Business context and reporting period
This is Rice Acquisition Corp. II’s unaudited Form 10-Q for the quarter ended March 31, 2023—not an operating-company quarterly report from NET Power Inc. Rice was a special-purpose acquisition company (SPAC) that had not commenced operations and had no operating revenue. Its activity was pursuing a business combination, including the proposed merger with NET Power. The filing was signed May 12, 2023.
Financial performance and position
| Metric | Q1 2023 / March 31, 2023 | Prior comparable / December 31, 2022 |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| Net income (loss) | $(2.4) million; $(0.05) per share | Q1 2022: $17.6 million; $0.39 per share |
| General and administrative expense | $1.65 million, plus $30,000 related-party expense | Q1 2022: $323,000, plus $30,000 related-party expense |
| Trust investment interest | $3.71 million | Q1 2022: $30,000 |
| Cash from operations | $(783,000) | Q1 2022: $(204,000) |
| Cash outside trust | $845,000 | $1.63 million |
| Trust account investments | $353.65 million | $349.94 million |
| Current liabilities | $5.84 million | $5.02 million |
| Total liabilities | $46.84 million | $41.57 million |
| Working capital | Deficit of approximately $4.8 million | Not clearly stated for the prior date |
The quarterly loss included a $4.45 million noncash loss from remeasuring warrant liabilities, partly offset by trust interest. The comparable 2022 quarter included a $17.90 million warrant fair-value gain. These items drove the change from reported profit to loss; they do not represent operating revenue. The filing does not report operating margins because Rice had no operations or revenue.
Material changes, transaction and outlook
- General and administrative expense rose to $1.65 million from $323,000 year over year. Trust interest increased to $3.71 million from $30,000, while warrant remeasurement moved from a large gain to a loss.
- On April 23, 2023, after quarter-end, Rice and NET Power amended the business combination agreement. The transaction contemplated NET Power equity holders receiving 137,192,563 OpCo units and an equivalent number of Class B shares, subject to specified adjustments.
- Also on April 23, OXY agreed to invest $250 million in Rice shares and separately $10 million in NET Power units; Rice-family trusts agreed to invest $25 million in Rice shares. The filing also describes earlier PIPE commitments totaling $225.45 million. Funding and closing remained subject to transaction conditions.
- The amended proposed stockholders’ agreement contemplated a ten-member initial board and three OXY designees, up from two in the prior form.
- Rice’s 24-month business-combination period was due to expire June 18, 2023. If no combination closed by then, the filing says Rice would wind up, redeem public shares from the trust (subject to terms), and liquidate; warrants could expire worthless. Management intended to complete the transaction before the deadline, but completion was not assured.
Liquidity, risks and unusual items
Management concluded that the cash needs, mandatory liquidation deadline and subsequent dissolution raised substantial doubt about Rice’s ability to continue as a going concern. The $353.65 million trust balance was principally reserved for a business combination or public-share redemptions and should not be confused with available operating cash. No Working Capital Loans were outstanding; the Sponsor or affiliates could provide such loans but had no obligation to do so.
Other key risks include transaction failure or delay, public-share redemptions reducing cash available at closing, the need to meet the transaction’s stated minimum cash condition, potential creditor claims against trust funds, and limited liquidity in the public securities. Warrant liabilities were $29.28 million, including $16.77 million valued using Level 3 inputs; changes in valuation assumptions can materially affect reported earnings. The filing reported no legal proceedings, no defaults on senior securities, and no off-balance-sheet arrangements. Management said disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the NET Power business combination closed, and the final transaction terms, conditions and closing date.
- Actual public-share redemptions, trust cash released, PIPE proceeds funded, transaction expenses and cash available at closing.
- How the June 18, 2023 deadline was addressed and whether an extension or liquidation process applied.
- Final share count, dilution, exchange rights and governance arrangements, including OXY’s board designation rights.
- Available unrestricted cash and any Sponsor or other working-capital financing, given the reported working-capital deficit and going-concern warning.
- Changes in warrant fair value and the assumptions used to value private-placement warrants.