UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarterly period ended
OR
For the transition period from to
Commission file number:
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(Address of principal executive offices)
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ | |
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| Smaller reporting company | |||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 12, 2024, there were
NABORS ENERGY TRANSITION CORP. II
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NABORS ENERGY TRANSITION CORP. II
CONDENSED BALANCE SHEETS
| September 30, |
| December 31, | |||
2024 | 2023 | |||||
(Unaudited) | ||||||
Assets |
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Current assets |
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Cash | $ | | $ | | ||
Prepaid expenses |
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Short-term prepaid insurance |
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Total Current Assets | ||||||
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Long-term prepaid insurance |
| — | ||||
Marketable securities held in Trust Account | | | ||||
Total Assets | $ | | $ | | ||
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Liabilities and Shareholders’ Deficit |
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Current liabilities |
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Accounts payable and accrued expenses | $ | | $ | | ||
Accrued offering costs |
| — | | |||
Total current liabilities | | | ||||
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Deferred legal fees |
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Deferred underwriting fee payable |
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Total Liabilities | | | ||||
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Commitments and Contingencies (Note 6) |
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Class A ordinary shares subject to possible redemption, | | | ||||
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Shareholders’ Deficit |
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Preference shares, $ |
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Class A ordinary shares, $ | — | — | ||||
Class B ordinary shares, $ | — | — | ||||
Class F ordinary shares, $ | | | ||||
Additional paid-in capital | — | — | ||||
Accumulated deficit | ( | ( | ||||
Total Shareholders’ Deficit | ( | ( | ||||
Total Liabilities and Shareholders’ Deficit | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
NABORS ENERGY TRANSITION CORP. II
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Period | ||||||||||||
from April 12, | ||||||||||||
Nine Months | 2023 | |||||||||||
Ended | (Inception) | |||||||||||
Three Months Ended September 30, | September 30, | through September 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
General and administrative expenses |
| $ | |
| $ | | $ | | $ | | ||
Loss from operations | ( | ( | ( | ( | ||||||||
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Other income: |
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| ||||||||||
Change in fair value of over-allotment option liability | — | | — | | ||||||||
Other income | — | | — | | ||||||||
Interest earned on marketable securities held in Trust Account | | | | | ||||||||
Unrealized gain on marketable securities held in Trust Account | — | | — | | ||||||||
Total other income | | | | | ||||||||
Net income | $ | | $ | | $ | | $ | | ||||
| ||||||||||||
Basic and diluted weighted average shares outstanding, Class A ordinary shares | | | | | ||||||||
Basic and diluted net income per share, Class A ordinary shares | $ | | $ | | $ | | $ | | ||||
Basic weighted average shares outstanding, Class F ordinary shares | | | | | ||||||||
Basic net income per share, Class F ordinary shares | $ | | $ | | $ | | $ | | ||||
Diluted weighted average shares outstanding, Class F ordinary shares | | | | | ||||||||
Diluted net income per share, Class F ordinary shares | $ | | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
NABORS ENERGY TRANSITION CORP. II
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
Ordinary Shares | Additional | Total | ||||||||||||||||||||||
Class A | Class B | Class F | Paid-in | Accumulated | Shareholders’ | |||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||||
Balance – December 31, 2024 (audited) | — | $ | — | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||||
Accretion of Class A ordinary shares subject to possible redemption |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| | ||||||
Balance – March 31, 2024 | — | — | — | — | | | — | ( | ( | |||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption | — | — | — | — | — | — | — | ( | ( | |||||||||||||||
Net income | — | — | — | — | — | — | — | | | |||||||||||||||
Balance – June 30, 2024 | — | — | — | — | | | — | ( | ( | |||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption | — | — | — | — | — | — | — | ( | ( | |||||||||||||||
Net income | — | — | — | — | — | — | — | | | |||||||||||||||
Balance – September 30, 2024 |
| — | $ | — |
| — | $ | — |
| | $ | | $ | — | $ | ( | $ | ( | ||||||
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND FOR THE PERIOD FROM APRIL 12, 2023 (INCEPTION) THROUGH SEPTEMBER 30, 2023
Ordinary Shares | Additional | Total | ||||||||||||||||||||||
Class A | Class B | Class F | Paid-In | Accumulated | Shareholders’ | |||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | |||||||
Balance – April 12, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Issuance of Class F ordinary shares to Sponsor |
| — |
| — |
| — |
| — |
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| |
| |
| — |
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Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Balance – June 30, 2023 | — | — | — | — | | | | ( | | |||||||||||||||
Sale of | — | — | — | — | — | — | | — | | |||||||||||||||
Fair value of Public Warrants at issuance | — | — | — | — | — | — | | — | | |||||||||||||||
Allocated value of transaction costs to warrants | — | — | — | — | — | — | ( | — | ( | |||||||||||||||
Forfeiture of founder shares(1) | — | — | — | — | ( | ( | | — | — | |||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||
Net income | — | — | — | — | — | — | — | | | |||||||||||||||
Balance – September 30, 2023 | — | $ | — | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
NABORS ENERGY TRANSITION CORP. II
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the |
| For the Period | |||
Nine Months | from April 12, | |||||
Ended | 2023 (Inception) | |||||
September 30, | through September 30, | |||||
| 2024 |
| 2023 | |||
Cash Flows from Operating Activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash used in operating activities: |
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Payment of formation costs through issuance of Class F ordinary shares |
| — |
| | ||
Interest earned on marketable securities held in Trust Account |
| ( |
| ( | ||
Unrealized gain on marketable securities held in Trust Account |
| — |
| ( | ||
Change in fair value of over-allotment option liability |
| — |
| ( | ||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses |
| ( |
| ( | ||
Short-term prepaid insurance |
| |
| ( | ||
Long-term prepaid insurance | | ( | ||||
Accounts payable and accrued expenses | ||||||
Deferred legal fee payable |
| |
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Net cash used in operating activities | ( | ( | ||||
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Cash Flows from Investing Activities: | ||||||
Investment of cash in Trust Account | — | ( | ||||
Net cash used in investing activities | — | ( | ||||
| ||||||
Cash Flows from Financing Activities: | ||||||
Proceeds from sale of Units, net of underwriting discounts paid | — | | ||||
Proceeds from sale of Private Placements Warrants | — | | ||||
Repayment of promissory note - related party | — | ( | ||||
Proceeds from convertible promissory note - related party | — | | ||||
Payment of offering costs | ( | ( | ||||
Net cash (used in) provided by financing activities | ( | | ||||
| ||||||
Net Change in Cash | ( | | ||||
Cash – Beginning of period | | | ||||
Cash – End of period | $ | | $ | | ||
| ||||||
Non-Cash investing and financing activities: | ||||||
Offering costs included in accrued offering costs | $ | — | $ | | ||
Deferred offering costs paid by Sponsor in exchange for Class F ordinary shares | $ | — | $ | | ||
Deferred offering costs paid through promissory note- related party | $ | — | $ | | ||
Deferred underwriting fee payable | $ | — | $ | | ||
Deferred legal fee payable | $ | — | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Nabors Energy Transition Corp. II (the “Company”) was incorporated in the Cayman Islands on April 12, 2023. The Company was incorporated for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”). The Company intends to identify solutions, opportunities, companies or technologies that focus on advancing the energy transition; specifically, ones that facilitate, improve or complement the reduction of carbon or greenhouse gas emissions while satisfying growing energy consumption across markets globally. The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
As of September 30, 2024, the Company had not yet commenced operations. All activity for the period from April 12, 2023 (inception) through September 30, 2024 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues prior to the completion of the Business Combination, at the earliest, and will generate non-operating income in the form of interest income on permitted investments and cash from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
On April 24, 2023, Nabors Energy Transition Sponsor II LLC, a Cayman Islands limited liability company (the “Sponsor”), paid $
The registration statement for the Company’s Initial Public Offering was declared effective on July 13, 2023. On July 18, 2023, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
In addition, the direct or indirect owners of the Sponsor loaned the Company a total of $
Transaction costs amounted to $
The Company’s initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least
5
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
transaction company owns or acquires
Following the closing of the Initial Public Offering on July 18, 2023, an amount of $
The Company will provide holders of the Company’s outstanding Public Shares sold in the Initial Public Offering (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares (including any securities for which such shares are exchanged in any prior migration or other restructuring) upon the completion of a Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) without a shareholder vote by means of a tender offer. Except as required by applicable law or stock exchange listing requirements, the decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its 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 $
Notwithstanding the foregoing, the Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Sponsor and the Company’s officers and directors (the “Initial Shareholders”) have agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (A) in a manner that would affect the substance or timing of the Company’s obligation to redeem
The Company has
6
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
possible but not more than 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 the Company to pay its taxes (net of any taxes payable by the Company and less up to $
The Sponsor, officers and directors will not be entitled to liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $
Going Concern Consideration
As of September 30, 2024, the Company had $
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete an Initial Business Combination by July 18, 2025, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to consummate an Initial Business Combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after July 18, 2025.
7
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on March 27, 2024. The interim results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
8
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has $
Marketable Securities in Trust Account
At September 30, 2024 and December 31, 2023, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. The Company’s marketable securities are presented at fair value on the condensed balance sheets. Gains and losses resulting from the change in fair value of marketable securities held in the Trust Account are included in interest earned on marketable securities held in Trust Account in the condensed statement of operations. For the nine months ended September 30, 2024, and the period from April 12, 2023 (inception) through September 30, 2023, the Company did not withdraw any interest earned on the Trust Account.
Offering Costs
Offering costs consisted of legal, accounting, and other costs incurred through the condensed balance sheet date that were directly related to the Initial Public Offering. Upon completion of the Initial Public Offering, offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the warrants were charged to equity. Offering costs allocated to the Class A ordinary shares were charged against the carrying value of Class A ordinary shares subject to possible redemption upon the completion of the Initial Public Offering.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution, which at times may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition.
Income Taxes
The Company accounts for income taxes under ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2024 and December 31, 2023, there were
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented.
9
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to its short-term nature.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the condensed statement of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the condensed balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the condensed balance sheet date.
Class A Ordinary Shares Subject to Possible Redemption
The Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, or if there is a shareholder vote or tender offer in connection with the Company’s initial business combination. In accordance with ASC 480-10-S99, the Company classifies Public Shares subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Public Shares sold as part of the Units in the Initial Public Offering were issued with other freestanding instruments (i.e., Public Warrants), and as such, the initial carrying values of Public Shares classified as temporary equity are the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital and accumulated deficit. Accordingly, at September 30, 2024 and December 31, 2023, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed balance sheets.
At September 30, 2024 and December 31, 2023, the Class A ordinary shares subject to possible redemption reflected on the condensed balance sheets are reconciled in the following table:
Gross proceeds from Public Shareholders |
| $ | |
Less: |
|
| |
Proceeds allocated to Public Warrants |
| ( | |
Proceeds allocated to the over-allotment option |
| ( | |
Class A ordinary shares issuance costs |
| ( | |
Plus: |
|
| |
Accretion of carrying value to redemption value |
| | |
Class A ordinary shares subject to possible redemption, December 31, 2023 | | ||
Plus: |
| ||
Accretion of carrying value to redemption value | | ||
Class A ordinary shares subject to possible redemption, September 30, 2024 | $ | |
10
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Net Income per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. The Company has three classes of ordinary shares, which are referred to as Class A ordinary shares, Class B ordinary shares, and Class F ordinary shares. Income and losses are shared pro rata between the three classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, the three classes of ordinary shares share pro rata in the income of the Company. Accretion associated with the redeemable Class A ordinary shares is excluded from net income per ordinary share as the redemption value approximates fair value. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering and (ii) the private placement, and any warrants issued in connection with the related party convertible promissory note, since the exercise of the warrants and the conversion of the related party convertible promissory note is contingent upon the occurrence of future events. The warrants are exercisable to purchase
The following table reflects the calculation of basic and diluted net income per ordinary share (in dollars, except per share amounts):
For the Three Months Ended September 30, 2024 | For the Nine Months Ended September 31, 2024 | |||||||||||||||||
| Class A |
| Class B |
| Class F |
| Class A |
| Class B |
| Class F | |||||||
Basic and diluted net income per ordinary share |
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Numerator: |
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Allocation of net income | $ | | $ | — | $ | | $ | | $ | — | $ | | ||||||
Denominator: |
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Basic and diluted weighted average shares outstanding |
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| — |
| |
| |
| — |
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Basic and diluted net income per ordinary share | $ | | $ | — | $ | | $ | | $ | — | $ | | ||||||
For the Period from April 12,2023 (Inception) | ||||||||||||||||||
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11
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Warrant Instruments
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Accordingly, the Company evaluated and classified the warrant instruments under equity treatment at its assigned fair value.
Share-Based Compensation
The Company adopted ASC Topic 718, “Compensation—Stock Compensation”, guidance to account for its share-based compensation. It defines a fair value-based method of accounting for an employee share option or similar equity instrument. The Company recognizes all forms of share-based payments, including share option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest. Share-based payments, excluding restricted shares, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Share-based compensation expense is included in costs and operating expenses depending on the nature of the services provided in the condensed statement of operations.
Recent Accounting Standards
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2016-13 on April 12, 2023. The adoption of ASU 2016-13 did not have a material impact on its unaudited condensed financial statements.
In August 2020, the FASB issued ASU 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)” (“ASU 2020-06”), to simplify certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 as of April 12, 2023 (inception). There was no effect to the Company’s presented unaudited condensed financial statements.
12
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering on July 18, 2023, the Company sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Private Warrant holders purchased an aggregate of
The Private Warrant holders and the Company’s officers and directors will agree, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On April 13, 2023, the Sponsor paid an aggregate of $
The Initial Shareholders have agreed not to transfer, assign or sell any of the Founder Shares until
On July 13, 2023, the Company, the Sponsor and the Company’s
13
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Company has estimated that the fair value of the Founder Shares granted to the Company’s independent directors on July 13, 2023 and June 25, 2024, were approximately $
Related Party Loans
On April 24, 2023, an affiliate of the Sponsor agreed to loan the Company up to $
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined, and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Overfunding Convertible Notes – Related Party
On July 18, 2023, concurrently with the closing of the Initial Public Offering, direct or indirect owners of the Sponsor loaned the Company a total of $
14
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Administrative Support Agreement
The Company entered into an agreement which provides that, commencing on July 14, 2023 through the earlier of consummation of the initial Business Combination and the Company’s liquidation, the Company will reimburse the Sponsor or an affiliate thereof $
In addition, the Sponsor, officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Any such payments prior to an initial Business Combination will be made using funds held outside the Trust Account.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and the Overfunding Loans (and the Class A ordinary shares issuable upon exercise or conversion thereof) are entitled to registration rights pursuant to a registration rights agreement entered into on July 13, 2023. These holders are entitled to make up to
Underwriting Agreement
The Company granted the underwriters a
The underwriters were entitled to an underwriting discount of $
Deferred Legal Fees
As of September 30, 2024 and December 31, 2023, the Company had a total of $
15
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Risks and Uncertainties
The United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from the invasion of Ukraine by Russia and conflicts in the Middle East and around the Red Sea. In response to the ongoing Russia-Ukraine conflict, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance, increasing geopolitical tensions among a number of nations. The invasion of Ukraine by Russia and conflicts in the Middle East and around the Red Sea and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Middle East and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyberattacks against U.S. companies. Additionally, any resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.
Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, conflicts in the Middle East and around the Red Sea and subsequent sanctions or related actions, could adversely affect the Company’s search for an initial business combination and any target business with which the Company may ultimately consummate an initial business combination.
NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares — The Company is authorized to issue
Class A Ordinary Shares — The Company is authorized to issue
Class B Ordinary Shares — The Company is authorized to issue
Class F Ordinary Shares — The Company is authorized to issue
Prior to the completion of the initial Business Combination, holders of the Class F ordinary shares will have the right to elect all of the Company’s directors prior to an initial Business Combination. On any other matter submitted to a vote of the Company’s shareholders, holders of the Class A ordinary shares, holders of the Class B ordinary shares (if any) and holders of the Class F ordinary shares will vote together as a single class, except as required by law or share exchange rule. Each ordinary share will have
16
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Following the completion of the initial Business Combination and the automatic conversion of the Class F ordinary shares into Class B ordinary shares, holders of the Class A ordinary shares and Class B ordinary shares will generally vote together as a single class, except as required by law or stock exchange rule, on all matters presented for a shareholder vote with each Class A ordinary share entitling the holder to
The Class F ordinary shares will automatically convert into Class B ordinary shares at the time of an initial Business Combination, or earlier at the option of the holder, on a
Warrants — At September 30, 2024, there are
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $
Notwithstanding the above, if the Company’s Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the
17
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until
Redemption of warrants for cash when the price per Class A ordinary share equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of |
| ● | if, and only if, the reported last sale price of the Class A ordinary shares equals or exceeds $ |
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is effective, and a current prospectus relating to those Class A ordinary shares is available throughout the
The Company has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Class A ordinary shares may fall below the $
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete an initial Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
NOTE 8. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value
18
NABORS ENERGY TRANSITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(Unaudited)
hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:Unobservable inputs based on assessment of the assumptions that market participants would use in pricing the asset or liability.
At September 30, 2024, assets held in the Trust Account were comprised of $
At December 31, 2023, assets held in the Trust Account were comprised of $
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
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| September 30, |
| December 31, | ||||
Description | Level | 2024 |
| 2023 | ||||
Assets: |
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Marketable securities held in Trust Account |
| 1 | $ | | $ | | ||
The public warrants were valued at the closing of the Initial Public Offering using a Monte Carlo simulation in a risk-neutral framework (a special case of the Income Approach). The public warrants have been classified within shareholders’ deficit and will not require remeasurement after issuance. The following table presents the quantitative information regarding market assumptions used in the valuation of the public warrants:
| July 18, 2023 |
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Market price of public stock | $ | | ||
Term (years) |
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Risk-free rate |
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Volatility |
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NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Nabors Energy Transition Corp. II. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Nabors Energy Transition Sponsor II LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the proposed Business Combination, the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on April 12, 2023, formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “initial business combination”). We intend to effectuate our initial business combination using cash derived from the proceeds of the Initial Public Offering of 30,500,000 units, the sale of the 9,540,000 warrants sold in a private placement to the direct or indirect owners of our sponsor and the overfunding loans, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from April 12, 2023 (inception) through September 30, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and subsequent to the Initial Public Offering, identifying a target company for an initial business combination. We do not expect to generate any operating revenues prior to the completion of our initial business combination at the earliest. Following our Initial Public Offering, we generate non-operating income in the form of interest income on permitted investments from the proceeds derived from the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
20
For the three months ended September 30, 2024, we had a net income of $3,971,625, which consists of interest income on marketable securities held in the trust account of $4,450,892, offset by operating costs of $479,267.
For the nine months ended September 30, 2024, we had a net income of $11,340,536, which consists of interest income on marketable securities held in the trust account of $12,345,276, offset by operating costs of $1,004,740.
For the three months ended September 30, 2023, we had a net income of $3,507,082, which consists of interest income on marketable securities held in the Trust Account of $3,272,323, change in fair value of over-allotment option liability of $402,224, other income of $290 and an unrealized gain on marketable securities held in our Trust Account of $86,189, offset by operating costs of $253,944.
For the period from April 12, 2023 (inception) through September 30, 2023, we had a net income of $3,499,655, which consists of interest income on marketable securities held in the Trust Account of $3,272,323, change in fair value of over-allotment option liability of $402,224, other income of $290 and an unrealized gain on marketable securities held in our Trust Account of $86,189, offset by operating costs of $261,371.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of Class F ordinary shares by our sponsor and loans from our sponsor.
On July 18, 2023, we consummated the Initial Public Offering of 30,500,000 units, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 500,000 units, at $10.00 per unit, generating gross proceeds of $305,000,000. Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 9,540,000 private placement warrants to the direct or indirect owners of our Sponsor, at a price of $1.00 per private placement warrant, generating gross proceeds of $9,540,000.
In addition, the direct or indirect owners of our sponsor loaned the Company a total of $3,050,000, and in exchange, the Company issued unsecured promissory notes to each lender for an aggregate principal amount of $3,050,000, as of the closing date of the Initial Public Offering at no interest, which is referred to as the overfunding loans. The overfunding loans will be repaid upon the closing of the initial business combination or converted into warrants of the post-business combination entity at a price of $1.00 per warrant (or any combination thereof), at our sponsor’s discretion, which warrants will be identical to the private placement warrants. The overfunding loans were extended in order to ensure that the amount in the trust account was $10.10 per share at the closing of the Initial Public Offering. If the Company does not complete an initial business combination, the Company will not repay the overfunding loans from amounts held in the trust account, and the trust account proceeds will be distributed to the Company’s public shareholders, subject to the limitations; however, the Company may repay the overfunding loans if there are funds available outside the trust account to do so.
Following the Initial Public Offering, sale of the private placement warrants and the overfunding loans, a total of $308,050,000 was placed in the trust account. We incurred transaction costs of $17,966,142 consisting of $6,100,000 of cash underwriting discount, $10,675,000 of deferred underwriting fees, and $1,191,142 of other final offering costs.
For the nine months ended September 30, 2024, cash used in operating activities was $264,250. Net income of $11,340,536 was affected by interest earned on marketable securities held in the trust account of $12,345,276. Changes in operating assets and liabilities provided $740,490 of cash for operating activities.
For the period from April 12, 2023 (inception) through September 30, 2023, cash used in operating activities was $544,434. Net income of $3,499,655 was affected by interest earned on marketable securities held in the Trust Account of $3,272,323, payment of formation costs through issuance of Class F ordinary shares of $7,427, unrealized gain on marketable securities held in trust account of $86,189 and changes in fair value of over-allotment option liability of $402,224. Changes in operating assets and liabilities used $290,780 of cash for operating activities.
As of September 30, 2024, we had marketable securities held in the trust account of $328,013,391 (including $19,963,391 of interest income) substantially consisting of U.S. Treasury Bills with a maturity of 185 days or less. We may withdraw interest from the trust account to pay taxes, if any. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less income taxes payable), to complete our initial business combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds
21
held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2024, we had cash of $1,645,094. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete an initial business combination, to pay for directors and officers liability insurance premiums.
In order to finance working capital deficit or to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes its initial business combination, the Company would repay the Working Capital Loans. In the event that the initial business combination does not close, the Company may use a portion of the working capital held outside the trust account to repay the Working Capital Loans but no proceeds from the trust account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into private placement warrants of the post business combination entity at a price of $1.00 per private placement warrant at the option of the lender. Such warrants would be identical to the private placement warrants.
We believe that amounts not held in the trust account will be sufficient to pay the costs and expenses to which such proceeds are allocated that are payable prior to the closing of our initial business combination. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination.
We have determined that mandatory liquidation, should a business combination not occur by July 18, 2025, and potential subsequent dissolution raise substantial doubt about our ability to continue as a going concern for a reasonable period of time which is considered to be one year from the date of the issuance of the financial statements. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, or operating lease obligations, other than an agreement to pay an aggregate of $15,000 per month to an affiliate of our sponsor for office space, utilities, secretarial and administrative support.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $6,100,000 in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or $10,675,000 in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting agreement for the Initial Public Offering.
Critical Accounting Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and
22
income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting estimates:
Marketable Securities in Trust Account
Substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. We account for marketable securities at fair value on the condensed balance sheet. Gains and losses resulting from the change in fair value of marketable securities held in the Trust Account are included in interest earned on marketable securities held in Trust Account in the condensed statement of operations. As of September 30, 2024 and December 31, 2023, the fair value of marketable securities held in Trust Account amounts to $328,013,391 and $315,668,115, respectively.
Derivative Financial Instruments
We evaluate the financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statement of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The underwriters’ over-allotment option was deemed to be a freestanding financial instrument indexed on the contingently redeemable shares and was accounted for as a liability pursuant to ASC 480. On August 27, 2023, the remainder of the over-allotment option to purchase 4,000,000 Units expired and the over-allotment option liability, which was initially measured at fair value of $402,224, was derecognized in the statement of operations.
Warrant Instruments
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Accordingly, the Company evaluated and classified the warrant instruments under equity treatment at its assigned fair value. Fair value of public warrants at issuance amounted to $3,507,500.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2024 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Form on Form 10-K filed with the SEC on March 27, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Form on Form 10-K filed with the SEC on March 27, 2024, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We have not sold any equity securities during the quarterly period ended September 30, 2024.
In connection with the Public Offering, sale of the Private Placement Warrants and the Overfunding Loan, we generated gross proceeds of $317,590,000. Of the gross proceeds, a total of $308,050,000, including $10,675,000 of deferred underwriting discounts and commissions was placed in the Trust Account. The net proceeds from the Initial Public Offering, sale of the Private Placement Warrants and the Overfunding Loan may be invested in U.S. government treasury bills with a maturity of 185 days or less and in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We paid a total of $6,100,000 in underwriting discounts and commissions and incurred approximately $1,191,142 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $10,675,000 in underwriting discounts and commissions.
There has been no material change in the planned use of the proceeds from the Public Offering and certain of the proceeds from the sale of the Private Placement Warrants and the Overfunding Loan as is described in the Company’s final prospectus related to the Public Offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
| (a) |
| (b) | None. |
| (c) | None of our directors or executive officers adopted or terminated a Rule 10b5 - 1 trading arrangement or a non - Rule 10b5 - 1 trading arrangement (as defined in Item 408 (c) of Regulation S - K) during the quarterly period covered by this Quarterly Report on Form 10-Q. |
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Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
| Description of Exhibit |
3.1 |
| |
31.1* |
| |
31.2* |
| |
32.1* |
| |
32.2* |
| |
101.INS* |
| Inline XBRL Instance Document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NABORS ENERGY TRANSITION CORP. II | ||
Date: November 12, 2024 | By: | /s/ ANTHONY G. PETRELLO |
| Name: | Anthony G. Petrello |
| Title: | Chairman, President and Chief Executive Officer |
|
| (Principal Executive Officer) |
Date: November 12, 2024 | By: | /s/ WILLIAM RESTREPO |
| Name: | William Restrepo |
| Title: | Chief Financial Officer |
|
| (Principal Financial and Accounting Officer) |
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