Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

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

For the Period ended March 31, 2021

 

OR

 

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

For the transition period from _________________ to ________________

 

Commission File Number 000-53204

 

Beam Global

(Exact name of Registrant as specified in its charter)

 

Nevada	26-1342810
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

 

5660 Eastgate Dr. San Diego, California	92121
(Address of principal executive offices)	(Zip Code)

  

(858) 799-4583

(Registrant’s telephone number, including area code)

 

_____________________________________________

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

 

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

 

Title of each class	Trading Symbol(s)	Name of each exchange in which registered
Common stock, $0.001 par value	BEEM	Nasdaq Capital Market
Warrants	BEEMW	Nasdaq Capital Market

 

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

 

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

 

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

 

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

 

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

 

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

 

The number of registrant's shares of common stock, $0.001 par value outstanding as of May 17, 2021 was 8,887,260.

 

 

 

TABLE OF CONTENTS

 

		Page
PART I	FINANCIAL INFORMATION	3
Item 1	Financial Statements (Unaudited)	3
	Condensed Balance Sheets at March 31, 2021 (Unaudited) and December 31, 2020	3
	Condensed Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	4
	Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	5
	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	6
	Condensed Notes To Condensed Financial Statements as of March 31, 2021 (Unaudited)	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4	Controls and Procedures	21
PART II	OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	23
	SIGNATURES	24

 

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Beam Global

Condensed Balance Sheets

 

 

		March 31,				December 31,
		2021				2020
		(Unaudited)
Assets
Current assets
Cash		$	28,214,029			$	26,702,804
Accounts receivable			1,583,712				1,786,471
Prepaid and other current assets			141,137				321,393
Inventory, net			1,553,443				1,092,763
Total current assets			31,492,321				29,903,431
Property and equipment, net			249,777				235,036
Operating lease right of use asset			2,362,001				2,418,503
Patents, net			308,248				293,789
Deposits			52,000				52,000
Total assets		$	34,464,347			$	32,902,759
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	895,066			$	727,919
Accrued expenses			531,297				391,567
Sales tax payable			40,483				92,130
Deferred revenue			97,541				107,489
Operating lease liabilities, current			420,456				521,006
Total current liabilities			1,984,843				1,840,111
Operating lease liabilities, noncurrent			1,964,050				1,910,357
Total liabilities			3,948,893				3,750,468
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock, $0.001 par value, 10,000,000 authorized, none outstanding as of March 31, 2021 and December 31, 2020, respectively.			–				–
Common stock, $0.001 par value, 9,800,000 shares authorized, 8,858,383 and 8,482,387 shares issued or issuable and outstanding as of March 31, 2021 and December 31, 2020, respectively.			8,871				8,482
Additional paid-in-capital			82,779,998				80,166,415
Accumulated deficit			(52,273,415	)			(51,022,606	)
Total stockholders' equity			30,515,454				29,152,291
Total liabilities and stockholders' equity		$	34,464,347			$	32,902,759

 

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

 

 

 

 

Beam Global

Condensed Statements of Operations

(Unaudited)

 

		For the Three Months Ended
		March 31,
		2021				2020
Revenues		$	1,372,392			$	1,317,052
Cost of revenues			1,521,512				1,356,693
Gross loss			(149,120	)			(39,641	)
Operating expenses			1,102,675				902,000
Loss from operations			(1,251,795	)			(941,641	)
Other income (expense)
Interest income			986				8,892
Interest expense			–				(9,772	)
Total other income (expense), net			986				(880	)
Net loss		$	(1,250,809	)		$	(942,521	)
Net loss per share - basic and diluted		$	(0.14	)		$	(0.17	)
Weighted average shares outstanding - basic and diluted			8,764,959				5,523,174

 

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

 

 

 

Beam Global

Condensed Statements of Changes in Stockholders' Equity (Deficit)

(Unaudited)

 

 

																		Total
		Common Stock								Additional				Accumulated				Stockholders'
		Stock				Amount				Paid-in-Capital				Deficit				Equity (Deficit)
Balance at December 31, 2019			5,208,170			$	5,207			$	51,628,536			$	(45,809,581	)		$	5,824,162
Stock issued for director services			14,813				15				78,432				–				78,447
Stock issued to escrow account - unvested			(14,813	)			(15	)			15				–				–
Stock option expense			–				–				27,068				–				27,068
Warrants exercised			43,993				44				282,306				–				282,350
Net loss for the three months ended March 31, 2020			–				–				–				(942,521	)			(942,521	)
Balance at March 31, 2020			5,252,163			$	5,251			$	52,016,357			$	(46,752,102	)		$	5,269,506

 

 

																		Total
		Common Stock								Additional				Accumulated				Stockholders'
		Stock				Amount				Paid-in-Capital				Deficit				Equity (Deficit)
Balance at December 31, 2020			8,482,387			$	8,482			$	80,166,415			$	(51,022,606	)		$	29,152,291
Stock  issued for director services - vested			10,548			$	11				122,435				–				122,446
Stock issued to escrow account - unvested			(24,253	)			(12	)			12				–				–
Stock option expense			–				–				68,944				–				68,944
Warrants exercised for cash			388,638				389				2,469,155				–				2,469,544
Stock option exercise (cashless)			1,063				1				(46,963	)			–				(46,962	)
Net loss for the three months ended March 31, 2021			–				–				–				(1,250,809	)			(1,250,809	)
Balance at March 31, 2021			8,858,383			$	8,871			$	82,779,998			$	(52,273,415	)		$	30,515,454

 

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

 

 

 

 

 

Beam Global

Condensed Statements of Cash Flows

(Unaudited)

 

		For the Three Months Ended
		March 31,
		2021				2020
Operating Activities:
Net loss		$	(1,250,809	)		$	(942,521	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			20,328				8,936
Common stock issued for services			122,446				78,447
Compensation expense related to grant of stock options			68,944				27,068
Amortization of debt discount			–				5,990
Amortization of operating lease right of use asset			9,645				(12,289	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable			202,759				(214,077	)
Prepaid expenses and other current assets			180,256				(308,685	)
Inventory			(454,634	)			(605,396	)
Deposits			–				(223	)
Increase (decrease) in:
Accounts payable			167,147				522,770
Accrued expenses			139,730				79,456
Convertible note payable repaid in lieu of salary - related party			–				(220,417	)
Sales tax payable			(51,647	)			22,218
Deferred revenue			(9,948	)			5,447
Net cash used in operating activities			(855,783	)			(1,553,276	)
Investing Activities:
Purchases of equipment			(33,445	)			(125,142	)
Funding of patent costs			(22,129	)			(18,370	)
Net cash used in investing activities			(55,574	)			(143,512	)
Financing Activities:
Repayments of auto loan			–				(2,718	)
Withhold shares to cover taxes for cashless stock option exercise			(46,962	)			–
Proceeds from warrant exercises			2,469,544				282,350
Net cash provided by financing activities			2,422,582				279,632
Net increase (decrease) in cash			1,511,225				(1,417,156	)
Cash at beginning of period			26,702,804				3,849,456
Cash at end of period		$	28,214,029			$	2,432,300
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest		$	–			$	52,666
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Transfer of prepaid asset to inventory		$	–			$	72,750
Depreciation cost capitalized into inventory		$	6,046			$	3,705

 

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

 

 

 

 

BEAM GLOBAL

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2021

(Unaudited)

 

 

1.

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

 

Nature of Operations

 

Beam Global, a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”) is a cleantech innovation company based in San Diego, California. Beam develops, designs, engineers, manufactures and sells high-quality, renewably energized infrastructure products for electric vehicle charging, outdoor media and energy security and disaster preparedness. 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. When competing with utilities or typical solar companies, we rely on our products’ ease of deployment, reliability, accessibility, and total cost of ownership, rather than producing the cheapest kilowatt hour with the help of subsidies.

 

Basis of Presentation

 

The interim unaudited condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three months ended March 31, 2021 and 2020, and our financial position as of March 31, 2021, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

 

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2020. The December 31, 2020 balance sheet is derived from those statements.

 

Risks and Uncertainties

 

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders as well as the shutdown of many businesses around the world. To date, while we have seen some delays and cancellations of opportunities in our pipeline as a result of funding issues, priority issues or temporary business closures, the pandemic has not had a material adverse effect on the Company’s financial position or results of operations for the quarter ended March 31, 2021. However, it is difficult to predict if these governmental actions and the widespread economic disruption arising from the pandemic will impact our business in the future. The Company will continue to monitor its progress and communicate changes in estimates and assumptions with shareholders, as necessary. 

 

 

 

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of intangible assets, 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 August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. This ASU includes amendments that significantly change the guidance on convertible instruments and the derivative scope exception for contracts in an entity's own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. The prior conditions were difficult to apply and resulted in circumstances where warrants may have been required to be accounted for as a liability rather than as equity if issued under a registration statement. The Company, in consultation with legal counsel, determined that its outstanding public warrants issued under a Registration Statement on Form S-1 met, and continues to meet, the criteria for equity based on the terms of the warrant. Had the warrants been determined that liability treatment was required, the liability would have been approximately $64 million for the 953,595 public warrants at December 31, 2020 with a non-cash charge to the statement of operations of $61 million for the year ended December 31, 2020.

 

The ASU is effective for smaller reporting companies in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, although early adoption is permitted, as early as fiscal years beginning after December 15, 2020. As such, the Company has adopted ASU 2020-06 effective January 1, 2021, on a full retrospective basis, which will allow the Company to continue to classify the warrants as equity, and as a result, had no effect on its condensed financial statements and related disclosures. If the Company had recorded the warrants as a liability in prior periods, with the full retrospective adoption on January 1, 2021, the liability would have been recast as equity and retained earnings adjusted to reverse the effect of the liability entries and as a result, there would be no impact on the financial statements for any periods presented.

 

Concentrations

 

Credit Risk

 

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

 

The Company maintains its cash in banks and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through March 31, 2021. As of March 31, 2021, $28,219,329 of the Company’s cash deposits were greater than the federally insured limits.

 

Major Customers

 

For the three months ended March 31, 2021, revenues from three customers accounted for 32%, 12% and 10% of total revenues, with no other single customer accounting for more than 10% of revenues. At March 31, 2021, accounts receivable from four customers accounted for 28%, 19%, 11% and 10% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

 

For the three months ended March 31, 2020, revenues from three customers accounted for 26%, 17% and 14% of total revenues, with no other single customer accounting for more than 10% of revenues. At March 31, 2020, accounts receivable from two customers accounted for 37% and 21% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

 

For the three months ended March 31, 2021 and 2020, we had a heavy concentration of sales to federal, state and local governments which represented 70% and 82% of revenues, respectively.

 

Cash and Cash Equivalents

 

For the purposes of the unaudited condensed statements of cash flows, the Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at March 31, 2021 and December 31, 2020, respectively.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments, including accounts receivable, accounts payable, accrued expenses, and short-term loans, are carried at historical cost basis. At March 31, 2021, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

 

Accounts Receivable

 

Accounts receivable are customer obligations due under normal trade terms. Management reviews accounts receivable on a periodic basis to determine if any receivables may become uncollectible. Management’s evaluation includes several factors including the aging of the accounts receivable balances, a review of significant past due accounts, dialogue with the customer, the financial profile of a customer, our historical write-off experience, net of recoveries, and economic conditions. The Company includes any accounts receivable balances that are determined to be uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

 

 

 

 

Inventory

 

Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method of accounting. Inventory costs primarily relate to purchased raw materials and components used in the manufacturing of our products, work in process for products being manufactured, and finished goods. Included in these costs are direct labor and certain manufacturing overhead costs associated with the manufacturing process. The Company regularly reviews inventory components and quantities on hand and performs annual physical inventory counts. A reserve is established if this review process determines the net realizable value of such inventory may be below the carrying value.

 

Patents

 

The Company believes it will achieve future economic value benefits for its various patents and patent ideas. All administrative costs for obtaining patents are accumulated on the balance sheet as a patent asset until such time as a patent is issued. The costs of these intangible assets are classified as a long-term asset and amortized on a straight-line basis over the legal life of such asset, which is typically 20 years. In the event a patent is denied or abandoned, all accumulated administrative costs will be expensed in the period in which the patent was denied or abandoned. Patent amortization expense was $7,670 and $1,091 in the three months ended March 31, 2021 and 2020, respectively.

 

Leases

 

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)” whereby lessees need to recognize almost all leases on the balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019 using the effective date method and applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases, and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected to not recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less.

  

Revenue Recognition

 

Beam follows the revenue standards of Financial Accounting Standards Board Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation.

 

Revenues are primarily derived from the direct sales of manufactured products. Revenues may also consist of maintenance fees for the maintenance of previously sold products and revenues from sales of professional services.

 

Revenues from inventoried product are recognized upon the final delivery of such product to the customer or when legal transfer of ownership takes place. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for such products within a 30-45 day period after delivery.

 

Revenues from maintenance fees for services provided by the Company are recognized equally over the period of the maintenance term. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for the service in advance of the maintenance period.

 

 

 

 

Extended maintenance or warranty services, where the customer has the option to purchase this extension as a separate purchase option, are considered a separate performance obligation. If the Company does not control the extended services, in terms of having the responsibility for fulfillment of the obligation or the option to choose who will perform the services, the Company is acting as an agent and would report the revenues on a net basis.

 

Revenues from professional services are recognized when services are performed. Revenue values are based upon fixed fee arrangements or hourly fee-based arrangements with agreed to hourly rates of service categories in line with expertise requirements. These services are billed to a customer as such services are provided and the customer will be obligated to make payments for such services typically within a 30-45 day period.

 

Revenues on a bill-and-hold arrangement are recognized when control of the product is transferred to the customer, but physical possession of the product transfers at a point in time in the future. To determine this, the reason for the arrangement must be substantive, the product must be separately identified and ready for physical transfer, the customer has the ability to direct the use of the product and the product cannot be directed to another customer.

 

The Company has a policy of recording sales incentives as a contra revenue.

 

The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.

 

Any deposits received from a customer prior to delivery of the purchased product or monies paid prior to the period for which a service is provided are accounted for as deferred revenue on the balance sheet.

 

Sales tax is recorded on a net basis and excluded from revenue.

 

The Company generally provides a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and it will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably estimated. At March 31, 2021, the Company has no product warranty accrual given the Company’s historical financial warranty expense.

  

Cost of Revenues

 

The Company records direct material and component costs, direct labor and associated benefits, and manufacturing overhead costs such as supervision, manufacturing equipment depreciation, rent, and utility costs, all of which are included in inventory prior to a sale, as costs of revenues. The Company further includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.

 

Stock-Based Compensation

 

The Company follows ASC 718, “Compensation – Stock Compensation.” ASC 718 requires companies to estimate and recognize the fair value of stock-based awards to employees and directors. The fair value of the portion of an award that is ultimately expected to vest is recognized as an expense over the shorter of the service periods or vesting periods using the straight-line attribution method.

 

The Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption.

 

The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model.

 

Net Loss Per Share

 

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

 

 

 

 

Options to purchase 337,633 common shares and warrants to purchase 576,946 common shares were outstanding at March 31, 2021. These shares were not included in the computation of diluted loss per share for the three months ended March 31, 2021 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.

 

Reclassifications

 

Where necessary, the prior year’s information has been reclassified to conform to the current period’s statement presentation. On the Condensed Statements of Cash Flows, the amortization of operating lease right of use asset of $12,289 at March 31, 2020 was reclassified from accrued expenses to conform to the March 31, 2021 presentation.

 

Segments

 

The Company follows ASC 280-10 "Disclosures about Segments of an Enterprise and Related Information." During the three months ended March 31, 2021 and 2020, the Company only operated in one segment; therefore, segment information has not been presented.

 

2.

LIQUIDITY

 

As reflected in the accompanying unaudited condensed financial statements for the three months ended March 31, 2021, the Company had a net loss and net cash used in operating activities of $1,250,809 (which includes $191,390 of non-cash compensation expense) and $855,783, respectively. Additionally, at March 31, 2021, the Company had an accumulated deficit of $52,273,415. The Company has incurred significant losses from operations since inception, and such losses are expected to continue.

 

In April 2019, the Company issued shares of its common stock in a public offering that generated gross proceeds of $13,201,000, which was used to pay off the Company’s debt and to fund business operations. The Company issued shares in two additional public offerings generating gross proceeds of $11,499,675 in July 2020 and $7,500,000 in November 2020. In addition, the company issued warrants as part of the April 2019 public offering which has generated an additional $10,879,389 during fiscal 2020 through March 31, 2021. At March 31, 2021, there are 576,946 warrants outstanding, which if fully exercised would generate an additional $3,639,359.

 

At March 31, 2021, our cash balance was $28,214,029 and our working capital was $29,507,478. Management believes it has sufficient cash to fund its liabilities and operations for at least the next twelve months from the issue date of this report.

 

3.

INVENTORY

 

Inventory consists of the following:

 

		March 31,				December 31,
		2021				2020
Finished goods		$	–			$	–
Work in process			672,880				559,582
Raw materials			891,987				544,605
Inventory allowance			(11,424	)			(11,424	)
Total net inventory		$	1,553,443			$	1,092,763

 

 

 

 

4.	ACCRUED EXPENSES

 

The major components of accrued expenses are summarized as follows:

 

		March 31,				December 31,
		2021				2020
Accrued salaries		$	285,131			$	178,449
Accrued vacation			227,926				205,809
Other accrued expense			18,240				7,309
Total accrued expenses		$	531,297			$	391,567

 

5.	CONVERTIBLE NOTE PAYABLE - RELATED PARTY AND NOTE PAYABLE

 

On October 18, 2016, the Company entered into a five-year employment agreement, effective as of January 1, 2016, with Mr. Desmond Wheatley, the Chief Executive Officer, President, and Chairman of the Company (the “Agreement”). Pursuant to the Agreement, Mr. Wheatley received an annual deferred salary of $50,000 which Mr. Wheatley deferred until such time as Mr. Wheatley and the Board of Directors agreed that payment of the deferred salary and/or cessation of the deferral was appropriate. In August 2018, the Agreement was amended to provide that his salary shall defer until the earliest to occur of the following: (i) a permissible event specified in Section 409A of the Code, (ii) December 31, 2020, (iii) a change of control as defined in the Agreement, or (iv) a sale of all or substantially all of the assets of the Company.

 

All deferred amounts were evidenced by an unsecured convertible promissory note payable by the Company to Mr. Wheatley bearing simple interest at the rate of 10% per annum, accruing until paid, convertible into shares of the Company’s common stock at $7.50 per share at any time in whole or in part at Mr. Wheatley’s discretion. As the conversion price was equivalent to the fair value of the common stock at various salary deferral dates prior to June 30, 2018, there was no beneficial conversion feature to this note through such date. Subsequent to June 30, 2018 through December 31, 2018 and based on the average daily closing price of our common stock, the Company recorded $8,672 of debt discount for the beneficial conversion feature value which is being amortized to interest expense over the term of the note. For the three months ended March 31, 2019 and based on the average daily closing price of our common stock, the Company recorded $3,967 of debt discount for the beneficial conversion feature value which is also being amortized to interest expense over the term of the note. There was no beneficial conversion value and therefore, no debt discount was recorded for any other periods subsequent to March 31, 2019. Additionally, on March 29, 2017 the Board of Directors granted Mr. Wheatley a $35,000 bonus for which Mr. Wheatley agreed to defer such bonus under the same terms of his salary deferral.

  

On September 17, 2019, the Board of Directors adopted a resolution to pay off the convertible promissory note issued to Mr. Wheatley for his deferred compensation in the near future (subject to a recommendation on timing from Mr. Wheatley), and no additional salary was deferred after September 15, 2019. In February 2020, the remaining debt discount of $5,990 was recorded as interest expense, additional interest of $3,442 was accrued, and the total note of $220,417 and interest of $52,326 was paid to Mr. Wheatley.

 

On May 1, 2020, the Company received a U.S. Small Business Administration Paycheck Protection Program loan of $339,262 which was offered through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This loan was recorded as a note payable, is subject to a 1% annual interest rate and has a two year term. This low interest loan was intended to support short term cash flow in the event we were more heavily impacted by the COVID-19 virus. In July 2020, we were able to raise capital and no longer required the loan. The full amount of the loan was repaid on November 13, 2020 in addition to $1,847 of interest.

 

6.

AUTO LOAN

 

In October 2015, the Company purchased a new vehicle and financed the purchase through a dealer auto loan. The loan has a term of 60 months, requires minimum monthly payments of approximately $950, and bears interest at a rate of 5.99 percent. The final payment was made on this loan in October 31, 2020.

 

 

 

 

7.	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 March 31, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

 

Leases:

 

In August 2016, the Company entered into a sublease for its current corporate headquarters and manufacturing facility. The sublease expired in August 2020 which was the same term of the master lease for which the Company was the subtenant. In September 2020, the Company initiated a new five year master lease agreement, with two optional one year renewals. Monthly lease payments will range from $52,000 to $58,526 per month over the term of the lease.

 

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, 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. All expenses and liabilities relating to such contracts were recorded in accordance with GAAP during the periods.

 

8.

LEASES

 

The Company evaluates new leases at inception based on the criteria defined in Leases (Topic 842). On September 1, 2020, the Company entered into a new five year operating lease with payments ranging from $52,000 to $58,526. The lease has two one-year options to extend the term of the lease. At this time, it is not reasonably certain that we will extend the term of the lease and therefore the renewal periods have been excluded from the right-of-use (“ROU”) asset. We calculated the present value of the lease payment stream using our effective borrowing rate of 10% and recorded a ROU asset and operating lease liability each of $2,605,032 at September 1, 2020. The ROU asset and the corresponding lease liability are being equally amortized on a straight-line basis over the term of the lease which expires on August 31, 2025.

 

The tables below show the operating ROU assets and liabilities as of December 31, 2020 and the balances as of March 31, 2021, including the changes during the periods.

 

		Operating right-of
		use asset
Operating lease ROU asset as of December 31, 2020		$	2,418,503
Less amortization of operating lease ROU asset			(56,502	)
Operating lease ROU asset as of March 31, 2021		$	2,362,001

 

 

 

 

As of March 31, 2021 and December 31, 2020, the current and non-current portions of the lease liability were recorded to the Balance Sheet as follows:

 

		March 31,				December 31,
		2021				2020
Operating lease liabilities, current		$	420,456			$	521,006
Operating lease liabilities, noncurrent			1,964,050				1,910,357
Total lease liability		$	2,384,506			$	2,431,363

 

The future minimum rental commitments for our operating leases reconciled to the lease liability as of March 31, 2021 is as follows:

 

2021		$	474,240
2022			649,147
2023			668,622
2024			688,680
2025			468,212
Total undiscounted future minimum payments			2,948,901
Less imputed interest			(564,394	)
Total lease liability		$	2,384,506

 

9.	COMMON STOCK

 

Director Annual Restricted Stock Grants

 

On October 20, 2020, the Company granted each of our two non-employee directors annual restricted stock grants of 12,200 shares of our common stock and our lead independent director was issued an annual restricted stock grant of 17,100 shares of common stock, which vest quarterly in four (4) equal installments. On the grant date, these shares had a per share fair value of $14.95 based on the closing trading price of our common stock, or $620,425. During the three months ended March 31, 2021, upon the death of one of our directors, 12,825 unvested shares of restricted stock were forfeited and returned to the Company, and 6,100 shares of restricted stock relating to the other two directors vested, generating an expense of $91,196. At March 31, 2021, there were 12,200 unvested shares of restricted stock representing $182,388 of unrecognized restricted stock grant expense which will be recognized through the quarter ending September 30, 2021.

 

On June 17, 2020, the Board approved two restricted stock grants to Mr. Wheatley under the 2011 Stock Incentive Plan. The total number of shares granted was determined based on an award of $150,000 divided by the per share quoted trading price on June 17, 2020. On the grant date, the shares had a per share fair value of $7.35 and 20,408 shares were granted, half of which vest quarterly over four equal installments and half vest quarterly over 12 equal installments. During the three months ended March 31, 2021, 3,401 of shares from this grant vested and 1,047 shares from an October 1, 2019 grant vested generating a total expense of $31,250. At March 31, 2021, 10,990 of these shares are unvested representing $75,000 of unrecognized restricted stock grant expense which will be recognized through the quarter ending March 31, 2023.

   

10.	STOCK OPTIONS AND WARRANTS

 

Stock Options

 

During the three months ended March 31, 2021, there were no stock options granted.

 

During the three months ended March 31, 2021 and 2020, the Company recorded non-cash stock option based compensation expense of $68,944 and $27,068, respectively. As of March 31, 2021, there was $703,866 of unrecognized stock option-based compensation expense that will be recognized over the next 3.5 years.

 

During the three months ended March 31, 2021, 2,300 stock options were exercised on a cashless basis for 1,063 shares of common stock at a weighted average exercise price of $13.97. The Company withheld shares to cover income and payroll taxes totaling $46,963, which was charged to additional paid in capital.

 

 

 

 

 

There were stock options outstanding to purchase 337,633 shares of common stock at a weighted average exercise price of $11.13 at March 31, 2021. During the three months ended March 31, 2021, 1,875 stock options terminated.

 

Warrants

 

During the three months ended March 31, 2021, 388,638 warrants to purchase shares of the Company’s common stock were exercised generating $2,469,543. At March 31, 2021, there were warrants outstanding to purchase up to 576,946 shares of the Company’s common stock at a weighted average exercise price of $6.31.

  

11.

REVENUES

 

For each of the identified periods, revenues can be categorized into the following:

 

		For the Three Months Ended
		March 31,
		2021				2020
Product sales		$	1,265,427			$	1,255,852
Maintenance fees			11,243				3,679
Professional services			3,750				14,525
Shipping and handling			98,820				46,511
Discounts and allowances			(6,848	)			(3,515	)
Total revenues		$	1,372,392			$	1,317,052

 

At March 31, 2021 and December 31, 2020, deferred revenue was $97,541 and $107,489, respectively. The March 31, 2021 balance consists of deferred maintenance fees pertaining to services to be provided through the fourth quarter of 2026.

 

Revenues during the quarters ended March 31, 2021 and 2020 had a heavy concentration of sales to federal, state and local governments which represented 70% and 82% of revenues, respectively.

 

12.	SUBSEQUENT EVENTS

 

Subsequent to March 31, 2021, warrants to purchase 18,233 shares of common stock were exercised generating proceeds of $114,868.

 

On April 1, 2021, the Board approved two restricted stock grants to Mr. Wheatley under the 2011 Stock Incentive Plan. The total number of shares granted was determined based on an award of $112,500, divided by the per share closing trading price on April 1, 2021. On the grant date, the shares had a per share fair value of $40.10 and 2,806 shares were granted, half of which will vest quarterly over three equal installments and half of which will vest quarterly over 11 equal installments.

 

On April 16, 2021, the Board appointed Nancy Floyd to the Company’s board of directors. Concurrent with her appointment, the Company, upon recommendation of the Compensation Committee, granted Ms. Floyd 5,592 shares of restricted stock which had a per share fair value of $33.34 on the date of grant and will vest quarterly through September 30, 2021.

 

On April 16, 2021, the Board appointed Mr. Posawatz the Lead Independent Director. With this appointment, the Company, upon recommendation of the Compensation Committee, granted Mr. Posawatz 2,246 shares of restricted stock for this role which had a per share fair value of $33.34 on the date of grant and will vest quarterly through September 30, 2021.

 

 

 

 

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

 

This report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about Beam Global (hereinafter, “Beam,” “Company,” “us,” “we” or “our”), 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.

 

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 inability to raise additional capital or financing to implement its business plans;

 

(e)

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

 

(f)

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

 

(g)

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

 

(h)

rapid and significant changes in markets;

 

(i)

litigation with or legal claims and allegations by outside parties;

 

(j)

insufficient revenues to cover operating costs, resulting in persistent losses;

 

(k)

potential dilution of the ownership of existing shareholders in the Company due to the issuance of new securities by the Company in the future; and

 

(l)

rapid and significant changes to costs of raw materials.

  

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, 2020 (sometimes referred to as the “2020 Form 10-K”) that we previously filed with the Securities and Exchange Commission, including without limitation the “Risk Factors” section in the 2020 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.

 

 

 

 

Overview

 

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

 

The Company has designed five product lines that incorporate the same underlying proprietary technology and value for producing a unique alternative to grid-tied charging of electric vehicles, having a built-in renewable energy source in the form of attached solar panels and/or light wind generator to produce power and battery storage to store the power. These products are rapidly deployable and attractively designed. Our product lines 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. In 2019, we began deploying our upgraded version, the EV ARC™ 2020, which provides all of the features of the original EV ARC™ in addition to elevating the electronics to the underside of the solar array making the unit flood-proof up to nine feet and making more space available on the engineered ballast and traction pad which gives the product stability.
	-	Solar Tree® DCFC – Off-grid, renewably energized and rapidly deployed, patented single-column mounted smart generation and energy storage system with the capability to provide a 50kW DC fast charge to one or more electric vehicles or larger vehicles.
	-	EV ARC™ DCFC – DC Fast Charging system for charging EVs.   - EV-Standard™ – patent issued on December 31, 2019 and still under development. A lamp standard, EV charging and emergency power product which uses an existing streetlamp’s foundation and a combination of solar, wind, grid connection and onboard energy storage to provide curbside charging. - UAV ARC™ - patent issued on November 24, 2020 and still under development. An off-grid, renewably energized and rapidly deployed product and network used to charge aerial drone (UAV) fleets.

 

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 best of breed solutions based upon our customer’s 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 infrastructure products are: 

 

·

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

 

·

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

 

·

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

 

·

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

 

 

 

 

Overall Business Outlook

 

Our revenues increased from $1,317,052 in the first quarter of 2020, to $1,372,392 for the same period in 2021. Our revenues continue to diversify to a broad array of customers and markets. We have strengthened our sales force over the past year and increased marketing efforts, including engaging a public relations firm and a rebranding, to help communicate and promote awareness to potential customers. On January 27, 2021, President Biden issued an executive order that called for “clean and zero-emission federal, state, local, and tribal government fleets.” President Biden also proposed $174 billion investment in the EV market and an additional 500,000 publicly available EV charging stations on U.S. highways. Beam Global views federal investment in EV infrastructure as an important potential source of future revenues particularly now that the Company has been awarded a Federal General Services Administration (GSA) Multiple Award Schedule (MAS) contract that will make the procurement process by federal agencies much easier and faster. We are also expanding geographically across the U.S. to add to our significant presence in California. We believe that our opportunities in corporate markets will increase as demand for workplace charging increases. We believe our products are uniquely positioned to benefit from this growth, as well as increased market share as a result of the features our products add.

 

We continue to make progress in our outdoor media advertising business in 2021, with the addition of a contracted industry expert to help identify a corporate sponsor who will receive global naming rights to the network of EV ARC^TM systems planned for the City of San Diego.

 

We have 2 new patents that were issued by the United States Patent and Trademark Office at the end of 2019 and in 2020 for our EV Standard^TM and UAV ARC™ which we expect will expand our product offerings with the same proprietary technology as our current products and allow us to expand into new markets.

 

We had a gross loss of $149,120 in the quarter ended March 31, 2021, compared to a loss of $39,641 for the same period in the prior year. We currently have a fixed overhead structure and facility that will support our expected growth over the next several years. Until our production increases, we have underutilized capacity that adds a fixed cost burden to our margins. Once we are able to increase our production volumes, we will improve our fixed cost per unit, as well as benefit from improved labor efficiencies and utilization and cost improvements by negotiating volume purchase discounts. We are also implementing lean manufacturing process improvements and making engineering changes to our product where we can benefit from cost reductions. Many of the components that we integrate into our products are manufactured by others. This is consistent with our strategy to take advantage of the investment by large and well-funded organizations in the improvement of various components and sub-assemblies which we integrate into our final product. Components such as battery cells and solar panels are expected to continue to decrease in cost in the coming months and years. We expect to see a significant increase in the demand for electric vehicle charging infrastructure and as such we do not anticipate significant pricing pressure on our products. The combination of this increase in demand for electric vehicle charging infrastructure and therefore our revenues, and the cost cutting measures described above lead us to believe that we will see significant improvement in our gross margins in the future.

 

Significant Accounting Policies and Estimates

 

The Company’s significant accounting policies are described in Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes in these policies or their application.

 

Use of Estimates. The preparation of financial statements in conformity with GAAP 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 valuation of inventory and standard cost allocations, depreciable lives of property and equipment, 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.

 

Changes in Accounting Principles. There were no significant changes in accounting principles that were adopted during the three months ended March 31, 2021.

 

 

 

 

Results of Operations

 

Comparison of Results of Operations for the Three Months Ended March 31, 2021 and 2020

 

Revenues. For the three months ended March 31, 2021, revenues were $1,372,392, a 4% increase over $1,317,052 for the three months ended March 31, 2020. During the first quarter of 2021, we shipped units to municipalities, federal agencies, a university, a utility company, and to enterprise companies. This included the sale of a unit to Jeep, a Stellantis brand, and one to their partner Electrify America, both for use in the Moab, UT launch of their Jeep 4xe Charging Network to provide EV charging at Jeep Badge of Honor off-road trailheads throughout the U.S. By comparison, revenues in the first quarter of 2020 were heavily concentrated on state and local municipalities in several cities across the U.S. During 2020, we experienced some delays in orders as a result of the COVID-19 virus, which are starting to move forward. Our backlog on March 31, 2021 was $1.2 million.

 

Gross Loss. For the three months ended March 31, 2021, we had a gross loss of $149,120 compared to a gross loss of $39,641 for the three months ended March 31, 2020. Despite the increase in revenues during the first quarter of 2021 compared to 2020, our gross loss increased primarily due to an increase in costs for the new EV ARC™ 2020 unit that was launched at the end of 2019 and rolled out in 2020, compared to the original EV ARC™. Our experience with the original EV ARC™ demonstrated that while the initial costs of the unit start out high, the operations and engineering teams improve the production process and reduce material costs which will reduce the costs over time. We anticipate that this process will be repeated with the EV ARC™ 2020. We are also being negatively impacted by increases in steel prices and shipping costs due to high demand. We expect our margins to improve as we increase our production levels, which will reduce our overhead costs per unit and improve our labor efficiency.

 

Operating Expenses. Total operating expenses were $1,102,675 for the three months ended March 31, 2021, compared to $902,000 for the same period in 2020, a 22% increase. The increase was primarily due to $85,875 for non-cash compensation expense for stock option expense and vesting of director restricted shares, $51,605 for increased sales headcount to support revenue growth, $29,241 for R&D increased headcount to support development projects, $14,610 for legal expenses and $19,344 of other net increases.

 

Other Income and Expense. Interest income was $986 in the quarter ended March 31, 2021, compared to $8,892 in the quarter ended March 31, 2020, due to a significantly lower average gross yield on our investments, despite higher cash balances. Interest expense was $9,772 in the quarter ended March 31, 2020, and there was no interest expense in the quarter ended March 31, 2021.

 

Net Loss. Our net loss was $1,250,809 for the three months ended March 31, 2021, a $308,288 increase from a net loss of $942,521 for the same period in 2020, primarily due to the increase in gross loss and increased operating expenses.

 

Liquidity and Capital Resources

 

At March 31, 2021, we had cash of $28,214,029, compared to cash of $26,702,804 at December 31, 2020. We have historically met our cash needs through a combination of equity and debt financings. Our cash requirements are generally for operating activities.

 

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

		March 31,
		2021				2020
Cash provided by (used in):
Net cash used in operating activities		$	(855,783	)		$	(1,553,276	)
Net cash used in investing activities		$	(55,574	)		$	(143,512	)
Net cash provided by financing activities		$	2,422,582			$	279,632

 

 

 

 

Operating Activities

 

Net loss of $1,250,809 for the three months ended March 31, 2021 decreased by $221,363 for non-cash expense items that included depreciation and amortization, common stock issued for services for director compensation, non-cash compensation expense related to grant of stock options, and amortization of operating lease right of use asset. Cash used in operations for the period included a $454,634 increase in inventory purchases, a $51,647 reduction of sales tax payable and a $9,948 decrease in deferred revenue. Cash provided by operations included a $202,759 decrease in accounts receivable due to lower revenues in the first quarter of 2021, compared to the fourth quarter of 2020, a $180,256 decrease in prepaid expenses and other current assets as the December 31, 2020 balance included a receivable for payment due for warrant exercises, a $167,147 increase in accounts payable primarily due to increased inventory purchases, and a $139,730 increase in accrued expenses for accrued payroll for Q1 2021 that was paid in Q2 2021.

   

Net loss of $942,521 for the three months ended March 31, 2020 decreased by $108,152 for non-cash expense items that included depreciation and amortization, common stock issued for services for director compensation, non-cash compensation expense related to stock options, amortization of debt discount to interest expense associated with the related party note and amortization of operating lease right of use asset. Cash used in operations for the period included increases in inventory by $605,396 for product needed for fiscal Q2 deliveries, prepaid expenses and other current assets of $308,685 for vendor prepayments, funding our annual business insurance and prepaid annual Nasdaq fees, increase in accounts receivable of $214,077 due to higher sales in Q1 2020 compared to Q1 2019 and a slow paying customer from Q4 2019, payment of a convertible note originally issued in lieu of salary for a related party of $220,417 and a $223 increase in deposits. Cash provided by operations included an increase of $522,770 for accounts payable, primarily for inventory purchases, $79,456 for accrued expenses, primarily for payroll, $22,218 for an increase for sales tax payable and $5,447 for an increase in deferred revenue.

 

Cash used in investing activities included $33,445 to purchase manufacturing equipment and $22,129 for patent related costs during the three months ended March 31, 2021. In the three months ended March 31, 2020, $125,142 was used to purchase manufacturing equipment and $18,371 was used to fund patent related costs.

 

During the three months ended March 31, 2021, cash generated by our financing activities included $2,469,544 in proceeds received from the exercise of warrants and we used cash of $46,962 to cover payroll taxes related to cashless stock option exercises. During the three months ended March 31, 2020, cash generated by our financing activities included $282,350 in proceeds received from the exercise of warrants and we used cash of $2,718 to make the final repayment of an auto loan.

 

Working capital has increased from $28,063,320 at December 31, 2020 to $29,507,478 at March 31, 2021, primarily due to cash proceeds from warrant exercises, partially offset by operating expenses.

 

While the Company continues to grow market awareness and focusing on the generation of sales, the Company has not generally earned a net profit on its sales of products during recent years. However, we believe that our net profit will improve as our revenues grow. Management believes that with increased production volumes that we believe are forthcoming, efficiencies will continue to improve, and total per unit production costs will decrease, thus allowing for increasing gross profits on the EV ARC ™ and Solar Tree® products in the future.  The Company may be required to raise capital from the issuance of its securities or debt instruments until it achieves positive cash flow from its business, which is predicated on increasing sales volumes and the continuation of production cost reduction measures. Management cannot currently predict when or if it will achieve positive cash flow.

 

On July 7, 2020, the Company issued 1,393,900 shares of common stock in an underwritten public offering at $8.25 per share, generating approximately $10,500,000 after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. On November 27, 2020, the Company issued 250,000 shares of common stock in an underwritten public offering at $30.00 per share, generating approximately $6,900,000 after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the aggregate net proceeds primarily for working capital and general corporate purposes.

 

 

 

 

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

 

Off-Balance Sheet Arrangements

 

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

  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not Applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

During the period covered by this filing, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2021, we do not yet have sufficient controls and procedures to ensure that all the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.

 

The Company intends to improve its internal control over financial reporting and improve its disclosure controls and procedures. As of December 31, 2020, we had identified the following material weaknesses, of which the items below still exist as of March 31, 2021 and through the date of this report:

   

·

The Company currently does not have automated manufacturing or purchasing systems in place to track inventory purchases, transactions, bills of material, part numbers, product costing, labor or a perpetual inventory system. The Company performs manual processes during the year to track and control inventory transactions, apply labor and overheads to inventory and to perform a wall to wall physical inventory at the end of the year to confirm the ending inventory balance and valuation. While these processes provide good results in determining inventory and cost of sales transactions, as we grow, it has become a very time-consuming process and could impact our ability to submit timely reporting. A manufacturing system will also provide better management tools to analyze and plan production. This will avoid over-purchasing or shortages of inventory. We plan to implement a manufacturing and purchasing system during fiscal 2021.

 

Since these controls have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

   

 

 

 

Corrective Action and Changes in Internal Control Over Financial Reporting

 

During the three months ended March 31, 2021, we have been reviewing several Enterprise Resource Planning (ERP) software packages to determine which will be the most effective based on our manufacturing environment and operating processes. We have narrowed our selection down to two choices. We are also looking at our current manual operating processes to determine the best structure we want to put in place once we begin to design the new ERP, as well as access controls to streamline and strengthen our approval processes and control environment. We plan to select the new ERP in fiscal Q3 2021.

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

 

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

 

None.

 

Item 6. Exhibits

 

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

  

101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Definition Linkbase Document
101.LAB	XBRL Labels Linkbase Document
101.PRE	XBRL Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

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: May 24, 2021	Beam Global
	By: /s/ Desmond Wheatley
	Desmond Wheatley, Chairman and Chief Executive Officer, (Principal Executive Officer)
	By: /s/ Katherine H. McDermott
	Katherine H. McDermott, Chief Financial Officer, (Principal Financial/Accounting Officer)