| | | | Page |
| PART I | | |
| | Item 1. | | 6 |
| | Item 1A. | | 15 |
| | Item 1B. | | 30 |
| | Item 2. | | 30 |
| | Item 3. | | 31 |
| | Item 4. | | 31 |
| | | | |
| PART II | | |
| | Item 5. | | 32 |
| | Item 6. | | 32 |
| | Item 7. | | 32 |
| | Item 7A. | | 48 |
| | Item 8. | | 48 |
| | Item 9. | | 48 |
| | Item 9A. | | 48 |
| | Item 9B. | | 49 |
| | |
| |
| PART III | | |
| | Item 10. | | 50 |
| | Item 11. | | 55 |
| | Item 12. | | 62 |
| | Item 13. | | 63 |
| | Item 14. | | 66 |
| | | | |
| PART IV | | |
| | Item 15. | | 67 |
| | Item 16 | | 69 |
| | | 70 |
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K and the information incorporated herein by reference may constitute “forward-looking statements”, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1.A Risk Factors” in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Some of the key factors that could cause actual results to differ from our expectations include:
| • | our ability to maintain the listing of our shares of common stock and warrants on Nasdaq; |
| • | our ability to raise financing in the future; |
| • | our success in retaining or recruiting officers, key employees or directors; |
| • | factors relating to our business, operations and financial performance, including: |
| o | our ability to control the costs associated with our operations; |
| o | our ability to grow and manage growth profitably; |
| o | our reliance on complex machinery for our operations and production; |
| o | the market’s willingness to adopt our technology; |
| o | our ability to maintain relationships with customers; |
| o | the potential impact of product recalls; |
| o | our ability to compete within our industry; |
| o | increases in costs, disruption of supply or shortage of raw materials; |
| o | risks associated with strategic alliances or acquisitions, including the acquisition of SerEnergy A/S, a Danish stock corporation (“SerEnergy”) and fischer eco solutions GmbH, a German limited liability company (“FES”), former wholly-owned subsidiaries of F.E.R. fischer Edelstahlrohre GmbH, completed on August 31, 2021; |
| o | the impact of unfavorable changes in U.S. and international regulations; |
| o | the availability of and our ability to meet the terms and conditions for government grants and economic incentives; and |
| o | our ability to protect our intellectual property rights; |
| • | market conditions and global and economic factors beyond our control, including the potential adverse effects of the ongoing global coronavirus (COVID-19) pandemic on capital markets, general economic conditions, unemployment and our liquidity, operations and personnel; |
| • | volatility of our stock price and potential share dilution; |
| • | future exchange and interest rates; and |
| • | other factors detailed herein under the section entitled “Risk Factors.” |
The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this Annual Report. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report on Form 10-K to conform these statements to actual results or to changes in our expectations.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. For a discussion of the risks involved in our business and investing in our common stock, see the section entitled “Risk Factors.”
Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.
PART I
References in this annual report to “we,” “us,” “Advent,” “company,” or “our company” are to Advent Technologies Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries. References to “management” or our “management team” are to our officers and directors.
Overview
We are an advanced materials and technology development company operating in the fuel cell and hydrogen technology space. We develop, manufacture, and assemble complete fuel cell systems and the critical components that determine the performance of hydrogen fuel cells and other energy systems.
We develop and manufacture high-temperature proton exchange membranes (“HT-PEM” or “HT-PEMs”) and fuel cell systems for the off-grid and portable power markets and plan to expand into the mobility market. Select applications are telecom towers (5G and older), energy infrastructure (methane emissions mitigation for the oil and gas industry), and portable power for defense or emergency response units. Our mission is to become a leading provider of fuel cell systems, HT-PEMs, fuel cells, and HT-PEM based membrane electrode assemblies (“MEA” or “MEAs”), which are critical components used in fuel cells, and other electrochemical applications such as electrolyzers and flow batteries. We develop the core chemistry components, the MEAs, that enable fuel cells to operate at high temperatures and also provide these MEAs to third-party fuel cell manufacturers. HT-PEM fuel cells have the advantage of operating with multiple low-carbon fuels (in addition to hydrogen) and under extreme conditions.
Our current revenue is derived from the sale of fuel cell systems and from the sale of MEAs, membranes, and electrodes for specific applications in the fuel cell and energy storage (flow battery) markets. While fuel cell systems sales and associated revenue is expected to provide the majority of our income in the near future, the MEA innovation is expected to facilitate strategic partnerships between us and Tier 1 suppliers and original equipment manufacturers (“OEMs”) as these downstream manufacturers develop their own white-labelled HT-PEM products.
We have our headquarters in Boston, Massachusetts, and are building out a product development and research and development facility in Charlestown, Massachusetts expected to open in 2022, and have MEA fabrication and system production facilities in Livermore, California; Achern, Germany; Aalborg, Denmark; and Patras, Greece. We plan to scale-up U.S. and European production and its global sales operations to handle future demand. Our investment priorities are increasing MEA production volumes, executing on new product development initiatives (next-generation fuel cell systems and MEAs), and optimizing production operations to improve unit costs.
Our principal focus is on the total fuel cell market, from components to complete systems, and we plan to use our products and technology to address pressing global climate needs. Fuel cell and hydrogen technology is expected to play a critical role in global decarbonization. In order to meet the targets established in the Paris Climate Accords, which seek to mitigate climate change and maintain global temperature less than 1.5°C-2.0°C above pre-industrial levels, the global community will need to accelerate the adoption of technologies like our fuel cells, that reduce or eliminate emissions of carbon dioxide and other greenhouse gases. We believe that fuel cells will be a key component of the future energy generation platform given that:
| • | Fuel cells generate electricity and heat from hydrogen-based fuels, thereby substantially reducing emissions of carbon dioxide and other pollutants generated by the combustion process in internal combustion engines (“ICE” or “ICEs”) and diesel generators. Fuel cells can be powered autonomously for hours or days where the fuel comes from a discrete source, or for longer where there is a pipeline or other large available source of fuel such as a tank. |
| • | Fuel cells utilize fuels with a high energy density relative to lithium-ion batteries and other battery technology (according to ARPA-E power densities, hydrogen contains 40,000 Wh/kg while lithium-ion batteries carry only about 260Wh/kg). This makes fuel cell technology well-suited for use in mobility and off-grid energy generation applications where battery technology faces limitations such as lifespan, self-discharge, weight (fuel cells are between 3 to 25 times lighter than batteries providing equivalent power), operation under almost any weather conditions, and recharge times. |
| • | We expect that hydrogen will also be used to create liquid, synthetic fuels (eFuels like eMethanol, made by combining hydrogen with carbon dioxide for a net-zero liquid fuel) that have the advantage of lower transportation costs and network infrastructure investment relative to hydrogen gas. Fuels like methanol have become subject to an increasing interest in Asia because they are currently available. We believe methanol has the potential to become a leading zero-emissions liquid fuel that can leverage the current global infrastructure from gas stations to fuel tankers and trucks. Given the urgency to decarbonize power generation, and the challenges the investment requirement poses for developing countries, we expect methanol to have an increasingly significant role as a liquid hydrogen carrier and a low/no carbon dioxide emission alternative to oil. |
Fuel cell and hydrogen technology is expected to play a critical role in global decarbonization given the clean nature of emissions from hydrogen and hydrogen-carrier fuels relative to fossil fuels. In addition, the challenges associated with existing battery technology limit it from mass adoption across industries. Globally, an average of $38 billion per annum is expected to be invested in the hydrogen and fuel cell sector between 2020 and 2040 with the goal of significantly increasing production capacity while lowering the cost of production. While the availability of hydrogen limited the fuel cell industry in the past, it is now expected to become an opportunity for growth, particularly in sectors such as industrials, power generation and automotive.
Within the fuel cell market, our products have significant advantages relative to its competitors that are focused on low-temperature proton exchange membrane technology (“LT-PEM” or “LT-PEMs”). We believe these advantages will help us secure commercial opportunities in the fuel cell market and help drive wide-spread adoption of fuel cell technology. The benefits of our HT-PEMs relative to LT-PEMs include:
| • | We have developed our products under the principle of “Any Fuel. Anywhere.” which can be distilled into the two components: |
| o | Any Fuel: While LT-PEMs require high-purity hydrogen to operate, our HT-PEMs can utilize low cost and abundant hydrogen-carrier fuels, including methanol, natural gas, e-fuels, liquid organic hydrogen carriers, dimethyl ether, and renewable biofuels. The infrastructure required for clean energy powered solely by high-purity hydrogen would cost trillions of dollars. In contrast, many of the hydrogen-carrier fuels can use existing or in-development infrastructure and have a much lower transport cost than hydrogen. This key technology differentiator bypasses the need to commit to a specific energy distribution network and leverages existing infrastructure. Most importantly, it provides an immediately serviceable market today, while we believe many LT-PEM competitors may have to wait another decade for the availability of green, high-purity, inexpensive hydrogen, and potentially longer for the maturity of hydrogen transportation and storage networks. Given the urgency to decarbonize power generation, and the investment challenges faced by developing countries, we expect methanol to have an increasingly significant role as a liquid hydrogen carrier and a low or no carbon dioxide emission alternative to oil. |
| | o | Anywhere: Our HT-PEM fuel cells have the ability to operate in a variety of practical conditions, including a wide range of geographies, weather, ambient temperatures (as low as -20oC and up to +55oC), and in humid or polluted environments. LT-PEM fuel cells, on the other hand, tend to struggle in the heat, can be damaged by dry climates, or polluted air, and cannot handle impurities of the hydrogen supply. LT-PEM technology is intolerant to CO damage (with performance degradation at levels as low as 10 ppm), while HT-PEM can withstand 1-4% CO concentrations, depending on temperature and operation. For example, readily available low-cost hydrogen can be made with 1-2% carbon monoxide (20,000ppm), which works well with HT- PEMs. LT-PEM loses performance with only 10ppm of carbon monoxide. The relative durability of our products in a range of environments also provides a longer life of operation relative to LT-PEM fuel cells. |
| • | Our HT-PEM technology significantly reduces the balance of plant requirements of a fuel cell system relative to LT-PEM fuel cells. This means that fuel cells using our HT-PEMs have simplified requirements for supporting components and auxiliary systems, which enables reduced cost and increases application range for the end-user. It does this through two methods: |
| o | Superior Heat Management: HT-PEM fuel cells operate at high temperatures (between 160°C and 220°C, with next-generation MEA-based fuel cells operating between 80°C and 240°C). Therefore, the temperature differential between a HT-PEM fuel cell and the outside environment is large. As a result, only a small radiator, similar or smaller than the radiator in an ICE vehicle, is needed to transfer heat away from the fuel cell stack. Conversely, because LT-PEM fuel cells run relatively cooler (under 85°C), a significantly larger radiator is required to effectively maintain suitable operating temperatures and conditions for an LT-PEM fuel cell. |
| o | Water Management Issues: HT-PEM fuel cells use phosphoric acid as an electrolyte rather than water-assisted membranes. Therefore, they reduce the need for water balance and other compensating engineering systems. |
Our Solution
Our core product offering include:
| 1. | Systems: Fuel cells for portable and stationary applications of power generation, in the range of 20W to 20kW. These fuel cells have applications in the telecom tower (e.g. 5G, 4G) power, surveillance, defense (and other portable power applications), energy (and other critical) infrastructure, and auxiliary power (marine, leisure) markets. Our fuel cells are manufactured in the U.S., Denmark, and Germany. Fuel cell systems provide the majority of our current revenue. |
| 2. | The next generation of our fuel cells, in the 15kW to 1MW range, is expected to target the mobility sector (e.g., heavy-duty automotive, mining equipment, marine, aerospace, and unmanned aerial vehicles (“UAV”)). We are planning to enter into joint development agreements with Tier 1 suppliers and OEMs to bring HT-PEM fuel cells to the mobility market. We intend to be a provider of MEAs and core technology via licensing, rather than producing end-products for the mobility industry. Revenue from joint development agreements may include engineering fees during the 1-3 year initial development cycle, MEA sales, and on-going licensing fees. |
| 3. | We are a developer of the key component of the fuel cell, the MEA. The operation of the MEA is key to the functionality and characteristics of a fuel cell system. Our MEA enables a robust, long-lasting, and ultimately low-cost fuel cell product, relative to LT-PEM technologies. In addition to our fuel cell system offerings, our MEA is also a discrete product offering to third-party fuel cell manufacturers. MEA sales are expected to be a rapidly growing market in the future as more and more fuel cells are deployed globally by third parties, especially in the mobility space. |
Our Business Outlook
In 2021, we became publicly listed on NASDAQ. We acquired UltraCell LLC (“UltraCell”), which spearheaded our product offering in the portable and defense markets. In the defense sector, we deliver human portable systems. In addition, the UltraCell portable system is being repurposed to provide remote power to oil and gas wellheads (Advent M-ZERØ family of products) and to address the critical problem of methane emissions in Canada and the U.S. Furthermore, the Company has continued with delivery of MEAs to fuel cell manufacturers in Asia and with delivery of electrodes to the high-growth redox flow-battery market. We are also part of a consortium that has applied to develop “White Dragon,” the seminal large-scale decarbonization project in Southern Europe. We were selected by the Greek Ministry of Development and Investment to be part of the first wave of Important Projects of Common European Interest (“IPCEI”) on Hydrogen, which is currently pending European Union approval.
In September 2021, we completed the acquisition of SerEnergy A/S (“SerEnergy”) and fischer eco solutions GmbH (“FES”), a leading manufacturer of fuel cell systems, with thousands of systems shipped in recent years. SerEnergy is located in Denmark and FES is located in Germany. The acquisition effectively doubled our team to over 170 people, and we believe the acquired business will be a strong pillar of its potential growth strategy. SerEnergy and FES have significant production capabilities, are expected to benefit significantly from our next-generation MEAs and are expected to provide a very strong foothold in the off-grid market. SerEnergy systems, primarily in the 5kW range, target the telecoms industry (especially the growing 5G tower demand) and other diesel generator replacement off-grid markets.
Our growth strategy is focused on targeting the following four sectors:
| • | The stationary off-grid market, expected to be a growing market. |
| • | The human-portable defense, surveillance, energy infrastructure, and leisure market based on UltraCell’s innovative products. |
| • | The development of next-generation MEA and fuel cell solutions for the mobility market. |
| • | The large-scale fuel cell systems market (power generation and power to gas), especially following developments in the multi-billion euro “White Dragon” project (in which Advent is the fuel cell development partner), if approved by the European Union. |
Business Strengths
Simplified balance of plant technology: Our HT-PEM technology significantly reduces the balance of plant requirements of a fuel cell system relative to LT-PEM fuel cells. Fuel cells utilizing our technology have simplified requirements for supporting components and auxiliary systems because they reduce the complexity of water management systems. Our technology enables advanced, low-cost and simplified cooling technology, and increases the application range for the end-user. This is especially important for air, heavy-duty transportation, and marine applications.
Leveraging existing fuel infrastructure: Given the fuel-flexible nature of our technology, we are able to leverage the existing fuel delivery infrastructure – e.g. around 3 million miles of natural gas pipelines connecting production, storage and distribution systems in the U.S. – to deliver power to a wide range of customers and markets today. Our plug-and-play dynamic enables swift “time-to-market” capabilities. By contrast, the infrastructure investment required for a high-purity hydrogen economy is expected to be significant – approximately $15 trillion between now and 2050 globally.
Experienced management team with proven track record: The team that we have recruited to bring innovation to the fuel cell industry is highly experienced with a long pedigree in R&D and world-class manufacturing. Our team has been developing MEA components since 2006 and is led by Dr. Emory De Castro (CTO) who has significant industrial experience. In addition, we initiated in 2021 a joint development effort under the U.S. Department of Energy (“DoE”) umbrella to commercialize next-generation MEAs and ultra-low platinum catalyst solutions developed by Los Alamos, NREL Laboratories, and Brookhaven Laboratories in the U.S. We were selected as the scale-up and commercialization partner of the DoE and is working closely with the highly-skilled R&D teams of top U.S. labs.
Following the acquisitions of UltraCell, SerEnergy and FES, and its ongoing recruiting and development in the U.S. (including the new product development facility, close to Harvard and MIT, under construction in Charlestown, Massachusetts that is expected to open in 2022), we have significantly increased our product, system integration, manufacturing, and testing capabilities. UltraCell brings Silicon Valley-type innovation, while SerEnergy’s expertise and world-class reputation in the stationary fuel cell industry is well established. Our team now numbers over 200 people, many with more than a decade of hands-on expertise in the HT-PEM market. Our investment plan reflects its strategic goal to assemble significant global know-how of the HT-PEM industry. We expect that HT-PEM, with technology initially developed decades after LT-PEM, is in early stages of growth as compared to LT-PEM, a technology initially developed during the 1960s.
Technology
Our fuel cells can use “Any Fuel. Anywhere.” because of the HT-PEM technology that we have pioneered since 2006. High-temperature fuel cells currently operate at high temperatures (between 160°C and 220°C) and have the potential to operate between 80°C and 240°C, unlike typical LT-PEM fuel cells that are limited to below 100°C. This temperature advantage allows the fuel cell to work with other fuels and to have reliable operation at extreme conditions, which we believe is a significant competitive advantage for the stationary power generation market.
Enhanced market opportunity: The multi-fuel capability enables us to have a very strong position in the off-grid and portable power market in select applications like telecom towers and critical infrastructure power needs. In these applications, diesel generators are primed for replacement for environmental and cost reasons, batteries are unable to provide a long-term year-round solution, and hydrogen presents difficult logistical concerns. We believe fuels like methanol are a more compelling choice and that our HT-PEM fuel cells are highly suitable for these applications. We believe decreasing fuel cell costs, due to technology innovation and manufacturing scale-up, can provide us with an opportunity to grow in the power generation market and potentially displace diesel generators in applications with a clear total cost of ownership value proposition, in addition to the environmental mandate.
The next-generation of our fuel cells is being developed in collaboration with the U.S. DoE after we were awarded the L’Innovator commercialization program. Under this program, we are working closely with the Los Alamos National Laboratory (LANL), Brookhaven National Laboratory (BNL), and National Renewable Energy Laboratory (NREL), to commercialize the decade-long materials advancements in the field of MEA development. We expect that these next-generation MEAs (“Advanced MEA”) will bring the HT-PEM technology into the mobility area by enabling fuel cells to be lightweight with high-power density. The Advanced MEA is also anticipated to deliver as much as three times the power output of its current MEA product. While we are 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 effective performance to our customers.
Based on the several critical advantages offered by our HT-PEM technology over batteries and LT-PEM technology, we expect to be highly competitive in numerous applications. In particular, our HT-PEM fuel cells and MEAs are well-suited to off-grid power, portable power applications, combined heat and power, and mobility (e.g., heavy-duty automotive, aviation, mining equipment, marine, and UAV). Our goal is to partner with Tier 1 suppliers and OEMs in these new markets, focusing on the fuel cell technology development, licensing, and the mass production of the next-generation MEAs.
| 1. | Off-Grid Power: We have a growing presence in the off-grid power market, with its recently acquired SerEnergy subsidiary having shipped thousands of systems worldwide to telecommunications providers for back-up power systems and stationary power sectors. Methanol is easier and cheaper to deliver to remote locations compared to pure hydrogen, providing our HT-PEM technology with an advantage in the off-grid market. Off-grid fuel cell solutions can use methanol already available at some remote industrial sites, like wellheads. Additionally, methanol can be found in products already present at some remote sites, such as certain windshield washer fluids. These products could be repurposed as a fuel source for the fuel cell. Fuel cells in these applications produce significantly less of the greenhouse gases compared to ICE generators and produce power without ICEs’ attendant high levels of nitrogen oxides, sulfur oxides or particulate emissions. Off-grid power solutions have the potential to run full-time, 365 days a year, 24 hours per day. Our launch of the M-ZERØ methanol-fueled low-power system targets the power generation needs of remote oil and gas locations. The current method of powering such equipment results in significant methane emissions that are equivalent to millions of cars’ emissions per year. |
| 2. | Portable Power: Our acquisition of Silicon Valley-based UltraCell provided us with complete system technology for the portable power and defense markets. Electrification is one of the key initiatives in the defense industry as the needs for mobility and power on demand are increasing dramatically. Our fuel cells have already been deployed by the US Department of Defense (“DoD”), in the XX-55 portable power system, while the next-generation “Honey Badger” product, a wearable fuel cell designed to provide soldiers with on the go power, is currently in the DoD’s demonstration/validation program. |
The above markets define our current products, while the markets below constitute its largest opportunities for growth in the future:
| 3. | Combined Heat and Power (“CHP”): By virtue of their high temperature operation, HT-PEM fuel cells are well suited for delivering heat in addition to power to large commercial buildings and single or multi-family homes. The CHP efficiency is at the 85%-90% range, making HT-PEM fuel cells extremely efficient for such uses. HT-PEM fuel cells can be supplied by existing natural gas infrastructure and eventually by a future hydrogen-blend or pure-hydrogen pipeline network. |
| 4. | Automotive: By charging electric vehicles’ batteries on-board through the conversion of high-purity hydrogen or hydrogen-carrier fuels into electricity, our fuel cells solve the range and recharging issues that battery-only electric vehicles currently face. This issue is a particular challenge in heavy-duty and commercial vehicles. Since our fuel cells can use hydrogen-carrier fuels such as natural gas, methanol and biofuels, fuels that are of growing in importance in China, India, and Western Europe, we believe that our technology will be critical in accelerating the mass adoption of electric vehicles and the shift away from ICEs. Existing battery and LT-PEM technology are unable to meet the needs of heavy-duty transportation which require long-range, heavy payloads, fast refill times, and the ability to operate in diverse environments. For example, LT-PEM fuel cells are unable to operate in hot environments because the radiator required to cool the MEA to the appropriate temperature range would be too large and therefore impractical. The use of battery-only technology has the added disadvantage of insufficient power capacity without a substantial volume and weight of batteries, which results in a significant reduction in cargo capacity. |
| 5. | Aviation: Our fuel cells can deliver much longer range (autonomy) and better utilization (through faster time to refill and greater payload) for commercial drones, eVTOLs, and auxiliary power for traditional aircraft than battery power alone can deliver. Existing commercial drones based on battery-only technology have a limited flight time given the power limitations of the lightweight requirements of flight. Compared to battery powered flights, aircrafts powered by fuel cells using next generation HT-PEMs and ultra-lightweight non-metal plates could increase range, payload/passenger capacity, and the number of trips made on one charge or fill-up. HT-PEM aircraft have the potential to refuel significantly faster than an equivalent battery could recharge. The high-purity hydrogen currently required by LT-PEM is considered unsafe for widespread commercial use, while our HT-PEM provides sufficient range using safer liquid fuels and the Company believes it is key to efficient real-world flight usage. Hydrogen gas and dimethyl ether are suitable for use as fuel for aviation fuel cells, and both work well with HT-PEM technology. Additionally, high-temperature operation in aviation is essential, given heat exchange issues. Fuel cells have shown that drones can stay airborne for longer periods of time, which enhances their value proposition and business applications. We expect drone prototypes based on our technology to be available as soon as 2022. |
| 6. | Marine: In the marine industry, neither compressed hydrogen nor batteries are a viable option for commercial shipping. The industry is evaluating alternative fuels to replace bunker fuel, and methanol appears to be among the most likely hydrogen carriers positioned to meet the European Union’s 2050 decarbonization objectives. Our fuel cells are well-suited for methanol use, as the high-temperature operation can use low-grade hydrogen (converted from methanol via reformation) that does not work with current LT-PEM fuel cells. Applications in the marine industry are likely to develop initially in auxiliary power and smaller ships, and eventually scale to the multi-MW range main propulsion market. Our fuel cells promise fuel flexibility with hydrogen gas, liquid organic hydrogen carriers, methanol, and natural gas, and operate at high temperatures through proprietary chemistry. Marine applications could be scalable for divergent load requirements and applications such as powering the entire propulsion system or, alternatively, providing auxiliary power to a differently powered primary propulsion system. Marine fuel cell usage could offer long range and a fast refill; unlike battery power, and longer routes and larger vessels can be powered by fuel cells as compared to batteries. In addition, fuel cells can be used in a hybrid structure in conjunction with battery power. We are planning our initial focus on applications for auxiliary marine power, and then plans to focus on vessels’ main power. |
We have been issued, acquired, licensed, or applied for approximately 190 international and United States patents, with a concentration in membranes, electrodes, and MEAs, which support its product offerings. In the MEA sector, our products include two existing membrane technologies: “TPS®”, which we have exclusive rights to use and was obtained through patents filed by its founders and technical staff, and “PBI” technology, of which we are a selective licensee, and provides exclusive rights to us for commercial sale of MEAs using PBI technology. Leveraging our membrane technologies, we also have intellectual property for lightweight stacks made through advances in bipolar plate materials, which supports water-cooled systems. This results in a simpler and more compact balance-of-plant design. Our own investments in developing leading next-generation fuel cell technology are supported by being able to leverage the research and development efforts of its strategic partners. We are planning next generation prototypes for fuel stacks as soon as 2022, with pilot production as soon as 2023 and mass production as soon as 2024.
Our rights to commercialize the next-generation HT-PEM materials technology from the DoE L’Innovator Program also includes rights to a portfolio of patents supporting this advanced technology. We were selected through a highly competitive bidding process by virtue of our management team’s track record in taking laboratory inventions and processes through to a fully-scaled and manufactured product. We expect that this technology will reduce production costs of its MEAs significantly through a 3-fold increase in power output per unit area of membrane, and will provide longer operating lifetime and a wider temperature operating range as well as substantially lower platinum content. We expect these advantages will enable us to reduce the cost to end-users of fuel cells and encourage a wider market adoption. We anticipate commercialization and mass manufacture of this product by 2022. This and other partnerships, joint ventures, and joint development agreements, including with DoE, NASA (through Advent’s affiliation with Northeastern University) and the European Space Agency, are expected to assist Advent in the mobility and off-grid power markets.
Our products and technology are currently being used in the marketplace to generate electricity for commercial applications, and we are developing partnerships with Tier 1 suppliers, OEMs, and system integrators to further drive commercial adoption and use in an increasing number of applications and end markets. To date, more than 300,000 TPS® and PBI MEAs have been sold (by us and others) for use in defense, micro-combined heat and power (µCHP) systems, battery range extenders for fuel cell battery hybrid vehicles, remote power for telecom and auxiliary power in remote locations, demonstrating strong early-stage adoption of our existing product line. To date, we have shipped thousands of systems for defense, off-grid and remote/portable power markets.
As our business ramps up to mass-production, we plan to pursue a revenue model that includes engineering fees, MEA sales and hardware-technology licensing fees through the life of product development. Our customer relationship is split into two phases: 1) partner with OEMs to co-develop customized fuel cell systems based on our MEAs, for which we earn engineering and licensing fees, and 2) produce and sell proprietary MEAs directly to OEMs while earning licensing fees on fuel cells produced by customers using our technology. We expect high-margin licensing fees to become a larger component of our revenue mix over time as our customers scale to mass manufacturing of fuel cells and other products.
We were founded and are managed by a team of world-class electrochemists, material scientists, and fuel cell specialists with significant industry and manufacturing expertise. We have received numerous R&D funds from the DoE and the European Union and are considered a pioneer with years of experience in clean energy technology innovation. We have our headquarters in Boston, Massachusetts and our operations in other Massachusetts locations, as well as in California, Greece, Germany, Denmark, and the Philippines. In 2022, We will open a facility in Charlestown, Massachusetts offering research and development facilities and additional production capacity. For additional capacity, we intend to utilize existing U.S.-based toll-manufacturing for the membrane and electrode production to scale-up its production levels without significant capital expenditure. Our Patras, Greece based production of membranes, electrodes, and MEAs benefits from labor cost and skill availability advantages.
We intend to direct the majority of our near-term funding requirements to operating expenses and capital expenses for product development and plan to make substantial investments over the next several years, among others, in new production equipment and warehousing, systems assembly line, MEA assembly automation, aeronautical stacks and U.S. facility expansion.
Recent Acquisitions
Business Combination of AMCI Acquisition Corp. and Advent Technologies
In February 2021, we closed our business combination with AMCI Acquisition Corp. The business combination has provided us with a sustainable funding base for the next phase of our expansion efforts to respond to significant and immediate market opportunities. Our shareholders opted to roll 100% of their equity and, as of the completion of the business combination, owned 54% of the pro-forma equity base.
On February 18, 2021, we acquired UltraCell, formerly a fuel cell division of Bren-Tronics, Inc. Prior to the acquisition, we had a mutually beneficial partnership, having worked together for several years. UltraCell is a leader in lightweight fuel cells for the portable power market, including small-scale fuel cell technology for the defense industry, and has sold thousands of battery pack charger systems built around Advent MEAs to four NATO militaries, including those of the U.S. and the U.K. UltraCell systems have been deployed with excellent performance in stringent and challenging conditions and climates. UltraCell’s technology uses hydrogen or liquid fuels to deliver reliable power at a fraction of the weight of batteries. Traditional LT-PEM fuel cell technology cannot be used in this type of remote environment fuel cell product due to the issues with compressed high-purity hydrogen. Our fuel flexibility allows for the use of methanol in its fuel cell application, which is stable in liquid form, cheaper, and more accessible than hydrogen. With our technology powering UltraCell products like the “Honey Badger”, a portable fuel cell which is in advanced testing with the U.S. military, multi-day military missions that generally required over 100 pounds of batteries can substitute a fuel cell and methanol canister with a total weight of 25 pounds. UltraCell’s fuel cell innovations are expected to complement the development of our next-generation lightweight systems for the mobility market, with an emphasis on the commercial drone, aviation, and heavy-duty automotive industries. UltraCell produces the only made in the U.S. NATO approved fuel cell products and is one of only two manufacturers of NATO approved fuel cell products manufacturing in a NATO country. Since the acquisition, we have retained current UltraCell operations in the Livermore, California area, in parallel to its Boston operations, and plan to continue to do so, with the possibility of expansion in the future.
On September 1, 2021 (CEST), we completed our acquisition (the “Fischer Acquisition”) of SerEnergy and FES from F.E.R. fischer Edelstahlrohre GmbH (“Fischer”). SerEnergy and FES currently market and build standalone systems and critical fuel cell components. These products are complementary to the mobile systems produced by Advent. The Fischer Acquisition is well aligned to the “Any Fuel. Anywhere.” strategy, and is expected to accelerate our growing revenue base in fuel cell stacks and systems. The Fischer Acquisition also increases our patent and trademark portfolio with new intellectual property and increases our labor force by approximately 90 employees, many of whom are highly-skilled manufacturing and sales professionals experienced in the fuel cell industry. SerEnergy has deployed hundreds of standalone telecom remote self-maintaining power systems, including sales to Smart Communications, a leading telecommunications provider in the Philippines. These systems can operate in both high humidity and high temperature environments and offer remote monitoring. We believe that the combined HT-PEM fuel cell production capacity and operations in international markets, currently consisting of Germany, Denmark and the Philippines, will support our expansion into international customer segments, in particular the Asian and European markets.
Specific Product Offerings
Honey Badger: The Reformed Methanol Wearable Fuel Cell Power System, or “Honey Badger” is an offering marketed by our subsidiary UltraCell. On June 7, 2021, the U.S. DoD, through the U.S. Army DEVCOM Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance and Reconnaissance (C5ISR) Center, with funding through the Project Manager Integrated Visual Augmentation System (PM IVAS), has entered into a contract with us to complete the MIL-STD certification of the cutting edge “Honey Badger”. “Honey Badger” is placed on a soldier worn plate carrier and provides on the move battery charging in the field. It has been selected by the DoD’s National Defense Center for Energy and Environment (NDCEE) to take part in its 2021 demonstration/validation program and is the only fuel cell to take part in this program. The NDCEE is a DoD program that addresses high-priority environmental, safety, occupational health, and energy technological challenges that are demonstrated and validated at active installations for military application. The product is offered at 20W and 50W power versions, and both are in testing and certification stages. Its core technology has completed successful field trials in Army Expeditionary Warrior Experiments and high-altitude tests in California’s Sierra Nevada. UltraCell’s “Honey Badger 50” (the 50W power version) 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.
M-ZERØ: Our M-ZERØ line of products are designed to generate power in remote environments. Their use significantly reduces methane emissions where they replace older, less efficient technology. The current M-ZERØ products are 50W and 150W systems, with systems featuring up to 400W of power expected to be released by the end of 2022. We have entered into agreements to trial ten 50W systems in Canada starting in the third quarter of 2021. If the trials are successful, this could result in mass deployment of M-ZERØ systems during 2023. The products, which are not expected to require extensive servicing or refueling schedules, can work throughout the year, including in extreme cold. Traditional green remote power options of solar plus battery storage do not function well in either extreme cold or in hard-to-reach areas. Widespread adoption of M-ZERØ technology at all of the wellheads in the U.S. and Canada will result in a substantial reduction of carbon dioxide emissions.
Important Projects of Common European Interest (“IPCEI”)
White Dragon: White Dragon is an IPCEI proposal submitted by a consortium of Advent, Damco Energy S.A. (Copelouzos Group Company), PPC Greece, The Hellenic Gas Transmission System Operator (“DESFA”) S.A., Hellenic Petroleum, Motor Oil, Corinth Pipeworks, TAP and Terna Energy (together the “consortium”) to develop a more than €8 billion green hydrogen project in Greece to gradually replace Western Macedonia’s lignite coal power plants of and transition to clean energy production and transmission, with the ultimate goal of fully decarbonizing Greece’s energy system. The project plans to use large-scale renewable electricity to produce green hydrogen by electrolysis in Western Macedonia. This hydrogen would then be stored and, through our HT-PEM fuel cells, would be expected to supply all of Greece with clean electricity, green energy, and heat. Our HT-PEM fuel cells provide a combination of both heat and electrical power, and the heat generated by the project can initially be used in conjunction with the district heating networks of Western Macedonia, and in the future in other applications that require a heating and/or cooling system, such as industrial workings, data centers and greenhouses. The White Dragon proposal also includes plans covering the transportation sector. We are the sole fuel cell development partner for the proposed project. Estimates are that the project, if approved, would continue from 2022 through 2029, produce over 200,000 tons of hydrogen per year, reduce annual carbon dioxide emissions by 11.5 million tons and create 18,000 direct jobs and almost 30,000 indirect jobs. We were informed in September 2021 that the Greek government had approved of the White Dragon proposal and it is currently pending European Union approval.
Green HiPo: Green HiPo is an IPCEI proposal submitted by us which will, if approved, allow us to develop, design, and manufacture fully scalable HT-PEM fuel cells for the production of power and heat. Green HiPo is linked to, but independent of, the White Dragon project. It proposes to establish a production facility in Western Macedonia with a staggered production plan, starting with 15kW stacks, integration into 120kW modules, 1MW scale single units, and ultimately multi-MW fully integrated systems. Estimates are that the project, if approved, would continue from 2022 through 2029, create approximately 1,400 jobs in the Western Macedonia region and the total cost of the project could exceed €4 billion. We were informed in September 2021 that the Greek government had approved of the Green HiPo proposal and it is currently pending European Union approval.
Our intellectual property portfolio covers among other things: membranes, electrodes, MEAs, and systems exploiting the unique operating characteristics of its materials. In general, our employees are party to agreements providing that all inventions, whether patented or not, made or conceived while being an Advent employee, which are related to or result from work or research that the Company performs, will remain our sole and exclusive property.
We have been issued, acquired, licensed, or applied for approximately 190 international patents (including the intellectual property from the Fischer Acquisition), the vast majority in membranes, electrodes, and MEAs, which support our product offerings. Additionally, we have approximately eighteen trademarks registered with the USPTO and various international trademark offices, with additional trademark applications pending.
The market for alternative fuel and energy storage systems is still in the early stages of growth and is characterized by well-established battery and LT-PEM products. We believe the principal competitive factors in the markets in which it operates include, but are not limited to, the size, weight, lifetime, durability, and total cost of ownership of these systems to the end-user. We believe that our HT-PEM technology competes with these other technologies across a number of new and existing applications in the alternative energy fuel market, especially in the realm of fuel flexibility and heat management. We believe the total addressable market opportunity could be over $72 billion by the year 2030.
Employees and Human Capital Resources
Our employees are critical to our success. As of December 31, 2021, we had approximately 200 employees, including part-time, contractors and employees who joined us from the recent Fischer Acquisition. We also occasionally rely on additional independent contractors to support our operations. To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are represented by a labor organization or are a party to any collective bargaining arrangement.
We believe that developing a diverse, equitable and inclusive culture is critical to continuing to attract and retain the top talent necessary for our long-term success and strategy. We value diversity at all levels.
We strive to create a collaborative environment where our colleagues feel respected and valued. We provide our employees with competitive compensation, opportunities for equity ownership and a robust employment package, including health care, retirement benefits and paid time off. In addition, we regularly interact with our employees to gauge employee satisfaction and identify areas of focus.
Available Information
Our Internet address is https://www.advent.energy. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available through the “Investors” portion of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at http://www.sec.gov. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.
An investment in our common stock involves a high degree of risks. You should consider carefully the risks described below as well as the other information contained in this Annual Report on Form 10-K before investing in our common stock. The risks described below are those that we believe are the material risks that we face. If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. See “Forward-Looking Statements” in this Annual Report on Form 10-K.
Risk Factors Relating to Our Operations and Business
We may be unable to adequately control the costs associated with our operations.
We will require significant capital to develop and grow our business, including developing and manufacturing our fuel cells and building Advent’s brand. We expect to incur significant expenses which will impact our profitability, including research and development expenses, raw material procurement costs, sales and distribution expenses as we build Advent’s brand and market our fuel cells, and general and administrative expenses as we scale our operations. Our ability to become profitable in the future will not only depend on our ability to successfully market our fuel cells and other products and services, but also to control our costs. If we are unable to cost efficiently design, manufacture, market, sell, distribute and service our fuel cells, our margins, profitability and prospects would be materially and adversely affected.
We may need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our operations and prospects could be negatively affected.
The scale-up of production of our fuel cells, membranes and electrodes, together with the associated investment in our assembly line and product development activities, will consume capital. While we expect that we will have sufficient capital to fund our planned operations through to breakeven, we may need to raise additional funds through the issuance of equity, equity related or debt securities, or through obtaining credit from government or financial institutions. This capital will be necessary to fund our ongoing operations, continue research, development and design efforts, improve infrastructure, and introduce new technologies. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially adversely affected.
If we fail to manage our future growth effectively, we may not be able to market and sell our fuel cells successfully.
Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition. We intend to expand our operations significantly. Our future expansion will include:
| • | forecasting production and revenue; |
| • | controlling expenses and investments in anticipation of expanded operations; |
| • | entry into new material contracts; |
| • | establishing or expanding design, production, licensing and sales; and |
| • | implementing and enhancing administrative infrastructure, systems and processes. |
We intend to hire additional personnel, including design and production personnel. Because our technologies are different from traditional electric vehicle battery technology, individuals with sufficient training in alternative fuel and electric vehicles may not be available to hire, and as a result, we will need to expend significant time and expense training the employees we do hire. Competition for individuals with experience designing and manufacturing hydrogen fuel cells is high, and we may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business and prospects.
We will rely on complex machinery for our operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.
We will rely heavily on complex machinery for our operations and our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Our membrane and fuel cell production plant will consist of large-scale machinery combining many components. The production plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of the production plant components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, and seismic activity and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.
Our future growth is dependent upon the market’s willingness to adopt our hydrogen-powered fuel cell and membrane technology.
Our growth is highly dependent upon the adoption by the automotive, aerospace, power and energy industries. If the market for our fuel cells and membranes does not develop at the rate or to the extent that we expect, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel and energy storage systems is still new and is characterized by rapidly changing technologies, price competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.
Factors that may influence the adoption of our fuel cell and membrane technology include:
| • | perceptions about safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of alternative fuel or electric vehicles; |
| • | improvements in the fuel economy of internal combustion engines and battery powered vehicles; |
| • | the availability of service for alternative fuel vehicles; |
| • | volatility in the cost of energy, oil, gasoline and hydrogen; |
| • | government regulations and economic incentives promoting fuel efficiency, alternate forms of energy, and regulations banning internal combustion engines; |
| • | the availability of tax and other governmental incentives to sell hydrogen; |
| • | volatility in the cost of energy, oil, gasoline and hydrogen; |
| • | government regulations and economic incentives promoting fuel efficiency, alternate forms of energy, and regulations banning internal combustion engines; |
| • | the availability of tax and other governmental incentives to sell hydrogen; |
| • | perceptions about and the actual cost of alternative fuel; and |
We Continue to Generate a Low Level of Revenue from our core product MEA and Developing Commercial Sales to Major Organizations.
Based on conversations with existing customers and incoming inquiries from new customers, we anticipate substantial increased demand for our MEAs from a wide range of customers as we scale up our production facilities and testing capabilities, and as the awareness our MEA capabilities become widely known in the industry. We expect 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 December 31, 2021, we were still generating a low level of revenues compared to our future projections and have not made any commercial sales to major organizations.
Future product recalls could materially adversely affect our business, prospects, operating results and financial condition.
Any product recall in the future may result in adverse publicity, damage our brand and materially adversely affect our business, prospects, operating results and financial condition. In the future, we may voluntarily or involuntarily, initiate a recall if any of our fuel cells or membranes prove to be defective. Such recalls involve significant expense and diversion of management attention and other resources, which could adversely affect our brand image in our target markets, as well as our business, prospects, financial condition and results of operations.
If we are unable to attract and retain key employees and hire qualified management, technical and fuel cell and system engineering personnel, our ability to compete could be harmed.
Our success depends, in part, on our ability to retain our key personnel. The unexpected loss of or failure to retain one or more of our key employees could adversely affect our business. Our success also depends, in part, on our continuing ability to identify, hire, attract, train and develop other highly qualified personnel.
Competition for these employees can be intense, and our ability to hire, attract and retain them depends on our ability to provide competitive compensation. We may not be able to attract, assimilate, develop or retain qualified personnel in the future, and our failure to do so could adversely affect our business, including the execution of our global business strategy. Any failure by our management team to perform as expected may have a material adverse effect on our business, prospects, financial condition and results of operations.
We have been, and may in the future be, adversely affected by the global COVID-19 pandemic.
We face various risks related to epidemics, pandemics, and other outbreaks, including the recent COVID-19 pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of COVID-19 has also impacted our potential customers and suppliers by disrupting the manufacturing, delivery and overall supply chain of fuel cell manufacturers and suppliers.
Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which Advent operates. For example, In May 2021, Advent’s research and development activities in Boston were limited by the restrictions imposed on laboratory work in the U.S., with laboratories being run at approximately 25% occupancy, with the result that certain business development activities have moved more slowly. Additionally, in Patras, Greece, approximately half of the Company’s workforce have worked from home during the temporary lockdowns imposed by the Greek authorities, although these have largely been in support functions. These measures limit operations in our U.S. and Greece locations and have and may continue to adversely impact our employees, research and development activities and operations and the operations of our suppliers, vendors and business partners, and may negatively impact our sales and marketing activities. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, suppliers, vendors and business partners.
The extent to which the COVID-19 pandemic continues to impact our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of the global economic impact, including any recession that has occurred or may occur in the future.
There are no comparable recent events that may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain.
Increases in costs, disruption of supply or shortage of raw materials could harm our business.
Once we increase production, we may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials. Any such increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. We use various raw materials including precious group metals such as platinum; carbon black; polymer precursors, reactants, and solvents; as well as carbon cloth and carbon fiber paper. The prices for these raw materials fluctuate depending on market conditions and global demand and could adversely affect our business and operating results.
We are or may be subject to risks associated with strategic alliances or acquisitions.
We have entered into, and may in the future enter into additional, strategic alliances, including joint ventures or minority equity investments with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.
When appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. In addition to possible stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business strategy if we fail to do so. Furthermore, acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.
We may experience difficulties integrating the operations of acquired companies into our business and in realizing the expected benefits of these acquisitions.
We completed the acquisition of SerEnergy and FES on August 31, 2021. Acquisitions involve numerous risks, any of which could harm our business and negatively affect our financial condition and results of operations. The success of our acquisition of FES and SerEnergy will depend in part on our ability to realize the anticipated business opportunities from combining their and our operations in an efficient and effective manner. These integration processes could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the acquisitions, and could harm our financial performance. If we are unable to successfully or timely integrate the operations of FES and SerEnergy with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies and other anticipated benefits resulting from the acquisitions, or fully offset the costs of the acquisition, and our business, results of operations and financial condition could be materially and adversely affected.
We are subject to substantial regulation and unfavorable changes to, or failure by us to comply with, these regulations could substantially harm our business and operating results.
Our fuel cells and membranes are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to alternative energy are currently evolving and we face risks associated with changes to these regulations, including but not limited to:
| • | increased subsidies for corn and ethanol production, which could reduce the operating cost of vehicles that use ethanol or a combination of ethanol and gasoline; and |
| • | increased sensitivity by regulators to the needs of established automobile manufacturers with large employment bases, high fixed costs and business models based on the internal combustion engine, which could lead them to pass regulations that could reduce the compliance costs of such established manufacturers or mitigate the effects of government efforts to promote alternative fuel vehicles. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected. |
We face risks associated with our international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.
We face risks associated with our international operations, including possible unfavorable regulatory, political, tax and labor conditions, which could harm our business. We have international operations in Greece that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. We are subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell our fuel cells and membranes and require significant management attention. These risks include:
| • | difficulty in staffing and managing foreign operations; |
| • | foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in the U.S., and foreign tax and other laws limiting our ability to repatriate funds to the U.S.; |
| • | fluctuations in foreign currency exchange rates and interest rates; |
| • | U.S. and foreign government trade restrictions, tariffs and price or exchange controls; |
| • | foreign labor laws, regulations and restrictions; |
| • | changes in diplomatic and trade relationships; |
| • | political instability, natural disasters, war or events of terrorism; and |
| • | the strength of international economies. |
If we fail to successfully address these risks, our business, prospects, operating results and financial condition could be materially harmed.
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.
Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of alternative energies or other reasons may result in the diminished competitiveness of the alternative fuel industry generally. This could materially and adversely affect the growth of the alternative fuel automotive markets and our business, prospects, financial condition and operating results.
While certain tax credits and other incentives for alternative energy production and alternative fuel vehicles have been available in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the future, our financial position could be harmed.
We may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which we may apply in the future. As a result, our business and prospects may be adversely affected.
We anticipate continuing to apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel vehicles and related technologies. We anticipate that in the future there will be new opportunities for us to apply for grants, loans and other incentives from the U.S., state and foreign governments. Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives. If we are not successful in obtaining any of these additional incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could be materially adversely affected.
We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and cause us to incur substantial costs.
Companies, organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use, develop, license or sell our fuel cell and membrane technologies, which could make it more difficult for us to operate our business. We may receive inquiries from patent or trademark owners inquiring whether we infringe their proprietary rights. Companies owning patents or other intellectual property rights relating to fuel cells may allege infringement of such rights. In response to a determination that we have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:
| • | cease development, sales, license or use of fuel cells or membranes that incorporate the asserted intellectual property; |
| • | pay substantial damages; |
| • | obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all; or |
| • | redesign one or more aspects or systems of our fuel cells or membranes. |
A successful claim of infringement against us could materially adversely affect our business, prospects, operating results and financial condition. Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion of resources.
We also plan to license patents and other intellectual property from third parties and we may face claims that our use of this in-licensed technology infringes the intellectual property rights of others. In such cases, we will seek indemnification from our licensors. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses.
Our business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third parties.
Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we will rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyright, trademarks, intellectual property licenses and other contractual rights to establish and protect our rights in our technology.
The protection of our intellectual property rights will be important to our future business opportunities. However, the measures we take to protect our intellectual property from unauthorized use by others may not be effective for various reasons, including the following:
| • | any patent applications we submit may not result in the issuance of patents; |
| • | the scope of our issued patents may not be broad enough to protect our proprietary rights; |
| • | our issued patents may be challenged and/or invalidated by our competitors; |
| • | the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make aggressive enforcement impracticable; |
| • | current and future competitors may circumvent our patents; and |
| • | our in-licensed patents may be invalidated, or the owners of these patents may breach our license arrangements. |
Patent, trademark, and trade secret laws vary significantly throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the U.S. Further, policing the unauthorized use of our intellectual property in foreign jurisdictions may be difficult. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the U.S.
Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application, or if we are the first party to file such a patent application. If another party has filed a patent application to the same subject matter as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, our competitors may design around our issued patents, which may adversely affect our business, prospects, financial condition or operating results.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could materially and adversely affect our business, financial condition, operating results, cash flows and prospects.
The SEC released a public statement regarding accounting for warrants which resulted in our warrants being accounted for as liabilities rather than as equity and a restatement of our previously issued financial statements.
On April 12, 2021, the staff of the SEC issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”) (the “Statement”). In the Statement, the SEC staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance, our warrants were accounted for as equity within our balance sheet, and after discussion and evaluation, including with our independent auditors, we have concluded that our warrants should be presented as liabilities with subsequent fair value remeasurement. Therefore, we conducted a valuation of our warrants and restated our previously issued financial statements, which resulted in unanticipated costs and diversion of management resources and may result in potential loss of investor confidence. Although we have now completed the restatement, we cannot guarantee that we will have no further inquiries from the SEC or Nasdaq regarding our restated financial statements or matters relating thereto. Any future inquiries from the SEC or Nasdaq as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself.
The restatement of the Company’s financial statements in May 2021 has subjected us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings.
As a result of the restatement of our financial statements discussed above, we have become subject to additional risks and uncertainties, including, among others, increased professional fees and expenses and time commitment that may be required to address matters related to the restatement, and scrutiny of the SEC and other regulatory bodies which could cause investors to lose confidence in the Company’s reported financial information and could subject the Company to civil or criminal penalties or shareholder litigation. We could face monetary judgments, penalties or other sanctions that could have a material adverse effect on the Company’s business, financial condition and results of operations and could cause its stock price to decline.
Certain of our warrants are accounted for as a warrant liability and are recorded at fair value upon issuance with changes in fair value each period to be reported in earnings, which may have an adverse effect on the market price of our common stock.
Following the restatement of our historical financial statements, we account for our warrants as a warrant liability and recorded at fair value upon issuance any changes in fair value each period reported in earnings as determined by the Company based upon a valuation report obtained from its independent third party valuation firm. The impact of changes in fair value on earnings may have an adverse effect on the market price of our common stock.
Obtaining the MIL-STD certification for the Honey Badger and advancing it for U.S. army integration is subject to risks and uncertainty.
Obtaining the MIL-STD certification for the Honey Badger and advancing it for U.S. army integration is subject to risks and uncertainty, and may not be completed on the timeline the Company expects, or at all.
Cybersecurity risks and attacks, security incidents, and data breaches could compromise our intellectual property or other proprietary information, could disrupt our electronic infrastructure, operations and manufacturing, and could impact our competitive position, reputation, results of operations, financial condition, and cash flows.
We rely upon the information technology and data security infrastructure and its capacity, reliability, and security in connection with various aspects of our business activities. We also rely on our ability to expand and continually update these technologies and related infrastructure in response to the changing needs of our business. We face challenges related to supporting our older technologies and implementing necessary upgrades and the hardening of current technologies. In addition, some of these technologies are managed by third-party service providers and are not under our direct control. If we experience a problem with a critical technology, including during upgrades or new technology implementations, any resulting disruptions could have an adverse effect on our business operations and our performance.
Our business operations rely upon our electronic infrastructure and that of our third-party vendors, including to handle information and data such as intellectual property, personal information, protected information, financial information and other confidential and proprietary information related to our business and our employees, prospects, customers, suppliers and other business partners. While we maintain certain administrative, technical, and physical safeguards and take preventive and proactive measures to combat known and unknown cybersecurity risks, we currently are building out and maturing our electronic infrastructure and safeguards. There is no assurance that our current controls and our ongoing efforts will be sufficient to eliminate security risks.
Cyberattacks are increasing in frequency and evolving in nature. We and our third-party providers are at risk of attack through use of increasingly sophisticated methods, including malware, phishing, ransomware, and the deployment of technologies to find and exploit vulnerabilities. Our electronic infrastructure, and information technology systems maintained by our third-party providers, have been in the past, and may be in the future, subjected to attempts to gain unauthorized access, disable, destroy, maliciously control or cause other business disruptions. In some cases, it is difficult to anticipate or to detect immediately such incidents and any damage caused. While these types of incidents have not had a material impact on our business to-date, future incidents involving access to or improper use of our systems, or those of our third-parties, could compromise confidential, proprietary or otherwise sensitive information.
In addition, cyberattacks could negatively impact our reputation and our competitive position and could result in litigation with third parties, regulatory action, significant remediation costs, and loss of business and customers relationships, any of which could adversely impact our business, our financial condition, and our operating results. Although we maintain some insurance coverage, we cannot be certain that coverage would apply to cyber risks, that it may be adequate for liabilities incurred, or that any insurer will not accept or deny coverage of future claims.
We may experience problems with the operation of our electronic infrastructure or the technology systems of third parties on which we rely, as well as the development and deployment of new electronic infrastructure, that could adversely affect, or even disrupt, all or a portion of our operations until resolved. In addition, as a result of the COVID-19 pandemic a large percentage of our salaried employees continue to work remotely full or part-time. This remote working environment may pose a heightened risk for security breaches or other disruptions of our information technology environment.
Our global operations are subject to data privacy laws and regulations that impose significant compliance costs and create reputational and legal risk.
Due to the international scope of our operations, we may be subject to a complex system of regulatory requirements regarding data privacy, such as the European Union General Data Protection Regulation and California’s Consumer Privacy Act and its amendments.
Our numerous foreign operations are governed by laws, rules and business practices that differ from those of the U.S. We cannot predict now our future data privacy risks or the nature, scope or effect of future regulatory requirements to which our operations might be subject or the manner in which existing laws might be administered or interpreted.
A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results and net worth.
Goodwill and other intangible assets are a component of our assets. As a part of our acquisition of SerEnergy and FES on August 31, 2021, we recognized $29.4 million in goodwill and $19.8 million in other intangible assets. As of December 31, 2021, goodwill was $30.0 million and other intangible assets were $23.3 million of our total assets of $163.0 million. We may have to write off all or part of our goodwill or other intangible assets if their value becomes impaired. Although this write-off would be a non-cash charge, it could reduce our earnings and our financial condition.
Risks Related to Ownership of Our Common Stock and Warrants
Delaware law and our second amended and restated certificate of incorporation and amended and restated bylaws contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our second amended and restated certificate of incorporation and our amended and restated bylaws, and the Delaware General Corporations Law (“DGCL”), contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore depress the trading price of our common stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors or taking other corporate actions, including effecting changes in our management. Among other things, our second amended and restated certificate of incorporation and amended and restated bylaws include provisions regarding:
| • | a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; |
| • | the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
| • | the limitation of the liability of, and the indemnification of, our directors and officers; |
| • | the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
| • | the requirement that directors may only be removed from our board of directors for cause; |
| • | a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; |
| • | the requirement that a special meeting of stockholders may be called only by our board of directors, the chairperson of our board of directors, our chief executive officer or our president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; |
| • | controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; |
| • | the requirement for the affirmative vote of holders of at least 65% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of the second amended and restated certificate of incorporation or amended and restated bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; |
| • | the ability of our board of directors to amend the amended and restated bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the amended and restated bylaws to facilitate an unsolicited takeover attempt; and |
| • | advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of surviving entity. |
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our board of directors or management.
In addition, as a Delaware corporation, we will be subject to provisions of Delaware law, including Section 203 of the DGCL, which may generally prohibit certain stockholders holding 15% or more of our outstanding capital stock from engaging in certain business combinations with us for a specified period of time unless certain conditions are met.
Any provision of the second amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
The second amended and restated certificate of incorporation designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit the ability of our stockholders to choose the judicial forum for disputes with us or our directors, officers, or employees.
The second amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on its behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of its directors, officers, or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law, or the second amended and restated certificate of incorporation or the amended and restated bylaws or (4) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants. The second amended and restated certificate of incorporation also provides that the federal district courts of the U.S. will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. The exclusive forum provision is applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find the exclusive-forum provision be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm its results of operations.
We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
Although we conducted due diligence on Advent, we cannot assure you that this diligence revealed all material issues that may be present in Advent’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of our control will not later arise. As a result, the company may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in losses. Even if the due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that the company reports charges of this nature could contribute to negative market perceptions about the Company or our securities. Accordingly, our stockholders could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the Proxy Statement / Prospectus relating to the business combination contained an actionable material misstatement or material omission.
An active market for our securities may not develop, which would adversely affect the liquidity and price of our securities.
The price of our securities may vary significantly due to factors specific to our business as well as to general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.
NASDAQ may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our securities are currently listed on Nasdaq. However, we cannot assure you that our securities will continue to be listed on Nasdaq in the future. In order to continue listing its securities on Nasdaq, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of its securities (generally 300 public holders). Additionally, we are required to demonstrate compliance with Nasdaq’s listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, our stock price would generally be required to be at least $4 per share and its stockholders’ equity would generally be required to be at least $5 million and we will be required to have a minimum of 300 public holders. We cannot assure you that we will be able to meet those initial listing requirements at all times.
If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
| • | a limited availability of market quotations for its securities; |
| • | reduced liquidity for its securities; |
| • | a determination that our common stock is a “penny stock” which will require brokers trading in the common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| • | a limited amount of news and analyst coverage; and |
| • | a decreased ability to issue additional securities or obtain additional financing in the future. |
Our common stock price may change significantly and you could lose all or part of your investment as a result.
The trading price of our common stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares of our common stock at an attractive price due to a number of factors such as those listed in “Risk Factors Relating to Our Operations and Business” and the following:
| • | results of operations that vary from the expectations of securities analysts and investors; |
| • | results of operations that vary from our competitors; |
| • | changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; |
| • | declines in the market prices of stocks generally; |
| • | strategic actions by us or our competitors; |
| • | announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; |
| • | any significant change in our management; |
| • | changes in general economic or market conditions or trends in our industry or markets; |
| • | changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
| • | future sales of our common stock or other securities; |
| • | investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; |
| • | the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; |
| • | litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; |
| • | guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; |
| • | the development and sustainability of an active trading market for our common stock; |
| • | actions by institutional or activist stockholders; |
| • | changes in accounting standards, policies, guidelines, interpretations or principles; and |
| • | other events or factors, including those resulting from pandemics, natural disasters, war, acts of terrorism or responses to these events. |
These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low.
In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.
Because there are no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock at a price greater than what you paid for it.
We intend to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of common stock will be at the sole discretion of the board of directors. The board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications of the payment of dividends by us to our stockholders or by its subsidiaries to it and such other factors as the board of directors may deem relevant. As a result, you may not receive any return on an investment in our common stock unless you sell your common stock for a price greater than that which you paid for it.
Our stockholders may experience dilution in the future.
The percentage of shares of our common stock owned by current stockholders may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including, without limitation, equity awards that we may grant to its directors, officers and employees, or exercise of warrants. Such issuances may have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
If securities or industry analysts do not publish research or reports about our business, if they change their recommendations regarding our common stock or if our operating results do not meet their expectations, our common stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our businesses. If no securities or industry analysts commence coverage of us or our business, the trading price for our common stock could be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our securities or publish unfavorable research about our businesses, or if our operating results do not meet analyst expectations, the trading price of our common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.
Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for our common stock to decline.
The sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate.
As of March 31, 2022, we have a total of 51,253,591 shares of our common stock outstanding. All shares held by public stockholders prior to the Business Combination and all of the shares issued in the Business Combination to former Old Advent stockholders are freely tradable without registration under the Securities Act, and without restriction by persons other than our “affiliates” (as defined under Rule 144 of the Securities Act, “Rule 144”), including our directors, executive officers and other affiliates.
The shares of Advent’s common stock reserved for future issuance under the 2021 Equity Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to any applicable vesting requirements, lockup agreements and other restrictions imposed by law. A total of 6,915,892 shares of common stock have been reserved for future issuance under the 2021 Equity Incentive Plan. We are expected to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to the Equity Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. The initial registration statement on Form S-8 is expected to cover shares of our common stock.
In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
As a public company, we are subject to additional laws, regulations and stock exchange listing standards, which impose additional costs on us and may strain our resources and divert our management’s attention.
Advent previously operated on a private basis and following the Business Combination it became a wholly-owned subsidiary of a public company that is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of Nasdaq and other applicable securities laws and regulations. Compliance with these laws and regulations will increase our legal and financial compliance costs and make some activities more difficult, time-consuming or costly, which may strain our resources or divert management’s attention.
We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. We may continue to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We cannot predict whether investors will find securities issued by us less attractive because we will rely on these exemptions. If some investors find those securities less attractive as a result of its reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, 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 election to opt out is irrevocable. We have 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, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
We may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous for warrant holders.
We will have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the public warrants become redeemable by us, we may exercise our redemption right when the registration statement to which this Annual Report forms a part comes into effect with respect to the shares of common stock underlying such warrants. Redemption of the outstanding public warrants could force you to: (1) exercise your warrants and pay the related exercise price at a time when it may be disadvantageous for you to do so; (2) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (3) accept the nominal redemption price which, at the time the outstanding public warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the placement warrants or working capital warrants will be redeemable by us for cash so long as they are held by our sponsor or its permitted transferees.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations.
Accounting principles and related pronouncements, implementation guidelines and interpretations we apply to a wide range of matters that are relevant to our business, including, but not limited to, revenue recognition, leases and stock-based compensation, are complex and involve subjective assumptions, estimates and judgments by our management. Changes in accounting pronouncements or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance.
The exercise of Warrants for our common stock would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
As of December 31, 2021, we had Warrants to purchase an aggregate of 26,369,557 shares of our common stock outstanding. To the extent remaining Warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the then-existing holders of common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such Warrants may be exercised could adversely affect the market price of our common stock.
The valuation of our Warrants could increase the volatility in our net income (loss) in our consolidated statements of earnings (loss).
The change in fair value of our Warrants is the result of changes in stock price and Warrants outstanding at each reporting period. The Change in Fair Value of Warrant Liabilities represents the mark-to-market fair value adjustments to the outstanding Warrants issued in connection with the initial public offering of ACMI and the concurrent private placement. Significant changes in our stock price or number of Warrants outstanding may adversely affect our net income (loss) in our consolidated statements of earnings (loss).
| Item 1B. | Unresolved Staff Comments. |
None.
We lease approximately 3,400 square feet of offices located in Patras, Greece. The leases are set to expire on December 31, 2028. We entered into a lease dated February 5, 2021 for approximately 6,000 square feet of office space at 200 Clarendon Street, Boston, Massachusetts 02116 as the Company’s executive offices. The term of the lease is five years (unless sooner terminated as provided in the lease agreement). Through the Fischer Acquisition, we have leased from Fischer the space, comprising approximately 10,750 square feet, in which FES operates and acquired property containing approximately 8,600 square feet of SerEnergy office, production and laboratory facilities located in Aalborg, Denmark. We also assumed a lease from Fischer in Aalborg, Denmark for approximately 7,000 square meters containing meeting rooms and a warehouse used by SerEnergy, and office, workshop, and warehouse spaces in two locations in Paranaque City, Philippines totaling approximately 10,500 square meters. Through our wholly owned subsidiary, FES, we entered into a lease agreement with fischer group SE & Co. KG in Achern for approximately 1,017 square feet of office space, workspace and outdoor laboratory at 77855 Achern, Im Gewerbegebiet 7 for use by FES. We have a short-term lease in Somerville, Massachusetts for laboratory space while it builds out a dedicated leased space of approximately 21,400 square feet in the Hood Park complex in Charlestown, Massachusetts.
| Item 3. | 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.
| Item 4. | Mine Safety Disclosures. |
Not applicable.
PART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Certain Information Regarding the Trading of Our Common Stock
Our units, Class A common stock and public warrants are listed on the Nasdaq Capital Market under the symbols “ADN” and “ADNW”, respectively.
Holders of Our Common Stock
As of March 31, 2022, there were approximately 50 holders of record of shares of our common stock and 6 holders of record of our warrants. Such numbers do not include DTC participants or beneficial owners holding shares through nominee names.
Dividends
We have never declared or paid any dividends on our common stock. We do not anticipate declaring or paying any cash dividends on our capital stock in the foreseeable future. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of the board of directors at such time.
Securities authorized for issuance under equity compensation plans
See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans.
Recent sales of unregistered securities
None.
| Item 7. | 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 consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, 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 Annual Report on Form 10-K, 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 and data relating to the year-ended December 31, 2020 are those of Advent Technologies, Inc. and its subsidiaries, the financial information and data for the year-ended December 31, 2021 are those of Advent Technologies Holdings, Inc. and its subsidiaries. See Note 1 “Basis of Presentation” in the accompanying 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 offerings are full fuel cell systems and 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 production facilities in Greece, Denmark, Germany and Philippines. In 2022, 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 fuel cell systems and MEAs, as well as the sale of membranes and electrodes for specific applications in the iron flow battery and cellphone markets, respectively. While fuel cell systems and 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. Advent expects to continue to be eligible for grant funding based on its product development activities over the foreseeable future.
Business Combination and Public Company Costs
On October 12, 2020, Advent Technologies Inc. (“Advent Technologies”) 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 (the “Closing”), Merger Sub merged with and into Advent Technologies Inc., with Advent Technologies Inc. surviving the Merger as a wholly-owned subsidiary of AMCI and AMCI changed its name to “Advent Technologies Holdings, Inc.”. 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 are and will be disclosed in the company’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 Technologies 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 Technologies in many respects. Under this method of accounting, AMCI is treated as the acquired entity whereby Advent Technologies 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 Technologies’s reported financial position and results was an increase in cash of approximately $141 million. Total direct and incremental transaction costs of AMCI and Advent Technologies, along with liabilities of AMCI paid off at the Closing, were approximately $23.6 million.
As a consequence of the Business Combination, Advent Technologies 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 product testing, development projects and associated research and development activities; |
| • | Expand production facilities to increase and automate assembly and production of fuel cell systems and MEAs; |
| • | 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 to audit the Company’s consolidated financial statements for the year ending December 31, 2021. EY served as independent registered public accounting firm of Advent 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 Company’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
Share Purchase Agreement
On August 31, 2021, pursuant to the Share Purchase Agreement (the “Purchase Agreement”), dated as of June 25, 2021, by and between Advent Technologies Holdings, Inc. (the “Company” or the “Buyer”) and F.E.R. fischer Edelstahlrohre GmbH, a limited liability company incorporated under the Laws of Germany (the “Seller”), the Company acquired (the “Acquisition”) all of the issued and outstanding equity interests in SerEnergy A/S, a Danish stock corporation and a wholly-owned subsidiary of the Seller (“SerEnergy”) and fischer eco solutions GmbH, a German limited liability company and a wholly-owned subsidiary of the Seller (“FES” and together with SerEnergy, the “Target Companies”), together with certain outstanding shareholder loan receivables. As consideration for the transactions contemplated by the Purchase Agreement, the Company paid to the Seller €15,000,000 in cash and on August 31, 2021, the Company issued to the Seller 5,124,846 shares of common stock, par value $0.0001 per share, of the Company (“Common Stock”).
Pursuant to the Purchase Agreement, the Company acquired SerEnergy and FES, the fuel cell systems business of fischer Group. SerEnergy is a leading manufacturer of methanol-powered high-temperature polymer electrolyte membrane (“HT-PEM”) fuel cells and operates facilities in Aalborg, Denmark and in Manila, Philippines. FES provides fuel-cell stack assembly and testing as well as the production of critical fuel cell components of the SerEnergy HT-PEM fuel cells, including membrane electrode assemblies, bipolar plates and reformers. FES operates a facility on fischer Group’s campus in Achern, Germany, and Advent agreed to lease that respective portion of the facility at the closing of the Acquisition.
Announced Projects White Dragon & Green HiPo (4.65GW Green Hydrogen & 400MW Fuel Cells), approved by Greek Government and submitted to EU
On September 7, 2021, Advent announced that two Greek Important Projects of Common European Interest (“IPCEI”) had been approved by the Greek Minister of Development and Investments and the Greek Minister of Environment, Energy, and Climate Change. The programs submitted by Advent and the White Dragon consortium of companies aspire to replace Greece’s largest coal-fired plants with renewable solar energy parks, which will be supported by green hydrogen production (4.65GW), and fuel cell heat and power production (400MW). The projects are part of the “Hydrogen Technologies” IPCEI and will now move towards approval at the European Union (“EU”) level. As a next step, Advent will demonstrate before the European Commission the economic, environmental, financial, social, and technical feasibility of the projects and the positive spillover effects to the European economy and society. Advent hopes to receive final notification from the European Commission in the second or third quarter of 2022. If approved, the Company will be the technology partner for an €8 billion project.
Collaboration with the DOE
The efforts with the constellation of Department of Energy National Laboratories (Los Alamos National Laboratory, LANL; Brookhaven National Laboratory, BNL; National Renewable Energy Laboratory, NREL) continue to gain momentum. This group of leading scientists and engineers is working closely with Advent’s development and manufacturing teams and are furthering the understanding of breakthrough materials that will advance HT-PEM fuel cells. This next generation HT-PEM is well suited for heavy duty transportation, marine, and aeronautical applications, as well as delivering benefits in cost and lifetime for stationary power systems used in telecom and other remote power markets.
Advent and BASF New Business GmbH (“BASF”) signed a Memorandum of Understanding (“MoU”)
On December 13, 2021, it was announced that the MoU aims to develop and increase the manufacturing scale of advanced fuel cell membranes designed for long-term operations under extreme conditions. BASF intends to improve the long-term stability of its Celtec® membrane and to increase production capacity with advanced technical capabilities to enable further improved and competitive Advent fuel cell systems and MEAs. Under the agreement the two companies will explore the implementation of high-volume manufacturing for the Celtec® membranes, utilize Advent’s fuel cell stack and system testing facilities to assess and qualify the new Celtec® membrane for the SereneU (telecom power), M-ZERØ (methane emissions reduction), and Honey Badger (portable power, defense) Advent product families. Furthermore, BASF supports the realization of large-scale Important Projects of Common European Interests (“IPCEIs”) White Dragon and Green HiPo (pending EU approval), through materials for power generation, hydrogen generation, and power storage. The goal of the two projects as submitted by Advent and the White Dragon consortium of companies is to replace Greece’s largest coal-fired power plants with renewable solar energy parks, which will be supported by CO2-free hydrogen production (4.65GW), and fuel cell heat and power production (400MW). In addition, BASF will also evaluate the producibility of the ion-pair membrane developed in collaboration by Advent and the U.S. Department of Energy. Advent has substantial experience in the development of high-temperature PEM fuel cell systems namely for stationary and portable applications as well as critical components such as MEAs and Gas Diffusion Electrodes (“GDEs”). Advent is working to increase the performance and scope of its products to satisfy the requirements of its customers and to address new applications. BASF has substantial experience in the manufacturing and development of proton-conducting membranes, GDEs, HT-PEM MEAs and the pertinent chemicals, catalysts, and compositions for their application in hydrogen separation and fuel cells. BASF is constantly improving the quality, robustness and performance of its products to support growth in fuel cell systems applications.
Advent Launches New Product Line, M-ZERØ™ Fuel Cells, to Significantly cut Methane Emissions in North America
The Advent M-ZERØ™ products, designed specifically to generate power in remote environments, will offer the ability to drop methane emissions to effectively zero where they replace methane polluting pneumatic injection technology. M-ZERØ™ will initially be deployed mainly in Canada and the United States with the ultimate goal of providing remote power to up to 185,000 oil and gas wellheads.
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 demonstration/validation program for 2021. The NDCEE is a DOD program that addresses high-priority environmental, safety, occupational health, and energy technological challenges that are demonstrated and validated 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.
UltraCell Purchase Agreement
On February 18, 2021, Advent Technologies Inc., entered into a Membership Interest Purchase Agreement (the “MI Purchase Agreement”) with Bren-Tronics, Inc. (“Bren-Tronics”) and UltraCell, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Bren-Tronics (“UltraCell”). Pursuant to the MI 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 $6 million upon achievement of certain milestones. Advent also assumed the terms of Bren-Tronics lease for property used in UltraCell’s operations in Livermore, California.
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. 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.
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. 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 August 2022. The Company provided security in the form of a security deposit in the amount of $750,000, upon commencement of the lease.
On August 31, 2021, the Company through its wholly owned subsidiary, FES, entered into a lease agreement by and among the Company, in its capacity as lessee, and fischer group SE & Co. KG, having its registered seat in Achern, in its capacity as lessor. The lease provides for the rental by the Company of office space, workspace and outdoor laboratory at 77855 Achern, Im Gewerbegebiet 7 for use by FES. Under the terms of the lease, the Company leases 1,017 square feet at a monthly basic rate of Euros 7,768 plus VAT. The lessor has granted the lessee an option right to extend the lease by another five years at the terms and conditions of the lease agreement (option term). The option right must be exercised by written declaration of the lessee and delivered to the lessor not later than ninety days prior to the expiration of the fixed term. The lessee is entitled to terminate the lease early (even during fixed lease term or option term), to the end of each calendar quarter with a notice period of four months. The lessee is obliged to furnish security to the lessor upon occupying the leased premises. The Company provided security in the form of a parent guarantee for a maximum amount of Euro 30,000.
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 fuel cell systems and 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 December 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. While 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 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 consolidated financial statements for more information.
Components of Results of Operations
Revenue
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 fuel cell systems and 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 systems and electrodes. Advent expects cost of revenues to increase substantially in line with increased production. Advent recognizes cost of revenues in the period that revenues are recognized.
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, and incentive and stock-based compensation expense. 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 income / (expenses) consist of additional de minimis incidental income / (expenses) incurred by the business. These income / (expenses) are expected to remain at a de minimis level in the future.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability amounting to $22.7 million for the year ended December 31, 2021 represents the change in fair value of the Private Placement Warrants and Working Capital Warrants from February 4, 2021 to December 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 or losses on transactions denominated in foreign currencies and on translation of monetary items denominated in foreign currencies. 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 portion of the Company’s costs are denominated in euros.
Amortization of intangibles
The intangible assets of $4.7 million recognized on the acquisition of UltraCell is the Trade Name “UltraCell” ($0.4 million) and the Patented Technology ($4.3 million). The Trade Name has an indefinite useful life while the Patented Technology has a useful life of 10 years, for which amortization expense of $(0.4) million has been recognized for the period from the acquisition date of UltraCell to December 31, 2021.
The intangible assets of $19.8 million recognized on the acquisition of SerEnergy and FES are the Patents amounting to $16.9 million, the Process know-how (IPR&D) amounting to $2.6 million and the Order backlog amounting to $0.3 million. The Patents have a useful life of 10 years, the Process know-how has a useful life of 6 years and the Order backlog has a useful life of 1 year. Amortization expense of $(0.8) million has been recognized in relation to these intangibles for the period from the acquisition date of SerEnergy and FES to December 31, 2021.
Income taxes
Income taxes amounting to $0.9 million for the year ended December 31, 2021 mainly relates to current income tax benefit of its subsidiary SerEnergy and deferred income tax benefit on tax losses of its subsidiary FES and on intangible assets recognized upon the acquisition of SerEnergy and FES.
Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
The following table sets forth a summary of our consolidated results of operations for the years ended December 31, 2021 and 2020, and the changes between periods.
| | | Years Ended December 31, | | | | | | | |
| | | 2021 | | | 2020 | | | $ change | | | % change | |
| Revenue | | $ | 7,068,842 | | | $ | 882,652 | | | $ | 6,186,190 | | | | 700.9 | % |
| Cost of revenue | | | (5,406,216 | ) | | | (513,818 | ) | | | (4,892,398 | ) | | | 952.2 | % |
| Gross profit | | | 1,662,626 | | | | 368,834 | | | | 1,293,792 | | | | 350.8 | % |
| Income from grants | | | 829,207 | | | | 206,828 | | | | 622,379 | | | | 300.9 | % |
| Research and development expenses | | | (3,540,540 | ) | | | (102,538 | ) | | | (3,438,002 | ) | | | 3,352.9 | % |
| Administrative and selling expenses | | | (41,876,741 | ) | | | (3,546,856 | ) | | | (38,329,885 | ) | | | 1,080.7 | % |
| Amortization of intangible assets | | | (1,184,830 | ) | | | - | | | | (1,184,830 | ) | | | N/A | |
| Operating loss | | | (44,110,278 | ) | | | (3,073,732 | ) | | | (41,036,546 | ) | | | 1,335.1 | % |
| Fair value change of warrant liability | | | 22,743,057 | | | | - | | | | 22,743,057 | | | | N/A | |
| Finance expenses, net | | | (51,561 | ) | | | (5,542 | ) | | | (46,019 | ) | | | 830.4 | % |
| Foreign exchange losses, net | | | (42,708 | ) | | | (26,072 | ) | | | (16,636 | ) | | | 63.8 | % |
| Other income (expenses), net | | | 15,638 | | | | (15,696 | ) | | | 31,334 | | | | (199.6 | )% |
| Loss before income taxes | | | (21,445,852 | ) | | | (3,121,042 | ) | | | (18,324,810 | ) | | | 587.1 | % |
| Income taxes | | | 922,510 | | | | - | | | | 922,510 | | | | N/A | |
| Net loss | | $ | (20,523,342 | ) | | $ | (3,121,042 | ) | | $ | (17,402,300 | ) | | | 557.6 | % |
| Net loss per share | | | | | | | | | | | | | | | | |
| Basic loss per share | | $ | (0.45 | ) | | $ | (0.15 | ) | | $ | (0.30 | ) | | | N/A | |
| Basic weighted average number of shares | | | 45,814,868 | | | | 20,518,894 | | | | N/A | | | | N/A | |
| Diluted loss per share | | $ | (0.45 | ) | | $ | (0.15 | ) | | $ | (0.30 | ) | | | N/A | |
| Diluted weighted average number of shares | | | 45,814,868 | | | | 20,518,894 | | | | N/A | | | | N/A | |
Revenue
Our total revenue from product sales increased by approximately $6.2 million or 700.9% from approximately $0.9 million in the year ended December 31, 2020 to approximately $7.1 million in the year ended December 31, 2021. The increase in revenue was related to a) 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, b) revenue from UltraCell’s operations (acquired on February 18, 2021) and c) revenue from SerEnergy and FES’s operations (acquired on August 31, 2021).
Cost of Revenues
Cost of revenues increased by approximately $4.9 million from approximately $0.5 million in the year ended December 31, 2020 to approximately $5.4 million in the year ended December 31, 2021. The increase in cost of revenues was directly related to the increased revenues and the requirement for increased production of MEAs and fuel cell systems to satisfy customer demand, as well as, cost of revenues attributed to UltraCell’s, SerEnergy’s and FES’s operations.
Gross profit, which is revenue, net minus the cost of revenue, increased to $1.7 million in the year ended December 31, 2021 from $0.4 million in the year ended December 31, 2020.
Research and Development Expenses
Research and development expenses were approximately $3.5 million in the year ended December 31, 2021, primarily related to the Company’s cooperative research and development agreement with the U.S. Department of Energy, as well as the research and development costs of SerEnergy and FES in the four-month period from September 1, 2021 to December 31, 2021.
Administrative and Selling Expenses
Administrative and selling expenses were approximately $41.9 million in the year ended December 31, 2021, and $3.5 million in the year ended December 31, 2020. The increase was primarily due to one-time transaction costs following the Business Combination amounting to $5.9 million, the increased personnel in the Greece and Boston offices, the recognition of stock-based compensation expense amounting to $7.7 million, incentive compensation costs, administrative and selling expenses associated with being a public company, costs of the SerEnergy/FES businesses post-acquisition and a non-recurring $2.4 million charge for executive severance.
Change in fair value of Warrant Liability
The change in fair value of warrant liability amounting to $22.7 million was due to the change in fair value of the Private Placement Warrants and Working Capital Warrants from February 4, 2021 to December 31, 2021.
Liquidity and Capital Resources
As of the date of this filing of the Annual Report on Form 10-K, Advent’s existing cash resources and projected cash flows 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 results over the next 12 months.
The following table sets forth a summary of our consolidated cash flows for the years ended December 31, 2021 and 2020, and the changes between periods.
| | | Years Ended December 31, | | |
| |
| | | 2021 | | | 2020 | | | $ change | | | % change | |
| Net Cash used in Operating Activities | | $ | (35,837,000 | ) | | $ | (1,425,068 | ) | | $ | (34,411,932 | ) | | | 2,414.8 | % |
| | | | | | | | | | | | | | | | | |
| Cash Flows from Investing Activities: | | | | | | | | | | | | | | | | |
| Proceeds from sale of property and equipment | | | 6,970 | | | | - | | | | 6,970 | | | | N/A | |
| Purchases of property and equipment | | | (3,920,470 | ) | | | (122,508 | ) | | | (3,797,962 | ) | | | 3,100.2 | % |
| Purchases of intangible assets | | | (17,747 | ) | | | - | | | | (17,747 | ) | | | N/A | |
| Advances for the acquisition of property and equipment | | | (2,200,158 | ) | | | - | | | | (2,200,158 | ) | | | N/A | |
| Acquisition of a subsidiary, net of cash acquired | | | (19,425,378 | ) | | | - | | | | (19,425,378 | ) | | | N/A | |
| Net Cash used in Investing Activities | | $ | (25,556,783 | ) | | $ | (122,508 | ) | | $ | (25,434,275 | ) | | | 20,761.3 | % |
| | | | | | | | | | | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | | | | | | | | | | |
| Business Combination and PIPE financing, net of issuance costs paid | | | 141,120,851 | | | | - | | | | 141,120,851 | | | | N/A | |
| Proceeds of issuance of preferred stock | | | - | | | | 1,430,005 | | | | (1,430,005 | ) | | | (100.0 | )% |
| Proceeds from issuance of non-vested stock awards | | | - | | | | 21,756 | | | | (21,756 | ) | | | (100.0 | )% |
| Repurchase of shares | | | - | | | | (69,431 | ) | | | 69,431 | | | | (100.0 | )% |
| Proceeds of issuance of common stock and paid-in capital from warrants exercise | | | 262,177 | | | | - | | | | 262,177 | | | | N/A | |
| State loan proceeds | | | 118,274 | | | | - | | | | 118,274 | | | | N/A | |
| Repayment of convertible promissory notes | | | - | | | | (500,000 | ) | | | 500,000 | | | | (100.0 | )% |
| Net Cash provided by Financing Activities | | $ | 141,501,302 | | | $ | 882,330 | | | $ | 140,618,972 | | | | 15,937.2 | % |
| | | | | | | | | | | | | | | | | |
| Net increase in cash and cash equivalents | | $ | 80,107,519 | | | $ | (665,246 | ) | | $ | 80,772,765 | | | | (12,141.8 | )% |
| Effect of exchange rate changes on cash and cash equivalents | | | (858,823 | ) | | | (18,035 | ) | | | (840,788 | ) | | | 4,662.0 | % |
| Cash and cash equivalents at the beginning of year | | | 515,734 | | | | 1,199,015 | | | | (683,281 | ) | | | (57.0 | )% |
| Cash and cash equivalents at the end of year | | $ | 79,764,430 | | | $ | 515,734 | | | $ | 79,248,696 | | | | 15,366.2 | % |
Cash flows used in Operating Activities
Advent’s cash flows used in 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 receivable, inventory, accounts payable and other current assets and liabilities.
Net cash used in operating activities was approximately $(35.8) million for the year ended December 31, 2021, which related to outflows in connection with one-time transaction costs, administrative and selling expenses, research and development expenses, and costs associated with insurances services and other consulting services.
Net cash used in operating activities was approximately $(1.4) million for the year ended December 31, 2020, mainly related to payments to suppliers, net of receipts from customers.
Cash Flows used in Investing Activities
Advent’s cash flows used in investing activities were approximately $(25.6) million for the year ended December 31, 2021, which related to the acquisition of fixed assets and the amounts paid for the acquisition of UltraCell LLC on February 18, 2021 and the acquisition of SerEnergy and FES on August 31, 2021, net of cash acquired. Advent expects to invest substantially in fixed assets, plant and equipment in the near future as it executes its product development programs.
Advent’s cash flows from investing activities were approximately $(0.1) million for the year ended December 31, 2020, which related to the acquisition of fixed assets.
Cash Flows from Financing Activities
Advent’s cash flows from financing activities were approximately $141.5 million for the year ended December 31, 2021, which related to the cash amount contributed at the date of the Merger (February 4, 2021) and proceeds from issuance of common stock and additional paid-in capital from warrants exercise.
Advent’s cash flows from financing activities were approximately $0.9 million for the year ended December 31, 2020, which related to proceeds of issuance of preferred stock and repayment of loan.
Contract Assets and Contract Liabilities
Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. As of December 31, 2021, and 2020, Advent recognized contract assets of $1,617,231 and $85,930, respectively on the consolidated balance sheets. The balance as of December 31, 2021 includes an amount of $587,267 from the SerEnergy and FES acquisition.
Advent recognizes contract liabilities when we receive customer payments or have the unconditional right to receive consideration in advance of the performance obligations being satisfied on our contracts. We receive payments from customers based on the terms established in our contracts. Contract liabilities are classified as either current or long-term liabilities in the consolidated balance sheets based on the timing of when we expect to recognize the related revenue. As of December 31, 2021, and 2020, Advent recognized contract liabilities of $1,118,130 and $167,761, respectively, in the consolidated balance sheets. During the year ended December 31, 2021, the Company recognized the whole amount of $167,761 in revenues. The balance as of December 31, 2021 amounting to $1,118,130 was from the SerEnergy and FES acquisition.
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 consolidated 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. Advent 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, 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. See Note 2 in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information about the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the years ended December 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, Advent 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 date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended, (b) the last date of Advent’s fiscal year in which Advent has total 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 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 modified retrospective approach to all 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 accounting guidance in effect for that period.
In accordance with ASC 606, revenue is recognized when control of the promised 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 revenue 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 |
| • | recognize revenue as the performance obligation is satisfied. |
With significant and recurring customers, we negotiate written master agreements as framework agreements (general terms and conditions of trading), following individual 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 be the purchase orders agreed with customers.
We have assessed that each product sold is a single performance obligation because the promised goods are distinct on their own and within the context of the 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 contract. 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 principal. 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 two years) as it does not provide a service to the customer beyond fixing defects that existed at the time 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 contract and recognize 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 at contract inception the variable consideration and adjust the transaction price only to the extent that it is probable that a significant reversal in the amount 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 completion of the performance obligation is less than one year. Payment terms are in the majority fixed and do not include variable consideration, except from volume rebates.
Revenue 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 recognize revenue as those performance obligations are satisfied.
In the majority of cases of product sales, revenue is recognized at a point in time when the customer obtains control of the respective goods that is, when the products are shipped from our facilities as control passes to the customer in accordance with agreed contracts and the stated 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 the 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 the grantor and proceeds to its distribution to the parties agreed in the process specified in the program. We assessed whether it acts as a principal or agent in its role as a coordinator for specific grants and has concluded that in all related transactions it acts as an agent.
Goodwill
The Company 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 recorded 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 measurement period, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statement of operations.
For significant acquisitions, the Company obtains independent appraisals and valuations of the intangible (and certain tangible) assets acquired and certain 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 context 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 acquired business, estimates of cost avoidance, the nature of the business acquired, the specific characteristics of the identified intangible assets and 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.
We conduct a goodwill impairment analysis annually in the fourth fiscal quarter, or more frequently, if changes in facts and circumstances indicate that the fair value of our reporting units may be less than their carrying amounts. In testing goodwill for impairment, the Company first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. When the Company determines a fair value test is necessary, it estimates the fair value of a reporting unit and compares the result with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment is recorded equal to the amount by which the carrying value exceeds the fair value, up to the amount of goodwill associated with the reporting unit. Currently, we identify one reporting unit.
Income Taxes
Advent follows the asset and liability method of accounting for income taxes under ASC 740, Income Taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. This method also requires the recognition of future tax benefits, such as net operating loss carry forwards, to the extent that it is more likely than not that such benefits will be realized. 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. Valuation allowances are reassessed periodically to determine whether it is more likely than not that the tax benefits will be realized in the future and if any existing valuation allowance should be released.
Part of the Advent’s business activities are conducted through its subsidiaries outside of U.S. Earnings from these subsidiaries are generally indefinitely reinvested in the local businesses. Further, local laws and regulations may also restrict certain subsidiaries from paying dividends to their parents. Consequently, Advent generally does not accrue income taxes for the repatriation of such earnings in accordance with ASC 740, “Income Taxes.” To the extent that there are excess accumulated earnings that we intend to repatriate from any such subsidiaries, we recognize deferred tax liabilities on such foreign earnings.
Advent assesses its income tax positions and records tax benefits for all years subject to examination based on the evaluation of the facts, circumstances, and information available at each reporting date. For those tax positions with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information, Advent records a tax benefit. For those income tax positions that are not likely to be sustained, no tax benefit is recognized in the consolidated financial statements. Advent recognizes interest and penalties related to uncertain tax positions as part of the provision for income taxes.
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. For those income tax positions that are not likely to be sustained, no tax benefit is recognized in the consolidated financial statements. Advent recognizes interest and penalties related to uncertain tax positions as part of the provision for income taxes.
For the years ended December 31, 2021 and 2020, net income tax benefits (provisions) of $922,510 and $0, respectively, have been recorded in the consolidated statements of operations. Advent is currently not aware of any issues under review that could result in significant accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities.
The Company and its U.S. subsidiaries may be subject to potential examination by U.S. federal, state and city, while the Company’s subsidiaries outside U.S. may be subject to potential examination by their 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 tax laws in the countries where business activities of Company’s subsidiaries are conducted. 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.
Warrant Liability
The Company accounts for the 26,369,557 warrants (comprising of 22,029,279 Public Warrants and 3,940,278 Private Placement Warrants) issued in connection with the initial public offering and the 400,000 Working Capital Warrants issued at the consummation of the Business Combination in accordance with ASC 815-40-15-7D. If the warrants do not meet the criteria for equity treatment, they must be recorded as liabilities. We have determined that only the Private Placement Warrants and 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 fair 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 Company’s statement of operations. The fair value of the Private Placement Warrants 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 and the Working Capital Warrants has been determined based on a modified Black-Scholes-Merton model for the year ended December 31, 2021.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by Advent as of the specified 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 results of operations under adoption.
See Note 2 in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information about recent accounting pronouncements, the timing of their adoption and Advent’s assessment, to the extent Advent has made one, of their potential impact on Advent’s financial condition and results of operations.
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 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 interest, 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 following tables show a reconciliation of net income / (loss) to EBITDA and Adjusted EBITDA for the three months ended December 31, 2021 and 2020 and for the years ended December 31, 2021 and 2020.
| EBITDA and Adjusted EBITDA | | Three months ended December 31, (Unaudited) | | | Years Ended December 31, | |
| (in Millions of US dollars) | | 2021 | | | 2020 | | | $ change | | | 2021 | | | 2020 | | | $ change | |
| Net loss | | $ | (9.00 | ) | | $ | (1.70 | ) | | | (7.30 | ) | | $ | (20.52 | ) | | $ | (3.12 | ) | | | (17.40 | ) |
| Depreciation of property and equipment | | $ | 0.38 | | | $ | 0.00 | | | | 0.38 | | | $ | 0.56 | | | $ | 0.02 | | | | 0.54 | |
| Amortization of intangibles | | $ | 0.71 | | | $ | 0.00 | | | | 0.71 | | | $ | 1.18 | | | $ | 0.00 | | | | 1.18 | |
| Finance (income) costs, net | | $ | 0.02 | | | $ | 0.01 | | | | 0.01 | | | $ | 0.05 | | | $ | 0.01 | | | | 0.04 | |
| Other (income) expenses, net | | $ | 0.06 | | | $ | 0.04 | | | | 0.02 | | | $ | (0.02 | ) | | $ | 0.02 | | | | (0.04 | ) |
| Foreign exchange differences, net | | $ | 0.04 | | | $ | 0.00 | | | | 0.04 | | | $ | 0.04 | | | $ | 0.03 | | | | 0.01 | |
| Income tax | | $ | (0.87 | ) | | $ | 0.00 | | | | (0.87 | ) | | $ | (0.92 | ) | | $ | 0.00 | | | | (0.92 | ) |
| EBITDA | | $ | (8.66 | ) | | $ | (1.65 | ) | | | (7.01 | ) | | $ | (19.63 | ) | | $ | (3.04 | ) | | | (16.59 | ) |
| Net change in warrant liability | | $ | (6.91 | ) | | $ | 0.00 | | | | (6.91 | ) | | $ | (22.74 | ) | | $ | 0.00 | | | | (22.74 | ) |
| One-Time Transaction Related Expenses (1) | | $ | 0.00 | | | $ | 0.00 | | | | 0.00 | | | $ | 5.87 | | | $ | 0.00 | | | | 5.87 | |
| One-Time Transaction Related Expenses (2) | | $ | 0.00 | | | $ | 0.00 | | | | 0.00 | | | $ | 0.89 | | | $ | 0.00 | | | | 0.89 | |
| Executive severance (3) | | $ | 0.00 | | | $ | 0.00 | | | | 0.00 | | | $ | 2.44 | | | $ | 0.00 | | | | 2.44 | |
| Adjusted EBITDA | | $ | (15.57 | ) | | $ | (1.65 | ) | | | (13.92 | ) | | $ | (33.17 | ) | | $ | (3.04 | ) | | | (30.13 | ) |
(1) Bonus awarded after consummation of the Business Combination effective February 4, 2021.
(2) Transaction costs related to the acquisition of SerEnergy/FES.
(3) Former Financial Officer resignation.
Adjusted Net Income/(Loss)
This supplemental 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 one-time transaction costs. Adjusted Net Loss differs from the most comparable GAAP measure, net income / (loss), primarily because it does not include one-time transaction costs and warrant liability changes. The following table shows a reconciliation of net income/(loss) for three months ended December 31, 2021 and 2020 and for the years ended December 31, 2021 and 2020.
| Adjusted Net Loss | | Three months ended December 31, (Unaudited) | | | Years Ended December 31, | |
| (in Millions of US dollars) | | 2021 | | | 2020 | | | $ change | | | 2021 | | | 2020 | | | $ change | |
| Net loss | | $ | (9.00 | ) | | $ | (1.70 | ) | | | (7.30 | ) | | $ | (20.52 | ) | | $ | (3.12 | ) | | | (17.40 | ) |
| Net change in warrant liability | | $ | (6.91 | ) | | $ | 0.00 | | | | (6.91 | ) | | $ | (22.74 | ) | | $ | 0.00 | | | | (22.74 | ) |
| One-Time Transaction Related Expenses (1) | | $ | 0.00 | | | $ | 0.00 | | | | 0.00 | | | $ | 5.87 | | | $ | 0.00 | | | | 5.87 | |
| One-Time Transaction Related Expenses (2) | | $ | 0.00 | | | $ | 0.00 | | | | 0.00 | | | $ | 0.89 | | | $ | 0.00 | | | | 0.89 | |
| Executive severance (3) | | $ | 0.00 | | | $ | 0.00 | | | | 0.00 | | | $ | 2.44 | | | $ | 0.00 | | | | 2.44 | |
| Adjusted Net Loss | | $ | (15.91 | ) | | $ | (1.70 | ) | | | (14.21 | ) | | $ | (34.06 | ) | | $ | (3.12 | ) | | | (30.94 | ) |
(1) Bonus awarded after consummation of the Business Combination effective February 4, 2021.
(2) Transaction costs related to the acquisition of SerEnergy/FES.
(3) Former Financial Officer resignation.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Advent 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.
Interest Rate Risk
Advent holds cash and cash equivalents for working capital, investment and general corporate purposes. As of December 31, 2021, Advent had a cash balance of approximately $79.8 million, consisting of operating and savings accounts which are not affected by changes in the general level of U.S. interest rates. Advent is not expected to be materially exposed to interest rate risk in the future as it intends to take on limited debt finance.
Inflation Risk
Advent does not believe that inflation currently has a material effect on its business.
Foreign Exchange Risk
Advent has costs and revenues denominated in Euros, Danish Krone and Philippine pesos, and therefore is exposed to fluctuations in exchange rates. 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 realize a portion of our revenues and costs in foreign currencies, and therefore expect to put in place appropriate foreign exchange risk mitigation features in due course.
| Item 8. | Financial Statements and Supplementary Data. |
This information required by this item may be found on pages F-1 through F-45 of this annual report on Form 10-K.
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
None.
| Item 9A. | Controls and Procedures. |
Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial and accounting officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on the foregoing, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective as of the end of the period covered by this Report.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company 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’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In accordance with guidance issued by the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. On August 31, 2021, the Company acquired SerEnergy and FES (the “acquired entities”), as discussed in note 3 “Business Combination” of the Company’s notes to consolidated financial statements. We have excluded the acquired entities from our assessment of internal control over financial reporting as of December 31, 2021 because they were acquired by us during 2021. The acquired entities are wholly-owned subsidiaries whose total assets and total revenues excluded from our assessment of internal control over financial reporting collectively represent approximately 43% and 33%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions recorded necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles. Our policies and procedures also provide reasonable assurance that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
As of December 31, 2021, our management completed its assessment of the remediation efforts related to the material weakness in internal control over financial reporting reported in our Form 10-Q for the quarter-ended March 31, 2021. Our management has designed and implemented additional control and review procedures, to help us better achieve our disclosure objectives. As a result of the adoption of such procedures and the internal controls implemented during the year-ended December 31, 2021, our management has determined that the previously reported material weakness had been remediated as of December 31, 2021.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. Based on the assessment, management believes that, as of December 31, 2021, our internal control over financial reporting is effective.
Changes in Internal Control over Financial Reporting
Other than the disclosure above, there have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| Item 9B. | Other Information. |
None.
PART III
| Item 10. | Directors, Executive Officers and Corporate Governance. |
Executive Officers and Board of Directors
Our business and affairs are managed by or under the direction of our Board. The table below lists the persons who currently serve as executive officers and directors.
| Name | Age | Position |
Vassilios Gregoriou | 57 | Chairman, Chief Executive Officer and Director |
Kevin Brackman | 49 | Chief Financial Officer |
| Christos Kaskavelis | 53 | Chief Marketing Officer |
Emory De Castro | 64 | Chief Technology Officer and Director |
| James F. Coffey | 59 | Chief Operating Officer and General Counsel |
Katherine E. Fleming | 56 | Director |
Anggelos Skutaris | 57 | Director |
Katrina Fritz | 49 | Director |
The following is a brief biography of each executive officer and director:
Vassilios Gregoriou has been Chairman and CEO of Advent since inception. Dr. Gregoriou cofounded Advent Technologies Inc. in 2012. In addition, Dr. Gregoriou is an internationally known scientist with research and/or managerial positions in both the U.S. (Northeastern, MIT, Polaroid, Princeton) and Greece (NHRF, FORTH) over his 30-year career so far in the technology sector. His research activity extends over a wide area of subjects in the renewable energy space that include the areas of flexible photovoltaics based on organic semiconductors, optically active materials based on conjugated oligomers and polymer nanocomposites. His published work as co-author includes three books and more than 100 scientific papers. He is also co-inventor of 15 patents. Dr. Gregoriou has more than 25 years of experience in the U.S. market. He has extensive experience in the technical development of new products and in the management of such activities. He holds a Ph.D. in Physical Chemistry from Duke University and he has attended the MBA program at Northeastern University. He was also a NRSA award recipient at Princeton University. He also served as President of Society for Applied Spectroscopy(SAS) in 2001. Dr. Gregoriou is well-qualified to serve on the board of directors due to his extensive scientific, managerial and industry experience.
Kevin Brackman has been Chief Financial Officer of Advent since July 2021. Prior to joining the Company, Mr. Brackman served as Executive Vice President, Chief Financial Officer of Myers Industries, a publicly traded corporation with internationally located manufacturing and sales operations in the polymer production sector. Before his promotion to Chief Financial Officer in 2018, he served as Myers Industries’ Chief Accounting Officer and Corporate Controller. Prior to joining Myers Industries in 2015, Mr. Brackman was Director of Financial Planning and Analysis, Financial Reporting and Technical Accounting at Ingersoll-Rand and previously excelled in a variety of positions at Chiquita Brands International, including Assistant Corporate Controller and Controller - North American operations. Mr. Brackman received his bachelor’s degree in Accounting and Finance from Miami University.
Christos Kaskavelis joined Advent as Chief Marketing Officer in 2019. From 2015 to 2016 he served as Managing Director of Mamaya IKE, a Greek publishing and media consulting company. From 2016 to 2018, he was a research scholar at the MIT Media Lab in Boston, Massachusetts. He has been a seed investor in the Company, an angel investor, and has served on its board of directors since the first day. He is a serial entrepreneur in the tech industry and primarily digital marketing, with successful exits in both Nasdaq and London Stock Exchanges. He has designed and been responsible for enterprise software systems designed for Pratt & Whitney, Analog Devices, General Electric and Lucent Technologies in the areas of Just-In-Time (JIT) manufacturing, Supply Chain Management and Production Scheduling. He holds a Ph.D. in Supply Chain Management as well as an M.Sc. in Manufacturing Engineering from Boston University, a B.Sc. in Electrical Engineering and a B.A. in Business Economics from Brown University.
Emory De Castro has been Advent’s Chief Technology Officer since 2013. Dr. De Castro is responsible for the overall technical, manufacturing and business development operations for Advent. Prior to joining Advent, Dr. De Castro was a Vice President, Business Management and the site manager for BASF Fuel Cell Inc. in Somerset NJ. At BASF Dr. De Castro led marketing and sales, business development, quality control, and R&D direction all cumulating in nearly a four-fold increase in revenues. As the Executive Vice President at the E-TEK Division, De Nora North America he managed operations, created a global brand, and expanded the organization’s fuel cell component business in Asia and Europe. Dr. De Castro has over 20 patent applications spanning fuel cell materials and catalysts, electrochemical technology, sensors, and a beer bottle cap that extends shelf life. He is the recipient of the 2013 Department of Energy Award for Manufacturing R&D in lowering the cost of gas diffusion electrodes and the 2005 ECS New Technology Award to E-TEK Division, for introducing and commercializing a new electrolysis technology. Emory De Castro received his Ph.D. from the Department of Chemistry at the University of Cincinnati and a B.S. in Chemistry from Duke University. Dr. De Castro is well-qualified to serve on our board of directors due to his extensive scientific and technological experience.
James F. Coffey has served as General Counsel and Corporate Secretary of Advent since March 2020. Beginning in 2018, while a partner at a national Am Law 100 law firm, Jim served as Advent’s outside legal counsel. Mr. Coffey has over thirty years of experience in corporate and securities law, mergers and acquisitions, venture capital and corporate finance, and intellectual property law. He has extensive international experience having closed transactions in both North and South America, Europe, and China. Throughout the course of his career, Jim has developed strong relationships and strategic contacts within the clean energy and technology sectors and specific experience in the fuel cell industry. From 2013 to 2017, he served as general counsel to another HT PEM fuel cell company that was a customer of Advent. Mr. Coffey was a Gerald L. Wallace Scholar at New York University School of Law where he received an LL.M. in Corporate Law. He received his J.D. from the New England School of Law, and his B.A., cum laude, from Providence College. Mr. Coffey is listed in The Best Lawyers in America® for Mergers and Acquisitions. He is recognized for his work in intellectual property law by the IAM Patent 1000. Mr. Coffey was named a Massachusetts Super Lawyer by Law and Politics magazine. He is AV® rated by Martindale-Hubbell. Mr. Coffey is a fellow of the Boston Bar Foundation and the American Bar Foundation.
Katherine E. Fleming has been a director of Advent since February 2021. Ms. Fleming has over fifteen years’ experience in Higher Education leadership and has been the Provost of New York University since 2016, with responsibility for allocating financial resources and setting strategic priorities, and with oversight of all Deans and Directors. From 2007-2011 she directed the Institut Remarque at the Ecole Normale Superieure in Paris, and from 2012-2016 she served as the President of the Board of the University of Piraeus. A historian by training, she earned a BA from Barnard College of Columbia University, an MA from the University of Chicago and a Ph.D. from the University of California, Berkeley. She was granted honorary Greek citizenship by the Hellenic Republic in 2015 and in 2019 was named by France to the Legion d’Honneur. Dr. Fleming is well-qualified to serve on the board of directors due to her extensive financial and scholastic experience.
Anggelos Skutaris has been a director of Advent since February 2021. Mr. Skutaris has a BSc in Economics from Arizona State University and an MBA from the Thunderbird School of Global Management. He has more than 30 years of International experience in banking, finance, management, treasury and investments. He is currently a member of the Incorporation Committee and Chief Investment Officer for Power Bank, a Qatar-based financial institution with a mission to provide Islamic financing to the global energy sector. Key positions he held in the past include: Chief Investment Officer (Janus Continental Group, JCG), Head of Treasury Operations & Transformation (Qatar Airways), Managing Partner (New Symbol Global Advisors), Chief Executive Officer (PiraeusCapital Management), Founder & CEO (OliveTree Management Associates), Group Treasurer (Titan Cement), Head of Equity Financing (Calyon Securities) and Director of Equity Financing (Credit Suisse). Whilst at Titan cement, Mr. Skutaris was instrumental in issuing the largest corporate syndicated facility in Greece, a 5-year, €800 million transaction. Mr. Skutaris is well-qualified to serve on the board of directors due to his extensive business development and financial experience.
Katrina Fritz has been a director of Advent since February 2021. Ms. Fritz is the Executive Director of the Stationary Fuel Cell Collaborative, leading education and outreach activities with the guidance of state agencies, local air districts and industry. She also works with the National Fuel Cell Research Center on state level clean energy policy and market development. Katrina currently serves as an expert to the European Commission on Horizon 2020 programs for research and innovation and was appointed to the New Jersey Fuel Cell Task Force in January 2021. As Principal of KM Fritz LLC, Katrina has provided advisory and consulting services to global industrial firms related to business and communications strategy in distributed energy generation markets. She has held leadership positions in numerous trade associations and on advisory boards including: The California Hydrogen Business Council, the International Energy Agency’s Fuel Cell Working Group; the U.S. Fuel Cell and Hydrogen Energy Association; the Alliance for Clean Energy New York; the Pacific Clean Energy Application Center at University of California, Berkeley; and the Connecticut Fuel Cell and Hydrogen Coalition. Katrina has held leadership positions at ClearEdge Power (formerly UTC Power), Plug Power and Case Western Reserve University, leading strategic planning, government relations, business development, and corporate communications. She also worked in the software industry in Santa Cruz, California and Watford, United Kingdom. Katrina has a BA degree from the University of Michigan and an MBA from the Weatherhead School of Management at Case Western Reserve University. Ms. Fritz is well-qualified to serve on the board of directors due to her extensive leadership and clean fuel technology experience.
Board Composition
Our authorized board of directors consists of seven members. As of March 31, 2022, the board of directors had two vacancies. In accordance with the second amended and restated certificate of incorporation, our board of directors is divided into three classes, Classes I, II and III, each to serve a three-year term. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following the election. Directors will not be able to be removed during their term except for cause. The directors are divided among the three classes as follows:
| • | the Class I directors are Anggelos Skutaris, and Katrina Fritz, and their terms will expire at the annual meeting of stockholders to be held in 2024; |
| • | the Class II director is Katherine E. Fleming, and her term will expire at the annual meeting of stockholders to be held in 2022; and |
| • | the Class III directors are Vassilios Gregoriou, and Emory De Castro, and their terms will expire at the annual meeting of stockholders to be held in 2023. |
We expect that any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of the board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.
Director Independence
The board of directors has determined that each of Ms. Fleming, Mr. Skutaris, and Ms. Fritz are independent directors as defined in Nasdaq rules and the applicable SEC rules. For further information, see “Item 13. Certain Relationships and Related Transactions, and Director Independence.”
Board Leadership Structure
The leadership of the Board is currently structured so that it is led by the Chairman, Vassilios Gregoriou, who also serves as the Company’s Chief Executive Officer. When the Chairman of the Board is not an independent director, a Lead Director may be elected annually by the Board. The Board has elected Mr. Skutaris to serve as Lead Director.
Our Board has concluded that our current leadership structure is appropriate at this time. However, our Board will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.
Committees of the Board of Directors
The board of directors has the authority to appoint committees to perform certain management and administration functions. The Board has established an audit committee, compensation committee and nominating and corporate governance committee.
Audit Committee
Our audit committee consists of Mr. Skutaris, Ms. Fritz and Ms. Fleming. The board of directors has determined that each member is independent under the Nasdaq Stock Market listing standards and Rule 10A-3(b)(1) under the Exchange Act. The chairperson of our audit committee is Mr. Skutaris. Our board of directors has determined that Mr. Skutaris qualifies as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K and possesses financial sophistication, as defined under the rules of Nasdaq Stock Market.
The primary purpose of the audit committee is to discharge the responsibilities of the board of directors with respect to our accounting, financial, and other reporting and internal control practices and to oversee our independent registered accounting firm. Specific responsibilities of our audit committee include:
| • | selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements; |
| • | helping to ensure the independence and performance of the independent registered public accounting firm; |
| • | discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results; |
| • | developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; |
| • | reviewing policies on risk assessment and risk management; |
| • | reviewing related party transactions; |
| • | obtaining and reviewing a report by the independent registered public accounting firm at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and |
| • | by the independent registered public accounting firm |
The compensation committee consists of Mr. Skutaris, Ms. Fleming and Ms. Fritz. The chairperson of the compensation committee is Mr. Skutaris. The primary purpose of the compensation committee is to discharge the responsibilities of the board of directors to oversee its compensation policies, plans and programs and to review and determine the compensation to be paid to its executive officers, directors and other senior management, as appropriate.
Specific responsibilities of the compensation committee include:
| • | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| • | reviewing and approving the compensation of our other executive officers; |
| • | reviewing and recommending to our board of directors the compensation of our directors; |
| • | reviewing our executive compensation policies and plans; |
| • | reviewing and approving, or recommending that our board of directors approve, incentive compensation and equity plans, severance agreements, change-of-control protections and any other compensatory arrangements for our executive officers and other senior management, as appropriate; |
| • | selecting independent compensation consultants and assessing whether there are any conflicts of interest with any of the committee’s compensation advisors; |
| • | assisting management in complying with our proxy statement and Annual Report disclosure requirements; |
| • | if required, producing a report on executive compensation to be included in our annual proxy statement; |
| • | reviewing and establishing general policies relating to compensation and benefits of our employees; and |
| • | reviewing our overall compensation philosophy. |
Role of the Compensation Consultant
In accordance with the Compensation Committee Charter, the Compensation Committee has the authority to engage, retain and terminate a compensation consultant. The Compensation Committee also has the sole authority to approve the fees of such consultant. The Compensation Committee engaged ClearBridge Compensation Group LLC (“ClearBridge”) as its independent compensation consultant. ClearBridge reports directly to the Compensation Committee, which has authority under the Compensation Committee Charter to retain compensation consultants, although its representatives may also meet with management from time to time.
Services performed by ClearBridge for the Compensation Committee include, but are not limited to:
| 1. | reviewing and formalizing the Company’s compensation philosophy; |
| 2. | preparation of competitive benchmarking reviews regarding executive compensation; |
| a. | In 2021, the Company elected to forgo establishing a compensation peer group, and as a result relied on survey data for benchmark purposes, scoped to the Company’s size; |
| 3. | review of cash bonuses paid to executive officers; |
| 4. | review of long-term incentive awards in connection with the Business Combination; |
| 5. | evaluation of compensation program design for 2021; |
| 6. | review and determine go-forward non-employee director compensation program; and
|
| 7. | analysis of current trends in executive compensation, and updates regarding applicable legislative and governance activity. |
The Compensation Committee determined that the services provided by ClearBridge to the Compensation Committee did not give rise to any conflicts of interest. The Compensation Committee made this determination by assessing the independence of ClearBridge under the applicable rules adopted by the SEC and incorporated into the Nasdaq Corporate Governance Requirements. In making this assessment, the Compensation Committee also considered ClearBridge’s written correspondence to the Compensation Committee that affirmed the independence of ClearBridge and the consultants and employees who provide services to the Compensation Committee on executive compensation matters.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Ms. Fleming and Ms. Fritz. The board of directors has determined each proposed member is independent under Nasdaq listing standards. The chairperson of our nominating and corporate governance committee is Ms. Fleming.
Specific responsibilities of our nominating and corporate governance committee include:
| • | identifying, evaluating and selecting, or recommending that our board of directors approve, nominees for election to our board of directors; |
| • | evaluating the performance of our board of directors and of individual directors; |
| • | reviewing developments in corporate governance practices; |
| • | evaluating the adequacy of our corporate governance practices and reporting; |
| • | reviewing management succession plans; and |
| • | developing and making recommendations to our board of directors regarding corporate governance guidelines and matters. |
Code of Business Conduct and Ethics
The Company’s Code of Business Conduct and Ethics applies to all of its employees, officers and directors, including those officers responsible for financial reporting. The Code of Business Conduct and Ethics is available on its website at www.advent.energy. Information contained on or accessible through such website is not a part of this Annual Report, and the inclusion of the website address in this Annual Report is an inactive textual reference only. The Company intends to disclose any amendments to the Code of Business Conduct and Ethics, or any waivers of its requirements, on its website to the extent required by the applicable rules and exchange requirements.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who beneficially own more than 10% of the Company’s common stock to file with the SEC reports showing initial ownership of and changes in ownership of the Company’s common stock and other registered equity securities. Based solely upon our review of the copies of such forms or written representations from certain reporting persons received by us with respect to fiscal year 2021, the Company believes that its directors and executive officers and persons who own more than 10% of a registered class of its equity securities have complied with all applicable Section 16(a) filing requirements for fiscal year 2021, except Kevin Brackman filed a late Form 3.
| Item 11. | Executive Compensation. |
Summary Compensation Table
The following table sets forth certain information about the compensation paid or accrued during the years ended December 31, 2021 and 2020 to our Chief Executive Officer and each of our two most highly compensated executive officers other than our Chief Executive Officer who were serving as executive officers at December 30, 2021, and whose annual compensation exceeded $100,000 during such year or would have exceeded $100,000 during such year if the executive officer were employed by the Company for the entire fiscal year (collectively the “named executive officers”).
| Name and Principal Position | Fiscal Year | | Salary ($)(1) | | | Bonus ($)(2)(3) | | | Stock Awards ($) (4) | | | Option Awards ($) (4) | | | Non-Equity Incentive Plan Compensation ($) | | | All Other Compensation ($) | | | Total ($) | |
| Vassilios Gregoriou | 2021 | | $ | 800,000 | | | $ | 3,000,000 | | | $ | 9,553,142 | | | $ | 4,647,475 | | | $ | 1,200,000 | | | | — | | | $ | 19,200,617 | |
| Chairman of the Board of Directors and Chief Executive Officer | 2020 | | $ | 170,000 | | | | — | | | $ | 323,966 | | | | — | | | | — | | | | — | | | $ | 493,966 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Christos Kaskavelis (5) | 2021 | | $ | 358,186 | | | $ | 1,110,000 | | | $ | 3,582,426 | | | $ | 1,742,802 | | | $ | 358,186 | | | | — | | | $ | 7,151,600 | |
| Chief Marketing Officer | 2020 | | $ | 120,000 | | | | — | | | $ | 173,896 | | | | — | | | | — | | | | — | | | $ | 293,896 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Emory De Castro | 2021 | | $ | 350,000 | | | $ | 1,110,000 | | | $ | 3,582,426 | | | $ | 1,742,802 | | | $ | 350,000 | | | | — | | | $ | 7,135,228 | |
| Chief Technology Officer | 2020 | | $ | 150,000 | | | | — | | | $ | 173,896 | | | | — | | | | — | | | | — | | | $ | 323,896 | |
| (1) | As of December 31, 2020, an aggregate of $613,970, $120,000, and $426,422 was due in unpaid compensation for prior service to, respectively, Messrs. Gregoriou, Kaskavelis, and De Castro. These amounts were repaid to Messrs. Gregoriou, Kaskavelis, and De Castro in connection with the Business Combination in February 2021. |
| (2) | The Company entered into transaction bonus letter agreements with each of Messrs. Gregoriou, Kaskavelis, and De Castro, which entitled each executive to receive a transaction bonus which was paid promptly following the Business Combination, contingent upon such executive’s continued employment through the consummation of the Business Combination and execution of a general release of claims. |
| (3) | The Company entered into employment agreements with each of Messrs. Gregoriou, Kaskavelis, and De Castro, which entitled each executive to receive a one-time sign-on bonus. |
| (4) | The amounts included under the “Stock Awards” and “Option Awards” columns reflect the aggregate grant date fair value of such awards granted during the 2021 and 2020 fiscal years. For more information regarding these share-based compensation arrangements, see Note 16 to the audited Consolidated Financial Statements for the year ended December 31, 2021 included as part of this filing. |
| (5) | Compensation for Mr. Kaskavelis was paid to Mamaya IKE, a Greek company owned by Mr. Kaskavelis and his wife. |
Narrative Disclosure to Summary Compensation Table
Compensation Philosophy and Objectives
The Company operates in a dynamic and rapidly evolving environment, which requires a highly-skilled and technical workforce. As a result, the Company places great emphasis on its ability to attract, retain, and motivate top talent in the industry. The Company achieves these objectives by creating an appropriate balance between achieving short-term results and creating long-term sustainable value to shareholders that reinforces the linkage between pay and performance.
Elements of Executive Compensation
The compensation of executives of the Company includes three main elements: (i) base salary; (ii) an annual bonus; and (iii) long-term equity incentives. Perquisites and personal benefits are not a significant element of compensation for the Company’s executive officers.
Base salary is provided as a fixed source of compensation for the Company’s executive officers. Adjustments to base salaries are reviewed annually and as warranted throughout the year to reflect promotions or other changes in the scope of an executive officer’s role or responsibilities, as well as to maintain market competitiveness.
On February 4, 2021, from fiscal year 2020 to 2021, Mr. Gregoriou’s annual base salary was increased from $170,000 to $800,000; Mr. Kaskavelis’s annual base salary was increased from $120,000 to $358,186; and Mr. De Castro’s annual base salary was increased from $150,000 to $350,000.
As of December 31, 2020, an aggregate of $613,970, $120,000, and $426,422 was due in unpaid compensation for prior service to, respectively, Messrs. Gregoriou, Kaskavelis, and De Castro. These amounts were repaid to Messrs. Gregoriou, Kaskavelis, and De Castro in connection with the Business Combination.
In 2021, the named executive officers were each eligible to receive an annual cash incentive award, based on the achievement of pre-approved key performance objectives determined by the Compensation Committee.
As provided in their respective employment agreements, the target bonus amount for Mr. Gregoriou was 150% of his base salary and for Messrs. Kaskavelis and De Castro were 100% of their base salaries. Actual bonus payouts vary based on Compensation Committee assessment of executive performance versus pre-established key performance indicators.
In January 2022, the Compensation Committee reviewed the Company’s performance in 2021 relative to these performance objectives, and approved bonuses for the named executive officers equal to 100% of the bonus targets. The bonuses, which were paid in February 2022, were as follows: (i) Mr. Gregoriou, $1,200,000, (ii) Mr. Kaskavelis, $358,186, and (iii) Mr. De Castro, $350,000.
In 2021, the Company adopted the Advent Technologies Holdings, Inc. 2020 Incentive Plan (the “Equity Incentive Plan”). The Equity Incentive Plan advances the Company’s interests by providing for the grant to our employees, directors, consultants and advisors of stock options, SARs, restricted and unrestricted stock and stock units, performance awards and other awards that are convertible into or otherwise based on our common stock.
Following the Business Combination, on June 11, 2021, the Compensation Committee made grants to select senior executives. The grants were made to recognize each executive’s role and contributions to date, including outstanding efforts towards a successful transaction, as well as to incentivize and to retain the executives, and to further align them with the post-Business Combination stockholders. Specifically, the Company granted 922,118 time-vested restricted stock units (“RSUs”) and stock options to purchase 922,118 shares of common stock to Vassilios Gregoriou and 345,794 RSUs and stock options to purchase 345,794 shares of common stock to each of Christos Kaskavelis and Emory De Castro. The stock options have an exercise price of $10.36 per share and all of the awards vest 25% upon each annual anniversary of February 4, 2021, the vesting commencement date, until the fourth anniversary of the vesting commencement date.
In recognition of past service, in 2020, each of our executive officers was granted shares of common stock of Advent Technologies Inc. at a discounted purchase price of $0.01 per share. These shares were issued pursuant to the terms of either the Advent Technologies Inc. 2018-2020 Stock Grant Plan or the Advent Technologies Inc. 2020-2023 Stock Grant Plan (collectively, the “Stock Grant Programs”). Pursuant to the Stock Grant Programs, Mr. Gregoriou was granted 512,080 shares on March 26, 2020 and 297,834 shares on September 9, 2020, and each of Messrs. Kaskavelis and De Castro was granted 256,040 shares on March 26, 2020 and 178,701 shares on September 9, 2020. In general, under the Stock Grant Programs, if the employee ceased to be employed with Advent for any reason prior to December 31, 2020, Advent had a limited repurchase period to repurchase the granted shares at a price of $0.01 per share. This limited repurchase right lapsed on December 31, 2020.
Transaction Bonus Letter Agreements with Executive Officers
Advent entered into transaction bonus letter agreements with each of Messrs. Gregoriou, Kaskavelis, and De Castro, which entitled each executive to receive a transaction bonus that was payable promptly following the Business Combination, contingent upon such executive’s continued employment through the consummation of the Business Combination and execution of a general release of claims. The transaction bonuses, which were paid at the time of the Business Combination in February 2021, were as follows: (i) for Mr. Gregoriou, $2,500,000, and (ii) $860,000 for each of Messrs. Kaskavelis and De Castro.
One-Time Bonuses
On October 12, 2020, in connection with the execution of the Merger Agreement and the announcement of the Merger, Advent entered into employment agreements, with each of Messrs. Gregoriou and De Castro. In addition, Advent entered into an employment agreement with Mr. Kaskavelis on December 31, 2020. As part of the employment agreements, Advent agreed to pay one-time sign-on bonuses payable in two installments: (i) 50% on the first payroll date following the consummation of the Business Combination and (ii) 50% to be paid on the first payroll date following the one-year anniversary of the consummation of the Business Combination, subject to the applicable executive’s employment through the relevant payment date. The one-time bonuses were as follows: (i) Mr. Gregoriou, $500,000 and (ii) Messrs. Kaskavelis and De Castro, $250,000.
Employment Agreements
Advent is a party to certain offer letters with each of the named executive officers that set forth the initial terms and conditions of the officer’s employment with Advent, each of which has since been superseded by new employment agreements as described in “Executive Compensation-Employment Agreements and Other Arrangements with Executive Officers and Directors-Employment and Consulting Arrangements with Executive Officers and Directors” below. The material terms of these offer letters are summarized below.
Mr. Gregoriou. On December 3, 2012, Advent entered into an offer letter with Mr. Gregoriou, which provided for an annual base salary of $170,000, eligibility to receive an annual performance bonus of cash and performance stock awards and an initial grant of restricted stock awards in an amount equal to 4% of outstanding common stock on Mr. Gregoriou’s date of hire. Pursuant to the offer letter, if Mr. Gregoriou’s employment is terminated without “cause” or if he resigns for “good reason” (as each such term was defined in the offer letter), he is entitled to (i) 6 months’ base salary continuation and (ii) 12 months’ subsidized benefits continuation, in each case subject to Mr. Gregoriou’s execution and non-revocation of a release of claims. As described in further detail in the “Executive Compensation-Employment Agreements and Other Arrangements with Executive Officers and Directors-Employment and Consulting Arrangements with Executive Officers and Directors” section of this filing, effective as of the consummation of the Business Combination, this offer letter is being superseded in its entirety by a new employment agreement between Mr. Gregoriou and Advent.
On October 19, 2019, Mr. Gregoriou separately entered into an agreement with Advent that contained (i) a perpetual confidentiality covenant, (ii) an assignment of intellectual property covenant, (iii) a non-competition covenant for two year post-termination of employment, (iv) a covenant not to solicit any of Advent’s customers or patrons during the two-year period following termination and (v) a covenant not to solicit any of Advent’s employees or consultants during the two-year period following termination.
Messrs. Kaskavelis and De Castro. Neither Messrs. Kaskavelis nor De Castro were previously party to employment agreements with Advent, though each entered into offer letters with Advent in May 2020. These offer letters set forth such executive’s base salary ($120,000 for Mr. Kaskavelis and $150,000 for Mr. De Castro), a bonus target of 100% of base salary, and a right to an award pursuant to the 2020-2023 Stock Grant Plan. As described in further detail in the “Executive Compensation-Employment Agreements and Other Arrangements with Executive Officers and Directors-Employment and Consulting Arrangements with Executive Officers and Directors” section of this filing, in connection with the announcement of the Business Combination, Messrs. Kaskavelis and De Castro each entered into an employment agreement with Advent, which became effective as of the consummation of the Business Combination.
The Company sponsors an employee savings plan under Section 401(k) of the Internal Revenue Code. Subsequent to the Business Combination, the Company made matching contributions equal to 100% of the participant’s pre-tax contribution up to a maximum of 5% of the participant’s eligible earnings for U.S employees. Total expense related to the Company’s defined contribution plan was $85,946 for the year ended December 31, 2021. Advent did not provide, in 2020, any health and welfare benefits or 401(k) retirement plan to its U.S. full-time employees.
As described in Note 2 of the Company’s audited consolidated financial statements for fiscal year 2021, pursuant to Greek Labor Law 2112/1920, employees in Greece are entitled to an indemnity in the event of dismissal or retirement, though as a director, Mr. Gregoriou is not eligible for such indemnity.
Other Compensation Policies
Stock Ownership/Holding Policy
The Company maintains meaningful stock ownership guidelines to reinforce the importance of stock ownership. These guidelines are intended to align the interests of executives and shareholders and to focus the executives on our long-term success. Under these guidelines, each of our active executives and non-employee directors must own shares in accordance with the following schedule:
| | Role | | Required Ownership Level |
| | Chief Executive Officer and Chairman | | 6.0x Base Salary |
| | Other Executive Officers | | 3.0x Base Salary |
| | Non-Employee Directors | | 3.0x Annual Cash Retainer |
Shares that count towards satisfying the ownership requirements include:
| • | Shares owned by the executive/director, including those obtained through the vesting of restricted stock units and performance stock units |
| • | Shares owned jointly by the executive/director and spouse or held in trust established by the executive/director for the benefit of the executive/director and/or family members |
| • | Unvested time-based restricted stock units |
| • | Note: Unvested performance stock units and unexercised stock options do not count towards satisfying stock ownership requirements |
Each executive or non-employee director has 5 years to meet the ownership guidelines starting from when the executive/director first becomes subject to the policy. Executives/directors who do not meet the ownership guidelines after 5 years of being subject to the guidelines are expected to retain 50% of net shares (i.e., shares remaining after payment of taxes) upon vesting or exercise of stock options until they meet the guidelines.
Prohibition on Pledging and Hedging
The Company maintains a comprehensive Insider Trading Policy that includes a prohibition on pledging Company securities or holding Company securities in a margin account. Additionally, the policy prohibits engaging in hedging, monetization and similar transactions in respect of Company securities. This policy, applicable to all officers, directors and associates, was put in place to ensure that the interests of these individuals remain aligned with those of stockholders, and that they continue to have the incentive to execute the Company’s long-term plans and achieve the performance for which their equity awards are intended.
Employment Agreements and Other Arrangements with Executive Officers and Directors
On October 12, 2020, in connection with the execution of the Merger Agreement and the announcement of the Business Combination Advent entered into employment agreements, with each of Messrs. Gregoriou, and De Castro. In addition, Mr. Kaskavelis entered into an employment agreement on December 31, 2020. The material terms of these employment agreements are set forth below:
| • | Mr. Gregoriou serves as our Chief Executive Officer and Chairman of our board of directors, with an initial annual base salary of $800,000, a one-time signing bonus of $500,000, and beginning in fiscal year 2021, eligibility to earn an annual performance bonus with a target equal to 150% of his annual base salary. |
| • | Mr. De Castro serves as our Chief Technology Officer, with an annual base salary of $350,000, a one-time signing bonus of $250,000, and beginning in fiscal year 2021, eligibility to earn an annual performance bonus with a target equal to 100% of his annual base salary. |
| • | Mr. Kaskavelis serves as our Chief Marketing Officer, with an annual base salary of €315,000, a one-time signing bonus of $250,000, and beginning in fiscal year 2021, eligibility to earn an annual performance bonus with a target equal to 100% of his annual base salary. |
The sign-on bonuses are payable in two installments: (i) 50% on the first payroll date following the consummation of the Business Combination and (ii) 50% to be paid on the first payroll date following the one year anniversary of the consummation of the Business Combination, subject to the applicable executive’s employment through the relevant payment date.
The employment agreements provide that if an executive’s employment terminates without “cause” or by him for “good reason,” (as such terms are defined in the employment agreement or term sheet, as applicable), the executive will be entitled to (i) up to 12 months’ subsidized medical, dental and vision benefits continuation (18 months for Mr. Gregoriou) and (ii) payment of one times (two times for Mr. Gregoriou) the sum of such executive’s annual base salary and target bonus, payable over 12 months. If such termination of employment without “cause” or resignation for “good reason” occurs within 60 days prior to, or 12 months following, a “change in control” (as such term is defined in the 2021 Equity Incentive Plan), severance is enhanced and provides for (i) up to 18 months’ subsidized medical, dental and vision benefits continuation for all executives, (ii) two times (three times for Mr. Gregoriou) the sum of such executive’s annual base salary and target bonus, payable over 12 months, and (iii) the initial grant of stock options and restricted stock units issued pursuant to the 2021 Equity Incentive Plan, shall become fully vested, and such options will remain exercisable for a period of one year following such termination of employment. Moreover, if the acquirer in such “change in control” does not agree to assume or substitute for equivalent stock options, any unvested portion of the initial grant of stock options shall become fully vested and exercisable at the time of such transaction.
The employment agreements for Messrs. Gregoriou, Kaskavelis, and De Castro each contain (i) a perpetual confidentiality covenant, (ii) an assignment of intellectual property covenant, (iii) a non-competition covenant for one year post-termination of employment (subject to, for Mr. Gregoriou, the Executive’s receipt of at least 50% of the Executive’s highest annualized base salary within the two (2) year period preceding termination) for the entire year, (iv) a covenant not to solicit any of our customers, vendors, suppliers or other business partners during the eighteen (18)-month period following termination and (v) a covenant not to solicit any of our employees or independent contractors during the eighteen (18)-month period following termination.
Beginning in 2021, the Company entered into a term sheet for Charalampos Antoniou, a member of Advent’s board of directors prior to the Business Combination, providing that he will serve as our Business Development Representative, with annual consulting fees of $240,000 per year and eligibility to earn a discretionary annual performance bonus.
Outstanding Equity Awards at Fiscal Year End
The following table provides information with respect to awards held by the named executive officers as of December 31, 2021.
| | Option Awards (1) | | Stock Awards (2) | |
| Name | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Option
Exercise
Price ($) | | Option
Expiration
Date | | Number of Shares or Units of Stock that Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | |
| Vassilios Gregoriou | ‒ | | | 922,118 | | | $ | 10.36 | | 6/11/2031 | | | 922,118 | | | $ | 6,464,047 | |
| Emory De Castro | ‒ | | | 345,794 | | | $ | 10.36 | | 6/11/2031 | | | 345,794 | | | $ | 2,424,016 | |
| Christos Kaskavelis | ‒ | | | 345,794 | | | $ | 10.36 | | 6/11/2031 | | | 345,794 | | | $ | 2,424,016 | |
| (1) | Option awards vest 25% upon each anniversary of February 4, 2021, the vesting commencement date, until the fourth anniversary of the vesting commencement date. |
| (2) | Stock awards consist of grants of restricted stock units that vest 25% upon each anniversary of February 4, 2021, the vesting commencement date, until the fourth anniversary of the vesting commencement date. |
| (3) | Market value of restricted stock unit awards is based on the closing price of $7.01 per share on December 31, 2021 on the Nasdaq Stock Market. |
Pursuant to offer letters with each of the Company’s non-employee directors (the “Director Offer Letters”), each director receives an annual retainer of $100,000, to be paid quarterly in arrears. In addition, each non-employee director is eligible to receive an annual grant of stock awards for a number of shares of Company common stock determined by dividing $100,000 by the closing price per share of Company common stock on the applicable grant date. In 2021, each non-employee director received a one-time grant of stock award for their work prior to the Business Combination determined by dividing $100,000 by the closing price per share of Company common stock on the applicable grant date. While each of Messrs. Gregoriou, Kaskavelis, and De Castro served as members of the board of directors of the Company in 2021 and 2020, none received additional compensation for director services and all compensation earned by them with respect to their employment with Advent is set forth in the “Summary Compensation Table” above.
The following table sets forth all compensation paid to or earned by each non-employee director of the Company during fiscal year 2021.
| Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1)(2) | | | Total ($) | |
| Katherine E. Fleming | | $ | 100,000 | | | $ | 199,989 | | | $ | 299,989 | |
| Katrina Fitz | | $ | 100,000 | | | $ | 199,989 | | | $ | 299,989 | |
| Anggelos Skutaris | | $ | 100,000 | | | $ | 199,989 | | | $ | 299,989 | |
Lawrence M. Clark, Jr. (former director) (3) | | $ | 100,000 | | | $ | ‒ | | | $ | 100,000 | |
| (1) | The amounts disclosed above reflect the full grant date fair values in accordance with FASB ASC Topic 718. See “Note 16 - Share Based Compensation” to our consolidated financial statements for the year ended December 31, 2021. |
| (2) | On June 11, 2021, the company granted to each non-employee director a total of 19,304 restricted stock units, 9,652 of which vested on February 4, 2022 and 9,652 of which vest on June 8, 2022. |
| (3) | Mr. Clark resigned on January 28, 2022. |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The following table sets forth information known to the Company regarding the beneficial ownership of our common stock as of March 16, 2022 by:
| • | each person known to us to be the beneficial owner of more than 5% of outstanding common stock; |
| • | each of our named executive officers and directors; and |
| • | all executive officers and directors as a group |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Stock issuable upon exercise of options and warrants currently exercisable within 60 days are deemed outstanding solely for purposes of calculating the percentage of total voting power of the beneficial owner thereof.
The beneficial ownership of Company common stock is based on 51,253,591 shares of common stock outstanding as of March 16, 2022.
Unless otherwise indicated, the Company believes that each person named in the table below has sole voting and investment power with respect to all shares of Company common stock beneficially owned by them.
| Name and Address of Beneficial Owner | | Number of Shares | | | % | |
| Directors and Executive Officers | | | | | | |
| Vassilios Gregoriou (1) | | | 5,926,564 | | | | 11.5 | % |
| Christos Kaskavelis (2) | | | 3,877,009 | | | | 7.6 | % |
| Emory De Castro (3) | | | 2,297,895 | | | | 4.5 | % |
| Katherine E. Fleming | | | 2,413 | | | | * | |
| Anggelos Skutaris | | | 2,413
| | | | * | |
| Katrina Fritz | | | 2,413 | | | | * | |
| All directors and executive officers as a group (eight individuals)(4) | | | 12,872,308
| | | | 24.9 | % |
| Five Percent Holders: | | | | | | | | |
| F.E.R. fischer Edelstahlrohre GmbH (5) | | | 5,124,846 | | | | 10.0 | % |
| BNP Paribas Asset Management UK Ltd. (6) | | | 3,814,184 | | | | 7.4 | % |
| Invesco Ltd. (7) | | | 2,778,867 | | | | 5.4 | % |
| Charalampos Antoniou (8) | | | 2,775,049 | | | | 5.4 | % |
| (1) | Share amount includes 230,529 shares issuable upon exercise of options. |
| (2) | Share amount includes (a) 86,448 shares issuable upon exercise of options, and (b) 1,802,405 shares owned by Nemaland Ltd, an entity in which Mr. Kaskavelis and his wife each hold a 50% stake and for which Mr. Kaskavelis holds shared voting and dispositive power with his wife with regard to such shares of Company common stock. The business address of Mr. Kaskavelis is 200 Clarendon Street, Boston, MA 02116. The business address of Nemaland Ltd is 77 Strovolou, Office 204, 2018 Strovolos, 2018, Cyprus. |
| (3) | Share amount includes an aggregate of 86,448 shares issuable upon exercise of options. |
| (4) | Share amount includes an aggregate of 489,873 shares issuable upon exercise of options. Unless otherwise indicated, the business address of each of the individuals is 200 Clarendon Street, Boston, MA 02116. |
| (5) | Pursuant to a Schedule 13G filed with the SEC on September 9, 2021, all shares are held of record by F.E.R. fischer Edelstahlrohre GmbH (“Fischer GmbH”). Fischer GmbH has shares voting and dispositive power over such shares. Fischer GmbH is 100% owned by fischer group SE & Co. KG (“Fischer KG”). Johann Fischer holds an interest and 51% of the voting power in Fischer KG. The remaining interests in Fischer KG are held by Hans-Peter Fischer, Roland Fischer and Michaela Behrle. The business address for such entities and persons is Im Gewerbegebiet 7, 77855 Achern-Fautenbach, Germany. |
| (6) | Pursuant to a Schedule 13G filed with the SEC on January 31, 2022, BNP Paribas Asset Management UK Ltd. (“BNP”) has sole voting and dispositive power over such shares. The business address for BNP is 5 Aldermanbury Square, London, EX2V 7BP. |
| (7) | Pursuant to a Schedule 13G filed with the SEC on February 14, 2022, Invesco Capital Management LLC is a subsidiary of Invesco Ltd. (“Invesco”) and it advises the Invesco WilderHill Clean Energy ETF which owns 5.41% of such shares. However, no one individual has greater than 5% economic ownership. The shareholders of the Fund have the right to receive or the power to direct the receipt of dividends and proceeds from the sale of securities listed above. Invesco has sole voting and dispositive power over such shares. The business address for Inveso is 1555 Peachtree Street NE, Suite 1800, Atlanta, GA 30309 |
| (8) | Share amount includes 1,784,389 shares owned by Neptune International AG, an entity for which Mr. Antoniou holds shared voting and dispositive power with regard to such shares of Company common stock. The business address of Mr. Antoniou is Bernoldweg 14, ZUG, 6300, Switzerland. The business address of Neptune International AG is Bahnhofstrasse 7, ZUG, 6300, Switzerland. |
Equity Compensation Plan Table
The following table summarizes our equity compensation plan information as of December 31, 2021. Information is included for equity compensation plans approved by our stockholders and equity compensation plans not approved by our stockholders.
| Plan Category | | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | (b) Weighted-average exercise price per share of outstanding options, warrants and rights | | | (c) Number of securities remaining available for future issuance under equity compensation plans | |
| Equity compensation plans approved by stockholders | | | 2,624,894 | | | $ | 9.63 | | | | 1,588,899 | |
| Equity compensation plans not approved by stockholders | | ‒ | | | $ | ‒ | | | ‒ | |
| Total | | | 2,624,894 | | | $ | 9.63 | | | | 1,588,899 | |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
The following is a description of transactions since January 1, 2021 to which we have been a participant in which the amount involved, exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements which are described under “Executive Officer and Director Compensation.”
In addition, in order to finance transaction costs in connection with an intended initial business combination, on November 20, 2020, our sponsor agreed to loan the Company up to $1,000,000 as a working capital loan. This loan was non-interest bearing and due at the earlier of the date on which the Company consummates its Business Combination or February 22, 2021. On November 20, 2020, the Company borrowed $400,000 on the working capital loan. At the option of the lender, at Closing, such loan was converted into working capital warrants at a price of $1.00 per warrant. The working capital warrants are identical to the placement warrants, including as to exercise price, exercisability and exercise period.
In connection with a loan previously made by Orion Resource Partners (USA) LP to the Company, our sponsor has agreed to transfer one-half of its remaining founder shares and one-half of its remaining placement warrants to permitted transferees of our sponsor and Orion Resource Partners (USA) LP at the Closing of the Business Combination. The loan by Orion Resource Partners (USA) LP was paid by the Company upon the Closing of the Business Combination.
Private Placement Securities
Simultaneously with the closing of the initial public offering, the Company consummated the sale of 5,500,000 private placement warrants at a price of $1.00 per warrant ($5,500,000.00 in the aggregate in a private placement with our sponsor. On November 27, 2018, the underwriters partially exercised their over-allotment option and purchased an additional 2,052,077 units at a price of $10.00 per unit upon receiving notice of the underwriters’ election to partially exercise their over-allotment option, generating additional gross proceeds of $20,520,770, which were placed in the Trust Account and incurring additional offering costs of $410,416 in underwriting fees, which were paid via the purchase by our sponsor of an additional 410,416 private placement warrants at a price of $1.00 ($410,416 in the aggregate) in a private placement on November 27, 2018, simultaneously with the partial exercise of the underwriters’ over-allotment option.
Registration Rights Agreement
On November 15, 2018, we entered into a registration rights agreement with respect to the founder shares, the placement warrants, the working capital warrants and the shares of 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.
Simultaneously with the execution of the Merger Agreement, AMCI and Advent entered into voting agreements (the “Voting Agreements”) with certain insiders of Advent holding in the aggregate approximately 40% of Advent’s outstanding capital stock. Pursuant to the Voting Agreements, each such stockholder agreed, among other things, to vote all of its shares of Advent stock in favor of the Merger Agreement and related transactions and to otherwise take certain other actions in support of the Merger Agreement and related transactions and the other matters submitted to Advent stockholders for their approval, and provide a proxy to the Company to vote such Advent stock accordingly. The Voting Agreements prevent transfers of the Advent stock held by such stockholder between the date of the Voting Agreement and the date of the Closing, except for certain permitted transfers where the recipient also agrees to comply with the Voting Agreement.
Simultaneously with the execution and delivery of the Merger Agreement, certain former stockholders of Advent, who collectively owned 23,735,315 shares of our common stock as of February 5, 2021, entered into a Lock-Up Agreement, which expired on February 4, 2022, with the Company and the Purchaser Representative (each, a “Lock-Up Agreement”). Pursuant to the Lock-Up Agreements, each Advent stockholder party thereto agreed not to, during the period commencing from the Closing and ending on the one (1) year anniversary of the Closing (subject to early release if the closing price of the Company’s common stock equals or exceeds $12.00 per share for any 20 out of 30 trading days commencing 150 days after the Closing and also subject to early release if the Company, following the Business Combination, consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of the Company’s stockholders having the right to exchange their equity holdings in the Company for cash, securities or other property): (x) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any restricted securities, (y) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the restricted securities, or (z) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (x), (y) or (z) above is to be settled by delivery of restricted securities or other securities, in cash or otherwise (in each case, subject to certain limited permitted transfers where the recipient takes the shares subject to the restrictions in the Lock-Up Agreement).
Similarly, our sponsor, who as of February 5, 2021, along with its permitted transferees, owned a total of 5,513,019 shares of our common stock, agreed to a substantially identical lock-up in connection with the initial public offering (and its permitted transferees are subject to such lock-up with respect to the shares transferred to such permitted transferees), which expired on February 4, 2022. Additionally, our sponsor, who as of February 5, 2021, along with its permitted transferees, owned a total of 4,340,278 private placement warrants and working capital warrants, agreed with the Company not to dispose of or hedge any of the private placement warrants or working capital warrants or shares of our common stock underlying such warrants during the period from the date of the Closing continuing through the date that is 30 days after the Closing.
Non-Competition Agreement
Simultaneously with the execution and delivery of the Merger Agreement, certain insider Advent stockholders entered into non-competition and non-solicitation agreements for the benefit of the Company, Advent and each of their respective present and future affiliates, successors and subsidiaries (each, a “Non-Competition Agreement”), to become effective at the Closing, pursuant to which the Advent stockholder party thereto agreed not to compete with the Company, Advent and their respective affiliates during the three (3) year period following the Closing in North America or the European Union (including Greece) or in any other markets in which the Company and Advent are engaged. The Advent stockholder party thereto also agreed during such three (3) year restricted period to not solicit employees or customers of such entities. The Non-Competition Agreement also contains customary confidentiality and non-disparagement provisions.
Our Board has determined that three (3) of our directors, Dr. Fleming, Mr. Skutaris, and Ms. Fritz, are independent directors in accordance with the listing requirements of the Nasdaq Stock Market, or Nasdaq. Under the rules of the Nasdaq Stock Market, independent directors must comprise a majority of a listed company’s board of directors within one year of the completion of its initial public offering. In addition, the rules of the Nasdaq Stock Market require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent and that director nominees be selected or recommended for the board’s selection by independent directors constituting a majority of the independent directors or by a nominating and corporate governance committee comprised solely of independent directors. Under the rules of the Nasdaq Stock Market, a director will only qualify as “independent” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that such person is “independent” as defined by the applicable rules of the Nasdaq Stock Market and the Exchange Act.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or (2) be an affiliated person of the listed company or any of its subsidiaries.
Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that three of our directors are “independent directors” as defined under applicable rules of the Nasdaq Stock Market, including, in the case of all the members of our audit committee, the independence criteria set forth in Rule 10A-3 under the Exchange Act, and in the case of all the members of our compensation committee, the independence criteria set forth in Rule 10C-1 under the Exchange Act. In making such determination, our board of directors considered the relationships that each such non-employee director has with our Company and all other facts and circumstances that our board of directors deemed relevant in determining his or her independence, including the beneficial ownership of our capital stock by each non-employee director. Mr. Gregoriou is not an independent director under these rules because he is our Chief Executive Officer. Emory De Castro is not an independent director under these rules because he is our Chief Technology Officer.
Former Chief Financial Officer Resignation
On July 1, 2021, William Hunter resigned from Advent Technologies Holdings, Inc. (the “Company”) from his positions as President, Chief Financial Officer and as a director of the Company, effective immediately.
In connection with Mr. Hunter’s resignation, the Company entered into a Separation Agreement and General Release with Mr. Hunter, effective July 1, 2021 (the “Separation and Release Agreement”). Pursuant to the Separation and Release Agreement, subject to Mr. Hunter’s execution of a release of claims, Mr. Hunter will be entitled to the payments and benefits set forth in the Employment Agreement by and between Mr. Hunter and the Company dated January 12, 2021 (the “Hunter Employment Agreement”) based on a termination without cause, and accelerated vesting of the unvested portion of the signing bonus Mr. Hunter was granted under the Hunter Employment Agreement. Mr. Hunter will continue to be subject to certain restrictive covenants pursuant to the terms of the Hunter Employment Agreement and the Separation and Release Agreement.
| Item 14. | Principal Accounting Fees and Services. |
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 to audit the Company’s consolidated financial statements for the year ending December 31, 2021. EY served as independent registered public accounting firm of Advent 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 Company’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.
The following is a summary of fees paid or to be paid to EY and Marcum, for services rendered.
Audit Fees. Audit fees consist of fees for professional services rendered for the audit of our year-end financial statements and services that are normally provided by EY in connection with regulatory filings. The aggregate fees of EY and Marcum related to audit and review services totaled $851,573 for the year ended December 31, 2021 and $100,425 for the year ended December 31, 2020, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings
Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. During the year ended December 31, 2021, we paid EY $11,827 in audit-related fees. During the year ended December 31, 2020, we did not pay Marcum any audit-related fees.
Tax Fees. We did not pay EY or Marcum for tax return services, planning and tax advice for each of the year ended December 31, 2021 and December 31, 2020.
All Other Fees. We did not pay EY or Marcum for any other services for each of the year ended December 31, 2021 and December 31, 2020.
Pre-Approval Policy
Our audit committee is responsible for approving or pre-approving all auditing services (including comfort letters and statutory audits) and all permitted non-audit services by the independent auditor and pre-approve the related fees. Pursuant to its charter, the audit committee delegated to each of its members, acting singly, the authority to pre-approve any audit services if the need for consideration of a pre-approval request arises between regularly scheduled meetings, with such approval presented to the audit committee at its next scheduled meeting or as soon as practicable thereafter.
PART IV
| Item 15. | Exhibits, Financial Statement Schedules. |
(1) Financial Statements
For a list of the financial information included herein, see Index to the Financial Statements on page F-1.
(2) Financial Statement Schedules:
All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.
(3) Exhibits.
The following is a list of exhibits filed as part of this Annual Report on Form 10-K.
Exhibit Number | | Description |
| 2.1 | | |
| | | |
| 2.2 | | |
| | | |
| 2.3 | | |
| | | |
| 2.4 | | |
| | | |
| 3.1 | | |
| | | |
| 3.2 | | |
| | | |
| 4.1 | | |
| | | |
| 4.2 | | |
| | | |
| 4.3 | | |
| | | |
| 4.4 | | |
| 10.1 | | |
| | | |
| 10.2 | | |
| | | |
| 10.3 | | |
| | | |
| 10.4 | | |
| | | |
| 10.5 | | |
| | | |
| 10.6 | | |
| | | |
| 10.7+ | | |
| | | |
| 10.8+ | | |
| | | |
| 10.8(a)+ | | |
| | | |
| 10.9+ | | |
| | | |
| 10.10+ | | |
| | | |
| 10.11+ | | |
| | | |
| 10.12+ | | |
| | | |
| 10.13+ | | |
| | | |
| 10.14 | | |
| | | |
| 10.15+ | | |
| | | |
| 10.16 | | |
| | | |
| 10.17 | | |
| | | |
| 10.18+ | | |
| | | |
| 10.19 | | |
| | | |
| 10.20 | | |
| | | |
| 10.21* | | |
| 16.1 | | |
| | | |
| 21.1* | | |
| | | |
23.1*
| | Consent of Independent Registered Public Accounting Firm
|
| | | |
| 31.1* | | |
| | | |
| 31.2* | | |
| | | |
| 32.1** | | |
| | | |
| 32.2** | | |
| | | |
| 101.INS* | | Inline XBRL Instance |
| | | |
| 101.SCH* | | Inline XBRL Taxonomy Extension Schema |
| | | |
| 101.CAL* | | Inline XBRL Taxonomy Extension Calculation |
| | | |
| 101.LAB* | | Inline XBRL Taxonomy Extension Labels |
| | | |
| 101.PRE* | | Inline XBRL Taxonomy Extension Presentation |
| | | |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
| + | Indicated a management or compensatory plan, contract or arrangement. |
| Item 16. | Form 10-K Summary. |
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | Advent Technologies Holdings, Inc. |
| | | |
| | By: | /s/ Kevin Brackman | |
| March 31, 2022 | Name: | Kevin Brackman | |
| | Title: | Chief Financial Officer | |
| Name | | Position | | Date |
| | | | | |
| /s/ Vassilios Gregoriou | | Chief Executive Officer and Chairman of the Board | | March 31, 2022 |
| Vassilios Gregoriou | |
| | |
| | | | | |
| /s/ Kevin Brackman | | Chief Financial Officer | | |
| Kevin Brackman | | | | |
| | | | | |
| /s/ Emory De Castro | | Chief Technology Officer and Director | | |
| Emory De Castro | | | | |
| | | | | |
| /s/ Katherine E. Fleming | | Director | | |
| Katherine E. Fleming | | | | |
| | | | | |
| /s/ Anggelos Skutaris | | Director | | |
| Anggelos Skutaris | | | | |
| | | | | |
| /s/ Katrina Fritz | | Director | | |
| Katrina Fritz | | | | |
