UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ to __________

COMMISSION FILE NUMBER 001-41306

ALTERNUS CLEAN ENERGY, INC.

(Exact name of registrant as specified in its charter)

Delaware		87-1431377
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

17 State Street, Suite 4000 New York, NY 10004		(212) 739-0727
(Address of principal executive offices) (Zip Code)		(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	ALCE	OTCQB Market
Warrants, each whole warrant exercisable into one share of Common Stock	ACLEW	OTC Pink Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	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 June 27, 2025, the registrant had a total of 119,718,354 shares of its common stock, par value $0.0001 per share, issued and outstanding.

ALTERNUS CLEAN ENERGY, INC.

INDEX TO FORM 10-Q

	Page #
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	1
Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024	1
Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024	2
Consolidated Statements of Stockholders’ Equity/(Deficit) for the Three Months Ended March 31, 2025 and 2024.	3
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024	4
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3. Quantitative and Qualitative Disclosures About Market Risk	50
Item 4. Controls and Procedures	50
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	53
Item 1A. Risk Factors	53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3. Defaults Upon Senior Securities	55
Item 4. Mine Safety Disclosures	55
Item 5. Other Information	55
Item 6. Exhibits	55
Signatures	57

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, 2024, 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.

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,
	2025			2024
ASSETS
Current Assets
Cash and cash equivalents	$	81		$	161
Prepaid expenses and other current assets		133			131
Taxes recoverable		-			347
Current assets held for sale		4,044			-
Total Current Assets		4,258			639

Capitalized development costs		2,940			4,775
Intangible assets		1,424			1,554
Goodwill		241			241
Long-term prepaid expenses		518			518
Total Assets	$	9,381		$	7,727

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	10,690		$	9,799
Accrued liabilities		2,889			2,371
Taxes payable		-			14
Operating lease liability		-			28
Short term convertible and non-convertible promissory notes, net of debt issuance costs		9,141			24,851
Convertible notes measured at fair value		450			1,702
Warrant liability		-			811
Due to affiliate		297			-
Current liabilities held for sale		17,274			-
Total Current Liabilities		40,741			39,576

Long term convertible and non-convertible promissory notes, net of debt issuance costs		-			1,629
Operating lease liability, net of current portion		-			407
Total Liabilities		40,741			41,612

Shareholders’ Deficit
Preferred stock, $0.0001 par value, 1,000,000 authorized as of March 31, 2025 and December 31, 2024. 10,000 issued and outstanding as of March 31, 2025 and 0 as at December 31, 2024.		60			-
Common stock, $0.0001 par value, 300,000,000 authorized as of March 31, 2025 and as of December 31, 2024; 10,148,354 issued and outstanding as of March 31, 2025 and 5,037,826 issued and outstanding as of December 31, 2024.		10			10
Additional paid in capital		39,098			35,917
Foreign currency translation reserve		(3,215	)		(2,679	)
Accumulated deficit		(67,313	)		(67,133	)
Total Shareholders’ Deficit		(31,360	)		(33,885	)
Total Liabilities and Shareholder’ Deficit	$	9,381		$	7,727

The accompanying notes are an integral part of these consolidated financial statements.

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
	2025			2024

Revenues	$	-		$	93

Operating Expenses
Cost of revenues		-			(15	)
Selling, general, and administrative		(1,490	)		(3,107	)
Depreciation, amortization, and accretion		(130	)		(70	)
Development costs		-			(7	)
Gain on sale of Spanish subsidiaries		3,589			-
Total operating expenses		1,969			(3,199	)

Income/(loss) from operations		1,969			(3,106	)

Other income/(expense):
Interest expense		(2,190	)		(1,681	)
Fair value movement of FPA asset		-			(483	)
Fair value movement of convertible debt		806			-
Fair value movement of warrants		(811	)		-
Gain on extinguishment of debt		-			179
Other expense		-			(2	)
Other income		46			6
Total other expenses		(2,149	)		(1,981	)
Loss before provision for income taxes		(180	)		(5,087	)
Loss from continuing operations		(180	)		(5,087	)

Discontinued operations:
Loss from operations of discontinued business components		-			(3,642	)
Gain on sale of discontinued operations, net assets		-			2,150
Income tax		-			-
Income/(loss) from discontinued operations		-			(1,492	)
Net income/(loss)	$	(180	)	$	(6,579	)

Basic & diluted earnings/(loss) per share of common stock:
Continuing operations	$	(0.02	)	$	(1.93	)
Discontinued operations		-			(0.57	)
Total earnings/(loss) per share of common stock, basic & diluted	$	(0.02	)	$	(2.50	)
Weighted-average common stock outstanding, basic & diluted		8,404,044			2,636,925

Comprehensive income/(loss)
Net income/(loss)	$	(180	)	$	(6,579	)
Foreign currency translation adjustment		(536	)		(1,232	)
Comprehensive income/(loss)	$	(716	)	$	(7,811	)

The accompanying notes are an integral part of these consolidated financial statements.

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, 2024		-	$	-		2,876,215	$	7	$	27,874		$	(2,924	)	$	(88,211	)	$	(63,254	)
Settlement of Related Party Debt for Shares		-		-		319,600		1		9,657			-			-			9,658
Conversion of Debt		-		-		52,800		-		1,029			-			-			1,029
Merger Costs – Settlement of Related Party Debt and Conversion of Debt		-		-		-		-		(10,633	)		-			-			(10,633	)
Stock Compensation for Third Party Services		-		-		7,252		-		117			-			-			117
Foreign currency translation adjustment		-		-		-		-		-			(1,232	)		-			(1,232	)
Net Loss		-		-		-		-		-			-			(6,579	)		(6,579	)
Balance at March 31, 2024		-	$	-		3,255,867	$	8	$	28,044		$	(4,156	)	$	(94,790	)	$	(70,894	)

	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, 2025		-	$	-		5,037,826	$	10	$	35,917	$	(2,679	)	$	(67,133	)	$	(33,885	)
Shares Issued for Payables		-		-		647,723		-		415		-			-			415
Shares issued for Conversion of Debt		-		-		2,936,747		-		2,203		-			-			2,203
Shares issued for Debt Issuance Costs		-		-		1,526,058		-		563		-			-			563
Issuance of Preferred equity shares to Officer		10,000		60														60
Foreign currency translation adjustment		-		-		-		-		-		(536	)		-			(536	)
Net Loss		-		-		-		-		-		-			(180	)		(180	)
Balance at March 31, 2025		10,000	$	60		10,148,354	$	10	$	39,098	$	(3,215	)	$	(67,313	)	$	(31,360	)

The accompanying notes are an integral part of these consolidated financial statements.

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,
	2025			2024
Cash Flows from Operating Activities
Net income/(loss)	$	(180	)	$	(6,579	)
Income/(loss) from discontinued operations, net of tax		-			(1,492	)
Loss from continuing operations	$	(180	)	$	(5,087	)
Adjustments to reconcile loss from continuing operations to net cash provided by/(used in) operations:
Depreciation, amortization and accretion		130			70
Amortization of debt discount		1,400			532
Debt issuance costs capitalized		(145	)		-
Stock compensation costs		60			-
Credit loss expense		-			(3	)
Loss on issuance of debt		-			117
Gain (loss) on foreign currency exchange rates		349			69
Fair value movement of FPA asset		-			483
Fair value movement of convertible debt		806			-
Fair value movement in warrant liability		(811	)		-
Gain on extinguishment of debt		-			179
(Gain)/loss on disposal of asset		(3,589	)		1,348
Non-cash operating lease assets		-			(19	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable and other short-term receivables		-			(31	)
Prepaid expenses and other assets		(3	)		(1,576	)
Accounts payable		4			4,213
Accrued liabilities		1,130			(3,357	)
Operating lease liabilities		-			(13	)
Payable to affiliate		297			1,039
Net Cash provided by/(used in) Operating Activities	$	(552	)	$	(2,036	)
Net Cash provided by/(used in) Operating Activities - Discontinued Operations		-			(2,735	)

Cash Flows from Investing Activities:
Purchases of property and equipment		-			(1,486	)
Capitalized Cost		-			(228	)
Construction in Process		-			(1,165	)
Net Cash provided by/(used in) Investing Activities	$	-		$	(2,879	)
Net Cash provided by/(used in) Investing Activities - Discontinued Operations		-			-

Cash Flows from Financing Activities:
Proceeds from debt		492			1,109
Payments of debt principal		(21	)		(1,982	)
Debt Issuance Cost		-			(315	)
Contributions from parent		-			253
Net Cash provided by/(used in) Financing Activities	$	471		$	(935	)
Net Cash provided by/(used in) Financing Activities - Discontinued Operations		-			(13,162	)

Effect of exchange rate on cash		1			(595	)
Net increase/(decrease) in cash, cash equivalents and restricted cash	$	(80	)	$	(22,342	)
Cash, cash equivalents, and restricted cash beginning of the year		161			24,564
Cash, cash equivalents, and restricted cash end of the period	$	81		$	2,222

The accompanying notes are an integral part of these consolidated financial statements

ALTERNUS CLEAN ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED SUPPLEMENTAL STATEMENTS OF CASH FLOW

(Unaudited)

	Year Ended December 31,
	2025		2024
	(in thousands)
Supplemental Cash Flow Disclosure
Cash paid during the period for:
Interest (net of capitalized interest of $0 and $872 respectively)	$	-	$	4,462
Taxes		-		526
Non-cash investing and financing activities:
Shares issued for settlement of debt		415		9,836
Shares issued for conversion of debt		2,203		1,029
Shares issued for debt issuance costs		563		-

The accompanying notes are an integral part of these consolidated financial statements

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 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 and transferred 2,300,000 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.

Clean Earth’s (SPAC) 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.

Alternus Clean Energy Inc. is a holding company that operates through the following 22 operating subsidiaries as of March 31, 2025:

Subsidiary	Principal Activity	Date Acquired / Established	ALTN Ownership	Country of Operations
PC-Italia-01 S.r.l.	Sub-Holding SPV	15 May 2015	AEG MH 02 Limited	Italy
PC-Italia-03 S.r.l.	SPV	1 July 2020	AEG MH 02 Limited	Italy
PC-Italia-04 S.r.l.	SPV	15 July 2020	AEG MH 02 Limited	Italy
Risorse Solari I S.r.l.	SPV	28 September 2019	AEG MH 02 Limited	Italy
Risorse Solari III S.r.l.	SPV	3 August 2021	AEG MH 02 Limited	Italy
AED Italia-01 S.r.l.	SPV	22 October 2021	AEG MH 02 Limited	Italy
AED Italia-02 S.r.l.	SPV	22 October 2021	AEG MH 02 Limited	Italy
AED Italia-03 S.r.l.	SPV	22 October 2021	AEG MH 02 Limited	Italy
AED Italia-04 S.r.l.	SPV	22 October 2021	AEG MH 02 Limited	Italy
AED Italia-05 S.r.l.	SPV	22 October 2021	AEG MH 02 Limited	Italy
AEG MH 02 Limited	Holding Company	8 March 2022	Alternus Europe Limited	Ireland
Alternus Europe Limited f/k/a AEG JD 03 Limited	Holding Company	21 March 2022	Alternus Lux 01 S.a.r.l.	Ireland
AED Italia-06 S.r.l.	SPV	2 August 2022	AEG MH 02 Limited	Italy
AED Italia-07 S.r.l.	SPV	2 August 2022	AEG MH 02 Limited	Italy
AED Italia-08 S.r.l.	SPV	5 August 2022	AEG MH 02 Limited	Italy
Alternus LUX 01 S.a.r.l.	Holding Company	5 October 2022	Alternus Clean Energy, Inc.	Luxembourg
Alt Alliance LLC	Holding Company	September 2023	Alternus Clean Energy, Inc.	USA
AEG MH 04 Limited	Holding Company	16 January 2024	Alternus Lux 01 S.a.r.l.	Ireland
ALT POL HC 02 sp. z.o.o.	Holding Company	20 January 2023	Alternus Europe Limited	Poland
ALANTEAN LLC	Joint Venture LLC Partnership	10 April 2024	Alt Alliance LLC	USA
BESS LLC	Holding Company	10 December 2024	Alternus Clean Energy, Inc.	USA
EverOn Energy LLC	Holding Company	24 March 2025	Alternus Clean Energy, Inc.	USA

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, 2025, the Company had net loss from continuing operations of approximately ($0.2) million and ($5.1) million for the three months ended March 31, 2025 and 2024, respectively. The Company had total shareholders’ equity/(deficit) of ($31.4) million as of March 31, 2025 and ($33.9) million as of December 31, 2024. The Company had $0.1 million of unrestricted cash on hand as of March 31, 2025.

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 and other core 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.

On February 10, 2025, the Company received a determination letter (the “Delisting Notification”) from the Nasdaq Hearings Advisor stating that the Panel determined to delist the Company’s common stock, par value $0.0001 per share (the “Common Stock”) from the Nasdaq Capital Market, and Nasdaq accordingly suspended trading in the Company’s Common Stock effective at the opening of trading on February 12, 2025, because the Company has not demonstrated compliance with the MVLS Rule, nor does it meet any of the alternative requirements under Nasdaq Listing Rule 5550(b) and has failed to demonstrate that additional time to regain compliance is appropriate. The Company was additionally in violation of the bid price requirement of Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”), as disclosed recently on January 31, 2025, which was taken into consideration by the Panel in its Delisting Notification.

A Form 25-NSE was filed with the Securities and Exchange Commission (“SEC”), which removed the Company’s securities from listing on Nasdaq. The Company’s Common Stock is currently quoted on the OTCQB trading market. However, there can be no assurance that the Company’s Common Stock will continue to trade on any over-the-counter trading market.

The Company is currently taking several steps to begin to alleviate the going concern issue. We are working with multiple global banks and funds in an attempt secure the necessary project financing to execute on our transatlantic business plan. The Company has sold or discontinued non-strategic businesses, operations, and assets in order to eliminate significant indebtedness.

3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.

These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

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, 2024, contained in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”).

Net Loss Per Share

Net loss per share is computed pursuant to ASC 260, Earnings per Share. Basic net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the weighted average number of common stock outstanding for the period. Diluted net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the weighted average number of common stock outstanding for the period plus the number of common stock that would have been outstanding if all potentially dilutive common stock had been issued, using the treasury stock method or if-converted method, as applicable. Potentially dilutive shares related to stock options, warrants, and convertible notes were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect due to losses in each period. The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

	March 31,		March 31,
	2025		2024
Warrants		3,143,328		478,000
Total		3,143,328		478,000

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718. Stock-based compensation expense for equity instruments issued to employees and non-employees is measured based on the grant-date fair value of the awards. The fair value of each stock unit is determined based on the valuation of the Company’s stock on the date of grant. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton stock option pricing valuation model. The Company uses a simplified method for calculating the expected term of their options. The Company recognizes compensation costs using the straight-line method for equity compensation awards over the requisite service period of the awards, which is generally the awards’ vesting period. The Company accounts for forfeitures of awards in the period they occur.

Use of the Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including (1) the expected terms of the option, (2) the expected volatility of the price of the Company’s common stock, and (3) the expected dividend yield of our common stock. The assumptions used in the option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgments. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future. Additional inputs to the Black-Scholes-Merton option-pricing model include the risk-free interest rate and the fair value of the Company’s common stock. The Company determines the risk-free interest rate by using the United States Treasury Rates of the same period as the expected term of the stock-option.

Recently Adopted Accounting Standards

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 adopted the ASU on January 1, 2025 and the impact of adoption was not material to the Company’s financial condition, results of operations or cash flows.

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. 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.

As of March 31, 2025, a summary of the Company’s assets and liabilities measured at fair value on a recurring basis is as follows, in thousands:

	Fair Value Measurement
	Level 1		Level 2		Level 3		Total
Convertible Notes	$	-	$	-	$	450	$	450
Warrant Liability		-		-		-		-
Total	$	-	$	-	$	450	$	450

Valuation Techniques

●

Convertible Note (fair value option): Valued using unobservable inputs that are not corroborated by market data (Level 3).

●

Warrant Liability: Valued using unobservable inputs that are not corroborated by market data (Level 3).

The Company measures the April 19, 2024 convertible note and private placement warrants using a Monte Carlo simulation valuation model and applying the following assumptions as of March 31, 2025:

	Convertible Loan Note			Warrant Liability
Risk-free rate		3.94	%		3.94	%
Underlying stock price	$	0.03		$	0.03
Expected volatility		50	%		50	%
Term		0.05 years			4.6 years
Dividend yield		0	%		0	%

The following table presents changes of the convertible note and private placement warrants issued April 2024 with significant unobservable inputs (Level 3) as of March 31, 2025, in thousands:

	Convertible Note
Balance at April 19, 2024	$	2,145
Conversions		(1,752	)
Change in fair value		(37	)
Balance at December 31, 2024	$	356
Change in fair value		(29	)
Balance at March 31, 2025	$	327

	Warrant Liability
Balance at April 19, 2024	$	803
Change in fair value		(394	)
Balance at December 31, 2024	$	409
Change in fair value		(409	)
Balance at March 31, 2025	$	-

As the Convertible Note issued October 1, 2024 was paid out in four tranches, the Company grouped the first two tranches together and the last two trances together and conducted two valuations. The Company measures the convertible loan and private placement warrants using a Monte Carlo simulation valuation model using the following assumptions as of March 31, 2025:

October 1 and October 21 Tranches	Convertible Loan Note			Warrant Liability
Risk-free rate		3.96	%		3.96	%
Underlying stock price	$	0.03		$	0.03
Expected volatility		50	%		50	%
Term		0.56 years			5.0 years
Dividend yield		0	%		0	%

The following table presents changes of the convertible note and private placement warrants issued October 2024 with significant unobservable inputs (Level 3) as of March 31, 2025, in thousands:

	Convertible Note
Balance at October 1, 2024	$	1,659
Cash payment		(250	)
Conversions		(31	)
Change in fair value		(32	)
Balance at December 31, 2024	$	1,346
Conversions		(2,058	)
Change in fair value		835
Balance at March 31, 2025	$	123

	Warrant Liability
Balance at October 1, 2024	$	573
Change in fair value		(171	)
Balance at December 31, 2024	$	402
Change in fair value		(402	)
Balance at March 31, 2025	$	-

The fair values of these Level 3 liabilities are sensitive to unobservable inputs used in the Monte Carlo simulation valuation model, including discount rates, expected term, expected volatility, path dependency parameters and estimates of various payout outcomes. Changes to these inputs could result in significantly higher or lower fair value measurement.

5. Business Combination

On December 11, 2024, BESS LLC, a Delaware limited liability company and wholly owned subsidiary of the Company entered into an asset purchase agreement (the “APA”) with LiiON LLC (“LiiON”), a U.S.-based expert in advanced energy storage solutions, and closed on the acquisition of certain assets related to LiiON’s Battery Storage Business. The assets purchased included customer relationships, customer service agreements and intellectual property (IP). Also, in connection with the APA, the Company entered into an exclusive consulting agreement, with an initial term of 3 years, providing the Company with the right to receive consulting services of three key employees of the LiiON Battery Storage Business to assist with the transition and integration into the Company’s business.

As consideration for the acquisition, the Company issued a non-interest bearing promissory note (the “Note”) with a principal amount of $2,000,000 and having a fair value upon issuance of approximately $1,537,000 and 250,000 shares of the Company’s restricted common stock with a fair value of $287,500.

The Company determined that the set of assets and activities acquired in connection with the APA and related agreements constitute a business subject to the guidance in ASC 805 Business Combinations.

The total acquisition date fair value of consideration transferred (i.e., the “purchase price”) of $1,824,500 was attributed to the following net assets (in thousands):

Net assets acquired (at fair values):				Useful Life
●	Exclusive Consulting Agreement	$	1,396	3 yrs
●	Intellectual Property (IP)	$	187	3yrs
Total identifiable assets		$	1,583
●	Goodwill	$	241	Indefinite
Total identifiable intangibles and goodwill		$	1,824

The goodwill recognized arises primarily from the fair value of an assembled workforce in the form of an exclusive consulting arrangement for three key employees. This goodwill has been allocated to the Company’s United States Operations segment.

The LiiON Battery Storage Business did not have a material effect on the Company’s operations for the three month period ending March 31, 2025.

6. 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. Other receivable consist of the following (in thousands):

	March 31,		December 31,
	2025		2024
	(in thousands)
Prepaid expenses and other current assets	$	131	$	131
Other receivable		2		-
Total	$	133	$	131

7. 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. Long-term prepaid expenses and other receivables 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. Capitalized development costs and other long-term assets consisted of the following:

	March 31,		December 31,
	2025		2024
	(in thousands)
Capitalized development cost	$	2,940	$	4,775
Long-term prepaid expenses		518		518
Total	$	3,458	$	5,293

Capitalized development costs relate 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 as of March 31, 2025 consisted of $2.9 million of active development in the US. Capitalized development costs as of December 31, 2024 consisted of $1.2 million of active development in the US and $3.6 million across Europe.

Long-term Prepaid Expenses consist of estimated income tax payments made by Clean Earth prior to the business combination in December 2023.

SEC Form 10-Q filed by Alternus Clean Energy Inc.