million
non-operating loss resulting from the change in fair value of derivative warrant liabilities, approximately $2.2 million in loss upon
issuance of private placement warrants, approximately $593,000 in offering costs associated with derivative warrant liabilities, and approximately
$697,000 in general and administrative expenses, partially offset by approximately $18,000 of interest earned on investments held in the
trust account. Of the approximately $10.2 million net loss, approximately $9.8 million of it is attributable to Rice Acquisition Corp.
II while the remaining approximately $392,000 is attributable to a non-controlling interest in a subsidiary.

26

Contractual Obligations

Related Party Loans

On February 10, 2021, our
Sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory
note (the “Note”). This Note was non-interest bearing and payable upon the completion of the Initial Public Offering. As of
June 16, 2021, we borrowed approximately $167,000 under the Note. We repaid the Note in full on December 14, 2021 and borrowing is no
longer available.

Administrative Services Agreement

Commencing on the date that
our securities were first listed on the New York Stock Exchange, we agreed to pay our Sponsor a total of $10,000 per month for office
space, secretarial and administrative services provided to us. Upon completion of the initial Business Combination or our liquidation,
we will cease paying these monthly fees. For the year ended December 31, 2022 and for the period from February 2, 2021 (inception) through
December 31, 2021, there were $120,000 and $65,000 in fees incurred and paid under this agreement, respectively. There was no outstanding
payable balance as of December 31, 2022 and 2021.

Critical Accounting Policies and Estimates

This management’s discussion
and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared
in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our
consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value
of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other
factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions. We have identified the following as our critical accounting policies:

Derivative Warrant Liabilities

We do not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued stock
purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant
to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The Public Warrants and the
Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period. The
liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our
consolidated statements of operations. The initial fair value of the Public Warrants and the Private Placement Warrants were estimated
using a Monte Carlo simulation model. While the fair value of the Private Placement Warrants continues to be measured under a Monte Carlo
simulation model, subsequent to the Public Warrants being traded on an active market, the fair value of the Public Warrants has since
been based on the observable listed prices for such warrants. The determination of the fair value of the warrant liability may be subject
to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant
liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets
or require the creation of current liabilities.

27

Class A Ordinary Shares Subject to Possible
Redemption

We account for our ordinary
shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption
(if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including
Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon
the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary
shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered
to be outside of our control and subject to occurrence of uncertain future events. Although we did not specify a maximum redemption threshold,
our amended and restated memorandum and articles of association provides that currently, we will not redeem our Public Shares in an amount
that would cause its net tangible assets (shareholders’ equity) to be less than $5,000,001. Accordingly, as of the Initial Public
Offering, 34,500,000 Class A ordinary shares subject to possible redemption at the redemption amount were presented at redemption value
as temporary equity, outside of the shareholders’ equity section of our consolidated balance sheets.

Under ASC 480-10-S99, we have
elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal
the redemption value at the end of the reporting period. This method would view the end of the reporting period as if it were also the
redemption date of the security. Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book
value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

Net Income (Loss) per Ordinary Share

We comply with accounting
and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred
to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. This
presentation assumes a Business Combination as the most likely outcome. Net income (loss) per ordinary share is calculated by dividing
the net income (loss) by the weighted average shares of ordinary shares outstanding for the respective period.

The calculation of diluted
net income (loss) per ordinary share does not consider the effect of the warrants issued in connection with the Initial Public Offering
and the Private Placement to purchase an aggregate of 19,525,000 ordinary shares in the calculation of diluted income (loss) per share,
because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As
a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the year ended December 31, 2022 and
for the period from February 2, 2021 (inception) through December 31, 2021. Accretion associated with the redeemable Class A ordinary
shares is excluded from earnings per share as the redemption value approximates fair value.

Recent accounting standards

In August 2020, the FASB issued
ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s
Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also
removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and
it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021, with no material
impact upon adoption.

In June 2022, the FASB issued
ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The
ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and
to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value.
The ASU applies to both holders and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU
are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The
Company is still evaluating the impact of this pronouncement on the consolidated financial statements.

28

Our management does not believe
that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our
consolidated financial statements.

Off-Balance Sheet Arrangements

As of December 31, 2022 and
2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.

JOBS Act

On April 5, 2012, the JOBS
Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying
public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new
or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay
the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the
relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our consolidated financial
statements may not be comparable to companies that comply with public company effective dates.

Additionally, we are in the
process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain
conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not
be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial
reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by
the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing
additional information about the audit and the consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain
executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s
compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the Initial
Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a blank check company incorporated as a
Cayman Islands exempted company on February 2, 2021. As used herein, “we” refers to Rice Acquisition Corp. II and our majority-owned
and controlled operating subsidiary, Rice Acquisition Holdings II LLC (“OpCo”), unless the context indicates otherwise. We
were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar
business combination with one or more businesses (the “Business Combination”). We are an early stage and emerging growth company
and, as such, we are subject to all of the risks associated with early stage and emerging growth companies.

As of December 31, 2021, we had not commenced
any operations. All activity for the period from February 2, 2021 (inception) through December 31, 2021 relates to our formation and the
preparation for initial public offering (the “Initial Public Offering”), described below. We will not generate any operating
revenues until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the
form of interest income on investments from the proceeds derived from the Initial Public Offering (as defined below). We have selected
December 31 as its fiscal year end.

55

Our sponsor is Rice Acquisition Sponsor II LLC,
a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared
effective on June 15, 2021. On June 18, 2021, we consummated our Initial Public Offering of 34,500,000 units (the “Units”
and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), which included
the full exercise of the underwriters’ option to purchase an additional 4,500,000 Units to cover over-allotments, at $10.00 per
Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.1 million, of which approximately
$11.7 million and approximately $593,000 was for deferred underwriting commissions and offering costs allocated to the derivative warrant
liabilities, respectively.

Simultaneously with the closing of the Initial
Public Offering, we consummated the private placement (“Private Placement”) of 10,900,000 warrants (each, a “Private
Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant
to our Sponsor, generating proceeds of $10.9 million. Each Private Placement Warrant is exercisable to purchase one of our Class A ordinary
shares or one Class A Unit of OpCo together with our corresponding non-economic Class B ordinary share.

Following the Initial Public Offering, the Public
Shareholders (as defined below) hold a direct economic equity ownership interest in us in the form of Class A ordinary shares, and an
indirect ownership interest in Opco through our ownership of Class A Units of Opco. By contrast, the holders of our Founder Shares and
Sponsor Shares (each as defined below), including our officers and directors to the extent they hold such shares (the “Initial Shareholders”),
own direct economic interests in Opco in the form of Class B Units and a corresponding non-economic voting equity interest in us in the
form of Class B ordinary shares, as well as a small direct interest through the Sponsor Shares.

Upon the closing of the Initial Public Offering
and the Private Placement, $345,026,000 of the net proceeds of the sale of the Units in the Initial Public Offering and of the Private
Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the United States
with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. “government securities”
within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended (the “Investment Company Act”),
which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business
Combination and (ii) the distribution of the Trust Account as described below.

Our management has broad discretion with respect
to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although
substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance
that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having
an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for
working capital purposes, if permitted, and excluding the amount of any deferred underwriting discount held in the Trust Account) at the
time of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-business
combination company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling interest in
the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

We will provide the holders of our outstanding
Class A ordinary shares, par value $0.0001 per share (the “Public Shareholders”) with the opportunity to redeem all or a portion
of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a Business
Combination or conduct a tender offer will be made by us, solely in our discretion. The Public Shareholders will be entitled to redeem
their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially at $10.00 per Public Share, plus any
pro rata interest earned on the funds held in the Trust Account and not previously released to us to pay our tax obligations). The per-share
amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions
we will pay to the underwriters. These Public Shares were recorded at a redemption value and classified as temporary equity upon the completion
of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” We will proceed with a Business Combination
if a majority of the shares voted are voted in favor of the Business Combination. We will not redeem the Public Shares in an amount that
would cause its net tangible assets to be less than $5,000,001. If a shareholder vote is not required by law and we do not decide to hold
a shareholder vote for business or other reasons, we will, pursuant to its amended and restated memorandum and articles of association,
conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, shareholder approval of the transaction is required by law, or we decide to obtain shareholder approval
for business or legal reasons, we will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and
not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of
whether they vote for or against the proposed transaction. If we seek shareholder approval in connection with a Business Combination,
the Initial Shareholders agreed to vote their Founder Shares and any Public Shares purchased during or after the Initial Public Offering
in favor of a Business Combination. In addition, the Initial Shareholders agreed to waive their redemption rights with respect to their
Founder Shares and Public Shares in connection with the completion of a Business Combination.

56

If we are unable to complete a Business Combination
within 24 months from the closing of the Initial Public Offering, or June 18, 2023 (the “Combination Period”), we will (i)
cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our or Opco’s
taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then-outstanding Public Shares
and Class A Units of Opco (other than those held by us), which redemption will completely extinguish Public Shareholders’ rights
as shareholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject
in each case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if we fail
to consummate an initial Business Combination within 24 months from the closing of the Initial Public Offering.

Pursuant to the Opco LLC Agreement and a letter
agreement that our Sponsor and our officers and directors have entered into with us, our Sponsor, and our officers and directors agreed
to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if we fail to consummate
an initial Business Combination within 24 months from the closing of the Initial Public Offering (although they will be entitled to liquidating
distributions from the Trust Account with respect to any Public Shares they hold if we fail to complete an initial Business Combination
within the prescribed time frame).

Liquidity and Capital Resources

As of December 31, 2021, we had approximately
$2.6 million in our operating bank account and working capital of approximately $2.8 million.

Our liquidity needs through December 31, 2021
have been satisfied through a payment of $25,000 from our Sponsor to cover for certain expenses in exchange for the issuance of the Founder
Shares, the loan of approximately $126,000 from our Sponsor pursuant to the Note, and the proceeds from the consummation of the Private
Placement not held in the Trust Account. We fully repaid the Note balance upon closing of the Initial Public Offering. In addition, in
order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of
our officers and directors may, but are not obligated to, provide us with Working Capital Loans. As of December 31, 2021, there were no
amounts outstanding under any Working Capital Loan.

Based on the foregoing, our management believes
that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing.
Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial
Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.

57

Our management continues to evaluate the impact
of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect
on our financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable
as of the date of the consolidated financial statements. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Results of Operations

Our entire activity from February 2, 2021 (inception)
through December 31, 2021 was in preparation for our formation and the Initial Public Offering, and, subsequent to the Initial Public
Offering, identifying a target company for a Business Combination. We will not be generating any operating revenues until the closing
and completion of our initial Business Combination at the earliest.

For the period from February 2, 2021 (inception) through December 31,
2021, we had net loss of approximately $9.8 million, which consisted of approximately $6.7 million non-operating loss resulting from the
change in fair value of derivative warrant liabilities, approximately $2.2 million in loss upon issuance of private placement warrants,
approximately $593,000 in offering costs associated with derivative warrant liabilities, and approximately $697,000 in general and administrative
expenses, partially offset by approximately $18,000 of interest earned on investments held in the trust account.

Contractual Obligations

Related Party Loans

On February 10, 2021, our Sponsor agreed to loan
us an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”).
This Note was non-interest bearing and payable upon the completion of the Initial Public Offering. As of June 16, 2021, we borrowed approximately
$167,000 under the Note. We repaid the Note in full on December 14, 2021 and borrowing is no longer available.

Administrative Services Agreement

Commencing on the date that our securities were first listed on the
New York Stock Exchange, we agreed to pay our Sponsor a total of $10,000 per month for office space, secretarial and administrative services
provided to us. Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees. As of
December 31, 2021, there were $65,000 in fees incurred and paid under this agreement.

Critical Accounting Policies and Estimates

This management’s discussion and analysis
of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance
with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated
financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that
we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions. We have identified the following as our critical accounting policies:

Derivative Warrant Liabilities

We do not use derivative instruments to hedge
exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued stock purchase
warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480
and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

58

The Public Warrants and the Private Placement Warrants are recognized
as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and
adjusts the carrying value of the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is recognized in our consolidated statements of operations. The
initial fair value of the Public Warrants and the Private Placement Warrants were estimated using a Black-Scholes option pricing model
with the volatility calculated by back solving in a Monte Carlo simulation. While the fair value of the Private Placement Warrants continues
to be measured under Black-Scholes, subsequent to the Public Warrants being traded on an active market, the fair value of the Public Warrants
has since been based on the observable listed prices for such warrants. The determination of the fair value of the warrant liability may
be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative
warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current
assets or require the creation of current liabilities.

Class A Ordinary Shares Subject to Possible
Redemption

We account for our ordinary shares subject to
possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified
as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Although we did not specify a maximum redemption threshold, our amended
and restated memorandum and articles of association provides that currently, we will not redeem our Public Shares in an amount that would
cause its net tangible assets (shareholders’ equity) to be less than $5,000,001. Accordingly, as of the Initial Public Offering,
34,500,000 Class A ordinary shares subject to possible redemption at the redemption amount were presented at redemption value as temporary
equity, outside of the shareholders’ equity section of our consolidated balance sheet.

Under ASC 480-10-S99, we have elected to recognize
changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value
at the end of the reporting period. This method would view the end of the reporting period as if it were also the redemption date of the
security. Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

Net Income (Loss) per Ordinary Share

We comply with accounting and disclosure requirements of FASB ASC Topic
260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary
shares. Income and losses are shared pro rata between the two classes of shares. This presentation assumes a Business Combination as the
most likely outcome. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average shares
of ordinary shares outstanding for the respective period.

The calculation of diluted net income (loss) per
ordinary share does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement
to purchase an aggregate of 19,525,000 ordinary shares in the calculation of diluted income (loss) per share, because their exercise is
contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income
(loss) per share is the same as basic net income (loss) per share for the period from February 2, 2021 (inception) through December 31,
2021. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates
fair value.

Recent accounting standards

In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting
for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions
that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021, with no material impact upon adoption.

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Our management does not believe that any recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our consolidated financial
statements.

Off-Balance Sheet Arrangements

As of December 31, 2021, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

JOBS Act

On April 5, 2012, the JOBS Act was signed into
law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.
We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which
adoption of such standards is required for non-emerging growth companies. As such, our consolidated financial statements may not be comparable
to companies that comply with public company effective dates.

Additionally, we are in the process of evaluating
the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to
Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information
about the audit and the consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to
median employee compensation. These exemptions will apply for a period of five years following the completion of the Initial Public Offering
or until we are no longer an “emerging growth company,” whichever is earlier.