Business Context and Reporting Period
Rice Acquisition Corp. II, a Cayman Islands special purpose acquisition company (SPAC), filed this Form 8-K on February 24, 2022. The filing addresses previously issued financial statements for the period from inception on February 2, 2021 through June 30, 2021 and September 30, 2021, plus the audited balance sheet as of June 18, 2021. The provided filing does not identify Net Power Inc. as the registrant.
Material Accounting and Financial Reporting Changes
- The Audit Committee concluded that previously issued financial statements should no longer be relied upon.
- The error relates to the classification of Class A ordinary shares issued in the IPO and subject to redemption. All such public shares should have been classified as temporary equity rather than partly as permanent equity.
- The correction affects the initial carrying value of the public shares, additional paid-in capital, accumulated deficit, and Class A ordinary shares.
- The company also revised its earnings-per-share presentation to allocate income and losses pro rata between the two classes of shares.
- The company initially treated the matter as not qualitatively material and revised disclosures without restating the financial statements. After further consideration, management and the Audit Committee determined that the significant quantitative errors required a restatement.
Cash, Liquidity, Debt, and Other Metrics
The filing does not provide revenue, profit, cash-flow, margin, debt, or liquidity amounts. Management stated that the restatement will not affect the company’s cash position or cash held in the IPO trust account.
Restatement Plans and Outlook
The company plans to restate the affected financial statements through an amendment to its third-quarter 2021 Form 10-Q and through its Form 10-K for the period ended December 31, 2021 with respect to the audited balance sheet filed as an exhibit to the June 2021 Form 8-K. The company discussed the matter with its independent registered public accounting firm, WithumSmith+Brown, PC.
Key Risks and Unusual Items
- Investors should not rely on the previously issued audited balance sheet as of June 18, 2021 or the interim financial statements for the periods ended June 30 and September 30, 2021.
- The restatement is a significant financial reporting correction involving equity classification and earnings-per-share presentation.
- The filing states that cash and trust-account balances are unaffected, but reported equity and accumulated deficit amounts will change.
Facts Investors Should Verify
- Confirm the amended third-quarter 2021 Form 10-Q and 2021 Form 10-K were filed and review the restated amounts.
- Verify the final classification of all redeemable public shares as temporary equity.
- Review the effect on additional paid-in capital, accumulated deficit, Class A ordinary shares, and earnings per share.
- Confirm whether the restatement affected any business-combination, redemption, or transaction-related disclosures.
- Confirm the filing’s registrant and ticker information, as the supplied document identifies Rice Acquisition Corp. II rather than Net Power Inc.