Alternus Clean Energy(ALCE) - 2023 Q2 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited condensed financial statements, management's analysis, market risk disclosures, and internal controls Condensed Financial Statements (Unaudited) The unaudited condensed financial statements for the period ended June 30, 2023, reflect the company's status as a pre-business combination SPAC, detailing significant redemptions, net income from trust interest, and going concern doubts Condensed Balance Sheets The condensed balance sheets provide a snapshot of the company's assets, liabilities, and stockholders' deficit at specific reporting dates Condensed Balance Sheet Summary (Unaudited) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $85.1 million | $236.5 million | | Marketable securities held in Trust Account | $84.9 million | $235.6 million | | Cash | $0.1 million | $0.6 million | | Total Liabilities | $3.8 million | $7.9 million | | Deferred underwriter fee payable | $0.8 million | $4.4 million | | Promissory note – related party | $1.0 million | $0.8 million | | Total Stockholders' Deficit | ($3.6 million) | ($6.9 million) | - Class A common stock subject to possible redemption decreased significantly from 23,000,000 shares ($235.6 million) at year-end 2022 to 8,147,563 shares ($84.9 million) as of June 30, 2023, following shareholder redemptions[10] Condensed Statements of Operations The condensed statements of operations detail the company's revenues, expenses, and net income or loss over specific periods Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Loss from operations | ($0.5 million) | ($0.7 million) | ($0.9 million) | ($1.0 million) | | Other income | $2.2 million | $0.3 million | $4.8 million | $0.3 million | | Net income (loss) | $1.4 million | ($0.5 million) | $3.2 million | ($0.7 million) | - The company shifted from a net loss to a net income, primarily driven by a significant increase in dividend and realized gains on marketable securities held in the Trust Account, amounting to $4.8 million for the six months ended June 30, 2023, compared to $0.3 million in the same period of 2022[12] Condensed Statements of Changes in Common Stock Subject to Possible Redemption and Stockholders' Deficit This statement tracks changes in common stock subject to redemption and the overall stockholders' deficit, reflecting equity movements - In the second quarter of 2023, 14.9 million shares of Class A common stock were redeemed, reducing the value of stock subject to redemption by $154.2 million[14] - A deferred underwriter fee forfeiture of $3.6 million was recognized, which positively impacted the accumulated deficit[14] - The total stockholders' deficit improved from ($6.9 million) at the end of 2022 to ($3.6 million) as of June 30, 2023, driven by net income and the underwriter fee forfeiture[14] Condensed Statements of Cash Flows The condensed statements of cash flows categorize cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1.1 million | ($1.0 million) | | Net cash provided by (used in) investing activities | $152.3 million | ($232.3 million) | | Net cash (used in) provided by financing activities | ($154.0 million) | $233.9 million | | Net Change in Cash | ($0.5 million) | $0.6 million | - Financing activities in 2023 were dominated by a $154.2 million cash outflow for the redemption of Class A common stock, contrasting with 2022 which saw large inflows from the IPO and private placement[17] - The company received $0.2 million in proceeds from a promissory note with a related party to fund operations and extension payments[17] Notes to Unaudited Condensed Financial Statements These notes provide detailed explanations and additional information supporting the unaudited condensed financial statements - The company, a blank check company, entered into a Business Combination Agreement with Alternus Energy Group Plc on October 12, 2022, which was amended on April 12, 2023, reducing the consideration from $550 million to $275 million and earnout shares from 35 million to 20 million[19][23][25] - On May 25, 2023, stockholders approved extending the business combination deadline to November 28, 2023, leading to the redemption of 14.9 million shares for approximately $154.2 million, leaving $84.6 million in the trust account[36][37] - The company's financial condition, including a working capital deficit of $2.8 million and reliance on related-party loans, raises substantial doubt about its ability to continue as a going concern[40][43] - One of the underwriters waived their right to deferred commissions totaling $7.2 million, reducing the remaining deferred fee payable upon business combination to $0.8 million[87] Management's Discussion and Analysis of Financial Condition and Results of Operations The company is a pre-business combination SPAC focused on completing its merger with Alternus Energy Group Plc, reporting a net income turnaround primarily due to trust account income, but facing a working capital deficit and going concern doubts after significant shareholder redemptions - The company's primary focus is on consummating the Business Combination with Alternus Energy Group Plc, with a deadline extended to November 28, 2023[119][123] Results of Operations Summary | Period | Net Income / (Loss) | Key Drivers | | :--- | :--- | :--- | | Six Months Ended June 30, 2023 | $3.2 million | $3.1 million dividend income, $1.7 million realized gains | | Six Months Ended June 30, 2022 | ($0.7 million) | $0.7 million legal/accounting expenses, offset by $0.3 million dividend income | - In connection with a stockholder vote to extend the merger deadline, 14.9 million shares of Class A Common Stock were redeemed for an aggregate of $154.2 million[125] - Management has concluded there is substantial doubt about the Company's ability to continue as a going concern due to its working capital deficit and lack of financial resources to sustain operations for the next year[131][134] - The deferred underwriting commission payable upon a business combination has been reduced to $0.8 million after one of the underwriters waived their right to $7.2 million in fees[136][142] Quantitative and Qualitative Disclosures Regarding Market Risk The company is a smaller reporting company and is therefore not required to provide the information requested under this item - As a smaller reporting company defined by Rule 12b-2 of the Exchange Act, the company is not required to provide quantitative and qualitative disclosures about market risk[147] Controls and Procedures Based on an evaluation as of June 30, 2023, the company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2023[149] - No changes occurred in the internal control over financial reporting during the fiscal quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[150] Part II. Other Information This section covers legal proceedings, risk factors, equity sales, and other miscellaneous disclosures Legal Proceedings The company reports no legal proceedings - The company has no legal proceedings to report[153] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed with the SEC - As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K[154] Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities The company details the proceeds from its February 2022 Initial Public Offering and a simultaneous private placement, generating gross proceeds of $230 million from the IPO and $8.9 million from the private placement, with $84.6 million remaining in the Trust Account after redemptions - On February 28, 2022, the company consummated its IPO of 23,000,000 Units at $10.00 per Unit, generating gross proceeds of $230 million[155] - Simultaneously with the IPO, the company sold 890,000 Private Placement Units to its sponsor at $10.00 per unit, generating $8.9 million[156] - Following the IPO and redemptions, $84.6 million remained in the Trust Account, and the deferred underwriting commission has been reduced to $0.8 million[158][159] Defaults Upon Senior Securities The company reports no defaults upon senior securities - The company has no defaults upon senior securities to report[161] Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[162] Other Information The company reports no other information - The company has no other information to report[163] Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including the Business Combination Agreement and its amendments, support agreements, and officer certifications - The report includes several exhibits, such as the Business Combination Agreement with Alternus Energy Group Plc, its first amendment, and various certifications by the principal executive and financial officers[166]