SPI(SPI) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements SPI Energy reported a $12.4 million net loss and $116.7 million working capital deficit for H1 2023, highlighting liquidity issues and going concern doubts Condensed Consolidated Balance Sheets Total assets slightly decreased to $230.5 million, while liabilities rose to $222.3 million, causing total equity to fall to $8.2 million by June 30, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $4,516 | $3,533 | | Inventories | $35,288 | $28,987 | | Total current assets | $82,137 | $81,956 | | Total assets | $230,539 | $231,095 | | Liabilities & Equity | | | | Accounts payable | $38,091 | $30,405 | | Convertible bonds, current | $45,250 | $42,676 | | Total current liabilities | $198,820 | $189,697 | | Total liabilities | $222,331 | $213,223 | | Total equity | $8,208 | $17,872 | Unaudited Condensed Consolidated Statements of Operations H1 2023 revenues grew to $106.8 million, but net loss widened to $12.4 million due to higher operating and interest expenses Key Operating Results (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $58,850 | $48,584 | $106,773 | $87,119 | | Gross profit | $5,238 | $3,872 | $9,734 | $6,581 | | Operating loss | $(3,067) | $(5,595) | $(10,335) | $(12,574) | | Net loss | $(2,641) | $(2,218) | $(12,390) | $(9,004) | | Net loss per share (Basic & Diluted) | $(0.08) | $(0.08) | $(0.39) | $(0.34) | Unaudited Condensed Consolidated Statements of Comprehensive Loss Total comprehensive loss for H1 2023 was $11.9 million, primarily driven by the $12.4 million net loss, partially offset by foreign currency adjustments Comprehensive Loss Summary (in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(2,641) | $(2,218) | $(12,390) | $(9,004) | | Foreign currency translation adjustments | $(128) | $(2,427) | $478 | $(2,362) | | Total comprehensive loss | $(2,769) | $(4,645) | $(11,912) | $(11,366) | Unaudited Condensed Consolidated Statements of Equity Total equity decreased from $17.9 million to $8.2 million by June 30, 2023, primarily due to a $11.9 million net loss - Total equity fell by $9.7 million in the first six months of 2023, from $17.9 million to $8.2 million[17] - The primary driver of the equity decrease was the net loss of $11.9 million attributable to shareholders during the first half of 2023[11][17] Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operations was $5.5 million for H1 2023, with overall cash decreasing by $5.1 million, largely due to reduced financing activities Cash Flow Summary (in thousands) | Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,484) | $(11,539) | | Net cash used in investing activities | $(1,994) | $(387) | | Net cash provided by financing activities | $136 | $15,856 | | Increase (decrease) in cash | $(5,097) | $3,408 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail business operations, a going concern warning due to $12.4 million net loss and $116.7 million working capital deficit, and significant legal issues - The company is engaged in providing photovoltaic (PV), roofing, solar energy systems installation, and electric vehicle (EV) solutions[23] - There is substantial doubt about the Group's ability to continue as a going concern due to recurring losses, a net loss of $12.4 million in H1 2023, a working capital deficit of $116.7 million, and an accumulated deficit of $682.7 million[27][127] Revenue by Stream - H1 2023 (in thousands) | Revenue Stream | Amount | | :--- | :--- | | Sales of PV components | $74,027 | | Sales of self-assembled solar modules | $18,739 | | Roofing and solar systems installation | $1,425 | | Electricity revenue with PPAs | $2,248 | | Automotive sales & leasing | $2,083 | | Others | $8,251 | | Total | $106,773 | - The company is involved in significant legal proceedings, including an arbitration award against it for €38.1 million plus interest in the Sinsin case, and a default on a note held by Streeterville[79][80] Segment Gross Profit - H1 2023 (in thousands) | Segment | Revenues | Gross Profit | | :--- | :--- | :--- | | Renewable energy solutions | $94,191 | $8,201 | | PV stations constructions and operations | $8,991 | $2,221 | | Electric vehicles | $2,083 | $286 | | Others | $1,508 | $(974) | | Total | $106,773 | $9,734 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2023 revenue growth and improved gross margin, while addressing significant liquidity challenges and outlining plans to mitigate going concern doubts - The company is a global provider of photovoltaic (PV) and electric vehicle (EV) solutions, developing solar projects and selling PV components, alongside sales and leasing of EVs and roofing/solar installation services in the U.S.[97] - The company's liquidity has deteriorated, with a net loss of $12.4 million and cash used in operations of $5.5 million for the six months ended June 30, 2023, raising substantial doubt about its ability to continue as a going concern[98][127] - Key operational drivers include market demand for PV/EV solutions, government subsidies and regulations (like California's zero-emission mandates), and the ability to develop and operate solar projects effectively[102][106][108] Results of Operations H1 2023 revenues grew 22.6% to $106.8 million with improved gross margin, but net loss widened to $12.4 million due to increased expenses Q2 2023 vs Q2 2022 Performance (in millions) | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $58.9 | $48.6 | +21.1% | | Gross Profit | $5.2 | $3.9 | +33.3% | | Gross Margin | 8.9% | 8.0% | +0.9 ppt | | Net Loss | $(2.6) | $(2.2) | +18.2% | H1 2023 vs H1 2022 Performance (in millions) | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $106.8 | $87.1 | +22.6% | | Gross Profit | $9.7 | $6.6 | +47.0% | | Gross Margin | 9.1% | 7.6% | +1.5 ppt | | Net Loss | $(12.4) | $(9.0) | +37.8% | Liquidity and Capital Resources The company faces significant liquidity challenges with a $116.7 million working capital deficit and $12.4 million net loss, outlining plans to improve cash flow and seek new financing - The company has a working capital deficit of $116.7 million and an accumulated deficit of $682.7 million as of June 30, 2023, raising substantial doubt about its ability to continue as a going concern[127] - Management plans to implement measures to improve liquidity, including negotiating PV solar project sales, postponing convertible bond payments, improving US business profitability, and seeking credit facilities and new financing[128] Cash Flow Summary - H1 2023 vs H1 2022 (in thousands) | Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,484) | $(11,539) | | Net cash used in investing activities | $(1,994) | $(387) | | Net cash provided by financing activities | $136 | $15,856 | Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is omitted as the company qualifies as a smaller reporting company - The company has omitted this section as it is a smaller reporting company[142] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2023, due to identified material weaknesses, and has outlined remediation plans - Management concluded that disclosure controls and procedures were not effective as of June 30, 2023[143] - Material weaknesses were identified in several areas: (1) control environment, (2) risk assessment, (3) monitoring activities, (4) process-level controls, (5) lack of resources with requisite U.S. GAAP skills, and (6) IT general controls[144][145][146] - Remediation plans include strengthening oversight, engaging professional advisers, improving internal control execution, establishing a formal risk assessment program, and providing more training on U.S. GAAP and SEC requirements[146][147][148] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company faces significant legal proceedings, including a €38.1 million arbitration award against it and a default on a note held by Streeterville seeking at least $2.7 million - An arbitration tribunal in Malta ordered the company to pay SINSIN €38,054,000 plus interest. Sinsin is now seeking to confirm this award in a U.S. District Court in California[153][154] - The company defaulted on a 2022 Note held by Streeterville, which filed a complaint seeking damages of at least $2,676,000. The parties have entered into a term sheet to mediate the dispute with a structured payment plan[155] Item 1A. Risk Factors This section is omitted as the company qualifies as a smaller reporting company - Information regarding risk factors has been omitted because the company qualifies as a smaller reporting company[157] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds from registered securities were reported - None reported[157] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None reported[157] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL interactive data files - The report includes certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act[158] - XBRL interactive data files are included as exhibits for financial reporting[158]