alpha-En Corporation

ALPE
Delayed OTC Bulletin Board - Other OTC - 08/19 03:30:15 pm
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ALPHA EN : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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08/14/2019 | 09:50 pm

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995



Certain statements contained in this report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements give expectations or
forecasts of future events. Forward-looking statements can be identified by
words such as "believe," "expect," "anticipate," "estimate," "project," "plan,"
"should," "intend," "may," "will," "would," "potential" and similar expressions
to future periods. Forward-looking statements are not based on historical facts
but rather represent current expectations and assumptions. Forward-looking
statements include statements we make about matters such as: future revenues;
future industry conditions; future changes in our capacity and operations;
research and development and capital expenditures and their impact on us;
business process, rationalization, investment, operational, tax, financial and
capital projects and initiatives; contingencies; our ability to become a
Qualified Opportunity Zone Business; changes in the regulatory environment;
future capital raising activities and future working capital, costs, revenues,
business opportunities, cash flows, margins, earnings and growth.



Forward-looking statements relate to the future and are subject to many risks,
assumptions and uncertainties, including those risks set forth in this report
and as described in Part I, Item IA Risk Factors of our Annual Report on Form
10-K for our prior fiscal year ended December 31, 2018. Although we believe the
expectations reflected in the forward-looking statements are reasonable, actual
results, developments and business decisions could differ materially from those
contemplated by such forward-looking statements. The environment for which we
operate in is highly competitive and rapidly changing and it is not possible for
our management to predict all risks, as new risks emerge from time to time.



While no list of uncertainties could be complete, some factors that could cause
actual results to differ materially from those in the forward-looking statements
include the following, without limitation: current and future business and
economic uncertainties may adversely affect our ability to generate revenues,
profitability and financial condition; changes in the energy storage and battery
markets could adversely affect our ability to compete and or to successfully
commercialize products acceptable to the market; our business, financial
condition and results of operations could be adversely affected by new
government regulations; potential inability to attract and retain skilled
personnel, could harm our business; we may pursue strategic opportunities which
could result in operating difficulties or dilution; assertions of claims,
lawsuits and proceedings against us could harm our business, results of
operations and reputation; and our potential inability to raise capital when and
if needed.



All subsequent written and oral forward-looking statements by or attributable to
us or persons acting on our behalf are expressly qualified in their entirely by
these factors. We undertake no obligation to publicly update or revise any
forward-looking statements whether as a result of new information, future
developments or otherwise, except as may be required by law.






Overview




We are focused on developing and commercializing our proprietary process for
producing pure lithium metal.



Lithium is the lightest metal with the highest electrochemical potential, making
it an attractive choice for use in lightweight, high energy density batteries.
There is a substantial existing market for lithium metal in primary
(non-rechargeable) batteries, and rechargeable batteries and many future
opportunities in next-generation batteries (such as solid-state) currently under
development.



Lithium occurs naturally only as a compound (such as lithium carbonate) in rocks
or brine. Current commercial technology for refining these compounds into
lithium metal require high temperatures to melt the compounds and produce
hazardous emissions, such as chlorine gas. Our process refines the compounds
into lithium metal at room temperature and without noxious emissions. As
importantly, our process produces lithium metal at higher purity levels and in
thinner layers with a more consistent surface than other commercially-available
processes. For these reasons, we believe our process will enable more efficient
and effective production of lithium battery components, such as lithium metal
anodes. Our process may also have applicability in recycling lithium batteries.



In early 2019, the US Patent and Trademark Office granted us a patent on
products obtained by our process. We have filed additional patent applications
in the United States and in other countries for other aspects, enhancements and
applications of our process.



To test and develop our process, we partnered for several years with university
and government research laboratories, including City University of New York,
Princeton, Cornell and Argonne National Laboratory. In 2018, we opened our own
laboratory in Yonkers, NY, where our laboratory staff now conduct most of our
research and development activities. At present, these activities are focused on
continuing to improve our process and on testing the efficacy of the lithium we
produce in various types of batteries. In addition, we are working to automate
our process to allow us to produce greater quantities of lithium metal anodes
for potential commercial customers.



In June 2019 we received a technology development grant from the New York State
Energy Research and Development Authority
(NYSERDA) which could provide us with
up to approximately $1.0 million in grant funding over time to assist in our
research and developments activities.






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Our headquarters and laboratory facility are located in an Opportunity Zone, as
defined in the Tax Cuts and Jobs Act of 2017 (the "TCJA"). We are currently
working with our advisors (including a firm that specializes in Opportunity Zone
matters) to explore the possibility of being designated as a Qualified
Opportunity Zone Business (QOZB) under the TCJA. If we were to be designated as
a QOZB, qualified investors in our company may be eligible for certain favorable
tax treatment on their investment in us. There can be no assurance that we will
succeed in obtaining a designation as a QOZB.






Results of Operations




Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018



General and administrative expenses were approximately $1.2 million for the
three months ended June 30, 2019 as compared to approximately $1.4 million for
the three months ended June 30, 2018.



Legal and professional fees were approximately $68,000 for the three months
ended June 30, 2019 as compared to approximately $120,000 for the three months
ended June 30, 2018.



Research and development expenses were approximately $149,000 for the three
months ended June 30, 2019 as compared to approximately $739,000 for the three
months ended June 30, 2018. The decrease in research and development expenses
mostly relates to amortization of research and development prepaid expenses of
$421,000 during the three months ended June 30, 2018 and stock-based expenses of
$30,000 and $227,000 during the three months ended June 30, 2019 and 2018,
respectively.



Net loss attributable to non-controlling interest was $0 for the three months
ended June 30, 2019 as compared to net loss attributable to non-controlling
interest of approximately $126,000 for the three months ended June 30, 2018,
with such change resulting from our purchase of all of the outstanding shares of
our former subsidiary, Clean Lithium Corporation.



Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018



General and administrative expenses were approximately $2.1 million for the six
months ended June 30, 2019 as compared to approximately $2.2 million for the six
months ended June 30, 2018.



Legal and professional fees were approximately $169,000 for the six months ended
June 30, 2019 as compared to approximately $261,000 for the six months ended
June 30, 2018.



Research and development expenses were approximately $298,000 for the six months
ended June 30, 2019 as compared to approximately $465,000 for the six months
ended June 30, 2018. The decrease in research and development expenses mostly
relates to amortization of research and development prepaid expenses of $421,000
during the six months ended June 30, 2018 and stock-based expenses of $41,000
and income resulted from stock-based compensation of $217,000 during the six
months ended June 30, 2019 and 2018, respectively.



Net loss attributable to non-controlling interest was $0 for the six months
ended June 30, 2019 as compared to net loss attributable to non-controlling
interest of approximately $155,000 for the six months ended June 30, 2018, with
such change resulting from our purchase of all of the outstanding shares of our
former subsidiary, Clean Lithium Corporation.






Going Concern




The Company's condensed financial statements have been prepared assuming that it
will continue as a going concern, which contemplates continuity of operations,
realization of assets, and liquidation of liabilities in the normal course of
business.



As reflected in the condensed financial statements, the Company had an
accumulated deficit of approximately $28.2 million at June 30, 2019, a net loss
of approximately $2.6 million and approximately $740,000 net cash used in
operating activities for the six months ended June 30, 2019. These factors raise
substantial doubt about the Company's ability to continue as a going concern.



The Company is attempting to further develop the intellectual property
associated with its technology; broaden its patent portfolio; scale up
production of various products; and begin generating revenue; however, the
Company's cash position is not sufficient to support its daily operations. The
ability of the Company to continue as a going concern is dependent upon its
ability to raise additional funds by way of a public or private offering and its
ability to further develop its technology and generate sufficient revenue. While
the Company believes in the viability of its technology and in its ability to
raise additional funds by way of a public or private offering, there can be no
assurances to that effect.



The condensed financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.






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Liquidity and Capital Resources



Long-term deposits at June 30, 2019 includes $35,000 of cash deposited with
Chase Bank ("Chase") as collateral for an irrevocable standby letter of credit
associated our Yonkers office lease.



As of June 30, 2019, we had an accumulated deficit of approximately $28.2
million
and working capital deficit of approximately $117,000.



We have limited funds to continue our operating activities. Future operating
activities are expected to be funded by loans and investments from officers,
directors and stockholders, until we begin to generate cash flows from
operations.






The table below sets forth selected cash flow data for the periods presented
(dollars in thousands):



Six Months Ended June 30,
2019
2018



Net cash used in operating activities $ (740 ) $ (2,176 )
Net cash used in investing activities


- (177 )
Net cash provided by financing activities 970 2,880


Net increase in cash and restricted cash $ 230 $ 527



The success of our business plan during the next 12 months and beyond is
contingent upon us generating sufficient revenue to cover our costs of
operations, or upon us obtaining additional financing. We believe that our
current capital resources are not sufficient to support our operations for the
next 12 months. We intend to finance our operations through debt and/or equity
financings. There can be no assurance that such additional financing will be
available to us on acceptable terms, or at all. We intend to use all
commercially-reasonable efforts at our disposal to raise sufficient capital to
run our operations on a go forward basis.



Off Balance Sheet Arrangements



As of the date of this report, we have no significant off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to our
stockholders.






Commitments




On March 22, 2016, we entered into a lease (the "Lease") with Hudson View
Building
#3, LLC ("the "Landlord"), for office and laboratory space located in
Yonkers, New York (the "Leased Premise"). The Leased Premise consists of
approximately 8,000 square feet. The Lease has a term of 87 months from the
lease commencement date, which is the date upon which the Landlord has
substantially completed certain interior leasehold improvements to the Leased
Premise. The annual rent of the first year of the lease is approximately
$208,000, increasing by 1.5% on each anniversary of the lease commencement date.
In the event of a termination of the lease following a default by the Company,
the Company will be obligated to pay the sum of the rent payable for the
remainder of the lease term. The Company moved into the office on May 30, 2017.
The Company began paying the monthly rent during the quarter ended September 30,
2017
. On March 31, 2018, we entered into a lease amendment agreement with the
Landlord. Which resulted in abatement of rent for the period from October 2017
through March 2018, and the expiration date of the Lease was extended to March
31, 2025
.



In connection with this lease, we obtained an Irrevocable Standby Letter of
Credit (the "Letter of Credit") from Chase Bank for a sum not exceeding
$150,000. The Company has deposited this amount with Chase Bank as collateral
for the Letter of Credit and recorded the amount as restricted cash and
long-term deposits in the balance sheets. During the six months ended June 30,
2019
, $15,000 restricted cash was released to the Company.






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As of June 30, 2019, contractual minimal lease payments are as follows (in
thousands):



2019 $ 106
2020 215
2021 219
2022 222
2023 225
2024 229
2025 58
Total $ 1,274

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