ALCE 10-Q/A
Aedis Energy Inc. (ALCE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
(Amendment No. 1)
(Mark One)
FOR
THE QUARTERLY PERIOD ENDED
or
FOR THE TRANSITION PERIOD FROM _________ to __________
COMMISSION
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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.
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.
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| ☒ | Smaller reporting company | ||
| 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 ☐ No
As
of May 21, 2024, the registrant had a total of
EXPLANATORY NOTE
Alternus Clean Energy, Inc. (the “Company”) filed its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 with the U.S. Securities and Exchange Commission (“SEC”) on May 21, 2024 (the “Original Form 10-Q”). This Amendment No. 1 on Form 10-Q/A (this “Amendment” or “Form 10-Q/A”) is being filed to restate (the “Restatement”) certain information in the Company’s previously issued condensed consolidated financial statements as of and for the three months ended March 31, 2024 (the “Affected Period”).
This Form 10-Q/A also amends and restates the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations, Disclosure Controls and Procedures, Risk Factors and other disclosures made in the Original Filing resulting from the restatement and revision of the relevant periods. The items amended in the Original Filing are listed under “Items Amended in this Form 10-Q/A” below. Other than the “Items Amended in this Form 10-Q/A,” disclosures in the Original Form 10-Q remain unchanged, including forward-looking statements made in the Original Filing which are not changed to reflect events, results, or developments that occurred or facts that became known to the Company after the date of the Original Filing, and such forward-looking statements should be read in conjunction with our filings with the SEC, including those subsequent to the filing of the Original Filing. However, for the convenience of the reader, this Form 10-Q/A restates in its entirety, as amended, the Company’s Original Filing. The Company has not modified or updated disclosures presented in the Original Filing and does not reflect or purport to reflect any information or events occurring after May 21, 2024, the original filing date of the Original Form 10-Q, or modify or update those disclosures affected by subsequent events, except to the extent they are otherwise required to be included and discussed herein. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings with the SEC subsequent to the filing of the Original Filing.
Because these revisions are treated as corrections of errors to our prior period financial results, the revisions are considered to be a “restatement” under U.S. generally accepted accounting principles (“US GAAP”). Accordingly, the revised financial information included in this Form 10-Q/A has been identified as “As Restated.”
The Company’s management has assessed the effect of the foregoing on the Company’s internal control over financial reporting and disclosure controls and procedures. The Company’s control over the timely identification and implementation of financial adjustments and procedures performed to assess the materiality of financial adjustments did not operate effectively as of March 31, 2024 resulting in a material weakness in the Company’s internal control over financial reporting. Based on this assessment, the Company’s disclosure controls and procedures were ineffective in the first quarter of 2024. For a discussion of management’s consideration of the material weakness identified, see Part I, Item 4, “Controls and Procedures” of this Form 10-Q/A.
Items Amended in this Form 10-Q/A
The following sections in the Original Report are revised in this Form 10-Q/A to reflect the restatement:
| ● | Part I, Item 1: Financial Statements |
| ● | Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ● | Part I, Item 4: Controls and Procedures |
| ● | Part II, Item 1A: Risk Factors |
Part II, Item 6: Exhibits
ALTERNUS CLEAN ENERGY, INC.
INDEX TO FORM 10-Q/A
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.
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PART I
ITEM 1. FINANCIAL STATEMENTS
ALTERNUS CLEAN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
| As of March 31 | As of December 31 | |||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Unbilled energy incentives earned | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Taxes recoverable | ||||||||
| Restricted cash | ||||||||
| Current discontinued assets held for sale | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use asset | ||||||||
| Other receivable | ||||||||
| Capitalized development cost and other long-term assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Taxes payable | ||||||||
| Deferred income | ||||||||
| Operating lease liability | ||||||||
| Green bonds | ||||||||
| Convertible and non-convertible promissory notes, net of debt issuance costs | ||||||||
| Due to affiliate | ||||||||
| Current discontinued liabilities held for sale | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Asset retirement obligations | ||||||||
| Total Liabilities | ||||||||
| Shareholders’ Deficit | ||||||||
| Preferred stock, $ | ||||||||
| Common Stock, $ | ||||||||
| Additional paid in capital | ||||||||
| Foreign Currency Translation Reserve | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
1
ALTERNUS CLEAN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| Revenues | $ | $ | ||||||
| Operating Expenses | ||||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Selling, general and administrative | ( | ) | ( | ) | ||||
| Depreciation, amortization, and accretion | ( | ) | ( | ) | ||||
| Development Costs | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Income/(loss) from operations | ( | ) | ||||||
| Other income/(expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Fair value movement of FPA Asset | ( | ) | ||||||
| Gain on extinguishment of debt | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Total other expenses | ( | ) | ( | ) | ||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Income taxes | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Discontinued operations: | ||||||||
| Loss from operations of discontinued business component | ( | ) | ( | ) | ||||
| Gain on sale of discontinued business components | ||||||||
| Net income/(loss) from discontinued operations | ( | ) | ||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to common stockholders, basic | ( | ) | ( | ) | ||||
| Net loss per share attributable to common stockholders, basic | ( | ) | ( | ) | ||||
| Net loss per share attributable to common stockholders, diluted | ( | ) | ( | ) | ||||
| Weighted-average common stock outstanding, basic | ||||||||
| Weighted-average common stock outstanding, diluted | ||||||||
| Comprehensive loss: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these consolidated financial statements
2
ALTERNUS CLEAN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-In | Foreign Currency Translation | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Reserve | Deficit | Equity | |||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Distribution to stockholder | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Contribution from stockholder | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Foreign Currency Translation | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Reserve | Deficit | Equity | |||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Settlement of Related Party Debt for Shares | ||||||||||||||||||||||||||||||||
| Conversion of Debt | ||||||||||||||||||||||||||||||||
| Merger Costs – Settlement of Related Party Debt and Conversion of Debt | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock Compensation for Third Party Services | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2024, as restated | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
3
ALTERNUS CLEAN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income/(loss) to net cash provided used in operations: | ||||||||
| Depreciation, amortization and accretion | ||||||||
| Amortization of debt discount | ||||||||
| Credit loss expense | ( | ) | ||||||
| Share-based compensation to third parties | ||||||||
| Gain (loss) on foreign currency exchange rates | ||||||||
| Fair value movement of FPA Asset | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Loss on disposal of asset | ||||||||
| Non-cash operating lease assets | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable and other short-term receivables | ||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued liabilities | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Payable to affiliate | ||||||||
| Net Cash provided by (used in) Operating Activities | $ | ( | ) | $ | ||||
| Net Cash provided by (used in) Operating Activities - Discontinued Operations | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Sales of property and equipment | ||||||||
| Capitalized Cost | ( | ) | ( | ) | ||||
| Construction in Process | ( | ) | ( | ) | ||||
| Net Cash provided by (used in) Investing Activities | $ | $ | ( | ) | ||||
| Net Cash provided by (used in) Investing Activities - Discontinued Operations | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from debt | ||||||||
| Debt Issuance Cost | ( | ) | ( | ) | ||||
| Payments of debt principal | ( | ) | ||||||
| Distributions to parent | ( | ) | ||||||
| Contributions from parent | ||||||||
| Net Cash provided by (used in) Financing Activities | $ | ( | ) | $ | ||||
| Net Cash provided by (used in) Financing Activities - Discontinued Operations | ( | ) | ( | ) | ||||
| Effect of exchange rate on cash | ( | ) | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | ( | ) | $ | ||||
| Cash, cash equivalents, and restricted cash beginning of the year | ||||||||
| Cash, cash equivalents, and restricted cash end of the year | $ | $ | ||||||
| Cash Reconciliation | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Cash, cash equivalents, and restricted cash end of the year | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
4
ALTERNUS CLEAN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED SUPPLEMENTAL STATEMENTS OF CASH FLOW
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| (in thousands) | ||||||||
| Supplemental Cash Flow Disclosure | ||||||||
| Cash paid during the period for: | ||||||||
| Interest (net of capitalized interest of 872 and 64 respectively) | ||||||||
| Taxes | ||||||||
| Non-cash financing activities: | ||||||||
| Shares issued for settlement of debt | ||||||||
| Shares issued for conversion of debt | ||||||||
| Shares issued for stock compensation to third parties | ||||||||
The accompanying notes are an integral part of these consolidated financial statements
5
ALTERNUS CLEAN ENERGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Formation
Alternus Clean Energy, Inc.
(the “Company”) was incorporated in Delaware on
On October 12, 2022, Clean
Earth entered into a Business Combination Agreement, as amended by that certain First Amendment to the Business Combination Agreement,
dated as of April 12, 2023 (the “First BCA Amendment”) (as amended by the First BCA Amendment, the “Initial Business
Combination Agreement”), and as amended and restated by that certain Amended and Restated Business Combination Agreement, dated
as of December 22, 2023 (the “A&R BCA”) (the Initial Business Combination Agreement, as amended and restated by the A&R
BCA, the “Business Combination Agreement”), by and among Clean Earth, Alternus Energy Group Plc (“AEG”) and the
Sponsor. Following the approval of the Initial Business Combination Agreement and the transactions contemplated thereby at the special
meeting of the stockholders of Clean Earth held on December 4, 2023, the Company consummated the Business Combination on December 22,
2023. In accordance with the Business Combination Agreement, Clean Earth issued and transferred
Clean Earth’s only pre-combination assets were cash and investments and the SPAC did not meet the definition of a business in accordance with U.S. GAAP. Therefore, the substance of the transaction was a recapitalization of the target (AEG) rather than a business combination or an asset acquisition. In such a situation, the transaction is accounted for as though the target issued its equity for the net assets of the SPAC and, since a business combination has not occurred, no goodwill or intangible assets would be recorded. As such, AEG is considered the accounting acquirer and these consolidated financial statements represent a continuation of AEG’s financial statements. Assets and liabilities of AEG are presented at their historical carrying values.
6
| Subsidiary | Principal Activity | Date Acquired / Established | ALCE Ownership | Country of Operations | ||||
| Power Clouds S.r.l. | ||||||||
| F.R.A.N. Energy Investment S.r.l. | ||||||||
| PC-Italia-01 S.r.l. | ||||||||
| PC-Italia-03 S.r.l. | ||||||||
| PC-Italia-04 S.r.l. | ||||||||
| Solis Bond Company DAC | ||||||||
| ALT US 03, LLC | ||||||||
| Alternus Energy Americas Inc. | ||||||||
| LJG Green Source Energy Beta S.r.l | ||||||||
| Ecosfer Energy S.r.l. | ||||||||
| Lucas EST S.r.l. | ||||||||
| Risorse Solari I S.r.l. | ||||||||
| Risorse Solari III S.r.l. | ||||||||
| Alternus Iberia S.L. | ||||||||
| AED Italia-01 S.r.l. | ||||||||
| AED Italia-02 S.r.l. | ||||||||
| AED Italia-03 S.r.l. | ||||||||
| AED Italia-04 S.r.l. | ||||||||
| AED Italia-05 S.r.l. | ||||||||
| ALT US 01 LLC | ||||||||
| AEG MH 01 Limited | ||||||||
| AEG MH 02 Limited | ||||||||
| ALT US 02 LLC | ||||||||
| AEG JD 01 Limited | ||||||||
| Alternus Europe Limited (f/k/a AEG JD 03 Limited) | ||||||||
| Alt Spain 03, S.L.U. | ||||||||
| AEG MH 03 Limited | ||||||||
| Lightwave Renewables, LLC | ||||||||
| Alt Spain Holdco, S.L.U. | ||||||||
| AED Italia-06 S.r.l. | ||||||||
| AED Italia-07 S.r.l. | ||||||||
| AED Italia-08 S.r.l. | ||||||||
| ALT US 04 LLC | ||||||||
| Alternus LUX 01 S.a.r.l. | ||||||||
| Alt Spain 04, S.L.U. | ||||||||
| Alt Alliance LLC | ||||||||
| ALT US 05 LLC | ||||||||
| ALT US 06 LLC | ||||||||
| ALT US 07 LLC | ||||||||
| AEG MH 04 Limited | ||||||||
| ALT US 08 LLC | ||||||||
| ALT US AM LLC |
7
2. Going Concern and Management’s Plans
The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Condensed Consolidated Financial Statements are issued. Based on its recurring losses from operations since inception and continued cash outflows from operating activities (all as described below), the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these Condensed Consolidated Financial Statements were issued.
The accompanying consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As shown in the accompanying consolidated financial statements during the period ended March 31, 2024, the Company had net loss from continuing
operations of ($
Our operating revenues are insufficient to fund our operations and our assets already are pledged to secure our indebtedness to various third party secured creditors, respectively. The unavailability of additional financing could require us to delay, scale back, or terminate our acquisition efforts as well as our own business activities, which would have a material adverse effect on the Company and its viability and prospects.
The terms of our indebtedness, including the covenants and the dates on which principal and interest payments on our indebtedness are due, increases the risk that we will be unable to continue as a going concern. To continue as a going concern over the next twelve months, we must make payments on our debt as they come due and comply with the covenants in the agreements governing our indebtedness or, if we fail to do so, to (i) negotiate and obtain waivers of or forbearances with respect to any defaults that occur with respect to our indebtedness, (ii) amend, replace, refinance, or restructure any or all of the agreements governing our indebtedness, and/or (iii) otherwise secure additional capital. However, we cannot provide any assurances that we will be successful in accomplishing any of these plans.
As of March 31, 2024, Solis
was in breach of the three financial covenants under Solis’ Bond terms:
Additionally, because Solis
was unable to fully repay the Solis Bonds by September 30, 2023, Solis’ bondholders have the right to immediately transfer ownership
of Solis and all of its subsidiaries to the bondholders and proceed to sell Solis’ assets to recoup the full amount owed to the
bondholders which as of March 31, 2024 is currently €
8
On October 16 2023, bondholders approved to further extend the temporary waiver to December 16, 2023. On December 18, 2023, a representative group of the bondholders approved an extension of the temporary waivers and the maturity date of the Solis Bonds until January 31, 2024, with the right to further extend to February 29, 2024 at the Solis Bond trustee’s discretion, which was subsequently approved by a majority of the bondholders on January 3, 2024. On March 12, 2024, the Solis Bondholders approved resolutions to further extend the temporary waivers and the maturity date until April 30, 2024 with the right to further extend to May 31, 2024 at the Bond Trustee’s discretion, which it granted, and thereafter on a month-to-month basis to November 29, 2024 at the Bond Trustee’s discretion and approval from a majority of Bondholders. As such, the Solis bond debt is currently recorded as short-term debt.
On December 28, 2023, Solis
sold
On January 18, 2024, Solis
sold
On March 20, 2024, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC therein stating that
for the 32 consecutive business day period between February 2, 2024 through March 19, 2024, the Common Stock had not maintained a minimum
closing bid price of $
On May 6, 2024, the Company
received a letter from the listing qualifications department staff of The Nasdaq Stock Market (“Nasdaq”) notifying the Company
that for the last 30 consecutive business days, the Company’s minimum Market Value of Listed Securities (“MVLS”) was
below the minimum of $
The Company is currently working on several processes to address the going concern issue. We are working with multiple global banks and funds to secure the necessary project financing to execute on our transatlantic business plan.
9
3. Summary of Significant Accounting Policies
Basis of Presentation
The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Restatement of Previously Issued Condensed Consolidated Financial Statements
As described in Note 4 - Restatement of Previously Issued Condensed Consolidated Financial Statements, our condensed consolidated financial statements as of and for the three month periods ended March 31, 2024 are restated in this Quarterly Report on Form 10-Q (this “Amendment No.1”, this “Quarterly Report” or this “Form 10-Q/A”) to reflect the corrections related to the accounting treatment of certain receivables, capitalized interest for on-going construction projects, and loss recognition upon conversion of debt to equity. The restated condensed consolidated financial statements are indicated as “Restated” in the unaudited condensed consolidated financial statements and accompanying notes, as applicable. See Note 4 - Restatement of Previously Issued Condensed Consolidated Financial Statements for further discussion.
The Company assessed the materiality of the error, both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bullentin No. 99, and concluded that the error is material to the Affected Financials based upon quantitative aspects of the error.
Basis of Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The results of subsidiaries acquired or disposed of during the respective periods are included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal, as appropriate. The consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the related notes for the year ended December 31, 2023, contained in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”).
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures to enhance the transparency of income tax disclosures relating to the rate reconciliation, disclosure of income taxes paid, and certain other disclosures. The ASU should be applied prospectively and is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact on the related disclosures; however, it does not expect this update to have an impact on its financial condition or results of operations.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve the disclosures about reportable segments and include more detailed information about a reportable segment’s expenses. This ASU also requires that a public entity with a single reportable segment, provide all of the disclosures required as part of the amendments and all existing disclosures required by Topic 280. The ASU should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact on the financial statements and related disclosures.
4. Restatement of Previously Issued Condensed Consolidated Financial Statements
On August 16, 2024, the Audit Committee of the Board of Directors of the Company, after discussions with the Company’s management and its current and former independent registered public accounting firms, determined that the Company’s unaudited financial statements included in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2024, filed with the SEC on May 21, 2024, as well as the relevant portions of any communication which describe or are based on the unaudited financial statements, should no longer be relied upon.
This Note discloses the nature of the restatement adjustments and discloses the cumulative effects of these adjustments on the condensed consolidated balance sheets, statements of operations, and statements of cash flows for the three months ended March 31, 2024 included in the original Form 10-Q. The condensed consolidated statements of stockholders’ equity/(deficit) for the three months ended March 31, 2024 have also been restated for the correction to net loss.
10
Description of Restatement Adjustments
The categories of the restatement adjustments and their impact on the previously reported condensed consolidated financial statements included in the original Q1 2024 Form 10-Q are described below.
| ● | Accounts Receivable Adjustment – In the sale agreement for the Polish subsidiaries sold on January 18, 2024, there was a € |
| o | The impact to the condensed consolidated balance sheets for the three months ended March 31, 2024 is a decrease in Accounts Receivable, net of $ |
| ● | Capitalized Interest Adjustment – We identified interest on U.S. loans utilized for current construction projects was included as Interest Expense on the Company’s Condensed Consolidated Statements of Operations. Management determined the interest on these loans should be capitalized as part of the cost of the project. This resulted in the reclassification of interest expense to the Company’s Condensed Consolidated Balance Sheets. |
| o | The impact to the condensed consolidated statements of operations for the three months ended March 31, 2024 is a decrease to interest expense of $ | |
| o | The impact to the condensed
consolidated balance sheets for the three months ended March 31, 2024 is an $ | |
| o | The impact to the condensed
consolidated statements of shareholders’ equity/(deficit) for the three months ended March 31, 2024 is an decrease to Accumulated
deficit of $ |
| ● | Gain on Extinguishment of Debt - In January of 2024, the Company issued
|
| o | The impact to the condensed consolidated statements of operations for the three months ended March 31, 2024 is an increase to other income of $ | |
| o | The impact to the condensed consolidated balance sheets for the three months ended March 31, 2024 is a decrease to Additional paid in capital of $ | |
| o | The impact to the condensed consolidated statements of shareholders’ equity/(deficit) for the three months ended March 31, 2024 is a decrease to Additional paid in capital of $ |
Condensed Consolidated Financial Statements – Restatement Reconciliation Tables
In light of the foregoing, in accordance with ASC 250, Accounting Changes and Error Corrections, we are restating the previously issued condensed consolidated financial statements for the three-month period ended March 31, 2024, to reflect the effects of the restatement adjustments, and to make certain corresponding disclosures. In the following tables, we have presented a reconciliation of our condensed consolidated balance sheets, statements of operations, statements of stockholders’ equity/(deficit), and cash flows as previously reported for these prior periods to the restated and revised amounts.
11
| As of March 31, 2024 | ||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| ASSETS | ||||||||||||
| Current Assets | ||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Accounts receivable, net | ( | ) | ||||||||||
| Unbilled energy incentives earned | ||||||||||||
| Prepaid expenses and other current assets | ||||||||||||
| Taxes recoverable | ||||||||||||
| Restricted cash | ||||||||||||
| Current discontinued assets held for sale | ||||||||||||
| Total Current Assets | ||||||||||||
| Property and equipment, net | ||||||||||||
| Right of use asset | ||||||||||||
| Other receivable | ||||||||||||
| Capitalized development cost and other long-term assets, net | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||||||
| Current Liabilities | ||||||||||||
| Accounts payable | $ | $ | $ | |||||||||
| Accrued liabilities | ||||||||||||
| Taxes payable | ||||||||||||
| Deferred income | ||||||||||||
| Operating lease liability | ||||||||||||
| Green bonds | ||||||||||||
| Convertible and non-convertible promissory notes, net of debt issuance costs | ||||||||||||
| Due to affiliate | ||||||||||||
| Current discontinued liabilities held for sale | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Operating lease liability, net of current portion | ||||||||||||
| Asset retirement obligations | ||||||||||||
| Total Liabilities | ||||||||||||
| Shareholders’ Deficit | ||||||||||||
| Preferred stock, $ | ||||||||||||
| Common Stock, $ | ||||||||||||
| Additional paid in capital | ( | ) | ||||||||||
| Foreign Currency Translation Reserve | ( | ) | ( | ) | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | $ | |||||||||
12
| Three Months Ended March 31, 2024 | ||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| Revenues | $ | $ | $ | |||||||||
| Operating Expenses | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ||||||||
| Selling, general and administrative | ( | ) | ( | ) | ||||||||
| Depreciation, amortization, and accretion | ( | ) | ( | ) | ||||||||
| Development Costs | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ||||||||
| Income/(loss) from operations | ( | ) | ( | ) | ||||||||
| Other income/(expense): | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Fair value movement of FPA Asset | ( | ) | ( | ) | ||||||||
| Gain on extinguishment of debt | ||||||||||||
| Other expense | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||
| Total other expenses | ( | ) | ( | ) | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||||||
| Income taxes | ||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||||||
| Discontinued operations: | ||||||||||||
| Loss from operations of discontinued business component | ( | ) | ( | ) | ||||||||
| Gain on sale of discontinued business components | ||||||||||||
| Net income/(loss) from discontinued operations | ||||||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||||||
| Net loss attributable to common stockholders, basic | ( | ) | ( | ) | ||||||||
| Net loss per share attributable to common stockholders, basic | ( | ) | ( | ) | ||||||||
| Net loss per share attributable to common stockholders, diluted | ( | ) | ( | ) | ||||||||
| Weighted-average common stock outstanding, basic | ||||||||||||
| Weighted-average common stock outstanding, diluted | ||||||||||||
| Comprehensive loss: | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||||||
13
| Preferred Stock | Common Stock | Additional Paid-In | Foreign Currency Translation | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Reserve | Deficit | Equity | |||||||||||||||||||||||||
| As Previously Reported | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Settlement of Related Party Debt for Shares | - | |||||||||||||||||||||||||||||||
| Conversion of Debt | - | |||||||||||||||||||||||||||||||
| Merger Costs – Settlement of Related Party Debt and Conversion of Debt | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock Compensation for Third Party Services | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Restatement Adjustments | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Settlement of Related Party Debt for Shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| As Restated | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Settlement of Related Party Debt for Shares | - | |||||||||||||||||||||||||||||||
| Conversion of Debt | - | |||||||||||||||||||||||||||||||
| Merger Costs – Settlement of Related Party Debt and Conversion of Debt | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock Compensation for Third Party Services | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2024, as restated | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
14
| Three Months Ended March 31, 2024 | ||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| Cash Flows from Operating Activities | ||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | $ | ( | ) | |||||
| Adjustments to reconcile net income/(loss) to net cash provided used in operations: | ||||||||||||
| Depreciation, amortization and accretion | ||||||||||||
| Amortization of debt discount | ||||||||||||
| Credit loss expense | ( | ) | ( | ) | ||||||||
| Share-based compensation to third parties | ||||||||||||
| Gain (loss) on foreign currency exchange rates | ||||||||||||
| Fair value movement of FPA Asset | ||||||||||||
| Gain on extinguishment of debt | ( | ) | ( | ) | ||||||||
| Loss on disposal of asset | ||||||||||||
| Non-cash operating lease assets | ( | ) | ( | ) | ||||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable and other short-term receivables | ( | ) | ||||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||||||
| Accounts payable | ||||||||||||
| Accrued liabilities | ( | ) | ( | ) | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||||||
| Payable to affiliate | ||||||||||||
| Net Cash provided by (used in) Operating Activities | $ | ( | ) | $ | $ | ( | ) | |||||
| Net Cash provided by (used in) Operating Activities - Discontinued Operations | ( | ) | ( | ) | ||||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||||||
| Sales of property and equipment | ||||||||||||
| Capitalized Cost | ( | ) | ( | ) | ||||||||
| Construction in Process | ( | ) | ( | ) | ( | ) | ||||||
| Net Cash provided by (used in) Investing Activities | $ | $ | ( | ) | $ | |||||||
| Net Cash provided by (used in) Investing Activities - Discontinued Operations | ||||||||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Proceeds from debt | ||||||||||||
| Debt Issuance Cost | ( | ) | ( | ) | ||||||||
| Payments of debt principal | ( | ) | ( | ) | ||||||||
| Distributions to parent | ||||||||||||
| Contributions from parent | ||||||||||||
| Net Cash provided by (used in) Financing Activities | $ | ( | ) | $ | $ | ( | ) | |||||
| Net Cash provided by (used in) Financing Activities - Discontinued Operations | ( | ) | ( | ) | ||||||||
| Effect of exchange rate on cash | ( | ) | ( | ) | ||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | ( | ) | $ | $ | ( | ) | |||||
| Cash, cash equivalents, and restricted cash beginning of the year | ||||||||||||
| Cash, cash equivalents, and restricted cash end of the year | $ | $ | $ | |||||||||
| Cash Reconciliation | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Restricted cash | ||||||||||||
| Cash, cash equivalents, and restricted cash end of the year | $ | $ | $ | |||||||||
15
Summary of Restatement - Consolidated Supplemental Statements of Cash Flows
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| Supplemental Cash Flow Disclosure | ||||||||||||
| Cash paid during the period for: | ||||||||||||
| Interest (net of capitalized interest of 872 and 64 respectively) | ( | ) | ||||||||||
| Taxes | ||||||||||||
| Non-cash financing activities: | ||||||||||||
| Shares issued for settlement of debt | ||||||||||||
| Shares issued for conversion of debt | ||||||||||||
| Shares issued for stock compensation to third parties | ||||||||||||
5. Business Combination
As discussed in Note 1 – Organization and Formation, on December 22, 2023, Clean Earth Acquisitions Corp. (“CLIN”), Alternus Energy Group Plc (“AEG”) and Clean Earth Acquisition Sponsor LLC (the “Sponsor”) completed the Business Combination. Upon the Closing of the Business Combination, the following occurred:
| ● | In
connection with the Business Combination, AEG transferred to CLIN all issued and outstanding AEG interests in certain of its subsidiaries
(the “Acquired Subsidiaries”) in exchange for the issuance by CLIN at the Closing of |
| ● | In
connection with the Business Combination, |
| ● | In
addition to shares issued to AEG noted above, |
| ● | Each
share of CLIN Class A common stock held by the CLIN Sponsor prior to the closing of the Business Combination, which totaled |
16
| ● | Each
share of CLIN common stock subject to possible redemption that was not redeemed prior to the closing of the Business Combination, which
totaled |
| ● | In
connection with the Business Combination, an investor that provided the Company funding through a promissory note, was due to receive
warrants to purchase |
| ● | In connection with the Business Combination, CLIN entered into a Forward Purchase Agreement (the “FPA”) with certain accredited investors (the “FPA Investors”) that gave the FPA Investors the right, but not an obligation, to purchase up to |
| ● | The proceeds received by the Company from the Business Combination, net of the FPA and transaction costs, totaled $ |
| Number of Shares | ||||
| Exchange of CLIN common stock subject to possible redemption that was not redeemed for Alternus Clean Energy Inc. common stock | ||||
| Exchange of public share rights held by CLIN shareholders for Alternus Clean Energy Inc. common stock | ||||
| Issuance of Alternus Clean Energy, Inc. common stock to promissory note holders | ||||
| Exchange of CLIN Class A common stock held by CLIN Sponsor for Alternus Clean Energy Inc. common stock | ||||
| Subtotal - Business Combination, net of redemptions | ||||
| Issuance of shares under the FPA | ||||
| Shares purchased by the accredited investor under the FPA | ||||
| Issuance of Alternus Clean Energy Inc. common stock to Alternus Energy Group Plc. on the Closing Date | ||||
| Issuance of Alternus Clean Energy Inc. common stock to the CLIN Sponsor as a holder of CLIN convertible notes on the Closing Date | ||||
| Total – Alternus Clean Energy Inc. common stock outstanding as a result of the Business Combination, FPA, exchange of Acquired Subsidiaries’ shares for shares of Alternus Clean Energy Inc. and issuance of Alternus Clean Energy Inc. common stock the holder of CLIN convertible notes. | ||||
17
6. Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Inputs used to measure fair value are prioritized within a three-level fair value hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
On December 3, 2023, the Company entered into an agreement with (i) Meteora Capital Partners, LP, (ii) Meteora Select Trading Opportunities Master, LP, and (iii) Meteora Strategic Capital, LLC (collectively “Meteora”) for OTC Equity Prepaid Forward Transactions (the “FPA”). The purpose of the FPA was to decrease the amount of redemptions in connection with the Company’s Special Meeting and potentially increase the working capital available to the Company following the Business Combination.
Pursuant to the terms of the
FPA, Meteora purchased
The Company holds various financial instruments that are not required to be recorded at fair value. For cash, restricted cash, accounts receivable, accounts payable, and short-term debt the carrying amounts approximate fair value due to the short maturity of these instruments.
The fair value of the Company’s recorded forward purchase agreement (“FPA”) is determined based on unobservable inputs that are not corroborated by market data, which require a Level 3 classification. A Monte Carlo simulation model was used to determine the fair value. The Company records the forward purchase agreement at fair value on the consolidated balance sheets with changes in fair value recorded in the consolidated statements of operation.
| Fair Value Measurement | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Forward Purchase Agreement | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
18
| Forward Purchase Agreement | ||||
| Balance at January 1, 2023 | $ | |||
| Recognition of Forward Purchase Agreement Asset | ||||
| Change in fair value | ( | ) | ||
| Balance at December 31, 2023 | ||||
| Change in fair value | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Forward Purchase Agreement | ||||
| Risk-free rate | ||||
| Underlying stock price | $ | |||
| Expected volatility | ||||
| Term | ||||
| Dividend yield | ||||
7. Accounts Receivable
Accounts receivable relate
to amounts due from customers for services that have been performed and invoices that have been sent. Unbilled energy incentives relate
to services that have been performed for the customer but have yet to be invoiced.
| March 31 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| (in thousands) | ||||||||
| Accounts receivable | $ | $ | ||||||
| Unbilled energy incentives earned | ||||||||
| Total | $ | $ | ||||||
8. Prepaid Expenses and Other Current Assets
Prepaid and other current
expenses generally consist of amounts paid to vendors for services that have not yet been performed.
| March 31 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| (in thousands) | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
| Accrued revenue | ||||||||
| Other receivable | ||||||||
| Total | $ | $ | ||||||
19
9. Property and Equipment, Net
| March 31 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| (in thousands) | ||||||||
| Solar energy facilities | $ | $ | ||||||
| Land | ||||||||
| Software and computers | ||||||||
| Furniture and fixtures | ||||||||
| Asset retirement | ||||||||
| Construction in progress | ||||||||
| Total property and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
10. Capitalized development cost and other long-term assets
Capitalized development costs
are amounts paid to vendors that are related to the purchase and construction of solar energy facilities. Notes receivable and prepaids
consist of amounts owed to the Company as well as amounts paid to vendors for services that have yet to be received by the Company.
| March 31 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Capitalized development cost | $ | $ | ||||||
| Other receivables | ||||||||
| Total | $ | $ | ||||||
Capitalized development cost relates to various projects that are under development for the period. As the Company closes either a purchase or development of new solar parks, these development costs are added to the final asset displayed in Property and Equipment. If the Company does not close on the prospective project, these costs are written off to Development Cost on the Consolidated Statement Operations and Comprehensive Loss.
Capitalized Development Cost
consist of $
Other Receivables as of March
31, 2024 relates to a security deposit of $
11. Deferred Income
| Activity | ||||
| Deferred income – Balance January 1, 2023 | $ | |||
| Green certificates received | ||||
| Green certificates sold | ( | ) | ||
| Foreign exchange gain/(loss) | ||||
| Deferred income – Balance December 1, 2023 | $ | |||
| Green certificates received | ||||
| Green certificates sold | ( | ) | ||
| Foreign exchange gain/(loss) | ( | ) | ||
| Deferred income – Balance March 31, 2024 | $ | |||
20
12. Accrued Liabilities
| March 31 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Accrued legal | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued financing cost | ||||||||
| Accrued construction expense | ||||||||
| Accrued transaction cost - business combination | ||||||||
| Accrued audit fees | ||||||||
| Accrued payroll | ||||||||
| Other accrued expenses | ||||||||
| Total | $ | $ | ||||||
13. Taxes Recoverable and Payable
| March 31 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Taxes recoverable | $ | $ | ||||||
| Less: Taxes payable | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
14. Green Bonds, Convertible and Non-convertible Promissory Notes
| As of March 31 | As of December 31 | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Senior Secured Green Bonds | $ | $ | ||||||
| Senior Secured debt and promissory notes secured | ||||||||
| Total debt | ||||||||
| Less current maturities | ( | ) | ( | ) | ||||
| Long term debt, net of current maturities | $ | $ | ||||||
| Current Maturities | $ | $ | ||||||
| Less current debt discount | ( | ) | ( | ) | ||||
| Current Maturities net of debt discount | $ | $ | ||||||
21
The Company incurred debt
issuance costs of $
There was no interest expense stemming from amortization of debt discounts for discontinued operations for the three months ended March 31, 2024 and 2023, respectively.
All outstanding debt for the company is considered short-term based on their respective maturity dates and are to be repaid within the year 2024.
Senior secured debt:
In May 2022, AEG MH02 entered
into a loan agreement with a group of private lenders of approximately $
In June 2022, Alt US 02, a
subsidiary of Alternus Energy Americas, and indirect wholly owned subsidiary of the Company, entered into an agreement as part of the
transaction with Lightwave Renewables, LLC to acquire rights to develop a solar park in Tennessee. The Company entered into a construction
promissory note of $
On February 28, 2023, Alt
US 03, a subsidiary of Alternus Energy Americas, and indirect wholly owned subsidiary of the Company, entered into an agreement as part
of the transaction to acquire rights to develop a solar park in Tennessee. Alt US 03 entered into a construction promissory note of $
In July 2023, one of the Company’s
US subsidiaries acquired a 32 MWp solar PV project in Tennessee for $
In July 2023, Alt Spain Holdco,
one of the Company’s Spanish subsidiaries acquired the project rights for a 32 MWp portfolio of Solar PV projects in Valencia, Spain,
with an initial payment of $
22
In October 2023, Alternus
Energy Americas, one of the Company’s US subsidiaries secured a working capital loan in the amount of $
In December 2023, Alt US 07,
one of the Company’s US subsidiaries acquired the project rights to a 14 MWp solar PV project in Alabama for $
For the year ended December
31, 2023,
Convertible Promissory Notes:
In January 2024, the
Company assumed a $
Other Debt:
In January 2021, the Company
approved the issuance by one of its subsidiaries, Solis, of a series of
As of March 31, 2024, Solis was in breach of the
three financial covenants under Solis’ Bond terms:
23
Additionally, because Solis
was unable to fully repay the Solis Bonds by September 30, 2023, Solis’ bondholders have the right to immediately transfer ownership
of Solis and all of its subsidiaries to the bondholders and proceed to sell Solis’ assets to recoup the full amount owed to the
bondholders which as of March 31, 2024 is currently €
On October 16 2023, bondholders approved to further extend the temporary waiver to December 16, 2023. On December 18, 2023, a representative group of the bondholders approved an extension of the temporary waivers and the maturity date of the Solis Bonds until January 31, 2024, with the right to further extend to February 29, 2024 at the Solis Bond trustee’s discretion, which was subsequently approved by a majority of the bondholders on January 3, 2024. On March 12, 2024, the Solis Bondholders approved resolutions to further extend the temporary waivers and the maturity date until April 30, 2024 with the right to further extend to May 31, 2024 at the Bond Trustee’s discretion, which it granted, and thereafter on a month-to-month basis to November 29, 2024 at the Bond Trustee’s discretion and approval from a majority of Bondholders. As such, the Solis bond debt is currently recorded as short-term debt.
On December 28, 2023, Solis
sold
On January 18, 2024, Solis
sold
On December 21, 2022, the
Company’s wholly owned Irish subsidiaries, AEG JD 01 LTD and AEG MH 03 LTD entered in a financing facility with Deutsche Bank AG
(“Lender”). This is an uncommitted revolving debt financing of €
24
On March 21, 2024, ALCE and
the Sponsor of Clean Earth (“CLIN”) agreed to a settlement of a $
15. Leases
The Company determines if
an arrangement is a lease or contains a lease at inception or acquisition when the Company acquires a new park. The Company has operating
leases for corporate offices and land with remaining lease terms of
Operating lease assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at the commencement date. As most of the Company’s leases do not provide an implicit rate, the Company estimates its incremental borrowing rate based on information available at the commencement date in determining the present value of future payments. Lease expense related to the net present value of payments is recognized on a straight-line basis over the lease term.
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Operating Lease - Operating Cash Flows (Fixed Payments) | ||||||||
| Operating Lease - Operating Cash Flows (Liability Reduction) | ||||||||
| New ROU Assets - Operating Leases | ||||||||
| Weighted Average Lease Term - Operating Leases (years) | ||||||||
| Weighted Average Discount Rate - Operating Leases | % | % | ||||||
The Company’s operating leases generally relate to the rent of office building space as well as land and rooftops upon which the Company’s solar parks are built. These leases include those that have been assumed in connection with the Company’s asset acquisitions and business combinations. The Company’s leases are for varying terms and expire between 2027 and 2051.
In October 2023, the Company
entered a new lease for land in Madrid, Spain where solar parks are planned to be built. The lease term is
| (in thousands) | ||||
| Five-year lease schedule: | ||||
| 2024 Apr 1 – Dec 31 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total | $ | |||
The Company had no finance leases as of March 31, 2024.
25
16. Commitments and Contingencies
Litigation
The Company recognizes a liability for loss contingencies when it believes it is probable a liability has occurred and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. The Company has established an accrual for those legal proceedings and regulatory matters for which a loss is both probable and the amount can be reasonably estimated.
On May 4, 2023 Alternus received
notice that Solartechnik, an international group specializing in solar installations, filed an arbitration claim against Alternus Energy
Group PLC, Solis Bond Company DAC, and ALT POL HC 01 SP. Z.o.o. in the Court of Arbitration at the Polish Chamber of Commerce, claiming
that PLN
Contingencies
Amendment to Agreement with Hover Energy, LLC
On October 31, 2023, the Company
amended its agreement with Hover Energy, LLC to extend the remaining $
17. Asset Retirement Obligations
The Company’s AROs mostly
relate to the retirement of solar park land or buildings.
| Activity | ||||
| ARO Liability - Balance January 1, 2023 | $ | |||
| Additional obligations incurred | ||||
| Disposals | ( | ) | ||
| Accretion expense | ||||
| Foreign exchange gain/(loss) | ||||
| ARO Liability - Balance December 31, 2023 | $ | |||
| Additional obligations incurred | ||||
| Disposals | ||||
| Accretion expense | ||||
| Foreign exchange gain/(loss) | ( | ) | ||
| ARO Liability -- March 31, 2024 | $ | |||
26
18. Development Cost
The Company depends heavily on government policies that support our business and enhance the economic feasibility of developing and operating solar energy projects in regions in which we operate or plan to develop and operate renewable energy facilities. The Company can decide to abandon a project if it becomes uneconomic due to various factors, for example, a change in market conditions leading to higher costs of construction, lower energy rates, political factors or otherwise where governments from time to time may review their laws and policies that support renewable energy and consider actions that would make the laws and policies less conducive to the development and operation of renewable energy facilities, or other factors that change the expected returns on the project. Any reductions or modifications to, or the elimination of, governmental incentives or policies that support renewable energy or the imposition of additional taxes or other assessments on renewable energy could result in, among other items, the lack of a satisfactory market for the development and/or financing of new renewable energy projects, our abandoning the development of renewable energy projects, a loss of our investments in the projects, and reduced project returns, any of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
| Miscellaneous development cost | $ | |||
| Total | $ |
Miscellaneous development cost relates to cost associated with projects abandoned during various phases, due to lack of technical, legal, or financial feasibility.
19. Discontinued Operations Sold
In July 2023, the Company engaged multiple parties to market the Polish and Netherlands assets to potential buyers. In the fourth quarter of 2023, the Company decided to proceed with the sales of the 6 PV parks in Poland and 1 park in the Netherlands. As the exit of these two markets represented a strategic shift for the Company, the assets were classified as discontinued operations in accordance with ASC 205-20. As of December 31, 2023, the Polish and Netherlands assets were classified as disposal groups held for sale. The balances and results of the Polish and Netherlands disposal groups are presented below.
The sale of the Polish assets
was finalized January 19, 2024 with a cash consideration of $
| As of January 19 | As of December 31 | |||||||
| Poland | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Assets: | ||||||||
| Cash & cash equivalents | $ | $ | ||||||
| Other current assets | ||||||||
| Property, plant, and equipment, net | ||||||||
| Operating leases, non-current - assets | ||||||||
| Total assets held for sale | $ | $ | ||||||
| Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Operating leases, current – liabilities | ||||||||
| Other current liabilities | ||||||||
| Operating leases, non-current - liabilities | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities to be disposed of | $ | $ | ||||||
| Net assets held for sale | $ | $ | ||||||
27
| Three Months Ended March 31 | ||||||||
| Poland | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Revenues | $ | $ | ||||||
| Operating Expenses | ||||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Depreciation, amortization, and accretion | ( | ) | ( | ) | ||||
| Gain on disposal of asset | ||||||||
| Total operating expenses | ( | ) | ||||||
| Income/(loss) from discontinued operations | ( | ) | ||||||
| Other income/(expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other expenses | $ | ( | ) | $ | ( | ) | ||
| Income/(Loss) before provision for income taxes | $ | ( | ) | |||||
| Net income/(loss) from discontinued operations | $ | $ | ( | ) | ||||
| Impact of discontinued operations on EPS | ||||||||
| Net income/(loss) attributable to common stockholders, basic | $ | $ | ( | ) | ||||
| Net income/(loss) attributable to common stockholders, diluted | ( | ) | ||||||
| Net income/(loss) per share attributable to common stockholders, basic | $ | $ | ( | ) | ||||
| Net income/(loss) per share attributable to common stockholders, diluted | ( | ) | ||||||
| Weighted-average common stock outstanding, basic | ||||||||
| Weighted-average common stock outstanding, diluted | ||||||||
| As of February 21, | As of December 31 | |||||||
| Netherlands | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Assets: | ||||||||
| Cash & cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other current assets | ||||||||
| Property, plant, and equipment, net | ||||||||
| Operating leases, non-current – assets | ||||||||
| Other non-current assets | ||||||||
| Total assets held for sale | $ | $ | ||||||
| Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Operating leases, current – liabilities | ||||||||
| Other current liabilities | ||||||||
| Operating leases, non-current – liabilities | ||||||||
| Total liabilities to be disposed of | $ | $ | ||||||
| Net assets held for sale | $ | $ | ||||||
28
| Three Months Ended March 31 | ||||||||
| Netherlands | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Revenues | $ | $ | ||||||
| Operating Expenses | ||||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Depreciation, amortization, and accretion | ( | ) | ( | ) | ||||
| Loss on disposal of asset | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Income/(loss) from discontinued operations | ( | ) | ||||||
| Other income/(expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other expenses | $ | ( | ) | $ | ( | ) | ||
| Loss before provision for income taxes | $ | ( | ) | $ | ( | ) | ||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
| Impact of discontinued operations on EPS | ||||||||
| Net loss attributable to common stockholders, basic | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to common stockholders, diluted | ( | ) | ( | ) | ||||
| Net loss per share attributable to common stockholders, basic | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable to common stockholders, diluted | ( | ) | ( | ) | ||||
| Weighted-average common stock outstanding, basic | ||||||||
| Weighted-average common stock outstanding, diluted | ||||||||
20. Italy Sale Disclosure
In June 2023 the Company engaged
an Italian firm to market the Company’s operating assets in Italy. During the fourth quarter of 2023 a buyer was identified, and
the sale of the assets was finalized on December 28, 2023. The Company received a cash consideration of $
| As of March 31, | Year Ended December 31, | |||||||
| Italy | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Assets: | ||||||||
| Cash & cash equivalents | $ | $ | ||||||
| Other current assets | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Net assets | $ | $ | ||||||
29
| Three Months Ended March 31, | ||||||||
| Italy | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Revenues | $ | $ | ||||||
| Operating Expenses | ||||||||
| Cost of revenues | ( | ) | ||||||
| Selling, general, and administrative | ( | ) | ( | ) | ||||
| Depreciation, amortization, and accretion | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||
| Other income/(expense): | ||||||||
| Other expense | ( | ) | ||||||
| Total other expenses | $ | $ | ( | ) | ||||
| Loss before provision for income taxes | $ | ( | ) | $ | ( | ) | ||
| Income taxes | ||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
| Impact on EPS | ||||||||
| Net loss attributable to common stockholders, basic | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to common stockholders, diluted | ( | ) | ( | ) | ||||
| Net loss per share attributable to common stockholders, basic | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable to common stockholders, diluted | ( | ) | ( | ) | ||||
| Weighted-average common stock outstanding, basic | ||||||||
| Weighted-average common stock outstanding, diluted | ||||||||
21. Shareholders’ Equity
Common Stock
As of December 31, 2023, the
Company had a total of
On January 23, 2024, the Company
entered into a six-month marketing services agreement. The Company issued
On February 20, 2024, the
Company entered into a two-month marketing services agreement. The Company issued
Preferred Stock
As of March 31, 2024 and December
31, 2023, the Company also had a total of
30
Warrants
As of December 31, 2023, warrants
to purchase up to
| Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding - December 31, 2022 | $ | |||||||||||
| Issued during the quarter | ||||||||||||
| Expired during the quarter | ||||||||||||
| Outstanding – March 31, 2023 | ||||||||||||
| Exercisable – March 31, 2023 | $ | |||||||||||
| Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding - December 31, 2023 | $ | |||||||||||
| Issued during the quarter | ||||||||||||
| Expired during the quarter | ||||||||||||
| Outstanding – March 31, 2024 | ||||||||||||
| Exercisable – March 31, 2024 | $ | |||||||||||
22. Segment and Geographic Information
The Company has
The European Segment derives revenues from three sources, Country Renewable Programs, Green Certificates and Long-term Offtake Agreements. The US Segment revenues are derived from Long-term Offtake Agreements.
In evaluating financial performance, we focus on EBITDA, a non-GAAP measure, as a segment’s measure of profit or loss. EBITDA is
defined as earnings before interest expense, income tax expense, depreciation and amortization. The Company uses EBITDA because management
believes that it can be a useful financial metric in understanding the Company’s earnings from operations. EBITDA is not a measures
of the Company’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance
measure derived in accordance with GAAP. As a trans-Atlantic independent solar power provider, we evaluate many of our capital expenditure
decisions at a regional level. Accordingly, expenditures on property, plant and equipment and associated debt by segment are presented.
| Three Months Ended March 31 | ||||||||
| Revenue by Segment | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Europe | $ | $ | ||||||
| Europe – Discontinued Operations | ||||||||
| United States | ||||||||
| Total for the period | $ | $ | ||||||
31
| Three Months Ended March 31 | ||||||||
| Operating Loss by Segment | 2024 | 2023 | ||||||
| (As Restated) | ||||||||
| (in thousands) | ||||||||
| Europe | $ | ( | ) | $ | ( | ) | ||
| United States | ( | ) | ( | ) | ||||
| Total for the period | $ | ( | ) | $ | ( | ) | ||
| As of March 31, | As of December 31 | |||||||
| Assets by Segment | 2024 | 2023 | ||||||
| (As Restated) | ||||||||
| (in thousands) | ||||||||
| Europe | ||||||||
| Fixed Assets | $ | $ | ||||||
| Other Assets | ||||||||
| Total for Europe | $ | $ | ||||||
| United States | ||||||||
| Fixed Assets | $ | $ | ||||||
| Other Assets | ||||||||
| Total for US | $ | $ | ||||||
| As of March 31, | As of December 31, | |||||||
| Liabilities by Segment | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Europe | ||||||||
| Debt | $ | $ | ||||||
| Other Liabilities | ||||||||
| Total for Europe | $ | $ | ||||||
| United States | ||||||||
| Debt | $ | $ | ||||||
| Other Liabilities | ||||||||
| Total for US | $ | $ | ||||||
| Three Months Ended March 31 | ||||||||
| Revenue by Product Type | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Country Renewable Programs (FIT) | ||||||||
| Europe | $ | $ | ||||||
| US | ||||||||
| Total for the period | $ | $ | ||||||
| Green Certificates (FIT) | ||||||||
| Europe | $ | $ | ||||||
| US | ||||||||
| Total for the period | $ | $ | ||||||
| Energy Offtake Agreements (PPA) | ||||||||
| Europe | $ | $ | ||||||
| United States | ||||||||
| Total for the period | $ | $ | ||||||
32
| Three Months Ended March 31, | ||||||||
| EBITDA by Segment | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Europe | $ | $ | ||||||
| US | ( | ) | ( | ) | ||||
| Total for the period | $ | ( | ) | $ | ||||
Below is a reconciliation of net income to EBITDA and adjusted EBITDA for the periods presented:
| Three Months Ended March 31, | ||||||||
| EBITDA Reconciliation to Net Loss | 2024 | 2023 | ||||||
| (As Restated) | ||||||||
| (in thousands) | ||||||||
| Europe | ||||||||
| EBITDA | $ | $ | ||||||
| Depreciation, amortization, and accretion | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Income taxes | - | - | ||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| US | ||||||||
| EBITDA | $ | ( | ) | $ | ( | ) | ||
| Depreciation, amortization, and accretion | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Income taxes | - | - | ||||||
| Valuation on FPA Asset | ( | ) | - | |||||
| Gain on extinguishment of debt | - | |||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Consolidated Net Loss | $ | ( | ) | $ | ( | ) | ||
23. Income Tax Provision
The Company’s provision
from income taxes for interim periods is determined using its effective tax rate expected to be applied for the full year. The Company’s
effective tax rate was
The Company assesses the realizability of the deferred tax assets at each reporting date. The Company continues to maintain a full valuation allowance for its net deferred tax assets. If certain substantial changes in the entity’s ownership occur, there may be an annual limitation on the amount of the carryforwards that can be utilized. The Company will continue to assess the need for a valuation allowance on its deferred tax assets.
33
24. Related Party
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.
AEG:
Alternus Energy Group Plc
(“AEG”) was an eighty percent (
In January 2024, the Company assumed a $
Nordic ESG
In January of 2024, the Company
issued
Sponsor:
Clean Earth Acquisitions Sponsor
LLC (“Sponsor”) was the founder and controlling shareholder of the Company during the year ended December 31, 2023 and up
to the Business Combination Closing Date, December 22, 2023, when Sponsor became an
In order to fund working capital
deficiencies or finance transaction costs in connection with a business combination, the Sponsor initially loaned $
34
On December 18, 2023, the
Sponsor entered into a non-redemption agreement (the “NRA”) with the Company and the investor named therein (the “Investor”).
Pursuant to the terms of the NRA, among other things, the Investor agreed to withdraw redemptions in connection with the Business Combination
on any Common Stock, held by the Investor and to purchase additional Common Stock from redeeming stockholders of the Company such that
the Investor will be the holder of no fewer than
On March 19, 2024 we entered
into a settlement agreement with the Sponsor and SPAC Sponsor Capital Access (“SCA”) pursuant to which, among other things,
we agreed to repay Sponsor’s debt to SCA, related to the CLIN SPAC entity extensions, in the amount of $
D&O:
In connection with the Business Combination Closing, the Company entered into indemnification agreements (each, an “Indemnification Agreement”) with its directors and executive officers. Each Indemnification Agreement provides for indemnification and advancements by the Company of certain expenses and costs if the basis of the indemnitee’s involvement in a matter was by reason of the fact that the indemnitee is or was a director, officer, employee, or agent of the Company or any of its subsidiaries or was serving at the Company’s request in an official capacity for another entity, in each case to the fullest extent permitted by the laws of the State of Delaware.
Consulting Agreements:
On May 15, 2021 VestCo Corp.,
a company owned and controlled by our Chairman and CEO, Vincent Browne, entered into a Professional Consulting Agreement with one of our
US subsidiaries under which it pays VestCo a monthly fee of $
In July of 2023, John Thomas,
one of our directors, entered into a Consulting Services Agreement with one of our US subsidiaries under which it pays Mr. Thomas a monthly
fee of $
| Three Months Ended March 31, | ||||||||
| Transactions with Directors | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Loan from Vestco, a related party to Board member and CEO Vincent Browne | $ | $ | ||||||
| Total | $ | $ | ||||||
| Three Months Ended March 31, | ||||||||
| Director’s remuneration | 2024 | 2023 | ||||||
| (in thousands) | ||||||||
| Remuneration in respect of services as directors | $ | $ | ||||||
| Remuneration in respect to long term incentive schemes | ||||||||
| Total | $ | $ | ||||||
35
25. Subsequent Events
Management has evaluated subsequent events that have occurred through May 21, 2024, which is the date the financial statements were available to be issued and has determined that there were no subsequent events that required recognition or disclosure in the financial statements as of and for the period ended March 31, 2024, except as disclosed below.
On April 19, 2024, the Company
entered into a Securities Purchase Agreement (the “Purchase Agreement”), by and between the Company and an institutional investor
(the “Investor”), pursuant to which the Company agreed to issue to the Investor a senior convertible note in the principal
amount of $
The Convertible Note matures
on April 20, 2025 and bears interest at a rate of seven percent (
Additionally on April 19,
2024, Maxim Group LLC served as the sole placement agent (the “Placement Agent”) and the Company agreed to issue the Placement
Agent a warrant to purchase up to an aggregate of
On April 24, 2024, AEG PLC,
a
On April 25, 2024 Joseph E. Duey, the Company’s Chief Financial Officer, resigned, effective as of April 30, 2024. Mr. Duey will be available to the Company on an as needed basis until May 31, 2024 to provide transitional services and otherwise assist as needed. Mr. Duey has advised the Company that his decision to step down from the role of Chief Financial Officer was not based on any disagreement with the Company on any matter relating to its operations, policies or practices. Mr. Duey is pursuing outside interests not in the renewable energy industry. Vincent Browne, the Company’s Chief Executive Officer, will act as interim Chief Financial Officer. The Company will be seeking a suitable replacement in due course.
On April 30, 2024 AEG and
Solis Bond Company, an indirect wholly owned subsidiary and related party, announced that the Bond Trustee granted a technical extension
of the Maturity Date until 31 May 2024. As was previously disclosed on 26 February 2024, the Bond Trustee, with approval from a majority
of the Bondholders, may further extend the Bonds on a month to month basis to 29 November 2024. On May 1, 2024 Solis made an interest
payment of EUR
36
On April 30, 2024, ALT US
01 LLC (“ALT”), an indirect wholly owned subsidiary and related party, entered into a Membership Interest Purchase and Sale
Agreement (the “MIPA”) by and among ALT and C2 Taiyo Fund I, LP (“C2”). Pursuant to the MIPA C2 will sell to ALT
100% of the membership interests in Taiyo Holding LLC (“Target”). The Target owns a portfolio of special purchase vehicles
(SPVs) which own and operate a portfolio of solar parks across the United States, with a maximum total production capacity of approximately
80.7 MWp. In exchange, ALT will pay to C2 a Purchase Price (as defined in the MIPA) of approximately $
On
May 6, 2024, the Company received a letter from the listing qualifications department staff of The Nasdaq Stock Market (“Nasdaq”)
notifying the Company that for the last 30 consecutive business days, the Company’s minimum Market Value of Listed Securities (“MVLS”)
was below the minimum of $
On May 8, 2024 we issued
On May 15, 2024, Mohammed Javade Chaudhri, a Class I director of Alternus Clean Energy, Inc. (the “Company”), notified the Company that they will resign from the Company’s Board of Directors (the “Board”) effective immediately. Mr. Chaudhri’s decision to resign from the Board is solely for personal reasons and is not the result of any disagreement with the Company’s operations, policies or procedures, or any disagreements in respect of accounting principles, financial statement disclosure, or any issue impacting on the committees of the Board on which they served.
37
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2024. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and those discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC.
Restatement of Previously Issued Condensed Consolidated Financial Statements
In this Quarterly Report on Form 10-Q/A, we have restated our previously issued condensed consolidated financial statements as of March 31, 2024. Refer to the “Explanatory Note” preceding “Item 1. Financial Statements (unaudited)” for background on the restatement, the fiscal periods impacted, control considerations, and other information. As a result, we have also restated certain previously reported financial information as of March 31, 2024 in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, including but not limited to information within the “Consolidated Results of Operations” section to conform the discussion with the appropriate restated amounts. See “Item 1. Financial Statements (unaudited)—Notes to Condensed Consolidated Financial Statements—Note 4. Restatement of Previously Issued Condensed Consolidated Financial Statements,” for additional information related to the restatement.
Overview
The Company is a transatlantic integrated clean energy independent power producer. The Company develops, builds, owns, and operates a diverse portfolio of utility scale solar photo-voltaic (PV) parks that connect directly to national power grids. As of March 31, 2024, the Company’s revenue streams are generated from long-term, government-mandated, fixed price supply contracts with terms of between 15-20 years in the form of either government feed in tariffs (FIT), power purchase agreements (PPA) with investment grade off-takers, and other energy incentives. Of the Company’s current annual revenues, approximately 78% are generated from long-term contracts and 22% by sales to the general energy market in the countries the Company operates. The Company’s goal is to own and operate over 3.0 giga-watts (GWs) of solar parks over the next five years.
The Company was incorporated in Delaware on May 14, 2021, and was originally known as Clean Earth Acquisitions Corp. (“Clean Earth”).
On October 12, 2022, Clean Earth entered into a Business Combination Agreement, as amended by that certain First Amendment to the Business Combination Agreement, dated as of April 12, 2023 (the “First BCA Amendment”) (as amended by the First BCA Amendment, the “Initial Business Combination Agreement”), and as amended and restated by that certain Amended and Restated Business Combination Agreement, dated as of December 22, 2023 (the “A&R BCA”) (the Initial Business Combination Agreement, as amended and restated by the A&R BCA, the “Business Combination Agreement”), by and among Clean Earth, Alternus Energy Group Plc (“AEG”) and the Sponsor. Following the approval of the Initial Business Combination Agreement and the transactions contemplated thereby at the special meeting of the stockholders of Clean Earth held on December 4, 2023, the Company consummated the Business Combination on December 22, 2023. In accordance with the Business Combination Agreement, Clean Earth issued 57,500,000 shares of common stock of Clean Earth, par value $0.0001 per share, to AEG, and AEG transferred to Clean Earth, and Clean Earth received from AEG, all of the issued and outstanding equity interests in the Acquired Subsidiaries (as defined in the Business Combination Agreement) (the “Equity Exchange,” and together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). In connection with the Closing, the Company changed its name from Clean Earth Acquisition Corp. to Alternus Clean Energy, Inc.
The Company uses annual recurring revenues as a key metric in its financial management information and believes this method better reflects the long-term stability of operations into the future. Annual recurring revenues are defined as the estimated future revenue generated by operating solar parks based on the remaining term, the price received per mega-watt hour (MWh) of energy produced multiplied by the estimated production from each solar park over a full year of operation. It should be noted that the actual revenues reported by the Company in a particular year may be lower than the annual recurring revenues because not all parks may be revenue generating for the full year in their first year of operation. The Company must also account for the timing of acquisitions that take place throughout the financial year.
38
Impacts of the Ukraine/Russia conflict
The geopolitical situation in Eastern Europe intensified on February 24, 2022, with Russia’s invasion of Ukraine. The war between the two countries continues to evolve as military activity proceeds and additional sanctions are imposed. In addition to the human toll and impact of the events on entities that have operations in Russia, Ukraine, or neighboring countries (e.g., Belarus, Poland, Romania) or that conduct business with their counterparties, the war is increasingly affecting economic and global financial markets and exacerbating ongoing economic challenges, including issues such as rising inflation and global supply-chain disruption. These events have not impacted the physical operations of our facilities in Romania. However, the Company has seen fluctuations in energy rates due to inflation, increased interest rates, and other macro-economic factors.
Known trends or Uncertainties
The Company has a working capital deficiency and negative equity, and management has determined there is doubt about the Company’s ability to continue as a going concern, if planned financing and/or equity raises do not complete. Refer to Footnote 2 of the accompanying financial statements.
The Company is currently working on several processes to address the going concern issue. We are working with multiple global banks and funds to secure the necessary corporate and project level financing to execute our transatlantic business plan.
Competitive Strengths
The Company believes that the following competitive strengths contribute to its success and differentiate the Company from its competitors:
| ● | The Company is an Independent Power Producer and is comfortable operating across all aspects of the solar PV value chain from development through long-term operational ownership, compared to only buying operating parks where the high levels of competition from investment companies tend to be. Management believes that the Company’s flexibility in this regard makes it a more attractive partner to local developers who benefit from having a single trusted and flexible customer that allows them to plan effectively and grow faster; |
| ● | The Company’s history of identifying and entering new solar PV markets coupled with its on-the-ground capabilities and transatlantic platform gives the Company potential competitive advantages in developing and operating solar parks; |
| ● | The Company’s existing pipeline of owned and contracted solar PV projects provides it with clear and actionable opportunities as well as the ability to cultivate power generation and earnings as these are required; |
| ● | The Company is technology and supplier agnostic and as such has the flexibility to choose from a broad range of leading manufacturers, operations and maintenance (O&M) experts, top tier suppliers, and engineering, procurement, and construction (EPC) vendors across the globe and can benefit from falling component and service costs; and |
| ● | The Company is led by a highly experienced management team and has strong, localized execution capabilities across all key functions and locations. |
Vision and Strategy
The Company aims to become one of the leading producers of clean energy in Europe and the U.S. by 2030 and to have commenced delivery of 24/7 clean energy to national power grids. The Company’s business strategy of developing to own and operate a diverse portfolio of solar PV assets that generate stable long-term incomes, in countries which currently have unprecedented positive market forces, positions us for sustained growth in the years to come.
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To achieve its goals, the Company intends to pursue the following strategies:
| ● | Continue our growth strategy which targets acquiring independent solar PV projects that are either in development, in construction, newly installed or already operational, in order to build a diversified portfolio across multiple geographies; |
| ● | Developer and Agent Relationships: long term relationships with high-quality developer partners, both local and international, can reduce competition in acquisition pricing and provide the Company with exclusive rights to projects at varying stages. Additionally, the Company works with established agents across Europe and the United States. Working with these groups provides the Company with an understanding of the market and in some cases enables it to contract projects at the pre-market level. This allows the Company to build a structured pipeline of projects in each country where it currently operates or intends to operate; |
| ● | Expand our transatlantic IPP portfolio in locations that deliver higher yields for lowest equity deployed and attractive returns on investments, and increase and optimize the Company’s long-term recurring revenue and cash flows; |
| ● | Long-term off-take contracts combined with the Company’s efficient operations are expected to provide robust and predictable cash flows from projects and allow for high leverage capacity and flexibility of debt structuring. Our strategy is to reinvest the project cash flows into additional solar PV projects to provide non-dilutive capital for Alternus to “self-fund” future growth; |
| ● | Optimization of financing sources to support long-term growth and profitability in a cost-efficient manner; |
| ● | As a renewable energy company, we are committed to growing our portfolio of clean energy parks in the most sustainable way possible. The Company is highly aware and conscious of the ever growing need to mitigate the effects of climate change, which is evident by its core strategy. As the Company grows, it intends to establish a formal sustainability policy framework in order to ensure that all project development is carried out in a sustainable manner mitigating any potential localized environmental impacts identified during the development, construction and operational process. |
Given the long-term nature of our business, the Company does not operate its business on a quarter-by-quarter basis, but rather, with long-term shareholder value creation as a priority. The Company aims to maximize return for its shareholders by originating from the ground up and/or acquiring projects during the development cycle, installation stage, or already operational.
We intend that the parks we own and operate will have a positive cash flow with long-term income streams at the lowest possible risk. To this end we use Levelized Cost of Energy (“LCOE”) as a key criterion to ranking the projects we consider for development and/or acquisition. The LCOE calculates the total cost of ownership of the parks over their expected life reflected as a rate per megawatt hour (MWh). Once the income rates for the selected projects are higher than this rate, the project will be profitable for its full life, including initial capex costs. The Company will continue to operate with this priority as we continue to invest in internal infrastructure and additional solar PV power plants to increase installed power and resultant stable long-term revenue streams.
Key Factors that Significantly Affect Company Results of Operations and Business
The Company expects the following factors will affect its results of operations – inflation and energy rate fluctuations.
Offtake Contracts
Company revenue is primarily a function of the volume of electricity generated and sold by its renewable energy facilities as well as, where applicable, the sale of green energy certificates and other environmental attributes related to energy generation. The Company’s current portfolio of renewable energy facilities is generally contracted under long-term FIT programs or PPAs with investment grade counterparties. As of March 31, 2024, the average remaining life of its FITs and PPAs was 8.6 years. Pricing of the electricity sold under these FITs and PPAs is generally fixed for the duration of the contract, although some of its PPAs have price escalators based on an index (such as the consumer price index) or other rates specified in the applicable PPA.
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The Company also generates Renewable Energy Credit (RECs) as the Company produces electricity. RECs are accounted for as government incentives and are considered operational revenue as part of the solar facilities.
Project Operations and Generation Availability
The Company revenue is a function of the volume of electricity generated and sold by Company renewable energy facilities. The volume of electricity generated and sold by the Company’s renewable energy facilities during a particular period is impacted by the number of facilities that have achieved commercial operations, as well as both scheduled and unexpected repair and maintenance required to keep its facilities operational.
The costs the Company incurs to operate, maintain, and manage renewable energy facilities also affect the results of operations. Equipment performance represents the primary factor affecting the Company’s operating results because equipment downtime impacts the volume of the electricity that the Company can generate from its renewable energy facilities. The volume of electricity generated and sold by the Company’s facilities will also be negatively impacted if any facilities experience higher than normal downtime as a result of equipment failures, electrical grid disruption or curtailment, weather disruptions, or other events beyond the Company’s control.
Seasonality and Resource Variability
The amount of electricity produced and revenues generated by the Company’s solar generation facilities is dependent in part on the amount of sunlight, or irradiation, where the assets are located. As shorter daylight hours in winter months result in less irradiation, the electricity generated by these facilities will vary depending on the season. Irradiation can also be variable at a particular location from period to period due to weather or other meteorological patterns, which can affect operating results. As most of the Company’s solar power plants are in the Northern Hemisphere, the Company expects its current solar portfolio’s power generation to be at its lowest during the first and fourth quarters of each year. Therefore, the Company expects first and fourth quarter solar revenue to be lower than in other quarters. As a result, on average, each solar park generates approximately 15% of its annual revenues in Q1 every year, 37% in each of Q2 and Q3, and the remaining 11% in Q4. The Company’s costs are relatively flat over the year, and so the Company will always report lower profits in Q1 and Q4 as compared to the middle of the year.
Interest Rates on Company Debt
Interest rates on the Company’s senior debt are mostly variable for the full term of the finance at interest rates ranging from 6% to 30%. The relative certainty of cash flows provides sufficient coverage ratios.
In addition to the project specific senior debt, the Company uses a small number of promissory notes in order to reduce, and in some cases eliminate, the requirement for the Company to provide equity in the acquisition of the projects. As of March 31, 2024, 97.30% of the Company’s total liabilities were project-related debt.
Cash Distribution Restrictions
In certain cases, the Company, through its subsidiaries, obtain project-level or other limited or non-recourse financing for Company renewable energy facilities which may limit these subsidiaries’ ability to distribute funds to the Company for corporate operational costs. These limitations typically require that the project-level cash is used to meet debt obligations and fund operating reserves of the operating subsidiary. These financing arrangements also generally limit the Company’s ability to distribute funds generated from the projects if defaults have occurred or would occur with the giving of notice or the lapse of time, or both.
Renewable Energy Facility Acquisitions and Investments
The Company’s long-term growth strategy is dependent on its ability to acquire additional renewable power generation assets. This growth is expected to be comprised of additional acquisitions across the Company’s scope of operations both in its current focus countries and new countries. Our operating revenues are insufficient to fund our operations and our assets already are pledged to secure our indebtedness to various third party secured creditors, respectively. The unavailability of additional financing could require us to delay, scale back, or terminate our acquisition efforts as well as our own business activities, which would have a material adverse effect on the Company and its viability and prospects.
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Management believes renewable power has been one of the fastest growing sources of electricity generation globally over the past decade. The Company expects the renewable energy generation segment to continue to offer growth opportunities driven by:
| ● | The continued reduction in the cost of solar and other renewable energy technologies, which the Company believes will lead to grid parity in an increasing number of markets; |
| ● | Distribution charges and the effects of an aging transmission infrastructure, which enable renewable energy generation sources located at a customer’s site, or distributed generation, to be more competitive with, or cheaper than, grid-supplied electricity; |
| ● | The replacement of aging and conventional power generation facilities in the face of increasing industry challenges, such as regulatory barriers, increasing costs of and difficulties in obtaining and maintaining applicable permits, and the decommissioning of certain types of conventional power generation facilities, such as coal and nuclear facilities; |
| ● | The ability to couple renewable energy generation with other forms of power generation and/or storage, creating a hybrid energy solution capable of providing energy on a 24/7 basis while reducing the average cost of electricity obtained through the system; |
| ● | The desire of energy consumers to lock in long-term pricing for a reliable energy source; |
| ● | Renewable energy generation’s ability to utilize freely available sources of fuel, thus avoiding the risks of price volatility and market disruptions associated with many conventional fuel sources; |
| ● | Environmental concerns over conventional power generation; and |
| ● | Government policies that encourage the development of renewable power, such as country, state or provincial renewable portfolio standard programs, which motivate utilities to procure electricity from renewable resources. |
Access to Capital Markets
The Company’s ability to acquire additional clean power generation assets and manage its other commitments will likely be dependent on its ability to raise or borrow additional funds and access debt and equity capital markets, including the equity capital markets, the corporate debt markets, and the project finance market for project-level debt. The Company accessed the capital markets several times in 2022 and 2023, in connection with long-term project debt, and corporate loans and equity. Limitations on the Company’s ability to access the corporate and project finance debt and equity capital markets in the future on terms that are accretive to its existing cash flows would be expected to negatively affect its results of operations, business, and future growth.
Foreign Exchange
The Company’s operating results are reported in United States (USD) Dollars. The Company’s current project revenue and expenses are generated in other currencies, including the Euro (EUR), the Romanian Lei (RON), and the Polish Zloty (PLN). This mix may continue to change in the future if the Company elects to alter the mix of its portfolio within its existing markets or elect to expand into new markets. In addition, the Company’s investments (including intercompany loans) in renewable energy facilities in foreign countries are exposed to foreign currency fluctuations. As a result, the Company expects revenues and expenses will be exposed to foreign exchange fluctuations in local currencies where the Company’s renewable energy facilities are located. To the extent the Company does not hedge these exposures, fluctuations in foreign exchange rates could negatively impact profitability and financial position. The Company exited the Polish market in January 2024 and expects minimal impact from the fluctuations of this currency.
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Key Metrics
Operating Metrics
The Company regularly reviews several operating metrics to evaluate its performance, identify trends affecting its business, formulate financial projections and make certain strategic decisions. The Company considers a solar park operating when it has achieved connection and begins selling electricity to the energy grid.
Operating Nameplate capacity
The Company measures the electricity-generating production capacity of its renewable energy facilities in nameplate capacity. The Company expresses nameplate capacity in direct current (DC), for all facilities. The size of the Company’s renewable energy facilities varies significantly among the assets comprising its portfolio.
The Company believes the combined nameplate capacity of its portfolio is indicative of its overall production capacity and period to period comparisons of its nameplate capacity are indicative of the growth rate of its business. The production capacity listed below for Italy, Poland, and the Netherlands reflect the actual production from those parks during the three months ended March 31, 2023. The parks were sold on December 28, 2023, January 19, 2024, and February 21, 2024, respectively. The table below outlines the Company’s operating renewable energy facilities as of March 31, 2024 and 2023:
| Three Months Ended March 31 | ||||||||
| MW (DC) Nameplate capacity by country – continuing operations | 2024 | 2023 | ||||||
| Romania | 40.1 | 40.1 | ||||||
| Italy | - | 10.5 | ||||||
| United States | 3.8 | 0.4 | ||||||
| Total | 43.9 | 51.0 | ||||||
| Discontinued Operations: | ||||||||
| Netherlands | - | 11.8 | ||||||
| Poland | - | 88.4 | ||||||
| Total | - | 100.2 | ||||||
| Total for the period | 43.9 | 151.2 | ||||||
Megawatt hours sold
Megawatt hours sold refers to the actual volume of electricity sold by the Company’s renewable energy facilities during a particular period. The Company tracks MWh sold as an indicator of its ability to realize cash flows from the generation of electricity at its renewable energy facilities. The megawatt hours listed below for Italy, Poland, and the Netherlands reflect the actual volume of electricity sold during the three months ended March 31, 2024 and March 31, 2023 before the operating parks were sold on December 28, 2023, January 19, 2024, and February 21, 2024, respectively. The Company’s MWh sold for renewable energy facilities for the three months ended March 31, 2024 and 2023, were as follows:
Three Months Ended March 31 | ||||||||
| MWh (DC) Sold by country | 2024 | 2023 | ||||||
| Romania | 9,064 | 9,131 | ||||||
| Italy | - | 1,924 | ||||||
| United States | 842 | 156 | ||||||
| Total | 9,906 | 11,211 | ||||||
| Discontinued Operations: | ||||||||
| Netherlands | 466 | 1,348 | ||||||
| Poland | 500 | 11,774 | ||||||
| Total | 966 | 13,122 | ||||||
| Total for the period | 10,872 | 24,333 | ||||||
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Consolidated Results of Operations
The following table illustrates the consolidated results of operations for the three months ended March 31, 2024 and 2023:
| Three Months
Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| Revenues | $ | 2,180 | $ | 3,846 | ||||
| Operating Expenses | ||||||||
| Cost of revenues | (834 | ) | (1,015 | ) | ||||
| Selling, general and administrative | (3,747 | ) | (1,725 | ) | ||||
| Depreciation, amortization, and accretion | (568 | ) | (842 | ) | ||||
| Development costs | (7 | ) | (111 | ) | ||||
| Total operating expenses | (5,156 | ) | (3,693 | ) | ||||
| Income/(loss) from continuing operations | (2,976 | ) | 153 | |||||
| Other income/(expense): | ||||||||
| Interest expense | (4,159 | ) | (3,468 | ) | ||||
| Valuation on FPA asset | (483 | ) | - | |||||
| Gain on extinguishment of debt | 179 | |||||||
| Other expense | (223 | ) | (40 | ) | ||||
| Other income | 7 | - | ||||||
| Total other expenses | (4,679 | ) | (3,508 | ) | ||||
| Loss before provision for income taxes | (7,655 | ) | (3,355 | ) | ||||
| Income taxes | - | - | ||||||
| Net loss from continuing operations | (7,655 | ) | (3,355 | ) | ||||
| Discontinued operations: | ||||||||
| Loss from operations of discontinued business component | (1,074 | ) | (1,897 | ) | ||||
| Gain on sale of assets | 2,150 | - | ||||||
| Net income/(loss) from discontinued operations | 1,076 | (1,897 | ) | |||||
| Net loss for the period | $ | (6,579 | ) | $ | (5,252 | ) | ||
| Net loss attributable to common stockholders, basic | (7,655 | ) | (3,355 | ) | ||||
| Net loss attributable to common stockholders, diluted | (7,655 | ) | (3,355 | ) | ||||
| Net loss per share attributable to common stockholders, basic | (0.12 | ) | (0.06 | ) | ||||
| Net loss per share attributable to common stockholders, diluted | (0.12 | ) | (0.06 | ) | ||||
| Weighted-average common stock outstanding, basic | 65,077,094 | 57,500,000 | ||||||
| Weighted-average common stock outstanding, diluted | 65,077,094 | 57,500,000 | ||||||
| Comprehensive loss: | ||||||||
| Net loss | $ | (6,579 | ) | $ | (5,252 | ) | ||
| Foreign currency translation adjustment | (1,232 | ) | (104 | ) | ||||
| Comprehensive loss | $ | (7,811 | ) | $ | (5,356 | ) | ||
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Three Months Ended March 31, 2024 compared to March 31, 2023.
The Company generates its revenue from the sale of electricity from its solar parks. The revenue is from FIT, PPA, REC, or in the day-ahead or spot market.
Revenue
Revenue for the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended March 31 | ||||||||||||||||
| Revenue by Country | 2024 | 2023 | Change ($) | Change (%) | ||||||||||||
| (in thousands) | ||||||||||||||||
| Italy | $ | - | $ | 655 | $ | (655 | ) | (100 | )% | |||||||
| Romania | 2,087 | 3,173 | (1,086 | ) | (34 | )% | ||||||||||
| United States | 93 | 18 | 75 | 417 | % | |||||||||||
| Total for continuing operations | $ | 2,180 | $ | 3,846 | $ | (1,666 | ) | (43 | )% | |||||||
| Discontinued Operations: | ||||||||||||||||
| Netherlands | $ | 16 | $ | 202 | $ | (186 | ) | (92 | )% | |||||||
| Poland | 106 | 1,105 | (999 | ) | (90 | )% | ||||||||||
| Total for discontinued operations | $ | 122 | $ | 1,307 | $ | (1,185 | ) | (91 | )% | |||||||
| Total for the period | $ | 2,302 | $ | 5,153 | $ | (2,851 | ) | (55 | )% | |||||||
Revenue for continuing operations decreased by $1.7 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to a lower volume of Green Certificates being sold and lower energy rates for production in 2024 in Romania compared to the same period in 2023. Additionally, the three months ended March 31, 2023 includes revenues earned by the Italian parks which were sold in December 2023.
Revenue for discontinued operations decreased by $1.2 million due to all operating parks in Poland and the Netherlands being sold on January 19, 2024 and February 21, 2024, respectively.
| Three Months Ended March 31 | ||||||||||||||||
| Revenue by Offtake Type | 2024 | 2023 | Change ($) | Change (%) | ||||||||||||
| (in thousands) | ||||||||||||||||
| Country Renewable Programs (FIT) | $ | 153 | $ | 550 | $ | (397 | ) | (72 | )% | |||||||
| Green Certificates (FIT) | 1,569 | 1,872 | (303 | ) | (16 | )% | ||||||||||
| Energy Offtake Agreements (PPA) | 441 | 1,424 | (983 | ) | (69 | )% | ||||||||||
| Other Revenue | 17 | - | 17 | 100 | % | |||||||||||
| Total for continuing operations | $ | 2,180 | $ | 3,846 | $ | (1,666 | ) | (43 | )% | |||||||
| Discontinued Operations: | ||||||||||||||||
| Country Renewable Programs (FIT) | $ | 46 | $ | 766 | $ | (720 | ) | (94 | )% | |||||||
| Guarantees of Origin | 7 | 8 | (1 | ) | (13 | )% | ||||||||||
| Energy Offtake Agreements (PPA) | 36 | 533 | (497 | ) | (93 | )% | ||||||||||
| Other Revenue | 33 | - | 33 | 100 | % | |||||||||||
| Total for discontinued operations | $ | 122 | $ | 1,307 | $ | (1,185 | ) | (91 | )% | |||||||
| Total for the period | $ | 2,302 | $ | 5,153 | $ | (2,851 | ) | (55 | )% | |||||||
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Cost of Revenues
The Company capitalizes its equipment costs, development costs, engineering, and construction related costs that are deemed recoverable. The Company’s cost of revenues with regards to its solar parks is primarily a result of the asset management, operations, and maintenance, as well as tax, insurance, and lease expenses. Certain economic incentive programs, such as FIT regimes, generally include mechanisms that ratchet down incentives over time. As a result, the Company seeks to connect its solar parks to the local power grids and commence operations in a timely manner to benefit from more favorable existing incentives. Therefore, the Company generally seeks to make capital investments during times when incentives are most favorable.
Cost of revenues for the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended March 31 | ||||||||||||||||
| Cost of Revenues by Country | 2024 | 2023 | Change ($) | Change (%) | ||||||||||||
| (in thousands) | ||||||||||||||||
| Italy | $ | - | $ | 262 | $ | (262 | ) | (100 | )% | |||||||
| Romania | 819 | 734 | 85 | 12 | % | |||||||||||
| United States | 15 | 19 | (4 | ) | (21 | )% | ||||||||||
| Total for continuing operations | $ | 834 | $ | 1,015 | $ | (181 | ) | (18 | )% | |||||||
| Discontinued Operations: | ||||||||||||||||
| Netherlands | $ | 115 | $ | 61 | $ | 54 | 89 | % | ||||||||
| Poland | 101 | 936 | (835 | ) | (89 | )% | ||||||||||
| Total for discontinued operations | $ | 216 | $ | 997 | $ | (781 | ) | (78 | )% | |||||||
| Total for the period | $ | 1,050 | $ | 2,012 | $ | (962 | ) | (48 | )% | |||||||
Cost of revenues for continuing operations decreased by $0.2 million for the three months ended March 31, 2024 compared to the same period in 2023. The three months ended March 31, 2023 include costs incurred for the Italian parks which were sold in December 2023 which is the main driver of the decrease. This was partially offset by an increase in operational costs for the parks in Romania.
Cost of revenues for discontinued operations decreased by $0.8 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to all operating parks in Poland and the Netherlands being sold on January 19, 2024 and February 21, 2024, respectively. The slight increase for the Netherlands park is due to additional operations and maintenance fees incurred before prior to the disposal.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended March 31, 2024 and 2023 were as follows:
| Three Months Ended March 31 | ||||||||||||||||
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| (in thousands) | ||||||||||||||||
| Selling, general and administrative | $ | 3,747 | $ | 1,725 | $ | 2,022 | 117 | % | ||||||||
| Total for continuing operations | $ | 3,747 | $ | 1,725 | $ | 2,022 | 117 | % | ||||||||
| Total for the period | $ | 3,747 | $ | 1,725 | $ | 2,022 | 117 | % | ||||||||
Selling, general and administrative expenses for continuing operations increased by $2.0 million for the three months ended March 31, 2024 compared to the same period in 2023. The majority of this increase was from additional audit, accounting fees, insurance, and legal costs associated with being listed on Nasdaq.
There were no selling, general and administrative expenses for discontinued operations for the three months ended March 31, 2024 and 2023.
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Development Cost
| Three Months Ended March 31 | ||||||||||||||||
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| (in thousands) | ||||||||||||||||
| Development Cost | $ | 7 | $ | 111 | $ | (104 | ) | (94 | )% | |||||||
| Total for continuing operations | $ | 7 | $ | 111 | $ | (104 | ) | (94 | )% | |||||||
| Total for the period | $ | 7 | $ | 111 | $ | (104 | ) | (94 | )% | |||||||
Development cost decreased by $0.1 million for the three months ended March 31, 2024 compared to the same period in 2023 due to final work performed for projects abandoned for the development of renewable energy projects.
The Company depends heavily on government policies that support our business and enhance the economic feasibility of developing and operating solar energy projects in regions in which we operate or plan to develop and operate renewable energy facilities. The Company can decide to abandon a project if there is material change in budgetary constraints, political factors or otherwise, governments from time to time may review their laws and policies that support renewable energy and consider actions that would make the laws and policies less conducive to the development and operation of renewable energy facilities. Any reductions or modifications to, or the elimination of, governmental incentives or policies that support renewable energy or the imposition of additional taxes or other assessments on renewable energy, could result in, among other items, the lack of a satisfactory market for the development and/or financing of new renewable energy projects, our abandoning the development of renewable energy projects, a loss of our investments in the projects, and reduced project returns, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Refer to Footnote 18 to the accompanying financial statements for more detail of development cost.
There were no development costs for discontinued operations for the three months ended March 31, 2024 and 2023.
Depreciation, Amortization and Accretion Expense
Depreciation, amortization, and accretion expenses for the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended March 31 | ||||||||||||||||
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| (in thousands) | ||||||||||||||||
| Depreciation, Amortization and Accretion expense | $ | 568 | $ | 842 | $ | (274 | ) | (33 | )% | |||||||
| Total for continuing operations | $ | 568 | $ | 842 | $ | (274 | ) | (33 | )% | |||||||
| Discontinued Operations: | ||||||||||||||||
| Depreciation, Amortization and Accretion expense | $ | 180 | $ | 735 | $ | (555 | ) | (76 | )% | |||||||
| Total for discontinued operations | $ | 180 | $ | 735 | $ | (555 | ) | (76 | )% | |||||||
| Total for the period | $ | 748 | $ | 1,577 | $ | (829 | ) | (53 | )% | |||||||
Depreciation and Amortization expense for continuing operations decreased by $0.3 million for the three months ended March 31, 2024 compared to the same period in 2023. This was primarily driven by the sale of the Italian assets which were sold in December 2023.
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Depreciation, amortization and accretion expenses for discontinued operations decreased by $0.8 million for the three months ended March 31, 2024 compared to the same period in 2023 due to all operating parks in Poland and the Netherlands being sold on January 19, 2024 and February 21, 2024, respectively.
Gain on Disposal of Assets
| Three Months Ended March 31 | ||||||||||||||||
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| (in thousands) | ||||||||||||||||
| Discontinued Operations: | ||||||||||||||||
| Gain on disposal of asset | $ | 3,374 | $ | - | $ | 3,374 | 100 | % | ||||||||
| Costs related to disposal of asset | (1,224 | ) | - | (1,224 | ) | 100 | % | |||||||||
| Total for discontinued operations | $ | 2,150 | $ | - | $ | 2,150 | 100 | % | ||||||||
| Total for the period | $ | 2,150 | $ | - | $ | 2,150 | 100 | % | ||||||||
On January 19, 2024, the Company sold its operating parks in Poland with a carrying value of $55.2 million for $59.4 resulting in a $4.2 million gain partially offset by a $0.9 million loss on sale of assets in the Netherlands. $1.6M of the cash received was held back by the seller per the SPA and recorded as a receivable on the Consolidated Balance Sheet. On February 22, 2024, the Company sold its operating park in the Netherlands with a carrying value of $8.0 million for $7.1 million resulting in a $0.9 million loss. The costs incurred to complete the transaction totaled $1.2 million and are reported together with the disposal of the assets according to ASC 360-10-35-38.
Interest Expense, Other Income, and Other Expense
| Three Months Ended March 31 | ||||||||||||||||
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| (As Restated) | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Interest expense | $ | (4,159 | ) | $ | (3,468 | ) | $ | (691 | ) | 20 | % | |||||
| Valuation on FPA asset | (483 | ) | - | (483 | ) | (100 | )% | |||||||||
| Gain on extinguishment of debt | 179 | - | 179 | 100 | % | |||||||||||
| Other expense | (223 | ) | (40 | ) | (183 | ) | 460 | % | ||||||||
| Other income | 7 | - | 7 | 100 | % | |||||||||||
| Total for continuing operations | $ | (4,679 | ) | $ | (3,508 | ) | $ | (1,171 | ) | 33 | % | |||||
| Discontinued Operations: | ||||||||||||||||
| Interest income/(expense) | $ | (801 | ) | $ | (1,472 | ) | $ | 671 | (46 | )% | ||||||
| Total for discontinued operations | $ | (801 | ) | $ | (1,472 | ) | $ | 671 | (46 | )% | ||||||
| Total for the period | $ | (5,480 | ) | $ | (4,980 | ) | $ | (500 | ) | 10 | % | |||||
Total other expenses for continuing operations increased by $1.2 million for the three months ended March 31, 2024 compared to the same period in 2023. The primary drivers causing the increase is the recognition of a $0.5 million reduction in valuation on the Forward Purchase Agreement, and a $0.7 million increase in interest expense due to increase of the effective interest rate of the Solis bond from 8.7% to 10.4% and interest associated in the U.S. for loans related to project construction and development. This was offset by a $0.2 million gain recognized on the conversion of the Nordic ESG debt to shares.
Total other expenses for discontinued operations decreased by $0.7 million for the three months ended March 31, 2024 compared to the same period in 2023 driven by the sale of the Polish and Netherlands operating parks on January 19, 2024 and February 21, 2024, respectively.
Net Loss
Net loss for continuing operations increased by $4.3 million for the three months ended March 31, 2024 compared to the same period in 2023. This is primarily due to an increase in SG&A expense of $2.0 million, other expense of $0.5 million, interest expense of $0.7 million, and decreased revenues of $1.7 million. This was partially offset by a decrease in cost of revenues of $0.2 million, depreciation of $0.3 million, and development cost of $0.1 million.
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Net income for discontinued operations increased by $3.0 million for the three months ended March 31, 2024 compared to the same period in 2023. This is primarily due to a decrease in cost of revenues of $0.8 million, depreciation of $0.5 million, interest expense of $0.7 million, and an increase in the gain on disposal of asset of $2.2 million. This was partially offset by a decrease in revenues of $1.2 million.
Liquidity and Capital Resources
Capital Resources
A key element to the Company’s financing strategy is to raise much of its debt in the form of project specific non-recourse borrowings at its subsidiaries with investment grade metrics. Going forward, the Company intends to primarily finance acquisitions or growth capital expenditures using long-term non-recourse debt that fully amortizes within the asset’s contracted life, as well as retained cash flows from operations and issuance of equity securities through public markets.
The following table summarizes certain financial measures that are not calculated and presented in accordance with U.S. GAAP, along with the most directly comparable U.S. GAAP measure, for each period presented below. In addition to its results determined in accordance with U.S. GAAP, the Company believes the following non-U.S. GAAP financial measures are useful in evaluating its operating performance. The Company uses the following non-U.S. GAAP financial information, collectively, to evaluate its ongoing operations and for internal planning and forecasting purposes.
The following non-U.S. GAAP table summarizes the total capitalization and debt as of March 31, 2024 and December 31, 2023:
| As of March 31 | As of December 31 | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Senior Secured Green Bonds | $ | 87,264 | $ | 166,122 | ||||
| Senior Secured debt and promissory notes | 31,523 | 32,312 | ||||||
| Total debt | 118,787 | 198,434 | ||||||
| Less current maturities | (118,787 | ) | (198,434 | ) | ||||
| Long term debt, net of current maturities | $ | - | $ | - | ||||
| Current Maturities | 118,787 | 198,434 | ||||||
| Less current debt discount | (908 | ) | (892 | ) | ||||
| Current Maturities net of debt discount | 117,879 | 197,542 | ||||||
| As of March 31 | As of December 31 | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Cash and cash equivalents | $ | 1,381 | $ | 4,618 | ||||
| Restricted cash | 841 | 19,161 | ||||||
| Available capital from continuing operations | $ | 2,222 | $ | 23,779 | ||||
| Discontinued operations: | ||||||||
| Cash and cash equivalents | $ | - | $ | 444 | ||||
| Available capital from discontinued operations | - | 444 | ||||||
Restricted Cash relates to balances that are in the bank accounts for specific defined purposes and cannot be used for any other undefined purposes. The decrease was related to payments paying down the principal of the Green Bonds. Refer to Footnote 3 – Summary of Significant Accounting Policies for further discussion of restricted cash.
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Liquidity Position
Our consolidated financial statements for the three months ended March 31, 2024 and for the year ended December 31, 2023 identifies the existence of certain conditions that raise substantial doubt about our ability to continue as a going concern for twelve months from the issuance of this report. Refer to Footnote 2 of the accompanying financial statements for more information.
In January 2021, one of the Company’s subsidiaries, Solis Bond Company DAC (“Solis”), issued a series of 3-year senior secured green bonds in the maximum amount of $242.0 million (€200 million) with a stated coupon rate of 6.5% + EURIBOR and quarterly interest payments. The bond agreement is for repaying existing facilities of approximately $40 million (€33 million), and funding acquisitions of approximately $87.2 million (€72.0 million). The bonds are secured by Solis’ underlying assets. The Company raised approximately $125.0 million (€110.0 million) in the initial funding. In November 2021, Solis completed an additional issue of $24 million (€20 million). The additional Issue was completed at an issue price of 102% of par value, corresponding to a yield of 5.5%. The Company raised $11.1 million (€10 million) in March 2022 at 97% for an effective yield of 9.5%. In connection with the bond agreement the Company incurred approximately $11.8 million in debt issuance costs. The Company recorded these as a discount on the debt and they are being amortized as interest expense over the contractual period of the bond agreement. As of March 31, 2024 and December 31, 2023, there was $87.3 million and $166.1 million outstanding on the Bond, respectively.
As of March 31, 2024, Solis was in breach of the three financial covenants under Solis’ Bond terms: (i) the minimum Liquidity Covenant that requires the higher of €5.5 million or 5% of the outstanding Nominal Amount, (ii) the minimum Equity Ratio covenant of 25%, and (iii) the Leverage Ratio of NIBD/EBITDA to not be higher than 6.5 times for the year ended December 2021, 6.0 times for the year ended December 31, 2022 and 5.5 times for the period ending on the maturity date of the Bond. The Solis Bond carries a 3 months EURIBOR plus 6.5% per annum interest rate, and has quarterly interest payments, with a bullet payment to be paid on the Maturity Date. The Solis Bond is senior secured through a first priority pledge on the shares of Solis and its subsidiaries, a parent guarantee from Alternus Energy Group Plc, and a first priority assignment over any intercompany loans. Additionally, Solis bondholders hold a preference share in an Alternus holding company which holds certain development projects in Spain and Italy. The preference share gives the bondholders the right on any distributions up to EUR 10 million, and such assets will be divested to ensure repayment of up to EUR. 10 million should ts not be fully repaid by the Maturity Date.
Additionally, because Solis was unable to fully repay the Solis Bonds by September 30, 2023, Solis’ bondholders have the right to immediately transfer ownership of Solis and all of its subsidiaries to the bondholders and proceed to sell Solis’ assets to recoup the full amount owed to the bondholders which as of March 31, 2024 is currently €80.8 million (approximately $87.3 million). If the ownership of Solis and all of its subsidiaries were to be transferred to the Solis bondholders, the majority of the Company’s operating assets and related revenues and EBIDTA would be eliminated.
On October 16, 2023, bondholders approved to further extend the temporary waiver to December 16, 2023. On December 18, 2023, a representative group of the bondholders approved an extension of the temporary waivers and the maturity date of the Solis Bonds until January 31, 2024, with the right to further extend to February 29, 2024, at the Solis Bond trustee’s discretion, which was subsequently approved by a majority of the bondholders on January 3, 2024. On March 12, 2024, the Solis Bondholders approved resolutions to further extend the temporary waivers and the maturity date until April 30, 2024 with the right to further extend to May 31, 2024 at the Bond Trustee’s discretion, which it granted, and thereafter on a month-to-month basis to November 29, 2024 at the Bond Trustee’s discretion and approval from a majority of Bondholders. As such, the Solis bond debt is currently recorded as short-term debt.
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On December 28, 2023, Solis sold 100% of the share capital in its Italian subsidiaries for approximately €15.8 million (approximately $17.5 million).
On January 18, 2024, Solis sold 100% of the share capital in its Polish subsidiaries for approximately €54.4 million (approximately $59.1 million), and on February 21, 2024, Solis sold 100% of the share capital of its Netherlands subsidiary for approximately €6.5 million (approximately $7 million). Additionally, on February 14, 2024, Solis exercised its call options to repay €59,100,000 million (approximately $68.5 million) of amounts outstanding under the bonds. Subsequently, on May 1, 2024, Solis made an interest payment of €1,000,000 (approx. $1,069,985.00) to the Bondholders, which is approximately 50% of the total interest due for the first quarter of 2024. The remaining interest amount will be paid alongside, and in addition to, the next interest payment due July 6, 2024 from Solis’ ongoing business operations. Solis will incur a late payment penalty in accordance with the Bond Terms, which will also be paid in July 2024.
On March 20, 2024, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC therein stating that for the 32 consecutive business day period between February 2, 2024 through March 19, 2024, the Common Stock had not maintained a minimum closing bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until September 16, 2024 (the “Compliance Period”), to regain compliance with the Bid Price Rule. If the Company does not regain compliance with the Bid Price Rule by September 16, 2024, the Company may be eligible for an additional 180-day period to regain compliance. If the Company cannot regain compliance during the Compliance Period or any subsequently granted compliance period, the Common Stock will be subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq hearings panel. The notice from Nasdaq has no immediate effect on the listing of the Common Stock and the Common Stock will continue to be listed on The Nasdaq Capital Market under the symbol “ALCE.” The Company is currently evaluating its options for regaining compliance. There can be no assurance that the Company will regain compliance with the Bid Price Rule or maintain compliance with any of the other Nasdaq continued listing requirements.
The Company is currently working on several processes to address the going concern issue. We are working with multiple global banks and funds to secure the necessary project financing to execute our transatlantic business plan.
Financing Activities
On December 21, 2022, the Company’s wholly owned Irish subsidiaries, AEG JD 01 LTD and AEG MH 03 LTD entered in a financing facility with Deutsche Bank AG (“Lender”). This is an uncommitted revolving debt financing of up to €500,000,000 to finance eligible project costs for the acquisition, construction, and operation of installation/ready to build solar PV plants across Europe. (the “Warehouse Facility”). The Warehouse Facility, which matures on the third anniversary of the closing date of the Credit Agreement (the “Maturity Date”), bears interest at Euribor plus an aggregate margin at a market rate for such facilities, which steps down by 0.5% once the underlying non-Euro costs financed reduces below 33.33% of the overall costs financed. The Warehouse Facility is not currently drawn upon, but a total of approximately €1,800,000 in arrangement and commitment fees is currently owed to the Lender. Once drawn, the Warehouse Facility capitalizes interest payments until projects reach their commercial operations dates through to the Maturity Date; it also provides for mandatory prepayments in certain situations.
In May 2022, AEG MH02 entered into a loan agreement with a group of private lenders of approximately $10.8 million with an initial stated interest rate of 8% and a maturity date of May 31, 2023. In February 2023, the loan agreement was amended stating a new interest rate of 16% retroactive to the date of the first draw in June 2022. In May 2023, the loan was extended, and the interest rate was revised to 18% from June 1, 2023. In July 2023, the loan agreement was further extended to October 31, 2023. In November 2023, the loan agreement was further extended to May 31, 2024. Due to these addendums, $0.9 million of interest was recognized in the three months ended March 31, 2024. The Company had principal outstanding of $10.8 million and $11.0 million as of March 31, 2024 and December 31, 2023, respectively.
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In June 2022, Alt US 02, a subsidiary of Alternus Energy Americas, and indirect wholly owned subsidiary of the Company, entered into an agreement as part of the transaction with Lightwave Renewables, LLC to acquire rights to develop a solar park in Tennessee. The Company entered into a construction promissory note of $5.9 million with a variable interest rate of prime plus 2.5% and an original maturity date of June 29, 2023. On January 26, 2024, the loan was extended to June 29, 2024 due to logistical issues that caused construction delays. The Company had principal outstanding of $5.4 million and $4.3 million as of March 31, 2024 and December 31, 2023, respectively.
On February 28, 2023, Alt US 03, a subsidiary of Alternus Energy Americas, and indirect wholly owned subsidiary of the Company, entered into an agreement as part of the transaction to acquire rights to develop a solar park in Tennessee. Alt US 03 entered into a construction promissory note of $920 thousand with a variable interest rate of prime plus 2.5% and due May 31, 2024. This note had a principal outstanding balance of $717 thousand as of March 31, 2024 and December 31, 2023, respectively.
In July 2023, one of the Company’s US subsidiaries acquired a 32 MWp solar PV project in Tennessee for $2.4 million financed through a bank loan having a six-month term, 24% APY, and an extended maturity date of February 29, 2024. The project is expected to start operating in Q1 2025. 100% of offtake is already secured by 30-year power purchase agreements with two regional utilities. The Company had a principal outstanding balance of $7.0 million as of March 31, 2024 and December 31, 2023, respectively. As of the date of this report this loan is currently in default, but management is in active discussions with the lender to renegotiate the terms.
In July 2023, Alt Spain Holdco, one of the Company’s Spanish subsidiaries acquired the project rights for a 32 MWp portfolio of Solar PV projects in Valencia, Spain, with an initial payment of $1.9 million, financed through a bank loan having a six-month term and accruing ’Six Month Euribor’ plus 2% margin, currently 5.9% interest. On January 24, 2024, the maturity date was extended to July 28, 2024. The portfolio consists of six projects totaling 24.4 MWp. This note had a principal outstanding balance of $3.2 million as of March 31, 2024 and December 31, 2023, respectively.
In October 2023, Alternus Energy Americas, one of the Company’s US subsidiaries secured a working capital loan in the amount of $3.2 million with a 0% interest until a specified date and a maturity date of March 31, 2024. In February 2024, the loan was further extended to February 28, 2025, and the principal amount was increased to $3.6 million. In March 2024, the Company began accruing interest at a rate of 10%. Additionally, the Company issued the noteholder warrants to purchase up to 90,000 shares of restricted common stock, exercisable at $0.01 per share having a 5-year term and fair value of $86 thousand. The Company had a principal outstanding balance of $1.8 million as of March 31, 2024 and $3.2 million as of December 31, 2023. As of the date of this report this loan is currently in default, but management is in active discussions with the lender to renegotiate the terms.
In December 2023, Alt US 07, one of the Company’s US subsidiaries acquired the project rights to a 14 MWp solar PV project in Alabama for $1.1 million financed through a bank loan having a six-month term, 24% APY, and a maturity date of May 28, 2024. The project is expected to start operating in Q2 2025. 100% of offtake is already secured by 30-year power purchase agreements with two regional utilities. This note had a principal outstanding balance of $1.1 million as of March 31, 2024 and December 31, 2023, respectively.
In December 2023, as part of the Business Combination, the Company assumed an existing loan balance of $1.6 million with a 0% interest rate until perpetuity as part of the Business Combination with Clean Earth. The Company had a principal outstanding balance of $1.4 million as of March 31, 2024 and $1.6 million as of December 31, 2023.
In January 2024, the Company assumed a $938 thousand (€850 thousand) convertible promissory note with a 10% interest maturing in March 2025 as part of the Business Combination that was completed in December 2023. On January 3, 2024, the noteholder converted all of the principal and accrued interest owed under the note, equal to $1.0 million, into 1,320,000 shares of restricted common stock.
For the year ended December 31, 2023, 225,000 shares of Common Stock were issued at Closing to the Sponsor of Clean Earth to settle CLIN promissory notes of $1.6 million. The shares were issued at the closing price of $5 per share for $1.1 million. The difference of $0.5 million was recognized as an addition to Additional Paid in Capital. Management determined the extinguishment of this note is the result of a Troubled Debt Restructuring.
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On March 21, 2024, ALCE and the Sponsor of Clean Earth (“CLIN”) agreed to a settlement of a $1.2 million note assumed by ALCE as part of the Business Combination that was completed in December 2023. The note had a maturity date of whenever CLIN closes its Business Combination Agreement and accrued interest of 25%. ALCE issued 225,000 shares to the Sponsor in March 21, 2024 and a payment plan of the rest of the outstanding balance was agreed to with payments to commence on July 15, 2024. The closing stock price of the Company was $0.47 on the date of issuance.
Material Cash Requirements from Known Contractual Obligations
The Company’s contractual obligations consist of operating leases generally related to the rent of office building space, as well as land upon which the Company’s solar parks are built. These leases include those that have been assumed in connection with the Company’s asset acquisitions. The Company’s leases are for varying terms and expire between 2027 and 2055.
For the three months ending March 31, 2024 and 2023, the Company incurred operating lease expenses from continuing operations of $65 thousand and $50 thousand, respectively. The following table summarizes the Company’s future minimum contractual operating lease payments as of March 31, 2024.
Maturities of lease liabilities as of March 31, 2024 were as follows:
| (in thousands) | ||||
| Five-year lease schedule: | ||||
| 2024 Apr 1 – Dec 31 | $ | 154 | ||
| 2025 | 235 | |||
| 2026 | 241 | |||
| 2027 | 247 | |||
| 2028 | 215 | |||
| Thereafter | 2,021 | |||
| Total lease payments | 3,113 | |||
| Less imputed interest | (1,748 | ) | ||
| Total | $ | 1,365 | ||
The Company had no finance leases as of March 31, 2024.
In October 2023, the Company entered a new lease for land in Madrid, Spain where solar parks are planned to be built. The lease term is 35 years with an estimated annual cost of $32 thousand.
Cash Flow Discussion
The Company uses traditional measures of cash flows, including net cash flows from operating activities, investing activities and financing activities to evaluate its periodic cash flow results.
For the Three Months Ended March 31, 2024 compared to March 31, 2023
The following table reflects the changes in cash flows for the comparative periods:
| Three Months Ended March 31, | ||||||||||||
| 2024 | 2023 | Change ($) | ||||||||||
| (in thousands) | ||||||||||||
| Net cash provided by (used in) operating activities | (4,603 | ) | 1,179 | (5,782 | ) | |||||||
| Net cash provided by (used in) operating activities – Discontinued Operations | (2,085 | ) | (805 | ) | 1,280 | |||||||
| Net cash provided by (used in) investing activities | 64,661 | (1,028 | ) | 65,689 | ||||||||
| Net cash provided by (used in) investing activities – Discontinued Operations | - | (52 | ) | 52 | ||||||||
| Net cash provided by (used in) financing activities | (76,635 | ) | 1,937 | (78,572 | ) | |||||||
| Net cash provided by (used in) financing activities – Discontinued Operations | (3,151 | ) | (325 | ) | 2,826 | |||||||
| Effect of exchange rate on cash | (528 | ) | 215 | (743 | ) | |||||||
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Net Cash Used in Operating Activities
Net cash used in continuing operating activities for the three months ended March 31, 2024 compared to 2023 increased by $5.8 million. The increase of $4.3 million in 2024 was primarily driven by an increase of interest expense, an increase in selling, general, and administrative expenses, and a decrease in revenues in the first quarter of 2024. The remaining increase was a result of the normal fluctuations of receivables and payables over the normal course of business operations.
Net cash used in discontinued operating activities for the three months ended March 31, 2024 compared to 2023 increased by $1.3 million. The net income increased by $3.0 million primarily driven by the gain on the sale of the Polish parks offset by the reclassification of Solis bond interest expense to discontinued operations that covers the portion of the Poland and Netherlands parks before they were sold.
Net Cash Used in Investing Activities
Net cash provided by continuing investing activities for the three months ended March 31, 2024 compared to 2023 increased by $65.7 million. This was a result of the cash received for the sale of the Polish parks of $59.4 million and from the sale of the Netherlands park of $7.1 million.
Net cash used in discontinued investing activities for the three months ended March 31, 2024 compared to 2023 decreased by $52 thousand. This was a result of the derecognition of a small, miscellaneous project in Poland.
Net Cash Provided by Financing Activities
Net cash used in continuing financing activities for the three months ended March 31, 2024 compared to 2023 decreased by $78.6 million mainly driven by the $75.2 million payment made towards the Solis bond principal balance.
Net cash used in discontinued financing activities for the three months ended March 31, 2024 compared to 2023 increased by $2.8 million due to related party transaction activity with parent company in 2023.
Critical Accounting Estimates
In the notes to our consolidated financial statements and in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K, we have disclosed those accounting policies that we consider to be most significant in determining our results of operations and financial condition and involve a higher degree of judgment and complexity. There have been no changes to those policies that we consider to be material since the filing of our 2023 Annual Report on Form 10-K. The accounting principles used in preparing our condensed consolidated financial statements conform in all material respects to GAAP.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures about market risk, see “Item 7A., Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2023. Our exposures to market risk have not changed materially since December 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this annual report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were not, in design and operation, effective at a reasonable assurance level due to the material weaknesses in internal control over financial reporting described below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
The Company has identified the following material weakness in internal control over the financial reporting process.
| ● | The Company did not design and maintain an effective control environment commensurate with its financial reporting requirements. Specifically, the Company lacked a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of its financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in its finance and accounting functions. |
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate controls over our Exchange Act reporting disclosures.
| ● | The Company did not design and maintain effective controls for communicating and sharing information within the Company. Specifically, the accounting and finance departments were not consistently provided the complete and adequate support, documentation, and information including the nature of relationships with certain counterparties to record transactions within the financial statements timely, completely and accurately. |
The accounting group has implemented a monthly review with the appropriate responsible parties within the Company, to review and confirm that the accounting department has received the proper documentation for various transactions.
| ● | The Company did not design and maintain effective controls for transactions between related parties and affiliates recorded between itself, the parent company and its subsidiaries. Specifically, the accounting and finance departments lacked formalized documentation establishing intercompany due to/from balances and did not periodically assess the collectability of such outstanding balances. |
As part of the new despac structure, the Company is in the process of formalizing documentation related to intercompany due to/from within the new organization structure, and with Alternus Energy Group which is the majority shareholder.
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| ● | The Company did not design and maintain effective controls to address the identification of and accounting for certain non-routine, unusual or complex transactions, including the proper application of U.S. GAAP to such transactions. Specifically, the Company did not design and maintain controls to timely identify and account for warrant instruments related to certain promissory notes, forward purchase agreements, debt modifications, and impairment of discontinued operations. |
The Company will have third party experts review non routine, unusual and complex transactions in order to have the required expertise to confirm the proper accounting treatment.
| ● | The Company did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the period-end financial reporting process addressing areas including financial statement and footnote presentation and disclosures, account reconciliations and journal entries, including segregation of duties, assessing the reliability of reports and spreadsheets used in controls, and the timely identification and accounting for cut-off of expenditures. |
The Company is working with an external consultant to review and assess the Company’s current internal control structure to improve the overall effectiveness of the control environment. In addition, the Company is investing in third party software to improve the accuracy, review, and approval of account reconciliations and other accounting functions. Also, the Company is investing in third party software to improve the process around the completion of the financial statements.
| ● | The Company did not design and maintain effective controls to address the identification of and accounting for certain non-routine, unusual or complex transactions, including the proper application of U.S. GAAP to such transactions. Specifically, the Company did not properly account for items that resulted in Restatement of this report – namely,
1. the capitalization of interest costs for those projects under construction and instead booked such interest to the income statement
2. classifying incorrectly the receivable for a sale of the Polish assets in Accounts receivable instead of other receivable
3. incorrect accounting for the forgiveness of related party debt |
The Company will have third party experts review non routine, unusual and complex transactions in order to have the required expertise to confirm the proper accounting treatment.
The material weaknesses described above could result in a material misstatement to substantially all of the Company’s accounts or disclosures. These material weaknesses leads management to conclude that the Company’s disclosure controls and procedures are not effective to give reasonable assurance that the information required to be disclosed in reports that the Company files under the Exchange Act is recorded, processed, summarized and reported as and when required.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to conduct an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have identified the material weaknesses described above in our internal controls over financial reporting and have therefore concluded that our internal controls over financial reporting are not effective at the reasonable assurance level.
As stated above, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our fiscal quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business activities. In connection with such litigation, the Company may be subject to significant damages. We may also be subject to equitable remedies and penalties. Such litigation could be costly and time consuming and could divert or distract Company management and key personnel from its business operations. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this registration statement, we do not believe we are party to any claim or litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. However, due to the uncertainty of litigation and depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s business, results of operations, financial position, or cash flows.
On May 4, 2023 Alternus received notice that Solartechnik filed an arbitration claim against Alternus Energy Group PLC, Solis Bond Company DAC and ALT POL HC 01 SP. Z.o.o. in the Court of Arbitration at the Polish Chamber of Commerce, claiming that PLN 24,980,589 (approximately $5.8 million) is due and owed to Solartechnik pursuant to a preliminary share purchase agreement by and among the parties that did not ultimately close, plus costs, expenses, legal fees and interest. The Company has accrued a liability for this loss contingency in the amount of approximately $6.8 million, which represents the contractual amount allegedly owed. It is reasonably possible that the potential loss may exceed our accrued liability due to costs, expenses, legal fees and interest that are also alleged by Solartechnik as owed, but at the time of filing this report we are unable to determine an estimate of that possible additional loss in excess of the amount accrued. The Company intends to vigorously defend this action.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2023 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. There have been no material changes during fiscal 2024 to the risk factors that were included in the Form 10-K except for as stated below.
The following information updates, and should be read in conjunction with, the risk factors disclosed in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023filed with the SEC on April 15, 2024.
We may face litigation and other risks as a result of the Restatement.
We previously identified a material weakness in our internal control over financial reporting in our 2023 Annual Report on Form 10-K. Subsequent to the filing of the Original Form 10-Q, we identified some misstatements, requiring the restatement of the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2024, which was partially caused by the same material weakness in internal control over financial reporting. As a result of such material weaknesses, the Restatement and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Form 10-Q/A, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could adversely affect our business, financial condition and results of operations.
Adverse publicity and potential concerns from our customers relating to or arising from the restatements could have an adverse effect on our business and financial condition.
We could continue to be the subject of negative publicity focusing on the restatement and adjustment of our financial statements, and we may be adversely impacted by negative reactions from our customers or others with whom we do business. Concerns include the perception of the effort required to address our accounting and control environment. Continued adverse publicity and potential concerns from our customers could harm our business and have an adverse effect on our financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Unregistered Securities
| ● | On January 11, 2024, we issued 7,765,000 shares of restricted common stock valued at $1.23 per share to Nordic ESG and Impact Fund SCSp (“Nordic ESG”) as settlement of AEG’s €8m note. |
| ● | On January 23, 2024 we issued 81,301 shares of restricted common stock valued at $1.01 per share to Outside the Box Capital Inc. in exchange for services. |
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| ● | On February 5, 2024 we issued to SCM Tech, LLC warrants to purchase up to 90,000 shares of restricted common stock, exercisable at $0.01 per share having a 5 year term and fair value of $86,000. |
| ● | On February 20, 2024 we issued 100,000 shares of restricted common stock valued at $0.35 per share to Moneta Advisory Partners, LLC in exchange for services. |
| ● | On March 19, 2024 we issued 225,000 shares of restricted common stock valued at $0.47 per share to SPAC Sponsor Capital Access. |
| ● | On April 19, 2024, the Company issued (a) a senior convertible note in the principal amount of $2,160,000, bearing an eight percent (8.0%) original issue discount (the “Convertible Note”), and (b) a warrant (the “Warrant”) to purchase up to 2,411,088 shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), equal to 50% of the face value of the Convertible Note divided by the volume weighted average price, at an exercise price of $0.480 per share (the “Exercise Price”). Pursuant to the said offering, the Company received gross proceeds of $2,000,000, before fees and other expenses associated with the transaction. |
| ● | On May 8, 2024, we issued 330,000 shares of restricted common stock valued at $0.35 per share to a third party consultant in exchange for services. |
| ● | On May 8, 2024 we issued 100,000 shares of restricted common stock valued at $0.35 per share to a third party consultant in exchange for services. |
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 6. Exhibits
| * | Filed herewith |
| ** | Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: August 23, 2024 | ALTERNUS CLEAN ENERGY, INC. | |
| By: | /s/ Vincent Browne | |
| Vincent Browne | ||
| Chairman and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on August 23, 2024.
| Signature | Title | Date | ||
| /s/ Vincent Browne | Chairman, Chief Executive
Officer, and Interim Chief Financial Officer |
August 23, 2024 | ||
| Vincent Browne | (Principal Executive Officer) | |||
| /s/ Aaron T. Ratner | Director | August 23, 2024 | ||
| Aaron T. Ratner | ||||
| /s/ Nicholas Parker | Director | August 23, 2024 | ||
| Nicholas Parker | ||||
| /s/ Tone Bjornov | Director | August 23, 2024 | ||
| Tone Bjornov | ||||
| /s/ Candice Beaumont | Director | August 23, 2024 | ||
| Candice Beaumont | ||||
| /s/ John Thomas | Director | August 23, 2024 | ||
| John Thomas |
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