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BUSINESS COMBINATIONS
 3 Months Ended
Mar. 31, 2025
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
BUSINESS COMBINATIONS

 

3. BUSINESS COMBINATIONS

 

Telcom

 

On August 30, 2024, the Company acquired Telcom d.o.o Beograd (“Telcom”), pursuant to a Share Sale and Purchase Agreement dated as of August 30, 2024 (the “Telcom Agreement”) with the owners (the “Telcom Sellers”) of Telcom. Telcom is a business located in Serbia and engaged in the manufacturing of telecommunications equipment. Beam acquired all of the equity stock of Telcom from the Telcom Sellers in exchange for cash and Beam common stock. The total purchase price was subject to adjustment based on the amount of cash held by Telcom at closing. Based on Telcom’s cash balance at closing equal to approximately EUR 220,298, Beam paid to the Telcom Sellers a purchase price equal to EUR 815,298 which was paid to the Telcom Sellers as follows: (i) EUR 430,000 cash and (ii) issued 82,506 shares of Beam common stock. At closing, Telcom had a positive working capital balance of approximately EUR 500,000 which consisted of (i) a cash balance equal to EUR 220,000, accounts receivables of approximately EUR 115,000, inventory of approximately EUR 275,000 and accounts payable of approximately EUR 110,000.

 

In addition to the above payments, the Telcom Sellers are eligible to earn up to EUR 250,000 (the “Earnout Cap”) in additional shares of Beam common stock if Telcom meets certain revenue milestones for fiscal years 2024 and 2025 (the “Telcom Earnout Consideration”). The Telcom Earnout Consideration that the Telcom Sellers are eligible to receive for 2024 was equal to the amount the net revenue of Telcom (“Telcom Net Revenue”) exceeded EUR 850,000 for 2024 up to the Earnout Cap. The Company issued 27,836 shares of stock valued at $0.1 million as payment for the 2024 Telcom Earnout Consideration. The Telcom Earnout Consideration was less than the Earnout Cap, and the Telcom Sellers will be eligible for additional Telcom Earnout Consideration in 2025 if (i) 2025 Telcom Net Revenue exceeds 2024 Telcom Net Revenue, and (ii) 2025 Telcom Net Revenue exceeds $850,000. The Telcom Earnout Consideration for 2025 will be calculated based on the amount the 2025 Net Revenue exceeds the 2024 Net Revenue subject to the Earnout Cap. In no event, will the Telcom Earnout Consideration for 2024 and 2025, in the aggregate, exceed the Earnout Cap. The Telcom Earnout Consideration for each period will be calculated based on the volume weighted average price of Beam’s common stock for the thirty trading days prior to the end of the applicable calendar year. In no event and under no circumstances will the Telcom Sellers receive from Beam or will Beam issue to the Telcom Sellers in connection with the transaction Beam’s common stock in an amount that exceeds 19.99% of the outstanding common stock of Beam immediately prior to closing.

 

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. Goodwill represents the premium the Company paid over net fair value of tangible and intangible assets acquired.

 

The valuation of the Telcom Earnout Consideration was performed using a discounted cash flow analysis to determine the fair value of the contingent consideration, which includes estimates and assumptions such as forecasted revenues of Telcom, discount rates, 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 Telcom Earnout Consideration will be reassessed on a quarterly basis with the change recorded to operating expenses. Change in the fair value of the Earnout Consideration during the three months ended March 31, 2025 is as follows (in thousands):

     
Balance as of December 31, 2024  $259 
Change in Fair Value   – 
Balance as of March 31, 2025  $259 

 

The following table summarizes the estimated fair value allocation of consideration exchanged for the estimated fair value of tangible assets acquired and liabilities assumed at the acquisition date. The estimated fair value for working capital is generally equivalent to the net book value of the acquired assets and liabilities on the acquisition date. Fair value assigned to property, plant and equipment is based on real estate appraisals, market value comparisons, or acquired net book value of recently acquired assets. The valuation of the contingent consideration is based on a discounted cash flow analysis using the Company’s forecasted results for the operations for the two years subject to revenue earn-out targets.

 

Consideration is comprised of the following (in thousands):

     
Cash  $481 
Common Stock   387 
Earnout Consideration   276 
Total Consideration  $1,144 

 

The following table shows the allocation of consideration to assets and liabilities at fair value (in thousands):

     
Assets Acquired    
Cash and cash equivalents  $244 
Accounts Receivable   224 
Inventory   296 
Prepaid expenses   2 
Property, plant and equipment   30 
Goodwill   692 
Total assets acquired  $1,488 
      
Liabilities Assumed     
Accounts payable  $266 
Accrued Expenses   10 
Other liabilities   68 
Total liabilities assumed  $344 
      
Net assets acquired  $1,144 

 

The Company believed it to be probable that the maximum amount of Telcom Earnout Consideration would be earned and therefore accrued the full amount in the opening balance sheet. The estimated fair values were assigned to identifiable assets acquired and liabilities.

 

Pro Forma Unaudited Financial Information

 

The following unaudited pro forma financial information summarizes the combined results of operations of Beam Global and Telcom as if the company had been acquired as of the beginning of the three months ended March 31, 2024 (in thousands):

     
   March 31, 
   2024 
Revenues  $14,749 
Net Loss  $(3,030)

 

The pro forma financial information is presented for information purposes only and may not be indicative of the results of operations that would have been achieved had the acquisition been completed at the beginning of the three months ended March 31, 2024. In addition, the unaudited 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 unaudited pro forma financial information includes adjustments to reflect the incremental amortization expense of the identifiable intangible assets and transaction costs.

 

The statement of operations, in the table above, for the three months ended March 31, 2024 includes revenues of $0.2 million and income from operations of $8 thousand from the acquired Telcom business.