UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Period ended
OR
For the transition period from _________________ to ________________
Commission File Number
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
|
|
|
| (Address of principal executive offices) | (Zip Code) |
(
(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 class | Trading Symbol(s) | Name of each exchange in which registered |
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.
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).
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 ☐ |
| 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 November 12, 2024 was .
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Beam Global
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory, net | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Deposits | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Sales tax payable | ||||||||
| Deferred revenue, current | ||||||||
| Note payable, current | ||||||||
| Deferred consideration, current | ||||||||
| Operating lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Deferred revenue, noncurrent | ||||||||
| Note payable, noncurrent | ||||||||
| Contingent consideration, noncurrent | ||||||||
| Other liabilities, noncurrent | ||||||||
| Deferred tax liabilities, noncurrent | ||||||||
| Operating lease liabilities, noncurrent | ||||||||
| Total liabilities | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock, $ par value, authorized, outstanding as of September 30, 2024 and December 31, 2023. | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively. | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated Other Comprehensive Income (AOCI) | ||||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
| 3 |
Beam Global
Condensed Consolidated Statement of Operations and Comprehensive Loss
(Unaudited, in thousands except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ( | ) | ||||||||||||||
| Income/Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other (expense) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ( | ) | ||||||||||||||
| Income/Loss before income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ||||||||||||||||
| Net Income/Loss | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net foreign currency translation adjustments | ||||||||||||||||
| Total Comprehensive Income/Loss | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net loss per share - basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net loss per share - diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
| 4 |
Beam Global
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited, in thousands)
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Stock | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ( | ) | ||||||||||||||||||||||
| Stock-based compensation to consultants | ||||||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||||||
| Sale of stock under Committed Equity Facility | ||||||||||||||||||||||||
| Net income (loss) | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ||||||||||||||||||||||||
| Settlement of earnout related to acquisition | ||||||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||||||
| Proceeds from issuance of common stock, pursuant to public offering | ||||||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||||||
| Sale of stock under Committed Equity Facility | ||||||||||||||||||||||||
| Net income (loss) | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ( | ) | ||||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||||||
| Expenses to maintain Committed Equity Facility | – | ( | ) | ( | ) | |||||||||||||||||||
| Net income (loss) | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Stock | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balance at December 31, 2023 | 14,398 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ( | ) | ||||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||||||
| Impact of foreign currency translation | – | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ( | ) | ||||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||||||
| Impact of foreign currency translation | – | ( | ) | ( | ) | |||||||||||||||||||
| Sale of stock under Committed Equity Facility | ||||||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ||||||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||||||
| Proceeds from issuance of common stock, pursuant to public offering | – | |||||||||||||||||||||||
| Stock option exercise and restricted stock unit vestings (cashless) | ( | ) | ( | ) | ||||||||||||||||||||
| Impact of foreign currency translation | – | |||||||||||||||||||||||
| Stock issued for acquisition and expenses | – | |||||||||||||||||||||||
| Net loss | – | |||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
| 5 |
Beam Global
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating Activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Provision on credit losses | ( | ) | ||||||
| Common stock issued for services | ||||||||
| Change in fair value of contingent consideration liabilities | ( | ) | ||||||
| Employee stock-based compensation | ||||||||
| Disposal of property and equipment | ||||||||
| Amortization of operating lease right of use asset | ||||||||
| Abandoned patent costs | ||||||||
| Stock Compensation expense for non-employees | ||||||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ( | ) | ( | ) | ||||
| Deposits | ( | ) | ||||||
| Increase (decrease) in: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Operating lease liability | ( | ) | ||||||
| Sales tax payable | ||||||||
| Deferred revenue | ( | ) | ||||||
| Other long term liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities: | ||||||||
| Acquisition, net of cash acquired | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Payment of Deferred Consideration | ( | ) | ||||||
| Funding of patent costs | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from sale of common stock under committed equity facility, net of offering costs | ||||||||
| Taxes paid related to net share settlement of equity awards | ( | ) | ||||||
| Proceeds from warrant exercises | ||||||||
| Borrowings of note payable | ||||||||
| Payments of equity offering costs | ( | ) | ||||||
| Proceeds from issuance of common stock, pursuant to public offering | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes | ( | ) | ||||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | |||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Fair value of common stock issued as consideration for business combination | $ | $ | ||||||
| Purchase of property and equipment by incurring debt | $ | $ | ||||||
| Purchase of property and equipment by incurring current liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | ||||||
| Issuance of stock for Committed Equity Line | $ | $ | ||||||
| Warrants issued for services to non-employee | $ | $ | ||||||
| Shares issued for services to non-employee | $ | $ | ||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements
| 6 |
BEAM GLOBAL
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Operations
References in this Report to “we,” “us,” “our,” the “Company” or “Beam” means Beam Global, a Nevada corporation, and its subsidiaries.
Beam is a sustainable technology innovation company based in San Diego, California; Broadview, Illinois; Belgrade and Kraljevo, Serbia. We develop, design, engineer, manufacture and sell high-quality, renewably energized infrastructure products for electric vehicle (“EV”) charging, energy security and disaster preparedness. We also manufacture highly energy-dense battery solutions in safe, compact and unique form-factors. Additionally, we manufacture street lighting, communications and energy infrastructure products. Beam’s products enable vital and highly valuable energy production in locations where it is either too expensive or too impactful to connect to the utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. Beam’s energy storage products provide high energy density in a safe, compact and bespoke form-factors, which we believe are ideal for the rapidly growing mobile and stationary equipment product market which often requires electrical energy without being connected to the electrical grid.
Beam’s products and proprietary technology solutions target the following markets:
| · | electric vehicle (EV) charging infrastructure; | |
| · | energy storage solutions; | |
| · | energy security and disaster preparedness; | |
| · | mobile and stationary equipment; | |
| · | transportation infrastructure products; and | |
| · | power electronics and telecommunications equipment |
Basis of Presentation
The interim unaudited condensed consolidated 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 months and nine months ending September 30, 2024 and 2023, and our financial position as of September 30, 2024, 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 consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023. The December 31, 2023 balance sheet is derived from those statements.
| 7 |
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 certain expected credit losses (CECL), 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.
Recent Accounting Pronouncements
In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements” (“ASU 2023-06”), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s disclosure update and simplification initiative issued in August 2018. The effective date for the amendments for each topic will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoptions prohibited.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 requiring enhanced segment disclosures. ASU 2023-07 requires disclosure of significant segment expenses regularly provided to the chief operating decision maker (“CODM”) included within segment operating profit or loss. Additionally, ASU 12 2023-07 requires a description of how the CODM utilizes segment operating profit or loss to assess segment performance. The requirements of ASU 2023-07 are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company's annual reporting requirements will be effective for the year ending 2024 and interim reporting requirements will be effective beginning with the first quarter of fiscal 2025. Early adoption is permitted, and retrospective application is required for all periods presented. The Company is in the process of analyzing the impact of ASU 2023-07 on its related Condensed Consolidated Financial Statements.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a company’s effective tax rate reconciliation and information on income taxes paid. This standard will be effective for Beam beginning with our annual financial statements for the fiscal year ending December 31, 2025. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on our consolidated 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 institutions that at times may exceed federally insured limits. The Company has not experienced any losses
in such accounts from inception through September 30, 2024. As of September 30, 2024, approximately $
| 8 |
Major Customers
The Company continually assesses
the financial strength of its customers. We are not aware of any material credit risks associated with our customers.
A summary of the allowance for credit losses for the nine months ending September 30, 2024 and December 31, 2023:
| Summary of allowance for credit losses | September 30, | December 31, | ||||||
| (Dollars in thousands) | 2024 | 2023 | ||||||
| Allowance for credit losses: | ||||||||
| Beginning of period | $ | $ | ||||||
| Net provision for credit losses | ( | ) | ||||||
| (Charge-offs)/recoveries, net | ( | ) | ||||||
| End of Period | $ | $ | ||||||
| Allowance for credit losses as a % of total Accounts Receivable | ||||||||
Fair Value Measurement
The Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and liabilities in the consolidated financial statements that are already required by generally accepted accounting principles to be measured at fair value. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market participant that holds the asset or owes the liability.
The Company utilizes market data or assumptions that market participants who are independent, knowledgeable, and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
| 9 |
The Company is able to classify fair value balances based on the observability of those inputs. The guidance establishes a formal fair value hierarchy based on the inputs used to measure fair value. The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to level 3 measurements, and accordingly, Level 1 measurement should be used whenever possible.
The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities or published net asset value for alternative investments with characteristics similar to a mutual fund.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs for the asset or liability.
The methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while management believes its valuation methods are appropriate, the fair value of certain financial instruments could result in a difference fair value measurement at the reporting date. There were no changes in the Company’s valuation methodologies from the prior year.
For purpose of this disclosure, the carrying amounts for financial assets and liabilities such as cash and cash equivalents, accounts receivable – trade, other prepaid expenses and current assets, accounts payable and other current liabilities, all approximate fair value due to their short-term nature as of September 30, 2024. The Company had Level 3 liabilities as of September 30, 2024. There were no transfers between levels during the reporting period.
| Level 1 | Level 2 | Level 3 | ||||||||||
| Contingent Consideration as of December 31, 2023 | $ | $ | $ | |||||||||
| Additions | ||||||||||||
| Change in fair value | ( | ) | ||||||||||
| Contingent Consideration as of September 30, 2024 | $ | $ | $ | |||||||||
Significant Accounting Policies
During the nine months ended September 30, 2024, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2023.
| 10 |
Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the periods presented using the treasury stock method for options, restricted stocks and warrants. Diluted net income (loss) per share is computed By giving effect to all potential dilutive common share equivalents outstanding for the period. For periods in which Beam has reported net losses, diluted loss per share is the same as basic loss per share, as the effects of common stock equivalents outstanding and shares issuable upon conversion of convertible debt instruments are antidilutive and, therefore, excluded from the calculation of diluted loss per share.
Options to purchase shares of common stock and warrants to purchase shares of common stock were outstanding at September 30, 2024. Options to purchase common shares and warrants to purchase shares of common stock were outstanding at September 30, 2023.
The following table presents the calculation of basic and diluted loss per share:
| Calculation of earnings (loss) per share | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Numerator for basic and diluted loss per share - net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Number of shares used in basic computation | ||||||||||||||||
| Denominator for diluted loss per share - weighted-average number of shares of common stock outstanding | ||||||||||||||||
| Loss per share | ||||||||||||||||
| Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Segments
The Company assesses its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. Management reviews financial results, manages the business and allocates resources on an aggregate basis. Therefore, financial results are reported in a single operating segment.
| 11 |
| 2. | LIQUIDITY |
The Company had net losses
of $ million (which includes $
In 2022, the Company entered
into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC under which the Company
issued shares for approximately $
The Company’s outstanding
warrants generated $
In March 2023, the Company entered into a supply chain line of credit agreement with OCI Group for up to $100 million to further support our working capital requirements. Subject to the terms of the agreement, OCI Group will make available to the Company funding based on amounts owed to the Company by its customers. To date, the Company has not borrowed against this line of credit.
Although the Company believes that it will become profitable in the next few years as our revenues grow, we improve our gross profit and we leverage our overhead costs, we expect to continue to incur losses for a period of time. If necessary, the Company may raise additional capital to finance its future operations through equity or debt financings. There is no guarantee that profitable operations will be achieved, or that additional capital or debt financing will be 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.
| 12 |
| 3. | BUSINESS COMBINATIONS |
Amiga DOO Kraljevo
On
October 20, 2023, the Company acquired Amiga DOO Kraljevo (“Amiga”), pursuant to a Share Sale and Purchase Agreement dated
October 6, 2023 (the “Purchase Agreement”) by and among the Company and the owners of Amiga (the “Sellers”). Pursuant
to the terms of the Purchase Agreement, the Company acquired all the equity stock of Amiga from the Sellers in exchange for cash and common
stock. With respect to the cash portion of the purchase price, the Company paid to the Sellers
The
Sellers are eligible to earn additional shares of the Company’s common stock if Amiga meets certain revenue milestones for the years
ended December 31, 2024 and 2025 (the “Earnout Consideration”). The Earnout Consideration that Sellers are eligible to receive
is equal to two times the amount of revenue of Amiga (“Amiga Net Revenue”) that is greater than specific revenue targets for
each of the years ended December 31, 2024 and 2025. The Earnout Consideration will be paid in the Company’s stock for each annual
target period and will be calculated based on the volume weighted average price of Beam’s common stock for the thirty trading days
prior to the end of the applicable measurement period. In no event and under no circumstances will the Company issue to the Sellers an
amount of the Company’s common stock that exceeds 19.99% of the total outstanding common stock of the Company immediately prior
to the closing. An estimate of the fair value of the contingent consideration has been recorded in the opening balance sheet. On
February 16, 2024, the Company and the Sellers entered into an amendment to the Purchase Agreement to remove the requirement that the
Sellers shall be providing services to Amiga as a condition to receive the Earnout Consideration. During the nine months ended
September 30, 2024, the Company recorded $
Amiga, located in Serbia, is engaged in the manufacture and distribution of steel structures with integrated electronics, such as streetlights, cell towers, and ski lift towers. The acquisition of Amiga is assisting in introducing our products to Europe, increasing and diversifying our revenues, enhancing our manufacturing and engineering capabilities, accelerating the development of BeamSpot™ (formerly named EV Standard™) and other products both in Europe and the US, adding new customer segments in both Europe and the US, and we believe, increasing barriers to entry for future competition, and advancing Beam’s position as a leader in the green economy.
The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. Goodwill represents the premium the Company paid over net fair value of tangible and intangible assets acquired.
On November 7, 2023, Amiga changed its name to Beam Europe LLC.
Telcom
On August 30, 2024, the Company
acquired Telcom d.o.o Beograd (“Telcom”), pursuant to a Share Sale and Purchase Agreement dated as of August 30, 2024 (the
“Agreement”) with the owners (the “Sellers”) of Telcom. Telcom is a business located in Serbia and engaged in
the manufacturing of telecommunications equipment. Beam acquired all of the equity stock of Telcom from the Sellers in exchange for cash
and Beam common stock. The total purchase price was subject to adjustment based on the amount of cash held by Telcom at closing. Based
on Telcom’s cash balance at closing equal to approximately EUR
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In
addition to the above payments, the Sellers are eligible to earn up to EUR
The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. Goodwill represents the premium the Company paid over net fair value of tangible and intangible assets acquired.
The valuation of the Earnout Consideration was performed using a discounted cash flow analysis to determine the fair value of the contingent consideration, which includes estimates and assumptions such as forecasted revenues of Telcom, discount rates, and the milestone settlement value. As such valuation includes the use of unobservable inputs, it is considered to be a Level 3 measurement. The fair value of the Earnout Consideration will be reassessed on a quarterly basis with the change recorded to operating expenses. Change in the fair value of the Earnout Consideration during the nine months ended September 30, 2024 is as follows (in thousands):
| Balance as of December 31, 2023 | $ | |||
| Acquisition of Telcom | ||||
| Balance as of September 30, 2024 | $ | |||
The following table summarizes the estimated fair value allocation of consideration exchanged for the estimated fair value of tangible assets acquired and liabilities assumed at the acquisition date. The estimated fair value for working capital is generally equivalent to the net book value of the acquired assets and liabilities on the acquisition date. Fair value assigned to property, plant and equipment is based on real estate appraisals, market value comparisons, or acquired net book value of recently acquired assets. The valuation of the contingent consideration is based on a discounted cash flow analysis using the Company’s forecasted results for the operations for the two years subject to revenue earn-out targets.
Consideration is comprised of the following (in thousands):
| Cash | $ | |||
| Common Stock | ||||
| Earnout Consideration | ||||
| Total Consideration | $ | |||
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The following table shows the allocation of consideration to assets and liabilities at fair value (in thousands):
| Assets Acquired | ||||
| Cash and cash equivalents | $ | |||
| Accounts Receivable | ||||
| Inventory | ||||
| Prepaid expenses | ||||
| Property, plant and equipment | ||||
| Goodwill | ||||
| Total assets acquired | $ | |||
| Liabilities Assumed | ||||
| Accounts payable | $ | |||
| Accrued Expenses | ||||
| Other liabilities | ||||
| Total liabilities assumed | $ | |||
| Net assets acquired | $ | |||
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.
Pro Forma Unaudited Financial Information
The unaudited pro forma financial information summarizes the combined results of operations of Beam Global, Amiga and Telcom as if the companies had been combined as of the beginning of the nine months ended September 30, 2024 and 2023 (in thousands):
| September 30, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Net Income (Loss) | ( | ) | ( | ) | ||||
| Net Revenues | $ | $ | ||||||
The pro forma financial information is presented for information purposes only and may not be indicative of the results of operations that would have been achieved had the acquisition been completed at the beginning of the nine months ended September 30, 2024 and 2023. In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition. The unaudited pro forma financial information includes adjustments to reflect the incremental amortization expense of the identifiable intangible assets and transaction costs.
The statement of operations,
in the table above, for the nine months ended September 30, 2024 includes revenues of $
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| 4. | INVENTORY |
Inventory consists of the following (in thousands):
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Total inventory | $ | $ | ||||||
| 5. | PROPERTY AND EQUIPMENT |
Property and equipment consist of the following (in thousands):
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Office furniture and equipment | $ | $ | ||||||
| Computer equipment and software | ||||||||
| Land, buildings and leasehold improvements | ||||||||
| Autos | ||||||||
| Machinery and equipment | ||||||||
| Total property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, net | $ | $ | ||||||
Depreciation expense during
the three months and nine months ended September 30, 2024 and September 30, 2023 was $
| 6. | INTANGIBLE ASSETS |
The intangible assets consist of the following (in thousands):
| December 31, 2023 | ||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted-average Amortization Period (yrs) | |||||||||||
| Developed technology | $ | $ | ( | ) | $ | |||||||||
| Trade name | ( | ) | ||||||||||||
| Customer relationships | ( | ) | ||||||||||||
| Backlog | ( | ) | ||||||||||||
| Patents | ( | ) | ||||||||||||
| Intangible assets | $ | $ | ( | ) | $ | |||||||||
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| September 30, 2024 | ||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted-average Amortization Period (yrs) | |||||||||||
| Developed technology | $ | $ | ( | ) | $ | |||||||||
| Trade name | ( | ) | ||||||||||||
| Customer relationships | ( | ) | ||||||||||||
| Backlog | ( | ) | ||||||||||||
| Patents | ( | ) | ||||||||||||
| Intangible assets | $ | $ | ( | ) | $ | |||||||||
Amortization expense during
the three and nine months ended September 30, 2024 and September 30, 2023 was $
| 7. | ACCRUED EXPENSES |
The major components of accrued expenses are summarized as follows (in thousands):
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Accrued Expenses: | ||||||||
| Accrued vacation | $ | $ | ||||||
| Accrued salaries and bonus | ||||||||
| Vendor accruals | ||||||||
| Accrued warranty | ||||||||
| Other accrued expense | ||||||||
| Total accrued expenses | $ | $ | ||||||
| Other Long-Term Liabilities: | ||||||||
| Long-term deferred tax liability | $ | $ | ||||||
| Acquired long-term liability | ||||||||
| Total long-term liabilities | $ | $ | ||||||
Acquired long-term liability
of $
| 8. | NOTE PAYABLE |
In May 2023, the Company purchased
two new trucks and financed the purchase through an auto loan. The loan has a term of 60 months, requires monthly payments of approximately
$
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| 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 September 30, 2024, after consulting with legal counsel, management believes 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.
| 10. | INCOME TAXES |
There was no Federal income tax expense for the nine months ended September 30, 2024 or 2023 due to the Company’s net losses. Income tax expense represents the 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 September 30, 2024 and no benefit has been provided for the quarter-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.
| 11. | STOCKHOLDERS’ EQUITY |
Committed Equity Facility
In
2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II,
LLC under which the Company issued shares for approximately $
The
Company issued shares under the Purchase Agreement for $
Stock Options
Option activity for the nine months ended September 30, 2024 is as follows:
| Weighted | ||||||||
| Number of | Average | |||||||
| Options | Exercise | |||||||
| Outstanding | Price | |||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding at September 30, 2024 | $ | |||||||
The stock options terminate ten (10) years from the date of grant or upon termination of employment.
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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 paid during the life of the options granted during the nine months ended September 30, 2024 and 2023:
| Nine months ended September 30, 2024 |
Nine months ended September 30, 2023 | |||
| Expected volatility | % - % | % - % | ||
| Expected term | - Years | - Years | ||
| Risk-free interest rate | % - % | % - % | ||
| Weighted-average FV | $ |
$ |
The Company’s stock option compensation expense was $ million and $ million for the three and nine months ended September 30, 2024, and $ million and $ million for the three and nine months ended September 30, 2023. There was $ million of total unrecognized compensation costs related to outstanding stock options at September 30, 2024 which will be recognized over .0 years. Total intrinsic value of options outstanding and options exercisable were $ thousand and $ million, respectively, as of September 30, 2024. The number of shares of common stock underlying stock options vested and unvested as of September 30, 2024 were and , respectively.
Restricted Stock Units
In November 2022, the Company granted restricted stock units (“RSUs”) and up to performance stock units (“PSU”) to its Chief Executive Officer (“CEO”). For the RSUs, 50% vested upon the grant date, 25% vested on February 1, 2024 and 25% will vest on February 1, 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-year period ending December 31, 2024.
Stock compensation expense related to the RSUs and PSUs was $ million and $ million during the three and nine months ended September 30, 2024, with $ million in unrecognized stock compensation expense remaining to be recognized over months as of September 30, 2024.
Restricted Stock Awards
The Company issues restricted stock to its non-employee members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters.
The Company also previously issued restricted stock awards 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 nine months ended September 30, 2024 is as follows:
Nonvested Shares | Weighted- Average Grant- Date Fair Value | |||||||
| Nonvested at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Nonvested at September 30, 2024 | $ |
| 19 |
Stock compensation expense related to restricted stock awards was $ million and $ million during each of the nine months ended September 30, 2024 and 2023 respectively.
As of September 30, 2024,
there were unvested shares of common stock representing $
Warrants
In 2023, the Company
issued warrants to purchase up to
shares of the Company’s common stock at a price per share equal to $17.00 to a consultant for services to be provided over a
five-year period. The warrants were 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 $
A summary of activity of warrants outstanding for the nine months ended September 30, 2024 is as follows:
Number of Warrants | Weighted Average Exercise Price | |||||||
| Exercisable at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Expired | ( | ) | ||||||
| Exercised | ( | ) | ||||||
| Outstanding at September 30, 2024 | $ | |||||||
| Exercisable at September 30, 2024 | $ | |||||||
Exercisable warrants as of
September 30, 2024 have a weighted average remaining contractual life of years. The intrinsic value of the exercisable shares of the
warrants at September 30, 2024 was $. Warrants to purchase
| 12. | REVENUES |
For each of the identified periods, revenues are categorized as follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Maintenance fees | ||||||||||||||||
| Professional services | ||||||||||||||||
| Shipping and handling | ||||||||||||||||
| Discounts and allowances | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
Percentages of our revenues
derived from customers located in California during the three months ended September 30, 2024 and 2023 were
| 20 |
At September 30, 2024 and
December 31, 2023, deferred revenue was $
| 13. | SUBSEQUENT EVENTS |
Management has evaluated events that have occurred subsequent to the date of these condensed consolidated financial statements and has determined that no such reportable subsequent events exist through date of filing. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this Report to “we,” “us,” “our,” the “Company” or “Beam” means Beam Global, a Nevada corporation, and its subsidiaries.
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 and Section 21E of the Securities Exchange Act of 1934, as 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) | 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; | |
| (f) | litigation with or legal claims and allegations by outside parties; | |
| (g) | insufficient revenues to cover operating costs, resulting in persistent losses; | |
| (h) | rapid and significant changes to costs of raw materials from government tariffs or other market factors; | |
| (i) | failure to realize the anticipated benefits of any acquisition or difficulties in integrating any acquisition with the Company and its operations; | |
| (j) | the 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 | |
| (k) | the factors set forth in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and 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, 2023 (sometimes referred to as the “2023 Form 10-K”) that we previously filed with the Securities and Exchange Commission, including without limitation the “Risk Factors” section in the 2023 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.
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Overview
Beam Global develops, manufactures, and sells high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy storage, energy security, smart city infrastructure and disaster preparedness.
The Company has multiple product lines that incorporate our proprietary technology. Our off-grid EV charging and energy security products produce a unique alternative to 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. Versions of our charging infrastructure products are modified to support EVs, eMotorcycles, eBikes, desalination and auxiliary power. Our Smart Cities products combine structural elements with built in electronics, renewable energy generation and IoT capabilities. These products are scalable and attractively designed and include:
| - | EV ARC™ Electric Vehicle Autonomous Renewable Charger – a patented, rapidly deployed, infrastructure product that uses integrated solar power and battery storage to provide a mounting asset and a source of power for factory installed electric vehicle charging stations of any brand. The electronics are elevated to the underside of the sun-tracking solar array making the unit flood-proof up to nine and a half feet and allowing adequate space to park a vehicle on the engineered ballast and traction pad which gives the product stability and a certified wind rating of 160 miles per hour. | |
| - | Solar Tree® DCFC – Patented off-grid, renewably energized and rapidly deployed, single-column mounted smart generation and energy storage system with the capability to provide a 150kW DC fast charge to one or more electric vehicles or larger vehicles. | |
| - | EV ARC™ DCFC – DC Fast Charging system for charging EVs comprised of four interconnected EV ARC™ systems and a 24kW DC fast charger. | |
| - | BeamSpot™ – patent issued on December 31, 2019 and currently.in the process of initial installation. A streetlight, EV charging and emergency power product which uses an existing streetlight’s foundation and a combination of solar, wind, grid connection and onboard energy storage to provide curbside charging and emergency power. | |
| - | BeamBike™ - rapidly deployed, construction free, solar-powered charging system based on the patented EV ARC™ platform which generates and stores its own clean electricity, accessed through twelve integrated, weatherized 120 V outlets supporting any eBike charger. Supports 12 eBikes and is available with or without bundled eBike packages. | |
| - | BeamPatrol™ - Rapidly deployed and easily transported, the BeamPatrol™ station allows law enforcement and safety personnel to charge and quickly access nimble, quiet and responsive motorcycles without the need for any additional infrastructure or fuel. This innovative solution is ideal for law enforcement, customs and border patrol, the military, park services, air and seaport operations and any situation where the ability to rapidly gain access to an environment, without alerting targets of the operation, is required. BeamPatrol™ and the motorcycles it supports generate low to no maintenance or fuel costs and provide a highly reliable mobility solution while assisting in the carbon reduction efforts of the agencies that use the product. Available with, or without bundled eMotorcyles. | |
| - | BeamWell™ - based on the patented EV ARC™ system, is a self-sufficient, self-contained operational system for use in war zones and remote or disaster areas where only salt, brackish or dirty water is available because a reliable clean water supply is not available or has been interrupted. The BeamWell™ system provides three essential services to regions in crisis: it turns seawater into fresh water, which is then stored in an integrated 3000-liter tank that is replenished daily; it provides a source of electricity which can be used for medical or communications devices as well as cooking and lighting; and it charges four integrated and bundled Benzina Zero electric mopeds for the rapid distribution of food, water, medications or other vital resources, to those in need. | |
| - | Smart Cities Infrastructure products – Street lighting, street furniture, communications infrastructure products, energy infrastructure products, with electronics integration including renewable energy sources, battery storage, sensors and IoT integration. | |
| - | UAV ARC™ - patent issued on November 24, 2020 and currently under development. An off-grid, renewably energized and rapidly deployed product and network used to charge aerial drone (UAV) fleets. |
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We believe that there is a clear need for a rapidly deployable and highly scalable EV charging infrastructure, and that our products fulfill that requirement. Unlike grid-tied installations which require general and electrical contractors, engineers, consultants, digging trenches, permitting, pouring concrete, wiring, and ongoing utility bills, the EV ARC™ system can be deployed in minutes, not months, and is powered by renewable energy so there is no utility bill. We are agnostic as to the EV charging service equipment or provider and integrate the best of breed solutions based upon our customers’ requirements. For example, our EV ARC™ and Solar Tree® products have been deployed with 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. Our products replace the infrastructure required to support EV chargers, not the chargers themselves. We do not sell EV charging, rather we sell products which enable it.
We believe our chief differentiators for our electric vehicle charging and energy security infrastructure products are:
| · | our patented, renewable energy products 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 marketable inventions by integrating our proprietary technology and parts, and other commonly available engineered components, which create a further barrier to entry for our competition; | |
| · | our international operations in two of the three largest automotive markets in the world today. |
Beam AllCell™ designs, manufactures and sells custom, high-quality, bespoke lithium-ion energy storage solutions. Our world-class battery engineering team rigorously creates unique battery formats and shapes to the highest standards, delivering highly flexible solutions that maximize power in compact spaces. Our patented PCC™ phase change material, manufactured in-house, provides passive thermal management solution and critical safety features against thermal runaway. Our proprietary Smart BMS, designed by the Company, further differentiates our products, ensuring superior customer satisfaction. Our battery is ideal for applications requiring high energy density, high power, and safe, space efficient enclosures. Our batteries power drones, submersibles, medical devices, recreational products and micro-mobility solutions. The Company is integrating these advanced batteries and technologies into our new product designs under development.
On October 20, 2023, Beam acquired Amiga DOO Kraljevo (“Amiga” or “Beam Europe”), a business located in Serbia and engaged in the manufacture and distribution of steel structures with electronic integration, including (i) infrastructure products for public lighting; (ii) infrastructure products for mobile telephone, networks and transmission lines; (iii) infrastructure products for tram, trolleybus, and railways; (iv) infrastructure products for contact networks, masts, portals and semi-portals for road and railway signaling; (v) large steel lattice structures for specific purposes (e.g., stadiums, factories, power plants, etc.); and (vi) distribution and command electrical cabinets. Amiga has engineering, product development and manufacturing capabilities which are well suited to manufacture and sell Beam’s current and future products in the European market. As a large European manufacturer of streetlights, Amiga is well positioned to assist in the development of the EV-Standard™ for both the European and US markets.
On August 30, 2024, Beam acquired Telcom d.o.o. Beograd (“Telcom”), a business located in Serbia and engaged in the manufacturing of power electronics and telecommunications equipment. Telcom engineers and manufacturers specialized power electronics includer invertors, charge controllers, power supplies and LED lighting. Telcom has electrical engineering, product development and manufacturing capabilities which Beam believes are ideally suited to improve the Company’s current and future products for the global market. Telcom has a well-respected and highly talented team of electrical engineers, focused on power electronics and the integration of renewables and energy storage.
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Overall Business Outlook
Our revenues for the first nine months of 2024 were $40.9 million, a 14% decrease from $47.3 million for the first nine months in 2023. We believe that the decrease in revenue is a result of order timing, uncertainty in the U.S. government’s zero emission vehicle strategy related to the presidential election and evolving certification requirements for energy storage systems requiring updates to our EV ARC™ products which we believe will be completed in the first quarter of 2025. These matters have particularly impacted our larger federal customers and we do not believe that they signify any fundamental reduction in demand for our products. Our pipeline of prospective customer orders has increased during the same period, although we cannot be sure of when, or if, those prospective orders will turn into actual sales. As we have continued investment in our sales resources, in September of 2024, we hired a new Vice President of Sales in the U.S. and a new Director of Channel Partnerships in Europe to drive growth in commercial and government sectors. The Company believes there continues to be a high level of support for funding EV charging infrastructure from both commercial and government entities, including a number of federal grants available under the Inflation Reduction Act. In addition, certain of our commercial customers may benefit from the Federal Solar Investment Tax Credit and accelerated depreciation as allowed under Section 179 of the IRS code which, we believe, provides a competitive advantage for our products over traditionally installed EV charging infrastructure which is not eligible for these incentives. Given these available incentives, we have invested in a federal lobbyist, a federal business development resource and a government relations employee, who have helped to identify opportunities and increase awareness of our product and outreach with federal agencies. In addition, the General Services Administration (GSA) awarded Beam Global a federal blanket purchase agreement in April 2022 which provides federal agencies a streamlined procurement process for procuring EV ARC™ systems. In the nine months ended September 30, 2024, we recorded revenues of $28.4 million for federal customers, compared to $39.9 million for the same period in 2023. We expect to see uneven orders from quarter to quarter, especially with our federal customers, but over time we expect our revenues to grow. Our commercial, non-government, revenues increased as a percentage of our revenues from 11% to 31% from the first nine months of 2023 to the first nine months of 2024. Our geographic expansion into Europe and our additional business development activities in the Middle East and Africa are, we believe, also providing opportunities for growth which are not dependent on, or impacted by, shifts in US government and zero emission vehicle strategies. The new products we have brought to market offer values which are also not dependent upon US federal government investment.
We expect the electric vehicle market to continue to experience significant growth globally over the next decade, which will in turn increase demand for additional EV charging infrastructure. We believe we are positioned to benefit significantly from this growth.
We believe the Company’s acquisition of All Cell, a battery technology company, will increase our new customer opportunities. We now have the ability to value engineer bespoke battery solutions for our products. Beam All-Cell™ 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 our Beam All-Cell™ highly differentiated products. With the continued growth of untethered electrification, we believe there is an opportunity for increased demand in these markets and others.
In October 2023, the Company acquired Amiga (now renamed Beam Europe), an established manufacturer of specialized steel structures and equipment, producing streetlights, communications and energy infrastructure whose manufacturing, engineering and sales teams service municipalities, states and commercial customers in 16 nations. The addition of Amiga has expanded Beam’s presence into the European, Middle Eastern and African markets and increased our production, engineering, sales and product development expertise. The EU has mandated a transition to zero emission vehicles by 2035 and they are heavily focused on green and sustainable energy. An increase in electric vehicles adoptions will increase the demand for charging infrastructure. We believe that our sustainably energized EV ARCTM and BeamSpot™ products can play a major role in the provision of EV charging infrastructure in Europe.
On August 30, 2024, Beam acquired Telcom d.o.o. Beograd (“Telcom”), a business located in Serbia and engaged in the manufacturing of power electronics and telecommunications equipment. Telcom engineers and manufacturers specialized in power electronics including invertors, charge controllers, power supplies and LED lighting. Telcom has electrical engineering, product development and manufacturing capabilities which Beam believes are ideally suited to improve the Company’s current and future products for the global market. Telcom has a well-respected and highly talented team of electrical engineers, focused on power electronics and the integration of renewables and energy storage. Existing Telcom customers include the region’s largest telecommunications company as well as other corporate entities which we believe provide further opportunities for cross selling the other products in our portfolio.
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Our energy security business is connected with the deployment of our EV charging and our Smart Cities infrastructure products and serves as an additional benefit and value proposition for 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. The state-of-the-art storage batteries installed on our EV charging 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.
We are in development on our newest patented products which include- BeamSpot™, UAV ARC™ and others, which we expect will continue to expand our product offerings leveraging the same proprietary technology as our current products and allow us to expand into new markets. Amiga is one of Europe’s largest manufacturers of streetlights and has a team of qualified structural, electrical and civil engineers who are experts in the field of development and deployment of street lighting. They are working with our engineers in San Diego and Broadview to continually improve the engineering and development of our new BeamSpot™ product. We believe that BeamSpot™ may become our largest selling product when available for sale. BeamSpot™ is currently in the process of being installed and we received our first order for that product within two months of it being launched.
Our gross margin improved as a percentage of sales, year over year, and was 10.7% in Q3 2024, up 9.0% from the gross margin reported in Q3 2023. Additionally, our cost of goods sold included non-cash intellectual property amortization of $0.7 million for the first nine months of 2024 and $0.8 million in 2023, related to the acquisition of All Cell in 2022. Excluding this non-cash expense results in a gross margin of 12.3% for the three months ended September 30, 2024, up from 2.8% for the same period ending September 30, 2023. We implemented engineering design changes to our EV ARCTM in Q4 2023 that resulted in cost reductions to our bill of materials. Our gross margin improvements were achieved in spite of ongoing inflation and the high costs of many of our components, including steel, that began during the Covid pandemic. We expect to see our costs of goods sold continue to decrease over time. We are implementing lean manufacturing process improvements and making engineering changes to our products which we expect to result in cost reductions. We have observed that we are able to manufacture certain elements of our products in Serbia and ship them to the U.S. less expensively than we can manufacture them in the U.S.; largely because we are better equipped in Serbia and as a result can self-perform certain processes which we outsource in the U.S. We anticipate further reductions in direct costs as a result of having our Serbian operations support our U.S. manufacturing. 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, and reducing costs, 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 we believe may further reduce our costs, increase our gross margins, and significantly increase the potential output from our factory. We expect that the receipt of orders may be inconsistent quarter over quarter, however, we expect that in the long term, our revenues will grow as we expand our product offerings and geographic reach and because we expect to see a significant increase in the demand for electric vehicle charging infrastructure. As such we do not anticipate significant pricing pressure on our products. The increase in demand for electric vehicle charging infrastructure and, we believe, over the long term, our revenues, combined with the cost cutting measures described above, lead us to believe that we will continue to see improvement in our gross margins in the future. Beam Europe has the capability to perform several activities which we outsource in the US. We believe that in combination with a generally less expensive operating environment in Serbia, we will be able to produce our products in Europe less expensively than in the US, even as we continue to reduce our costs in the US.
Critical Accounting Estimates
The financial statements and related disclosures were prepared in accordance with U.S. generally accepted accounting principles which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances, and we continually evaluate our assumptions and modify as needed. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected. There have been no changes since year end, refer back to the Company’s Form 10-K for December 31, 2023.
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Results of Operations
Comparison of Results of Operations for the Three Months Ended September 30, 2024 and 2023
Revenues. For the quarter ended September 30, 2024, our revenues, though they were the second highest third quarter revenues in our history, decreased 30% to $11.5 million compared to $16.5 million for the same period in 2023. Revenues to federal customers decreased by $7.5 million in Q2 2024 compared to the quarter ended September 30, 2023. During the first three months of 2024, revenues from California represented 21% of total revenues. We recorded revenues of $3.5 million as a result of our acquisition of Amiga and $67 thousand as a result of our acquisition of Telcom, demonstrating the positive contribution of our geographic expansions. Revenues derived from non-government commercial entities increased by 80% for the three months from 2023 to 2024 and were 11% of total revenues. The receipt of orders may continue to be uneven due to the timing of customer approvals or budget cycles, however, we believe that the diversification of our product offerings combined with our geographic expansions, recent hires and as EV adoption increases, our business will be less impacted by specific variations in order timing.
Gross Profit. For the quarter ended September 30, 2024, our gross profit was $1.2 million, or 10.7% of sales, compared to a gross profit of $0.8 million or 1.7% of sales for the same period in 2023. The margin improved by 9 percentage points, primarily because we have implemented cost improvements in late 2023 as a result of design changes to the EV ARCTM as well as operational improvements and positive margins generated from the acquisition of Amiga. Additionally, 48.6% of ARC sales reflected the price increase implemented in 2024. Our gross profits included a negative impact of $0.8 million for non-cash depreciation and intangible amortization. Our gross margin net of non-cash items was 17.6%. We began to see some improvements in the reduction of material costs in late 2023, which we believe should continue to improve. Our engineering and operations teams continue to identify further cost reductions and efficiencies which, along with support from our Serbian facilities, we believe will improve our gross margins in future quarters.
Operating Expenses. Total operating expenses were a credit of $50 thousand, or (0.4%) of revenues, for the quarter ended September 30, 2024, compared to $4.0 million, or 24% of revenues, for the same quarter in the prior year. The $4.1 million decrease is mostly attributable to $6.1 million related to the non-cash change in fair value of contingent consideration for the Amiga acquisition, offset by non-cash warrants amortization increase of $0.2 million and stock compensation increase of $0.2 million, resulting in $1.7 million increase in operating expenses quarter over quarter mainly related to $1.2 million for operating expenses for Beam Europe, $0.3 million in customer service accommodation costs, $0.1 million related to facility expansion and $0.1 million mainly for consulting for government relations and engineering.
Comparison of Results of Operations for the Nine Months Ended September 30, 2024 and 2023
Revenues. For the nine months ending September 30, 2024 our revenues, while they were the second highest nine month revenues in our history and higher than any full year barring 2023, decreased 14% to $41.0 million compared to $47.3 million for the same period in 2023. Revenues to federal customers decreased by $11.5 million in 2024. During the first nine months of 2024, revenues from California represented 25% of total revenues. Revenues were diverse across federal, state and local governments, as well as enterprise and education sector customers. International customers comprised 20% of the revenues through September 30, 2024, and were primarily from Beam Europe. Revenues derived from non-government commercial entities increased by 136% for the nine months from 2023 to 2024 and were 30.5% of total revenues in 2024. For the nine months ended September 30, 2024, the Company’s sales to federal, state and local governments represented 69% of revenues. We continue to invest in sales employees, diversifying our product portfolio and expanding our geographic footprint to reduce our reliance on single large orders of our EV ARC™ product by federal agencies, although we believe that that opportunity still exists. 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 and our new and existing products are brought to larger international audiences, our business will be less impacted by specific variations in order timing.
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Gross Profit. For the nine months ended September 30, 2024, our gross profit was $5.1 million, or 12% of sales, compared to a gross profit of $0.8 million, or 2% of sales in the same period of 2023. The margin improved by 11 percentage points, compared to prior year. This is primarily a result of cost improvements developed during 2023 which are now being recognized and the positive margins we are generating from the acquisition of Amiga. Our gross profits were negatively impacted by $2.8 million for non-cash depreciation and intangible amortization. Our gross margin net of non-cash items was 18.3% in 2024 and 3.1% in 2023. We began to see some improvements on material pricing in 2023, which has continued to improve over time. We continue to make engineering changes and work with suppliers to improve our costs which, along with support from our Serbian facilities, we believe will continue to improve our gross profit over time.
Operating Expenses. Total operating expenses were $11.6 million, or 28% of revenues, for the nine months ended September 30, 2024, compared to $11.9 million, or 25% of revenues, for the same period in the prior year. When you remove the $4.5 million the non-cash decrease in fair value of contingent consideration for the Amiga acquisition in 2024 and $0.3 million increase in fair value of contingent consideration for the All Cell acquisition in 2023, the net change in fair value contingent consideration is $4.3 million offset by non-cash increases in warrants amortization expense $0.3 million, stock compensation $0.3 million, bad debt allowance $0.4 million resulting in $3.3 million increase in operating expenses. The increase is mainly related to $2.1 million for operating expenses for Beam Europe, $0.4 million for facility expansion, $0.3 million commissions due to earned at time of customer payment, $0.3 million in customer accommodation service costs and $0.2 million related to acquisition costs.
Liquidity and Capital Resources
At September 30, 2024, we had cash of $4.8 million, compared to cash of $10.4 million at December 31, 2023. We have historically met our cash needs through a combination of debt and equity financing. Our cash requirements are generally for operating activities.
Management believes the Company’s present cash flows will enable it to meet its obligations for twelve months from the date of these financial statements. Management will continue to assess its operational needs and seek additional financing as needed to fund its operations.
Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the table below:
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash provided by (used in): | ||||||||
| Net cash used in provided by operating activities | $ | (3,052 | ) | $ | (13,768 | ) | ||
| Net cash used in investing activities | $ | (3,658 | ) | $ | (881 | ) | ||
| Net cash provided by financing activities | $ | 1,218 | $ | 27,726 | ||||
For the nine months ended September 30, 2024, our cash used in operating activities was $3.1 million compared to cash used of $13.8 million for the nine months ended September 30, 2023. Net loss of $6.7 million for the nine months ended September 30, 2024 was decreased by ($1.2) million of non-cash expense items that included depreciation and amortization of $2.8 million, and employee stock-based compensation expense of $2.0 million offset by decreases of ($4.3) million for a change in fair value of contingent consideration liabilities and $0.1 million provision on credit losses. Cash used in operations included a $5.0 million decrease in accounts receivable as well as a $1.7 million decrease in accounts payable primarily for inventory, $0.6 million decrease in operating lease liability and $0.5 million decrease in long term liabilities offset by $0.4 million increase in inventory, $0.3 million increase in deferred revenue, and $0.2 million increase in accrued expenses.
For the nine months ended September 30, 2023, our cash used in operating activities was $13.8 million compared to $15.7 million for the nine months ended September 30, 2022. Net loss of $11.0 million for the nine months ended September 30, 2023 was increased by $3.2 million of non-cash expense items that included depreciation and amortization of $1.1 million, common stock issued for services for director compensation of $0.3 million, employee stock-based compensation expense of $1.3 million, change in the fair value of contingent consideration liabilities of $0.3 million and $0.3 million for stock compensation for non-employees. Further, cash used in operations included a $10.5 million increase in accounts receivable due to the increase in revenues and the timing of customer payments, a $1.1 million increase in inventory and $0.6 million decrease in deferred revenue for customer deposits. Cash generated from operations included a $4.3 million increase in accounts payable primarily for inventory, $1.4 million increase in accrued expenses, and $0.5 million decrease in prepaid expenses and other current assets.
Cash used in investing activities in the nine months ended September 30, 2024 included $2.7 million reduction of deferred consideration for a cash payment for the Amiga acquisition, $0.5 million used for the Telcom acquisition and $0.4 million for the purchase of equipment compared to $0.8 million purchased in the same period in the prior year, primarily transportation equipment, a sleeving machine and an automated welder used in our battery manufacturing and $0.1 million for patent costs.
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For the nine months ended September 30, 2024, cash generated by our financing activities included $0.8 million for the exercise of warrants and $0.5 million in proceeds from public offering issuance of common stock compared to $25.4 million in proceeds from the public offering issuance of common stock, net of offering expenses, $2.1 million for shares sold through the Company’s equity facility, $0.2 million for repayment of note payable and $0.1 million from the exercise of warrants for the same period in the prior year.
Current assets were $31.1 million on September 30, 2024, a decrease of $9.6 million at December 31, 2023, primarily due to decreases of $4.6 million in accounts receivable, $5.5 million in cash, $0.3 million in prepaid expenses and other current assets, offset by an increase of $0.8 million in inventory, $0.8 million in operating lease costs for Right of Use assets and $0.8 million in Goodwill related to the Telcom acquisition. Current liabilities decreased to $13.3 million at September 30, 2024 from $16.9 million at December 31, 2023, primarily due to a $2.7 million decrease in the fair value of contingent consideration liabilities and $1.4 million decrease in accounts payable offset by $0.2 million in operating lease liabilities and. As a result, our working capital decreased to $17.9 million at September 30, 2024 compared to $23.8 million at December 31, 2023.
The Company has been focused on product development, geographic expansion and on marketing and sales efforts to increase our revenues. Revenues increased annually by 45% from 2020 to 2021, 144% from 2021 to 2022, and 206% from 2022 to 2023 demonstrating that this investment has been successful. Improvements to gross profitability have been made despite the recent inflationary period. As revenues increase in the future, we expect to continue to see our fixed overhead costs spread over more units, which will reduce the cost per unit. Our engineering and operations teams have made several design changes and process improvements in our product development and manufacturing operations which have helped to increase labor efficiency and reduce material costs. In addition, the Company increased pricing in Q3 of 2023 for the first time to cover some of the inflationary cost increases, which we are beginning to benefit from as new orders are received and are shipped. Our Serbian operations are also able to contribute to further cost reductions to produce our products both in Europe and the U.S.
On March 22, 2023, the Company entered into that certain Supply Chain Line of Credit with OCI Limited (“OCI”), whereby OCI may provide a supply chain line of credit in the amount of up to $100 million based on the amounts of approved accounts receivable of the Company (the “Credit Facility”). In order to request a drawdown on the Credit Facility, the Company is required to submit a transaction request to OCI which sets forth the terms of the applicable account receivables, including but not limited to the name of the party responsible for the applicable account receivables (the “Obligor”), the terms of repayment and the amount of such receivables. The Company has no obligation to submit a drawdown request and OCI is not obligated to accept any drawdown request from the Company. In the event OCI accepts a drawdown request of the Company and upon satisfaction of certain conditions required by OCI to issue the drawdown, OCI will disburse funds to the Company for such drawdown in an amount equal to the full value of the applicable account receivables assigned to OCI minus any transaction expenses incurred by OCI and the full amount of interest to be incurred for such receivables over the term of the drawdown. The Company will pay interest on any drawdown at the Secured Overnight Financing Rate +300 basis points. Upon the disbursement of funds to the Company for a drawdown, the Company will assign all rights to such account receivables of the Obligor to OCI. The Company will act as a collection agent on any account receivable assigned to OCI and agrees to establish a designated bank account for the purpose of collecting payment on any applicable account receivables that are assigned to OCI. In the event (i) the Company is in material breach of the Credit Facility, (ii) the Company or the Obligor is insolvent or is subject to reorganization or liquidation, or (iii) any dispute related to an agreement with an Obligor or non-payment by an Obligor, OCI has the right to exercise any contractual rights it may have against Obligor, increase the interest rate to the agreed upon default interest rate, and demand immediate repayment by the Company for the outstanding amounts owed under such account receivables. The Company has also agreed to indemnify OCI for any losses incurred by OCI in connection with the Credit Facility. Either party may terminate the Credit Facility at any time by providing fifteen (15) days prior written notice to the other party. To date, Beam Global has not drawn on this line of credit.
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. In addition, we could pursue other equity or debt financing. 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. There is no guarantee that profitable operations will be achieved, or that additional capital or debt financing will be 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.
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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 internal controls over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. All internal control systems, 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 effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
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 our evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2024 due to the material weaknesses in our internal controls over financial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, the consolidated financial statements for the periods covered by and included in this Quarterly Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.
The following material weaknesses existed as of December 31, 2023:
Material weaknesses:
| · | During Q4 2023, the Company implemented NetSuite ERP system to automate operations and accounting for the San Diego and Broadview locations. We did not implement program change management and user access controls to ensure that: |
| a. | IT program and data changes affecting the Company’s financial IT applications & underlying accounting records are identified, tested, authorized, and implemented appropriately, and | |
| b. | Appropriate segregation of duties that would adequately restrict user access and ensure adequate review of transactions. |
| · | Because we are a small company, many employees have multiple job responsibilities, and during the implementation in Q4, access was allowed for employees to access necessary tasks. As we move forward into 2024, we will assign access to ensure the proper segregation of duties. Additionally, we need to ensure the employees are adequately trained and able to resolve issues timely. The Company needs to establish appropriate procedures for change management to ensure changes to the system are formally approved, properly restricted to appropriate personnel, and adequately tested. |
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| · | In our review, we noted that the Company did not implement adequate controls relating to documentation of the review and approval of reconciliations and other schedules prepared internally to be included or disclosed in the financial statements. Many of our reports and reconciliations are performed in Excel spreadsheets, and we did not adequately validate the segregation of duties between the preparer and the approver with a signature and time stamp. NetSuite has many robust internal control features that can be configured and utilized to ensure workflow approvals are adhered to and integrated into documentation. |
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 September 30, 2024.
Changes in Internal Control Over Financial Reporting
The Company is continuing to actively work to remediate the material weaknesses described above, including the need for additional remediation steps and implementing additional measures to remediate the underlying causes that give rise to the material weaknesses. During the three months ended September 30, 2024, the Company has taken various actions to strengthen our internal control over financial reporting, including:
| · | Continue to review access in NetSuite ERP to ensure the proper segregation of duties and additional training courses to ensure the employees are trained and able to resolve issues timely. | |
| · | Managed processes related to ordering, counting, warehousing, valuing and transacting our inventory in NetSuite ERP. | |
| · | Increasing and monitoring the adequacy of staffing levels and expertise with the requisite technical knowledge and skills to support continued enhancement on the controls and procedures surrounding documentation of review and formalization of reconciliations, accounting policies and controls. | |
| · | Continue to manage a segregation of duties between the preparer and the approver of reconciliation and supporting schedules which included hiring additional staff. |
The material weaknesses will be considered remediated when management concludes that, through testing, the applicable remedial controls are designed, implemented and operating effectively. As management continues to evaluate and improve disclosure controls and procedures and internal control over financial reporting, the Company may decide to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures identified.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company may from time to time become party to actions, claims, suits, investigations or proceedings arising from the ordinary course of our business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims and other matters. Any litigation could divert management time and attention from the Company, could involve significant amounts of legal fees and other fees and expenses, or could result in an adverse outcome having a material adverse effect on our financial condition, cash flows or results of operations. Actions, claims, suits, investigations and proceedings are inherently uncertain, and their results cannot be predicted with certainty. We are not currently involved in any legal proceedings that we believe are, individually or in the aggregate, material to our business, results of operations or financial condition. However, regardless of the outcome, litigation can have an adverse impact on us because of associated cost and diversion of management time.
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, 2023, 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 may materially adversely affect our business, financial condition, liquidity or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
The Company and Kathy McDermott, the Company’s former Chief Financial Officer, entered into a consulting agreement effective November 11, 2024, whereby Ms. McDermott will consult with the Company related to the Enterprise Resource Planning (ERP) implementation in Serbia. The Company will pay Ms. McDermott $225 per hour for her consulting services. The consulting agreement will terminate on December 31, 2024 and may be extended by mutual agreement of the Company and Ms. McDermott. Pursuant to the consulting agreement, the Company granted to Ms. McDermott common stock under the Company’s equity incentive plan issued for payment of Ms. McDermott’s bonus of $300,000 earned by her for her services as the Company’s former Chief Financial Officer.
During the quarter ended September
30, 2024, no director or officer
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Item 6. Exhibits
*Represents a compensatory plan or arrangement
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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: November 14, 2024 | Beam Global |
| By: /s/ Desmond Wheatley | |
|
Desmond Wheatley, Chairman and Chief Executive Officer, (Principal Executive Officer) | |
| By: /s/ Lisa A. Potok | |
|
Lisa A. Potok, Chief Financial Officer (Principal Financial/Accounting Officer) |
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