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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2023

 

OR

 

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: 001-38742

 

 

 

Advent Technologies Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   83-0982969
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)

 

500 Rutherford Avenue

Boston, Massachusetts

  02129
(Address of principal executive offices)   (Zip code)

 

(617) 655-6000

(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   ADN   The Nasdaq Capital Market
Warrants   ADNWW   The Nasdaq Capital 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, 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 November 10, 2023, the registrant had 62,531,232 shares of common stock, par value $0.0001 per share, issued and outstanding.

 

 

 

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” 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- 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 referenced in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Annual Report”) which could cause actual results to differ materially. Moreover, we operate in a very competitive and rapidly changing environment and 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 or implied by any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances 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.

 

Some of the key factors that could cause actual results to differ from our expectations include:

 

our ability to maintain the listing of our shares of common stock and warrants on Nasdaq;

 

our ability to raise financing in the future;

 

our success in retaining or recruiting officers, key employees or directors;

 

factors relating to our business, operations and financial performance, including:

 

our ability to control the costs associated with our operations;

 

our ability to grow and manage growth profitably;

 

our reliance on complex machinery for our operations and production;

 

the market’s willingness to adopt our technology;

 

our ability to maintain relationships with customers;

 

the potential impact of product recalls;

 

our ability to compete within our industry;

 

increases in costs, disruption of supply or shortage of raw materials;

 

risks associated with strategic alliances or acquisitions;

 

the impact of unfavorable changes in U.S. and international regulations;

 

the availability of and our ability to meet the terms and conditions for government grants and economic incentives; and

 

our ability to protect our intellectual property rights;

 

 

 

 

market conditions and global and economic factors beyond our control;

 

volatility of our stock price and potential share dilution;

 

future exchange and interest rates; and

 

other factors detailed within the 2022 Annual Report under the section entitled “Risk Factors.”

 

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or reflect interim developments.

 

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. For a discussion of the risks involved in our business and investing in our common stock, see the section entitled “Risk Factors” within the 2022 Annual Report.

 

Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

 

 

 

 

Advent Technologies Holdings, Inc.

 

Table of Contents

 

      Page
PART I—FINANCIAL INFORMATION
       
Item 1. Unaudited Condensed Consolidated Financial Statements   1
  Unaudited Condensed Consolidated Balance Sheets   1
  Unaudited Condensed Consolidated Statements of Operations   2
  Unaudited Condensed Consolidated Statements of Comprehensive Loss   3
  Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity   4
  Unaudited Condensed Consolidated Statements of Cash Flows   8
  Notes to Unaudited Condensed Consolidated Financial Statements   9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   33
Item 3. Quantitative and Qualitative Disclosures About Market Risk   54
Item 4. Controls and Procedures   54
       
PART II—OTHER INFORMATION
       
Item 1. Legal Proceedings   55
Item 1A. Risk Factors   55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   56
Item 3. Defaults Upon Senior Securities   56
Item 4. Mine Safety Disclosures   56
Item 5. Other Information   56
Item 6. Exhibits   57
       
Signatures   58

 

i

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Unaudited Condensed Consolidated Financial Statements

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Amounts in USD thousands, except share and per share amounts)

 

                 
    As of  
   

September 30,
2023

    December 31,
2022
 
    (Unaudited)        
ASSETS                
Current assets:                
Cash and cash equivalents   $ 3,661     $ 32,869  
Restricted cash, current     2,018       -  
Accounts receivable, net     833       979  
Contract assets     63       52  
Inventories     13,913       12,620  
Prepaid expenses and Other current assets     3,030       2,980  
Total current assets     23,518       49,500  
Non-current assets:                
Goodwill     -       5,742  
Intangibles, net     1,789       6,062  
Property and equipment, net     24,260       17,938  
Right-of-use assets     3,741       4,055  
Restricted cash, non-current     750       750  
Other non-current assets     1,023       5,221  
Available for sale financial asset     316       320  
Total non-current assets     31,879       40,088  
Total assets   $ 55,397     $ 89,588  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Trade and other payables   $ 6,134     $ 4,680  
Deferred income from grants, current     780       801  
Contract liabilities     712       1,019  
Other current liabilities     2,668       4,703  
Operating lease liabilities     2,340       2,280  
Income tax payable     181       183  
Total current liabilities     12,815       13,666  
Non-current liabilities:                
Warrant liability     99       998  
Long-term operating lease liabilities     8,774       9,802  
Defined benefit obligation     89       72  
Deferred income from grants, non-current     338       50  
Other long-term liabilities     700       852  
Total non-current liabilities     10,000       11,774  
Total liabilities     22,815       25,440  
Commitments and contingent liabilities                
Stockholders’ equity                
Common stock ($0.0001 par value per share; Shares authorized: 500,000,000 and 110,000,000 at September 30, 2023 and December 31, 2022, respectively; Issued and outstanding: 62,108,317 and 51,717,720 at September 30, 2023 and December 31, 2022, respectively)     6       5  
Preferred stock ($0.0001 par value per share; Shares authorized: 1,000,000 at September 30, 2023 and December 31, 2022; nil issued and outstanding at September 30, 2023 and December 31, 2022)     -       -  
Additional paid-in capital     188,850       174,509  
Accumulated other comprehensive loss     (2,847 )     (2,604 )
Accumulated deficit     (153,427 )     (107,762 )
Total stockholders’ equity     32,582       64,148  
Total liabilities and stockholders’ equity   $ 55,397     $ 89,588  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

1

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Amounts in USD thousands, except share and per share amounts)

 

                                 
    Three months ended
September 30,
(Unaudited)
    Nine months ended
September 30,
(Unaudited)
 
    2023     2022     2023     2022  
Revenue   $ 1,264     $ 2,399     $ 3,353     $ 5,880  
Cost of revenues     (2,456 )     (2,339 )     (5,845 )     (6,126 )
Gross loss     (1,192 )     60       (2,492 )     (246 )
Income from grants     496       294       1,690       1,011  
Research and development expenses     (2,131 )     (2,547 )     (8,155 )     (7,338 )
Administrative and selling expenses     (8,916 )     (8,203 )     (25,736 )     (26,657 )
Sublease income     139       -       404       -  
Amortization of intangibles     (117 )     (696 )     (526 )     (2,113 )
Credit loss – customer contracts     64       -       (63 )     -  
Impairment losses     -       -       (9,763 )     -  
Operating loss     (11,657 )     (11,092 )     (44,641 )     (35,343 )
Fair value change of warrant liability     (134 )     (911 )     355       7,248  
Finance income / (expenses), net     -       -       118       (9 )
Foreign exchange gains / (losses), net     (12 )     (33 )     106       (51 )
Other income / (expenses), net     (123 )     1       (883 )     (220 )
Loss before income tax     (11,926 )     (12,035 )     (44,945 )     (28,375 )
Income taxes     80       567       (720 )     1,663  
Net loss   $ (11,846 )   $ (11,468 )   $ (45,665 )   $ (26,712 )
Net loss per share                                
Basic loss per share     (0.20 )     (0.22 )     (0.83 )     (0.52 )
Basic weighted average number of shares     60,371,473       51,660,133       55,294,610       51,465,004  
Diluted loss per share     (0.20 )     (0.22 )     (0.83 )     (0.52 )
Diluted weighted average number of shares     60,371,473       51,660,133       55,294,610       51,465,004  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

2

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(Amounts in USD thousands)

 

                                 
    Three months ended
September 30,
(Unaudited)
    Nine months ended
September 30,
(Unaudited)
 
    2023     2022     2023     2022  
Net loss   $ (11,846 )   $ (11,468 )   $ (45,665 )   $ (26,712 )
Other comprehensive loss, net of tax effect:                                
Foreign currency translation adjustment     (573 )     (1,181 )     (243 )     (3,040 )
Total other comprehensive loss     (573 )     (1,181 )     (243 )     (3,040 )
Comprehensive loss   $ (12,419 )   $ (12,649 )   $ (45,908 )   $ (29,752 )

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)

 

(Amounts in USD thousands, except share amounts)

 

                                                                                 
    Three Months Ended September 30, 2023  
    Preferred Stock
Series A
    Preferred Stock
Series Seed
    Common
Stock
    Additional
Paid-in
    Accumulated     Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     OCI     Equity  
Balance as of June 30, 2023 (Unaudited)     -     $ -       -     $ -       58,420,207     $ 6     $ 183,908     $ (141,581 )   $ (2,274 )   $ 40,059  
Issuance of common stock (Unaudited)                                     3,411,336       0       2,250                       2,250  
Stock issued under stock compensation plan (Unaudited)     -       -       -       -       276,774       0       -       -       -       0  
Stock based compensation expense (Unaudited)     -       -       -       -       -       -       2,479       -       -       2,479  
Reclassification of private warrants (Unaudited)     -       -       -       -       -       -       213       -       -       213  
Net loss (Unaudited)     -       -       -       -       -       -       -       (11,846 )     -       (11,846 )
Other comprehensive gain (Unaudited)     -       -       -       -       -       -       -       -       (573 )     (573 )
Balance as of September 30, 2023 (Unaudited)     -     $ -       -     $ -       62,108,317     $ 6     $ 188,850     $ (153,427 )   $ (2,847 )   $ 32,582  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)

 

(Amounts in USD thousands, except share amounts)

 

    Three Months Ended September 30, 2022  
    Preferred Stock
Series A
    Preferred Stock
Series Seed
    Common
Stock
    Additional
Paid-in
    Accumulated     Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     OCI     Equity  
Balance as of June 30, 2022 (Unaudited)     -     $ -       -     $ -       51,631,509     $ 5     $ 169,980     $ (48,669 )   $ (3,132 )   $ 118,184  
Stock issued under stock compensation plan (Unaudited)     -       -       -       -       86,211       0       -       -       -       0  
Stock based compensation expense (Unaudited)     -       -       -       -       -       -       1,862       -       -       1,862  
Net loss (Unaudited)     -       -       -       -       -       -       -       (11,468 )     -       (11,468 )
Other comprehensive loss (Unaudited)     -       -       -       -       -       -       -       -       (1,181 )     (1,181 )
Balance as of September 30, 2022 (Unaudited)     -     $ -       -     $ -       51,717,720     $ 5     $ 171,842     $ (60,137 )   $ (4,313 )   $ 107,397  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)

 

(Amounts in USD thousands, except share amounts)

 

    Nine Months Ended September 30, 2023  
    Preferred Stock
Series A
    Preferred Stock
Series Seed
    Common
Stock
    Additional
Paid-in
    Accumulated     Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     OCI     Equity  
Balance as of December 31, 2022     -     $ -       -     $ -       51,717,720     $ 5     $ 174,509     $ (107,762 )   $ (2,604 )   $ 64,148  
Issuance of common stock (Unaudited)                                     9,440,868       1       6,428                       6,429  
Stock issued under stock compensation plan (Unaudited)                                     949,729       0       -                       0  
Stock based compensation expense (Unaudited)     -       -       -       -       -       -       7,368       -       -       7,368  
Reclassification of private warrants (Unaudited)     -       -       -       -       -       -       545       -       -       545  
Net loss (Unaudited)     -       -       -       -       -       -       -       (45,665 )     -       (45,665 )
Other comprehensive loss (Unaudited)     -       -       -       -       -       -       -       -       (243 )     (243 )
Balance as of September 30, 2023 (Unaudited)     -     $ -       -     $ -       62,108,317     $ 6     $ 188,850     $ (153,427 )   $ (2,847 )   $ 32,582  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)

 

(Amounts in USD thousands, except share amounts)

 

    Nine Months Ended September 30, 2022  
    Preferred Stock
Series A
    Preferred Stock
Series Seed
    Common
Stock
    Additional
Paid-in
    Accumulated     Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     OCI     Equity  
Balance as of December 31, 2021     -     $ -       -     $ -       51,253,591     $ 5     $ 164,894     $ (33,425 )   $ (1,273 )   $ 130,201  
Stock issued under stock compensation plan (Unaudited)     -       -       -       -       464,129       0       -       -       -       0  
Stock based compensation expense (Unaudited)     -       -       -       -       -       -       6,948       -       -       6,948  
Net loss (Unaudited)     -       -       -       -       -       -       -       (26,712 )     -       (26,712 )
Other comprehensive loss (Unaudited)     -       -       -       -       -       -       -       -       (3,040 )     (3,040 )
Balance as of September 30, 2022 (Unaudited)     -     $ -       -     $ -       51,717,720     $ 5     $ 171,842     $ (60,137 )   $ (4,313 )   $ 107,397  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Amounts in USD thousands)

 

                 
   

Nine months ended
September 30,

(Unaudited)

 
    2023     2022  
Net Cash used in Operating Activities   $ (26,338 )   $ (32,166 )
                 
Cash Flows from Investing Activities:                
Purchases of property and equipment     (3,226 )     (3,549 )
Purchases of intangible assets     -       (117 )
Advances for the acquisition of property and equipment     (1,255 )     -  
Acquisition of available for sale financial assets     -       (319 )
Acquisition of subsidiaries     (1,864 )     -  
Net Cash used in Investing Activities   $ (6,345 )   $ (3,985 )
                 
Cash Flows from Financing Activities:                
Issue of common stock and paid-in capital     5,488          
State refundable deposit repayment     -       (41 )
Net Cash (used in) provided by Financing Activities   $ 5,488     $ (41 )
                 
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents   $ (27,195 )   $ (36,192 )
Effect of exchange rate changes on cash, cash equivalent, restricted cash and restricted cash equivalents     5       (1,126 )
Cash, cash equivalents, restricted cash and restricted cash equivalents at the beginning of the period     33,619       79,764  
Cash, cash equivalents, restricted cash and restricted cash equivalents at the end of the period   $ 6,429     $ 42,446  
                 
Reconciliation to Condensed Consolidated Balance Sheets:                
Cash and cash equivalents   $ 3,661     $ 41,696  
Restricted cash, current     2,018       -  
Restricted cash, non-current     750       750  
Cash, cash equivalents, restricted cash and restricted cash equivalents   $ 6,429     $ 42,446  
                 
Supplemental Cash Flow Information                
Cash activities                
Interest paid   $ 16     $ 16  
Non-cash Investing and Financing Activities:                
Assets acquired under operating leases   $ -     $ 1,594  
Issuance of common stock and paid-in capital   $ 769     $ -  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

8

 

 

ADVENT TECHNOLOGIES HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Basis of presentation

 

Overview

 

Advent Technologies Holdings, Inc. and its subsidiaries (collectively referred to as “Advent” or the “Company”) is an advanced materials and technology development company operating in the fuel cell and hydrogen technology space. Advent develops, manufactures and assembles the critical components that determine the performance of hydrogen fuel cells and other energy systems. To date, Advent’s principal operations have been to develop and manufacture Membrane Electrode Assembly (MEA), and fuel cell stacks and complete fuel cell systems for a range of customers in the stationary power, portable power, automotive, aviation, energy storage and sensor markets.

 

Advent has its headquarters in Boston, Massachusetts, which includes a research and development and manufacturing facility, a product development facility in Livermore, California, production facilities in Greece, Denmark, and Germany, and sales and warehousing facilities in the Philippines.

 

On February 4, 2021 (“Closing Date”), AMCI Acquisition Corp. (“AMCI”), consummated the business combination (the “Business Combination”) pursuant to that certain merger agreement (the “Agreement and Plan of Merger”), dated October 12, 2020, by and among AMCI, AMCI Merger Sub Corp., a Delaware corporation and newly formed wholly-owned subsidiary of AMCI (“Merger Sub”), AMCI Sponsor LLC (the “Sponsor”), solely in the capacity as the representative from and after the effective time of the Business Combination for the stockholders of AMCI, Advent Technologies, Inc., a Delaware corporation (“Legacy Advent”), and Vassilios Gregoriou, solely in his capacity as the representative from and after the effective time for the Legacy Advent stockholders (the “Seller Representative”), as amended by Amendment No. 1 and Amendment No. 2 to the Agreement and Plan of Merger, dated as of October 19, 2020 and December 31, 2020, respectively, by and among AMCI, Merger Sub, Sponsor, Legacy Advent, and Seller Representative. In connection with the closing of the Business Combination (the “Closing” or “Closing Date”), AMCI acquired 100% of the stock of Legacy Advent (as it existed immediately prior to the Closing) and its subsidiaries.

 

On the Closing Date, and in connection with the closing of the Business Combination, AMCI changed its name to Advent Technologies Holdings, Inc. Legacy Advent was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805. This determination was primarily based on Legacy Advent’s stockholders prior to the Business Combination having a majority of the voting interests in the combined company, Legacy Advent’s operations comprising the ongoing operations of the combined company, Legacy Advent’s board of directors comprising a majority of the board of directors of the combined company, and Legacy Advent’s senior management comprising the senior management of the combined company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Advent issuing stock for the net assets of AMCI, accompanied by a recapitalization. The net assets of AMCI are stated at historical cost, with no goodwill or other intangible assets recorded.

 

While AMCI was the legal acquirer in the Business Combination, because Legacy Advent was deemed the accounting acquirer, the historical financial statements of Legacy Advent became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a result, the consolidated financial statements included in this report reflect (i) the historical operating results of Legacy Advent prior to the Business Combination; (ii) the results of the Company (combined results of AMCI and Legacy Advent) following the closing of the Business Combination; (iii) the assets and liabilities of Legacy Advent at their historical cost; and (iv) Company’s equity structure for all periods presented.

 

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), issued to Legacy Advent’s stockholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Advent Preferred Stock (“Preferred Series A” and “Preferred Series Seed”) and Legacy Advent common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination Agreement. Activity within the statement of changes in stockholders’ equity / (deficit) for the issuances of Legacy Advent’s Preferred Stock, were also retroactively converted to Legacy Advent common stock.

 

9

 

 

On February 18, 2021, Advent Technologies, Inc. entered into a Membership Interest Purchase Agreement with Bren-Tronics, Inc. (“Bren-Tronics”) and UltraCell, LLC (“UltraCell”), a Delaware limited liability company and a direct wholly owned subsidiary of Bren-Tronics.

 

UltraCell LLC was renamed to Advent Technologies LLC following its acquisition by the Company.

 

On June 25, 2021, the Company entered into a Share Purchase Agreement, with F.E.R. fischer Edelstahlrohre GmbH, a limited liability company incorporated under the Laws of Germany (the “Seller”) to acquire all of the issued and outstanding equity interests in SerEnergy A/S, a Danish stock corporation and a wholly-owned subsidiary of the Seller (“SerEnergy”) and fischer eco solutions GmbH, a German limited liability company and a wholly-owned subsidiary of the Seller (“FES”) together with certain outstanding shareholder loan receivables.

 

SerEnergy and FES were renamed to Advent Technologies A/S and Advent Technologies GmbH, respectively, following their acquisition by the Company on August 31, 2021.

 

The unaudited condensed consolidated financial statements of the Company have been prepared to reflect the consolidation of the companies listed below:

 

                   
Company Name Country of
Incorporation
  Ownership Interest   Statements of Operations
    Direct   Indirect   2023   2022
Advent Technologies, Inc.   USA   100%   -   01/01 – 9/30   01/01 – 9/30
Advent Technologies S.A.   Greece   -   100%   01/01 – 9/30   01/01 – 9/30
Advent Technologies LLC   USA   -   100%   01/01 – 9/30   01/01 – 9/30
Advent Technologies GmbH   Germany   100%   -   01/01 – 9/30   01/01 – 9/30
Advent Technologies A/S   Denmark   100%   -   01/01 – 9/30   01/01 – 9/30
Advent Green Energy Philippines, Inc   Philippines   -   100%   01/01 – 9/30   01/01 – 9/30

 

Unaudited Condensed Consolidated Financial Statements

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods indicated. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022, included in the Annual Report on Form 10-K filed with the SEC on March 31, 2023. We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated.

 

Share and per share amounts are presented on a post-conversion basis for all periods presented, unless otherwise specified.

 

10

 

 

Going Concern

 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year from the date these unaudited condensed consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. As such, the accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.

 

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date that the unaudited condensed consolidated financial statements are issued. The Company’s ability to meet its liquidity needs will largely depend on its ability to generate cash in the future. During the nine months ended September 30, 2023, the Company used $26.3 million of cash in operating activities, and the Company’s ability to generate cash in the future is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond the Company’s control. The transition to profitability is dependent upon the successful development, approval, and commercialization of its products and the achievement of a revenue level adequate to support its cost structure. Based on the Company’s current operating plan, the Company believes that its cash and cash equivalents as of September 30, 2023 of $3.7 million will not be sufficient to fund operations and capital expenditures for the twelve months following the filing of this Quarterly Report on Form 10-Q, and the Company will need to obtain additional funding. In July 2022, the Company received official ratification from the European Commission of the European Union for one of the Important Projects of Common European Interest (“IPCEI”), Green HiPo. This project provides for the availability of funding up to €782.1 million over the next six years. As of the issuance date of the unaudited condensed consolidated financial statements, the Company has not received an agreement which provides the terms of the funding. In addition, on April 10, 2023, the Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that the Company has the right, but not the obligation, to sell to Lincoln Park up to $50 million worth of shares of the Company’s Common Stock, from time to time over the 36-month term of the Purchase Agreement. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which the Company agreed to register the resale of the shares of the Company’s Common Stock that have been and may be issued to Lincoln Park under the Purchase Agreement pursuant to a registration statement (the “Registration Statement”). The Registration Statement was filed on April 21, 2023 and declared effective on May 2, 2023. Per the terms of the Purchase Agreement, the Company will be unable to sell shares of the Company’s Common Stock to Lincoln Park if the sale price falls below $0.50 per share. On June 2, 2023, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (the “Agent”), for an at-the-market equity program under which it may sell up to $50 million of shares of the Company’s Common Stock from time to time through the Agent. The Company has no obligation to sell, and the Agent is not obligated to buy or sell, any of the Shares under the ATM Agreement and may at any time suspend offers under the ATM Agreement or terminate the ATM Agreement. The ATM Offering will terminate upon the earlier of (i) the issuance and sale of all shares of our Common Stock subject to the ATM Agreement, or (ii) the termination of the ATM Agreement as permitted therein. There is no assurance that the Company will have full access to either facility over the next twelve months. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects. Because of the uncertainty in securing additional funding and the insufficient amount of cash and cash equivalents as of the financial statement filing date, management has concluded that substantial doubt exists with respect to the Company’s ability to continue as a going concern for one year from the date the unaudited condensed consolidated financial statements are issued.

 

11

 

 

2. Summary of Significant Accounting Policies

 

There have been no significant changes from the significant accounting policies disclosed in Note 2 of the “Notes to Consolidated Financial Statements” included in the Annual Report on Form 10-K filed with the SEC on March 31, 2023.

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”). As an emerging growth company (“EGC”), the JOBS Act allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company elected to use this extended transition period under the JOBS Act until such time the Company is no longer considered to be an EGC. The Company did not apply any new accounting policies during the nine-month period ended September 30, 2023 other than those noted below.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates and judgments, including those related to the selection of useful lives for tangible assets, expected future cash flows from long-lived assets to support impairment tests, the carrying value of goodwill, provisions necessary for accounts receivables and inventory write downs, provisions for legal disputes, and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions.

 

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

 

Cash and cash equivalents are highly liquid investments with original maturities of three months or less. Cash and cash equivalents consist of cash on hand, deposits held on call with banks and investments in money market funds with original maturities of three months or less at the date of acquisition. As of September 30, 2023 and December 31, 2022, the Company has cash and cash equivalents which are restricted of $2.8 million and $0.8 million, respectively. The restricted cash, current is cash the Company received on behalf of other grant partners and is offset by a corresponding liability in trade and other current payables. The restricted cash, non-current is a letter of credit required by the Company’s lease agreement for the Hood Park facility in Boston, MA. The letter of credit is required for the duration of the lease agreement which has a term of eight years. The lease commenced in October 2022.

 

The Company reconciles cash, cash equivalents, restricted cash and restricted cash equivalents reported in the consolidated balance sheets that aggregate to the beginning and ending balances shown in the unaudited condensed consolidated statements of cash flows as follows:

 

               
   

September 30,
2023

    December 31,
2022
 
(Amounts in thousands)   (Unaudited)        
Cash and cash equivalents   $ 3,661     $ 32,869  
Restricted cash, current     2,018       -  
Restricted cash, non-current     750       750  
Cash, cash equivalents, restricted cash and restricted cash equivalents   $ 6,429     $ 33,619  

 

12

 

 

Warranties

 

The Company provides a warranty on fuel cells we sell for typically 2 years. The Company accrues a warranty reserve of 8% of the sale price of the fuel cells sold, which includes the Company’s best estimate of the projected costs to repair or replace items under warranties and recalls when identified. Warranty reserve is released when repairs or replacements are carried out in relation to items under warranties or when the warranty period for the fuel cell expires. The portion of the warranty reserve expected to be incurred within the next 12 months is included within Other current liabilities, while the remaining balance is included within Other long-term liabilities on the unaudited condensed consolidated balance sheets. Warranty expense is recorded as a component of cost of revenue in the unaudited condensed consolidated statements of operations.

 

The changes in the accrued warranty reserve for the three and nine months ended September 30, 2023 and 2022 were as follows:

 

                               
   

For the
Three Months Ended September 30,
2023

   

For the
Three Months Ended September 30,
2022

    For the
Nine Months Ended September 30,
2023
    For the
Nine Months Ended September 30,
2022
 
(Amounts in thousands)   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Balance at beginning of period   $ 969     $ 311     $ 1,047     $ -  
Additions     34       -       107       311  
Settlements     (62 )     -       (230 )     -  
Foreign exchange fluctuations     (30 )     (20 )     (13 )     (20 )
Balance at end of period   $ 911     $ 291     $ 911     $ 291  

 

Credit Losses

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which amends the requirement on the measurement and recognition of expected credit losses for financial assets held. Furthermore, amendments ASU 2019-10 and ASU 2019-11 provided additional clarification for implementing ASU 2016-13. ASU 2016-13 is effective for the Company beginning January 1, 2023, with early adoption permitted. The Company adopted the standard on January 1, 2023, in accordance with the adoption dates for private entities applicable to it under its emerging growth company status and the standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures. The Company is exposed to credit losses primarily through sales of its products. The Company assesses each customer’s ability to pay and a credit loss estimate by conducting a credit review which includes consideration of established credit rating or an internal assessment of the customer’s creditworthiness based on an analysis of their payment history when a credit rating is not available. The Company monitors credit exposure through active review of customer balances. The Company’s expected loss methodology for accounts receivable is developed through consideration of factors including, but not limited to, historical collection experience, current customer credit ratings, current customer financial condition, current and future economic and market conditions, and age of the receivables. Charges related to credit losses are included in Credit loss – customer contracts and are recorded in the period that the outstanding receivables are determined to be doubtful. Account balances are written-off against the allowance when they are deemed uncollectible.

 

Inventories

 

Inventories, which consist of raw materials, work-in-process and finished goods are stated at the lower of cost or net realizable value using the first-in, first-out cost method. Cost includes the cost of purchased materials, inbound freight charges, external and internal processing and applicable labor and overhead costs. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

 

13

 

 

The Company periodically reviews quantities of inventories on hand and compares these amounts to the expected use of each product. Inventories are reviewed to determine if valuation allowances are required for obsolescence (excess, obsolete, and slow-moving inventory). This review includes analyzing inventory levels of individual parts considering the current design of our products and production requirements as well as the expected inventory requirements for maintenance on installed power platforms. The Company records a charge to cost of revenue for the amount required to reduce the carrying value of inventory to the net realizable value.

 

Sublease

 

On January 9, 2023, the Company entered into a sublease agreement by and among the Company, in its capacity as sublandlord, BP Hancock LLC, a Delaware limited liability company, in its capacity as landlord, and Hughes Boston, Inc. (“Hughes”), in its capacity as subtenant. The sublease provides for the rental by Hughes of office space at 200 Clarendon Street, Boston, MA 02116. Under the terms of the sublease, Hughes subleases 6,041 square feet at an initial fixed annual rent of $0.6 million and will increase 3.0% on each anniversary of the sublease commencement date. The term of the sublease is through March 2026 (unless terminated as provided in the sublease) and the sublease commencement date was February 1, 2023. During the three and nine months ended September 30, 2023, the Company recognized $0.1 million and $0.4 million, respectively, in rent income which is included as sublease income in the unaudited condensed consolidated statement of operations.

 

Fair Value Measurements

 

The Company follows the accounting guidance in ASC 820 for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

 

The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:

 

Level 1: Quoted prices in active markets for identical assets or liabilities.

 

Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.

 

Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

Convertible Bond Loan

 

On May 25, 2022, Advent Technologies S.A (“Advent SA”) and UNI.FUND Mutual Fund (“UNIFUND”) entered into an agreement to finance Cyrus SA (“Cyrus”) with a convertible bond loan (“Bond Loan”) of €1.0 million. As a part of this transaction, Advent SA offered €0.3 million in bond loans with an annual interest rate of 8.00%. The term of the loan is three years and there is a surcharge of 2.5% for overdue interest.

 

Cyrus business relates to the research and experimental development in natural sciences and mechanics, the construction of pumps and hydrogen compressors and the wholesale of compressors. Hydrogen compressors are a critical part of the Hydrogen Refueling Stations (HRS) to be used by transport applications. Cyrus has developed a prototype Metal Hydride Compressor which offers unique advantages. The proceeds from the Bond Loan are to cover Cyrus’s working capital needs in the context of its operation and the product development.

 

14

 

 

Mandatory conversion of the Bond Loan will occur in the event of qualified financing which is equivalent to a share capital increase by Cyrus in the first three years from the execution of the Bond Loan agreement with a total amount over €3 million which is covered by third parties unrelated to the basic shareholders or by investors related to them.

 

The Company classifies the Bond Loan as an available for sale financial asset on the consolidated balance sheets. The Company recognizes interest income within the consolidated statement of operations. For the three and nine months ended September 30, 2023, the Company recognized $6 thousand and $19 thousand, respectively, of interest income related to the Bond Loan within the consolidated statements of operations. The Company did not recognize any interest income related to the Bond Loan during the three and nine months ended September 30, 2022.

 

The Company initially measured the available for sale Bond Loan at the transaction price plus any applicable transaction costs. The Bond Loan is remeasured to its fair value at each reporting period and upon settlement. The estimated fair value of the Bond Loan is determined using Level 3 inputs by using a discounted cash flow model. The change in fair value is recognized within the consolidated statements of comprehensive loss. The Company did not recognize any unrealized gain / (loss) during the three and nine months ended September 30, 2023 and 2022.

 

Warrant Liability

 

As a result of the Business Combination, the Company assumed a warrant liability (the “Warrant Liability”) related to previously issued 3,940,278 warrants, each exercisable to purchase one share of common stock at an exercise price of $11.50 per share, originally sold to AMCI Sponsor LLC (the “Sponsor”) in a private placement consummated in connection with AMCI’s initial public offering (the “Private Placement Warrants”) and the 400,000 warrants, each exercisable to purchase one share of Common Stock at an exercise price of $11.50 per share, converted from the Sponsor’s non-interest bearing loan to the Company of $0.4 million in connection with the closing of the Business Combination (the “Working Capital Warrants”) (Note 14). The Private Placement Warrants and the Working Capital Warrants have substantially the same terms as the 24,399,418 warrants, each exercisable to purchase one share of Common Stock at an exercise price of $11.50 per share, issued by AMCI in its initial public offering (the “Public Warrants”). As of September 30, 2023, the Company had an aggregate of 1,970,139 Private Placement Warrants and Working Capital Warrants outstanding.

 

The following tables summarize the fair value of the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.

 

                 
    As of
September 30,
2023
 
    (Unaudited)  
(Amounts in thousands)   Fair Value     Unobservable Inputs
(Level 3)
 
Assets                
Available for sale financial asset   $ 316     $ 316  
    $ 316     $ 316  
                 
Liabilities                
Warrant liability   $ 99     $ 99  
    $ 99     $ 99  

 

15

 

 

    As of
December 31,
2022
 
(Amounts in thousands)   Fair Value     Unobservable Inputs
(Level 3)
 
Assets                
Available for sale financial asset   $ 320     $ 320  
    $ 320     $ 320  
                 
Liabilities                
Warrant liability   $ 998     $ 998  
    $ 998     $ 998  

 

The carrying amounts of the Company’s remaining financial instruments reflected on the consolidated balance sheets and which consist of cash and cash equivalents, accounts receivables, net, other current assets, trade and other payables, and other current liabilities, approximate their respective fair values due to their short-term nature.

 

Changes in the fair value of Level 3 assets and liabilities for the three and nine months ended September 30, 2023 and 2022 were as follows:

 

                               
Available for Sale Financial Asset  
    For the
Three Months Ended September 30,
2023
    For the
Three Months Ended September 30,
2022
    For the
Nine Months Ended September 30,
2023
    For the
Nine Months Ended September 30,
2022
 
(Amounts in thousands)   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Estimated fair value (beginning of period)   $ 326     $ 311     $ 320     $ -  
Estimated fair value of available for sale financial asset acquired     -       -       -       311  
Foreign exchange fluctuations     (10 )     (20 )     (4 )     (20 )
Change in estimated fair value     -       -       -       -  
Estimated fair value (end of period)   $ 316     $ 291     $ 316     $ 291  

 

Warrant Liability  
    For the
Three Months Ended September 30,
2023
    For the
Three Months Ended September 30,
2022
   

For the
Nine Months Ended September 30,
2023

   

For the
Nine Months Ended September 30,
2022

 
(Amounts in thousands)   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Estimated fair value (beginning of period)   $ 177     $ 2,214     $ 998     $ 10,373  
Change in estimated fair value     135       911       (355 )     (7,248 )
Reclassification of private placement warrants     (213 )     -       (545 )     -  
Estimated fair value (end of period)   $ 99     $ 3,125     $ 99     $ 3,125  

 

The Warrant Liability is remeasured to its fair value at each reporting period and upon settlement. The change in fair value is recognized in “Fair value change of warrant liability” on the consolidated statements of operations.

 

16

 

 

The estimated fair value of the Private Placement Warrants and the Working Capital Warrants (each as defined below) is determined using Level 3 inputs by using the Black-Scholes model. The application of the Black-Scholes model requires the use of a number of inputs and significant assumptions including volatility. Significant judgment is required in determining the expected volatility of our common stock. Due to the limited history of trading of our Common Stock, we determined expected volatility based on a peer group of publicly traded companies.

 

The following tables provide quantitative information regarding Level 3 fair value measurement inputs as of their measurement date of September 30, 2023:

 

       
Available for Sale Financial Asset  
Interest Rate     8.00 %
Discount Rate     8.00 %
Remaining term (in years)     1.65  

 

Warrant Liability  
Stock price   $ 0.39  
Exercise price (strike price)   $ 11.50  
Risk-free interest rate     4.83 %
Volatility     128.2 %
Remaining term (in years)     2.34  

 

The Company performs routine procedures such as comparing prices obtained from independent source to ensure that appropriate fair values are recorded.

 

3. Related party disclosures

 

Balances with related parties

 

The were no outstanding balances with related parties as of September 30, 2023 and December 31, 2022.

 

Transactions with related parties

 

Related party transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by the related parties.

 

4. Accounts receivable, net

 

Accounts receivable consist of the following:

 

               
   

September 30,
2023

    December 31,
2022
 
(Amounts in thousands)   (Unaudited)        
Accounts receivable from third party customers   $ 1,205     $ 1,295  
Less: Allowance for credit losses     (372 )     (316 )
Accounts receivable, net   $ 833     $ 979  

 

17

 

 

5. Inventories

 

Inventories consist of the following:

 

               
    September 30,
2023
    December 31,
2022
 
(Amounts in thousands)   (Unaudited)        
Raw materials and supplies   $ 8,524     $ 7,518  
Work-in-process     523       547  
Finished goods     5,798       4,787  
Total   $ 14,845     $ 12,852  
Provision for slow moving inventory     (932 )     (232 )
Total   $ 13,913     $ 12,620  

 

The changes in the provision for slow moving inventory is as follows:

 

                               
    For the
three months ended September 30,
2023
    For the
three months ended September 30,
2022
    For the
nine months ended September 30,
2023
    For the
nine months ended September 30,
2022
 
(Amounts in thousands)   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Balance at beginning of period   $ (236 )   $ (44 )   $ (232 )   $ (48 )
Additions     (723 )     (204 )     (723 )     (204 )
Exchange differences     27       20       23       24  
Balance at end of period   $ (932 )   $ (228 )   $ (932 )   $ (228 )

 

6. Prepaid expenses and other current assets

 

Prepaid expenses are analyzed as follows:

 

               
    September 30,
2023
    December 31,
2022
 
(Amounts in thousands)   (Unaudited)        
Prepaid insurance expenses   $ 544     $ 263  
Prepaid research expenses     25       212  
Prepaid rent expenses     -       32  
Other prepaid expenses     181       181  
Total   $ 750     $ 688  

 

Prepaid insurance expenses as of September 30, 2023 and December 31, 2022 mainly include prepayments to insurers for directors’ and officers’ insurance for liabilities that may arise in their capacity as directors and officers of a public entity.

 

Prepaid research expenses as of September 30, 2023 and December 31, 2022 mainly relate to prepayments for expenses under the Cooperative Research and Development Agreement as discussed in Note 16.

 

Other prepaid expenses as of September 30, 2023 and December 31, 2022 mainly include prepayments for professional fees and purchases.

 

18

 

 

Other current assets are analyzed as follows:

 

               
    September 30,
2023
    December 31,
2022
 
(Amounts in thousands)   (Unaudited)        
VAT receivable   $ 599     $ 530  
Withholding tax     21       839  
Grant receivable     613       265  
Purchases under receipt     -       83  
Guarantees     37       38  
Other receivables     579       524  
Accrued interest income     32       13  
Accrued sublease income     80       -  
Tax receivable     319       -  
 Total    $ 2,280     $ 2,292  

 

7. Goodwill and Intangible Assets

 

Goodwill

 

As of December 31, 2022, the Company had goodwill of $5.7 million related to the acquisitions of UltraCell, SerEnergy, and FES, which is analyzed as follows:

 

                       
(Amounts in thousands)   Gross Carrying Amount     Cumulative Impairment     Net Carrying Amount  
Goodwill on acquisition of UltraCell   $ 631     $ -     $ 631  
Goodwill on acquisition of SerEnergy and FES     29,399       (24,288 )     5,111  
Total goodwill   $ 30,030     $ (24,288 )   $ 5,742  

 

The Company performed a qualitative analysis for the quarter ended June 30, 2023 and determined that triggering events for two of the Company’s reporting units, UltraCell and SerEnergy / FES, had occurred which would require testing goodwill and long-lived assets, including definite-lived intangibles, for impairment.

 

The Company considered the triggering events related to current and expected future economic and market conditions and their impact on the Company, as well as the current revenue forecasts. Given certain market factors, the Company determined that these triggering events had occurred and would require a quantitative analysis to be performed.

 

As a part of the impairment assessment, the Company updated significant fair value input assumptions including revenues, margin, and capital expenditures to reflect current market conditions. Other changes in valuation assumptions included increases in interest rates and market volatility, resulting in higher discount rates.

 

UltraCell Reporting Unit

 

In the second quarter of 2023, the Company updated the forecasted future cash flows of UltraCell used in the fair value measurement of the intangible assets and goodwill using a combination of market, cost and income approach methods. The Company is phasing out use of the UltraCell trade name and therefore recognized an impairment charge of $0.4 million during the period. The Patented Technology was valued with the multi-period excess earnings method, which is an income approach. The discount rate used for the valuation of the Patented Technology increased to 17.7% from 11.6% at the time of the acquisition of UltraCell. The Company determined that the undiscounted cash flows related to the Patented Technology was less than the current carrying value and therefore recognized an impairment charge of $3.3 million during the period. The Company determined that the fair value of the reporting unit utilizing the updated forecast was less than its current carrying value. As a result, the Company recorded a goodwill impairment charge of $0.6 million during the period.

 

19

 

 

SerEnergy and FES Reporting Unit

 

In the second quarter of 2023, the Company updated the forecasted future cash flows of SerEnergy and FES used in the fair value measurement of the intangible assets and goodwill using a combination of market, cost and income approach methods. The Company acquired finite-lived intangible assets, including patents, process know-how, and order backlog in conjunction with the SerEnergy and FES acquisition. The Company determined the undiscounted cash flows attributable to the IPR&D was greater than the current carrying value. As a result, the Company believes that the updated long-term forecast did not indicate impairment related to IPR&D. All other finite-lived intangible assets related to the SerEnergy and FES acquisition were previously fully amortized or impaired. The Company determined that the fair value of the reporting unit was $13.6 million utilizing the updated forecast, which was less than its current carrying value. As a result, the Company recorded a goodwill impairment charge of $5.1 million during the period.

 

In the event there are further adverse changes in the Company’s projected cash flows and/or further changes in key assumptions, including but not limited to an increase in the discount rate, lower market multiples, lower revenue growth, lower margin, and/or a lower terminal growth rate, the Company may be required to record non-cash impairment charges to its intangible assets and/or long-lived assets. Such non-cash charges could have a material adverse effect on the Company’s consolidated statements of operations and balance sheets in the reporting period of the charge. The assessment is sensitive to broader market conditions, including the discount rate and market multiples, and to the Company’s estimated future cash flows.

 

As of September 30, 2023, the Company fully impaired goodwill:

 

                       
(Amounts in thousands)   Gross Carrying Amount     Cumulative Impairment     Net Carrying Amount  
Goodwill on acquisition of UltraCell   $ 631     $ (631 )   $ -  
Goodwill on acquisition of SerEnergy and FES     29,399       (29,399 )     -  
Total goodwill   $ 30,030     $ (30,030 )   $ -  

 

Intangible Assets

 

Information regarding our intangible assets, including assets recognized from our acquisitions, as of September 30, 2023 and December 31, 2022 is as follows:

 

                               
   

As of September 30, 2023
(Unaudited)

 
(Amounts in thousands)   Gross Carrying Amount     Accumulated Amortization     Cumulative Impairment     Net Carrying Amount  
Indefinite-lived intangible assets:                                
Trade name “UltraCell”   $ 406     $ -     $ (406 )   $ -  
Total indefinite-lived intangible assets   $ 406     $ -     $ (406 )   $ -  
Finite-lived intangible assets:                                
Patents     21,221       (3,247 )     (17,974 )     -  
Process know-how (IPR&D)     2,612       (908 )     -       1,704  
Order backlog     266       (266 )     -       -  
Software     230       (145 )     -       85  
Total finite-lived intangible assets   $ 24,329     $ (4,566 )   $ (17,974 )   $ 1,789  
Total intangible assets   $ 24,735     $ (4,566 )   $ (18,380 )   $ 1,789  

 

20

 

 

    As of December 31,
2022
 
(Amounts in thousands)   Gross Carrying Amount     Accumulated Amortization     Cumulative Impairment     Net Carrying Amount  
Indefinite-lived intangible assets:                                
Trade name “UltraCell”   $ 406     $ -     $ -     $ 406  
Total indefinite-lived intangible assets   $ 406     $ -     $ -     $ 406  
Finite-lived intangible assets:                                
Patents     21,221       (3,068 )     (14,634 )     3,519  
Process know-how (IPR&D)     2,612       (582 )     -       2,030  
Order backlog     266       (266 )     -       -  
Software     233       (126 )     -       107  
Total finite-lived intangible assets   $ 24,332     $ (4,042 )   $ (14,634 )   $ 5,656  
Total intangible assets   $ 24,738     $ (4,042 )   $ (14,634 )   $ 6,062  

 

The Company did not record any additions to indefinite-lived intangible assets during the three and nine months ended September 30, 2023 and 2022.

 

In 2021, the Company recorded $22.9 million (net carrying amount) of amortizing intangible assets, most of which were in connection with the Company’s acquisitions of UltraCell, SerEnergy, and FES. The amortizing intangible assets consist of patents, process know-how (IPR&D), order backlogs, and software which are amortized over 10 years, 6 years, 1 year, and 5 years, respectively. In the three and nine months ended September 30, 2023, the Company did not record any additions to definite-lived intangible assets. In the three and nine months ended September 30, 2022, the Company recorded $0.0 million and $0.1 million, respectively, of amortizing intangible assets related to software. The amortization expense for the intangible assets for the three months ended September 30, 2023 and 2022 was $0.1 million and $0.7 million, respectively. The amortization expense for the intangible assets for the nine months ended September 30, 2023 and 2022 was $0.5 million and $2.1 million, respectively.

 

Amortization expense is recorded on a straight-line basis. Assuming constant foreign currency exchange rates and no change in the gross carrying amount of the intangible assets, future amortization expense related to the Company’s intangible assets subject to amortization as of September 30, 2023 is expected to be as follows:

 

       
(Amounts in thousands)      
Fiscal Year Ended December 31,      
2023   $ 116  
2024     465  
2025     465  
2026     438  
2027     305  
Thereafter     -  
Total   $ 1,789  

 

21

 

 

8. Property, plant and equipment, net

 

The Company’s property, plant and equipment, net, consisted of the following:

 

               
    September 30,
2023
    December 31,
2022
 
(Amounts in thousands)   (Unaudited)        
Land, Buildings & Leasehold Improvements   $ 14,329     $ 1,977  
Machinery     13,908       8,155  
Equipment     5,300       4,687  
Assets under construction     36       10,436  
    $ 33,573     $ 25,255  
Less: accumulated depreciation     (9,038 )     (7,317 )
Less: cumulative impairment     (275 )     -  
Total   $ 24,260     $ 17,938  

 

During the three and nine months ended September 30, 2023, additions to property, plant and equipment were $5.1 million and $9.0 million, respectively, primarily consisting of machines and assets related to the construction of the Hood Park facility. Additionally, on April 27, 2023, the Company entered into an agreement with ETTEL S.A. to purchase land in Kozani, Greece in the amount of €0.8 million. During the three and nine months ended September 30, 2022, additions to property, plant and equipment of $0.8 million and $3.5 million, respectively, include leasehold improvements, machinery, office and other equipment and assets under construction.

 

Assets under construction mainly relate to the design and construction of Company’s leased premises at Hood Park in Charlestown, MA. Completed assets are transferred to their respective asset classes, and depreciation begins when an asset is ready for its intended use. During the three and nine months ended September 30, 2023, the Company transferred assets under construction to land, buildings and leasehold improvements. During the three and nine months ended September 30, 2022, the Company did not transfer any assets under construction to other asset classes.

 

Depreciation expense during the three months ended September 30, 2023 and 2022 was $0.9 million and $0.3 million, respectively. Depreciation expense during the nine months ended September 30, 2023 and 2022 was $2.1 million and $1.1 million, respectively.

 

During the three months ended June 30, 2023, the Company decided to consolidate certain of its German operations with its operations in Denmark and Greece. In July 2023, the Company initiated the process to communicate its plan to affected employees in Germany and to relocate certain equipment to either Denmark or Greece. As part of this consolidation, the Company anticipates it will dispose of equipment below its current carrying value, resulting in an impairment charge of $0.3 million during the second quarter of 2023. The affected employees will continue to provide service through their termination dates, and as a result, the Company does not anticipate material severance charges.

 

There are no collaterals or other commitments on the Company’s property, plant and equipment.

 

22

 

 

9. Other non-current assets

 

Other non-current assets as of September 30, 2023 and December 31, 2022 are mostly comprised of advances to suppliers for the acquisition of fixed assets of $0.5 million and $4.9 million, respectively.

 

10. Trade and other payables

 

Trade and other payables include balances of suppliers and consulting service providers.

 

11. Other current liabilities

 

As of September 30, 2023 and December 31, 2022, other current liabilities consist of the following:

 

               
    September 30,
2023
    December 31,
2022
 
(Amounts in thousands)   (Unaudited)        
Accrued expenses(1)   $ 1,139     $ 1,522  
Other short-term payables(2)     503       2,260  
Taxes and duties payable     413       285  
Provision for unused vacation     285       300  
Accrued provision for warranties, current portion (Note 16)     228