AleAnna, Inc.: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2025.

This discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs that involve risks and uncertainties that may be outside our control. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set for under “Risk Factors” in our Annual Report on Form 10-K. Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” “AleAnna,” or the “Company” refer to AleAnna, Inc.

Overview

AleAnna is a natural gas resource developer focused on delivering critical natural gas supplies to Europe through both onshore conventional natural gas exploration and renewable natural gas development in Italy. We have several conventional natural gas discoveries including the Longanesi field, located in the Po Valley in Northern Italy, which is one of Italy’s largest modern gas discoveries. We retain a 33.5% working interest in the Longanesi field with our working interest partner, and operator, Padana. We acquired our working interest in the Longanesi field through a 2016 transaction with Enel. We also retain wholly owned concessions, permits, and pending applications on other exploration and development prospects across Italy which are supported by proprietary modern 3D seismic imaging.

Our recent drilling and exploration activities involve the drilling and testing of three Longanesi development wells (during 2022 and 2023) as well as the re-completion of two original discovery wells. We had no drilling activity during the three and six months ended June 30, 2025 or 2024. We had no other exploratory or development drilling during three and six months ended June 30, 2025 or 2024. Our Longanesi, Trava and Gradizza wells were classified by DeGolyer as proved undeveloped reserves as such wells had not yet started production as of December 31, 2024 and require future investments to install production facilities prior to being fully completed and producible. However, as noted in the “Recent Developments” section below, we achieved first production from the Longanesi field in 2025.

In 2021, we launched a renewable natural gas development business focused on bringing to market carbon-negative renewable natural gas derived from animal and agricultural waste. We currently generate revenue from electricity sales from two renewable natural gas assets.

The Transactions

On December 13, 2024, we consummated the previously announced business combination pursuant to the Merger Agreement, dated June 4, 2024, by and among Swiftmerge, HoldCo, Swiftmerge Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of HoldCo, and AleAnna Energy. Pursuant to the terms of the Merger Agreement, on December 13, 2024, SPAC migrated to and domesticated as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law, as amended, and the Companies Act (As Revised) of the Cayman Islands and changed its name to AleAnna, Inc. The transactions contemplated by the Merger Agreement are collectively referred to herein as the “Business Combination.”

The Business Combination was accounted for as a common control transaction with respect to AleAnna Energy which is akin to a reverse recapitalization. This conclusion was based on the fact that Nautilus Resources LLC (“Nautilus”) had a controlling financial interest in AleAnna Energy prior to the Business Combination and has a controlling financial interest in AleAnna, which includes AleAnna Energy as a wholly owned subsidiary. The net assets of SPAC are stated at their historical carrying amounts with no goodwill or intangible assets recognized in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). The Business Combination with respect to AleAnna Energy was not treated as a change in control primarily due to Nautilus receiving the controlling voting stake in AleAnna and the ability of Nautilus to nominate the full board of directors and management of AleAnna.

Under a reverse recapitalization, SPAC is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of AleAnna Energy issuing stock for the net assets of SPAC, accompanied by a recapitalization.

We incurred $9.5 million in transaction costs related to the Business Combination. Approximately $0.6 million of these costs were recorded as a reduction to additional paid-in capital, up to the amount of cash proceeds received in the transaction. Of the remaining $8.9 million, approximately $0.5 million represented prepaid directors and officers insurance premiums that were recorded to other assets in the consolidated balance sheet, and $8.4 million represented legal, accounting, consulting and advisory fees which were recorded as Business Combination transaction expenses in the consolidated statement of operations and comprehensive loss.

Recent Developments

Gradizza Concession – Regional Intesa Approval

On August 6, 2025, AleAnna reached an agreement with the Emilia Romagna Region (the “Intesa”) in support of its pending application for a production concession related to the Gradizza field. This represents one of two major regulatory approvals required prior to first production. The second required approval—authorization from the Federal Ministry—remains pending.

AleAnna holds a 100% working interest in the Gradizza field and will serve as operator. If and when a production concession is granted, Gradizza is expected to become the Company’s first operated producing asset. According to the Company’s reserve report as of December 31, 2024, Gradizza contains 380 MMcf of proved reserves.

First Production at Longanesi

On March 13, 2025, AleAnna achieved a key milestone with the first production from its working interest in five wells in the Longanesi field, and the field reached sustained maximum production during the second quarter of 2025. The Company began recognizing revenue and related expenses, including depreciation and depletion, associated with Longanesi production in the second quarter of 2025.

In connection with the Longanesi start-up in May 2025, AleAnna issued a $3.1 million bank guarantee to secure its contingent consideration obligation to Enel. The guarantee required $1.2 million in cash collateral, which was classified as restricted cash as of June 30, 2025. The collateral may be used to satisfy the contingent consideration liability as payments become due.

Gas Sale Agreement

On October 29, 2024, we entered into a gas sale agreement (“GSA”) with Shell Energy Europe Limited (“SEEL”), under which SEEL became the exclusive buyer of our share of the natural gas produced from the Longanesi field net of (i) any consumption and/or losses incurred in the transport, treatment and compression of gas before delivery; (ii) any volume to be allocated for regulated royalties auctions, if applicable; and (iii) any other volume contractually allocated to other parties before August 31, 2022.

Key Factors Affecting our Performance, Prospects and Future Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including competition from other carbon-based and non-carbon-based fuel producers, regulatory hurdles posed by the Italian government, and other factors. We believe the factors described below are key to our success.

Continued Development of Conventional Natural Gas Projects

As previously discussed, we and Padana achieved first production of the five wells in the Longanesi field in March 2025 through use of a temporary processing facility. The permanent processing facility is expected to be constructed over the remainder of 2025 and 2026.

We believe our achieving first production of the Longanesi field was a key milestone that will fuel our potential growth. We also have potentially viable discoveries in our Gradizza and Trava fields that are expected to achieve first production in the future.

Expanding Renewable Natural Gas Operations

In 2021, we launched a renewable natural gas development business focused on bringing to market carbon negative renewable natural gas derived from animal and agricultural waste. As previously discussed, the first three renewable natural gas assets were purchased between March 2024 and July 2024, with additional renewable natural gas projects expected to be purchased in the future.

We believe expanding the renewable natural gas business is another key to our potential growth and may unlock potential partnership or joint venture opportunities.

Key Components of Results of Operations

We are an early-stage company, and our historical results may not be indicative of our future results. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations or our future results of operations.

Revenue

During both the three and six months ended June 30, 2025, we generated approximately $3.3 million of revenue from sales of our share of natural gas from the Longanesi field. Results from the Longanesi field have been above expectations, with a stabilized production rate of approximately 28 million cubic feet per day (“MMcf/d”), which was achieved ahead of the anticipated 3-month ramp up timeline for this milestone.

During the three and six months ended June 30, 2025, we generated approximately $0.7 million and $1.4 million, respectively, of revenue from electricity sales at two renewable natural gas assets acquired in July 2024 (the “Casalino” and “Campopiano” plants). The plant assets are fully permitted for production of electricity through conversion of crop and animal waste bio feedstocks. The plant assets are currently biomethane to electricity conversion assets. It is our intention to begin upgrading the sites to refine biomethane into renewable natural gas through upgrading units. Following the upgrade process to transition the assets to biomethane to renewable natural gas conversion, we expect to sell renewable natural gas to customer(s) by trucking or piping the renewable natural gas to the interstate pipeline system (SNAM). Until the plant assets are upgraded, we will actively source bio feedstocks for the assets in order to produce biomethane which will be processed through reciprocating generators in order to generate electricity which is then sold onto the grid through a metered interconnection. Casalino and Campopiano derive revenues from the sale of such electricity to the local state-owned electrical utility (Gestore dei Servizi Energetici SpA or “GSE”). Energy generation revenue is recognized as the electricity generated by the Casalino and Campopiano assets is delivered to GSE. Revenues are based on actual output and “on-the-spot” predetermined prices for small renewable energy producers.

Expenses

General and Administrative (G&A) Expense

G&A expenses consist of compensation costs for personnel in executive, finance, accounting, and other administrative functions. G&A expenses also include legal fees, professional fees paid for accounting, auditing and consulting services, and insurance costs. As a newly public company, we expect that we will incur higher G&A expenses for public company costs such as compliance with the regulations of the Securities and Exchange Commission (the “SEC”) and the Nasdaq Capital Market.

Cost of Revenues

Cost of revenues primarily consists of biofeedstock purchased by the RNG Subsidiaries. This feedstock fuels the anaerobic digesters (“ADs”), which produce biomethane that is then converted to electricity and sold onto the grid.

Lease Operating Expenses

Lease operating expenses reflect ongoing costs related to the Longanesi field which commenced production in the second quarter of 2025. Such costs are passed down to us by the Longanesi field operator, Pradana, and include accrued royalties payable to the Italian government, pipeline fees, repairs and maintenance, and other field-related costs.

Depreciation and Depletion

Depreciation includes expense related to the Casalino and Campopiano renewable plant assets, which is recorded on a straight-line basis over the estimated useful lives of the assets. It also includes depreciation of lease and well equipment at the Longanesi field, which is calculated using the units-of-production method based on estimated proved developed reserves.

Depletion reflects the systematic allocation of the capitalized costs of our natural gas properties over the estimated proved developed reserves on a units-of-production basis. These costs include acquisition, exploration, and development expenditures associated with the Longanesi field. Depletion expense fluctuates based on production volumes and changes in our reserve estimates.

Income Tax Effects

AleAnna’s income tax consequences have been reflected in its consolidated financial statements in accordance with ASC 740, Income Taxes. Despite the start of Longanesi production, given AleAnna’s history of losses, and because future production remains uncertain, a full valuation allowance was applied against deferred tax assets as of June 30, 2025 and 2024.

We are also subject to a Valued-Added Tax (“VAT”), a broadly-based consumption tax assessed on the value added to goods and services. VAT generally applies to most goods and services bought and sold within the EU. In certain cases, including cross-border sales to business customers and sales of biogas within Italy, we are not required to collect VAT on revenues. To date, we have incurred higher VAT on purchases (input VAT) than we have collected on sales (output VAT), resulting in a net VAT refund receivable. As of June 30, 2025 and December 31, 2024, we had VAT receivables of $8.4 million, and $6.8 million, respectively. Under Italian tax law, VAT receivables may be used to offset other tax liabilities, including payroll taxes, income taxes, and other taxes payable to the Italian government.

Operations

Our net income or loss attributable to common stockholders was $0.4 million (income) and $1.6 million (loss) for the three and six months ended June 30, 2025, respectively, and $43.1 million and $157.5 million for the same periods in 2024. As of June 30, 2025 and December 31, 2024, we had an accumulated deficit of $192.7 million and $191.0 million, respectively. The majority of these accumulated losses stem from costs associated with the Longanesi field drilling and development, including asset impairments from previous years, as well as seismic imaging, exploratory costs for other conventional natural gas prospects, and general and administrative expenses. The accumulated deficits also include historical deemed dividends to the redemption value of AleAnna Energy's previous Class 1 Preferred Units (exchanged for Class A and Class C common stock in connection with the Business Combination) based on the redemption features of those units and the related accounting requirements. See “Note 10 — Equity" to the audited condensed consolidated financial statements for further details. We expect to continue to incur substantial expenses related to our operations, exploration, and development activities, including pre-commercialization efforts as we continue our development of, and seek regulatory approval for, our discoveries and exploration prospects. Since inception, we have incurred net losses annually. We achieved quarterly net income for the first time during the three months ended June 30, 2025. We expect to achieve sustained profitability during the second half of 2025.

Results of Operations

Comparison of the three and six months ended June 30, 2025 and 2024

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Revenues and Cost of Revenues

During the three and six months ended, our revenue was earned through sales of our share of natural gas production from the Longanesi field and from electricity generation and sales at the Casalino and Campopiano renewable natural gas plants. Cost of revenues from sales of electricity consists of feedstock costs, direct labor and overhead necessary to produce RNG and generate electricity. All cost of revenues was related to the RNG assets that were purchased in 2024.

General and Administrative (G&A) Expenses

General and administrative expenses consist of salaries and benefits, outside professional services including legal, human resources, audit and accounting services, and development stage expenses. We expect to continue to incur expenses to support operations as a public company, including expenses related to existing and future compliance with rules and regulations of the SEC and the Nasdaq, insurance expenses, investor relations, audit fees, professional services and general overhead and administrative costs.

General and administrative expenses increased by $0.8 million, or 87%, and $2.1 million or 72% for the three and six months ended June 30, 2025, compared to same periods in 2024. The increases were primarily due to increases in legal, audit and consulting fees to support public company operations.

Lease Operating Expenses and Depreciation and Depletion

Refer to the descriptions of lease operating expenses and depreciation and depletion provided in the “Expenses” section above. As of June 30, 2024, the Casalino and Campopiano plants had not yet been acquired, and the Longanesi field had not commenced production. Accordingly, period-over-period comparisons for these expense categories are not meaningful.

Contingent Consideration Liability

As of June 30, 2025 and December 31, 2024, the contingent consideration liability was recorded at $28.1 million and $25.0 million, respectively. The estimate of the contingent consideration liability was determined based on inputs including the following as of June 30, 2025 and December 31, 2024: the intercontinental exchange futures prices for European natural gas, Euro to USD exchange rates of 1.17 and 1.04, respectively, and management’s future expected annual Longanesi production. We are required to make formulaic deferred consideration payments effectively equating to 20% to 50% of revenue above certain European natural gas threshold prices. The calculation and timing of such payments are primarily driven by future expected Longanesi production, as modeled by DeGolyer, as well as forward European natural gas prices. While the timing and quantities of expected Longanesi production were unchanged from December 31, 2024 to June 30, 2025, and we had fully accrued the total capped Euro amount of the liability, average annual European natural gas forward prices declined slightly.

Since the total capped Euro-denominated liability was recorded as of June 30, 2025 and December 31, 2024, and June 30, 2024 and December 31, 2023, any changes in the USD-equivalent amount were entirely due to foreign exchange rate fluctuations. As such, these changes were included in currency translation adjustment for the three and six months ended June 30, 2025 and 2024.

Interest and Other Income (Expenses)

Interest and other income (expenses) primarily includes interest earned on cash and cash equivalents. Interest and other income decreased by $0.5 million and $0.5 million during the three and six months ended June 30, 2025 compared to the same periods in 2024, primarily due to higher interest (higher rates) earned on larger average cash balances during the 2024 periods compared to the 2025 periods presented.

Change in Fair Value of Derivative Liability

The change in the fair value of derivative liability related to the Class 1 Preferred Units was nil during the three and six months ended June 30, 2025, compared to nil during the three months ended June 30, 2024 and $0.2 million during the six months ended June 30, 2024. The fair value gain recorded during the six months ended June 30, 2024 (representing a decrease in the liability) was primarily due to a higher liquidation threshold which was driven by capital contributions made during the first quarter of 2024 through the Class 1 Preferred Units. The derivative liability was reduced from $0.2 million as of December 31, 2023 to zero during the first quarter of 2024 and was ultimately derecognized in conjunction with the Business Combination.

Currency Translation Adjustment

For the purpose of presenting consolidated financial statements, the assets and liabilities of our Euro operations are translated to USD at the exchange rate on the reporting date. The income and expenses are translated using average exchange rates. Foreign currency differences that arise on translation for consolidated purposes are recognized as a currency translation adjustment in other comprehensive loss on the consolidated statements of operations and comprehensive loss.

The currency translation adjustment increased by $3.9 million and $4.9 million for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024. This increase was primarily driven by fluctuation of the exchange rates between the Euro and the U.S. Dollar as well as the level of our activities. This increase was primarily driven by fluctuations in the Euro to U.S. Dollar exchange rates and the level of our Euro-denominated activities. The spot rate strengthened from December 31, 2024 to June 30, 2025, and the average exchange rates were higher during the 2025 periods, resulting in larger positive currency translation adjustments relative to the 2024 periods.

Segment Results

During the second quarter of 2025, in connection with the commencement of production at the Longanesi field, our evaluation of operating results between conventional and renewable operations became more relevant to the chief operating decision maker, resulting in further disaggregation of the Company’s single reportable segment. As a result, as of June 30, 2025, we determined that we have two operating segments, each of which also qualifies as a reportable segment, based on the manner in which the chief operating decision maker (“CODM”)—the Company’s Executive Director and Chief Executive Officer, collectively—reviews financial information to assess performance and allocate resources.

• The Conventional segment consists of the natural gas exploration and production activities conducted by AleAnna Italia. The primary product of this segment is conventional natural gas produced from onshore exploration and development in Italy.
• The Renewable segment consists of the RNG and electricity production activities conducted by AleAnna Renewable and the RNG Subsidiaries. The segment’s primary output is electricity generated from RNG derived from animal and agricultural waste.

Reconciling items include items not directly attributable to either reportable segment. These include corporate financing and investing activities, as well as administrative functions that support the Company’s overall operations. These items are presented in the segment reconciliation but do not constitute a reportable segment.

The CODM evaluates segment performance primarily using segment operating income (loss), which is consistent with the presentation in the Company’s consolidated statements of operations. The CODM monitors revenues and operating expenses by segment for purposes of strategic decision-making and resource allocation, including the evaluation of the timing and amount of future investment in, or development of, the conventional and renewable reportable segments. The expense categories reviewed by the CODM are consistent with those presented in the consolidated statements of operations and in the segment operating results presented below.

All of the Company’s revenue is generated with external customers, and located in Italy. All of the Company’s assets, other than corporate assets primarily comprised of cash located in the U.S., are located in Italy.

The three and six months ended June 30, 2025 reflect the revenue and expense categories noted above in the consolidated Results of Operations. For the three and six months ended June 30, 2024, the Company had no revenues, immaterial RNG assets, and minimal operating expenses outside of corporate general and administrative expenses. The vast majority of natural gas development activities were capitalized prior to the second quarter of 2025.

Selected financial information by segment is presented in the tables below:

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Liquidity, Capital Resources and Operations

We have begun generating revenue from our operations, although total revenues to date have been limited. We had an accumulated deficit of $192.7 million as of June 30, 2025. We had $22.8 million in unrestricted cash and cash equivalents on June 30, 2025. The Company’s continuing operations, as intended, are dependent upon its ability to generate cash flows or obtain additional financing. Between January 2024 and May 2024, prior to the Business Combination, we received an aggregate of $62.1 million in capital contributions from AleAnna Energy members resulting in the issuance of 62,100 Class 1 Preferred Units, to fund operating costs, capital expenditures, Business Combination related transaction expenses, and to provide working capital to meet our liabilities and commitments as they become due. We also received approximately $1.1 million from exercises of Public Warrants between January 2025 and May 2025. In addition, we are exploring Resource Backed Loan (“RBL”) financing, renewable natural gas project loan products and other financing arrangements with several financial institutions; however, there is no guarantee that such financing will be available to us. As a normal part of our business, depending on market conditions, we may from time to time consider opportunities to issue equity or debt securities to raise additional capital. Changes in our operating plans, lower than anticipated revenues, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all.

Presently, Padana is the operator of the Longanesi field under a Unitized Operating Agreement, and other companies in the future may operate some of the properties in which we have an interest. The failure of an operator of our wells or joint venture participant to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in ways that are in our best interest could reduce our production and revenues.

To mitigate operator risks, we monitor the operational risks, credit risk, financial position and liquidity of Padana. Operational risks are monitored and acted on through: (i) periodic meetings with Padana, through a formal committee known as the “Technical Committee”, to examine upcoming activities and discuss questions and concerns, (ii) through the receipt and analysis of daily reports, (iii) through requesting unscheduled calls with Padana where areas of concern are identified, and (iv) through occasional site visits. Further, Padana’s credit risk, financial position, and liquidity are periodically evaluated through review of the financial condition of Padana’s parent organization, Gas Plus S.p.A., which is a publicly-traded company on the Italian Stock Exchange (Euronext Milan). We are able to continuously monitor financial health of Gas Plus S.p.A. through exchange-required public disclosures, including half-annual and annual financial statements, corporate presentations, and press releases.

Cash Flows

The following table includes our cash flow data for the six months ended June 30, 2025 and 2024:

Cash used in operating activities

Cash used in operating activities decreased by $2.1 million for the six months ended June 30, 2025, compared to the same period in 2024. This decrease primarily reflects cash revenues from the Longanesi field from May and June 2025, collections on electricity sales receivable from RNG plants, and the timing of payments of accounts payable during the six months ended June 30, 2025 compared to the same period in 2024.

Cash used in investing activities

Cash used in investing activities decreased by $5.6 million for the six months ended June 30, 2025, compared to the same period in 2024. In both periods, investing cash flows primarily reflected continued development of the Longanesi wells. The decrease during the six months ended June 30, 2025 was driven by a lower level of completion and tie-in activity relative to the same period in 2024. During the second quarter of 2025, the five Longanesi wells were brought online, resulting in only a partial quarter of capitalized costs. Capital expenditures during the 2025 period primarily reflected final tie-in work and capital calls from our operating partner, Padana, for the permanent Longanesi processing facility. In contrast, the 2024 period included a full six months of development and tie-in costs for the Longanesi field, in addition to the acquisition of the Campagnatico RNG asset.

Cash provided by financing activities

Cash provided by financing activities during the six months ended June 30, 2025 reflects proceeds from cash exercises of Public Warrants.

Cash provided by financing activities during the six months ended June 30, 2024 reflects pre-Business Combination issuances of AleAnna Energy Class 1 Preferred Units used to fund our operations. Such Class 1 Preferred Units were exchanged for Class A and Class C commons stock as part of the Business Combination.

Contractual Obligations and Other Commitments

Participation Agreements and Blugas ORRI

In the normal course of business, we enter into agreements with other entities to assist in the performance of drilling of the Longanesi field. On June 26, 2009, we entered into a Participation Agreement with Padana for the drilling of the ‘Longanesi 1 exploration well, ’San Potito’ concession and ‘Abbadessee 1’ exploration,’ collectively referred to as the Longanesi field.

The Unified Operating Agreement arrangement was originally signed between Eni and Grove and dated September 26, 2009. However, Padana has succeeded Eni as the operator and 66.5% working interest owner, and we succeeded Grove as the non-operator and 33.5% working interest owner. On July 13, 2016, we acquired a 33.5% working interest in the Longanesi field from Enel, and, as part of the purchase, acquired a legacy contingent liability arising from an agreement between the Longanesi working interest’s original owner Grove Energy and Blugas. Blugas retained an interest akin to an ORRI, whereby Blugas was entitled to physical delivery of 20% of the first 350 million standard cubic meters (approximately 2,472 106ft3) produced from the Longanesi field. Prior to the Blugas settlement in May 2024 (as further described below), in accounting for the acquisition of the 33.5% working interest, we did not recognize an asset or liability in the consolidated financial statements related to the Blugas ORRI as our SEC Case reserves estimates contemplated the contractual arrangement and physical gas delivery to Blugas, such that the gas revenues attributable to our 33.5% working interest were reduced to reflect sale of the Blugas quantity and payment of such revenues (cash outflows to Blugas).

The physical volumes due to Blugas were being contested by us as usury because we considered, among other reasons, that extraction services and all associated risks are executed by us and that participation by Blugas was limited to financing a part of the sum necessary to start drilling, without participation in the construction and exploitation of the reservoir, and therefore do not share the risks or costs, which had increased compared to the initial forecast of the investment.

On May 28, 2024, we entered into the Blugas Settlement Agreement regarding the Blugas ORRI whereby Blugas was entitled to physical delivery of 20% of the first 350 million standard cubic meters (approximately 2,472 106ft3) produced from the Longanesi field. Under the terms of the Blugas Settlement Agreement, we paid Blugas approximately €5 million, plus an additional €1.1 million in applicable VAT, or a total of approximately $6.6 million. In exchange, we were released from any future liability related to the Blugas ORRI. As a result of the transactions contemplated by the Blugas Settlement Agreement, our 33.5% working interest in the Longanesi field is now unencumbered except for normal government royalties (10%). The Blugas Settlement Agreement was accounted for as an acquisition of the Blugas ORRI claim with a corresponding increase to the expected future cash flows from our reserves. Our year-end December 31, 2023 reserve quantities included the 20% of 350 million standard cubic meters (approximately 2,472 106ft3) allocable to the Blugas ORRI in our proved gas reserves. However, the required payments to Blugas associated with the sale of such quantities were reflected as cash outflows (costs) in our year-end December 31, 2023 reserve report as if such amounts were paid to Blugas. Following settlement, our year-end December 31, 2024 reserve quantities continue to include the 20% of 350 million standard cubic meters (approximately 2,472 106ft3), however, the previously required payments to Blugas associated with the sale of such quantities are no longer reflected as cash outflows (costs) as if such amounts were paid to Blugas. As the cash outflows (costs) are no longer reflected as if paid to Blugas, such amounts are reflected in our December 31, 2024 reserve report as allocable to our unencumbered 33.5% working interest.

Contingent Consideration Liability

In connection with our purchase of our 33.5% working interest in the Longanesi field, consideration paid included €7 million cash and up to €24 million of deferred consideration payable upon production of the Longanesi field. The deferred consideration is payable based on a formulaic calculation which is predominantly dependent on sales volumes and spot natural gas prices during the first 12 years of production (the “Earn-Out Period”). There will be no deferred consideration due if Longanesi is not developed and no deferred consideration due if average annual gas prices are less than €3.65/Mcf over the Earn-Out Period. Upon first production, we were also required to issue a bank guarantee of €3 million secured by cash collateral of €1 million related to the contingent consideration liability which was classified as restricted cash as of June 30, 2025. The cash collateral may be used to satisfy the contingent consideration liability as payments become due.

We recognized a liability for the contingent consideration in accounting for the asset acquisition in accordance with ASC 450, *Contingencies (“*contingent consideration liability”). As of June 30, 2025 and December 31, 2024, the total contingent consideration liability was recorded at $28.1 million and $25.0 million, respectively.

Emerging Growth Company Accounting Election

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We expect to be an emerging growth company at least through 2025.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2025. Based upon their evaluation, and due to the material weaknesses identified and previously disclosed in our Form 10-K for the year ended December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2025.

Effective internal controls are necessary to provide reliable financial reports and prevent fraud. AleAnna is in the process of adding resources with the appropriate level of experience and technical expertise to oversee AleAnna’s business processes and controls. While certain controls exist, AleAnna has not yet formally designed and implemented the full set of business processes and related internal controls required to meet the standards applicable to a public company.

As a result, AleAnna identified material weaknesses in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements would not be prevented or detected on a timely basis.

Changes in Internal Control over Financial Reporting

During the most recently completed fiscal quarter, the Company began developing and initiating certain remediation activities related to the material weaknesses previously disclosed in its Form 10-K for the year ended December 31, 2024. However, management determined that these activities did not result in a change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting as of June 30, 2025.

There have been no material changes to the risk factors disclosed under “Item 1A. Risk Factors” of our 2024 Form 10-K, other than the updates to specific risk factors noted below. For additional information concerning our risk factors, please refer to “Item 1A. Risk Factors” of our 2024 Form 10-K.

We have previously identified material weaknesses in the internal control over financial reporting of AleAnna Energy, LLC. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report the Company’s financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results, and we may face litigation as a result.

Effective internal controls are necessary to provide reliable financial reports and prevent fraud. AleAnna is in the process of adding resources with the appropriate level of experience and technical expertise to oversee its business processes and controls. While certain controls exist, AleAnna Energy, LLC has not yet formally designed and implemented the full set of business processes and related internal controls required to meet the standards applicable to a public company.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements would not be prevented or detected on a timely basis.

Management of AleAnna, Inc., as the registrant, is responsible for evaluating and remediating the internal control environment of AleAnna Energy, LLC. In connection with the preparation of AleAnna, Inc.’s consolidated financial statements as of and for the year ended December 31, 2024, management of AleAnna identified material weaknesses in internal control over financial reporting at AleAnna Energy, LLC. Specifically, management determined that AleAnna Energy LLC did not maintain an effective control environment in accordance with the COSO framework, as it did not maintain a sufficient complement of accounting and reporting resources commensurate with its financial reporting requirements. Details of the material weaknesses were as follows:

• Management did not maintain an effective control environment in accordance with the COSO framework as it did not maintain a sufficient complement of accounting and reporting resources commensurate with its financial reporting requirements. This material weakness contributed to the following material weaknesses:
• Management did not design, implement, and operate controls over the selection and implementation of accounting policies to ensure amounts recorded and disclosed were fairly stated in accordance with GAAP.
• Management did not design or maintain appropriate account reconciliation and journal entry review controls to review the work of third-party consultants used to assist management in recording transactions.

Although AleAnna Energy LLC was excluded from management’s assessment of internal control over financial reporting as of December 31, 2024, in reliance on the one-year exemption provided under the SEC’s rules for newly acquired businesses, we disclosed these material weaknesses due to their potential impact on our consolidated financial reporting.

We are in the early stages of designing and implementing a plan to remediate the material weaknesses identified. Our plan includes the below:

• Designing and implementing a risk assessment process supporting the identification of risks facing AleAnna Energy, LLC.
• Implementing controls to enhance our review of significant accounting transactions and other new technical accounting and financial reporting issues and preparing and reviewing accounting memoranda addressing these issues.
• Hiring additional experienced accounting, financial reporting and internal control personnel and changing roles and responsibilities of our personnel as we transition to being a public company and are required to comply with Section 404 of the Sarbanes-Oxley Act.
• Implementing controls to enable an accurate and timely review of accounting records that support our accounting processes and maintain documents for internal accounting reviews.

We cannot assure you that these measures will remediate the material weaknesses described above. The implementation of these remediation measures is in the early stages and will require validation and testing of the design and operating effectiveness of the Company’s internal controls over a sustained period of financial reporting cycles and, as a result, the timing of when the Company will be able to remediate the material weaknesses is uncertain and the Company may not remediate these material weaknesses during the year ended December 31, 2025. If the steps the Company takes do not remediate the material weaknesses in a timely manner, there could be a reasonable possibility that these control deficiencies or others may result in a material misstatement of its annual or interim financial statements that would not be prevented or detected on a timely basis. This, in turn, could jeopardize the Company’s ability to comply with its reporting obligations, limit its ability to access the capital markets and adversely impact its stock price.

We are required to develop and maintain proper and effective internal control over financial reporting in order to comply with Section 404 of the Sarbanes-Oxley Act. In addition, because of our status as an emerging growth company, you will not be able to depend on any attestation from our independent registered public accountants as to our internal control over financial reporting for the foreseeable future.

While AleAnna, Inc has implemented certain internal controls at the holding company level, these controls do not yet cover the consolidated operations of AleAnna Energy, LLC, which continues to operate with control deficiencies.

We are required by Section 404 of the Sarbanes-Oxley Act to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting in our second annual report following the completion of the Business Combination. The process of further designing, documenting, and implementing internal control over financial reporting required to comply with this requirement is ongoing, and is time-consuming, costly and complicated. During the course of our evaluation and testing, we may identify additional material weaknesses. If our remediation efforts are not successful, our management may be unable to assert that our internal control over financial reporting is effective in future filings. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

In addition, our independent registered public accounting firm will not be required to attest formally to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for as long as we qualify for scaled “smaller reporting company” disclosure under the Exchange Act. Accordingly, you will not be able to depend on any attestation concerning our internal control over financial reporting from our independent registered public accountants for the foreseeable future.

Although we are actively working to improve our internal control environment, we cannot be certain as to the timing of completion of our ongoing evaluation, testing and remediation actions or the impact of such actions on our operations. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.