Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Period ended June 30, 2022March 31, 2023

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to ________________

 

Commission File Number 000-53204

 

Beam Global

(Exact name of Registrant as specified in its charter)

 

Nevada26-1342810
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

 

5660 Eastgate Dr.

San Diego, California

92121
(Address of principal executive offices)(Zip Code)

 

(858) 799-4583

(Registrant’s telephone number, including area code)

 

(Former name, former address and formal fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading Symbol(s)Name of each exchange in which registered
Common stock, $0.001 par valueBEEMNasdaq Capital Market
WarrantsBEEMWNasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company under Rule 12b-2 of the Exchange Act. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated Filer ☒Smaller reporting company ☒
Emerging growth company ☐ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

The number of registrant's shares of common stock, $0.001 par value outstanding as of August 5, 2022May 9, 2023 was 10,084,97010,760,195.

 

   

 

 

TABLE OF CONTENTS

 

  Page
   
PART IFINANCIAL INFORMATION3
Item 1.Financial Statements (Unaudited)3
 Condensed Balance Sheets at June 30, 2022March 31, 2023 (Unaudited) and December 31, 2021 (Unaudited)20223
 Condensed Statements of Operations for the Three and Six Months Ended June 30,March 31, 2023 and 2022 and 2021 (Unaudited)4
 Condensed Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30,March 31, 2023 and 2022 and 2021 (Unaudited)5
 Condensed Statements of Cash Flows for the Three and Six Months Ended June 30,March 31, 2023 and 2022 and 2021 (Unaudited)6
 Notes To Condensed Financial Statements7
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations17
Item 3.Quantitative and Qualitative Disclosures About Market Risk2423
Item 4.Controls and Procedures2423
   
PART IIOTHER INFORMATION2625
Item 1.Legal Proceedings2625
Item 1A.Risk Factors2625
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2725
Item 3.Defaults Upon Senior Securities2725
Item 4.Mine Safety Disclosures2725
Item 5.Other Information2725
Item 6.Exhibits2826
 SIGNATURES2927

 

 

 

 

 

 

 

 

 

 

 2 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Beam Global

Condensed Balance Sheets

(In thousands)thousands, except share and per share data)

       
  June 30,  December 31, 
  2022  2021 
  (Unaudited)    
Assets        
Current assets        
Cash $13,754  $21,949 
Accounts receivable  2,898   3,827 
Prepaid expenses and other current assets  3,214   180 
Inventory, net  7,357   1,611 
Total current assets  27,223   27,567 
         
Property and equipment, net  1,403   650 
Operating lease right of use asset  1,948   2,030 
Goodwill  4,600   0 
Intangible assets, net  10,486   359 
Deposits  62   52 
Total assets $45,722  $30,658 
         
Liabilities and Stockholders' Equity        
Current liabilities        
Accounts payable $3,957  $1,567 
Accrued expenses  874   727 
Sales tax payable  114   57 
Deferred revenue, current  1,578   136 
Contingent consideration, current  699   0 
Operating lease liabilities, current  632   468 
Total current liabilities  7,854   2,955 
         
Deferred revenue, noncurrent  177   118 
Contingent consideration, noncurrent  344   0 
Operating lease liabilities, noncurrent  1,372   1,607 
Total liabilities  9,747   4,680 
         
Stockholders' equity        
Preferred stock, $0.001 par value, 10,000,000 authorized, NaN outstanding as of June 30, 2022 and December 31, 2021  0   0 
Common stock, $0.001 par value, 350,000,000 shares authorized, 10,084,184 and 8,971,711 shares issued or issuable and outstanding as of June 30, 2022 and December 31, 2021, respectively  10   9 
Additional paid-in-capital  98,665   83,588 
Accumulated deficit  (62,700)  (57,619)
         
Total stockholders' equity  35,975   25,978 
         
Total liabilities and stockholders' equity $45,722  $30,658 

 

         
  March 31,  December 31, 
  2023  2022 
       
Assets        
Current assets        
Cash $990  $1,681 
Accounts receivable  6,882   4,429 
Prepaid expenses and other current assets  2,839   1,579 
Inventory  12,745   12,246 
Total current assets  23,456   19,935 
         
Property and equipment, net  1,714   1,548 
Operating lease right of use asset  1,477   1,638 
Goodwill  4,600   4,600 
Intangible assets, net  9,673   9,947 
Deposits  62   62 
Total assets $40,982  $37,730 
         
Liabilities and Stockholders' Equity        
Current liabilities        
Accounts payable $7,080  $2,865 
Accrued expenses  2,578   1,687 
Sales tax payable  13   33 
Deferred revenue, current  871   1,183 
Contingent consideration, current  6,776   6,776 
Operating lease liabilities, current  613   628 
Total current liabilities  17,931   13,172 
         
Deferred revenue, noncurrent  273   266 
Contingent consideration, noncurrent  2   15 
Operating lease liabilities, noncurrent  924   1,070 
Total liabilities  19,130   14,523 
         
Stockholders' equity        
Preferred stock, $0.001 par value, 10,000,000 authorized, none outstanding as of March 31, 2023 and December 31, 2022.  –   – 
Common stock, $0.001 par value, 350,000,000 shares authorized, 10,238,389 and 10,178,306 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.  10   10 
Additional paid-in-capital  102,974   100,498 
Accumulated deficit  (81,132)  (77,301)
         
Total stockholders' equity  21,852   23,207 
         
Total liabilities and stockholders' equity $40,982  $37,730 

The accompanying unaudited notes are an integral part of these unaudited condensed financial statements

 

 3 

 

 

Beam Global

Condensed Statements of Operations

(Unaudited, in thousands except per share data)

 

 

                        
 Three Months Ended  Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2022  2021  2022  2021  2023  2022 
              
Revenues $3,718  $2,121  $7,488  $3,493  $13,020  $3,770 
                        
Cost of revenues  4,044   2,395   8,119   3,916   13,015   4,075 
                        
Gross loss  (326)  (274)  (631)  (423)
Gross profit (loss)  5   (305)
                        
Operating expenses  2,490   1,369   4,465   2,472   3,846   1,975 
                        
Loss from operations  (2,816)  (1,643)  (5,096)  (2,895)  (3,841)  (2,280)
                        
Other income (expense)                
Interest income  15   2   17   3 
Interest expense  (1)  0   (1)  0 
Total other income, net  14   2   16   3 
Other income  11   2 
                        
Loss before income tax expense  (2,802)  (1,641)  (5,080)  (2,892)  (3,830)  (2,278)
                        
Income tax expense  1   1   1   1   1   – 
                        
Net loss $(2,803) $(1,642) $(5,081) $(2,893) $(3,831) $(2,278)
                        
Net loss per share - basic $(0.28) $(0.18) $(0.52) $(0.33) $(0.38) $(0.24)
Net loss per share - diluted $(0.28) $(0.18) $(0.52) $(0.33) $(0.38) $(0.24)
                        
Weighted average shares outstanding - basic  10,075   8,882   9,694   8,824   10,214   9,309 
Weighted average shares outstanding - diluted  10,075   8,882   9,694   8,824   10,214   9,309 

 

The accompanying unaudited notes are an integral part of these unaudited condensed financial statements

 

 

 4 

 

 

Beam Global

Condensed Statements of Changes in Stockholders' Equity

(Unaudited, in thousands)

 

                     
              Total 
  Common Stock  Additional  Accumulated  Stockholders' 
  Stock  Amount  Paid-in-Capital  Deficit  Equity 
Balance at December 31, 2020  8,482  $8  $80,166  $(51,023) $29,151 
                     
Stock issued for director services - vested  11   –   123   –   123 
Stock issued to escrow account - unvested  (24)  –   –   –   – 
Stock option expense  –   –   69   –   69 
Warrants exercised for cash  389   1   2,469   –   2,470 
Stock option exercise (cashless)  1   –   (47)  –   (47)
Net loss for the three months ended March 31, 2021  –   –   –   (1,251)  (1,251)
Balance at March 31, 2021  8,859  $9  $82,780  $(52,274) $30,515 
                     
Stock issued for director services - vested  12   –   246   –   246 
Stock issued to escrow account - unvested  (2)  –   –   –   – 
Stock option expense  –   –   58   –   58 
Warrants exercised for cash  28   –   174   –   174 
Stock option exercise (cashless)  1   –   (34)  –   (34)
Net loss for the three months ended June 30, 2021  –   –   –   (1,642)  (1,642)
Balance at June 30, 2021  8,898  $9  $83,224  $(53,916) $29,317 

 

                     
  Common Stock  Additional Paid-in  Accumulated  Total Stockholders' 
  Stock  Amount  Capital  Deficit  Equity 
Balance at December 31, 2021  8,972  $9  $83,588  $(57,619) $25,978 
Stock issued for director services - vested  5   –   107   –   107 
Stock issued to (released from) escrow account - unvested  2   –   –   –   – 
Stock issued for acquisition  1,055   1   14,358   –   14,359 
Stock option expense  –   –   94   –   94 
Warrants exercised for cash  14   –   88   –   88 
Net loss  –   –   –   (2,278)  (2,278)
Balance at March 31, 2022  10,048  $10  $98,235  $(59,897) $38,348 
                     
Balance at December 31, 2022  10,178  $10  $100,498  $(77,301) $23,207 
Stock issued for director services - vested  6   –   76   –   76 
Stock issued to (released from) escrow account - unvested  (6)  –   –   –   – 
Stock-based compensation to consultants  6   –   1,704   –   1,704 
Employee stock-based compensation expense  –   –   438   –   438 
Warrants exercised for cash  16   –   100   –   100 
Sale of stock under Committed Equity Facility  38   –   158   –   158 
Net loss  –   –   –   (3,831)  (3,831)
Balance at March 31, 2023  10,238  $10  $102,974  $(81,132) $21,852 

 

  Common Stock  Additional  Accumulated  Total
Stockholders’		 
  Stock  Amount  Paid-in-Capital  Deficit  Equity 
Balance at December 31, 2021  8,972  $9  $83,588  $(57,619) $25,978 
                     
Stock issued for director services - vested  5   –   107   –   107 
Stock issued to escrow account - unvested  2   –   –   –   – 
Stock issued for acquisition  1,055   1   14,358   –   14,359 
Stock option expense  –   –   94   –   94 
Warrants exercised for cash  14   –   88   –   88 
Stock option exercise (cashless)                  – 
Stock option exercise (for cash)                  – 
Net loss  –   –   –   (2,278)  (2,278)
Balance at March 31, 2022  10,048  $10  $98,235  $(59,897) $38,348 
                     
Stock issued for director services - vested  5   –   104   –   104 
Stock issued to escrow account - unvested  (5)  –   –   –   – 
Stock issued for acquisition  –   –   –   –   – 
Stock option expense  –   –   98   –   98 
Warrants exercised for cash  36   –   228   –   228 
Net loss  –   –   –   (2,803)  (2,803)
Balance at June 30, 2022  10,084  $10  $98,665  $(62,700) $35,975 

The accompanying unaudited notes are an integral part of these unaudited condensed financial statements

 

 

 5 

 

 

Beam Global

Condensed Statements of Cash Flows

(Unaudited, in thousands)

 

 

                
 Six Months Ended  Three Months Ended 
 June 30,  March 31, 
 2022  2021  2023  2022 
          
Operating Activities:                
Net loss $(5,081) $(2,893) $(3,831) $(2,278)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization  472   34   332   187 
Common stock issued for services  211   369   76   107 
Change in fair value of contingent consideration liabilities  (208)  0   (13)  – 
Compensation expense related to grant of stock options  192   127 
Employee stock-based compensation  438   94 
Amortization of operating lease right of use asset  11   0   –   6 
Amortization of debt discount  0   19 
Other  14   – 
Changes in assets and liabilities:               
(Increase) decrease in:               
Accounts receivable  929   (1,022)  (2,453)  1,193 
Prepaid expenses and other current assets  (3,005)  25   390   (1,546)
Inventory  (3,546)  (828)  (414)  (632)
Increase (decrease) in:       
Increase in:        
Accounts payable  2,114   349   4,235   492 
Accrued expenses  147   4   932   386 
Sales tax payable  57   16   (20)  10 
Deferred revenue  282   48   (305)  74 
Net cash used in operating activities  (7,425)  (3,752)  (619)  (1,907)
                
Investing Activities:                
Payment for acquisition  (811)  0 
Purchases of equipment  (216)  (168)
Working capital payment for acquisition  –   (811)
Purchase of property and equipment  (314)  (131)
Funding of patent costs  (59)  (38)  (16)  (12)
Net cash used in investing activities  (1,086)  (206)  (330)  (954)
                
Financing Activities:                
Taxes paid related to net share settlement of equity awards  0   (81)
Proceeds from sale of stock under committed equity facility, net of offering costs  158   – 
Proceeds from warrant exercises  316   2,643   100   88 
Net cash provided by financing activities  316   2,562   258   88 
                
Net (decrease) increase in cash  (8,195)  (1,396)
Net decrease in cash  (691)  (2,773)
                
Cash at beginning of period  21,949   26,703   1,681   21,949 
                
Cash at end of period $13,754  $25,307  $990  $19,176 
                
Supplemental Disclosure of Non-Cash Investing and Financing Activities:                
Fair value of common stock issued as consideration for business combination $14,359  $0  $–  $14,359 
Purchase of property and equipment by incurring current liabilities $21  $– 
Depreciation cost capitalized into inventory $54  $16  $85  $15 
Right-of-use assets obtained in exchange for lease liabilities $192  $0  $–  $192 
Warrants issued for services to non-employee $

1,609

  $– 
Shares issued for services to non-employee $

95

  $– 

 

The accompanying unaudited notes are an integral part of these unaudited condensed financial statements

 

 

 6 

 

 

BEAM GLOBAL

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations

 

Beam Global, a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”), is a cleantechsustainable technology innovation company based in San Diego, California.

We develop, design, engineer, manufacture and sell high-quality, renewably energized infrastructure products for electric vehicle (“EV”) charging infrastructure, energy security, disaster preparedness and outdoor media andadvertising. We also produce proprietary energy security and disaster preparedness as well as safe and compact, highly energy-densestorage battery solutions. Beam’sproducts. Our Electric Vehicle (EV) charging infrastructure products are powered by locally generated renewable energy and enable electric vehicle chargingvital and reliable electrical powerhighly valuable services in locations where it is either too expensive, too disruptive or too impactfulimpossible to connect to thea utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. Beam’sWe do not compete with EV charging companies; rather, we enable such companies by providing infrastructure solutions that replace the time consuming and expensive process of construction and electrical work which are usually required to install traditional grid-tied EV chargers. We also do not compete with utilities. Our products provide utilities with another tool to deliver reliable and low-cost electricity to EV chargers and, in the case of a grid failure, to first responders and others, through our integrated emergency power panels. We also provide energy storage products provide hightechnologies that make commodity battery cells safer, longer lasting and more energy densityefficient and our battery management systems (BMS) and associated packaging make batteries safe and usable in a safe and compact form-factor ideal for the rapidly increasing numbersvariety of mobilemobility, energy-security and stationary equipment and products which require electrical energy without being connected to the electrical grid.applications.

 

On March 4, 2022,Our charging infrastructure products are rapidly deployed without the Company acquired substantially allneed for construction or electrical work. We compete with the assetshighly fragmented and disintegrated ecosystem of All Cell Technologies, LLC (“All Cell”),general contractors, electrical contractors, consultants, engineers, permitting specialists and others who are required to perform a traditional grid-tied EV charger installation construction and electrical project. Our clean-technology products are designed to replace a complicated, expensive, time consuming and risk prone process with an energy storage solutionseasy, low total cost of ownership, robust and technologies company based in Broadview, Illinois. Refer to note 3, Business Combination for additional details.reliable product.

 

Basis of Presentation

 

The interim unaudited condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three and six months ended June 30,March 31, 2023 and 2022, and 2021, and our financial position as of June 30, 2022,March 31, 2023, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

 

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2021.2022. The December 31, 20212022 balance sheet is derived from those statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAPaccounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of contingent consideration liability, valuation of intangible assets, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets.

 

 

 

 7 

 

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326) requiring initial recognition of credit losses, as well as any subsequent change in the estimate, when it is probable that a loss has been incurred. The standard eliminates the threshold for initial recognition in current U.S. GAAP and it covers a broad range of financial instruments, including trade and other receivables at each reporting date. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. The Company adopted this standard is effective for the Company beginning January 1, 2023. The adoption of this guidance is not expected to have a2023 with no material effect on ourthe financial statements.

 

Concentrations

 

Credit Risk

 

Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable.

 

The Company maintains its cash in banks and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through June 30, 2022.March 31, 2023. As of June 30, 2022,March 31, 2023, approximately $13.90.9 million million of the Company’s cash deposits were greater than the federally insured limits.

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which immediately appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. At the time, the Company maintained all of its cash deposits with SVB. All deposits and substantially all of the assets of SVB were transferred to Silicon Valley Bridge Bank, N.A. (“SVBB”), which is no longer affiliated with SVB. On March 27, 2023, First-Citizens Bank & Trust Company entered into an agreement with the FDIC to purchase substantially all loans and certain other assets and assume all customer deposits and certain other liabilities of SVBB. The Company has full access to all of its deposited funds with SVBB and we have also established deposit accounts at Bank of America.

 

Major Customers

 

The Company continually assesses the financial strength of its customers. For the three months ended June 30, 2022,March 31, 2023, two customers accounted for 3480% (the U.S. Army) and 1410% of total revenues and forrevenue, respectively. For the sixthree months ended June 30,March 31, 2022, twothree customers accounted for 2322%, 16% and 12% of total revenues each. ForAt March 31, 2023, accounts receivable from the three months ended June 30, 2021, revenues from four customersU.S. Army accounted for 22%, 18%, 16% and 10% of total revenues and for the six months ended June 30, 2021, revenues from three customers accounted for 13%, 13% and 11% of total revenues. At June 30, 2022, accounts receivable from two customers accounted for 47% and 1176% of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At December 31, 2021,2022, accounts receivable from fourthree customers accounted for 30%, 22%, 1315% and 1011% of total accounts receivable each with no other single customer accounting for more than 10% of the accounts receivable balance. For the sixthree months ended June 30,March 31, 2023 and 2022, and 2021, the Company had a heavy concentration ofCompany’s sales to federal, state and local governments which represented 6186% and 7769% of revenues, respectively.

 

Significant Accounting Policies

 

During the sixthree months ended June 30, 2022,March 31, 2023, there were no changes to our significant accounting policies as described in in our Annual Report on Form 10-K for the year ended December 31, 2021. See below for our policy related to business combinations, goodwill and indefinite-lived intangible assets and fair value measurements.2022.

Business Combination

The purchase price of an acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets assumed, such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows and estimates made by management. The Company records the net assets and results of operations of an acquired entity from the acquisition date. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

8

Contingent consideration liability is recognized at the estimated fair value on the acquisition date. Subsequent changes to the fair value of contingent consideration liability are recognized in operating expenses in the statement of operations. Contingent consideration liability related to the acquisition consists of commercial milestone payments and are valued using a Monte Carlo simulation. The fair value of commercial milestone payments reflects management’s estimates of discount rates and probability of achieving certain milestones.

Goodwill and Indefinite-lived Intangible Assets

Upon acquisition, identifiable intangible assets are recorded at fair value and are carried at cost less accumulated amortization. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives except for customer relationships, for which the amortization is recorded on an accelerated method over the estimate useful life. The carrying values of intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Goodwill represents the excess of the purchase prices of an acquired business over the fair value of the underlying net tangible and intangible assets. The Company is required to assess goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test, including macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after completing the qualitative assessment, it is determined it is more likely than not that the estimated fair value is greater than the carrying value, the Company concludes no impairment exists. Alternatively, if the Company determines in the qualitative assessment, it is more likely than not that the fair value is less than its carrying value, then the Company performs a quantitative goodwill impairment test to identify both the existence of an impairment and the amount of impairment loss, by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit is less than the carrying value, then a goodwill impairment charge is recognized in the amount by which the carrying amount exceeds the fair value, limited to the total amount of goodwill allocated to that reporting unit. The goodwill annual assessment test is performed in the fourth quarter of every year or when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist.

Fair Value Measurements

The fair value of assets and liabilities are based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

·    Level 1 — Quoted prices in active markets for identical assets or liabilities.

·    Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

·    Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of financial instruments such as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate the related fair values due to the short-term maturities of these instruments.

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Net Loss Per Share

 

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock consists of the incremental shares of common stock issuable upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.

 

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Options to purchase 284,433346,758 shares of common stock and warrants to purchase 469,621624,306 shares of common stock were outstanding at June 30, 2022.March 31, 2023. Options to purchase 333,980269,433 shares of common stockshares and warrants to purchase 549,335505,714 shares of common stock were outstanding at June 30, 2021.March 31, 2022. These options and warrants were not included in the computation of diluted loss per share for the three and six months ended June 30,March 31, 2023 and 2022 and 2021 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.

 

Segments

 

The Company follows ASC 280-10 for “Disclosures about Segments of an Enterprise and Related Information.” Management assesses its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. For periods through the date of the All Cell acquisition, the Company had, and reported in, one reportable segment. Subsequent to the acquisition of All Cell, management continues to reviewManagement reviews financial results, managemanages the business and allocateallocates resources on an aggregate basis. Therefore, financial results continue to beare reported in a single operating segment.

 

2.LIQUIDITY

 

The Company has a history of net losses. Forlosses for the sixthree months ended June 30,March 31, 2023 and 2022 and 2021,where the Company had net losses of $5.1 3.8 millionmillion (which includes $0.7 0.9 millionmillion of non-cash expenses) and $2.9 2.3 millionmillion (which included $0.5 million of non-cash expenses), respectively, and net cash used in operating activities of $7.4$0.6 million and $3.8$1.9 million, respectively. DuringAt March 31, 2023, the first six months of 2022, the $7.4 million of operating cash usage included $3.6 million to purchase inventory and to prepay vendors for inventory to reduce the risk of potential shortages of cells required for battery manufacturing, and an increase of work in process inventory of EV ARC™ units. The increases in prepayments and inventory are not expected to be ongoing quarterly cash requirements, but rather should reduce to lower levels over the next 12 months.

At June 30, 2022, weCompany had a cash balance of $13.81.0 million million and working capital of $19.45.5 million million.. The working capital balance is reduced by a current liability of $6.8 million for contingent consideration, which is a non-cash, all stock earn-out payment associated with the 2022 acquisition of AllCell Technologies. Based on the Company’s current operating plan, the Company believes that it has sufficient cashthe ability to fund its operations and meet contractual obligations for at least twelve months from June 30, 2022.the date of this report. In 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC (“B. Riley”) under which the Company has the right, but not the obligation, to sell up to $30.0 million shares or a maximum of 2.0 million shares of its common stock over a period of 24 months in its sole discretion (see note 11 for further information). The Company can also manage prepaymentissued 37,741 shares in January and inventory levels as well as spending levelsFebruary 2023 for sales$0.7 million under this agreement. The Company’s outstanding warrants generated $0.1 million of proceeds during each of the three months ended March 31, 2023 and marketing resources2022. In March 2023, the Company secured a $100 million credit facility with OCI Group to help managesupport our cash over time.working capital requirements. Furthermore, we could pursue other equity or debt financings. The Company believes that our businessit will become profitable in the next few years as our revenues continue to grow, we improve our gross margins and we leverage our overhead costs, but we expect to continue to incur losses for a period of time. That may require the Company to raise additional capital to finance its future operations. We have shown success in raising capital in public and private markets in the past. In addition, we have an S-3 Shelf registration that will become available on May 23, 2023 or we could pursue debt financings. In addition, the Company’s outstanding warrants have generated $0.3 million and $2.6 million of proceeds during the six months ended June 30, 2022 and 2021, respectively. There is no guarantee that profitable operations will be achieved, the warrants will be exercised or that additional capital or debt financing will be available.

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available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to meet our obligations or enable us to continue to implement our long-term business strategy. In addition, obtaining additional funding or entering into other strategic transactions could result in significant dilution to our stockholders.

 

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 Stockour 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 Stockour common stock if Beam’s newthe acquired 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. RevenuesAny revenues exceeding $20.0 million in 2023 will not be eligible for the Earnout Consideration. The maximum aggregate number of shares of Beam Common Stockour common stock that the Companywe 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 revenue in the Earnout calculation.

 

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

Schedule of Noncash or Part Noncash Acquisitions    
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): 

Schedule of assets acquired and liabilities assumed       
Inventory $2,146  $2,146 
Prepaid expenses  28   28 
Deposits  10   10 
Property, plant and equipment  397   397 
Right-of-use asset  192 
Intangible assets, including goodwill  15,059   15,059 
Total assets acquired  17,640   17,832 
        
Customer deposits  (1,219)  (1,219)
Lease liability  (192)
Total liabilities assumed  (1,219)  (1,411)
        
Total assets and liabilities assumed $16,421  $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 million of transaction costs during the six monthsyear ended June 30,December 31, 2022, directly related to the acquisition that is reflected in operating expenses in the statement of operations.

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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 monthsyear ended June 30,December 31, 2022 and the quarter ended March 31, 2023 is as follows (in thousands):

Schedule of fair value earnout        
Balance as of December 31, 2021 $0  $– 
Acquisition of All Cell  1,251   1,251 
Change in estimated fair value  (208)  5,540 
Balance as of June 30, 2022 $1,043 
Balance as of December 31, 2022 $6,791 
Change in estimated fair value  (13)
Balance as of March 31, 2023 $6,778 

 

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

Schedule of acquired intangible assets        
  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 Unaudited Financial Information

 

The following pro forma unaudited 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 monthsyear ended June 30,December 31, 2021 (in(unaudited and in thousands):

Schedule of Pro Forma Information                
  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)

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Schedule of Pro Forma Information        
  Year Ended December 31, 
  2022  2021 
Revenues $22,241  $14,399 
Net Loss $(20,395) $(10,551)

 

The pro forma unaudited 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 monthsyear ended June 30,December 31, 2021. In addition, the pro forma unaudited 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 unaudited 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.Company and payments to a non-employee.

 

The statement of operations for the three and six monthsyear ended June 30,December 31, 2022 includes revenues of $1.45.2 million million and $1.8 million, and loss from operations of $1.010.1 million million and $1.4 million,, respectively, from the acquired All Cell assets.business.

 

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.

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4.PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets are summarized as follows (in thousands):

Schedule of Other Current Assets             
 June 30, December 31,  March 31, December 31, 
 2022  2021  2023  2022 
Vendor prepayments $2,936  $87  $2,693  $1,049 
Deferred equity offering costs  –   344 
Prepaid insurance  –   106 
Related party receivable  17   27   16   38 
Prepaid insurance  261   66 
Other  130   42 
Total prepaid expenses and other current assets $3,214  $180  $2,839  $1,579 

 

Related party receivables as of June 30, 2022March 31, 2023 and December 31, 20212022 consisted primarily of payroll related taxes due for employee stock vesting.stock-based compensation.

 

5.INVENTORY

 

Inventory consists of the following (in thousands):

Schedule of Inventory             
 June 30, December 31,  March 31, December 31, 
 2022  2021  2023  2022 
Finished goods $77  $0  $1,031  $2,814 
Work in process  2,042   425   1,592   1,771 
Raw materials  5,238   1,186   10,122   7,661 
Total inventory $7,357  $1,611  $12,745  $12,246 

 

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6.PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following (in thousands):

Schedule of property and equipment      
  June 30,  December 31, 
  2022  2021 
Office furniture and equipment $132  $132 
Computer equipment and software  98   74 
Leasehold improvements  187   28 
Autos  337   337 
Machinery and equipment  1,245   562 
Total property and equipment  1,999   1,133 
Less accumulated depreciation  (596)  (483)
Property and Equipment, net $1,403  $650 

Schedule of property and equipment        
  March 31,  December 31, 
  2023  2022 
Office furniture and equipment $225  $186 
Computer equipment and software  130   118 
Leasehold improvements  222   180 
Autos  337   337 
Machinery and equipment  1,756   1,556 
Total property and equipment  2,670   2,377 
Less accumulated depreciation  (956)  (829)
Property and equipment, net $1,714  $1,548 

7.INTANGIBLE ASSETS

 

The intangible assets consist of the following (in thousands):

 Schedule of intangible assets Gross Carrying Amount  Accumulated Amortization  Weighted -Average Amortization Period (yrs) 
Developed technology  8,074   (795)   11 
Trade name  1,756   (190)   10 
Customer relationships  444   (62)   13 
Backlog  185   (200)   1 
Patents  507   (46)  20 
Intangible assets  10,966   (1,293)     

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7.8.ACCRUED EXPENSES

 

The major components of accrued expenses are summarized as follows (in thousands):

Schedule of accrued expense      
  June 30,  December 31, 
  2022  2021 
Accrued vacation $122  $238 
Accrued salaries and bonus  495   353 
Vendor accruals  121   36 
Other accrued expense  136   100 
Total accrued expenses $874  $727 

Schedule of accrued expense        
  March 31,  December 31, 
  2023  2022 
Accrued vacation $251  $190 
Accrued salaries and bonus  1,464   1,220 
Vendor accruals  504   85 
Accrued warranty  102   160 
Other accrued expense  257   32 
Total accrued expenses $2,578  $1,687 

 

8.9.COMMITMENTS AND CONTINGENCIES

Legal Matters:

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2022,March 31, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

 

Other Commitments:

 

The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, software licenses, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company.

 

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9.10.INCOME TAXES

 

There was no Federal income tax expense for the sixthree months ended June 30,March 31, 2023 or 2022 or 2021 due to the Company’s net losses. Income tax expense represents minimum state taxes due. As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established to offset all deferred tax assets as of June 30, 2022March 31, 2023 and no benefit has been provided for the year-to-date loss. On a quarterly basis, the company evaluates the positive and negative evidence to assess whether the more likely than not criteria have been satisfied in determining whether there will be further adjustments to the valuation allowance.

 

10.11.STOCKHOLDERS’ EQUITY

 

Stock Issued For AcquisitionServices

 

TheDuring the three months ended March 31, 2023, the Company issued 1,055,0006,444 shares of its common stock in exchange for marketing services to be provided over a six-month period. The fair value of such stock issued is $0.1 million and was recorded to prepaid expenses and other current assets upon acquiringissuance to be recognized over the service period.

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Committed Equity Facility

On September 2, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B. Riley. Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B. Riley up to $30.0 million, or a maximum of 2.0 million shares of the Company’s common stock at 97% of the volume weighted average price (“VWAP”) of the Company’s common stock on the trading day, calculated in accordance with the Purchase Agreement, over a period of 24 months subject to certain limitations and conditions contained in the Purchase Agreement. Sales and timing of any sales are solely at the election of the Company, and the Company is under no obligation to sell any common stock to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of the Company’s common stock, in September 2022, the Company issued B. Riley 10,484 shares of its common stock and will issue an additional 10,484 shares of its common stock or a cash payment of $150,000, at the Company’s sole discretion, sometime after the first VWAP purchase occurs.

The Company incurred an aggregate cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value of the 10,484 shares of common stock issued to B. Riley upon the execution of the agreement and the additional comment shares of 10,484, which was recorded to prepaid expenses and other current assets on the Balance Sheet to be offset against future proceeds from the sale of All Cell during the sixCompany’s common stock under the Purchase Agreement.

During the three months ended June 30, 2022. See further discussionMarch 31, 2023, the Company issued 37,741 shares under this agreement for $0.7 million in note 3. Business Combination.

proceeds, of which $Awards Under Stock Incentive Plans0.5 million was offset by the offering costs.

 

Stock Options

 

Option activity for the sixthree months ended June 30, 2022March 31, 2023 is as follows:

Schedule of option activity      
     Weighted 
     Average 
  Number of  Exercise 
  Options  Price 
Outstanding at December 31, 2021  263,433  $11.56 
Granted  21,000   16.72 
Exercised  0   0 
Forfeited  0   – 
Outstanding at June 30, 2022  284,433  $11.94 
Schedule of option activity          
     Weighted  Weighted
     Average  Average
  Number of  Exercise  Remaining
  Options  Price  Contractual Life
Outstanding at December 31, 2022  336,758   12.54   
Granted  10,000   17.55   
Outstanding at March 31, 2023  346,758  $12.68  6.88 Years

 

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the table below and we assumed there would not be dividends granted for the options granted during the three months ended March 31, 2023 and 2022:

Assumptions for options granted  Three months ended March 31, 
  2023  2022 
Expected Volatility  95%   97.40% - 97.41% 
Expected Term  7 Years   7 Years 
Risk-free interest rate  3.55%   1.55% - 1.71% 
Weighted-average FV $14.28  $14.31 

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The Company’s stock option compensation expense was $0.1 million and $0.2 million for the three and six months ended June 30, 2022, respectively, and $0.1 millionmillion for each of the three and six months ended June, 30, 2021. ThereMarch 31, 2023 and 2022, and there was $1.1 1.2 millionmillion of total unrecognized compensation costs related to outstanding stock options at June 30, 2022March 31, 2023 which will be recognized over 4.0 3.7years. NumberTotal intrinsic value of options outstanding and options exercisable were $2.0 million and $1.7 million, respectively, as of March 31, 2023. The number of stock options vested and unvested as of June 30, 2022March 31, 2023 were 191,778267,975 and 92,655,69,296, respectively.

 

Restricted Stock Units

In November 2022, the Company granted 142,500 restricted stock units (“RSUs”) and up to 142,500 performance stock units (“PSU”) to its Chief Executive Officer (“CEO”). 50% of the RSUs vested upon grant, with 25% vesting on February 1st of 2024 and 2025. The number of shares that will be earned under the PSUs will be determined based on the achievement of specific performance metrics during the three-years ending December 31, 2024.

There was no activity during the three months ended March 31, 2023. 142,500 PSUs and 71,250 RSUs remained outstanding as of March 31, 2023, with weighted-average grant-date fair values of $13.05 each.

Stock compensation expense related to the RSUs and PSUs was $0.3 million during the three months ended March 31, 2023, with $2.3 million in unrecognized stock compensation expense remaining to be recognized over 1.9 years as of March 31, 2023.

Restricted Stock Awards

The Company issues restricted stock to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters. The Company also issues restricted stock to its CEO, for which generally 50% of the shares granted vest ratably over four quarters and the remaining 50% vest ratably over twelve quarters. The common stock related to these awards are issued to an escrow account on the date of grant and released to the grantee upon vesting. The fair value is determined based on the closing stock price of the Company’s common stock on the date granted and the related expense is recognized ratably over the vesting period.

 

A summary of activity of the restricted stock awards for the sixthree months ended June 30, 2022March 31, 2023 is as follows:

Schedule of restricted stock award activity      
     Weighted- 
  Nonvested  Average Grant- 
  Shares  Date Fair Value 
Nonvested at December 31, 2021  13,669  $20.45 
Granted  7,436   20.17 
Vested  (10,382)  20.53 
Nonvested at June 30, 2022  10,723  $20.19 
Schedule of restricted stock award activity        
     Weighted- 
  Nonvested  Average Grant- 
  Shares  Date Fair Value 
Nonvested at December 31, 2022  17,865  $14.11 
Vested  (5,966)  12.75 
Nonvested at March 31, 2023  11,899  $14.79 

 

Stock compensation expense related to restricted stock awards was $0.1 million during each of the three months ended March 31, 2023 and 2022.

As of June 30, 2022,March 31, 2023, there were unreleased shares of common stock representing $0.2 million million of unrecognized restricted stock grant expense which will be recognized over approximately 2.51.75 years.

  

 

 

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Warrants

 

During the three months ended March 31, 2023, the Company issued 200,000 warrants with a $17.00 strike price to purchase the Company’s common stock for investor relations services to be provided over a five-year period. The awards are immediately exercisable but are subject to repurchase by the Company until the required service is provided. The fair value of such warrants was $8.05 per share or $1.6 million on the date of grant using the Black-Scholes option-pricing model. This model incorporated certain assumptions for inputs including a risk-free market interest rate of 3.86%, expected dividend yield of the underlying common stock of 0%, expected life of 2.5 years and expected volatility in the market value of the underlying common stock based on our historical volatility of 99.6%. The fair value of the warrants was recorded to prepaid expenses and other current assets to be recognized over the service period. At March 31, 2022, $1.6 million of cost has not been recognized and will be recognized over the next 5.0 years.

A summary of the numberactivity of shares of common stock underlying warrants outstanding for the three months ended June 30, 2022March 31, 2023 is as follows:

Schedule of warrant activity      
  

Number of

Common Stock

  Weighted Average Exercise Price 
Outstanding at December 31, 2021  519,658  $6.30 
Exercised  (50,037)  6.30 
Outstanding at June 30, 2022  469,621  $6.30 
Schedule of common stock warrant activity        
  Number of Warrants  Weighted Average Exercise Price 
Outstanding at December 31, 2022  440,204  $9.73 
Granted  200,000  $17.00 
Exercised  (15,898) $6.30 
Outstanding at March 31, 2023  624,306  $9.73 
Exercisable at March 31, 2023  424,306  $6.30 

 

Exercisable warrants as of March 31, 2023 have a weighted average remaining contractual life of 1.05 years. The intrinsic value of the exercisable shares of the warrants at March 31, 2023 was $4.1 million.

11.12.REVENUES

 

For each of the identified periods, revenues can be categorized into the following (in thousands):

Schedule of disaggregated revenues                        
 Three Months Ended Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2022  2021  2022  2021  2023  2022 
Product sales $3,192  $1,976  $6,754  $3,241  $12,811  $3,562 
Maintenance fees  9   12   20   23   16   11 
Professional services  405   52   431   56   36   26 
Shipping and handling  114   86   296   185   216   181 
Discounts and allowances  (2)  (5)  (13)  (12)  (59)  (10)
Total revenues $3,718  $2,121  $7,488  $3,493  $13,020  $3,770 

 

During the three and six months ended June 30,March 31, 2023 and 2022, 3860% and 43% of revenues were derived from customers located in California, respectively. During the three and six months ended June 30, 2021, 43% and 3848% of revenues were derived from customers located in California, respectively. In addition, 210% and 4% of revenues in the sixthree months ended June 30,March 31, 2023 and 2022 were international sales, compared to none in the same period in the prior year.respectively.

 

At June 30, 2022March 31, 2023 and December 31, 2021,2022, deferred revenue was $1.81.1 million million and $0.31.4 million million,, respectively. These amounts representedconsisted mainly of customer deposits in the amount of $1.50.7 million million and $0.11.0 million million for June 30, 2022March 31, 2023 and December 31, 2021,2022, respectively and prepaid multi-year maintenance plans for previously sold products which account for $0.20.4 million million and $0.20.3 million million for June 30, 2022March 31, 2023 and December 31, 2021,2022, respectively, and pertain to services to be provided through 2028.

2029.

 

 

 

 16 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This report contains forward-looking statements that are based on current expectations, estimates, forecasts, and projections about us, the industry in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” and variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act).amended.

 

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause the Company’s actual results to be materially different from any future results expressed or implied by the Company in those statements. The most important factors that could prevent the Company from achieving its stated goals include, but are not limited to, the following:

 

 (a)volatility or decline of the Company’s stock price, or absence of stock price appreciation;

 (b)fluctuation in quarterly results;

 (c)failure of the Company to earn revenues or profits;

 (d)inadequate capital to continue or expand its business, and the inability to raise additional capital or financing to implement its business plans;

 (e)unavailability of capital or financing to prospective customers of the Company to enable them to purchase products and services from the Company;

(f)failure to commercialize the Company’s technology or to make sales;

(g)reductions in demand for the Company’s products and services, whether because of competition, general industry conditions, loss of tax incentives for solar power, technological obsolescence or other reasons;

 (h)(f)litigation with or legal claims and allegations by outside parties;

 (i)(g)insufficient revenues to cover operating costs, resulting in persistent losses;

 (j)(h)rapid and significant changes to costs of raw materials from government tariffs or other market factors;
   
 (k)(i)increasing spreadthe preceding and other factors discussed in Part I, Item 1A, “Risk Factors,” and other reports we may file with the Securities and Exchange Commission from time to time; and
(j)the factors set forth in Part II, Item 7, “Management’s Discussion and Analysis of the COVID-19 pandemicFinancial Condition and its impact on the Company’s business as well as worldwide financial markets;Results of Operations.”

 

New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Because factors referred to elsewhere in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 20212022 (sometimes referred to as the “2021“2022 Form 10-K”) that we previously filed with the Securities and Exchange Commission, including without limitation the “Risk Factors” section in the 20212022 Form 10-K, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-looking statements or to reflect events or circumstances arising after the date of this report on Form 10-Q.

 

 

 

 17 

 

 

Overview

 

Beam Global develops, manufactures and sells high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy storage, energy security, disaster preparedness and outdoor media advertising.media.

 

The Company has designed five product lines for the electrification of transportation, that incorporate the same underlyingour proprietary technology and value for producing a unique alternative to utility grid-tied charging, having a built-in renewable energy source in the form of attached solar panels and/or light wind generator to produce power and battery storage to store the power. These products are rapidly deployable and attractively designed. Our product linesdesigned and include:

 

 -EV ARC™ Electric Vehicle Autonomous Renewable Charger – a patented, rapidly deployed, infrastructure product that uses integrated solar power and battery storage and electronics and computing, to provide a mounting asset and a source of power for factory installed electric vehicle charging stations of any brand. The electronics and energy storage are elevated to the underside of the trackingsun-tracking solar array making the unit flood-proof up to nine and a half feet and allowing adequate parking space to park a vehicle on the engineered ballast and traction pad which gives the product stability.

 

 -Solar Tree® DCFC – Off-grid,Patented off-grid, renewably energized and rapidly deployed, patented single-column mounted smart generation and energy storage system with the capability to provide a 150kW DC fast chargingcharge to one or more electric vehicles or larger vehicles.

 

 -EV ARC™ DCFC – DC Fast Charging system for charging EVs.EVs comprised of four interconnected EV ARC™ systems and a 50kW DC fast charger.

 

 -EV-Standard™ – patent issued on December 31, 2019 and stillcurrently under development. A lamp standard, EV charging and emergency power product which uses an existing streetlamp’s foundation and a combination of solar, wind, grid connection and onboard energy storage to provide curbside charging.

 

 -

UAV ARC™ - patent issued on November 24, 2020 and stillcurrently under development. An off-grid, renewably energized and rapidly deployed product and network used to charge aerial drone (UAV) fleets.

All Beam Global products are capable of operating completely independent of the utility grid but can also connect to the grid where it is advantageous to do so.

 

In addition, with the acquisition of All Cell Technologies, LLC (“All Cell”) in March 2022, we now offer Beam AllCell™ energy storage technology with a highly flexible lithium-ion andand/or lithium iron phosphate battery platform architecture. The battery design uses a proprietary phase change material which provides a low-cost thermal management solution and a unique safety mechanism to prevent propagation of thermal runaway. They are ideally suited for applications where energy density, safety and specialized enclosures require high power in small spaces. Drones, submersibles, medical and recreational products and a host of micro mobility products benefit from this technology. Beam is already using AllCell™ energy storage products in EV ARC™ products for EV charging and plans to incorporate this battery technology in our new product designs that are under development.

 

We believe that we are living in an increasingly electrified era, where electricity is replacing other forms of fuel and energy without being connected to the utility grid through the use of batteries and other forms of energy storage. We also believe that there is a clear need for a rapidly deployable and highly scalable EV charging infrastructure, and that our products fulfill these requirements.that requirement. Unlike utility grid-tied installations which require general and electrical contractors, engineers, consultants, digging trenches, permitting, pouring concrete, wiring, and ongoing utility bills, the EV ARC™ systems, equipped with our proprietary battery technologies,system can be deployed in minutes, not months, and areis powered by renewable energy so there is no utility bill. We are agnostic as to the EV charging service equipment or provider and integrate best of breed solutions based upon our customer’s requirements. For example, our EV ARC™ and Solar Tree® products have been deployed with ChargePoint,Chargepoint, Blink, Enel X, Electrify America and other high quality EV charging solutions. We can make recommendations to customers, or we can comply with their specifications and/or existing charger networks. Because they generate and store all their own electricity, ourOur products replace the utility grid and civil infrastructure required to support EV chargers, but not the chargers themselves. We do not sell EV charging, rather we sell products which enable it.

 

 

 

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We believe our chief differentiators for our electric vehicle charging infrastructure products are:

  

 ·our patented, renewably energizedrenewable energy products which dramatically reduce the cost, time and complexity of the installation and operation of EV charging infrastructure and outdoor media platforms when compared to traditional, utility grid tied alternatives;

 ·our proprietary and patented energy storage solutions;

 ·our first-to-market advantage with EV charging infrastructure products which are renewably energized, rapidly deployed and require no construction or electrical work on site;

 ·our products’ capability to operate during grid outages and to provide a source of EV charging and emergency power rather than becoming inoperable during times of emergency or other grid interruptions; and

 ·our ability to continuously create new and patentable inventions which are marketable and a complex integration of our own proprietary technology and parts, and other commonly available engineered components, creatingwhich create a further barrier to entry for our competition.

  

Overall Business Outlook

 

Our revenues increased 114% from $3.5 million infor the first sixthree months of 2021 to $7.52023 were $13.0 million, a 245% increase over $3.8 million for the first six months ofsame quarter in 2022, primarily due to our investmentderived from delivery of a significant backlog of orders received during the latter part of 2022. We have invested in sales and marketing resources over the past twothree years which has created increased demand for our EV ARC™ renewable chargers, as well aschargers. Additionally, we had an increase of $1.8 million ofin sales forfrom our battery storage business since March following theas a result of our acquisition of All Cell. DuringCell in March 2022. The Company believes there continues to be a high level of support for funding EV charging infrastructure on the first six monthsfederal level, including a number of federal grants available under the Inflation Reduction Act in 2022, in addition to the Federal Solar Investment Tax Credit and accelerated depreciation as allowed under Section 179 of IRS code which provide a strong financial incentive for many of our target customers. Given these available resources, we have invested in a federal lobbyist, a federal business development resource and a government relations employee, who have helped to identify opportunities on the federal side and have increased awareness of our product and outreach with federal agencies. In addition, the General Services Administration (GSA) awarded Beam Global a federal blanket purchase agreement which provides federal agencies a streamlined procurement process for procuring EV ARC™ systems. As a direct result, Beam Global was awarded a number of federal government orders in September through November 2022 that have or will be delivered in 2023. In the quarter ended March 31, 2023, we recorded revenues fromof $10.6 million for federal state and local governments increased by $1.8 millioncustomers, compared to $0.8 million for the prior year, primarily duesame period in 2022.

Ongoing efforts to an increase in salesexpand revenues to the State of California and federal customers.state agencies have also been successful. In June 2022, we were awarded a new three-year statewide contract with the State of California which can be used by state, local and municipal government entities throughout the U.S., not just California, and provides previously negotiated pricing to make the procurement process easier. We investedIn addition, in our federal business channel withearly October 2022, we were awarded a $5.3 million contract from the additionDepartment of a federal lobbyist, a federal business development resource and a government relations employee who are helpingCitywide Administrative Services to identify opportunities on the federal side, including increasing awareness of our product and outreach with federal agencies. deploy units throughout New York City.

In addition, as companies are movingrequire employees to return back to work fromthe workplace rather than working remotely from home duringas was the past two years due tocase during the pandemic, we are seeing an increase in orders for workplace charging and corporate fleets for enterprise customers. There is increased support for funding EV charging infrastructure on the state and federal level, as well as a number of federal grants available in additioncustomers which we expect to the Federal Solar Investment Tax Credit and accelerated depreciation as allowed under Section 179 of IRS code which provide a strong financial incentive for many of our target customers. Net Zero Emission Initiatives continues to expand at the federal, state and local levels and with private enterprise.continue. We expect the electric vehicle market to continue to experience significant growth over the next decade (60 new electric vehicles are expected to launch in 2022 alone) which will require additional EV charging infrastructure. We believe our products are uniquely positioned to benefit significantly from this growth.

 

We believe the Company’s acquisition of the assets of All Cell, a battery storagetechnology company, will provideincrease our new customer opportunities for our Beam Global’s products.opportunities. As a result of the acquisition of All Cell, we believe Beam’s gross margin will continue to improve by utilizing the Beam All CellAll-CellTM battery in its EV ARCs™ as it did, because we can reduce costs by retaining gross profits previously paid to battery vendors. We now also have the ability to value engineer bespoke battery solutions for 8 years in the past, but now at lower cost. Beam’s All Cellour products. Beam All-CellTM batteries are ideally suited for applications where energy density, safety and bespoke enclosures require high power in small spaces. Drones, submersibles, recreational products and a host of micro mobility and electric vehicle products are already benefiting from All Cell’sour Beam All-CellTM highly differentiated products. With the continued growth of untethered electrification, we believe there is opportunity for increased demand in these markets and others.

 

 

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We continuecontinued to workmake progress in finding a sponsor for our outdoor media advertising business during 2022 and the beginning of 2023, working with The Superlative Group (“Superlative”), an industry leading consultant engaged in the selling of corporate sponsorships and they have identified several potential corporate sponsors to engage infor a global naming rights agreement that would provide their corporate branding to network(s)our network of EV ARC™ units deployed throughout a city.systems. Superlative is compensated only when they are successful in securing a sponsor for our Driving“Driving on SunshineSunshine” network. This business model, if successful, can be replicated in other cities throughout the country. Our energy security business is connected with the deployment of our EV charging infrastructure products and serves as an additional benefit to theand value proposition offor our charging products which, along with their integrated emergency power panels, can continue to operate, charge EVs, and deliver emergency power during utility grid failures. Our proprietary and state-of-the-art storage batteries combined with solar or wind generation, integrated intoinstalled on our products and powering EV chargerscharging systems are immune to grid failures and provide another benefit for customers such as municipalities, counties, states, the federal government, hospitals, fire departments, large private enterprises with substantial facilities, and vehicle fleet operators or anyone who needs a reliable source of electricity to fuel electric vehicles.operators.

 

We have begunare in development on our newest patented products - our EV Standard™ and UAV ARC™, which we expect will expand our product offerings leveraging the same proprietary technology as our current products and allow us to expand into new markets.

 

Gross marginsOur gross profit improved in the six months ended June 30, 2022 as a percentage of sales reporting a positive gross margin in Q1 2023, compared to the same period in 2021. The increase in EV ARC™ systems sold from 42 units8.1% gross loss in the first six monthsquarter of 2021 to 74 units in2022. Additionally, our cost of goods sold (COGS) for the first six monthsquarter of 2023 included $0.2 million of non-cash intellectual property amortization from the acquisition of All Cell in 2022. Excluding this non-cash expense results in a further improved gross profit of 1.8% for the quarter. We increased the number of EV ARC deliveries from 45 in Q1 2022 to 152 in Q1 2023 which resulted in favorable fixed overhead absorption and improved labor efficiencies gained by the higher volume. This was partially offset byOur gross profit improvements were achieved in spite of ongoing inflation and supply chain driven cost increases on many of our components, including steel, in addition to increased delivery charges due to fuel price increases. We believe these cost increases are largely a temporary increase broughtbegan to see some improvements in pricing on bynew supply chain issues resultingorders placed in Q1 2023 which we expect to start to realize benefit from plant closuresin Q2 2023 and staffing shortages due to the Covid-19 virus as well as other transitory inflationary pressures. We believe the supply chain issues will resolve over time and costs will begin to come back down in the coming months and years.forward. We also expect to see a reduction in the cost of our bill of materials. Batteries are the highest cost contributor to our bill of materials, but with the March 2022 purchase of All Cell’s assets, a battery manufacturer, we expect those costs to be significantly reduced. We are implementing lean manufacturing process improvements and making engineering changes to our product where we expect to benefit from cost reductions. Many of the components that we integrate into our products are manufactured by others. This is consistent with our strategy to take advantage of the investment by large and well-funded organizations in the improvement of various components and sub-assemblies which we integrate into our final product. We continue to identify components and sub-assemblies that may be more cost effective to outsource, which may further reduce our costs, increase our gross margins, and significantly increase the potential output from our factory. We expect to see a significant increase in the demand for electric vehicle charging infrastructure and as such we do not anticipate significant pricing pressure on our products. The combination of this increase in demand for electric vehicle charging infrastructure and our revenues, and the cost cutting measures described above lead us to believe that we will see significant improvement in our gross margins over the next year.

 

Significant Accounting Policies and Estimates

 

The Company’s significant accounting policies are described in Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. There have been no material changes in these policies or their application.

 

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of intangible assets, valuation of contingent consideration liability, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets.

 

Changes in Accounting Principles. There were no significant changes in accounting principles that were adopted during the three months ended June 30, 2022.March 31, 2023.

  

 

 

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Results of Operations

 

Comparison of Results of Operations for the Three Months Ended June 30,March 31, 2023 and 2022 and 2021

 

Revenues. For the first quarter ended June 30, 2022,March 31, 2023, our revenues increased 75%245% to $3.7$13.0 million compared to $2.1$3.8 million for the same period in 2021. Revenues to customers in California represented 38%first quarter of the total, which continues to be a strong market for EV ARC™ systems. Most of these customers were state agencies or municipalities.2022. Revenues to federal customers increased by $9.8 million in Q1 2023, resulting from a number of large awards from federal agencies in late September and corporate enterprises also increased duringearly October of 2022 totaling more than $46.0 million. Some of these units shipped in the quarter comparedended December 31, 2022, with the balance scheduled for delivery by the end of 2023. We continue to have a strong concentration of revenues from the prior year.State of California which represents 60% of total revenues. Revenues derived from non-government, commercial entities increased by 55% from Q1 2022 to Q1 2023 representing a partial return to pre-COVID levels. We recorded energy storage revenuerevenues of $1.4$1.8 million as a result of our acquisition of All Cell which closed on March 4, 2022. We were awarded a new contract with the State of California’s Department of General Services in June 2022 for a three-year period plus two optional one-year extensions. In addition, the General Services Administration (GSA) awarded Beam Global a federal blanket purchase agreement (BPA) which will provide federal agencies a streamlined procurement process for procuring EV ARC™ systems. We continue to invest in sales and marketing employees, resources and programs to raise awareness of the benefits and value of our products, which is reflected in the strong year over year sales growth in the quarter. The receipt of orders may continue to be uneven due to the timing of customer approvals or budget cycles, however we believe that as EV adoption increases in concert with increased availability of infrastructure funding, our business will be less impacted by specific variations in order timing.

 

Gross Loss.Profit. For the quarter ended June 30, 2022, ourMarch 31, 2023, we recorded a marginal positive gross profit at .04% of revenues, compared to a gross loss wasof $0.3 million, or 9%8.1% of sales compared to $0.3 million, or 13% of sales in the same quarter of the prior year. As a percentage of sales, the margin improved by 4 percentage points,8.1%, primarily due to the increase in production levels in the current quarter compared to the second quarter of 2021,prior year, which resulted in favorable fixed overhead absorption. In addition, our labor efficiency improved during the quarter as a result of a steady flow of units through the factory. This was partially offsetOur gross profits, while positive, were negatively impacted by $0.2 million for non-cash intangible amortization and further by an increase in material costs for steel, batteries and other components compared to the first quarter of 2022, due to the Covid-19COVID-19 pandemic and other inflationary pressures. Shipping costs have increased globally as well as gas prices which have increased our delivery costs. We expect our cost per unit to continue to decrease as we expectbegan to see material costs returnsome improvements in pricing on new orders placed in Q1 2023 which we believe we will start to normalcy post pandemicrealize benefit from in Q2 2023 and as our volumes increase.forward. We also acquired a battery manufacturer,implemented some design changes in Q1 2023 which we believe will reduce the labor and material cost of our product. Our acquisition of All Cell in March 2022 which is expected toshould significantly reduce the cost of the batteries in our units.products. In addition, as we expect the Company to growour revenues increase in 20222023 and beyond, we expect our fixed overhead absorption to continue toalso improve.

 

Operating Expenses. Total operating expenses were $2.5$3.8 million, or 30% of revenues, for the quarter ended June 30, 2022,March 31, 2023, compared to $1.4$2.0 million, or 52% of revenues, for the same periodquarter in the prior year, an 82% increase. The increase was primarily due to $0.8 millionimprovement of 22% of revenues. Operating expenses in Q1 2022 included only one month of expenses attributable tofor our battery operation based on the newly acquired All Cell and $0.2 million increase for accounting and legal services, primarily attributable to the acquisition. Increases in other operating expenses were mostly offset by a gain recorded from the favorable change in fair value of contingent consideration related to the All Cell acquisition.

Comparison of Results of Operations for the Six Months Ended June 30, 2022 and 2021

Revenues. For the six months ended June 30, 2022, our revenues increased 114% to $7.5 million compared to $3.5 million for the same period in 2021. Revenues to customers in California represented 43% of the total, which continues to be a strong market for EV ARC™ systems. Most of these customers were state agencies or municipalities. Revenues to federal customers and corporate enterprises also increased during the quarter compared to the prior year. We recorded energy storage revenues of $1.8 million as a result of our acquisition of All Cell whichthat closed onin March 4, 2022. We were awarded a new contract withThis accounts for approximately $0.5 million of the State of California’s Department of General Services in June 2022 for a three-year period plus two optional one-year extensions.increase. In addition, the General Services Administration (GSA) awarded Beam Global a federal blanket purchase agreement (BPA) which will provide federal agencies a streamlined procurement process for procuring EV ARCs. We continue to invest in sales and marketing employees, resources and programs to raise awareness of the benefits and value of our products, which is reflected in the strong year over year sales growth in the quarter. The receipt of orders may continue to be uneven due to the timing of customer approvals or budget cycles, however we believe that as EV adoption increases in concert with increased availability of infrastructure funding, our business will be less impacted by specific variations in order timing.

21

Gross Loss. For the six months ended June 30, 2022, our gross loss was $0.6 million, or 8% of sales, compared to $0.4 million or 12% of sales in the same quarter of the prior year. As a percentage of sales, the margin improved by 4 percentage points, primarily due to the increase in production levels in the current quarter compared to the same period in 2021, which resulted in favorable fixed overhead absorption. In addition, our labor efficiency improved during the quarter as a result of a steady flow of units through the factory. This was partially offset by an increase in material costs for steel, batteriesR&D salaries and other components, due to the Covid-19 pandemic and other inflationary pressures. Shipping costs have increased globally as well as gas prices which have increased our delivery costs. We expect our cost per unit to continue to decrease as we expect to see material costs return to normalcy post pandemic. We also acquired a battery manufacturer, All Cell in March 2022, which should significantly reduce the cost of the batteries in our units. In addition, as we expect the Company to grow in 2022 and beyond, we expect our fixed overhead absorption to continue to improve.

Operating Expenses. Total operating expenses, were $4.5$0.3 million for the six months ended June 30, 2022, compared to $2.5non-cash compensation expense, $0.3 million for the same period in the prior year, an 81% increase, but a decrease as a percentage of revenue of 11 percentage points. The increase was primarily due to $1.1 million in expenses attributable to the newly acquired All Cell, $0.4 million increase for legal and accounting services, primarily attributable to the acquisition,audit fees, and $0.3 million increase for salesadmin salaries and marketing costsbonus expense. Operating expenses decreased from 52% to generate increased sales levels. Increases in other operating expenses were mostly offset by a $0.2 million gain recorded30% of revenues from the favorable change in fair value of contingent consideration relatedQ1 2022 to the All Cell acquisition.Q1 2023.

 

Liquidity and Capital Resources

 

At June 30, 2022,March 31, 2023, we had cash of $13.8$1.0 million, compared to cash of $21.9$1.7 million at December 31, 2021.2022. We have historically met our cash needs through a combination of debt and equity financings. Our cash requirements are generally for operating activities.

 

Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the table below (in thousands):below:

 

 June 30,  March 31, 
 2022  2021  2023  2022 
Cash provided by (used in):                
Net cash used in operating activities $(7,425) $(3,752) $(619) $(1,907)
Net cash used in investing activities $(1,086) $(206) $(330) $(954)
Net cash provided by financing activities $316  $2,562  $258  $88 

 

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For the sixthree months ended June 30, 2022,March 31, 2023, our cash used in operating activities was $7.4$0.6 million compared to $3.8$1.9 million for the same period in 2021.three months ended March 31, 2022. Net loss of $5.1$4.1 million for the sixthree months ended June 30, 2022March 31, 2023 was increased by $0.7$0.9 million of non-cash expense items that included depreciation and amortization of $0.5$0.3 million, common stock issued for services for director compensation of $0.1 million and employee stock-based compensation expense of $0.5 million. Further, cash used in operations included a $2.4 million increase in accounts receivable due to the increase in revenues in the quarter, $0.3 million decrease in deferred revenue, and a $0.2 million increase in inventory. Cash used in operations included a $4.2 million increase in accounts payable primarily for inventory, $0.9 million increase in accrued expenses and a $.4M decrease in prepaid expenses and other current assets.

For the three months ended March 31, 2022, our cash used in operating activities was $1.9 million. Net loss of $2.3 million for the quarter ended March 31, 2022 was increased by $0.4 million of non-cash expense items that included depreciation and amortization of $0.2 million, common stock issued for services for director compensation of $0.1 million and non-cash compensation expense related to the grant of stock options of $0.2$.01 million. Further, cash used in operations included an increase in prepaid expenses and other current assets by $3.0$1.5 million, primarily related to the prepaymentpurchase of battery cells and $3.5$0.6 million increase in inventory (i) to secure battery cells required for battery manufacturingbased on the sales forecast. Cash used in case of potential future supply chain challenges and (ii) due to higher work in work in process inventory nearly complete EV ARC units that were waiting for parts at June 30, 2022. The increases in prepayments and inventory are not expected to continue in future quarters, but rather should reduce to lower levels over the next 12 months. Cash provided by operations included a $0.9$1.2 million decrease in accounts receivable due to the collection of a couple of slow payingpay accounts from 2021, $2.1$0.5 million decrease in accounts payable, $0.4 million increase in accounts payable primarily for inventory, $0.3 million increase in deferred revenueaccrued expenses and $0.1 million increase in accrued expenses.

22

Net loss of $2.9 million for the six months ended June 30, 2021 decreased by $0.5 million for non-cash expense items that included depreciation and amortization, common stock issued for services for director compensation, non-cash compensation expense related to the grant of stock options, and amortization of operating lease right of use asset. Cash used in operations for the period included a $1.0 million increase in accounts receivable due to some slow payments from Q1 shipments and a $0.8 increase in inventory based on forecasted requirements. Cash provided by operations included a $0.3 increase in accounts payable primarily due to increased inventory purchases.deferred revenue.

 

Cash used in investing activities in the sixthree months ended June 30,March 31, 2023 included $0.3 million for the purchase of equipment and patent costs. The three months ended March 31, 2022 included $0.8 million cash payment for working capital payment related to the acquisition of All Cell and $0.2$0.1 million to purchase equipment. The three months ended June 30, 2021 included $0.2 million to fund patent related costs and to purchase equipment.

 

InFor the sixthree months ended June 30, 2022,March 31, 2023, cash generated by our financing activities included $0.3$0.2 million proceeds from the sale of stock and $0.1 million from the exercise of warrants, compared to $2.6$0.1 million for the exercise of warrants for the same period in the prior year.

  

Current assets were $27.2$23.4 million at June 30, 2022 and $27.6March 31, 2023, an increase from $19.9 million at December 31, 2021.2022, primarily due to a $2.5 million increase in accounts receivable, a $1.3 million increase in prepaid expenses and other current assets and $0.5 million increase in inventory, partially offset by a $0.7 million decrease in cash. Current liabilities, which include a $6.7 million non-cash contingent consideration attributable to our March 2022 acquisition of All Cell, increased to $7.9$17.9 million at June 30, 2022March 31, 2023 from $3.0$13.2 million at December 31, 2021,2022, primarily due to the acquisition of All Cell, including additions of $2.3a $4.2 million increase in accounts payable and accrued liabilities, $0.7 million in contingent consideration, current, based on the terms of the acquisition, and $1.5$0.9 million increase in accrued expenses, partially offset by a $0.3 million decrease in deferred revenue, for customer deposits.current. As a result, our working capital decreased to $19.4$5.5 million at June 30, 2022March 31, 2023 compared to $24.6$6.8 million at December 31, 2021.2022.

 

The Company has been focused on marketing and sales efforts over the past two years to support an increase inour revenues. We saw aRevenues increased by 45% increase in revenues infrom 2020 to 2021, compared144% from 2021 to 2020,2022, and the first half of245% from Q1 2022 was 114% higher than the first half of 2021 which shows continued improvement on revenues. While theto Q1 2023 demonstrating that this investment has been successful. The Company has still notnow earned a gross profit on its sale of products, aswhich includes $0.2 million of non-cash amortization of acquired intangible assets. Improvements have been made despite the current inflationary period. As revenues increase, we expect to continue to see our fixed overhead costs spread over more units, which will reduce the cost per unit. Management hasOur engineering and operations teams have made several design changes and process improvements in our product development and manufacturing operations in 20212022 and the first half of 2022early 2023 which has helped to increase labor efficiency and reduce material costs. At the same time, the Company is still recovering from supply chain issues related to the COVID-19 virus havewhich caused an increase in certain of our material costs, most notably in steel purchases. However, we believe that we will continue to improve our gross profit as our revenues grow. Management believes that with anticipated increased production volumes, efficiencies will continue to improve, and the fixed overhead cost per unit will decrease. In addition, our suppliers believe thatare seeing these costs that have increased over the past year should start to come back downdecline in the later part of 2022. This should result in increasingearly 2023, which will help us to increase gross profitsprofit on the EV ARC ™ and Solar Tree® products in the future.

 

The Company may be required to raise capital until it achieves positive cash flow from its business, which is predicated on increasing sales volumes and the continuation of production cost reduction measures. TheIn September 2022, the Company entered into a Common Stock Purchase Agreement with B. Riley under which the Company has the right to sell up to $30.0 million shares of its common stock over a period of 24 months (see note 10 for further information.) In addition, we could pursue other equity or debt financings. Furthermore, the Company has warrants to purchase 469,621624,306 shares of our Common Stock outstanding at June 30, 2022,March 31, 2023, which could potentially generate an additional $3.0$6.1 million of proceeds over the next 25.1 years, depending on the market value of our stock and the warrant holders’ ability to exercise them. The proceeds from these offerings are expected to provide working capital to fund business operations and the development of new products. Management cannot currently predict when or if it will achieve positive cash flow.

On March 4, 2022, There is no guarantee that profitable operations will be achieved, the Company completed an acquisition of the assets of All Cell Technologies, LLC (“All Cell”),warrants will be exercised or that additional capital or debt financing will be available on a leader in energy storage solutions. This strategic acquisition is expectedtimely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to increase and diversifymeet our Company’s revenue, gross profitability, manufacturing capabilities, intellectual portfolio and customer base. The Company purchased substantially all of the assets andobligations or enable us to continue to implement our long-term business of All Cell for 1,055,000 shares of Beam Common Stock (“Closing Consideration”) (on the closing date, based on the closing price of the Beam Common Stock of $13.61, such shares had a value of approximately $14.4 million) plus an additional $0.8 million in cash for the net working capital of primarily inventory held by All Cell at closing.strategy. In addition, obtaining additional funding or entering into other strategic transactions could result in significant dilution to the cash paid for the working capital of $0.8 million, the Purchase Agreement requires a capital investment of not less than $1.5 million of equipment to be used for the business. 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 Common Stock that the Company will issue to All Cell for the Closing Consideration and Earnout Consideration will not exceed 1.8 million shares.our stockholders.

 

 

 

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Management believes that evolution in the operations of the Company may allow it to execute on its strategic plan and enable it to experience profitable growth in the future. This evolution is anticipated to include the following continual steps: addition of sales personnel and independent sales channels, continued management of overhead costs, increased overhead absorption resulting from volume growth, process improvements and vendor negotiations leading to cost reductions, increased public awareness of the Company and its products, and the maturation of certain long sales cycle opportunities. Management believes that these steps, if successful, may enable the Company to generate sufficient revenue to continue operations. There is no assurance, however, as to if or when the Company will be able to achieve those operating objectives.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.

  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not Applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining adequate internaldisclosure controls over financial reporting, as such term is definedand procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(f). The design of any system of15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assuranceprocedures, management recognized that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. All internal control systems,controls and procedures, no matter how well designed have inherent limitations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effectiveand operated, can provide only reasonable assurance with respectof achieving the desired control objectives, and management necessarily was required to financial statement preparationapply its judgment in evaluating the cost-benefit relationship of possible controls and presentation.procedures.

 

During the period covered by this filing, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our internal controls over financial reporting. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022,March 31, 2023, we do not yet have sufficient internal controls over financial reporting and procedures to ensure that all the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.

 

We identified the following material weakness which existed as of December 31, 2021:2022:

 

 ·The Company currently does not have sufficient controls in place to ensure that all inventory is appropriately tracked and recorded on a timely basis, given the lack of an automated tracking system and the manual nature of its current processes and controls surrounding inventory.
   
 ·The Company performs manual processes during the year to track and control inventory transactions, apply labor and overheads to inventory and to perform a wall-to-wall physical inventory at the end of the year to confirm the ending inventory balance and valuation. While these processes provide good results in determining inventory and cost of sales transactions, as we grow, it has become a very time-consuming process and could impact our ability to submit timely reporting. While manual controls improved significantly in 2022 at our San Diego location, we determined we had similar issues with manufacturing systems at our Chicago facility that was added in 2022 as a result of the All Cell acquisition. A manufacturing system will also provide automated processes, better controls, and improved management tools to analyze and plan production. This will avoid over-purchasing or shortages of inventory. We plan to implement a manufacturing and purchasing system in early fiscal 2023.

 

 

 

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In addition, we identified the following during the six months ended June 30, 2022:

·With regard to a business combination that was completed during the quarter ended March 31, 2022, we identified that the controls over the review of the business combination were not designed effectively such that a material error in the calculation of the purchase price was not detected in a timely manner.  

 

Since these controls have a pervasive effect across the inventory transaction cycle, management has determined that these circumstances constitute a material weakness, based on the criteria established in the “Internal Integrated Framework” issued by COSO in 2013 and as a result, we did not maintain effective internal control over financial reporting as of June 30, 2022.March 31, 2023.

  

Changes in Internal Control Over Financial Reporting

 

During the three months ended June 30, 2022,March 31, 2023, we continuedbegan to implement stronger processes related to ordering, counting, warehousing, valuing and transacting our inventory.inventory at our energy storage facility in Broadview, IL. We are evaluatingalso have begun the implementation of a new enterprise resource planning (ERP) systemssystem to replace our existing QuickBooks system. In addition, we evaluatedThe implementation of the internal controls of All Cell and rolled out processes and procedures to this new acquisition which was acquired during the six months ended June 30, 2022.ERP is scheduled for completion in July 2023.

 

During the quarter ended June 30, 2022, the Company implemented a review control over third-party valuation reports, which include formalized review procedures and enhanced communications with third-party experts which we believe will address the material weakness identified in the quarter ended March 31, 2022.

 

 

 

 

 

 

 

 

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company may be involved in legal actions and claims arising in the ordinary course of business from time to time. As of the date of this report, there are no ongoing or pending legal claims or proceedings of which management is aware.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

In addition, the risks listed below should be considered:

We may acquire other businesses, which could require significant management attention, disrupt our business, dilute stockholder value and harm our business, revenue and financial results.

As part of our business strategy, we intend to make acquisitions to add complementary companies, products or technologies, such as our recent acquisition of All Cell. Our acquisitions may not achieve our goals, and we may not realize benefits from acquisitions. Any integration process will require significant time and resources, and we may not be able to manage the process successfully. If we fail to successfully integrate acquisitions, or the personnel or technologies associated with those acquisitions, the business, revenue and financial results of the combined company could be harmed. We may not successfully evaluate or utilize the acquired assets and accurately forecast the financial impact of an acquisition, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of our securities. We would expect to finance any future acquisitions through a combination of additional issuances of equity, corporate indebtedness or cash from operations. The sale of equity to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. In the future, we may not be able to find other suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all. Our acquisition strategy could require significant management attention, disrupt our business and harm our business, revenue and financial results.

We are dependent on a limited number of suppliers for our battery cells, and in the current market, there is a risk that these suppliers will not be able to provide cells at prices and volumes acceptable to us, which could have an adverse effect on our business.

We source battery cells from a few suppliers, but the demand for cells and for lithium has increased over the past year with the increase in electrification and the growing demand for electric vehicles. It is possible that our suppliers will not have adequate supply to cover our demand, or the price of the cells will increase due to shortages, impacting our ability to ship units and/or cause the price of our products to increase. While we believe that we will be able to establish additional supplier relationships for our battery cells, we may be unable to do so in the short term or at all at prices, quality or costs that are favorable to us.

26

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.On March 21, 2023, the Company issued 6,444 shares of its common stock to a consultant in exchange for marketing services to be provided over a six-month period. These shares were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and were offered pursuant to an exemption provided in Section 4(a)(2) under the Securities Act.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

 

 

 

 

 

 

 

 

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Item 6. Exhibits

 

    Incorporated by Reference  

Exhibit

Number

 Exhibit Description Form File No. Exhibit 

Filing

Date

 

Filed

Herewith

3.1 Articles of Incorporation SB-2 333-147104 3.1 11/2/2007  
             
3.2 Amendment to Articles of Incorporation dated December 23, 2016 S-1/A 333-226040 3.1.2 4/4/2019  
             
3.3 Certificate of Change to Articles of Incorporation dated April 11, 2019 8-K 001-38868 3.1 4/18/2019  
             
3.4 Certificate of Amendment to Articles of Incorporation dated September 14, 2020 8-K 000-53204 3.1 9/14/2020  
             
3.5 Certificate of Amendment to Articles of Incorporation dated July 20, 2021 8-K 001-38868 3.1 7/20/2021  
             
3.6 Bylaws of Registrant SB-2 333-147104 3.2 11/2/2007  
             
3.7 Amendment to Bylaws 8-K 000-53204 10.2 7/16/2014  
             
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act         X
             
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act         X
             
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act         X
             
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act         X
             
101.INS Inline XBRL Instance Document         X
             
101.SCH Inline XBRL Schema Document         X
             
101.CAL Inline XBRL Calculation Linkbase Document         X
             
101.DEF Inline XBRL Definition Linkbase Document         X
             
101.LAB Inline XBRL Labels Linkbase Document         X
             
101.PRE Inline XBRL Presentation Linkbase Document         X
             
104 The cover page to this Quarterly Report on Form 10-Q has been formatted in Inline XBRL         X

    Incorporated by Reference  

Exhibit

Number

 Exhibit Description Form File No. Exhibit 

Filing

Date

 

Filed

Herewith

3.1 Articles of Incorporation SB-2 333-147104 3.1 11/2/2007  
             
3.2 Amendment to Articles of Incorporation dated December 23, 2016 S-1/A 333-226040 3.1.2 4/4/2019  
             
3.3 Certificate of Change to Articles of Incorporation dated April 11, 2019 8-K 001-38868 3.1 4/18/2019  
             
3.4 Certificate of Amendment to Articles of Incorporation dated September 14, 2020 8-K 000-53204 3.1 9/14/2020  
             
3.5 Certificate of Amendment to Articles of Incorporation dated July 20, 2021 8-K 001-38868 3.1 7/20/2021  
             
3.6 Bylaws of Registrant SB-2 333-147104 3.2 11/2/2007  
             
3.7 Amendment to Bylaws 8-K 000-53204 10.2 7/16/2014  
             
10.1 Common Stock Purchase Agreement 8-K 001-38868 10.1 9/2/2022  
             
10.2 Registration Rights Agreement 8-K 001-38868 10.2 9/2/2022  
             
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act         X
             
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act         X
             
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act         X
             
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act         X
             
101.INS Inline XBRL Instance Document         X
             
101.SCH Inline XBRL Schema Document         X
             
101.CAL Inline XBRL Calculation Linkbase Document         X
             
101.DEF Inline XBRL Definition Linkbase Document         X
             
101.LAB Inline XBRL Labels Linkbase Document         X
             
101.PRE Inline XBRL Presentation Linkbase Document         X
             
104 The cover page to this Quarterly Report on Form 10-Q has been formatted in Inline XBRL         X

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: August 12, 2022May 15, 2023Beam Global
  
 By: /s/ Desmond Wheatley
 

Desmond Wheatley, Chairman and Chief Executive Officer,

(Principal Executive Officer)

  
 By: /s/ Katherine H. McDermott
 

Katherine H. McDermott, Chief Financial Officer,

(Principal Financial/Accounting Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

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