ADVENT TECHNOLOGIES HOLDINGS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year endedDecember 31, 2021 , as filed with theSecurities and Exchange Commission (the "SEC") onMarch 31, 2022 ("2021 Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Item 1A. Risk Factors" section of this Quarterly Report on Form 10-Q and the "Item 1A. Risk Factors" section of our 2021 Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. This MD&A generally discusses 2022 and 2021 items and year-over-year comparisons between 2022 and 2021. As used in this MD&A, unless the context indicates otherwise, the financial information and data relating to the three and nine months endedSeptember 30, 2021 are those ofAdvent Technologies, Inc. and its subsidiaries for the period prior to the Closing and are those ofAdvent Technologies Holdings, Inc. for the period subsequent to the Closing; and the data for the three and nine months endedSeptember 30, 2022 are those ofAdvent Technologies Holdings, Inc. See Note 1 "Basis of Presentation" in the accompanying unaudited condensed consolidated financial statements for additional information. 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 theMembrane 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 inBoston, Massachusetts , a product development facility inLivermore, California , and production facilities inGreece ,Denmark ,Germany andPhilippines . In 2022, Advent anticipates opening its new research and development and manufacturing facility atHood Park inCharlestown, 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
OnOctober 12, 2020 ,Advent Technologies, Inc. ("Legacy Advent") entered into the Merger Agreement withAMCI Acquisition Corp. ("AMCI"), aDelaware corporation,AMCI Merger Sub Corp. , a newly-formedDelaware corporation and wholly-owned subsidiary of AMCI ("Merger Sub"),AMCI Sponsor LLC , aDelaware limited liability company ("Sponsor"), solely in the capacity as the representative from and after the effective time of the Business Combination for the stockholders of AMCI, andVassilios Gregoriou , in the capacity as Seller Representative (the "Seller Representative"), pursuant to which, effectiveFebruary 4, 2021 (the "Closing"), Merger Sub merged with and into Legacy Advent., with Legacy Advent 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 theSEC , meaning thatAdvent Technologies, Inc.'s financial statements for previous periods are and will be disclosed in the company's current and future periodic reports filed with theSEC . 34 While the legal acquirer in the Merger Agreement is AMCI, for financial accounting and reporting purposes under GAAP, we have determined thatAdvent 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 ofAdvent Technologies in many respects. Under this method of accounting, AMCI is treated as the acquired entity whereby Legacy Advent is deemed to have issued common stock for the net assets and equity of AMCI, consisting mainly of cash, accompanied by a simultaneous equity recapitalization of AMCI. Upon consummation of the Business Combination, the most significant change in Legacy Advent's reported financial position and results was an increase in cash of approximately$141 million . Total direct and incremental transaction costs of AMCI and Legacy Advent, along with liabilities of AMCI paid off at the Closing, were approximately$23.6 million . As a consequence of the Business Combination, Legacy Advent became the successor to anSEC -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
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
OnFebruary 9, 2021 , the audit committee of the board of directors of the Company approved the engagement ofErnst & 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 endingDecember 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 endedDecember 31, 2020 , which consists only of the accounts of the pre-Business Combination special purpose acquisition company. 35 Business Developments Share Purchase Agreement
OnAugust 31, 2021 , pursuant to the Share Purchase Agreement (the "Purchase Agreement"), dated as ofJune 25, 2021 , by and between the Company and F.E.R. fischerEdelstahlrohre GmbH , a limited liability company incorporated under the Laws ofGermany (the "Seller"), the Company acquired (the "Acquisition") all of the issued and outstanding equity interests inSerEnergy A/S , a Danish stock corporation and a wholly-owned subsidiary of the Seller ("SerEnergy") and fischer eco solutionsGmbH , a German limited liability company and a wholly-owned subsidiary of the Seller ("FES"), together with certain outstanding shareholder loan receivables. As consideration for the transactions contemplated by the Purchase Agreement, the Company paid to the Seller €15.0 million in cash and onAugust 31, 2021 , the Company issued to the Seller 5,124,846 shares of common stock.
Pursuant to the Purchase Agreement, the Company acquired SerEnergy andFES , 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 inManila, 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 inAchern, Germany , and Advent agreed to lease that respective portion of the facility at the closing of the Acquisition.
OnJune 16, 2022 , Advent announced the receipt of a notification from the Greek State informing the Company that the IPCE Green HiPo was submitted for ratification by the EU for funding of €782.1 million, spread over the next six years commencing in 2022. OnJuly 15, 2022 , Advent received official ratification from theEuropean Commission of the EU . The Green HiPo project is designed to bring the development, design, and manufacture of HT-PEM fuel cells and electrolysers for the production of power and green hydrogen to theWestern Macedonia region ofGreece . Collaboration with theDOE The efforts with the constellation ofDepartment 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 appears to be 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.
Agreement with Hyundai Motor Company ("Hyundai")
OnApril 6, 2022 , Advent announced the signing of a technology assessment, sales, and development agreement with Hyundai, a leading multinational automotive manufacturer offering a range of world-class vehicles and mobility services in over 200 countries. Advent and Hyundai aim to deliver green energy solutions to current highcarbon applications, using fuel cell technology. Under the agreement, Hyundai will provide catalysts to Advent for evaluation in its proprietary MEAs, while Advent intends to support Hyundai in fulfilling its
fuel cell project needs, through:
? Developing inks and structures using Hyundai catalysts, which will then be
evaluated by Hyundai. Following evaluation, Hyundai will determine whether
their own or standard catalysts will be used for this project.
36
? Supplying MEAs throughout the development/commercialization cycle ("Advent
MEAs") for testing, evaluation, and optimization under conditions set by
Hyundai.
? Assisting Hyundai with the use and specifications of MEAs as well as their
implementation into Hyundai's designs. Following the completion of the first phase of the project, Hyundai and Advent will collaborate closely to set out specific product requirements, collaborative product goals, as well as milestones for achieving established goals and plans for the second phase, which shall also include Advent's stack cooling technology.
Technology Assessment Agreement for Automotives
OnMay 9, 2022 , Advent announced the signing of a second technology assessment agreement with another large global automotive manufacturer. With a common goal of sustainability and the faster decarbonization of theU.S. automotive industry, Advent is supporting efforts to advance innovative fuel cell technology as a sustainable and efficient option for achievingcarbon neutrality. More specifically, Advent will provide assistance, through:
? Supplying MEAs for testing, evaluation, and optimization under the
collaborator's conditions.
? Providing support on MEA operational parameters while the collaborator supplies
feedback to Advent on performance and durability.
? Sharing technical know-how for fuel cell stacks, proprietary HT-PEM technology,
and leveraging HT-PEM for advanced cooling systems. One of the primary objectives will be to conduct a detailed assessment of Advent's proprietary HT-PEM technology and newly launched MEAs for consideration of future opportunities. Contingent upon the successful execution of the first phase of the project, the companies will work to establish aJoint Development Agreement governing specific product requirements, goals, milestones, and plans.
Memorandum of Understanding ("MoU") with
OnJune 1, 2022 , Advent announced the signing of an MoU with Neptune Lines, a leading vehicle logistics provider operating 18 Pure Car and Truck Carrier vessels (owned or chartered), with a cargo capacity ranging between 1,500-4,600 cars. Neptune Lines and Advent agreed to jointly conduct a pilot program to explore the application of a fuel cell-based auxiliary power system. This application will be tested by Neptune Lines' highly experienced team, who will evaluate its performance as a sustainable source of power generation. After the evaluation stage, the parties will consider a broader collaboration.
MoU with
OnJune 3, 2022 , Advent announced the signing of an MoU withLaskaridis Shipping , a renowned ship management company based inAthens, Greece , with a fleet of 90 vessels, which includes 55 mid-sized or large dry bulk vessels. Under the terms of the MoU,Laskaridis Shipping and Advent have agreed to jointly conduct a pilot program, under which Advent will supplyLaskaridis Shipping with its SereneU methanol-powered fuel cells.Laskaridis Shipping will install these systems on selected dry bulk vessels to assess their overall performance as auxiliary, back-up, or emergency power sources. Following the successful completion of the pilot program,Laskaridis Shipping and Advent will collaborate on manufacturing and testing the next generation of Advent's fuel cells. 37
OnSeptember 15, 2022 , we announced the signing of an MoU with Hydrogen Systems, a hydrogen energy solutions company based inRiyadh, Saudi Arabia , to provide integrated hydrogen solutions and value-added support to industrial and renewable energy markets in theMiddle East . Under the MoU, Hydrogen Systems aims to utilize a vast number of its existing relationships in the telecom and hydrogen energy marketplace in theKingdom of Saudi Arabia , and elsewhere throughout theMiddle East to market, sell, distribute, install, and service Advent's full line of HT-PEM fuel cells and hydrogen production products. Simultaneously, Advent and Hydrogen Systems intend to collaborate and explore potential large-scale development opportunities for hydrogen fuel cell power applications across the region.
OnDecember 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), andHoney Badger (portable power, defense) Advent product families. Furthermore, BASF supports the realization of large-scale Important Projects of Common European Interests ("IPCEIs"), including Green HiPo, through materials for power generation, hydrogen generation, and power storage. In addition, BASF will also evaluate the producibility of the ion-pair membrane developed in collaboration by Advent and theU.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
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 inCanada andthe 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
OnMarch 31, 2021 , we announced that Advent's 50 W Reformed Methanol Wearable Fuel Cell Power System ("Honey Badger") had been selected by theU.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 aDOD program that addresses high-priority environmental, safety, occupational health, and energy technological challenges that are demonstrated and validated at active installations for military application. Advent'sHoney Badger 50™ ("HB50") fuel cell is the only fuel cell that is part of this program that supports theU.S. Army's goal of having a technology-enabled force by
2028.
38
Launch of the Honey Badger 50™ Fuel Cell System
OnAugust 4, 2022 , we announced the launch of its, a compact portable fuel cell system and quiet power supply for use in off-grid field applications such as military and rescue operations. The launch of Advent's portable power system coincided with the Company's fulfilment of its first shipment order from theU.S. Department of Defense . The HB50 power system can be fueled by biodegradable methanol, allowing near silent generation of up to 50W of continuous power with clean emissions. Designed for covert operations, HB50 can easily power radio and satellite communications gear, remote fixed and mobile surveillance systems, and laptop computers along with more general battery charging needs. HB50 is a unique technology that can provide 65% of weight savings versus batteries over a typical 72-hour mission. The weight savings benefit increases further for longer missions.
HB50's unique design allows it to be used in soldier-worn configurations or
operated inside a portable backpack or vehicle while charging batteries and
powering soldier systems, while its thermal features allow it to operate within
an ambient temperature range of -20°C to +55°C. Aside from its optimized
compatibility with Integrated Visual Augmentation System ("IVAS"), HB50 can also
power devices such as high frequency radios like the model 117G, as well as
B-GAN and StarLink terminals. HB50's durability allows it to be easily deployed
in challenging conditions and climates while supporting mission mobility for
three to seven days without the need to re-supply.
Since Honey Badger's fuel cell technology can run on hydrogen or liquid fuels,
the system can operate at a fraction of the weight of traditional military-grade
batteries to meet the U.S. Department of Defense's continuously evolving needs
for 'on-the-go' electronics needs. As military adoption and use of IVAS
equipment continues to evolve, the highly portable lightweight power solutions
like Honey Badger and HB50 will become a mission critical necessity.
UltraCell Purchase Agreement
OnFebruary 18, 2021 ,Advent Technologies, Inc. , entered into the UltraCell Purchase Agreement with Bren-Tronics and UltraCell, aDelaware limited liability company and a direct wholly owned subsidiary of Bren-Tronics. Pursuant to the UltraCell Purchase Agreement, and subject to the terms and conditions therein, onFebruary 18, 2021 , Advent acquired 100% of the issued and outstanding membership interests in UltraCell, for$4.0 million and a maximum of$6.0 million upon achievement of certain milestones. Advent also assumed the terms of Bren-Tronics lease for property used in UltraCell's operations inLivermore, California . Leases OnFebruary 5, 2021 , the Company entered into a lease agreement by and among the Company, in its capacity as tenant, andBP Hancock LLC , aDelaware limited liability company, in its capacity as landlord. The lease provides for the rental by the Company of office space at200 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$0.5 million . 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$0.1 million . OnMarch 8, 2021 , the Company entered into a lease for 21,401 square feet as a product development and manufacturing center atHood Park inCharlestown, MA. Under the terms of the lease, the Company will pay an initial fixed annual rent of$1.5 million . The lease has a term of eight years and five months, with an option to extend for five years and commenced inOctober 2022 . The Company provided security in the form of a security deposit in the amount of$0.8 million , upon commencement of the lease. OnAugust 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 groupSE & Co. KG , having its registered seat inAchern , 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 byFES . Under the terms of the lease, the Company leases 1,017 square feet at a monthly basic rate of €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 €30,000. 39
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 ofSeptember 30, 2022 , 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 theLos 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
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.
40
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 theSEC , 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), net
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$(0.9) million and$7.2 million for the three and nine months endedSeptember 30, 2022 , respectively, represents the change in fair value of the Private Placement Warrants and Working Capital Warrants. Change in fair value of warrant liability amounting to$2.4 million and$15.8 million for the three and nine months endedSeptember 30, 2021 , respectively, represents the change in fair value of the Private Placement Warrants and Working Capital Warrants.
Finance income / (expenses), net
Finance income / (expenses) consist mainly of bank charges. Finance income / (expenses) 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 Gains / (Losses), net
Foreign exchange gains / (losses) 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$0.1 million and$0.1 million has been recognized for the periods for the three months endedSeptember 30, 2022 and 2021, respectively. The amortization expense of$0.3 million and$0.3 million has been recognized for the periods for the nine months endedSeptember 30, 2022 and from the acquisition date of UltraCell toSeptember 30, 2021 , respectively. 41 The intangible assets of$19.8 million recognized on the acquisition of SerEnergy andFES 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$0.6 million and$1.8 million has been recognized in relation to these intangibles for the three and nine months endedSeptember 30, 2022 , respectively. The amortization expense of$0.2 million has been recognized for the period from the acquisition date of SerEnergy andFES to September
30, 2021, respectively. Results of Operations
Comparison of the Three Months Ended
The following table sets forth a summary of our consolidated results of
operations for the three months ended
Three months ended September 30,
(unaudited)
(Amounts in thousands, except share and
per share amounts) 2022 2021 $ change % change
Revenue, net $ 2,399 $ 1,674 $ 725 43.3 %
Cost of revenues (2,339 ) (1,646 ) (693 ) 42.1 %
Gross profit / (loss) 60 28 32 114.3 %
Income from grants 294 508 (214 ) (42.1 )%
Research and development expenses (2,547 ) (893 ) (1,654 ) 185.2 %
Administrative and selling expenses (8,203 ) (13,041 ) 4,838 (37.1 )%
Amortization of intangibles (696 ) (310 ) (386 ) 124.5 %
Operating loss (11,092 ) (13,708 ) 2,616 (19.1 )%
Fair value change of warrant liability (911 ) 2,422 (3,333 ) (137.6 )%
Finance income / (expenses), net - (14 ) 14 (100.0 )%
Foreign exchange gains / (losses), net (33 ) (15 ) (18 ) 120.0 %
Other income / (expenses), net 1 (16 ) 17 (106.3 )%
Loss before income tax (12,035 ) (11,331 ) (704 ) 6.2 %
Income tax 567 51 516 N/A
Net loss $ (11,468 ) $ (11,280 ) $ (188 ) 1.7 %
Net loss per share
Basic loss per share (0.22 ) (0.23 ) 0.01 N/ABasic weighted average number of shares 51,660,133 48,325,164
N/A N/A
Diluted loss per share (0.22 ) (0.23 ) 0.01 N/A
Diluted weighted average number of
shares 51,660,133 48,325,164 N/A N/A
Revenue, net
Our total revenue increased by approximately $0.7 million from approximately
$1.7 million in the three months ended September 30, 2021 to approximately $2.4
million in the three months ended September 30, 2022 . The increase in revenue
was related to revenue from UltraCell's operations (acquired on February 18,
2021 ) and increased demand from customers for Advent's MEAs and other products,
as a result of Advent's customers increasing their own testing and usage ofAdvent's products. Cost of Revenues
Cost of revenues increased by approximately$0.7 million from approximately$1.6 million in the three months endedSeptember 30, 2021 to approximately$2.3 million in the three months endedSeptember 30, 2022 . The increase in cost of revenues was related to 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 operations. We also faced supply chain cost pressure during the three months endedSeptember 30, 2022 . 42
Gross profit / (loss), which is revenue, net minus the cost of revenue,
increased to
Research and Development Expenses
Research and development expenses were approximately$2.5 million in the three months endedSeptember 30, 2022 , primarily related to internal research and development costs, as well as the Company's cooperative research development agreement with theU.S. Department of Energy . Research and development expenses were approximately$0.9 million in the three months endedSeptember 30, 2021 .
Administrative and Selling Expenses
Administrative and selling expenses were approximately$8.2 million in the three months endedSeptember 30, 2022 , and$13.0 million in the three months endedSeptember 30, 2021 . The decrease was primarily due to a non-recurring$2.4 million charge for executive severance in the three-months endedSeptember 30, 2021 and from stock-based compensation expenses of$2.7 million for the three months endedSeptember 30, 2022 compared to$3.3 million for the three months endedSeptember 30, 2021 .
Change in fair value of Warrant Liability
The change in fair value of warrant liability amounting to$(0.9) million and$2.4 million was due to the change in fair value of the Private Placement Warrants and Working Capital Warrants for the three months endedSeptember 30, 2022 and 2021, respectively. 43
Comparison of the Nine Months Ended
The following table sets forth a summary of our consolidated results of
operations for the nine months ended
Nine months ended September 30,
(unaudited)
(Amounts in thousands, except share and
per share amounts) 2022 2021 $ change % change
Revenue, net $ 5,880 $ 4,167 $ 1,713 41.1 %
Cost of revenues (6,126 ) (2,663 ) (3,463 ) 130.0 %
Gross profit / (loss) (246 ) 1,504 (1,750 ) (116.4 )%
Income from grants 1,011 632 379 60.0 %
Research and development expenses (7,338 ) (1,561 ) (5,777 ) 370.1 %
Administrative and selling expenses (26,657 ) (27,558 ) 901 (3.3 )%
Amortization of intangibles (2,113 ) (467 ) (1,646 ) 352.5 %
Operating loss (35,343 ) (27,450 ) (7,893 ) 28.8 %
Fair value change of warrant liability 7,248 15,833 (8,585 ) (54.2 )%
Finance income / (expenses), net (9 ) (27 ) 18 (66.7 )%
Foreign exchange gains / (losses), net (51 ) (2 ) (49 ) 2,450.0 %
Other income / (expenses), net (220 ) 78 (298 ) (382.1 )%
Loss before income tax (28,375 ) (11,568 ) (16,807 ) 145.3 %
Income tax 1,663 51 1,612 N/A
Net loss $ (26,712 ) $ (11,517 ) $ (15,195 ) 131.9 %
Net loss per share
Basic loss per share (0.52 ) (0.26 ) (0.26 ) N/A Basic weighted average number of shares 51,465,004 43,982,039
N/A N/A
Diluted loss per share (0.52 ) (0.26 ) (0.26 ) N/A
Diluted weighted average number of
shares 51,465,004 43,982,039 N/A N/A
Revenue, net
Our total revenue increased by approximately $1.7 million from approximately
$4.2 million in the nine months ended September 30, 2021 to approximately $5.9
million in the nine months ended September 30, 2022 . The increase in revenue was
related to revenue from UltraCell's operations (acquired on February 18, 2021 ),
revenue from SerEnergy and FES's operations (acquired on August 31, 2021 ), and
increased demand from customers for Advent's MEAs and other products, as a
result of Advent's customers increasing their own testing and usage of Advent's
products.
Cost of Revenues
Cost of revenues increased by approximately$3.4 million from approximately$2.7 million in the nine months endedSeptember 30, 2021 to approximately$6.1 million in the nine months endedSeptember 30, 2022 . The increase in cost of revenues was related to 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 andFES's operations. We also faced supply chain cost pressure during the nine months endedSeptember 30, 2022 .
Gross profit / (loss), which is revenue, net minus the cost of revenue,
decreased to
Research and Development Expenses
Research and development expenses were approximately$7.3 million in the nine months endedSeptember 30, 2022 , primarily related to internal research and development costs, as well as the Company's cooperative research development agreement with theU.S. Department of Energy . Research and development expenses were approximately$1.6 million in the nine months endedSeptember 30, 2021 . 44
Administrative and Selling Expenses
Administrative and selling expenses were approximately$26.7 million in the nine months endedSeptember 30, 2022 , and$27.6 million in the nine months endedSeptember 30, 2021 . The decrease was primarily due to a non-recurring$2.4 million charge for executive severance and one-time transaction costs following the Business Combination amounting to$5.9 million in the nine-months endedSeptember 30, 2021 . This was partially offset by an increase in personnel, the recognition of stock-based compensation expense amounting to$7.7 million for the nine months endedSeptember 30, 2022 compared to$4.0 million for the nine months endedSeptember 30, 2021 , and costs of the SerEnergy/FES businesses post-acquisition.
Change in fair value of Warrant Liability
The change in fair value of warrant liability amounting to
45
Liquidity and Capital Resources
As of the date of this filing of the Quarterly Report on Form 10-Q, Advent's existing cash resources and projected cash 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
nine months ended
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