AltEnergy Acquisition p(AEAE) - 2022 Q3 - Quarterly Report

QUARTERLY REPORT AltEnergy Acquisition Corp.'s quarterly report outlines financial performance and position for Q3 2022, including key statements and insights - AltEnergy Acquisition Corp. filed a Form 10-Q for the quarterly period ended September 30, 2022[1] - The registrant is a Smaller reporting company and an Emerging growth company[3] - As of November 07, 2022, 23 million shares of Class A common stock and 5.75 million shares of Class B common stock were issued and outstanding[4] Registered Securities Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |:--------------------------------------------------------------------------------------------------------------------|:------------------|:------------------------------------------| | Units, each consisting of one share of Class A common stock and one-half of one redeemable warrant | AEAEU | The Nasdaq Global Market | | Class A common stock, par value $0.0001 per share | AEAE | The Nasdaq Global Market | | Warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share | AEAEW | The Nasdaq Global Market | PART I—FINANCIAL INFORMATION AltEnergy Acquisition Corp.'s unaudited condensed financial statements for Q3 2022 and year-end 2021, with detailed accounting notes Item 1. Condensed Financial Statements AltEnergy Acquisition Corp.'s unaudited condensed financial statements, detailing balance sheets, operations, cash flows, and comprehensive accounting notes Condensed Balance Sheets This section provides a snapshot of AltEnergy Acquisition Corp.'s financial position, detailing assets, liabilities, and stockholders' deficit as of September 30, 2022, and December 31, 2021 Condensed Balance Sheets Summary | Metric | September 30, 2022 (unaudited) | December 31, 2021 (audited) | |:------------------------------------------|:-------------------------------|:----------------------------| | Total Assets | $236,500,501 | $236,424,406 | | Total Liabilities | $12,373,467 | $22,386,832 | | Class A common stock subject to possible redemption | $234,600,000 | $234,600,000 | | Total Stockholders' Deficit | $(10,472,966) | $(20,562,426) | Condensed Statements of Operations This section presents AltEnergy Acquisition Corp.'s financial performance, including expenses, investment income, and net income (loss) for the specified quarterly and nine-month periods Condensed Statements of Operations Summary | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Period Feb 9, 2021 (Inception) Through Sep 30, 2021 | |:---------------------------------------------------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:----------------------------------------------------| | Total Expenses | $323,407 | $40,954 | $1,101,157 | $126,155 | | Income earned on investments held in Trust Account | $1,031,530 | $0 | $1,436,349 | $0 | | Change in fair value of derivative warrant liabilities | $235,000 | $0 | $10,230,000 | $0 | | Net income (loss) | $920,184 | $(40,954) | $10,089,460 | $(126,155) | | Basic and diluted net income per share of Class A common stock | $0.03 | $0.00 | $0.35 | $0.00 | | Basic and diluted net income (loss) per share of Class B common stock | $0.03 | $(0.01) | $0.35 | $(0.03) | Condensed Statements of Changes in Stockholders' Deficit This section outlines the changes in AltEnergy Acquisition Corp.'s stockholders' deficit, reflecting accumulated deficit and total deficit for the periods presented Condensed Statements of Changes in Stockholders' Deficit Summary | Metric | September 30, 2022 | December 31, 2021 | |:----------------------------|:-------------------|:------------------| | Accumulated Deficit | $(10,473,541) | $(20,563,001) | | Total Stockholders' Deficit | $(10,472,966) | $(20,562,426) | - The company reported net income of $920,184 for the three months ended September 30, 2022, contributing to a reduction in accumulated deficit[14] - For the period from inception (February 9, 2021) through September 30, 2021, the company reported a net loss of $126,155[15] Condensed Statements of Cash Flows This section details AltEnergy Acquisition Corp.'s cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022 Condensed Statements of Cash Flows Summary | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Period Feb 9, 2021 (Inception) Through Sep 30, 2021 | |:------------------------------------------|:-------------------------------|:----------------------------------------------------| | Net Cash Used In Operating Activities | $(1,004,373) | $(109,199) | | Net Cash (Used In) Provided by Investing Activities | $252,572 | $0 | | Net Cash (Used In) Provided By Financing Activities | $(11,955) | $157,548 | | Net change in cash | $(763,756) | $48,349 | | Cash at end of period | $215,470 | $48,349 | Notes to Condensed Financial Statements This section provides detailed explanations of AltEnergy Acquisition Corp.'s accounting policies, organization, and specific financial instruments supporting the condensed financial statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND LIQUIDITY This note details AltEnergy Acquisition Corp.'s SPAC formation, IPO, private placement, trust account management, and liquidity, highlighting going concern doubts - AltEnergy Acquisition Corp. was incorporated on February 9, 2021, as a blank check company (SPAC) to effect a business combination[18] - The company consummated its Initial Public Offering (IPO) on November 2, 2021, raising $230 million from 23 million units (including over-allotment option)[20] - Simultaneously with the IPO, a Private Placement of 12 million warrants generated $12 million[21] Key Liquidity and Capital Metrics | Metric | September 30, 2022 | |:----------------------------------|:-------------------| | Investments held in Trust Account | $235,799,893 | | Cash outside Trust Account | $215,470 | | Working Capital | $365,300 | | Current Liabilities | $300,800 | - Management has determined that conditions raise substantial doubt about the company's ability to continue as a going concern, as it must complete a business combination by May 2, 2023, or liquidate[31][33] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines AltEnergy Acquisition Corp.'s accounting policies, including US GAAP conformity, emerging growth company status, and valuation of warrant liabilities - The financial statements are presented in conformity with US GAAP and SEC rules, with certain information condensed[35][36] - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new accounting standards[38][39] - A significant accounting estimate is the determination of the fair value of derivative warrant liabilities[40] - Investments held in the Trust Account are classified as trading securities and presented at fair value[42][43] - Class A common stock subject to possible redemption is classified as temporary equity due to redemption rights outside the company's control[45] - Net income (loss) per share is computed using the two-class method; warrants are anti-dilutive and not included in diluted EPS[46] - The Inflation Reduction Act of 2022 (IRAct) imposes a 1% excise tax on stock repurchases after December 31, 2022, which may apply to redemptions of the company's common stock[55] - Public Warrants and Private Placement Warrants are classified as derivative liabilities and measured at fair value at each reporting date[56][57] NOTE 3. INITIAL PUBLIC OFFERING This note details AltEnergy Acquisition Corp.'s IPO, including units sold, offering price, gross proceeds, and funds placed into the Trust Account - The Company sold 20 million Units at $10.00 per Unit, generating $200 million gross proceeds[61] - Underwriters exercised an over-allotment option for an additional 3 million Units, generating $30 million[61] - A total of $234.6 million ($10.20 per Unit) from the IPO and Private Placement proceeds was placed in the Trust Account[62] NOTE 4. PRIVATE PLACEMENT This note describes the private sale of warrants concurrent with AltEnergy Acquisition Corp.'s IPO, including the number, price, and allocation to related parties - An aggregate of 12 million Private Placement Warrants were sold at $1.00 per warrant, generating $12 million gross proceeds[63] - 11.6 million warrants were allocated to AltEnergy Acquisition Sponsor LLC and 400,000 to an affiliate of the underwriter[63] - Private Placement Warrants are subject to transfer restrictions until 30 days after the completion of an Initial Business Combination[64] NOTE 5. RELATED PARTY TRANSACTIONS This note details AltEnergy Acquisition Corp.'s transactions with related parties, including Founder Shares, administrative fees, and contingent compensation for officers - The Sponsor purchased 5.75 million Class B common stock (Founder Shares) for $25,000 on March 25, 2021[65] - An affiliate of the Sponsor is paid $15,000 per month for office space, utilities, and administrative support services[69] Related Party Balances and Fees | Metric | September 30, 2022 | December 31, 2021 | |:-------------------------------------|:-------------------|:------------------| | Due to related party | $15,000 | $3,873 | | Administrative fees (3 months ended) | $45,000 | $0 | | Administrative fees (9 months ended) | $135,000 | $0 | - The CFO receives $10,400 per month, with an additional $5,200 per month contingent upon a successful business combination[72] - One-time fees of $300,000 for the COO and $150,000 for the CFO are contingent upon the consummation of an initial business combination[74] NOTE 6. COMMITMENTS AND CONTINGENCIES This note outlines AltEnergy Acquisition Corp.'s commitments, including registration rights for securities and a deferred underwriting commission payable upon business combination - Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan warrants are entitled to registration rights[75] - The underwriters are entitled to a deferred fee of $8.05 million, payable only upon the completion of a Business Combination[76] NOTE 7. STOCKHOLDERS' EQUITY This note details the authorized and outstanding shares of the company's preferred stock, Class A common stock, and Class B common stock, including their par values, voting rights, and conversion features - The company is authorized to issue 1 million shares of preferred stock, with none issued or outstanding[79] - 23 million shares of Class A common stock were classified as temporary equity as of September 30, 2022, and December 31, 2021[79] - 5.75 million shares of Class B common stock were issued and outstanding, with holders having exclusive voting rights on director elections prior to a Business Combination[80] - Class B common stock automatically converts into Class A common stock on a one-for-one basis upon a Business Combination, subject to adjustment[81] NOTE 8. WARRANT LIABILITIES This note outlines the terms and conditions of the Public Warrants and Private Placement Warrants, including their exercisability, expiration, and potential redemption by the company, as well as registration requirements for the underlying shares - Public Warrants become exercisable on the later of 30 days after a Business Combination or 12 months from the IPO closing, expiring five years after a Business Combination[82] - The company may redeem outstanding Public Warrants at $0.01 per warrant if the Class A common stock price equals or exceeds $18.00 for 20 trading days within a 30-day period[85] - Private Placement Warrants are identical to Public Warrants but are non-transferable, non-assignable, and non-redeemable (if held by initial purchasers) until 30 days after a Business Combination[88] NOTE 9. FAIR VALUE MEASUREMENTS This note details the company's fair value measurement methodology for financial assets and liabilities, adhering to a three-tier hierarchy. It specifically addresses the valuation of Public and Private Placement Warrants, including the models used and key unobservable inputs - Fair value is defined as the price received for an asset or paid to transfer a liability in an orderly transaction, using a three-tier hierarchy (Level 1, 2, 3)[59][90] Fair Value Measurements of Financial Instruments | Description | Level | September 30, 2022 | December 31, 2021 | |:-------------------------------------------|:------|:-------------------|:------------------| | Investments held in Trust Account | 1 | $235,799,893 | $234,616,116 | | Warrant liability – Private Placement Warrants | 3 | $1,920,000 | $7,320,000 | | Warrant liability – Public Warrants | 1 | $1,840,000 | $6,670,000 | - Public Warrants are valued using publicly available prices (Level 1), while Private Placement Warrants are valued using a Monte Carlo simulation model (Sep 30, 2022) or modified Black-Scholes model (Dec 31, 2021) and classified as Level 3 due to unobservable inputs[58][94] Key Valuation Assumptions for Warrants | Assumption | September 30, 2022 | December 31, 2021 | |:-----------------------------------------|:-------------------|:------------------| | Risk-free interest rate | 4.06% | 1.26% | | Expected volatility of underlying shares | 2.00% | 12.0% | | Dividend yield | 0% | 0% | | Probability of business combination | 21% | 90% | - The company recorded a gain of $235,000 for the three months ended September 30, 2022, and $10.23 million for the nine months ended September 30, 2022, on the change in fair value of derivative warrants[97] NOTE 10. SUBSEQUENT EVENTS Management reviewed events after the balance sheet date and found no subsequent events requiring adjustment or disclosure in the financial statements - No subsequent events requiring adjustment or disclosure were identified up to the financial statement issuance date[98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses AltEnergy Acquisition Corp.'s financial condition, operational results, liquidity, and going concern status, focusing on its SPAC activities and performance Overview AltEnergy Acquisition Corp. is a blank check company formed to complete an Initial Business Combination, having completed its Public Offering in November 2021. Its activities primarily involve identifying acquisition targets, and it currently holds cash and working capital - The company is a blank check company (SPAC) formed to effect an Initial Business Combination[101] - Business activities from inception to September 30, 2022, focused on preparing for the Public Offering and identifying acquisition targets[102] Key Financial Position Metrics | Metric | September 30, 2022 | |:----------------|:-------------------| | Cash | $215,500 | | Working Capital | $365,300 | Results of Operations The company reported net income for the three and nine months ended September 30, 2022, primarily driven by interest income from the Trust Account and gains from changes in the fair value of derivative warrant liabilities, contrasting with net losses in the prior year periods due to formation costs Summary of Results of Operations | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Period Feb 9, 2021 (Inception) Through Sep 30, 2021 | |:-----------------------------------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:----------------------------------------------------| | Net income (loss) | $920,184 | $(40,954) | $10,089,460 | $(126,155) | | Interest income earned on Trust Account | $1,031,530 | $0 | $1,436,349 | $0 | | Operating expenses | $323,407 | $40,954 | $1,101,157 | $126,155 | | Gain on change in fair value of derivative warrant liability | $235,000 | $0 | $10,230,000 | $0 | | Income tax provision | $22,939 | $0 | $475,732 | $0 | Going Concern Considerations, Liquidity and Capital Resources The company's liquidity is primarily supported by investments in the Trust Account, but management has identified substantial doubt about its ability to continue as a going concern due to the May 2, 2023 deadline for completing a business combination, after which it would liquidate Liquidity and Capital Resources Summary | Metric | September 30, 2022 | |:----------------------------------|:-------------------| | Investments held in Trust Account | $235.8 million | | Working Capital | $365,300 | | Current Liabilities | $300,800 | | Cash | $215,500 | - Management has determined that the company may lack the financial resources to sustain operations for a reasonable period, raising substantial doubt about its ability to continue as a going concern[107] - The company must complete an initial business combination by May 2, 2023, or it will cease operations, redeem public shares, and liquidate[107][109] - Substantially all funds in the Trust Account are intended for an initial business combination, with remaining proceeds for working capital or other acquisitions[108] Off-Balance Sheet Arrangements The company confirms that it has no off-balance sheet arrangements, including obligations, assets, or liabilities, nor does it participate in transactions with unconsolidated entities or special purpose entities - The company has no obligations, assets, or liabilities considered off-balance sheet arrangements[112] - The company has not entered into off-balance sheet financing, established special purpose entities, or guaranteed debt/commitments of other entities[114] Contractual Obligations The company's contractual obligations include a monthly administrative services fee to an affiliate of the Sponsor and a deferred underwriting commission payable upon the consummation of an Initial Business Combination - The company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities as of September 30, 2022[115] - An administrative services agreement requires a payment of $15,000 per month to an affiliate of the Sponsor for office space and support services[115] - A deferred underwriting fee of 3.5% of the gross proceeds of the Public Offering is payable to B. Riley Securities, Inc. upon consummation of an Initial Business Combination[115] Critical Accounting Policies This section highlights the critical accounting policies that involve significant management estimates and judgments, specifically net income (loss) per common share, Class A common stock subject to possible redemption, and warrant instruments - Net income (loss) per common share is computed using the weighted average number of shares, with diluted EPS being the same as basic EPS due to anti-dilutive warrants[117] - Class A common stock subject to possible redemption is classified as temporary equity due to redemption rights outside the company's control[118] - Public and Private Placement Warrants are accounted for as derivative liabilities at fair value, with changes recognized in the statement of operations[119] Recent Accounting Pronouncements Management does not anticipate any material effect on the company's balance sheet from recently issued but not yet effective accounting standards - No recently issued, but not yet effective, accounting standards are expected to have a material effect on the company's balance sheet if currently adopted[120] Item 3. Quantitative and Qualitative Disclosures About Market Risk As of September 30, 2022, AltEnergy Acquisition Corp. was not exposed to any significant market or interest rate risk and has not engaged in any hedging activities - As of September 30, 2022, the company was not subject to any market or interest rate risk[122] - The company has not engaged in any hedging activities since its inception and does not expect to[122] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures, concluding that they were not effective due to a material weakness in accounting for complex financial instruments, and outlines remediation efforts Evaluation of Disclosure Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of September 30, 2022, due to a material weakness related to accounting for complex financial instruments. Remediation steps are being implemented to address this - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2022[124] - A material weakness existed related to the accounting for complex financial instruments[124] - Remediation steps include expanding and improving the review process for complex securities, enhancing access to accounting literature, and considering additional experienced staff[125] Changes in Internal Control Over Financial Reporting During the quarter ended September 30, 2022, there were no changes in the company's internal control over financial reporting that materially affected or are reasonably likely to materially affect it - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[126] PART II—OTHER INFORMATION This section provides additional information beyond financial statements, covering legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 1. Legal Proceedings AltEnergy Acquisition Corp. reports no legal proceedings - There are no legal proceedings[127] Item 1A. Risk Factors This section updates AltEnergy Acquisition Corp.'s risk factors, specifically addressing new tax-related risks introduced by the Inflation Reduction Act of 2022 Risks Related to Taxes The Inflation Reduction Act of 2022 introduces a 1% excise tax on stock repurchases after December 31, 2022, which may apply to the company's redemptions, potentially impacting its financial markets and stock price. Management is assessing the impact - The Inflation Reduction Act of 2022 (IRAct) imposes a 1% excise tax on stock repurchases after December 31, 2022[129] - This Excise Tax may apply to redemptions of the company's common stock, including those in connection with a merger, unless an exemption is available[129] - Management does not anticipate a material impact on financial statements from the IRAct but will continue to assess as additional guidance becomes available[130] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds AltEnergy Acquisition Corp. reports no unregistered sales of equity securities or use of proceeds - There were no unregistered sales of equity securities or use of proceeds[130] Item 3. Defaults Upon Senior Securities AltEnergy Acquisition Corp. reports no defaults upon senior securities - There were no defaults upon senior securities[130] Item 4. Mine Safety Disclosures AltEnergy Acquisition Corp. reports no mine safety disclosures - There were no mine safety disclosures[130] Item 5. Other Information AltEnergy Acquisition Corp. reports no other information - There is no other information to report[130] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report, including certifications from the CEO and CFO and Inline XBRL documents List of Exhibits | Exhibit No. | Description | |:------------|:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | 31.1* | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) | | 31.2* | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) | | 32.1* | Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350 | | 32.2* | Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350 | | 101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | 101.CAL* | Inline XBRL Taxonomy Extension Schema Document | | 101.SCH* | 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* | The cover page for the Company's Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101 |