Naeblys
Observe: I’ve coated Introduction Applied sciences Holdings (NASDAQ:ADN) beforehand, so traders ought to view this as an replace to my earlier articles on the corporate.
Introduction Applied sciences Holdings or “Introduction” is a small, Boston-headquartered gasoline cell firm primarily targeted on high-temperature polymer electrolyte membrane (“HT-PEM”) expertise.
HT-PEM gasoline cells do not require pure hydrogen and might deal with virtually any low- or zero-carbon gasoline. As well as, Introduction asserts its expertise to be extremely resilient and allow a extra environment friendly warmth administration.

Firm Presentation
Introduction used the 2020/2021 ESG hype to acquire a backdoor itemizing by combining with SPAC AMCI Acquisition Corp. in February 2021.
The transaction raised an combination $158.3 million in capital, together with $93.3 million of AMCI’s money in belief and $65 million from a PIPE funding led by Jefferies LLC and Fearnley Securities.
Over the previous two years, the corporate has spent a lot of the funds for masking working losses in addition to various acquisitions.
Final week, Introduction launched weak fourth quarter outcomes and subsequently filed its annual report on type 10-Okay with the SEC.
Complete FY2022 income of $7.8 million got here in at a tiny fraction of the corporate’s unique $23 million forecast.
Introduction reported unfavourable free money stream of $46.6 million for fiscal 2022, thus leaving the corporate with unrestricted money and money equivalents of simply $32.9 million on the finish of final yr.
Consequently, administration was required to incorporate a going concern warning within the firm’s annual report (emphasis added by writer):
Based mostly on the Firm’s present working plan, the Firm believes that its money and money equivalents as of December 31, 2022 of $32.9 million is not going to be enough to fund operations and capital expenditures for the twelve months following the submitting of this Annual Report on Type 10-Okay, and the Firm might want to acquire extra funding.
In July 2022, the Firm acquired official ratification from the European Fee of the European Union for one of many Essential Initiatives of Widespread European Curiosity (“IPCEI”), Inexperienced HiPo. This challenge gives for the supply of funding of €782.1 million over the following six years. As of the issuance date of the consolidated monetary statements, the Firm has not acquired an settlement which gives the phrases of the funding.
Along with Inexperienced HiPo, administration will pursue an extra capital elevate within the second quarter of 2023, however that is based mostly on estimates which might be topic to dangers and uncertainties. There may be no assurance that the Firm will have the ability to acquire extra funding on acceptable phrases, if in any respect. If the Firm is unable to acquire enough funding, it may very well be required to delay its improvement efforts, restrict actions and scale back analysis and improvement prices, which might adversely have an effect on its enterprise prospects. Due to the uncertainty in securing extra funding and the inadequate amount of money and money equivalents as of the monetary assertion submitting date, administration has concluded that substantial doubt exists with respect to the Firm’s potential to proceed as a going concern for one yr from the date the consolidated monetary statements are issued.
Including insult to harm, the corporate will likely be pursuing a near-term capital elevate and hasn’t been in a position to come to an settlement with the state of Greece on funding phrases for its key Inexperienced HiPo challenge:
We now have been working with a Greek state on the mechanism and timing schedule for the funding facility. These conferences have been included visits by Greek state officers to the corporate’s analysis and manufacturing services in Patras, Greece. It’s our objective to finalize these discussions as quickly as potential and proceed with the rollout of this system. The scope of Inexperienced HiPo, over the preliminary interval of 6 years, is to innovatively develop and manufacture gasoline cell techniques and electrolyzer techniques for the manufacturing of energy and inexperienced hydrogen respectively.
We’re aiming for cumulative capability of 118 megawatts of gasoline cells and 1.5 gigawatts of electrolyzers over this time. The manufacturing of those techniques will happen in Greece within the area of Western Macedonia, which is able to develop into our point of interest for expertise improvement and mass manufacturing. The corporate intends to create roughly 600 direct jobs for certified scientific and technical personnel and as much as 4,600 oblique jobs over the 6-year interval.

Firm Presentation
Sadly, the complementary “White Dragon” challenge seems to have been shelved in the interim thus inflicting substantial uncertainties relating to the implementation schedule for Inexperienced HiPo.
In the course of the question-and-answer session of final week’s convention name, CEO Vasilis Gregoriou was requested in regards to the subsequent steps and timing close to the Inexperienced HiPo challenge implementation however did not have a lot to supply:
(…) Right here is the scenario, the IPCEI has been ratified at €5.4 billion throughout the continent. Not all international locations are on the identical degree, okay. And as a really newly elected Chairman, my very first thing is to – for all of us to search out out the place we’re and to go within the subsequent couple of months when we’ve our first reporting to see the place everyone is. So, the concept is that the Greek state may be very optimistic about it. We acquired a letter in March that initially congratulated us on this superb success, if you’ll. And second is that they go as quick as potential to go to the following degree, which means, give us a name. And within the name, we’re going to see the precise particulars of what’s going to occur there. (…) So, I feel that’s how a lot I can say. I feel we within the subsequent few months, we’ll know issues.
However the unhealthy information would not cease right here as the corporate disclosed an combination $38.9 million in impairment fees associated to the €52 million acquisition of SerEnergy and fischer eco options GmbH in June 2021.
Bear in mind, the acquisition of SerEnergy was a giant wager on the stationary telecom backup energy market within the Philippines however key prospects like PLDT and Globe Telecom have lately began to monetize their towers in sale-and-leaseback transactions, thus leading to important order delays that are unlikely to be addressed anytime quickly.
At the very least Introduction managed to proceed its work with Hyundai following a profitable expertise evaluation over the previous yr.
The evaluation evaluated Introduction’s proprietary Membrane Electrode Meeting (“MEA”) expertise for supplying Hyundai’s high-temperature gasoline cell wants, and following its success, the 2 firms have entered right into a Joint Improvement Settlement (“JDA”). (…)
Underneath the settlement, Hyundai and Introduction will work collectively to additional develop HMC-Introduction Ion Pair™ MEA, set up industrial standards for MEA provide, and consider Introduction’s superior gasoline cell expertise for Hyundai’s heavy-duty and/or stationary utility. Moreover, the events will introduce superior cooling applied sciences for mobility Excessive-Temperature Proton Alternate Membrane (HT-PEM) gasoline cell stacks. Introduction will work intently as Hyundai evaluates these stack cooling applied sciences and guarantee optimum efficiency below totally different working situations.
Sadly, the continued improvement work with Hyundai is unlikely to end in any materials near- or medium-term monetary advantages to the corporate.
Given Introduction’s disappointing 2022 efficiency and contemplating ongoing delays in telecom backup energy orders in addition to restricted visibility into the timing of Inexperienced HiPo challenge funding, administration has abstained from offering income steering for 2023.
Presently, the two-analyst consensus is looking for 2023 revenues to extend greater than sixfold from final yr’s ranges to a whopping $52.3 million which the corporate is more likely to miss by a really vast margin once more.
Backside Line
Numerous unhealthy information for Introduction Applied sciences Holdings’ badly stricken shareholders because the enterprise continues to carry out nicely under administration’s unique expectations and accessible liquidity dwindling quick.
Consequently, the corporate has warned traders of its potential to proceed as a going concern and acknowledged its intent to pursue a capital elevate within the present quarter.
With the share value hovering close to all-time lows, elevating a considerable amount of money would possibly show more and more troublesome.
That stated, the corporate has no debt which could go away the door open for a small convertible deal.
With an fairness or equity-linked financing doubtless straight forward, I might advise traders to keep away from the shares and even think about promoting present positions.
Editor’s Observe: This text covers a number of microcap shares. Please concentrate on the dangers related to these shares.