Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On March 23, 2023, Spruce Power Holding Corporation (the “Company” or "Spruce") completed the acquisition of all the issued and outstanding interests in SS Holdings 2017, LLC (“SS Holdings”) from certain funds managed by HPS Investment Partners, LLC (“HPS”), pursuant to a Membership Interest Purchase And Sale Agreement (“Purchase Agreement”). The SS Holdings assets include 20-year use rights to the customer payment stream (“SS Holdings Master Lease”) of approximately 22,500 residential solar leases and power purchase agreements. The Company acquired SS Holdings for approximately $23 million of cash, net of cash received, and assumed $125 million of outstanding senior indebtedness and interest rate swaps with Deutsche Bank AG, New York Bank held by SS Holdings and its subsidiaries at the close of the acquisition.
The unaudited pro forma financial information has been developed from, and should be read in conjunction with, the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and audited annual financial statements of SS Holdings incorporated into this Current Report on Form 8-K/A.
The unaudited pro forma financial information has been prepared by the Company using the acquisition method of accounting in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"), with Spruce being the acquiring entity, and reflects estimates and assumptions deemed appropriate by Company's management to give effect to the acquisition as if it had been completed effective December 31, 2022, with respect to the unaudited pro forma condensed combined balance sheet, and as of January 1, 2022, with respect to the unaudited pro forma condensed combined statement of operations. The unaudited pro forma condensed combined financial statements should be read in conjunction with the estimates and assumptions set forth in the notes to the unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements include adjustments that reflect the accounting for the transaction in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Refer to the notes of the unaudited pro forma financial information for additional information regarding the basis of presentation and pro forma adjustments.
The unaudited pro forma condensed combined financial statements do not reflect the realization of any expected operating efficiencies or other synergies that may result from the transactions as a result of planned initiatives following the completion of the transactions.
SPRUCE POWER HOLDING CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2022
(In thousands, except share and per share amounts) | Spruce's Historical (as reported) | SS Holdings Historical (November 30, 2022 as reported) | Proforma and Reclassification Adjustments | Pro Forma Combined | ||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 220,321 | $ | 69,985 | $ | (103,799) | (3),(6) | $ | 186,507 | |||||||||||
Restricted cash | 19,823 | 9,503 | — | 29,326 | ||||||||||||||||
Accounts receivable, net | 8,336 | — | (28) | (1) | 8,308 | |||||||||||||||
Interest rate swap assets, current | 10,183 | 781 | — | 10,964 | ||||||||||||||||
Prepaid expenses and other current assets | 5,316 | — | — | 5,316 | ||||||||||||||||
Current assets of discontinued operations | 10,977 | — | — | 10,977 | ||||||||||||||||
Total current assets | 274,956 | 80,269 | (103,827) | 251,398 | ||||||||||||||||
Investment under SS Holdings master lease agreement | — | 102,713 | 44,611 | (3) | 147,324 | |||||||||||||||
Property and equipment, net | 396,168 | — | — | 396,168 | ||||||||||||||||
Interest rate swap assets, non-current | 22,069 | — | — | 22,069 | ||||||||||||||||
Deferred rent assets | 1,626 | — | — | 1,626 | ||||||||||||||||
Right-of-use assets | 2,802 | — | — | 2,802 | ||||||||||||||||
Goodwill | 128,548 | — | — | 128,548 | ||||||||||||||||
Other assets | 383 | 2,041 | — | 2,424 | ||||||||||||||||
Total assets | $ | 826,552 | $ | 185,023 | $ | (59,216) | $ | 952,359 | ||||||||||||
Liabilities, redeemable noncontrolling interests and stockholders’ equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 2,904 | 835 | $ | — | $ | 3,739 | |||||||||||||
Current portion of long-term debt | 25,314 | — | — | 25,314 | ||||||||||||||||
Accrued expenses and other current liabilities | 21,509 | — | (8) | (1) | 21,501 | |||||||||||||||
Deferred revenue, current | 39 | — | 39 | |||||||||||||||||
Lease liability, current | 834 | — | — | 834 | ||||||||||||||||
Current liabilities of discontinued operations | 9,097 | — | — | 9,097 | ||||||||||||||||
Total current liabilities | 59,697 | 835 | (8) | 60,524 | ||||||||||||||||
Long-term debt, net of current portion | 474,441 | 122,253 | 2,747 | (3) | 599,441 | |||||||||||||||
Deferred revenue | 452 | — | — | 452 | ||||||||||||||||
Lease liability, non-current | 2,426 | — | — | 2,426 | ||||||||||||||||
Warrant liabilities | 256 | — | — | 256 | ||||||||||||||||
Other long-term liabilities | 10 | — | — | 10 | ||||||||||||||||
Long-term liabilities of discontinued operations | 294 | — | — | 294 |
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Total liabilities | 537,576 | 123,088 | 2,739 | 663,403 | ||||||||||||||||
Redeemable noncontrolling interests | 85 | — | — | 85 | ||||||||||||||||
Stockholders’ equity | ||||||||||||||||||||
Common stock | 14 | — | — | 14 | ||||||||||||||||
Additional paid-in capital | 473,277 | 61,935 | (61,935) | (3),(6) | 473,277 | |||||||||||||||
Noncontrolling interests | 8,942 | — | — | 8,942 | ||||||||||||||||
Accumulated deficit | (193,342) | — | (20) | (1) | (193,362) | |||||||||||||||
Total stockholders’ equity (deficit) | 288,891 | 61,935 | (61,955) | 288,871 | ||||||||||||||||
Total liabilities, redeemable noncontrolling interests and stockholders’ equity | $ | 826,552 | $ | 185,023 | $ | (59,216) | $ | 952,359 |
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SPRUCE POWER HOLDING CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2022
(In thousands, except per share and share amounts) | Spruce's Historical (as reported) | SS Holdings Historical (Year Ended November 30, 2022 as reported) | Proforma and Reclassification Adjustments | Pro Forma Combined | ||||||||||||||||
Revenues | $ | 23,194 | $ | 10,125 | $ | (10,190) | (4),(5) | $ | 23,129 | |||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of revenues | 9,949 | — | — | 9,949 | ||||||||||||||||
Selling, general, and administrative expenses | 73,118 | 953 | (40) | (5) | 74,031 | |||||||||||||||
Total operating expenses | 83,067 | 953 | (40) | 83,980 | ||||||||||||||||
Loss from operations | (59,873) | 9,172 | (10,150) | (60,851) | ||||||||||||||||
Other (income) expense: | ||||||||||||||||||||
Interest (income) expense, net | 10,062 | 3,120 | (10,625) | (2),(4) | 2,557 | |||||||||||||||
Gain on extinguishment of debt | (4,527) | — | — | (4,527) | ||||||||||||||||
Gain on asset disposal | (580) | — | — | (580) | ||||||||||||||||
Change in fair value of obligation to issue shares of common stock to sellers of World Energy | (535) | — | — | (535) | ||||||||||||||||
Change in fair value of warrant liability | (5,148) | — | — | (5,148) | ||||||||||||||||
Change in fair value of interest rate swaps | (5,554) | (782) | — | (6,336) | ||||||||||||||||
Other (income) expense | (912) | 12 | (5) | (5) | (905) | |||||||||||||||
Net (loss) income from continuing operations | (52,679) | 6,822 | 480 | (45,377) | ||||||||||||||||
Net loss from discontinued operations | (40,112) | — | — | (40,112) | ||||||||||||||||
Net (loss) income | (92,791) | 6,822 | 480 | (85,489) | ||||||||||||||||
Less: Net income attributable to redeemable noncontrolling interests and noncontrolling interests | 1,140 | — | — | 1,140 | ||||||||||||||||
Net (loss) income attributable to stockholders | $ | (93,931) | $ | 6,822 | $ | 480 | $ | (86,629) | ||||||||||||
Net (loss) income attributable to stockholders per share, basic | $ | (0.66) | $ | (0.61) | ||||||||||||||||
Net (loss) income attributable to stockholders per share, diluted | $ | (0.66) | $ | (0.61) | ||||||||||||||||
Weighted-average shares outstanding, basic | 142,692,003 | 142,692,003 | ||||||||||||||||||
Weighted-average shares outstanding, diluted | 142,692,003 | 142,692,003 |
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Spruce Power Holding Corporation
Notes to Unaudited Pro Forma Condensed Combined Financial Statements (Amounts in thousands, except share and per share data) |
(1) DESCRIPTION OF THE TRANSACTION
On March 23, 2023, Spruce Power Holding Corporation (the “Company” or "Spruce") acquired the rights from SS Holdings 2017, LLC (the “SS Holdings”) to receive 100% of the cash flow from more than 22,500 residential rooftop solar systems across 10 states in the U.S for approximately $23 million in cash, net of cash acquired, and assumption of $125 million in debt of outstanding senior indebtedness and interest rate swaps with Deutsche Bank AG, New York Bank held by SS Holdings, and its subsidiaries at the close of the acquisition.
(2) BASIS OF PRO FORMA PRESENTATION
SS Holdings audited financial statements are as of and for the year ended November 30, 2022 and Spruce's financial statements are as of and for the year ended December 31, 2022.
The Unaudited Pro Forma Condensed Combined Balance Sheet is presented as if the acquisition had occurred as of December 31, 2022. The Unaudited Pro Forma Condensed Combined Statements of Operations are presented as if the acquisition had occurred on January 1, 2022.
The unaudited pro forma condensed combined financial statements include adjustments that reflect the accounting for the transaction in accordance with U.S. GAAP.
The purchase of SS Holdings has been accounted for as an acquisition of financial assets and the unaudited pro forma financial information was prepared accordingly. For purposes of developing the Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2022, the acquired SS Holdings assets and liabilities assumed, have been recorded at their relative fair values.
The unaudited pro forma financial information is based on the historical financial statements of the Company and SS Holdings after giving effect to the acquisition, as well as the assumptions and adjustments described in the accompanying notes to the unaudited pro forma financial information. The unaudited pro forma financial information does not give effect to the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies, or any other synergies that may result from the acquisition. The unaudited pro forma financial information is presented for illustrative purposes only and are not indicative of either future results of operations or results that might have been achieved if the acquisition was consummated as of January 1, 2022. This information should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and the SS Holdings financial statements and accompanying notes incorporated herein. Certain reclassifications have been made to the historical presentation of the SS Holdings financial statements to conform to the presentation used in the unaudited pro forma financial information.
Acquisition accounting rules require evaluation of certain assumptions, estimates, or determination of financial statement classifications. The accounting policies of the Company may materially vary from those of SS Holdings. During preparation of the unaudited pro forma financial information, management is not aware of any material differences, and accordingly, the unaudited pro forma financial information assumes no material differences in accounting policies between the two companies.
(3) PRO FORMA AND RECLASSIFICATION ADJUSTMENTS
The pro forma adjustments in the Unaudited Pro Forma Condensed Combined Balance Sheet and Statements of Operations are as follows:
(1) Includes elimination of intercompany balances between Spruce and SS Holdings.
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Spruce Power Holding Corporation
Notes to Unaudited Pro Forma Condensed Combined Financial Statements (Amounts in thousands, except share and per share data) |
(2) Includes the elimination of $0.5 million in deferred financing costs related amortization recorded in interest expense in the historical financial statements of SS Holdings as a result of the fair value adjustment in (3).
(3) Includes an adjustment to a) cash and cash equivalents of $35 million for the cash consideration paid to acquire SS Holdings, b) investment under SS Holdings master lease agreement of $44.6 million to adjust to the fair value of the asset, c) long-term debt, net of current portion of $2.7 million to adjust to the fair value of the long-term debt, and d) additional paid in capital to eliminate the subsidiary balance in consolidation of Spruce.
(4) Includes reclassification of Master lease investment interest income of $10.1 million to interest (income) expense, net.
(5) Includes elimination of Transition Manager Fee and Master Service Agreement fee between SS Holdings and Spruce.
(6) Includes the adjustment of $68.8 million in cash which was not acquired as part of SS Holdings.
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