All Cell Technologies, LLC (BEEM) Earnings Call Transcript & Summary

Okay, okay. That's 35 minutes past the hour, I think that's good enough. Thank you all of you for joining this the Beam Global Investor Call during which I'm going to discuss with you the recent acquisition that we made of AllCell Technologies. I'm going to take you through some slides and then I'll probably spend 20, 25 minutes doing that and then I'm going to open it up for questions. And I'll do my best to answer any questions that you have and if there's anything you ask me that I don't have the answer to, we can take note of that and get back to it. If I don't get to all the questions during the call, then feel free to e-mail me or e-mail the company or call me. Many of you know me, feel free to get in touch with me. I think you're all muted right now, I sort of hope you are for the moment when it comes down to taking questions. So you can either type them into the Q&A box in your Zoom thing or I'll endeavor to unmute you and we can take your questions at that time. Beyond that, just one other quick piece of housekeeping. Any of you who've been on one of these calls with me before will know that we are on the flight path for the Miramar Marine Corp Air Station and what that means is that from time to time various pieces of airborne equipment are going to fly over my office. I mean we are literally right in just a mile or so from where they take off. And so there may be a tremendous noise when that happens. I will not try to compete with them, I'll just stop talking, let them fly over, it's always done within a few seconds and then I'll just pick up where I left off. Just don't be surprised if you hear a lot of roaring noises and me stopping talking for a minute and expect me to be back on take and out. So with that said, I'm going to share my screen with you now and take you through some slides on this acquisition, which I'm very, very excited about, just got the forward-looking statements disclaimer out of the way what you all have a good read of that. Okay. So on February 16th, which was just over a week ago, I signed an asset purchase agreement to acquire a Chicago-based battery technology company, AllCell Technologies. They're as I mentioned, they're in Chicago, U.S. based manufacturing of these battery solutions. And the key thing to understand about them is that they provide technology, which takes the battery cells, which are a commodity and made by companies like Sanyo and LG Chem and Panasonic and many others and used in all sorts of applications, electric vehicles, power tools and everything else. Also doesn't make those, those are a commodity and I'm not interested in being involved or invested in the commodity space. What also has is a series of patents and technologies which takes those cells, the commodity cell regardless of who makes them and makes them safer, much safer, prevent from runaway, see some disasters, looking photograph down there, what happens to these cells if they start to run away. But in the right -- the left hand of the 2 pictures you can see where AllCell has kind of similar cell run away, they bought them right on one, but all the others are intact and it didn't happen. So take these cells, make them safer, make them live longer, which essentially means they're less expensive. You have to replace them less frequently because they have longer lives and make them more energy capable. You can put more energy into them and take more energy out of them and faster, which essentially reduces the cost of stored energy because you can get more into fewer batteries and again do it with a longer life. They have a variety of solutions, thermal management being key amongst them, that's what's making them safe and prevent that number one way. Thermal management doesn't just make them safe, it's part of what makes them live longer batteries or like Goldilocks, they like things that are not too odd or too gold. And if you keep them in that temperature range, it makes them live a lot longer also has a great technology to make that happen. And also the battery management systems they have and packaging and everything else to really, really on the high-tech end of batteries, not the commodity end and as such a great play for us. So I'm very, very happy to have them be part of it. Just a little bit more on them right now. You can see the images there tells you the story all sorts of very different types of vehicles that these battery solutions, energy storage or solutions are being used in today. They've got multiple patent and I'll go over that in a minute. Really it's all about where you need to put a lot of energy density in a safely, into a real estate confined environment, which is electric vehicles. So this is to be distinguished from large like utility-scale storage where real estate really isn't a concern because you've got these lines you can build on. This is -- we're talking about putting these things in electric vehicles, drones, EV tolls, fixed-wing aircraft, submersibles, you can see there and all sorts of other things. And then, of course, very importantly, also in Beam products. In fact, we've been using Beam's products for our AllCell energy storage products in our products for about 10 years. I'm very happy to report that we have never had any problem with them. So that made due diligence on this acquisition a whole lot easier. It was great that we've been buying from them, we had a great deal of faith in the product because we put in some very harsh conditions, very, very cold conditions in place in United States and some places in the Nevada desert where the temperature gets up to 120 degrees or up in the Midwest where it gets down to minus 40 degrees and expected the batteries to perform equally well in all those environments and we've had 10 years of in the field experience with the product. So due diligence was really easy, I knew the team have known them for a long time, I knew the founder of the company and also the fund that owns them from whom we bought them. So it was actually a fund that was the seller of the company and I'll go into a bit more the deal specifics or deal dynamics in a minute. But in any way, I like the people too that that's really very nice, obviously, doing to do an acquisition personalities are important. They're a great culture fit for Beam and everything that we care about. So it's really, in my view, a perfect strategic acquisition. Here are some bullet question, talk a little bit about the thinking that went into why we did it? So that first bullet point there. AllCell generates respectable revenues and respectable gross profits. And so we will be adding those revenues and those gross profits to our reporting starting in the first quarter of this year. And so that's immediately accretive from that point of view, from a revenue and a gross profit point of view. Beyond that because we will now own the battery technology solution, we will no longer be paying people for their -- or vendors, the various vendors that we've used over the last decade for their cost and their margins, we have to recapture all of those margins. And so that in itself will give us an immediate or certainly near-term reduction in our COGS, a significant reduction in our COGS. Batteries are by far the most expensive element of our products, 30% of our BOM actually coming from battery. So reducing our COGS is going to be a great play there. Initially, just for margin recapture, but down more so because of our combined efforts. They have a great intellectual property portfolio, a great set of patents, which are all foundational to defending against a competition. So that's -- those will be combined with our patents and make it again harder to compete with us in the future should anybody try to. And then batteries, if you think about our products, our Beam products today, it was kind of like a 3-legged stool, if you like. There's the structure that we make which is very important, can survive hurricanes, stand to 120-mile an hour winds that has survived targets, flood proof to 3.5 feet, fits inside a standard parking space, has our patented tracking built into it. All of these things are structural elements which are very important, very attractive and very important about our product. So that's one of the 3 leg stool. The second would be generation, we need to make electricity where our products are because remember we don't connect to the grid, we don't have any construction or electrical work when we deploy crucially. And so we need to generate electricity, that's really highly commoditized. We use other people's solar modules to get that done and I'm really not all that interested in playing in that space because it is so commoditized. We use the best solar modules that we can buy, most energy dense and most reliable. And then the third leg of our 3-legged stool and probably, in many ways, the most important one is energy storage. We need to be able to store the electricity that we generate. And for the last decade or so, we've been buying those solutions from others as I just mentioned. And that's a risk that has been a risk for us particularly at the moment where the demand for batteries is so great, supplies not fully caught up with that. We think there'll be some demand concerns over the next months and maybe even couple of years before supply catches up because of the fantastic amount of demand with all these electric vehicles, the Rivians, the Ford F-150, the GM Hummer, not to mention Tesla and others. So it's going to be a fantastic amount of demand. Through this acquisition, we have just secured our battery supply chain and that is a major, major area of de-risking for us as we move forward because we're also seeing a significant increase in demand for our products. As I said, batteries are the very important third leg on that 3-legged stool, so knowing that we don't have to worry about that just as a huge de-risking maneuver for us. Some of you will be aware, we have some products which are patented, but not yet in production, they're still going through the patenting -- the product development process. This acquisition is going to really help with that and I'll show you in a minute. And then AllCell has been selling to the same kind of people that we have, people who are electrifying transportation solutions and energy security solution, stationary energy solutions. AllCell has been selling to them so what we. AllCell has been selling them the energy storage that goes into their products. We've been selling them charging to charge that energy storage. Now we're going to combine our forces, cross-sell to each other's customers and continue to expand and cross-pollinate across new segments, as well as we go forward. And then having our own energy storage solution that was fantastic, a major customer asked me about this yes and I was able to say, yes, it's ours, we own it. It's proprietary to us, it's a major barrier to entry, makes us sexier and stickier and just an all run better solution out there. And then finally, certainly, there's a lot of emphasis on the green economy moving forward in the United States and certainly in Europe and other parts of the world that are interesting to us. The fact that we are now a battery manufacturer, as well as a renewable energized infrastructure provider certainly will not hurt us. And by the way that link that you see at the bottom of this will take you to an interview that I did when we first announced this, you can see that interview on our website and our blog page. And there's a lot -- I'm asked a lot of questions about the transaction, why we did it? And so if you miss anything here today, definitely check out that video because you might get the answers you're looking for there. So first of all, let's talk about increasing and diversifying revenues. We're going through the public company on their financials right now. Their financials are clean and have been honest in the past, but not to the standard that we require. So we're going through that process, so I'm not going to get into details on that. But I will tell you that their revenues in the past have been similar to ours and their gross profits have been very respectable in that space. They've been getting those revenues by selling their technology solutions and also helping companies like this one that you can see with this electric vehicle, understand how best for energy storage in it. So there's some recurring engineering revenue that they get and then they sell the products as a result of it. It's a really good solution actually. They've done this for the widest possible range of customers all the way from highly risky start-ups to Fortune 1,000 even 500 companies have got their also insight providing energy storage for us. So we've got a good broad base, a great opportunity again for us to get out of themselves to them. And it's sold in the US and internationally. So actually, many ways very similar to us, maintaining that sort of agnosticity where the commodity is concerned, selling internationally and to a broad variety of customers that their products are doing a lot of different jobs and as I say with a good gross profit already, which will be accretive to us. From a COGS reduction, I mean, you're looking at just to that this morning, that's one of our EV ARCs getting ready to go out of our factory -- on our factory for one. That area that shades why being done before it goes out, it's full of energy storage, we've been acquiring and installing energy storage in our products for 10-plus years now. As I mentioned already, 30% of our building materials, just recapturing the margin to give us about a 7% improvement on that in the near-term and we're very material heavy product. Labor is a much less material than the cost of the builds of material. So 7% reduction in our volume cost in the near-term will have a really significant impact on our COGS. And then we intend to make that a whole lot better. Ever since I felt confident we were going to get this deal done, I've had my engineering team working with their engineering team and their scientists to figure out ways to get a much better energy storage solution for our products, one that's much more tailored for what we're doing because battery is definitely -- depending on how you use them and where and under what circumstances you can really tailor the best way to get the most energy density and the most cost effectiveness out of it. And those teams are on -- are targeting a 50% cost reduction and that's without the more global reduction in cost of sales, which we also anticipated. There's been a little pickup in cost of sales actually this year for the first time in 20 years because of the supply chain constraints and the sort of COVID-related inflation that we're seeing. But everybody agrees that, that trend will return to falling cost in COGS. We think we can cut 50% of our cost just on our own efforts in the batteries and then further decrease in cost of sales, which we anticipate returning later this year or beginning of next year will help us to even further reduce those costs. So when you consider that last 30% of BOM, our BOM is most of our COGS, you can see how this is going to be very impactful on our profitability moving forward. In fact, I'll tell you this, on the back of a napkin, I can show how this acquisition, just the cost reduction and what we spend on batteries will end up paying for the acquisition once we hit a certain volume of products. So it's fantastic from that point of view. The other thing is the new products that we're going to be developing, the EV-Standard and UAV ARC, in particular, both of those have to have a really specialized energy storage shape and size. It's going to be much less expensive for us to develop those products and also to put energy storage in them as a result of this acquisition. So lots of cost saving and lots of improvement to the product as a result of this, not to mention we're getting the revenues and their gross profits currently that they're making. Now they have a really excellent IP portfolio, which will be added to us. This is -- there is on the left-hand side there, both in the US internationally. The IP basically is just defending their position in that they can take anybody's lithium-ion cell, make it safer, much less likely to catch on fire, much longer lived and much more energy test. And by the way, that not catching on fire thing is really important when you consider the fact that, most products now that contain these cells or many of them were being charged inside people's homes, whether it's your EV in your garage or your kids skateboard, electric skateboard under his bed or whatever else it is, the ability to reduce the risk of fire for these cells and there's no question that AllCell can do that, they're very well recognized for that, it's just huge. It's great for us to do in our products. But it's a very, very good place to be as so much of the world is moving to electrification, not just electrification, but untethered electrification, not plugged into the grid. You've got to have energy storage to make it safer and longer live is really important and to have all these patents defending that position is also clearly a key and a big part of what we've acquired pretty much double our patent portfolio. I already talked a little bit about securing our battery supply chain. Batteries are in demand at the moment, it's a great space to be in. The other reason is a great acquisition for us because energy storage is a very good space to be in. I have for a long time maintained that we intend to grow this company both organically and inorganically through addressing anywhere that clean energy and transportation intersects any of those types of opportunities we can get. Storage is going to be absolutely key to that and to energy security and some of the stationary applications like the recent wildfire fighting solutions we just did with the Marine Corp just announced. These sorts of things, all of them require safe energy storage and that's what we just acquired with this year, defended our access to the supply chain, make sure that we've got good solutions for any of these things moving forward. Accelerating our product development like use 2 of the most important products that we're working on right now and EV-Standard, which is the streetlight replacement will allow for curbside charging, a combination of a light-wind generator, a tracking solar panel, a streetlight circuit, all 3 of those circuits combined in what you can see inside that column there inside the red ring that I put on that image, that's -- those are matrices, but they've got to fit inside the column of this standard. Now the top left hand there shows you a typical battery pack looks like, that's a shipping pallet that thing staying on the sort of 4 by foot by 4 foot, so I'll give you an idea of the scale. That's what typical battery packs look like, that's what battery packs that we put into our EV ARC look like. And you know what we have the real estate in the EV ARC to do that, although we could certainly make it better. We've had to try and shoehorn these industry standard packages into our products over the last couple of years. That clearly is not going to work inside a cylindrical vertical call them for a lab side and we don't really want to build a lab that's quite a huge, fat square section called, that's not going to be very attractive. We'll take a look at the picture on the right where it is also custom battery, that's -- I just took that picture myself while I was out there visiting the book last week. That's an existing battery that they have that goes inside a submersible right now, which also needs to be cylindrical. So you can see how fascinated I am by this and how thrilled I am by the fact that we're now going to be able to get battery solutions that we can fit into some of our bespoke products and it's really going to help us advance this product development on the EV-Standard, which is certainly one of my favorite solutions that we're going to be bringing out and probably the largest numerical seller in our future. And then beside that, the UAV ARC, our drone recharging product, another situation here where we're going to get into development on that after we finish the EV-Standard, but it will also require batteries to fit inside a very tight piece of real estate because that thing is not very big. What you're looking at it's not very big, it goes on top of rooftops and stuff like that. And so just being able to have these bespoke batteries keeps us going to be fantastically helpful for our product development cycles. From a cross-sell and [ reclination ] point of view, these images are all vehicles that have wholesale in them right now. There are many others by the way. Unfortunately, of course, all the names I'd like to talk to you about I'm not allowed to, that's pretty typical. I'm afraid in the early stages of all these advances, but they've sold to some really fantastic companies that you are all be very familiar with. And what's interesting about all these vehicles is they are all vehicles that we have charged with the exception to submersible. These are all the types of vehicles that we have provided charging for already. So AllCell being put in the energy storage in the vehicles, we've been providing the charging to fill that storage up and putting AllCell energy storage in our products. You can see immediately what the cross-selling opportunities are here because there's a whole bunch of them that they are selling to right now that we have not sold to yet and then there's a whole bunch of people who we're selling to who could really benefit with this technology. So I'm thrilled and looking forward to enhancing their sales and engineering team, so they can take on a lot more as we move forward because I believe it's going to be a very busy time. Just quickly, this is an image of the sorts of things, you can see what we charge here sedans, scooters, motorcycles, bicycles, even a thin swing aircraft and full-size buses there. All of those solutions require solutions like we now own in AllCell, we'll be able to put our energy storage into all of these things and provide the charging infrastructure. And that -- if you look at that picture, the EV ARC clear with a black sedan part on it, the top enclosure that full of energy storage, very possibly AllCell energy storage. I've already showed you this and talked to you about this a little bit, but we're now just expanding. Any of you have seen this slide before, EV ARC, Solar Tree, EV-Standard, UAV ARC and now Beam AllCell, our energy storage solutions, which will be going out and aggressively marketing. Okay. Just on terms and then I'm going to turn this over to questions. Things, key things you should know. First of all, this was an all-stock deal. This has not impacted our cash position at all and I do not think that Beam rather AllCell will be a material burden on our -- or increase to our burn. We certainly are going to make some investments in adding to their automation, making them more efficient, making increasing their throughput and all that sort of stuff. But this is really -- the key thing here is we managed to get this transaction done with all stock. We were also pretty much able to dislocate the ticker price from the value of the deal, essentially turns into sold AllCell to us, basically converted 100% of their equity and AllCell into just under 10% of our equity post transaction fully diluted. And so I just -- I think that's a very good deal for us. We gave up less than 10% of our company and we got this fantastic solution, which as I said will pay for itself just in cost savings in the future, but also could give us all the other benefits that I've already outlined to you. So they got 1,055,000 shares of Beam Global. That was the consideration and we expect to close today or close to today. There's always a few struggling things that you got to get tide it on. But I think it's likely that we will close today and if not today, within the next couple of days. So they will get 1,055,000 shares of Beam Global for that. They have 2 earnout opportunities. The first one will be for '22 revenues, any revenues in excess of $7.5 million in revenue in 2022 will earn them 2x that amount again in our stock. And we will give that stock to them after we file our 10-K in 2023 once we've finish the audit and file all the numbers across. So their first opportunity to get a further tranche of shares from us will be in the -- at the end of the first quarter of 2023 after we file our 10-K and again it's 2x revenues in excess of $7.5 million. And in 2023, they get another opportunity to get the 2x revenues again, at this time, it's on any revenues in excess of $13.5 million. So they have to get to 13.5, they get nothing in 2022 unless they get to $7.5 million, then anything over that they get -- not the $7.5 million, whatever is above $7.5 million. And in 2023, whatever is above $13.5 million of revenue they get that opportunity for the earnout to not the $13.5 million just what's above $13.5 million. And it has to be not only $13.5 million, but that $13.5 million also has to be greater than 135% of 2022 revenues. So for example, if they did $11 million in 2022, it wouldn't be $13.5 million because the $15 million would be the milestone they'd have to hedge. So it's the greater of 13.5 or 135% of 2022 revenues, anything in excess of that they get 2x revenue. And again, that will be paid in when we file our 10-K at the end of the first quarter in 2024. So those are the 2 opportunities. In fact, but just one other thing on the 2023 I'll note, it is capped at $20 million in revenue. So it's anything above $13.5 million or 135% of 2022 revenues and below $20 million, they can earn that earn out on. One of the really important thing that you should understand about these earnouts is, they do not include any use of AllCell products, the battery solutions in our products. So we're not paying them for success that comes from our selling our Beam products. This is only for third-party sales, in other words, the existing business that I showed you the images on in the prior slides. And we're going to believe me, we are going to do everything we can to help them hit those numbers and exceed them. I can't wait for them to earn these earnouts and I think they will, I believe they will. But we're going to do everything we can to help them get there too, because it's going to be great for our -- have all these new sales and all this new revenue coming in. And one thing to be clear on this multiple is 2x revenues thing is that's a multiple which is -- would be commonly attributed to a battery company very much in the commodity end, making the cells or something very much a commodity play. That's not AllCell is placed. AllCell is a high-technology solution, multiple patents, lots of scientists and engineers in their makeup, lots of barrier to entry and lots of opportunity for very, very dramatic growth, which is not the commodity side of things. So I think that the multiple here is actually very -- also, of course, our multiple is faster than this, our revenue multiple is faster than this. So this is accretive in every way that you look at it, the revenue that we're bringing in initially with 1,055,000 shares and then any of the earnouts that we give them, this is accretive from a valuation point of view, from a revenue point of view, from a gross profit point of view in every way. Next bullet point also very important. We are -- they will receive from us restricted stock. So it's not free trading stock. However -- so obviously, people are worried, well, what if some -- if the seller just dumps all their shares on for market after they'd be crazy to do that because they're going to be a 10% shareholder in Beam they're not stupid enough to hurt themselves, but hey, strange things happen in the world. And so we're giving them restricted stock that they'll have to lift the restrictions on, there's a process above all that. We're going to help them with the first $10 million of value in the consideration that they have. We'll file an F3 to help them with that, so they would get liquidity in the first $10 million and only that first $10 million. Actually, they can get a lot more value from their earnouts if they hit their earnouts, they'll get a lot more value from that. But just to make sure that we are as existing shareholders and I always put my existing shareholders before my future shareholders or my friends in the banking industry or anything else, I always look after my existing shareholders, just to make sure that they're well protected. I have also restricted the seller to being able to sell no more than 4% of weekly trading volume ever. So they cannot dump their shares into the market, 4% is pretty immaterial of weekly trading volume, we will never be in a position where we have to sell or dumping their stock into the market. By the way, I don't want to sound naive, but the last point I want to make on this is that actually Townsend, they're smart people, it's a fund as I say, it's not a battery company, they own the battery company, but they've invested heavily in energy storage and other types of energy places throughout our history, so they have a good feeling for this. They're very enthusiastic about this combination, that's why we were able to get this deal done. They definitely view this as a 2 plus 2 equal 7 type of deal or tank even. And so now they converted their equity in AllCell into equity in Beam and they believe and frankly I believe that they're going to make a hell of a lot more money just by owning Beam's equity than they would ever have done had they done some kind of cash transaction or something like that. And I just copied and pasted the quote from the Townsend's, Chairman, Dennis Townsend, this is the quote that he offered for the press release and it tells you where his head is, he is -- this is not about a liquidity event for them, this is about dramatically increasing the value of their equity in AllCell through combining it Beam. He believes that, I believe it, I think everybody involved in it does too and we're all very excited about moving this thing forward. Just a quick reminder, we've got plenty of capital, plenty of cash. These numbers are as of 9/30, but they haven't changed too dramatically since then and no debt even post transaction, no debt. So we're in great shape where that's concerned. We will have no reason to go and raise money for a long time into the future. In fact, I believe and it is only my belief, I don't have a crystal ball, but I believe that we will cash flow before we'll ever need to raise money again. As I said before, I'm acquisitive and if there are other strategic opportunities to make acquisitions and doing a raise as a part of that, that's certainly not something I would relish company market where the current markets are concerned, I don't need to do it. But I'll never say I'll never do it if it's right for the shareholders, if it's the right type of transaction, then of course, I'll take a look at it. And I hope that you'll have gathered looking at this deal that I do the deal right, this is well priced, well-structured and absolutely in the best interest of our existing shareholders. Is it dilutive? Yes. We've given 10% of our post-transaction shares out, is that a bad thing? No. It's not because we will increase the absolute value of those shares. The dilution will not be problematic. One other thing on dilution that you should just be aware of, I want to constantly remind you of is, if you look at where Beam Global is from a point of view of shares issued and outstanding less than 9 million shares issued and outstanding less than 10 million fully diluted prior to the transaction. That is almost unbelievably small in comparison to anyone else that's out there in the market. Most companies have 60 million, 70 million, 100 million, 200 million, 300 million shares issued and outstanding. We have less than 10 million. We have an almost unbelievably small float. So having a little bit of dilution to do a fantastic transaction like this is certainly not problematic from a future EPS point of view, which is after all what we're paid to provide is earnings per share. We still have so few shares out, the earnings will be divided amongst far fewer shares than they would be had we 60 million, 70 million, 100 million, 200 million shares out there. So I'm not concerned about the dilution on this deal, on the contrary, I think it's a fantastic bargain for us and absolutely what we need to do to grow the company. So quick summary here. We get revenue, we get gross profit, we reduce our costs materially by the way not in a small way. We secured our access to probably the most important component that goes into our products. We've made it odder for people to ever compete with us in the future, will make it easier for us to get our new and really exciting products out and into market. Look I see to spend more time on the team, we've got a great team of people here, scientists and engineers, yes, very strong scientific and engineering team, which is what you need if you're going to be in the battery industry. But also with them, we got great operations people, people who've worked at Johnson Controls, Ford, Stellantis in building out factories globally. So these people are people who live, breath, eat and sleep, refined and efficient manufacturing. And I'm actually looking forward to having them come out here to San Diego, share ideas with them what we're doing and hear their ideas and we'll have our people going out to Chicago, I should say our people. We're all our people now, but we'll have the San Diego people going out to Chicago share ideas and do a lot of cross-learning that we're getting a really excellent world renowned actually team here in the battery space. And then finally, of course, across pollination opportunities, we're going to be able to sell a lot more as a result of doing this. So that's it for the slides. I'm going to stop sharing my screen now and I'm going to take questions if I can figure out how to do that.

Okay, take on you -- your hand up, let me see if I can figure out how to -- okay, lot of hands going up here. The question is, how do I unmute you? Can you all meet yourself? I don't know how to do this, I'm afraid, let's see -- hangout, I hear help is on its way. Yes, I don't see a way to unmute them, unfortunately.

I think if you hover over to the run and...

[ Scott ], just bear with us, I do apologize, I'm hopeless with this zoom thing here. It's possible that I can't do this, I don't know why I wouldn't be able to -- I don't know why...

I'll do it from next door...

I'll tell you what, I've got an operator who's going to do this for us here. So what I'm going to do is, I'm going to start with -- I got a question here from [ Mark Schneider ]. He typed it in, so I can answer that one while we're getting the rest of you unmuted. And his question is who are the competitors and what's the risk that one of the larger commodity players comes up with a comparable technology and how should compete with us? Okay. So that was, by the way, absolutely key in my thinking when I was looking at this deal. There are obviously lots of people putting battery pack together and lots of people making the sales, which is the commodity side. So from a competition point of view, nobody has this -- the combination of this refined passive thermal management solution and the battery management solutions that they have going into this and those things are well covered by their patents. I don't relish fighting a patent infringement battle, of course, but I've learned it numerically, you don't need money to do that, somebody else. We're happy to finance that because the patents are really, really good. So I feel very good that from a competition point of view, on the technology, we're well covered there and we will continue to invest in that, continue to enhance that. On the commodity side, it's really not what they do and if they did, they would come up against the same patents and intellectual property hurdles that we have and the many, many years of experience in the team. I think if there's a large commodity where we're going to try and get involved in this, they'll be more inclined to try and acquire us than to necessarily to just transfer the intellectual property, which I think is unlikely. So I'm pretty comfortable that we're well protected where that's concerned. Otherwise, I certainly would not have done that would not move forward with the deal. Let's see how we're doing it here on unmuting the rest of you. Okay. [ Joseph Miranda ].

Yes, can you hear me?

Yes, Joseph Miranda, I can hear you.

Yes, thank you. So congratulations. Sounds like a great deal.

Thank you.

Just couple of few questions when they happen, what in 2021, what percentage of AllCell's revenue came from Beam?

In 2021, none. We stopped using their products actually just a little over about 2 years ago. Now what I will tell you about that, it was nothing to do with the fact that we didn't like their products, it was more to do with some -- how can I put this delicately. We were endeavoring -- but let's put it this way, I've been looking at acquiring AllCell for a couple of years and I felt it was in our best interest to position us such that we were able to take a run at and fresh. Let me leave it at that.

Got it.

But no indicate -- you should take no indication from that at all if we were in any way dissatisfied with the product on the contrary.

Okay. What are AllCell's gross margins, roughly?

I can't share those with you yet. As I said, we're going through the audit and we also haven't made those public. But I will tell you that they are very respectable and certainly much better than we have reported ourselves. Although again, it's important not to fall into a trap of looking at what we report from a gross profit point of view because our unit economics are much better than the gross profits that we report. But AllCell's gross profits will be accretive to ours.

Okay. And if I may, does AllCell have any debt that Beam has to be concerned with?

We went into the deal with 0 debt. We are exiting the deal with 0 debt.

Great. That's fantastic. And then just the earnouts, how likely are those to come to pass?

As I said, I believe -- look, let me tell you a couple of points, first of all, we did not put those earnouts in place thinking that they couldn't meet them. They wouldn't have done that from a negotiating point of view. I believe that they can meet them, I believe they will meet them and I'm looking forward to meeting them. As I said earlier, the dilutive aspect of this would be, it's just not a problem because we have so few shares issued and outstanding such a small flow, what will be very beneficial to us while to get that tremendous increase in revenue and gross profitability. And also the other thing about that is, frankly, with their current cost structure if they hit their earnouts, I'm not going to make an absolute statement on this, but they would be at that point where cash flow was rounding on either side, let's put it that way. So we want to them to...

One other question and then I'll pull it back. I know hindsight is 2020, but I know you've been following them for a long time, you had used them for quite a while and then stopped. Any particular reason this didn't happen in early 2021 when the stock -- when Beam stock price was much higher?

Yes, so that's -- by the way, that's a very good question. These things take a while, particularly if you're me, I'm afraid. And some people would tell you that I'm not the easiest person to deal with where M&A is concerned. And the reason for that is because I have very stringent ideas about what's in the best interest of our company and our shareholders. And I'm generally disinclined to rotate away from those things. So you could stem, I'm a hard person to deal with where this takes place and that might make the process take a little bit longer and might make me less easy to come to terms with. So it's been a process, but it's been a long time. What I would tell you about where the share price is concerned, we were able very early on to get the seller to a point where they just recognize the value of Beam and to be less connected to that ticker price. So in other words what I can say to you about that is we didn't -- we were -- the negotiation around value was much less to do with the day-to-day fluctuations of the stock and more to do with the broader valuation of our company. And so said in a different way, had the share price being a lot higher than it was, that does not necessarily mean that we would have given a rational lower percentage of being for the company. I know I'm having a bit of trouble putting that exactly towards, but have already explained to you, can you see what I'm getting at there?

Keep it going. I wish you guys all the success in the world for you and me.

Yes. Thank you very much, Joseph. Great questions. Thank you. Okay. [ Andrew Scott ], I see your hand up. Let me see if the operator can unmute you. Look to up there you go, Andrew, you're up.

Hey, congrats on the acquisition, guys.

Thank you.

I'm on for Craig Irwin, by the way. Few of my questions were already answered. But I know you guys talk to the 7% margin capture that you're going to get in the near-term, but then also throughout the 50% in sell cost reduction goal out there. Can you kind of maybe walk us through how you could see yourselves getting there?

Yes, so the first thing to point out is actually that the first 7% we get just from margin recapture, that's kind of boring, I mean it's great, but it's not anything clever that we've done, it's just that we are now instead of paying an external company their cost plus their profit margin. We are -- we will recapture that profit margin. So that and that will result in about a 7% reduction in our bill of materials. And when I use the term in the near-term by the way, that's to describe as I mentioned during the call, there is a -- we have a couple of months of reintegration process to get those AllCell batteries back into our products because we've been using a different vendor for the last couple of years, as I already mentioned. So as soon as we start doing that, as soon as we start integrating the AllCell batteries into our products then we'll get that 7% reduction in BOM costs as a result of margin recapture. Now the other part of this is to correct something you just said, we're not -- it's not the sell cost reduction that will give us -- lead us to a 50% reduction in the cost of our batteries. We believe that, that will come in addition to that. The 50% reduction in our batteries we believe will come from our -- the combination of our engineers and their engineers and some of the other things that they know about how to put these packs together and how to source some of the raw materials and some of the other things like that, which we think we can get to us approximately, I mean, obviously, this is -- I'm talking about things that are going to happen in the future here. But right now, our modeling shows us that we can get to something like that level of cost reduction. Sell cost reduction, which I think we all agree and I know that you and the ROTH team and others are with me on this, sell cost reduction, although we've seen this hiccup this year and maybe that might even last into next year, that sell cost reduction which I think we all think is going to happen and be quite significant in the coming years, that will be -- that will add to further cost reductions in our battery cost, not -- that won't be the cause of the initial cost reductions that we've outlined.

Great. Thank you for the clarity there. I'll just hop back in the queue.

Excellent. Thanks, Andrew. Tate, I see your hand up there, Tate Sullivan, see if we can unmute you? To help, Andrew, it looks like I still have you, Tate, I'm looking for you. Tate, still looking for Tate Sullivan here. Tate, still trying to get you up here. Are you muted yourself or sorry, Tate, just bear with us, still trying to get you up here.

I'm trying to unmute Tate, but it's not letting me. It's asking me to promote him to panelist, so congratulations, Tate. But there are some -- while I figure this out, there are some questions in the Q&A that you may want to address?

Yes. Okay. Good. Good. Okay. So actually, Tate, you've actually typed a question as well and we're still going to try and pull you up, Tate, but you typed a question in here. Was buying AllCell a necessary step to bring the EV-Standard to market? I could have still brought the EV-Standard to market had I not bought AllCell, but there is no question that this is going to be a significant enhancement of that process. And form factor is a very big part of the -- what's challenging about the EV-Standard. As I've mentioned to you guys before, the EV-Standard is really just the same technologies in the EV ARC, but it's like squeezed through a sausage machine if you like. It's going to be tall and vertical as opposed to kind of lower and more swap what EV ARC gets all the technology, all the science and everything in that is going to be transmitted from the EV ARC into the EV-Standard. Of course, we're adding a light wind generator and some other tricky stuff there, a couple of other patents that we either have or have pending right now. But the really difficult thing was going to be getting energy storage into that type of space and I showed you those images, those the typical energy storage packs that we've been buying in the past have been large and rectangular blocks and just don't lend themselves well to that type of environment. AllCell is absolutely fantastic at producing very safe, very energy dense storage solutions, exactly the sort of thing that will fit beautifully inside a tall and cylindrical call it like that. So we could have done it without them, we're just going to do a whole lot better with them and having their technologies and their engineers working to enhance that and make sure that, that's the best -- it's going to be really important. By the way, just thermal management too on the EV-Standard because the EV ARC shades its energy enclosure, the story itself shades the -- where we store the energy. That in itself gives us a lot of defense from the radiant heat energy from the sun. You don't get that with the EV-Standard, where the street light does not have that, you're going to have a lot of radiant heat energy. So the thermal management again absolutely key to us here. And as I said, what the technology that we just bought through this acquisition is that I just don't know of anything that can rival it frankly for a thermal passive -- a passive thermal management solution. So yes, again, we could have done it without, yes, but it's going to do a lot better and a lot less expensively as a result of having done that. John lump, you've asked a question. Heartland Angels who were Angel investors in AllCell, great. Does the 1.5 million shares include department or separate shares being allocated for Heartland? I -- we are -- we have -- our transaction with Townsend is absolute and final. And so I think you'd have to take that question to Townsend. John, I'm not at all familiar with what that situation is there, but I am very comfortable that our transaction is final with Townsend and the due diligence that we've been doing over last long time leads me to feel very confident that we're there on that one. So please address that question to them. Right. Let's see where we are here a couple of Tate, you're still behind, obviously, we can - any -- [ Sandra ], any luck on unmuting Tate? I don't hear you, Sandra, either, I'm afraid. Okay. Tate, let's -- yes, I hear you now. Looks like Tate's lost his hand. Actually, Tate, maybe or you maybe typing your questions in that.

Yes, I think if somebody has an older version of Zoom, it's telling me that for some reason, I can't allow them to talk. So, Tate that...

Upgrade to Zoom...

I think you got your Tate question announce there.

Okay. Good. All right. Well, I'm not seeing any others here. I'm very sorry if you have tried to ask a question and we have been unable to unmute you, I do apologize for that. But look what I will say to you in wrapping this up is, please refer to the press release that we put out last Wednesday morning. It should be the latest press release on the list of press releases on our website or latest bar one something like that. And in that you will find a link to the interview that I did and that was released on our blog when we finished the transaction because a lot of the questions are answered in that or I believe they may be. And also the press release has a fair amount of information in it. And then you can look at our 8-K as well, which has the agreement as an exhibit to the 8-K, so you can -- if you really want to do a deep dive, you can dig through that. And then beyond that, if you've got any further questions, feel free to get in touch with me any time or just get in touch with the IR or company anytime and I'll be happy to answer your questions. I am absolutely thrilled to bits about this, I think it's a fantastic day for the company and for our future growth. I'm really looking forward to this and it's going to make us a much, much better company and I'm very, very confident that the deal structure was as good as it can be. So I'd be delighted to answer any questions that you've got or hear any comments or thoughts that you have. And then beyond that, I just stay in touch, we will -- hopefully, we've got all of you on our mailing list. If you're not on our mailing list, please send an e-mail to us, just go to our website and send us an e-mail and get on our mailing list because we do send out regular updates. We don't put out plus, we don't spam you or anything else like that, but whenever anything meaningful happens new contracts, new technologies, new patents, those sorts of things, you'll get an e-mail from us. And then just make sure you add the Beam e-mail address to your address book, so we don't get caught in your spam filter because we do sometimes send videos and links and the sort of thing that might end up getting caught up in your spam filter, but as I say, we will not -- we won't spam you. We don't do anything with your contact information, except send updates on our company and we don't put out a plus. So yes, check out the press release, look at the video and then make sure that you're on our mailing list, so that we can keep you up to date with everything that's going on or finally, just get directly in touch with me and I'll be happy to answer your questions anytime. And with that, I'm going to say thank you very much to all of you and look forward to hearing from you, look forward to sharing a lot more great news with you as we continue to evolve here.