There is no material pending or threatened litigation against the Company that remains outstanding as of March 31, 2021.
On February 5, 2021, the Company entered into a lease agreement by and among the Company, in its capacity as Tenant, and BP Hancock LLC, a Delaware limited liability company, in its capacity as Landlord. The lease provides for the rental by the Company of office space at 200 Clarendon Street, Boston, MA 02116 for use as the Company’s executive offices. Under the terms of the lease, the Company leases 6,041 square feet at an initial fixed annual rent of $456,095.50. The term of the lease is for five years (unless terminated as provided in the lease) and is expected to commence in April 2021. The Company provided security in the form of a security deposit in the amount of $114,023.88 which is included in Other current assets.
On March 8, 2021, the Company entered into a lease for 21,401 square feet as a product development and manufacturing center at Hood Park in Charlestown, MA. Under the terms of the lease, the Company will pay an initial fixed annual rent of $1,498,070.00. The lease has a term of eight years and five months, with an option to extend for five years, and is expected to commence in June 2021. The Company is obliged to provide security in the form of a security deposit in the amount of $750,000.00 before commencement of the lease.
16. | Net income / (loss) per share |
Net income (loss) per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period totaled to 46,105,947.
The following table sets forth the computation of the basic and diluted net loss per share for the three months ended March 31, 2021 and 2020.
| | Three-months ended March 31, | |
Numerator: | | 2021 | | | 2020 | |
Net income / (loss) | | $ | 2,905,674 | | | $ | (216,616 | ) |
Denominator: | | | | | | | | |
Weighted average shares outstanding, basic | | | 37,769,554 | | | | 14,979,803 | |
Dilutive effect of common stock issuable from assumed exercise of warrants | | | 3,217,792 | | | | - | |
Weighted average shares outstanding, diluted | | | 40,987,346 | | | | | |
Net income / (loss) per share: | | | | | | | | |
Basic | | $ | 0.08 | | | $ | (0.01 | ) |
Diluted | | $ | 0.07 | | | $ | (0.01 | ) |
Basic net income / (loss) per share is computed by dividing net income/ (loss) for the periods presented by the weighted-average number of common shares outstanding during these periods.
Diluted net income /(loss) per share is computed by dividing the net income /(loss), by the weighted average number of common shares outstanding for the periods, adjusted for the dilutive effect of shares of common stock equivalents resulting from the assumed exercise of the Public Warrants, Private Placements Warrants and Working Capital Warrants. The treasury stock method was used to calculate the potential dilutive effect of these common stock equivalents.
Potentially dilutive shares were excluded from the computation of diluted net income / (loss) when their effect was antidilutive.
Subsequent to March 31, 2021 certain warrantholders exercised their options to purchase an additional 22,798 shares at $11.50. These exercises generated $262,177 in additional proceeds to the Company and increased our shares outstanding by 22,798 shares.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2021 (the “Original Annual Report”), as amended by Amendment No. 1 to Form 10-K, filed with the SEC on May 20, 2021 (as so amended, the “2020 Annual Report”), our Current Report on Form 8-K, as filed with the SEC on February 9, 2021 as further amended by Amendment No. 2 to Form 8-K, filed with the SEC on March 26, 2021 (“Amendment No. 2”) and as further amended by Amendment No 3 to Form 8-K, filed with the SEC on May 20, 2021 (“Amendment No. 3,” and, the Original Form 8-K, as so amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3, the “Super Form 8-K”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Item 1A. Risk Factors” section of this Quarterly Report on Form 10-Q and the “Item 1A. Risk Factors” section of our 2020 Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
This MD&A generally discusses 2021 and 2020 items and year-over-year comparisons between 2021 and 2020. As used in this MD&A, unless the context indicates otherwise, the financial information relating to the quarter ended March 31, 2020 are those of Advent Technologies, Inc. and its subsidiaries, and the financial information and data for the quarter ended March 31, 2021 includes the financial information and data of Advent Technologies, Inc. and its subsidiaries for the period prior to the Closing and the financial information and data of Advent Technologies Holdings, Inc. for the period subsequent to the Closing. See Note 1 “Basis of Presentation” in the accompanying unaudited condensed consolidated financial statements for additional information.
Overview
Advent 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. Advent’s core product offering is the Membrane Electrode Assembly (MEA) at the center of the fuel cell. The Advent MEA, which derives its key benefits from the properties of Advent’s engineered membrane technology, enables a more robust, longer-lasting and ultimately lower-cost fuel cell product.
To date, Advent’s principal operations have been to develop and manufacture MEAs, and to design 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, a product development facility in Livermore, California, and an MEA assembly and production facility in Patras, Greece. In the third quarter of 2021, Advent anticipates opening its new research and development and manufacturing facility at Hood Park in Charlestown, Massachusetts. The majority of Advent’s current revenue derives from the sale of MEA’s as well as the sale of membranes and electrodes for specific applications in the iron flow battery and cellphone markets respectively. While MEA sales and associated revenues are expected to provide the majority of Advent’s future income, both of these markets remain commercially viable and have the potential to generate material future revenues based on Advent’s existing customers. Advent has also secured grant funding for a range of projects from research agencies and other organizations in the U.S. and Greece. Advent expects to continue to be eligible for grant funding based on its product development activities over the foreseeable future.
Historically, Advent has financed its operations through internal cashflows, grant income and private placements of equity and convertible notes. In the three months ended March 31, 2021, Advent generated revenue from product sales of approximately $1.5 million and incurred an operating loss of approximately $7 million. During the three months ended March 31, 2021, Advent received proceeds as a result of the Merger dated February 4, 2021 of approximately $140 million and recorded approximately $(12.2 million) in operating cashflow, resulting in a period end cash balance of approximately $125 million as of March 31, 2021.
Business Combination and Public Company Costs
On October 12, 2020, Advent Technologies, Inc. entered into the Merger Agreement with Advent Technologies Holdings, Inc. (formerly known as “AMCI”), a Delaware corporation, AMCI Merger Sub Corp., a newly-formed Delaware corporation and wholly-owned subsidiary of AMCI (“Merger Sub”), AMCI Sponsor LLC, a Delaware limited liability company (“Sponsor”), in its capacity as Purchaser Representative (the “Purchaser Representative”) and Vassilios Gregoriou, in the capacity as Seller Representative ( the “Seller Representative”), pursuant to which, effective February 4, 2021, Merger Sub merged with and into Advent Technologies Inc., with Advent Technologies Inc. surviving the Merger as a wholly-owned subsidiary of AMCI. Advent Technologies Inc. is deemed the accounting predecessor and the combined entity is the successor registrant with the SEC, meaning that Advent Technologies Inc.’s financial statements for previous periods will be disclosed in the registrant’s current and future periodic reports filed with the SEC.
While the legal acquirer in the Merger Agreement is AMCI, for financial accounting and reporting purposes under GAAP, we have determined that Advent is the accounting acquirer and the Business Combination will be accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Advent in many respects. Under this method of accounting, AMCI is treated as the acquired entity whereby Advent is deemed to have issued common stock for the net assets and equity of AMCI, consisting mainly of cash, accompanied by a simultaneous equity recapitalization of AMCI (the “Recapitalization”).
Upon consummation of the Business Combination, the most significant change in Advent’s reported financial position and results has been an estimated increase in cash of approximately $140 million. Total direct and incremental transaction costs of AMCI and Advent, along with liabilities of AMCI paid off at the Closing, were approximately $23.6 million.
As a consequence of the Business Combination, Advent became the successor to an SEC-registered and Nasdaq-listed company which has required and will require Advent to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Advent expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
Additionally, Advent anticipates that its revenue, capital and operating expenditures will increase significantly in connection with its ongoing activities following the Business Combination, as Advent expects to:
Expand U.S.-based operations to increase capacity for MEA testing, development projects and associated research and development activities;
Expand Greece-based production facilities to increase and automate MEA assembly and production;
Develop improved MEA and other products for both existing and new markets, such as ultra-light MEAs designed for aviation applications, to remain at the forefront of the fast-developing hydrogen economy;
Increase business development and marketing activities;
Increase headcount in management and head office functions in order to appropriately manage Advent’s increased operations;
Improve its operational, financial and management information systems;
Obtain, maintain, expand, and protect its intellectual property portfolio; and
Operate as a public company.
Change in Independent Registered Public Accounting Firm
On February 9, 2021, the audit committee of the board of directors of the Company approved the engagement of Ernst & Young (Hellas) Certified Auditors Accountants S.A. (“EY”) as the Company’s independent registered public accounting firm attestation requirementsto audit the Company’s consolidated financial statements for the year ending December 31, 2021. EY served as independent registered public accounting firm of Section 404Advent prior to the Business Combination. Accordingly, Marcum LLP (“Marcum”), the Company’s independent registered public accounting firm prior to the Business Combination, was informed that it would be replaced by EY as the Company’s independent registered public accounting firm following completion of its audit of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensationCompany’s financial statements for the fiscal year ended December 31, 2020, which consists only of the accounts of the pre-Business Combination special purpose acquisition company.
Business Developments
Selection of Wearable Fuel Cell for the DOD 2021 Validation Program
On March 31, 2021, we announced that UltraCell’s 50 W Reformed Methanol Wearable Fuel Cell Power System (“Honey Badger”) had been selected by the U.S. Department of Defense’s (“DOD”) National Defense Center for Energy and Environment (“NDCEE”) to take part in its periodic reportsdemonstration/validation program for 2021. The NDCEE is a DOD program that addresses high-priority environmental, safety, occupational health, and proxy statements,energy technological challenges that are demonstrated and exemptionsvalidated at active installations for military application. UltraCell’s “Honey Badger 50” fuel cell is the only fuel cell that is part of this program that supports the U.S. Army’s goal of having a technology-enabled force by 2028.
Collaboration with the DOE
On March 1, 2021, we announced that we had entered into a joint development agreement (the “CRADA”) with the United States Department of Energy’s (“DOE”) Los Alamos National Laboratory (“LANL”), Brookhaven National Laboratory (“BNL”), and National Renewable Energy Laboratory (“NREL”). Under this CRADA, along with support from the requirementsDOE’s Hydrogen and Fuel Cell Technologies Office (“HFTO”), our team of holding a nonbinding advisory vote on executive compensationscientists plan to work closely with its LANL, BNL, and stockholder approval of any golden parachute payments not previously approved.NREL counterparts over the coming years to develop breakthrough materials to help strengthen U.S. manufacturing in the fuel cells sector and bring high-temperature proton exchange membrane (“HT-PEM”) fuel cells to the market.
Further,UltraCell Purchase Agreement
On February 18, 2021, Advent Technologies Inc., entered into a Membership Interest Purchase Agreement with Bren-Tronics, Inc. (“Seller”) and UltraCell, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Seller (“UltraCell”) (the “Purchase Agreement”). Pursuant to the Purchase Agreement, and subject to the terms and conditions therein, on February 18, 2021, Advent acquired 100% of the issued and outstanding membership interests in UltraCell, for $4 million and a maximum of $2 million upon achievement of certain milestones. Advent also assumed the terms of Seller’s lease for property used in UltraCell’s operations in Livermore, California. From the respective acquisition, an amount $0.5 million recognized as Goodwill to the consolidated Balance Sheet.
Leases
On February 5, 2021, the Company entered into a lease agreement by and among the Company, in its capacity as Tenant, and BP Hancock LLC, a Delaware limited liability company, in its capacity as Landlord. The lease provides for the rental by the Company of office space at 200 Clarendon Street, Boston, MA 02116 for use as the Company’s executive offices. Under the terms of the lease, the Company leases 6,041 square feet at an initial fixed annual rent of $456,095.50. The term of the lease is for five years (unless terminated as provided in the lease). The Company provided security in the form of a security deposit in the amount of $114,023.88.
On March 8, 2021, the Company entered into a lease for 21,401 square feet as a product development and manufacturing center at Hood Park in Charlestown, MA. Under the terms of the lease, the Company will pay an initial fixed annual rent of $1,498,070.00. The lease has a term of eight years and five months, with an option to extend for five years and is expected to commence in June 2021. The Company is obliged to provide security in the form of a security deposit in the amount of $750,000.00, upon commencement of the lease.
Recent Developments
On April 16, 2021 the Company paid the $2 million of contingent consideration required to be paid to UltraCell’s former holders of membership interests pursuant to the terms of the Purchase Agreement with Bren-Tronics.
On May 5, 2021, the Company, in collaboration with a consortium of DEPA Commercial, Damco Energy (Kopelouzos Group), PPC Greece, DESFA, Hellenic Petroleum, Motor Oil, Corinth Pipeworks, TAP and Terna Energy, submitted to the Greek government the group’s “White Dragon” proposal for the development of an innovative, integrated green hydrogen project in Greece. The proposal aims to transition Greece to clean energy production and transmission, with the ultimate goal of decarbonizing the energy system. The proposal plans to use large-scale renewable electricity to produce green hydrogen, which would then be stored and through high-temperature fuel cells developed and manufactured by the Company, to supply Greece with clean electricity, green energy and heat. The proposal includes for the study and construction of a dedicated hydrogen pipeline in Greece to link green hydrogen production with large hydrogen end users, as well as plans to implement the first widescale hydrogen fueled projects for the entire transportation section, including heavy duty trucks, trains and cars. The combined projected budget for the proposal, if approved in its entirety by the European and Greek authorities, is € 8.063 billion.
Comparability of Financial Information
Advent’s results of operations and statements of assets and liabilities may not be comparable between periods as a result of the Business Combination.
Key Factors Affecting Our Results
Advent believes that its performance and future success depend on several factors that present significant opportunities for Advent but also pose risks and challenges, including those discussed below.
Increased Customer Demand
Based on conversations with existing customers and incoming inquiries from new customers, Advent anticipates substantial increased demand for its MEAs from a wide range of customers as it scales up its production facilities and testing capabilities, and as the awareness of its MEA capabilities becomes widely-known in the industry. Advent expects both its existing customers to increase order volume, and to generate substantial new orders from major organizations, with some of whom it is already in discussions regarding prospective commercial partnerships and joint development agreements. As of March 31, 2021, Advent was still generating a low level of revenues compared to its future projections and has not made any commercial sales to these major organizations.
Successful development of the Advanced MEA product
Advent’s future success depends in large part on the increasing integration of the hydrogen fuel cell into the energy transition globally over the next decade. In order to become cost-competitive with existing renewable power generation and energy storage technology and achieve widespread adoption, fuel cells will need to achieve substantial improvement in the cost/kw performance ratio delivered to prospective fuel cell customers, predominantly OEMs, System Integrators and major energy companies. Advent expects to play an important enabling role in the adoption of hydrogen fuel cells, as its MEA technology is the critical determining factor in the cost/kw performance ratio of the fuel cells. In partnership with the Los Alamos National Laboratory, Advent is currently developing its next generation MEA technology (“Advanced MEA”) which is anticipated to deliver as much as three times the power output of its current MEA product. Whilst Advent is already projecting being able to pass through substantial cost benefits to its customers through economies of scale as it increases MEA production, the successful development of the Advanced MEA will be an important factor in delivering the required improvement in cost/kw performance to Advent’s customers.
Basis of Presentation
Advent’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The Company has determined that it operates in one reportable segment. See Note 1 “Basis of Presentation” in the accompanying unaudited condensed consolidated financial statements for more information.
Components of Results of Operations
Revenue, net
Revenues consist of sales of goods (MEAs, membranes, fuel cell stacks, fuel cell systems and electrodes). Advent expects revenues to increase materially and be weighted towards MEA sales over time, in line with the projected increase in MEA production in response to customer demand.
Cost of Revenues
Cost of revenues consists of consumables, raw materials, processing costs and direct labor costs associated with the assembly and manufacture of MEAs, membranes, fuel cell stacks and electrodes. Advent expects cost of revenues to increase substantially in line with MEA production.
Income from Grants
Income from grants consists of cash subsidies received from research agencies and other national and international organizations in support of Advent’s research and development activities. Advent expects to continue to be eligible for grant income and remains in discussion with a number of prospective grantors in relation to a number of product development activities.
Research and Development Expenses
Research and development expenses consist of costs associated with Advent’s research and development activities, such as laboratory costs and sample material costs. Advent expects its research and development activities to increase substantially as it invests in improved technology and products.
Administrative and Selling Expenses
Administrative and selling expenses consist of travel expenses, indirect labor costs, fees paid to consultants, third parties and service providers, taxes and duties, legal and audit fees, depreciation, business development salaries and limited marketing activities. Advent expects administrative and selling expenses to increase in line with MEA production and revenue as the business scales up, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities and other administrative and professional services. Depreciation is also expected to increase as the Company invests in fixed assets in support of the scale-up of the business.
Other Income / Expenses
Other operating income / (expenses) consist of additional de minimis incidental operating income / (expenses) incurred by the business. These income / (expenses) are expected to remain at a de minimis level in the future.
Change Fair Value of Warrant Liability
Change of fair value of warrant liability amounting to $9,765,625 represents the change of fair value of the Private Placement Warrants and Working Capital Warrants from February 4, 2021 to March 31, 2021.
Finance Costs
Finance costs consist mainly of bank charges. Finance costs are not anticipated to increase materially as Advent is not intending to take on substantial borrowings at the corporate level in the near future.
Foreign exchange differences, net
Foreign exchange differences, net consists of foreign exchange gains and interest on deposits. As the Company scales up, its foreign exchange exposure is likely to increase given its revenues are denominated in both euros and dollars, and a substantial proportion of the Company’s costs are denominated in euros.
Income tax
Income tax expense relates to the current income tax charge for the Company’s operations in Greece. This category is expected to increase in future as the Company generates sales and profits from its operations in both Greece and the U.S.
Amortization of intangibles
The provisional value of $5 million of intangibles relates to trademarks, patents, customer relationships, customer contracts and know-how. Those intangibles mainly relate to definite-live intangible assets with estimated useful lives that vary between 3-10 years, with the exception of contract backlogs which are amortized over the remaining period of the contracts assumed based on income approach. During the period from acquisition and up to March 31, 2021, the Company has recognized in the condensed consolidated statement of operations amortization for those intangibles of $0.2 million. As noted earlier, the fair value of the acquired identifiable intangible assets is provisional pending receipt of the final valuations for these assets.
Results of Operations
Comparison of the Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020
The following table sets forth a summary of our consolidated results of operations and consolidated results of cash flows for the years indicated, and the changes between periods.
| | Three months ended March 31, | | | | | | | |
| | 2021 | | | 2020 | | | $ change | | | % change | |
Revenue, net | | $ | 1,489,292 | | | $ | 100,266 | | | | 1,389,026 | | | | 1,385.34 | % |
Cost of revenues | | | (347,342 | ) | | | (66,037 | ) | | | (281,305 | ) | | | 425.98 | % |
Gross profit/(loss) | | | 1,141,950 | | | | 34,229 | | | | 1,107,721 | | | | 3,236.11 | % |
Income from grants
| | | 38,453 | | | | 228,764 | | | | (190,311 | ) | | | (83.19 | %) |
Research and development expenses | | | (29,082 | ) | | | (51,269 | ) | | | 22,187 | | | | (43.28 | %) |
Administrative and selling expenses | | | (7,921,858 | ) | | | (302,669 | ) | | | (7,619,189 | ) | | | 2,517,33 | % |
Amortization of intangibles | | | (186,760 | ) | | | - | | | | (186,760 | ) | | | N/A | |
Operating Loss | | | (6,957,297 | ) | | | (90,945 | ) | | | (6,866,352 | ) | | | 7,550.00 | % |
Finance costs | | | (10,280 | ) | | | (2,523 | ) | | | (7,757 | ) | | | 307.45 | % |
Change fair value of warrant liability | | | 9,765,625 | | | | - | | | | 9,765,625 | | | | N/A | |
Foreign exchange differences, net | | | 23,955 | | | | (18,587 | ) | | | 42,542 | | | | (228.88 | )% |
Other income/ (expense) | | | 83,671 | | | | (104,561 | ) | | | 188,232 | | | | (180.02 | )% |
| | | | | | | | | | | | | | | | |
Income / (Loss) before income tax | | | 2,905,674 | | | | (216,616 | ) | | | 3,122,290 | | | | (1,441.39 | %) |
Net income/(loss) | | $ | 2,905,674 | | | $ | (216,616 | ) | | | 3,122,290 | | | | (1,441.39 | %) |
Net income/(loss) per share, basic | | | 0.08 | | | | (0.01 | )
| | | 0.09 | | | | N/A | |
Weighted Average shares outstanding, Basic | | | 37,769,554 | | | | 14,979,803 | | | | N/A | | | | N/A | |
Net income/(loss) per share, diluted | | | 0.07 | | | | (0.01 | )
| | | 0.08 | | | | N/A | |
Weighted Average shares outstanding, Diluted | | | 40,987,346 | | | | 14,979,803 | | | | N/A | | | | N/A | |
Revenue, net
Our total revenue from product sales increased by approximately $1.4 million or 1,385% from approximately $0.1 million in the three months ended March 31, 2020 to approximately $1.5 million in the year ended March 31, 2021. The increase in revenue was related to increased demand from customers for Advent’s MEAs and other products, as a result of Advent’s customers increasing their own testing and usage of Advent’s products.
Cost of Revenue
Cost of revenues increased by approximately $0.3 million or 426% from approximately $0.1 million in the three months ended March 31, 2020 to approximately $0.3 million in the three months ended March 31, 2021. The increase in cost of revenues was directly related to the increased revenues across the two years and the requirement for increased production of MEAs and other products to satisfy customer demand. Gross margins were higher for the three months ended March 31, 2021, reflecting a more mature mix of revenues leading to more normalized pricing arrangements.
Our Gross Profit, which is Revenue, net minus the Cost of Revenue increased to $1.1 million in the three months ended March 31, 2021.
Research and Development Expenses
Research and development expenses decreased in comparison to the prior year, decreasing from approximately $0.05 million in the three months ended March 31, 2020 to approximately $0.03 million in the three months ended March 31, 2021 due to decreased activity in Advent’s research and development function as the business continues to look to develop and improve its product suite in order to respond to anticipated future customer demand.
Administrative and Selling Expenses
Administrative and selling expenses were approximately $7.9 million in the three months ended March 31, 2021, and $0.3 million in the three months ended March 31, 2020. The increase was primarily due to one-time transaction costs post merger amounting to $5.9 million.
Change of fair value of Warrant Liability
Change of fair value of warrant liability amounting to $9,765,625 was due to the change of fair value of the Private Placement Warrants and Working Capital Warrants from February 4, 2021 to March 31, 2021.
Liquidity and Capital Resources
As of the date of this filing of the Quarterly Report on form 10-Q, Advent’s existing cash resources and projected cash inflows are anticipated to be sufficient to support planned operations for the next 12 months after the date hereof. This is based on the amount of cash we raised in the business combination and projected income during the financial year 2021.
Cash flows from Operating Activities
Advent’s cash flows from operating activities reflect the income statement position adjusted for working capital movements in current assets and liabilities. As Advent grows, it expects that operating cash flows will be affected by increased working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities.
Net cash used to operating activities was approximately $12.2 million for the three months ended March 31, 2021, which related to outflows in connection with one-time transactions costs, settlement of unpaid executive compensations and costs associated with insurances services and other consulting services.
Net cash used in operating activities was approximately $0.3 million for the three months ended March 31, 2020, mainly related to payments to suppliers net of receipts from customers.
Cash Flows from Investing Activities
Advent’s cash flows from investing activities represents the cash amount of $4 million paid at the consummation of the acquisition of UltraCell, LLC on February 18, 2021. Advent expects to invest substantially in fixed assets, plant and equipment in the near future as it executes its product development programs.
Cash Flows from Financing Activities
Advent’s cash flows from financing activities for the three months ended March 31, 2021 represent the cash amount contributed at the date of the Merger dated February 4, 2021.
Contract Assets and Contract Liabilities
A contract asset results when goods or services have been transferred to the customer, but payment is contingent upon a future event, other than the passage of time. As at March 31, 2021, Advent recognized contract assets of $0.7 million in the consolidated balance sheet. As at December 31, 2020, Advent recognized contract assets of $0.09 million in the consolidated balance sheet.
Advent recognizes contract liabilities when we receive customer payments in advance of the performance obligations being satisfied on our contracts. As at March 31, 2021, Advent recognized contract liabilities of $0.04 million in the unaudited consolidated balance sheet. As at December 31, 2020, Advent recognized contract liabilities of $0.2 million in the consolidated balance sheet.
Off-Balance Sheet Commitments and Arrangements
Since the date of our incorporation, Advent has not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Advent’s financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires Advent to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date, as well as the reported expenses incurred during the reporting period. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to Advent’s financial statements.
Emerging Growth Company Status
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 (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company hasAdvent elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,Advent, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time Advent is no longer considered to be an emerging growth company. At times, Advent may elect to early adopt a new or revised standard. This may make comparison ofSee Note 2 in the Company'sunaudited condensed consolidated financial statements with another public company which is neitherincluded elsewhere in this Quarterly Report on Form 10-Q for more information about the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the three months ending March 31, 2021 and 2020.
In addition, Advent intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, norAdvent intends to rely on such exemptions, Advent is not required to, among other things: (a) provide an auditor’s attestation report on Advent’s system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
Advent will remain an emerging growth company under the JOBS Act until the earliest of (a) the last day of Advent’s first fiscal year following the fifth anniversary of the closing of the Business Combination, (b) the last date of Advent’s fiscal year in which Advent has opted outtotal annual gross revenue of at least $1.1 billion, (c) the date on which Advent is deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which Advent has issued more than $1.0 billion in non-convertible debt securities during the previous three years.
While Advent’s significant accounting policies are described in the notes to Advent’s financial statements (see Note 2 in the unaudited condensed consolidated financial statements), Advent believes that the following accounting policies require a greater degree of judgment and complexity. Accordingly, these are the policies Advent believes are the most critical to aid in fully understanding and evaluating Advent’s financial condition and results of operations.
Revenue Recognition from January 1, 2019
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. We adopted ASU No. 2014-09 on January 1, 2019, using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of balance sheet in conformity with GAAP requires the Company's managementmodified retrospective approach to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and disclosure of contingent assets and liabilitiesall contracts not completed at the date of initial application. The prior period comparative information has not been restated and continues to be reported under the financial statements andaccounting guidance in effect for that period.
In accordance with ASC 606, revenue is recognized when control of the reported amountspromised goods or services are transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those services. We apply the following five steps in order to determine the appropriate amount of revenuesrevenue to be recognized as it fulfills its obligations under each of its arrangements:
identify the contract with a customer,
identify the performance obligations in the contract,
determine the transaction price,
allocate the transaction price to performance obligations in the contract, and expenses during the reporting period.
AMCI ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019
(Unaudited)recognize revenue as the performance obligation is satisfied.
Making estimates requires managementWith significant and recurring customers, we negotiate written master agreements as framework agreements (general terms and conditions of trading), following individually purchase orders. For customers with no master agreements, the approved purchase orders form the contract. Effectively, contracts under the revenue standard have been assessed to exercise significant judgment. Itbe the purchase orders agreed with customers.
We have assessed that each product sold is at least reasonably possible thata single performance obligation because the estimatepromised goods are distinct on their own and within the context of contract. In cases where the agreement includes customization services for the contracted products, we are providing integrated services; therefore, the goods are not separately identifiable, but are inputs to produce and deliver a combined output and form a single performance obligation within the context of the effectcontract. Furthermore, we assessed whether it acts as a principal or agent in each of its revenue arrangements and has concluded that in all sales transactions it acts as a condition, situation or set of circumstancesprincipal. Additionally, we, taking into consideration the guidance and indicative factors provided by ASC 606, concluded that it provides assurance type warranties (warranty period is up to 45 days) as it does not provide a service to the customer beyond fixing defects that existed at the datetime of sale. We, based on historical performance, current circumstances, and projections of trends, estimated that no allowance for returns as per warranty policy should be recognized, at the time of sale, accounted for under ASC 460, Guarantees.
Under ASC 606, we estimate the transaction price, including variable consideration, at the commencement of the balance sheet, which management considered in formulating itscontract and recognizes revenue over the contract term, rather than when fees become fixed or determinable. In other words, where contracts with customers include variable consideration (i.e. volume rebates), we estimate could changeat contract inception the variable consideration and adjust the transaction price only to the extent that it is probable that a significant reversal in the near term due toamount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Furthermore, no material rights or significant financing components have been identified in our contracts. Payment terms generally include advance payment requirements. The time between a customer’s payment and the receipt of funds is less than one or more future confirming events. Accordingly,year. Payment terms are in the actual results could differ significantlymajority fixed and do not include variable considerations, except from those estimates.volume rebates.
CashRevenue from satisfaction of performance obligations is recognized based on identified transaction price. The transaction price reflects the amount to which we have rights under the present contract. It is allocated to the distinct performance obligations based on standalone selling prices of the services promised in the contract. In cases of more than one performance obligation, we allocate transaction price to the distinct performance obligations in proportion to their observable stand-alone selling prices and cash equivalents held in Trust Accountrecognizes revenue as those performance obligations are satisfied.
At March 31, 2019,In the assets heldmajority of cases of product sales, revenue is recognized at a point in time when customer obtains control of the Trust Account were invested in money market funds meeting certain conditions under Rule 2a-7 underrespective goods that is, when the Investment Company Act which invest only in direct U.S. government treasury obligations. The Company considers all short-term investments with an original maturity of three months or less when purchasedproducts are shipped from our facilities as control passes to be cash equivalents. The Company had cash equivalents totaling $222,320,436 and $221,060,045 held in Trust Account as of March 31, 2019 and December 31, 2018, respectively.
Common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemptionthe customer in accordance with agreed contracts and the guidancestated shipping terms. In cases where the contract includes customization services, which one performance obligation is identified, revenue is recognized over time as our performance does not create an asset with alternative use and we have an enforceable right to payment for performance completed to date. We use the input method (i.e. cost-to cost method) to measure progress towards complete satisfaction of the performance obligation.
Income from grants and related deferred income
Grants include cash subsidies received from various institutions and organizations. Grants are recognized as other income. Such amounts are recognized in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilitiesthe consolidated statements of operations when all conditions attached to the grants are fulfilled.
Condition to the grants would not be fulfilled unless related costs have been characterized as eligible by the grantors, are actually incurred and there is certainty that costs are allowable. These grants are recognized as deferred income when received and recorded in income when the eligible and allowable related costs and expenses are incurred. Under all grant programs, a coordinator is specified. The coordinator, among other, receives the funding from Equity." Common stock subjectthe grantor and proceeds to mandatory redemption is classifiedits distribution to the parties agreed in the process specified in the program. We assessed whether it acts as a liability instrumentprincipal or agent in its role as a coordinator for specific grants and is measured at fair value. Conditionally redeemable common stock (including common stockhas concluded that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classifiedin all related transactions it acts as temporary equity. At all other times, common stock is classified as stockholders' equity. The Company's common stock features certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' equity section of the Company's balance sheets.
Net loss per common share
Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. An aggregate of 20,864,892 shares of common stock subject to possible redemption at March 31, 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 27,962,493 shares of common stock, since the exercise of the warrants are contingent upon the occurrence of future events. As a result, diluted loss per common share is the same as basic loss per common share for the periods presented.an agent.
AMCI ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019
(Unaudited)
Reconciliation of net loss per common shareGoodwill
The Company's net incomeCompany allocates the fair value of purchase consideration transferred in a business acquisition to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration transferred over the fair values of these identifiable assets and liabilities is adjusted forrecorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired licenses, trade names, in process research and development ("R&D"), useful lives and discount rates, patents, customer clientele, customer contracts and know-how. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the portionmeasurement period, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of income that is attributable to common stock subject to possible redemption, as these shares only participatethe measurement period, any subsequent adjustments are recorded in the incomeconsolidated statement of operations.
For significant acquisitions, the Company obtains independent appraisals and valuations of the Trust Accountintangible (and certain tangible) assets acquired and notcertain assumed obligations as well as equity. The Company analyzes each acquisition individually and all acquisitions within each reporting period in aggregate to determine if those are material acquisitions in the income or lossescontext of ASC 805-10-50.
The estimated fair values and useful lives of identified intangible assets are based on many factors, including estimates and assumptions of future operating performance and cash flows of the Company. Accordingly, basicacquired business, estimates of cost avoidance, the nature of the business acquired, the specific characteristics of the identified intangible assets and diluted loss per common share is calculated as follows:our historical experience and that of the acquired business. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including product demand, market conditions, regulations affecting the business model of our operations, technological developments, economic conditions and competition.
| | For the Three Months Ended March 31, 2019 | |
Net income | | | 790,254 | |
Less: Income attributable to common stock subject to possible redemption | | | (874,163 | ) |
Adjusted net loss | | $ | (83,909 | ) |
Weighted average shares outstanding, basic and diluted | | | 6,695,829 | |
Basic and diluted net loss per common share | | $ | (0.01 | ) |
We conduct a goodwill impairment analysis annually in the fourth fiscal quarter, as of October 1, and as necessary if changes in facts and circumstances indicate that the fair value of our reporting units may be less than their carrying amounts. When indicators of impairment do not exist and certain accounting criteria are met, we are able to evaluate goodwill impairment using a qualitative approach. When necessary, our quantitative goodwill impairment test consists of two steps. The first step requires that we compare the estimated fair value of our reporting units to the carrying value of the reporting unit’s net assets, including goodwill. If the fair value of the reporting unit is greater than the carrying value of its net assets, goodwill is not considered to be impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value of its net assets, we would be required to complete the second step of the test by analyzing the fair value of its goodwill. If the carrying value of the goodwill exceeds its fair value, an impairment charge is recorded. Currently, we identify one reporting unit.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, "IncomeIncome Taxes." Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2019. The Company isWe are currently not aware of any issues under review that could result in significant payments, accruals or material deviation from itsour position. The Company isWe are subject to income tax examinations by major taxing authorities since inception.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At March 31, 2019 and December 31, 2018, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities, which qualify as financial instruments under ASC 820, "Fair Value Measurements and Disclosures," approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's financial statements.authorities.
AMCI ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019
(Unaudited)
The Company may be subject to potential examination by U.S. federal, state and city, and the Subsidiary may be subject to potential examination by the Greek taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with the U.S. federal, state and city and Greek tax laws. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into legislation. As part of the legislation, the U.S. corporate income tax rate was reduced from 35% to 21%, among other changes, for which our management does not believe that have a material effect on our consolidated financial statements.
Note 3 - Initial Public OfferingWarrant Liability
Pursuant toThe Company accounts for the 26,392,355 warrants (comprising of 22,052,077 Public Warrants and 3,940,278 Private Placement Warrants) issued in connection with its Initial Public Offering and the Company sold 22,052,077 units400,000 Working Capital Warrants issued at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one redeemable warrant ("Public Warrant"). Each Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
Note 4 - Private Placement Warrants
Simultaneously with the closingconsummation of the Initial Public Offering,Business Combination in accordance with ASC 815-40-15-7D. If the Sponsor purchased an aggregate of 5,500,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrantwarrants do not meet the criteria for an aggregate purchase price of $5,500,000. Simultaneously with the exercise of the over-allotment, the Sponsor purchased an aggregate of 410,416 Private Placement Warrants at a price of $1.00 per Private Placement Warrant for an aggregate purchase price of $410,416. Each Private Placement Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share. The proceeds fromequity treatment, they must be recorded as liabilities. We have determined that only the Private Placement Warrants were addedand Working Capital Warrants must be recorded as liabilities and accordingly, the Company classifies these warrant instruments as liabilities at their fair value and adjusts the instruments to the proceeds from the Initial Public Offering heldfair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Trust Account. If the Company does not complete a Business Combination within the Combination Period,Company's statement of operations. The fair value of the Private Placement Warrants will expire worthless.and the Working Capital Warrants has been determined using either the quoted price, if available, or was based on a modified Black-Scholes-Merton model. The fair value of the Private Placement Warrants will be non-redeemable and exercisablethe Working Capital Warrants has been determined based on a cashless basis so long as theymodified Black-Scholes-Merton model for the quarter ended March 31, 2021.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are heldissued by the SponsorFASB or its permitted transferees. The warrants will expire five years after the completionother standard setting bodies that are adopted by Advent as of the Company's Business Combinationspecified effective date. Unless otherwise discussed, Advent believes that the impact of recently issued standards that are not yet effective will not have a material impact on Advent’s financial position or earlier upon liquidation.results of operations under adoption.
The Sponsor, andSee Note 2 in the Company's officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell anyunaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their Private Placement Warrants until 30 days afteradoption and Advent’s assessment, to the completionextent Advent has made one, of the initial Business Combination.their potential impact on Advent’s financial condition and results of operations.
Note 5 - Related Party TransactionsQuantitative and Qualitative Disclosures About Market Risk
Founder SharesAdvent is exposed to a variety of market and other risks, including the effects of changes in interest rates and inflation, as well as risks to the availability of funding sources, hazard events and specific asset risks.
On June 25, 2018, the Sponsor purchased 5,750,000 shares (the "Founder Shares") of the Company's Class B common stock for an aggregate price of $25,000. The Founder Shares will automatically convert into Class A common stock upon the consummation of a Business Combination on a one-for-one basis, subject to adjustments as described in Note 7. In October 2018, the Sponsor transferred 35,000 founder shares to each of Messrs. Uren, Clark and Grant, the Company's independent director nominees, and 100,000 each to Messrs. Hunter, Beem and Patel, the Company's officers.Interest Rate Risk
Advent holds cash and cash equivalents for working capital, investment and general corporate purposes. As of March 31, 2021, Advent had a resultcash balance of approximately $125 million, consisting of operating and savings accounts which are not affected by changes in the partial exercisegeneral level of the over-allotment option by the Underwriters and the expiration of the remaining portion of the over-allotment option, our Sponsor forfeited 236,981 Founder Shares.U.S. interest rates. Advent is not expected to be materially exposed to interest rate risk in future as it intends to take on limited debt finance.
Inflation Risk
The SponsorAdvent does not believe that inflation currently has agreed, subject to certain limited exceptions, not to transfer, assign or sell any ofa material effect on its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company's stockholders having the right to exchange their shares of common stock for cash, securities or other property.business.
AMCI ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019
(Unaudited)
Foreign Exchange Risk
Administrative Services AgreementAdvent has costs predominantly denominated in euros and revenues denominated in both euros and dollars, and therefore is exposed to fluctuations in the euro/dollar exchange rate. To date, Advent has not entered into any hedging transactions to mitigate the effect of foreign exchange due to the relatively low sums involved. As we increase in scale, we expect to continue to incur a substantial proportion of our costs in euros, and therefore expect to put in place appropriate foreign exchange risk mitigation features in due course.
Supplemental Non-GAAP Measures and Reconciliations
In addition to providing measures prepared in accordance with GAAP, we present certain supplemental non-GAAP measures. These measures are EBITDA, Adjusted EBITDA and Adjusted Net Income / (Loss) , which we use to evaluate our operating performance, for business planning purposes and to measure our performance relative to that of our peers. These non-GAAP measures do not have any standardized meaning prescribed by GAAP and therefore may differ from to similar measures presented by other companies and may not be comparable to other similarly titled measures. We believe these measures are useful in evaluating the operating performance of the Company’s ongoing business. These measures should be considered in addition to, and not as a substitute for net income, operating expense and income, cash flows and other measures of financial performance and liquidity reported in accordance with GAAP. The calculation of these non-GAAP measures has been made on a consistent basis for all periods presented.
EBITDA and Adjusted EBITDA
These supplemental non-GAAP measures are provided to assist readers in determining our operating performance. We believe this measure is useful in assessing performance and highlighting trends on an overall basis. We also believe EBITDA and Adjusted EBITDA are frequently used by securities analysts and investors when comparing our results with those of other companies. EBITDA differs from the most comparable GAAP measure, net income / (loss), primarily because it does not include income taxes, depreciation of property, plant and equipment, and amortization of intangible assets. Adjusted EBITDA adjusts EBITDA for transactional gains and losses, asset impairment charges, finance and other income and acquisition costs.
The Company entered into an agreement with an affiliatefollowing tables show a reconciliation of the Sponsor whereby, commencing on November 16, 2018 through the earlier of the Company's consummation of a Business Combinationnet income / (loss) to EBITDA and its liquidation, the Company agreed to pay the affiliate $10,000 per monthAdjusted EBITDA for office space, utilities and secretarial and administrative support. For the three months ended March 31, 2019, the Company recorded $30,000 in fees in connection with such services in general2021 and administrative expenses in the accompanying statement of operations.2020.
EBITDA and Adjusted EBITDA | | Three Months Ended March 31, | |
(in Millions of US dollars) | | | | | | | | | |
| | 2021 | | | 2020 | | | $ Change | |
Net Income / (loss)
| | $ | 2.91 | | | $ | (0.22 | ) | | $ | 3.13 | |
Amortization of intangibles
| | $ | 0.19 | | | $ | - | | | $ | 0.19 | |
Finance Costs | | $ | 0.01 | | | $ | - | | | $ | 0.01 | |
Other Income / (expense) | | $ | (0.08 | ) | | $ | 0.10 | | | $ | (0.18 | ) |
Foreign exchange differences, net | | | (0.02 | ) | | | 0.02 | | | $ | (0.04 | ) |
EBITDA | | $ | 3.00 |
| | $ | (0.10 | ) | | $ | 3.10 |
|
Net Change in Warrant Liability | | $ | (9.77 | ) | | $ | - | | | $ | (9.77 | ) |
One-Time Transaction Related Expenses(1) | | $
| 5.87 |
| | $
| -
|
| | $
| 5.87
|
|
Adjusted EBITDA | | $ | (0.90 | )
| | $ | (0.10 | )
| | $ | (0.80 | )
|
Related Party Loans
On June 25, 2018, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the "Promissory Note"). The Promissory Note was non-interest bearing and payable on the earlier of December 31, 2018 or the completion of the Initial Public Offering. $218,610 was outstanding under the Promissory Note as of November 20, 2018. The Company repaid the outstanding balance of the Promissory Note in the amount of $218,610 to the Sponsor on November 23, 2018.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company's officers and directors may, but are not obligated to, loan the Company funds as may be required ("Working Capital Loans"). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender's discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
Note 6 - Commitments
Registration Rights
Pursuant to a registration rights agreement entered into on November 15, 2018, the holders of the Founder Shares (and any shares of Class A common stock issuable upon conversion of the Founder Shares), Private Placement Warrants (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants), Forward Purchase Units (and any shares of Class A Common Stock issuable upon the exercise of the Forward Purchase Units and the Shares of Class A Common Stock underlying the warrants underlying the Forward Purchase Units) and securities that may be issued upon conversion of Working Capital Loans are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain "piggy-back" registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Other Agreements
In May 2018, the Company entered into an agreement with a legal firm to assist the Company with a potential business combination and related securities and corporate work. The Company has agreed to pay a portion of the invoices and the payment of the remaining amount will be deferred until the consummation of the Business Combination.(1) | Bonus awarded after consummation of the Business Combination effective February 4, 2021 |
AMCI ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019
(Unaudited)
In November 2018, the Company entered into an agreement with a transfer agent and trust company. The Company has paid a portion of the initial fees and the payment of the remaining amount will be deferred until the consummation of the Business Combination.
As of March 31, 2019, the aggregate amount deferred for such legal firm and transfer agent and trust company was $24,784. The deferred amount is an unrecognized contingent liability, as closing of a potential business combination was not considered probable as of March 31, 2019.
Note 7 - Stockholder's Equity
Preferred Stock - The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company's board of directors. At March 31, 2019 and December 31, 2018, there were no shares of preferred stock issued or outstanding.
Common Stock
Class A Common Stock - The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At March 31, 2019 and December 31, 2018, there were 1,187,185 and 1,182,761 shares of Class A common stock issued and outstanding, excluding 20,864,892 and 20,869,316 shares of common stock subject to possible redemption, respectively.
Class B Common Stock - The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At March 31, 2019 and December 31, 2018, there were 5,513,019 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, any private placement-equivalent securities issued, or to be issued, to any seller in a Business Combination, any private placement equivalent securities issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
Warrants - Each warrant is exercisable to purchase one share of our Class A common stock at an exercise price of $11.50 per share.
AMCI ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019
(Unaudited)
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrantholders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a "covered security" under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
– | in whole and not in part; |
– | at a price of $0.01 per warrant; |
– | upon not less than 30 days' prior written notice of redemption; and |
– | if, and only if, the reported last sale price of the Company's Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrantholders. |
– | if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants. |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a "cashless basis," as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company's assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
AMCI ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019
(Unaudited)
Note 8 - Fair Value Measurements
The Company follows the guidance of ASC 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
● | Level 1 : Observable inputs such as quoted prices in active markets;
|
● | Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
● | Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions
|
The following table presents information about the Company’s assets that are measured on a recurring basis at March 31, 2019 and December 31, 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
March 31, 2019
Description | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Other Unobservable Inputs (Level 3) |
Cash and cash equivalents held in Trust Account | | $ | 222,320,436 | | | | |
December 31, 2018
Description | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Other Unobservable Inputs (Level 3) |
Cash and cash equivalents held in Trust Account | | $ | 221,060,045 | | | | |
Note 9 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to AMCI Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “sponsor” refer to AMCI Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking StatementsAdjusted Net Income/(Loss)
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933supplemental non-GAAP measure is provided to assist readers in determining our financial performance. We believe this measure is useful in assessing our actual performance by adjusting our results from continuing operations for changes in warrant liability and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materiallyone-time transaction costs. Adjusted Net Loss differs from the events, performancemost comparable GAAP measure, net income / (loss), primarily because it does not include one-time transaction costs and results discussed inwarrant liability changes. The following table shows a reconciliation of net income/(loss) for the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s annual report on Form 10-K filed with the U.S. Securitiesthree months ended March 31, 2021 and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.2020.
Overview
We are a blank check company incorporated on June 18, 2018 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the sale of the private placement warrants that occurred simultaneously with the completion of our initial public offering, our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in a business combination:
| ● | may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and |
| ��� | may adversely affect prevailing market prices for our Class A common stock and/or warrants. |
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
Adjusted Net Income / (Loss) | Three Months Ended March 31, | |
(in Millions of US dollars) | | | | | | |
| 2021 | | 2020 | | $ Change | |
Net Income / (Loss) | | $ | 2.91 | | | $ | (0.22 | ) | | $ | 3.13 | |
One-Time Transaction Related Expenses (1) | | $ | 5.87 | | | $ | - | | | $ | 5.87 | |
Net Change in Warrant Liability | | $ | (9.77 | ) | | $ | - | | | $ | (9.77 | ) |
Adjusted Net Income / (Loss) | | $ | (0.99 | ) | | $ | (0.22 | ) | | $ | (0.77 | ) |
| ● | default and foreclosure on our assets if our operating revenues after our initial business combination are insufficient to repay our debt obligations; |
(1)
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our common stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from June 18, 2018 (inception) to March 31, 2019 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our business combination We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing a Business Combination.
For the three months ended March 31, 2019, we had net income of $790,254, which consists of dividend and interest income earned in the trust account of $1,260,391, offset by operating costs of $241,137 and a provision for income taxes of $229,000.
Liquidity and Capital Resources
On November 20, 2018, the Company consummated its initial public offering (“IPO”) of 20,000,000 units (the “Units”). Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (the “Class A Common Stock”), and one warrant of the Company (“Warrant”), with each Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $200,000,000. The Company had granted the underwriters for the IPO (the “Underwriters”) a 45-day option to purchase up to 3,000,000 additional Units to cover over-allotments, if any (“Over-Allotment Units”). On November 27, 2018, the Underwriters exercised the option in part and purchased an aggregate of 2,052,077 Over-Allotment Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $20,520,770.
On November 20, 2018, simultaneously with the consummation of the IPO, the Company completed the private sale (the “Private Placement”) of an aggregate of 5,500,000 warrants (the “Private Placement Warrants”) to AMCI Sponsor LLC (the “Sponsor”) at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $5,500,000. On November 27, 2018, in connection with the sale of Over-Allotment Units, the Company consummated a private sale of an additional 410,416 Private Placement Warrants to the Sponsor, generating gross proceeds of $410,416.
A total of $220,520,770, (or $10.00 per Unit) comprised of $216,110,354 of the proceeds from the IPO (including the Over-Allotment Units) and $4,410,416 of the proceeds of the sale of the Private Placement Warrants, was placed in a U.S.-based trust account at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust Company, acting as trustee.
For the three months ended March 31, 2019, cash used in operating activities was $150,701, consisting primarily of net income of $790,254, offset by dividend and interest income earned in trust account $1,260,391. Changes in operating assets and liabilities provided $319,436 of cash from operating activities.
We intend to use substantially all of the funds held in the trust account (excluding deferred underwriting fees) to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2019, we had cash of $735,578 held outside the trust account, working capital of $802,092, and $1,799,666 of interest available to pay for our tax obligations. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we would repay such loaned amounts. In the event that a business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such working capital loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreement exist with respect to such loans. We do not seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business a year from the date that the financial statements are issued. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of Public Shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of our initial public offering and the sale of the private placement units, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Based on the foregoing, management believes that the Company has sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of the financial statements.
Off-balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2019. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay an affiliate of our sponsor a monthly fee of $10,000 for office space, utilities and administrative support to us. We began incurring these fees on November 16, 2018 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has identified the following critical accounting policy:
Common stock subject to possible redemption
We account for common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Net loss per common share
Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. An aggregate of 20,864,892 shares of common stock subject to possible redemption at March 31, 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings.
Recent accounting pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKBonus awarded after the consummation of the Business Combination effective February 4, 2021. |
As of March 31, 2019, we were not subject to any market or interest rate risk. The net proceeds of our initial public offering and the sale of the private warrants held in the trust account are invested in certain money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invested only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there is no associated material exposure to interest rate risk. We have not engaged in any hedging activities since our inception. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
ITEM 4.Item 3. | CONTROLS AND PROCEDURESQuantitative and Qualitative Disclosures about Market Risk. |
Disclosure controls and procedures are controlsAdvent is exposed to a variety of market and other procedures that are designedrisks, including the effects of changes in interest rates and inflation, as well as risks to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarizedavailability of funding sources, hazard events 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 our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.specific asset risks.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 underOur management, with the Exchange Act,participation of our President and Chief Executive Officer and our Chief Financial Officer carried out an evaluation of(our principal executive officer and principal financial and accounting officer, respectively), evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2019. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure2021. The term “disclosure controls and procedures, (as” as defined in Rules 13a-15 (e)13a-15(e) and 15d-15 (e)15d-15(e) under the Exchange Act) were effective.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2019, there has been no change in our internal control over financial reportingAct, means controls and other procedures of a company that has materially affected, or is reasonably likelyare designed to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
None.
Factorsensure that could cause our actual resultsinformation required to differ materially from those in this Quarterly Report are any of the risks described in our annual report on Form 10-K filed with the SEC on April 1, 2019. Any of these factors could result inbe disclosed by a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on April 1, 2019, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
On November 20, 2018, we consummated our Initial Public Offering of 20,000,000 units. The units were sold at an offering price of $10.00 per unit generating total gross proceeds of $200,000,000. Jefferies LLC acted as the sole book running manager and UBS Investment Bank acted as lead manager. The Company had granted the underwriters a 45-day option to purchase up to 3,000,000 additional units to cover over-allotments, if any. On November 27, 2018, the underwriters exercised the option in part and purchased an aggregate of 2,025,077 over-allotment units, which were sold at an offering price of $10.00 per unit, generating gross proceeds of $20,520,770. The securities soldcompany in the offering were registeredreports that it files or submits under the SecuritiesExchange Act on a registration statement on Form S-1 (No. 333-227994). The SEC declaredis recorded, processed, summarized and reported within the registration statement effective on November 15, 2018.
Simultaneously with the consummation of the Initial Public Offering and the subsequent over-allotment, we consummated a private placement of 5,500,000 warrants (the “Private Placement Warrants”) to our Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $5,500,000. On November 27, 2018, in connection with the sale of over-allotment units, the Company consummated a private sale of an additional 410,416 private placement warrants to the Sponsor, generating gross proceeds of $410,416. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are the same as the warrants soldtime periods specified in the Initial Public Offering.
Of the gross proceeds received from the Initial Public OfferingSEC’s rules and private placement of Private Placement Warrants, $220,520,770 was placed in a trust account.
We paid a total of $4,410,416 in underwriting fees and $524,623 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $7,718,227 in underwriting fees.forms.
ForDisclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a descriptioncompany in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2021, and as a result of the usematerial weakness described below, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level as of the proceeds generatedend of the period covered by this Report. Notwithstanding the identified material weakness, our management has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods disclosed in accordance with U.S. GAAP.
Remediation Efforts to Address the Previously Disclosed Material Weakness
As previously disclosed in Part I, Item 9A of our 2020 Annual Report, our management, concluded that our disclosure controls and procedures and internal controls over financial reporting were not effective as of December 31, 2020 and December 31, 2019 due to a material weakness. The material weakness related to not having adequate controls over accounting for complex accounting instruments and, in particular, related to errors in the accounting for warrants issued in connection with AMCI's Initial Public Offering see Part I, Item 2and recorded in its pre-Business Combination, historical consolidated financial statements through December 31, 2020. In response to this material weakness, we have and will continue to implement a number of this Form 10-Q.actions, as described below. Our management is committed to ensuring that our internal controls over financial reporting are designed and operating effectively. As previously disclosed, our remediation plan includes, but is not limited to, that we will improve the process and controls in the determination of the appropriate accounting and classification of our financial instruments and key agreements. When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiency that have led to the material weakness we have identified and strengthen our internal controls over financial reporting. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended March 31, 2021, we completed the Business Combination and the internal controls of AMCI became our internal controls. We are engaged in the process of design and implementation of our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) in a manner commensurate with the scale of our operations subsequent to the Business Combination, including the enhancement of our internal and external technical accounting resources.
PART II—OTHER INFORMATION
ITEM 3.Item 1. | DEFAULTS UPON SENIOR SECURITIES.Legal Proceedings. |
We are from time to time subject to various claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions or relief. However, we do not consider any such claims, lawsuits or proceedings that are currently pending, individually or in the aggregate, to be material to our business or likely to result in a material adverse effect on our future operating results, financial condition or cash flows.
On December 17, 2020, a purported shareholder class action complaint was filed by Dillon Frey against the Company in the Supreme Court of the State of New York, County of New York, alleging that the proposed Business Combination with Advent is both procedurally and substantively unfair and seeking to maintain the action as a class action and enjoin the Business Combination, among other things, without stating a specific amount of damages. The complaint does not provide detail as to how the proposed Business Combination is unfair, either procedurally or substantively, and we believe it has no merit. On February 10, 2021, a notice of dismissal of the complaint was filed in the Supreme Court of the State of New York, County of New York.
In addition to the other information set forth in this Quarterly Report, for a discussion of risk factors that could significantly and negatively affect our business, financial condition, results of operations, cash flows and prospects, see the disclosure under the heading “Risk Factors” in our 2020 Annual Report. Such risks described are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that our management currently deems to be immaterial, also may adversely affect our business, financial condition, results of operations, cash flows or prospects. There are no material changes to the risk factors described in the 2020 Annual Report.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
None.
Not applicable.
None.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No.Exhibit Number | | Description of Exhibit |
31.1* | | |
| | Second Amended and Restated Certificate of Incorporation of Advent Technologies Holdings, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 9, 2021) |
| | |
| | Amended and Restated Bylaws of Advent Technologies Holdings, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 9, 2021) |
| | |
| | Employment Agreement, dated as of January 12, 2021, by and between Advent Technologies, Inc. and William Hunter (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 9, 2021). |
| | |
| | 2021 Equity Incentive Plan (incorporated by reference to 10.9 of AMCI Acquisition Corp.’s Registration Statement on Form S-4 (Reg. No. 333-250946), filed with the SEC on January 14, 2021). |
| | |
| | Form of Indemnification Agreement (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 9, 2021). |
| | |
| | Lease Agreement, dated as of February 5, 2021 by and between Advent Technologies, Inc. and BP Hancock LLC. (incorporated by reference to the Company’s Current Report on Form 8-K/A, filed with the SEC on February 9, 2021). |
| | |
| | Lease Agreement, entered into as of March 8, 2021, effective as of March 5, 2021, by and between Advent Technologies, Inc. and Hood Park LLC. |
| | |
| | Certification of Principal Executive Officer and Principal Financial Officer Pursuantpursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a),of 1934, as adopted Pursuantpursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1** | | |
| | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
| | Certification of Principal Executive Officer and Principal Financial Officer Pursuantpursuant to 18 U.S.C. Section 1350, as adopted Pursuantpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| | |
| | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| | |
101.INS | | XBRL Instance DocumentDocument. |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.SCH | | XBRL Taxonomy Extension Schema DocumentDocument. |
| | |
101.CAL | | XBRL Taxonomy Calculation Linkbase Document. |
| | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase DocumentDocument. |
| | |
101.LAB | | XBRL Taxonomy Extension LabelsLabel Linkbase DocumentDocument. |
| | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase DocumentDocument. |
† | This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing. |
*Filed herewith
**Furnished herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 20, 2021 | AMCI ACQUISITION CORP.ADVENT TECHNOLOGIES HOLDINGS, INC. |
| |
|
Date: May 15, 2019 | By: | /s/ William Hunter |
| Name: | William Hunter |
| Title: | Chief Executive Officer,President and Chief Financial Officer President and Director |
| | (Principal Executive Officer andAuthorized Officer; Principal Financial and Accounting Officer) |
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