{"url_path":"/sec/adsew/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1879248/0001213900-26-057891-index.html","accession_number":"0001213900-26-057891","cik":"0001879248","ticker":"ADSE","issuer_name":"Ads-Tec Energy Public Ltd Co","edgar_url":"https://www.sec.gov/Archives/edgar/data/1879248/0001213900-26-057891-index.html","primary_entity_key":"0001879248","primary_entity_name":"Ads-Tec Energy Public Ltd Co"},"word_count":7509,"has_tables":true,"body_markdown":"** **\n\n**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n** **\n\n**5.A. Operating Results**\n\n* *\n\n*This operating and financial\nreview should be read together with the section captioned “Item 4. Information on the Company - 4.B. Business Overview” and\nthe audited consolidated financial statements of the Company and the related notes to those statements included elsewhere in this Annual\nReport. Among other things, the audited consolidated financial statements include more detailed information regarding the basis of preparation\nfor the following information. The audited consolidated financial statements of the Company have been prepared in accordance with IFRS.\nThis discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set\nforth under “Item 3. Key Information - D. Risk Factors” and elsewhere in this Form 20-F, our actual results may differ materially\nfrom those anticipated in these forward-looking statements. Please see “Cautionary Note Regarding Forward-Looking Statements”\nin this Annual Report.*\n\n \n\n**Overview**\n\n \n\nADSE produces, develops, and\nmarkets battery-buffered EV charging systems infrastructure, battery storage systems and cloud-based services that enable the customer\nto control and manage the system, for example via Big-LinX, based on real-time information. ADSE’s ecosystem enables 24/7 access\nto its ecosystem platform consisting of hardware, software and services, over the air updates, prediction-based services, and data analytics.\n\n \n\nADSE generates revenue primarily\nthrough the sale of its products, services and Big-LinX. Big-LinX with its control and monitoring functions enables proactive monitoring,\nfast response time, parts, and performance warranty. ADSE targets two key markets: battery storage systems for residential, commercial,\nand industrial customers, and battery-buffered high-power charging infrastructure. Additionally, ADS-TEC has developed a new business\nmodel “Own & Operate” where it acts as a charge point operator (CPO), operating its own charging infrastructure at selected\nlocations across Germany.\n\n \n\nSince ADSE GM’s inception\nin 2008, it has been engaged in producing, developing, and marketing its battery-buffered energy systems, subscriptions, and other offerings,\nestablishing production and recruiting personnel. ADSE GM has incurred net operating losses and negative cash flows from operations in\nevery year since its inception.\n\n \n\nAs of December 31, 2025, ADSE\nhad an accumulated deficit of EUR 344.3 million. ADSE has funded its operations mainly with capital contributions, sustained shareholder\nloans and customer payments.\n\n** **\n\n**Key Factors Affecting Operating Results**\n\n \n\nWe believe our performance\nand future success depend on several factors which have affected ADSE’s performance in the periods for which financial information\nis presented in this Annual Report and which will continue to affect our future performance. These factors present significant opportunities\nfor us but also pose risks and challenges, including those discussed below and in the section of this Annual Report titled “Item\n3. Key Information - D. Risk Factors”.\n\n** **\n\n**Battery-Buffered EV Charging Systems**\n\n** **\n\n**Growth in EV Adoption**\n\n \n\nADSE’s revenue growth\nis directly tied to the continued acceptance of passenger and commercial EVs sold, which it believes drives the demand for charging infrastructure.\nThe market for EVs is still rapidly evolving and, although demand for EVs has grown in recent years, the ramp up of e-mobility in ADSE’s\ncore markets has been slower than expected, and there is no guarantee of such future demand. Factors impacting the adoption of EVs include,\nbut are not limited to, perceptions about EV features, quality, safety, performance and cost; perceptions about the limited range over\nwhich EVs may be driven on a single battery charge; volatility in the cost of oil and gasoline; availability of services for EVs; consumers’\nperception about the convenience and cost of charging EVs; and increases in fuel efficiency. In addition, macroeconomic factors could\nimpact demand for EVs, particularly since cost parity with traditional gasoline-powered vehicles has not been achieved across all regions\nand vehicle classes. If the market for EVs does not develop as expected or if there is any slow-down or delay in overall EV adoption rates,\nthis would impact ADSE’s ability to increase its revenue from hardware and software sale, as well from its Own & Operate network.\n\n \n\n51\n\n \n\n \n\n**Customer Concentration**\n\n \n\nADSE’s revenues have\nhistorically been concentrated among a limited number of key customers, and this concentration has materially affected its operating results.\nIn 2025, approximately 77% of total revenue was generated by the Company’s ten largest customers, with a small number of customers\neach accounting for a meaningful portion of total revenue. This level of concentration makes the Company’s demand highly dependent\non a limited number of customers. As a result, adverse developments affecting individual customers can lead to a significant reduction\nin demand. In 2025, the Company experienced a significant decline in revenue in its EV-charging hardware business, primarily driven by\nreduced demand following the insolvency of a key customer. This reduction in demand contributed to increased inventory levels and, consequently,\nexposed the Company to inventory valuation adjustments and write-downs. While ADSE is actively seeking to diversify its customer base,\nincluding by expanding relationships with a broader range of counterparties, its operating results may continue to be affected by order\nvolumes, financial condition and purchasing decisions of key customers.\n\n \n\n**Production Planning and Inventory Management**\n\n \n\nADSE’s operating results\nare affected by its ability to align production levels with realized customer demand. Historically, the Company has produced charging\nsystems and related products in advance of confirmed demand in order to support anticipated growth and customer deployment timelines,\nwhich resulted in an accumulation of inventory in prior periods. In 2025, lower-than-expected demand further increased these inventory\nlevels. As of 2025, adjustments to the valuation of finished goods and raw materials led the Company to recognized inventory write-downs,\nwhich impacted the operating results. The Company continues to focus on aligning production and sales more closely and on reducing existing\ninventory levels; however, any mismatch between production volumes and actual demand may continue to adversely affect its operating results.\n\n** **\n\n**Competition**\n\n \n\nADSE is currently a market\nleader within the EU in battery-buffered ultra-high-power chargers. ADSE intends to expand its market share over time in its product categories.\nExisting competitors may expand their product offerings and sales strategies, and new competitors may enter the market. Furthermore, a\ngrowing share of alternative fuel vehicles — such as plug-in hybrids and high fuel-economy gasoline vehicles — could reduce\ndemand for EV charging infrastructure, intensifying competitive pressure on ADSE's business. If ADSE’s market share decreases due\nto increased competition, its revenue and ability to generate profits in the future may be impacted.\n\n** **\n\n**United States Expansion**\n\n \n\nADSE operates in Europe, the United States and\nCanada. The United States and Canada are expected to be a significant contributor to ADSE’s revenue in future years. ADSE believes\nit is also well positioned to grow its North America business, both through new potential business relationships and the expansion of\nexisting multinational business relationships. However, ADSE primarily competes with larger providers of non-battery-buffered EV charger\nproducers, as well as a small number of battery-buffered charger producers. ADSE’s growth requires differentiating itself as compared\nto the potential newcomers and existing competitors with AC and DC chargers. If ADSE is unable to penetrate the market in US, its future\nrevenue growth and profits may be impacted.** **\n\n** **\n\n**Battery Storage Systems**\n\n** **\n\n**Growth in All-Electric-World Adoption**\n\n \n\nADSE’s battery storage\nsystems revenue growth is linked to the transition to an all-electric world by using renewable energy in various end-market segments.\nEven though ADSE's focus in 2025 was on battery-buffered EV charging systems with no material growth in battery storage, ADSE is convinced\nthat stationary storage is essential to achieving CO₂-neutral energy systems. To that end, ADSE has expanded its portfolio in 2025\nwith two dedicated BESS products: the BESS760 (760 kWh, primarily designed for behind-the-meter applications) and the BESS5000 (5 MWh,\ntargeting front-of-the-meter use cases). First successful client projects have demonstrated the advantages of these systems and laid the\nfoundation for future commercial deployments. The market for battery storage systems is still evolving and although demand for systems\nhas grown in recent years significantly, there is no guarantee of such future demand. Factors impacting the demand for battery storage\nsystems include but are not limited to: perceptions about battery storage systems features and advantages, quality, safety, performance\nand cost; volatility in the cost of energy; saturation of the market; legislative changes favoring other energy storage mechanisms; availability\nof services; and cost of installing and using a battery storage system. In addition, macroeconomic factors could impact demand for renewable\nenergy, particularly since they can be more expensive than energy from finite resources. If the market for battery storage systems does\nnot develop as expected or if there is any slow-down or delay in overall CO2 neutral adoption rates, this would impact ADSE´s\nability to increase its revenue or grow its business.\n\n** **\n\n52\n\n \n\n** **\n\n**Competition**\n\n \n\nADSE is currently offering\nits battery storage systems mainly within the European Union. ADSE intends to expand its market share over time in its product categories.\nExisting competitors may expand their product offerings and sales strategies, and new competitors may enter the market. Furthermore, ADSE’s\ncompetition includes other types of alternative energy storage solutions such as hydrogen and compressed air storage solutions, as well\nas conventional gas-fired power stations for longer-duration energy storage. If ADSE’s market share decreases due to increased competition,\nits revenue and ability to generate profits in the future may be impacted.\n\n** **\n\n**Impact of New Product Releases**\n\n \n\nAs ADSE introduces new products,\nits gross margins may be temporarily impacted by launch costs until its supply chain achieves targeted cost reductions. In addition, ADSE\nmay accelerate its operating expenditures where it sees growth opportunities which may impact gross margin until upfront costs and inefficiencies\nare absorbed and normalized operations are achieved. ADSE also continuously evaluates and may adjust its operating expenditures based\non its launch plans for its new products, as well as other factors including the pace and prioritization of current projects under development\nand the addition of new projects. As ADSE attains higher revenue, it expects operating expenses as a percentage of total revenue to continue\nto decrease in the future as it focuses on increasing operational efficiency and process automation.\n\n** **\n\n**Government Mandates, Incentives and Programs**\n\n \n\nThe European Union, the German\nfederal government, the U.S. federal government, foreign governments and some state and local governments provide incentives to end users\nand purchasers of renewable energy sources and battery storage systems in the form of rebates, tax credits and other financial incentives.\nThese governmental rebates, tax credits and other financial incentives significantly lower the effective total cost of ownership of renewable\nenergy sources and battery storage systems to customers. However, these incentives may expire on specified dates, end when the allocated\nfunding is no longer available, or be reduced or terminated as a matter of regulatory or legislative policy. Any reduction in rebates,\ntax credits or other financial incentives could reduce the demand for renewable energy sources and for battery storage systems offered\nby ADSE.\n\n** **\n\n**Components of Results of Operations**\n\n** **\n\n**Revenue**\n\n \n\nADSE develops, produces, and\ndistributes battery storage solutions for different areas of applications (“multi-use-case”). The product portfolio includes\nthe field “Charging,” which provides charging solutions for the expansion of the eMobility infrastructure at power-limited\nnetwork points; the field “Services,” which covers critical services such as spare part availability, remote management solutions\nand ongoing operational and software support and maintenance for charging infrastructure, as well as software solutions regarding intelligent\ncontrolling and monitoring of battery storage solutions; and the field “Commercial and industrial,” which offers solutions\nwith power ranges up to multiple MW/MWh.\n\n \n\nFor the fiscal years 2024\nand 2025, the revenue stream “Charging” mainly includes the production and delivery of ChargeBox (CBX) and ChargePost (CPT).\nRevenue for the CBX and CPT is recognized once the product is transferred to the customer. In 2025, revenues from this stream declined\nsignificantly compared to 2024, primarily due to the insolvency of a key customer in the EV-charging hardware business. The revenue stream\n“Service” continued to grow substantially compared to the prior year, highlighting the growing demand for comprehensive service\nsolutions. Service revenue is recognized in the periods in which the services are rendered. Finally, the revenue stream “Commercial\nand industrial” in fiscal year 2024 and 2025 includes the delivery of a large-scale modular battery storage solution. The revenue\nfor such storage solutions is recognized over time. The percentage of completion is based on the costs incurred. Revenues in this business\nline increased in 2025 by kEUR 513 or 31% compared to 2024, primarily due to the timing of project execution. The “Commercial and\nindustrial” business line only began generating commercial activity in the second half of 2025, and as a result, many projects were\nstill in early stages of delivery or had not yet progressed to revenue recognition by year-end. While the Company has approximately €256\nmillion in pending project proposals and has established an order backlog of approximately €9 million, revenues from these projects\nare expected to be recognized in future periods as delivery progresses.\n\n \n\n53\n\n \n\n \n\nADSE expects that 2026 will\nbe a challenging year due to uncertainty in the market associated with the ongoing war between Ukraine and Russia and the war in Iran\nand related supply chain disruptions as well as trade barriers due to customs duties. This can potentially impact ADSE’s efforts\nto increase sales to a growing customer base and the expansion of its operations in the United States. In addition, the extension of the\nbusiness model requires a start-up phase with an increase in revenue starting late 2026 into 2027.\n\n** **\n\n**Cost of Sales**\n\n \n\nADSE’s in-house production\ncost of sales include raw material, parts, labor and manufacturing costs. Further, cost of sales includes allocated overhead attributable\nto facilities, salaries and information technology as well as the amortization of capitalized development costs.\n\n \n\nIt also includes cost for\nfield service operations, spare parts, license cost for BigLinX, allocated facilities and information technology expenses, salaries, and\nrelated personnel expenses for providing 3rd level service and third-party support costs to perform installations, maintenance\nand repair service.\n\n** **\n\n**Gross Profit and Gross Margin**\n\n \n\nGross profit is revenue less\ncost of sales and gross margin is gross profit as a percentage of revenue. ADSE offers a range of products which vary widely in price\nand associated margin. Accordingly, ADSE’s gross profit and gross margin have varied and are expected to continue to vary from period\nto period due to revenue levels; geographic, vertical and product mix; new product introductions, and its efforts to optimize its operations\nand supply chain.\n\n \n\nIn 2025, gross profit declined\nsignificantly compared to the prior year, primarily due to lower revenue levels as well as an inventory write-down related to valuation\nadjustments in raw materials and finished goods. This write-down was associated with inventory build-up in prior periods and reflects\nthe Company’s efforts to realign production and sales with current demand levels.\n\n \n\nIn the long term, ADSE expects\nits gross profit to increase on an absolute basis and gross margin to increase over time as it expands its revenue and continues to optimize\nits operations and supply chain. However, in the short term, as ADSE launches new charging systems and battery storage products, and grows\nits presence in Europe and United States, it expects gross margin to experience variability from period to period.\n\n** **\n\n**Research and Development Expenses**\n\n \n\nResearch and not capitalized\ndevelopment expenses consist primarily of salaries and related personnel expenses for personnel related to the development of improvements,\nquality assurance, testing, product management, and cost for samples, allocated facilities, and information technology expenses. Information\ntechnology research and not capitalized development costs are expensed as incurred.\n\n \n\nADSE expects its research\nand development expenses to increase on an absolute basis and they may increase as a percentage of total revenue for the foreseeable future\nas it continues to invest in research and development activities to achieve its technology and product roadmap.\n\n** **\n\n54\n\n \n\n** **\n\n**Selling, General, and Administrative Expenses**\n\n \n\nSelling, general and administrative\n(“SG&A”) expenses primarily consist of personnel-related expenses, external storage, packaging, marketing cost,\nprofessional or legal fees, transaction cost, and other expenses. ADSE incurs additional general and administrative expenses as a result\nof operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq listing\nstandards, additional insurance expenses (including directors’ and officers’ insurance), investor relations activities and\nother administrative and professional services. ADSE also further increased the size of its selling, general and administrative function\nto support the growth of its business. Overall, the Company expects that the SG&A remains on the level of fiscal year 2025 in fiscal\nyear 2026.\n\n** **\n\n**Depreciation and Amortization**\n\n \n\nDepreciation and amortization\nprimarily relate to the depreciation of ADSE manufacturing and technology equipment, other tools, right-of-use assets and to capitalized\ndevelopment expenses. ADSE anticipates these expenses will continue to increase over time as it continues to develop new products and\nmay extend its warehouse facility in the United States into a production facility.\n\n** **\n\n**Other Expenses**\n\n \n\nOther expenses mainly include\neffects from provisions for onerous contracts, expenses from special warranties and exchange rate losses.\n\n** **\n\n**Other Income**\n\n \n\nOther income consists mainly\nof income from reversal of provisions, exchange rate gains, cost refunds and insurance compensation.\n\n** **\n\n**Finance Income**\n\n \n\nFinance income consists of\ninterest income, foreign currency gains and gains from the remeasurement of warrant liabilities.\n\n** **\n\n**Finance Costs**\n\n \n\nFinance costs primarily relate\nto losses from the remeasurement of warrant liabilities and interest expenses from shareholder loans.\n\n** **\n\n**Income Tax Benefits/(Expenses)**\n\n \n\nThe tax benefits/(expenses)\ninclude current and deferred taxes. Current taxes and deferred taxes are reported in profit or loss, except to the extent to which they\nare reported directly in equity or in other operating income.\n\n \n\nThe total tax loss carry forwards\nof ADSE as of December 31, 2025 amounted to EUR 156.7 million in Germany (corporate income tax only), EUR 21.1 in the U.S. and EUR 14.9\nin Ireland (December 31, 2024: EUR 123.3 million in Germany (corporate income tax only), EUR 20.3 million in the U.S. and EUR 10.7 million\nin Ireland).\n\n** **\n\n55\n\n \n\n** **\n\n**Results of Operations**\n\n \n\n**Comparison of the Twelve Months Ended December\n31, 2025 and 2024**\n\n \n\nThe results of operations\nfor the twelve months ended December 31, 2025 and 2024 presented below should be reviewed in conjunction with ADSE’s audited consolidated\nfinancial statements and the notes thereto included elsewhere in this Annual Report.\n\n \n\nThe following table summarizes\nADSE’s historical results of operations for the periods indicated:\n\n \n\n  \nYear Ended December 31,  \n   \n  \n\nin kEUR \n2025  \n2024  \nChange  \nChange (%) \n\nContinuing Operations \n   \n   \n   \n  \n\nRevenue \n 31,559  \n 110,013  \n -78,454  \n -71%\n\nCost of sales \n -47,842  \n -90,585  \n 42,743  \n -47%\n\nGross profit (loss) \n -16,283  \n 19,427  \n -35,710  \n -184%\n\nResearch and development \n -8,488  \n -8,971  \n 483  \n -5%\n\nSelling and general administrative \n -32,797  \n -31,588  \n -1,209  \n 4%\n\nImpairment losses on trade receivables, contract assets,\nand other investments \n -55  \n -58  \n 3  \n -5%\n\nOther expenses \n -1,334  \n -1,949  \n 615  \n -32%\n\nOther income \n 2,264  \n 14,530  \n -12,266  \n -84%\n\nOperating Result \n -56,694  \n -8,609  \n -48,084  \n 559%\n\nFinance income \n 60,788  \n 24  \n 60,764  \n 253183%\n\nFinance expenses \n -59,542  \n -88,883  \n 29,341  \n -33%\n\nNet finance result \n 1,246  \n -88,858  \n 90,105  \n -101%\n\nResult before tax \n -55,447  \n -97,467  \n 42,020  \n -43%\n\nIncome tax benefits (expenses) \n 257  \n -491  \n 748  \n -152%\n\nResult from continuing operations \n -55,190  \n -97,958  \n 42,768  \n -44%\n\nResult for the period \n -55,190  \n -97,958  \n 42,768  \n -44%\n\nOther comprehensive income (loss) for the period, net of tax \n -432  \n 939  \n -1371  \n -146%\n\nTotal comprehensive result for the period \n -55,621  \n -97,019  \n 41,397  \n -43%\n\n \n\n**Revenue**\n\n \n\nThe following table summarizes\nthe changes in revenue from the twelve months ended December 31, 2024 to 2025.\n\n \n\n  \nYear Ended December 31,  \n   \n  \n\nIn kEUR \n2025  \n2024  \nChange  \nChange (%) \n\nCharging \n 18,740  \n 102,533  \n -83,793  \n -82%\n\nService \n 10,277  \n 5,603  \n 4,674  \n 83%\n\nCommercial and industrial \n 2,190  \n 1,677  \n 513  \n 31%\n\nOther \n 352  \n 200  \n 152  \n 76%\n\nTotal \n 31,559  \n 110,013  \n -78,454  \n -71%\n\n \n\nThe following table summarizes\nthe changes in revenue from the twelve months ended December 31, 2024 to 2025 based on geography.\n\n \n\n \n\n  \nYear Ended December 31  \n   \n  \n\nIn kEUR \n2025  \n2024  \nChange  \nChange (%) \n\nEurope \n 29,105  \n 104,390  \n (75,285) \n (72)%\n\nNorth America \n 2,454  \n 5,623  \n (3,169) \n (56)%\n\nTotal \n 31,559  \n 110,013  \n (78,454) \n (71)%\n\n \n\n56\n\n \n\n \n\nTotal revenue decreased by\nEUR 78.5 million or 71%, from the year ended December 31, 2024 to December 31, 2025. This is primarily due to the combined impact of the\ninsolvency of a key customer in the existing EV-charging hardware business and the ongoing strategic shift towards new business models\nthat have not yet translated into additional revenue. Service revenue increased by EUR 4.7 million or 83% from the year ended December\n31, 2024 to December 31, 2025, reflecting continued expansion of the installed base and demonstrating the growing contribution of recurring\nrevenue streams.\n\n \n\nOn a geographic basis, revenue\nin Europe decreased by EUR 75.3 million, or 72%, to EUR 29.1 million in 2025, primarily reflecting the lower hardware-related revenue.\nRevenue in North America decreased by EUR 3.2 million, or 56%, to EUR 2.5 million in 2025, reflecting lower hardware-related revenue and\nthe continued prioritization of our strategic transition over near-term sales growth in the region.\n\n \n\nThe Company generated 19%\nof total revenue with one customer in the fiscal year ended December 31, 2025 and 40% of total revenue with another customer in the fiscal\nyear ended December 31, 2024. Besides these customers, about 50% of sales were generated with 19 further customers in 2025 (14 further\ncustomers in 2024).\n\n \n\n**Cost of Sales**\n\n \n\nCost of sales decreased by\nEUR 42.7 million or 47%, from the year ended December 31, 2024 to December 31, 2025. The decrease was primarily driven by the significant\nreduction in revenue to EUR 31.6 million in 2025, reflecting lower sales volumes. In addition, cost of sales includes valuation adjustments\nof EUR 13.2 million related to raw materials, work in progress, and finished goods. These adjustments result from elevated inventory levels\noriginating in prior periods and management’s actions to realign production volumes and sales activities with current market demand\nand the Company’s revised strategic focus.\n\n \n\n**Gross Profit** \n\n \n\nGross profit declined by EUR\n35.7 million from a profit of EUR 19.4 million for the year ended December 31, 2024 to a negative of EUR 16.3 million for the year ended\nDecember 31, 2025. The change reflects decreased sales volumes and the effects of inventory valuation adjustments, as discussed above.\n\n** **\n\n**Research and Development**\n\n \n\nResearch and development expenses\ndecreased by EUR 0.4 million, or 5%, to EUR 8.5 million from the year ended December 31, 2024 to December 31, 2025. In the year ended\nDecember 31, 2025, the Company also had capitalized development cost of EUR 0.3 million (year ended December 31, 2024: EUR 0.3 million).\n\n \n\n**Selling and General Administrative**\n\n \n\nSales and general administrative\nexpenses increased by EUR 1.2 million or 4%, from the year ended December 31, 2024 to December 31, 2025 mainly due to increased legal\nand consulting fees.\n\n \n\n**Impairment Gains (Losses) on Trade Receivables,\nContract Assets, and Other Investments**\n\n \n\nImpairment losses on trade\nreceivables, contract assets, and other investments did not change materially from the year ended December 31, 2024 to December 31, 2025.\n\n \n\n**Other Expenses**\n\n \n\nOther expenses decreased by\nEUR 0.6 million from the year ended December 31, 2024 to December 31, 2025 mainly due to lower foreign exchange losses.\n\n \n\n57\n\n \n\n \n\n**Other Income**\n\n \n\nOther income decreased by\nEUR 12.3 million from the year ended December 31, 2024 to December 31, 2025 primarily due to the release of provisions for warranties\nand onerous contracts in 2024 while no such significant effects occurred in 2025. The latter were released in 2024 as the underlying material\ncan be used as spare parts in service contracts with terms of up to 10 years and is thus considered to be of value despite high inventory\ncoverage. Warranty provisions were released following a detailed technical analysis and new insights regarding the estimated costs to\nfulfil the warranty obligations.\n\n \n\n**Net Finance Result** \n\n \n\nNet finance result increased\nfrom negative EUR 88.9 million for the year ended December 31, 2024 to EUR 1.2 million for the year ended December 31, 2025. Finance income\nincreased by EUR 60.8 million as the remeasurement of warrant liabilities resulted in a gain of EUR 40.5 million due to the decrease in\nstock price to USD 12.68 on December 31, 2025 compared to USD 15.51 on December 31, 2024. In addition, ADSE recognized foreign currency\ngains related to the conversion of warrants and financing activities denominated in USD due to the fluctuation of the USD – EUR\nexchange rate of EUR 19.8 million. Finance expenses for the year ended December 31, 2025 include higher interest expenses from shareholder\nloans taken out in fiscal year 2023 and 2024 in the amount of EUR 21.5 million as compared to EUR 16.1 million in 2024 and interest expense\nin an amount of EUR 20.8 million related to convertible notes that were issued and repaid in 2025. Last, finance expenses in 2025 include\nforeign currency losses of EUR 8.2 million (2024: EUR 6.7 million) that result from the foreign exchange valuation of warrant liabilities\ndenominated in USD at the reporting date.\n\n \n\n**Income Tax Benefits/Expenses**\n\n \n\nIncome taxes changed from\ndeferred tax expenses of EUR 0.5 million for the year ended December 31, 2024 to deferred tax income of EUR 0.3 million for the year ended\nDecember 31, 2025 primarily due to originating and reversal of temporary differences. Actual tax expense mainly results from the profit\nof ads-tec Energy Service GmbH in fiscal year 2025.\n\n \n\n**Comparison of the Twelve Months Ended December\n31, 2024 and 2023**\n\n \n\nThe results of operations\nfor the twelve months ended December 31, 2024 and 2023 presented below should be reviewed in conjunction with ADSE’s audited consolidated\nfinancial statements and the notes thereto included elsewhere in this Annual Report.\n\n \n\nThe following table summarizes\nADSE’s historical results of operations for the periods indicated:\n\n \n\n  \nYear Ended December 31  \n   \n  \n\nin kEUR \n2024  \n2023  \nChange  \nChange (%) \n\nContinuing Operations \n   \n   \n   \n  \n\nRevenue \n 110,013  \n 107,384  \n 2,629  \n 2%\n\nCost of sales \n (90,585) \n (110,270) \n 19,685  \n (18)%\n\nGross profit (loss) \n 19,427  \n (2,886) \n 22,313  \n (773)%\n\nResearch and development \n (8,971) \n (2,832) \n (6,139) \n 217%\n\nSelling and general administrative \n (31,588) \n (27,823) \n (3,765) \n 14%\n\nImpairment gains (losses) on trade receivables, contract assets, and other investments \n (58) \n 104  \n (162) \n (156)%\n\nOther expenses \n (1,949) \n (11,755) \n 9,806  \n (83)%\n\nOther income \n 14,530  \n 667  \n 13,863  \n 2078%\n\nOperating Result \n (8,609) \n (44,525) \n 35,916  \n (81)%\n\nFinance income \n 24  \n 190  \n (166) \n (87)%\n\nFinance expenses \n (88,883) \n (13,887) \n (74,996) \n 540%\n\nNet finance result \n (88,858) \n (13,697) \n (75,162) \n (549)%\n\nResult before tax \n (97,467) \n (58,221) \n (39,246) \n 67%\n\nIncome tax benefits (expenses) \n (491) \n 3,141  \n (3,632) \n (116)%\n\nResult from continuing operations \n (97,958) \n (55,081) \n (42,877) \n 78%\n\nResult for the period \n (97,958) \n (55,081) \n (42,877) \n 78%\n\nOther comprehensive income (loss) for the period, net of tax \n 939  \n 61  \n 878  \n 1439%\n\nTotal comprehensive result for the period \n (97,019) \n (55,020) \n (42,182) \n 77%\n\n** **\n\n58\n\n \n\n** **\n\n**Revenue**\n\n \n\nThe following table summarizes\nthe changes in revenue from the twelve months ended December 31, 2023 to 2024.\n\n \n\n  \nYear Ended December 31  \n   \n  \n\nIn kEUR \n2024  \n2023  \nChange  \nChange (%) \n\nCharging \n 102,533  \n 89,323  \n 13,210  \n 15%\n\nCommercial & Industry \n 1,677  \n 15,788  \n (14,111) \n (89)%\n\nResidential \n 0  \n 41  \n (41) \n (100)%\n\nService \n 5,603  \n 2,004  \n 3,599  \n 180%\n\nOther \n 200  \n 227  \n (27) \n (12)%\n\nTotal \n 110,013  \n 107,384  \n 2,630  \n 2%\n\n \n\nThe following table summarizes\nthe changes in revenue from the twelve months ended December 31, 2023 to 2024 based on geography.\n\n \n\n  \nYear Ended December 31  \n   \n  \n\nIn kEUR \n2024  \n2023  \nChange  \nChange (%) \n\nEurope \n 104,390  \n 102,413  \n 1,977  \n 2%\n\nNorth America \n 5,623  \n 4,971  \n 652  \n 13%\n\nTotal \n 110,013  \n 107,384  \n 2,629  \n 2%\n\n \n\nTotal revenue increased by\nEUR 2.6 million or 2%, from the year ended December 31, 2023 to December 31, 2024. Despite a challenging global economic landscape in\n2024, ADSE managed to grow its customer base and achieved higher sales with the product ChargePost in Europe and the product ChargeBox\nin the US. Service revenue grew by 180% as a result of a higher number of installed products and growing demand for service solutions.\n\n \n\nThe Company generated 40%\nand 36% of total revenue from one customer for the fiscal year ended December 31, 2024 and 2023. Besides this customer, about 50% of sales\nwere generated with 14 further customers in 2024 (11 further customers in 2023).\n\n \n\n**Cost of Sales**\n\n \n\nCost of sales decreased by\nEUR 19.7 million or 18%, from the year ended December 31, 2023 to December 31, 2024, despite the increased revenue of EUR 110 million.\nThis is due to an improvement in the material cost ratio compared to revenue which was achieved by higher selling prices on average and\na reduction of material purchase prices. In addition, a provision for onerous contracts from the previous year was utilized and fewer\nvaluation allowances within inventory were necessary as spare parts for long term service contracts have to be kept in stock and are considered\nto be of value.\n\n \n\n**Gross Profit** \n\n \n\nGross profit improved by EUR\n22.3 million from a loss of EUR 2.9 million for the year ended December 31, 2023 to a positive of EUR 19.4 million for the year ended\nDecember 31, 2024. The change was primarily due to decreased material costs and sales with higher margins than in fiscal year 2023.\n\n** **\n\n59\n\n \n\n** **\n\n**Research and Development**\n\n \n\nResearch and development expenses\nincreased by EUR 6.1 million or 217%, from the year ended December 31, 2023 to December 31, 2024. These figures represent the effect after\ncapitalizing development cost as intangible assets. In the year ended December 31, 2024, the Company has capitalized development cost\nof EUR 0.3 million (year ended December 31, 2023: EUR 5.4 million). The high research and development expenses represent the Company’s\nongoing efforts in the development of new products and improvement of existing products. The increase compared to prior year results because\nless cost was capitalized as projects from the past are considered to be finalized and further improvements cannot be capitalized under\nIFRS.\n\n \n\n**Selling and General Administrative**\n\n \n\nSales and general administrative\nexpenses increased by EUR 3.8 million or 14%, from the year ended December 31, 2023 to December 31, 2024 due to increased personnel cost\nas a result of growth in the number of employees. This also caused higher cost charges for outsourced services. In addition, insurance\nexpenses increased due the extension of the coverage and sum insured under the D&O insurance policy as well as stock and warehousing\ninsurances in the US.\n\n \n\n**Impairment Gains (Losses) on Trade Receivables,\nContract Assets, and Other Investments**\n\n \n\nImpairment losses on trade\nreceivables, contract assets, and other investments increased by EUR 0.2 million, from the year ended December 31, 2023 to December 31,\n2024 due to the reversal of a reserve for receivables that was repaid in the year ended December 31, 2023 and caused a positive effect\nin 2023.\n\n \n\n**Other Expenses**\n\n \n\nOther expenses decreased by\nEUR 9.8 million from the year ended December 31, 2023 to December 31, 2024 primarily due to high expenses for a provision for onerous\ncontracts that was formed in 2023. No corresponding expenses were incurred in 2024.** **\n\n \n\n**Other Income**\n\n \n\nOther income increased by\nEUR 13.9 million from the year ended December 31, 2023 to December 31, 2024 primarily due to the release of provisions for onerous contracts\nand warranty provisions and higher foreign exchange gains compared to 2023. The provisions for onerous contracts were released as the\nunderlying material can be used as spare parts in service contracts with terms of up to 10 years and is thus considered to be of value\ndespite high inventory coverage. Warranty provisions were released following a detailed technical analysis and new insights regarding\nthe estimated costs to fulfil the warranty obligations.\n\n \n\n**Net Finance Result** \n\n \n\nNet finance result decreased\nfrom negative EUR 13.7 million for the year ended December 31, 2023 to negative EUR 88.9 million for the year ended December 31, 2024.\nFinance income decreased by EUR 0.2 million as less interest was recognized since there were no outstanding loan receivables in 2024.\nFor the year ended December 31, 2024, the remeasurement of warrant liabilities resulted in losses of EUR 62.2 million due to the increase\nin stock price to USD 15.51 on December 31, 2024 compared to USD 7.15 on December 31, 2023 and additional warrants being issued in 2024.\nIn addition, finance expenses for the year ended December 31, 2024 include higher interest expenses from shareholder loans taken out in\nfiscal year 2023 and 2024 in the amount of EUR 19.8 million as compared to EUR 2.8 million in 2023. Last, finance expenses in 2024 include\nforeign currency losses of EUR 6.7 million that result from the foreign exchange valuation of warrant liabilities denominated in USD at\nthe reporting date.\n\n \n\n60\n\n \n\n \n\n**Income Tax Benefits/Expenses**\n\n \n\nIncome taxes changed from\nincome tax benefit of EUR 3.1 million for the year ended December 31, 2023 to income tax expenses of EUR 0.5 million for the year ended\nDecember 31, 2024 primarily due to originating and reversal of temporary differences.\n\n \n\n**5.B. Liquidity and Capital Resources**\n\n \n\n**Sources of Liquidity**\n\n \n\nADSE has incurred net losses\nand negative cash flows from operations since its inception, which it anticipates will continue for the foreseeable future. To date, ADSE\nhas funded its operations primarily with capital contributions, ongoing shareholder loans, proceeds from its operations, and customer\npayments.\n\n \n\nAs of December 31, 2025, ADSE\nhad EUR 5.0 million short term loans. As of December 31, 2024, ADSE had EUR 13.3 million short term loans.\n\n \n\nAs of December 31, 2025 and\n2024, we had cash and cash equivalents of EUR 7.0 million and EUR 22.9 million, respectively, of which as of December 31, 2024 EUR 0.64\nmillion were restricted. Our cash is mainly held in Euros and U.S. Dollars at banks.\n\n \n\nManagement has considered\nconditions and events that raise substantial doubt about ADSE’s ability to continue as a going concern, including historically recurring\nlosses and negative cash flows from operations, for the 12 months following the issuance of the financial statements. ADSE’s cash\non hand, available and undrawn shareholder loan facilities, and proceeds from recent financing activities, including the exercise of certain\nWarrants and the issuance of Ordinary Shares pursuant to certain subscription agreements are expected to satisfy ADSE’s working\ncapital and capital requirements for at least the next twelve months from May 15, 2026, the date on which ADSE’s audited financial\nstatements were issued. However, no assurances can be provided that sufficient cash is generated from ADSE’s operating activities.\nIf ADSE is unable to do so, it may need to ask for additional funding and/or significantly curtail its operations, modify existing strategic\nplans and/or dispose of certain operations or assets. See also ADSE’s audited financial statements for the years ended December\n31, 2025 and 2024, respectively, included elsewhere in this Annual Report for more information. For greater discussion of the shareholder\nloans, see “Item 7.B - Related Party Transactions - Indebtedness.”\n\n**  **\n\n**Liquidity Policy**\n\n \n\nADSE maintains a strong focus\non liquidity and defines its liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet its\nobligations under both normal and stressed conditions. ADSE manages its liquidity to provide access to sufficient funding to meet its\nbusiness needs and financial obligations, as well as capital allocation and growth objectives.\n\n** **\n\n61\n\n \n\n** **\n\n**Debt Profile**\n\n** **\n\nThe Company has financed its\noperations primarily through shareholder loans, which have been drawn, repaid and extended over time. During 2025, the Company also issued\nconvertible notes that were repaid within the year. The following table presents the outstanding amounts of such loans as of December\n31, 2025 and 2024.\n\n \n\n  \nAs of December 31, \n\nIn kEUR \n2025  \n2024 \n\nShareholder loans (1) \n 5,010  \n 13,333 \n\nTotal \n 5,010  \n 13,333 \n\n \n\n(1)\n\nOn August 18, 2023, ADSE US issued secured promissory\nnotes to entities and individuals affiliated with Lucerne Capital Management LP with an aggregate principal amount of USD 15 million due\non July 31, 2024. On each of August 26, 2024 and April 30, 2025, such promissory notes were amended and restated to extend the maturity\ndate from July 31, 2024 to August 31, 2025, and then from August 31, 2025 to August 31, 2026.\n\n \n\nOn August 26, 2024, ADSE US issued further secured\npromissory notes to entities and individuals affiliated with Lucerne Capital Management LP with an aggregate principal amount of USD 15\nmillion originally due on August 31, 2025. On April 30, 2025, such promissory notes were amended and restated to extend their maturity\ndate from August 31, 2025 to August 31, 2026\n\n \n\nAs of December 31, 2024, an amount of USD 20 million\nof these notes was drawn. In financial year 2025, the notes were fully paid back.\n\n \n\nOn August 26, 2024, ADSE GM issued a secured promissory\nnote with a principal amount of USD 3 million to ADSH, with the promissory note having an original maturity date of August 31, 2025. On\nNovember 15, 2025 and March 31, 2026, this note was amended and restated to extend the maturity date to March 31, 2026 respectively April\n30, 2026. As of December 31, 2024, an amount of USD 3 million of this note was drawn. In financial year 2025, the note was partially paid\nback and re-drawn and ended with a nominal amount drawn of USD 2.6 million.\n\n \n\nOn December 15, 2025, the Company issued unsecured\npromissory notes to Svelland Global Trading Master Fund with a total nominal amount of EUR 5 million due on June 30, 2026. In 2025, a\nnominal amount of EUR 2.7 million of these notes was drawn.\n\n* *\n\nPlease also refer to “Item 7.B - Related\nParty Transactions – Indebtedness”\n\n \n\nThe above amount for 2024 shows the\namortized cost of the shareholder loans considering a debt discount from the issue of warrants related to the loans and transaction cost\n- both are amortized over the term of the loans using the effective interest method. No debt discount or transaction cost were incurred\nwith the issuance of the promissory notes in 2025.\n\n \n\nIn addition to the shareholder\nloans described above, on May 1, 2025, ADSE secured financing through convertible note agreements with different institutional lenders\nin a total principal amount of USD 53.8 million. The notes could either be converted into equity or redeemed in cash over a period of\nthree years until May 01, 2028. Together with the convertible notes, 1,116,072 warrants were issued. On November 19, 2025 the convertible\nnotes were settled prior to the maturity date. Until that date, the lenders had converted a total principal amount of USD 29 million as\nwell as interest in the amount of USD 1.8 million into equity resulting in a total increase of equity of EUR 26.8 million. The remaining\noutstanding principal, interest and prepayment premium were settled in cash, resulting in a cash outflow of $27.9 million. In April 2026,\nthese rights and warrants were acquired by Lucerne Capital Management–affiliated entities and subsequently repurchased and cancelled\nby the Company in May 2026 for aggregate cash consideration of approximately $12.5 million.\n\n \n\n**Financing Developments**\n\n \n\nSubsequent to December 31,\n2025, the Company undertook a series of financing and capital structure transactions aimed at improving its liquidity position.\n\n \n\nCertain shareholder loan facilities\nwere amended and extended. On May 14, 2026, one of the secured promissory notes issued to entities affiliated with Lucerne Capital Management\nLP was amended and restated to increase the principal commitment to USD 25 million and extend the maturity date to July 31, 2027. In addition,\non February 25, 2026 and May 14, 2026, the Svelland promissory note was amended and restated to increase the total commitment from EUR\n5 million to EUR 12.5 million and subsequently to EUR 32.5 million, and to extend the maturity date to July 31, 2027.\n\n \n\nIn addition, in April 2026,\nthe Company repriced certain Warrants held by Lucerne-affiliated entities, which subsequently were exercised for an aggregate of 5,172,045\nOrdinary Shares, resulting in gross cash proceeds of approximately $5.2 million. In May 2026, the Company also entered into subscription\nagreements resulting in the issuance of 6,324,000 Ordinary Shares and gross cash proceeds of approximately $6.3 million.\n\n \n\n62\n\n \n\n \n\nFor further information, see\n“Item 7.B - Related Party Transactions.”\n\n \n\n**Cash Flow Summary**\n\n \n\n  \nYear Ended December 31, \n\nIn kEUR \n2025  \n2024  \n2023 \n\nCash flow from operating activities \n (36,985) \n (16,285) \n (20,659)\n\nCash flow from investing activities \n (3,262) \n (1,296) \n (9,920)\n\nCash flow from financing activities \n 24,046  \n 10,598  \n (25,492)\n\nNet (decrease) increase in cash and cash equivalents \n (16,201) \n (6,984) \n (5,087)\n\nNet cash and cash equivalents at the end of the period \n 6,987  \n 22,858  \n 29,162 \n\n \n\n**Operating Activities**\n\n \n\nThe negative cash flow from\noperating activities increased by EUR 20.6 million from the year ended December 31, 2024 to December 31, 2025 primarily due to the poor\noperating result and lower sales realized in 2025. Positive effects from the collection of trade receivables, a reduction of inventory\nand prepayments from customers were outweighed by the payment of significant trade payables.\n\n \n\nThe negative cash flow from\noperating activities decreased by EUR 4.4 million from the year ended December 31, 2023 to December 31, 2024 primarily due the\nbetter operating result from sales realized in 2024 with higher margins. This positive effect outweighed the cash outflow from the built-up\nof inventory in 2024 as compared to 2023.\n\n** **\n\n**Investing Activities**\n\n \n\nThe negative cash flow from\ninvesting activities increased by EUR 2.0 million from the year ended December 31, 2024 to December 31, 2025 due to a payment of EUR 1.0\nmillion reservation fee for a grid connection related to a strategic large-scale battery project and investments in the own & operate\nbusiness.\n\n \n\nThe negative cash flow from\ninvesting activities decreased by EUR 8.6 million from the year ended December 31, 2023 to December 31, 2024 because less development\nactivities were capitalized in 2024 and internally generated intangible assets did not increase. The cash outflow for research and development\nactivities in 2024 instead had a negative impact on the operating cash flow.\n\n** **\n\n**Financing Activities**\n\n \n\nThe cash flow from financing\nactivities increased by EUR 13.4 million from the year ended December 31, 2024 to December 31, 2025. This is primarily due to the financing\nthrough convertible notes that ADSE secured on May 1, 2025, which resulted in significant cash inflows during the period. A portion of\nthese notes was partially converted into equity, while the remaining principal and interest were settled prior to the maturity date of\nthe notes on November 19, 2025, resulting in a cash outflow of $27.9 million.\n\n \n\nThe cash flow from financing\nactivities decreased by EUR 14.9 million from the year ended December 31, 2023 to December 31, 2024 primarily due to the repayment of\nshareholder loans.\n\n \n\n**Commitments and Contractual Obligations**\n\n \n\nAs of December 31, 2025, commitments\nfrom master purchase agreements for materials exist of EUR 16.6 million, of which EUR 16.6 million are short-term. Additionally, other\ncommitments for purchase of materials exist of EUR 4.2 million of which EUR 1.2 million are short term. For contracted long-term cost\nallocation agreements with affiliated companies, commitments exist of EUR 3.4 million per year. We had no material cash commitments for\ncapital expenditures.\n\n \n\n63\n\n \n\n \n\nOur other contractual obligations\nconsist mainly of lease obligations capitalized under IFRS 16. Lease obligations are our future minimum commitments under lease agreements\nwithin the scope of IFRS 16 and reflected on the balance sheet in our audited consolidated financial statements included elsewhere in\nthis annual report. Lease agreements, which were not recognized in accordance with the exemptions in IFRS 16, are not material and therefore\nnot presented here. As of December 31, 2025, lease obligations for lease liabilities amounted to EUR 3,387 million, reflecting our future\nminimum lease commitments. As of December 31, 2025, EUR 1.5 million of the undiscounted committed lease payments associated with lease\nliabilities and other lease obligations will occur in the next 12 months and EUR 1.9 million between January 1, 2026 and December 31,\n2029.\n\n** **\n\n**Off-Balance Sheet Arrangements**\n\n \n\nThere are no off-balance sheet\narrangements as defined in Item 303 of Regulation S-K as of December 31, 2024 and December 31, 2025.\n\n** **\n\n**5.C. Research and Development, Patents and\nLicenses, etc.**\n\n \n\nADSE’s policy regarding\nresearch and development expenses is consistent with the requirements of IFRS IAS 38. Research costs are expensed as incurred through\nthe income statement, while development costs are capitalized after technical and commercial feasibility of the asset for sale or use\nhave been established. Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset\nis ready for use. For the periods ended December 31, 2023, 2024 and 2025, there were no research costs reflected in the statement of comprehensive\nincome. ADSE generally does not conduct research activities.\n\n \n\nMore information regarding\nour Research & Development matters is set forth in “Item 4.B. Business Overview – Research & Development.”\n\n \n\n**5.D. Trend Information**\n\n \n\nOther than as described in\n“Item 3. Key Information - D. Risk Factors”, “Item 4.B. - Business Overview”, “Item 5. Operating and Financial\nReview and Prospects - A. Operating Results”, and “Item 5. Operating and Financial Review and Prospects - B. Liquidity and\nCapital Resources”, which are incorporated by reference herein, we are not aware of any trends, uncertainties, demands, commitments\nor events since the beginning of our year ended December 31, 2024 that are reasonably likely to have a material effect on our net revenues,\nincome from operations, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not\nnecessarily indicative of future operating results or financial condition.\n\n \n\n**5.E. Critical Accounting Estimates** \n\n \n\nWe prepare our consolidated\nfinancial statements in accordance with IFRS and its interpretations as issued by the IASB. For a discussion of our significant accounting\npolicies and other estimates, please see “Material accounting policies” in note 3.3 and “Accounting estimates and management\njudgments” in note 2 of the notes to our consolidated financial statements included in this Annual Report.\n\n**  **\n\n64"}