BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

BUSINESS COMBINATION

3. BUSINESS COMBINATION

On March 4, 2022, the Company completed its acquisition of substantially all the assets of All Cell Technologies, LLC (“All Cell”), a leader in energy storage solutions. We believe this strategic acquisition will increase and diversify our Company’s revenue, gross profitability, manufacturing capabilities, intellectual portfolio and customer base. The Company purchased substantially all of the assets and business of All Cell for 1,055,000 shares of Beam Common Stock (“Closing Consideration”) plus an additional $0.8 million in cash for the net working capital held by All Cell at closing.

In addition, All Cell is eligible to earn an additional number of shares of Beam Common Stock if Beam’s new energy storage business meets certain revenue milestones (the “Earnout Consideration”). The Earnout Consideration is: (i) two times the amount of energy storage products revenue and contracted backlog that is greater than $7.5 million for 2022, and (ii) two times the amount of energy storage products 2023 revenue only which exceeds the greater of either $13.5 million or 135% of the 2022 cumulative revenue, capped at $20.0 million. Revenues exceeding $20.0 million in 2023 will not be eligible for the Earnout Consideration. The maximum aggregate number of shares of Beam Common Stock that the Company will issue to All Cell for the Closing Consideration and Earnout Consideration will not exceed 1.8 million shares. Revenue from energy storage products used in Beam Global products will not be considered as contributing to the Earnout calculation.

The preliminary fair value of consideration transferred consisted of the following (in thousands): 

Common Stock	$	14,359
Working Capital Cash Payment		811
Earnout Consideration		1,251
Total consideration transferred	$	16,421

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the acquisition date (in thousands): 

Inventory	$	2,146
Prepaid expenses		28
Deposits		10
Property, plant and equipment		397
Intangible assets, including goodwill		15,059
Total assets acquired		17,640
Customer deposits		(1,219	)
Total liabilities assumed		(1,219	)
Total assets and liabilities assumed	$	16,421

The estimated fair values assigned to identifiable assets acquired and liabilities assumed are provisional pending the finalization of the working capital and purchase price allocation and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize those fair values. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to complete the allocation of purchase price as soon as practicable, but no later than one year after the acquisition date. The Company incurred $0.1 million of transaction costs during the six months ended June 30, 2022, directly related to the acquisition that is reflected in operating expenses in the statement of operations.

Goodwill represents the excess of the total purchase price over the fair value of the underlying net assets, largely arising from synergies expected to be achieved by the combined company and expanded market opportunities. The goodwill is expected to be fully deductible for tax purposes.

The valuation of the Earnout Consideration was performed using a two-factor Monte Carlo simulation, which includes estimates and assumptions such as forecasted revenues of All Cell, volatility, discount rates, share price and the milestone settlement value. As such valuation includes the use of unobservable inputs, it is considered to be a Level 3 measurement. The fair value of the Earnout Consideration is reassessed on a quarterly basis with the change recorded to operating expenses. Change in the fair value of the Earnout Consideration during the six months ended June 30, 2022 is as follows (in thousands):

Balance as of December 31, 2021	$	–
Acquisition of All Cell		1,251
Change in estimated fair value		(208	)
Balance as of June 30, 2022	$	1,043

The preliminary fair values assigned to identifiable intangible assets and goodwill acquired are as follows ($ in thousands):

	Value		Useful Life (yrs.)
Developed technology	$	8,074		11
Trade name		1,756		10
Customer relationships		444		13
Backlog		185		1
Goodwill		4,600		N/A
	$	15,059

The fair values of the developed technology, trade name, customer relationships and backlog were estimated using an income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits in the form of cash flows to be derived from ownership of the asset. The estimated fair values were developed by discounting future net cash flows to their present value at market-based rates of return. The useful lives of the intangible assets for amortization purposes were determined by considering the period of expected cash flows used to measure the fair values of the intangible assets adjusted as appropriate for entity-specific factors including legal, competitive, and other factors that may limit the useful life. The identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives except for customer deposits which uses accelerated depreciation.

Pro Forma Financial Information

The following pro forma financial information summarizes the combined results of operations of Beam Global and All Cell as if the companies had been combined as of the beginning of the six months ended June 30, 2021 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenues	$	3,718		$	3,869		$	7,734		$	7,016
Net Loss	$	(2,657	)	$	(2,479	)	$	(5,807	)	$	(4,184	)

The pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved had the acquisition been completed at the beginning of the six months ended June 30, 2021. In addition, the pro forma financial information is not a projection of future results of operations of the combined company, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition. The pro forma financial information includes adjustments to reflect the incremental amortization expense of the identifiable intangible assets and transaction costs, as well as removes the impact of the debt that was not acquired by the Company.

The statement of operations for the three and six months ended June 30, 2022 includes revenues of $1.4 million and $1.8 million, and loss from operations of $1.0 million and $1.4 million, respectively, from the acquired All Cell assets.

Broadview Lease

As part of the acquisition, the Company assumed a facility lease located in Broadview, Illinois, and recorded $0.2 million in right-of-use asset and lease liability. The lease term ends on August 31, 2023 and contains clauses for annual rent escalation. Total minimum rental payments remaining as of June 30, 2022 were $0.2 million, of which $0.1 million is due within 2022.