Next Hydrogen Reports Q4 and Fiscal 2022 Financial Results and Application for Management Cease Trade Order
May 17, 2023
MISSISSAUGA, May 16, 2023 (GLOBENEWSWIRE) – Next Hydrogen Solutions Inc. (the “Company” or “Next Hydrogen”) (TSXV:NXH, OTC:NXHSF), a designer and manufacturer of electrolyzers, is pleased to report its financial results for the fourth quarter and full year ended December 31, 2022.
“We achieved significant milestones in the fourth quarter including (1) successful delivery of a proof-of-concept system to Hyundai Motor Company, (2) securing $5.1M in government funding support for our second and third generation product lines, (3) assembling a consortium of blue-chip industry partners to support our product launch strategy, (4) commissioning our Factory Acceptance Test, (5) testing 0.6MW and 1.8MW first generation electrolyzers, and (6) proving out the cell performance of our second generation in bench scale units. The focus for 2023 is to (1) launch our second-generation product line with better energy efficiency, lower cost and to address issues with respect to design and reliability based on our testing to date, (2) demonstrate multi-MW production from our second generation product line in a market application, and (3) demonstrate market traction for our product line with our strategic partners.
2022 Financial Highlights
- Revenue for the three-month period ended December 31, 2022 was $561,510 compared to $41,069 in the prior year. Revenue for the full year 2022 was $721,588 compared to $177,589 during the previous full year.
- Net loss for the three-month period ended December 31, 2022 was $3.2 million, compared to a loss of $6.3 million in the three-month (restated) period ended December 31, 2021. Net loss for the full year 2022 was $14.3 million compared to a loss of $26.6 million in fiscal 2021.
- Cash balance was $22.1 million as of December 31, 2022, compared to $39.2 million at December 31, 2021.
Management is also proud to highlight a number of recent developments that demonstrate significant recent progress:
- The Company has been awarded $5.1 million from Sustainable Development Technology Canada (SDTC) towards the development and demonstration of the Company’s next generation electrolysis technology. The SDTC project with a budget of over $12 million will run to early 2025, resulting in the launch of a second generation product line with cost and performance improvements and a third generation larger-scale product line with further cost and performance improvements. With the launch of these products, Next Hydrogen will be well positioned to support the needs of its customers for both near-term market demonstrations and commercial large-scale green hydrogen systems.
- Next Hydrogen successfully completed and delivered the build of a proof-of-concept electrolyzer using its unique design for Hyundai Motor Company. The pilot test demonstrated the ability to operate at significantly higher current densities and temperature compared to traditional alkaline electrolyzers, which provides a pathway to cost-effective green hydrogen production. The unit was tested using the newly commissioned test infrastructure and delivered to, and accepted by Hyundai Motor Company in the fourth quarter of 2022. The Company is looking forward to next steps and potential commercial arrangements in the future.
- The Company commissioned its Factory Acceptance Test equipment in October 2022, which allows Next Hydrogen to test commercial size systems prior to field demonstrations. This builds on the capability provided by bench scale and pilot scale test stands commissioned during Q2 and Q3 2022. As a result of these test stands, the Company commenced producing hydrogen from its systems in mid-2022 and has now progressed to 24/7 operation of its assets in its facility. The addition of these test stands significantly accelerates the Company’s ability to deliver reliable and innovative electrolyzers to its customers.
- In December 2022, we also successfully tested 0.6MW of individual modules of our first-generation product line in our Factory Acceptance Test. We also completed a successful 24 hour run of three of these modules connected together before year end.
- Subsequent to year end, the commissioning phase of this first-generation product line highlighted issues with respect to design as well as reliability; many of which were already known and already addressed in the second-generation product line. Further, due to supply chain challenges, the testing of our first-generation product line has come on the heels of the launch of our second-generation product line for demonstrations. As such, we are now in the process of investing in replacing and upgrading this unit to our second generation which will help to streamline and accelerate the validation of our go-forward product line. As a result, we have recorded a $0.4M inventory write‑down at December 31, 2022.
- Leveraging our test infrastructure, we achieved significant product development milestones which showcased the compelling features resulting from our unique design and which were proved out using our bench scale test infrastructure. We achieved cell performance that is enabling for full system energy efficiency of 55 kWh/kg (65 kWh/kg, previously) at a current density of 1 amp/cm2 (which is the 2030 target set by the European roadmap) in our bench scale test units, with a turn down ratio of well below 10%. We commissioned a pilot scale version (which uses full size parts) of our second generation electrolyzer in the fourth quarter. We are well positioned to assess the product performance in 2023.
- The Company is pleased to announce Dr. Jim Hinatsu was promoted to Chief Product Officer where he is responsible for developing and implementing the company’s product development and launch strategy and system architecture. This is in recognition of his efforts in putting together the product roadmap with internal and external stakeholders as well as helping secure strategic partners and government support for the launch strategy in 2022. Jim Hinatsu co-founded Next Hydrogen in 2008 and previously served as the Company’s Chief Operating Officer.
- Jim Franchville was promoted to Chief Operating Officer role. He joined the company in 2020 and previously served as our VP Manufacturing. He brings over 30 years experience in senior operations, lean supply chain and manufacturing roles, having worked with companies such as GE Healthcare, Delphi Automotive, National Oilwell Varco and Cessna Aircraft Company. He has demonstrated tremendous ability to implement strong processes and is responsible for transitioning the company from advanced engineering to a large volume manufacturing company in order to deliver innovative, repeatable and reliable products to our customers.
- The promotions for both Jim Hinatsu and Jim Franchville will be effective May 15th, 2023.
- Next Hydrogen was ranked first amongst publicly traded companies as the fastest-growing sustainable company in Canada by Corporate Knights, a Canadian media and research company committed to advancing a sustainable economy.
- The Company signed a memorandum of understanding with Black & Veatch, a global engineering, procurement, consulting and construction company, to develop a complete, large-scale, and integrated multi-megawatt green hydrogen solution and identify areas of deeper collaboration and specific global opportunities. Next Hydrogen’s unique hydrogen technology expertise and Black & Veatch’s vast customer network and engineering leadership will offer an integrated hydrogen solution to clients worldwide.
- Next Hydrogen joined a coalition of 40 partners that will work together, through the New York State Energy Research and Development Authority, to become one of at least four regional clean hydrogen hubs designated through the US federal Clean Hydrogen Hubs program included in the federal 2021 bipartisan Infrastructure Investment and Jobs Act to advance a vision that enables a long-term sustainable clean hydrogen industry in the US Northeast. The coalition will be competitively positioned to advance a vision that enables a long-term sustainable clean hydrogen industry in the Northeast region and to develop a proposal in response to the United States Department of Energy Funding Opportunity Announcement with $8 billion in funding available.
- The Company successfully upgraded to the highest market tier of OTC Markets, OTCQX under the symbol “NXHSF”.
For a more detailed discussion of Next Hydrogen’s second quarter results, please see the Company’s financial statements and management’s discussion and analysis, which are available on the Company’s website at nexthydrogen.com or on SEDAR at www.sedar.com.
During the year ended December 31, 2022, the Company identified material misstatements in the consolidated financial statement as at and for the year ended December 31, 2021. The December 31, 2021 previously issued consolidated financial statements should no longer be replied upon and the comparative information as at and for the year ended December 31, 2021 included in the December 31, 2022 consolidated financial statements have been restated to adjust for these material misstatements.
The Company identified material misstatements in the measurement of inventories and provisions, and the presentation of income statement as at and for the year-ended December 31, 2021. These material misstatements led to the following restated comparative information as at and for the year-ended December 31, 2021:
- Inventory balance was restated from $2.4M to $2.0M.
- Total provisions increased from $2.6M to $3.85M.
- Provisions were reclassified within the consolidated statements of comprehensive loss and are now included in cost of sales.
- As a result of the aforementioned restatements and reclassifications, cost of sales has a restated balance of $6M.
- Overall, the restatements resulted in a $1.6M increase in net loss to $26.6M.
These restatements had a similar effect on the 2022 quarterly reported amounts, refer to the Company’s management’s discussion and analysis for details.
Cease Trade Order Update
The British Columbia Securities Commission (the “BCSC”) issued a cease trade order (“CTO”) in respect of its securities as a result of the Company’s inability to file its audited annual financial statements and corresponding management’s discussion and analysis for the year ended December 31, 2022, including the CEO and CFO certifications (collectively, the “Financial Documents”), before May 1, 2023 as required by National Instrument 51-102 – Continuous Disclosure Obligations. With the filing of the Financial Documents, it is expected that the CTO will be revoked and the Company is coordinating with the TSX Venture Exchange to coordinate a resumption of trading as expeditiously as possible once the CTO has been revoked.
The Company further announces that as a result of the ongoing efforts by the Company’s external auditors to prepare the Financial Documents, the Company expects that the filing of its first quarter interim financial report and the Company’s Management Discussion & Analysis as at and for the period ended March 31, 2023 (the “Q1 Financials”) may be delayed. While the Company expects the BCSC to revoke the CTO shortly upon filing of the Financial Documents, the Company has applied to the BCSC for a Management Cease Trade Order (“MCTO”) that will prohibit the management of the Company from trading in the securities of the Company until such time as the Q1 Financials are filed. There is no guarantee that a MCTO will be granted. If the MCTO is granted, the MCTO will prohibit the chief executive officer, the chief financial officer, and possibly the directors, other officers and other insiders of the Company from trading in securities of the Company for so long as the Q1 Financials are not filed. The issuance of such MTCO does not generally affect the ability of persons who are not directors, officers or other insiders of the Company to trade in the Company’s securities.
No decision has yet been made by the BCSC on this application. The BCSC may grant the application and issue the MCTO or it may impose an issuer cease trade order if the Q1 Financials are not filed in a timely fashion.
During the period of default and until filing of the Q1 Financials, the Company intends to satisfy the provisions of the alternative information guidelines as required by National Policy 12-203 – Management Cease Trade Orders. Until the Company has filed the Q1 Financials, members of the Company’s management and other insiders are subject to an insider trading black-out policy as per its internal Insider Trading Policy that is consistent with the principles in Section 9 of National Policy 11-207 – Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.
About Next Hydrogen
Founded in 2007, Next Hydrogen is a designer and manufacturer of electrolyzers that use water and electricity as inputs to generate clean hydrogen for use as an energy source. Next Hydrogen’s unique cell design architecture supported by 40 patents enables high current density operations and superior dynamic response to efficiently convert intermittent renewable electricity into green hydrogen on an infrastructure scale. Following successful pilots, Next Hydrogen is scaling up its technology to deliver commercial solutions to decarbonize transportation and industrial sectors.
|Raveel Afzaal, President and Chief Executive Officer
Next Hydrogen Solutions Inc.
This news release contains “forward-looking information” and “forward-looking statements”. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In particular, forward looking information and statements herein include, but are not limited to, the filing of the Q1 Financials, including the timing for the filing of the Q1 Financials, lifting of the CTO and resumption of trading and the issuance of a MCTO in respect of the Company. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: the ability of the Company to obtain a MCTO and the timing thereof; the risks associated with the hydrogen industry in general; delays or changes in plans with respect to infrastructure development or capital expenditures; the uncertainty of estimates and projections relating to costs and expenses; failure to obtain necessary regulatory approvals; health, safety and environmental risks; uncertainties resulting from potential delays or changes in plans with respect to infrastructure developments or capital expenditures; currency exchange rate fluctuations; as well as general economic conditions, stock market volatility; and the ability to access sufficient capital. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, there will be no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change.