Acquisitions

6 Months Ended

Jun. 30, 2023

Acquisitions

Acquisitions

3.  Acquisitions

Alloy Custom Products, LLC and WesMor Cryogenics, LLC

On December 5, 2022, the Company acquired two subsidiaries of Cryogenic Industrial Solutions, LLC, Alloy Custom Products, LLC and WesMor Cryogenics, LLC (collectively, “CIS”). The CIS acquisition is expected to increase the Company’s production capabilities for stainless steel and aluminum cryogenic transport truck-mounted cryogenic pressure vessels, cryogenic transport trailers, and other mobile storage containers.

The fair value of consideration paid by the Company in connection with the CIS acquisition was as follows (in thousands):

Cash	$	30,700
Due to Cryogenic Industrial Solutions, LLC		500
Plug Power Inc. Common Stock		6,107
Total consideration	$	37,307

The following table summarizes the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):

Cash	$	267
Accounts receivable		5,038
Inventory		11,120
Prepaid expenses and other assets		464
Property, plant and equipment		3,887
Right of use asset		1,538
Identifiable intangible assets		13,430
Lease liability		(1,562)
Accounts payable, accrued expenses and other liabilities		(3,826)
Deferred revenue		(6,193)
Total net assets acquired, excluding goodwill	$	24,163

The preliminary allocation of the purchase price is considered provisional pending the finalization of the valuation for the assets acquired and liabilities assumed and related tax liabilities, if any, in relation to the CIS acquisition. Therefore, the fair values of the assets acquired and liabilities assumed are subject to change as we obtain additional information for valuation assumptions such as market demand for CIS product lines to support forecasted financial data, which will not exceed 12 months from the date of acquisition. During the three and six months ended June 30, 2023, the Company paid out the $0.5 million due to the sellers of CIS in connection with the acquisition. There have been no measurement period adjustments recorded for the three and six months ended June 30, 2023.

The fair value of the tradename totaling $6.2 million was calculated using the relief from royalty approach, which is a variant of the income approach, and was assigned a useful life of fifteen years. The fair value of the customer relationships totaling $7.1 million was calculated using the multi-period excess earnings method (“MPEEM”) approach, which is a variant of the income approach, and was assigned a useful life of fifteen years. The basic principle of the MPEEM approach is that a single asset, in isolation, is not capable of generating cash flow for an enterprise. Several assets are brought together and exploited to generate cash flow. The fair value of the non-compete agreements was $0.2 million with a useful life of five years.  

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. Goodwill and intangible assets are not deductible for income tax purposes. Goodwill associated with the CIS acquisition was calculated as follows (in thousands):

Consideration paid	$	37,307
Less: net assets acquired		(24,163)
Total goodwill recognized	$	13,144

The acquisition of CIS contributed $15.0 million and $26.2 million to total consolidated revenue for the three and six months ended June 30, 2023, respectively. The Company determined that the net income for the CIS acquisition for the three and six months ended June 30, 2023 was immaterial.

Joule Processing, LLC

On January 14, 2022, the Company acquired Joule Processing, LLC (“Joule”), an engineered modular equipment, process design and procurement company founded in 2009.

The fair value of consideration paid by the Company in connection with the Joule acquisition was as follows (in thousands):

Cash	$	28,140
Contingent consideration		41,732
Total consideration	$	69,872

The contingent consideration represents the estimated fair value associated with earn-out payments of up to $130 million that the sellers are eligible to receive in cash or shares of the Company’s common stock (at the Company’s election). Of the total earnout consideration, $90 million is related to the achievement of certain financial performance and $40 million is related to the achievement of certain internal operational milestones.

The following table summarizes the final allocation of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):

Current assets	$	2,672
Property, plant and equipment		493
Right of use asset		182
Identifiable intangible assets		60,522
Lease liability		(374)
Current liabilities		(2,612)
Contract liability		(3,818)
Total net assets acquired, excluding goodwill	$	57,065

The fair value of the developed technology totaling $59.2 million included in the identifiable intangible assets was calculated using the MPEEM approach. Therefore, to determine cash flow from the developed technology over its useful life of 15 years, one must deduct the related expenses incurred for the exploitation of other assets used for the

generation of overall cash flow. The fair value of the tradename totaling $0.8 million was calculated using the relief from royalty approach, which is a variant of the income approach, and was assigned a useful life of four years. The fair value of the non-compete agreements was $0.5 million with a useful life of six years.

In connection with the Joule acquisition, the Company recorded on its consolidated balance sheet a liability of $41.7 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $71.2 million and $53.2 million as of June 30, 2023 and December 31, 2022, respectively, and as a result, an increase of $11.3 million and $18.0 million was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three and six months ended June 30, 2023, respectively.

Included in the purchase price consideration are contingent earn-out payments as described above. Due to the nature of the earn-outs, a scenario-based analysis using the probability of achieving the milestone expectations was used to determine the fair value of the contingent consideration. These fair value measurements were based on unobservable inputs and are considered to be level 3 financial instruments.

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. Goodwill and intangible assets are not deductible for income tax purposes. Goodwill associated with the Joule acquisition was calculated as follows (in thousands):

Consideration paid	$	28,140
Contingent consideration		41,732
Less: net assets acquired		(57,065)
Total goodwill recognized	$	12,807

The Joule acquisition contributed $45.2 million and $65.9 million to the Company’s total consolidated revenue for the three and six months ended June 30, 2023, respectively, compared to $2.0 million and $3.3 million for the three and six months ended June 30, 2022, respectively. The Company determined that the net loss for the Joule acquisition for the three and six months ended June 30, 2023 was immaterial.

The CIS and Joule acquisitions were not material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.