SK ecoplant Strategic Investment

12 Months Ended

Dec. 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

SK ecoplant Strategic InvestmentIn October 2021, we expanded our existing relationship with SK ecoplant. As part of this arrangement, we amended the previous Preferred Distribution Agreement (“PDA”) and Joint Venture Agreement (“JVA”) with SK ecoplant. The restated PDA establishes SK ecoplant’s purchase commitments for our Energy Servers for the next three years on a take or pay basis as well as the basis for determining the prices at which the Energy Servers and related components will be sold. The restated JVA increases the scope of assembly done by the joint venture facility in the Republic of Korea, which was established in 2019, for the procurement of local parts for our Energy Servers and the assembly of certain portions of the Energy Servers for the South Korean market. The joint venture is a VIE of Bloom and we consolidate it in our financial statements as we are the primary beneficiary and therefore have the power to direct activities which are most significant to the joint venture.

The following are the aggregate carrying values of the Korean join venture’s assets and liabilities in our consolidated balance sheets, after eliminations of intercompany transactions and balances, as of December 31, 2022 and 2021 (in thousands):


	December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	2,591	$	2,955
Accounts receivable	4257		4362
Inventories	13,412		4,363
Prepaid expenses and other current assets	2,645		99
Total current assets	22,905		11,779
Property and equipment, net	1,141		1,101
Operating lease right-of-use assets	2,390		569
Other long-term assets	47		231
Total assets	$	26,483	$	13,680
Liabilities
Current liabilities:
Accounts payable	$	5,607	$	3,006
Accrued expenses and other current liabilities	1,355		567
Deferred revenue and customer deposits	2		475
Operating lease liabilities	393		175
Total current liabilities	7,357		4,223
Operating lease liabilities	2,000		402
Total liabilities	$	9,357	$	4,625

We also entered into a new Commercial Cooperation Agreement (the “CCA”) regarding initiatives pertaining to the hydrogen market and general market expansion for our products.

Simultaneous with the execution of the above agreements, we entered into a SPA pursuant to which we agreed to sell and issue to SK ecoplant 10,000,000 shares of Series A RCPS, par value $0.0001 per share, at a purchase price of $25.50 per share for an aggregate purchase price of $255.0 million. On December 29, 2021, the closing of the sale of RCPS was completed and we issued the 10,000,000 shares of RCPS (the “Initial Investment”).

We determined the fair value of the RCPS on the date of issuance thereof to be $218.0 million. We determined that the sale of the RCPS should be recorded at fair value. Accordingly, we allocated the excess of the cash proceeds received of $255.0 million plus the change in fair value of the RCPS between October 23, 2021, and December 29, 2021, of $9.7 million, over the fair value of the RCPS on December 29, 2021, and the fair value of the Option on October 23, 2021, to the PDA. This excess amounted to $37.0 million and will be recognized as revenue over the take or pay period based on an estimate of the revenue we expect to receive under the PDA. Accordingly, during the year ended December 31, 2022 and 2021, we recognized Product Revenue of $9.6 million and $2.8 million, respectively, in connection with this arrangement. The unrecognized amount of $24.6 million and $34.2 million included $10.0 million and $7.8 million in current deferred revenue and customer deposits and $14.6 million and $26.4 million in non-current deferred revenue and customer deposits on the consolidated balance sheet as of December 31, 2022 and 2021, respectively.

As of December 31, 2021, the RCPS has been presented outside of permanent equity in the mezzanine section of the consolidated balance sheets because there are certain redemption provisions upon liquidation, dissolution, or deemed liquidation events (which include a change in control and the sale or other disposition of all or substantially all of our assets), which are considered contingent redemption provisions that are not solely within our control.

We incurred transaction costs of $9.8 million in connection with this arrangement. We allocated the transaction costs between the RCPS, and the Option based on their relative fair values. Accordingly, an amount of $9.4 million is set off against the carrying amount of the RCPS with the balance of $0.4 million included in other income (expense), net in our consolidated statements of operations.

On November 8, 2022, each share of RCPS was converted into 10,000,000 shares of Class A Common Stock.

In addition to the Initial Investment, the SPA provided SK ecoplant with an option to acquire a variable number of shares of Class A Common Stock (the “Option”). The number of shares SK ecoplant may acquire under the Option (the “Option Shares”) is calculated as the lesser of (i) 11,000,000 shares of Class A Common Stock plus the number of shares of Class A Common Stock that SK ecoplant must hold to become our largest shareholder by no less than 1% of our issued and outstanding capital stock as of the issuance date of the Option Shares; and (ii) 15% of our issued and outstanding capital stock as of the issuance date of the Option Shares. The exercise price of the Option is calculated as the higher of (i) $23.00 per share and (ii) 115% of the volume-weighted average closing price of the 20 consecutive trading day period immediately preceding the exercise of the Option. According to the SPA SK ecoplant was entitled to exercise the Option through August 31, 2023, and the transaction must have been completed as of November 30, 2023.

PDA, JVA, CCA and the SPA entered into with SK ecoplant concurrently should be evaluated as a combined contract in accordance with ASC 606 and, to the extent applicable for separated components, under the guidance of Topic 815 - Derivatives and Hedging and applicable subsections and ASC 480 - Distinguishing Liabilities from Equity.

We concluded that the Option was a freestanding financial instrument that should have been separately recorded at fair value on the date the SPA was executed. We determined the fair value of the Option on that date to be $9.6 million.

On August 10, 2022, pursuant to the SPA, SK ecoplant notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA) electing to purchase 13,491,701 shares at a purchase price of $23.05 per share. Upon receipt of SK’s notice the purchase price and the number of shares of Class A Common Stock that SK will purchase under the Option were fixed. The payment for the Second Tranche Shares was agreed to be due the later of (i) December 6, 2022 and (ii) upon clearance under the HSR of the sale of the Second Tranche Shares as contemplated by the Second Tranche Exercise Notice. The Option was fair valued as of the notice date at $4.2 million, and gain on revaluation of $9.0 million was recorded under other income (expense), net in our consolidated statements of operations. Upon the receipt of the notice from SK ecoplant the Option met the criteria of equity award and was classified as a forward contract as part of additional paid-in capital.

HSR approval was received in November 2022. On December 6, 2022, SK and Bloom mutually agreed to delay the Second Closing Date for the purchase of the 13,491,701 shares of Class A Common Stock of the Issuer until March 31, 2023, unless an earlier date is mutually agreed upon and subject to and assuming the satisfaction of applicable regulatory clearance. The mutual agreement to modify the Second Closing Date did not change the accounting or valuation of the equity-classified forward recorded.