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Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No ☒
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.
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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
No ☒
The aggregate market value of the voting and non-voting common stock
held by nonaffiliates of the registrant as of June 30, 2021 (the last business day of the registrant’s most recently completed second
fiscal quarter) was $272,967,868
based upon the closing price of the shares on the NASDAQ Capital Market on that date. This calculation does not reflect a
determination that such persons are affiliates for any other purpose.
The number of registrant's shares of common stock,
$0.001 par value, issuable and outstanding as of March 23, 2022 was 10,035,392.
Portions of the registrant’s definitive
proxy statement for the registrant’s 2022 Annual Meeting of Stockholders which will be filed with the Commission no later than 120
days after the registrant’s fiscal year ended December 31, 2021, are incorporated by reference into Part III of this report.
PART I
Unless specifically noted
otherwise, this annual report on Form 10-K reflects the business and operations of Beam Global, a Nevada corporation (hereinafter the
“Company,” “us,” “we,” “our” or “Beam”).
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking
statements that are based on current expectations, estimates, forecasts, and projections about us, the industry in which we operate and
other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These
statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,”
“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” “should,” “would,” “could,” “will,” “opportunity,”
“potential” or “may,” and variations of such words or other words that convey uncertainty of future events or
outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and
Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act).
These forward-looking statements
are subject to numerous assumptions, risks and uncertainties that may cause the Company’s actual results to be materially different
from any future results expressed or implied by the Company in those statements. The most important factors that could prevent the Company
from achieving its stated goals include, but are not limited to, the following:
|
(a) |
volatility or decline of the Company’s stock price, or absence of stock price appreciation; |
|
(b) |
fluctuation in quarterly results; |
|
(c) |
failure of the Company to earn revenues or profits; |
|
(d) |
inadequate capital to continue or expand its business, and the
inability to raise additional capital or financing to implement its business plans; |
|
(e) |
unavailability of capital or financing to prospective customers of the Company to enable them to purchase products and services from the Company; |
|
(f) |
failure to commercialize the Company’s technology or to make sales; |
|
(g) |
reductions in demand for the Company’s products and services, whether because of competition, general industry conditions, loss of tax incentives for solar power, technological obsolescence or other reasons; |
|
(h) |
litigation with or legal claims and allegations by outside parties; |
|
(i) |
insufficient revenues to cover operating costs, resulting in persistent losses; |
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(j) |
rapid and significant changes to costs of raw materials from government tariffs or other market factors; |
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(k) |
increasing spread of the COVID-19 pandemic and its impact on the Company’s business as well as worldwide financial markets; |
|
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(l) |
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 |
|
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(m) |
the factors set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” |
We caution you that the foregoing
list may not contain all of the forward-looking statements made in this annual report on Form 10-K.
You should not rely upon forward-looking
statements as predictions of future events. We have based the forward-looking statements contained in this annual report on Form 10-K
primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial
condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to
risks, uncertainties and other factors described in the section titled "Risk Factors" and elsewhere in this annual report on
Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to
time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements
contained in this annual report on Form 10-K. We cannot assure you that the results, events and circumstances reflected in the forward-looking
statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the
forward-looking statements.
The forward-looking statements
made in this annual report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation
to update any forward-looking statements to reflect events or circumstances or to reflect new information or the occurrence of unanticipated
events, except as required by law.
Overview
Beam is a clean-technology
innovation company based in San Diego, California. We develop, engineer, manufacture and sell sustainable, renewable energy infrastructure
products for transportation, energy storage, energy security and outdoor media. Our renewable energy products enable vital and highly
valuable services in locations where it is either too expensive, too disruptive or impossible to connect to a utility grid, or where the
requirements for electrical power are so important that grid failures, like blackouts, are intolerable. We do not compete with Electric
Vehicle (EV) charging companies; rather, we enable such companies by providing infrastructure solutions that replace the time consuming
and expensive process of construction and electrical work which are usually required to install traditional grid-tied EV chargers. We
also do not compete with utilities. Our products provide utilities with another tool to deliver reliable and low-cost electricity to EV
chargers and, in the case of a grid failure, to first responders and others, through our integrated emergency power panels. Our energy
storage technologies make commodity battery cells safer, longer lasting and more energy efficient whilst our battery management systems
(BMS) and packaging make batteries safe and usable in a variety of mobility, security and stationary applications.
Our products are rapidly deployed
without the need for construction or electrical work. We compete with the highly fragmented and disintegrated ecosystem of general contractors,
electrical contractors, consultants, engineers, permitting specialists and others who are required to perform a traditional grid-tied
EV charger installation construction project. Our clean-technology products are designed to replace a complicated, expensive, time consuming
and risk prone process with an easy, low total cost of ownership, robust and reliable product.
Beam’s renewable energy infrastructure products and proprietary technology solutions target four markets
that are experiencing significant growth with annual global spending in the billions of dollars.
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· |
electric vehicle charging infrastructure; |
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· |
energy storage; |
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· |
energy security and disaster preparedness; and |
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· |
outdoor
media advertising. |
The Company focuses on creating
high-quality renewable energy products for EV charging, energy storage, energy security and outdoor media that are rapidly deployable,
have diverse use cases and are attractively designed. We believe that there is a clear need for a rapidly deployable and highly scalable
EV charging infrastructure, and that our EV ARC™ and Solar Tree™ products fulfill that requirement. We are agnostic as to
the EV charging service equipment as we do not sell EV charging, rather we sell products which enable it. Our EV ARC™ and Solar
Tree™ products replace the infrastructure required to support EV chargers, not the chargers themselves. Our ability to make commodity
battery cells safer, longer lived and more energy efficient is, we believe, a significant differentiator as we move to an increasingly
electrified and untethered world.
We believe our chief differentiators
are:
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· |
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; |
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· |
our first-to-market advantage for EV charging infrastructure products that are rapidly deployed and require no construction or electrical work on site; |
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· |
our proprietary energy storage solutions which proved energy dense,
safe and cost effective battery systems to a variety of applications including EVs, micro mobility, maritime, aviation, drones, stationary
and energy security systems; |
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· |
our products’ ability to operate during grid outages and to provide a source of EV charging and emergency power during times of emergency or other grid interruptions; and |
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· |
our ability to create new and patentable products using our own proprietary technology and parts, along with other commonly available engineered components, which create a further barrier to entry for our competition. |
Products and Technologies
Electric vehicle charging infrastructure
All of our infrastructure
products currently incorporate the same underlying technology with a built-in renewable energy source in the form of attached solar panels
and/or a light wind generator, along with battery storage which enables our products to generate and store all of their own electricity
while enabling them to operate without connecting to the grid. . Our products are also able to connect to the grid if a customer values
that capability. We believe that the U.S. and global utility grids lack sufficient capacity to supply enough electricity to all the new
EVs and other electrical devices which are becoming increasingly available to consumers, especially considering the number of national
and state governments that have announced future bans on the sale of gasoline and diesel vehicles, such as Norway starting in 2025, and
Germany starting in 2030, with most bans being put in place no later than 2040. Even locations with a grid connection often lack circuits
which are large enough to support EV charging in any meaningful way. For example, parking lots might have enough electrical capacity to
power lighting but not enough to power EV charging. Beam products provide that power without a requirement to increase the electrical
grid capacity at a site which can often be, and we believe will increasingly be, expensive, disruptive, complex and time consuming.
We believe that there will
be an increasing demand and need for rapidly deployed and highly scalable EV charging infrastructure products which do not require construction
or electrical work, and which do not rely on the utility grid for a supply of electricity. We are not aware of any other products which
provide a similar solution for this need as effectively as our patented products which are listed below:
|
· |
EV ARC™ (Electric Vehicle Autonomous Renewable Charger) – Our most popular product, we believe this patented product is the world’s first and only transportable, solar powered EV charger on the market. The EV ARC™ generates and stores all its own energy and supports Level I, Level II and DC Fast Charging (requiring 4 interconnected units). The electronics are elevated under the solar canopy which makes the unit flood-proof up to nine and a half feet of water. It does not need a grid connection and therefore needs no trenching, switch gear, or transformer upgrades. Because there is no foundation, trench or electrical infrastructure, the EV ARC™ typically does not require a building or any other kind of permit, and it is easily transportable if a different location is desired. EV ARC™ products can charge between one and six EVs simultaneously and a single unit can provide EV charging to as many as 12 parking spaces. |
Because the EV ARC™ systems are
solar powered, they are not disrupted during grid interruptions such as black-outs or brown-outs which is becoming increasingly important
as more transportation relies on electricity for fuel. There are no utility bills to pay and, as the number of EVs increase at a host
location, more EV ARC™ units can be added without disruptive planning or required permits from the utility or local governments.
Current grid-tied EV chargers are often placed in locations where a suitable circuit is most easily accessed and cheapest to install,
rather than in the most convenient and desirable locations for EV drivers. EV ARC™ systems do not need to be connected to the grid
and as such, can be placed anywhere, making them a rapidly deployable and highly scalable solution to EV charging infrastructure.
In 2019, we deployed our first EV ARC™
DC Fast Charging units that provide a 50kW DC fast charge to electric vehicles which provides a
range of up to 1,100 miles per day. We also have a patent pending on a version of the EV ARCTM which, when fully developed,
will be able to provide wireless charging to suitably equipped EVs.
Because EV ARC™ systems are highly
visible, we believe that they are an ideal platform for sponsored deployments wherein networks of EV ARC™ systems are deployed and
owned by us and monetized through sponsorship and naming-rights agreements with corporate sponsors who are eager to have their brands
associated with renewable, clean-energy by sponsoring a city-wide sponsorship of free EV charging through what we refer to as the “Driving
on Sunshine” network which we intend to deploy in highly populated areas where we will deliver free EV charging while monetizing
the network of EV ARCTM systems through corporate sponsorship programs. Our products also create significant reductions in
greenhouse gas and CO2 emissions which, we believe, is a further inducement to encourage corporations to sponsor our network as they may
benefit from the carbon offsets generated by a network of EV ARC™ systems.
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SolarTree® Products – This patented product
is used for larger scale solar powered EV charging applications. We believe our Solar Tree® product to be the only single
column, sun tracking, solar support structure with integrated energy storage, EV charging and media platforms available today. The
design of our Solar Tree® systems are ideal for charging electric buses, electric heavy-duty vehicles, electric agricultural
equipment, public transportation and electric vehicles used in the construction industry. In 2020, we launched our new generation of
Solar Tree® DCFC products with on-board battery storage that do not require a utility grid connection (though grid connection
capability is available). As a result, these products can be rapidly deployed and enable EV charging in remote locations where it
would otherwise be impossible or economically infeasible, such as rest areas, park and ride locations, construction sites, or any
location with insufficient grid connectivity. The costs and environmental impact associated with delivering a 50kW or greater
circuit to a remote rest area may be prohibitive, whereas a Solar Tree® DCFC can be deployed with minimal site
disturbance. |
We believe our Solar Tree® products
with on-board battery storage can provide a highly reliable source of energy to provide emergency power to first responders during times
of emergency or other grid failures. We also believe that our Solar Tree® products which may be optimized for branding can create
a visually appealing platform for the delivery of a sponsor’s brand with a less onerous planning and entitlement process than that
experienced with traditional signage.
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EV-Standard™ Product – On December 31, 2019, we were issued a patent for this product from the United States Patent and Trademark Office. The EV-Standard™ is currently in development and will use an existing streetlamp’s foundation and grid connection. Combining solar, wind-power and the streetlamp grid connection into on board batteries which are stored in the EV Standard’s column, the product will deliver meaningful Level II EV charging at “curbside” or “on street”. The EV-Standard™ design combines a tracking solar panel, wind energy and utility-generated electricity from the existing streetlamp grid connection in a bank of integrated batteries. While most traditional streetlamps do not have sufficient electrical capacity to provide meaningful EV charging, the combination of all three sources of power will do so in a sustainable and economical manner. Densely populated areas do not have large open parking lots and will require EV charging solutions where drivers park on the street. The EV StandardTM can provide that without having to invest in expensive, disruptive and time-consuming construction or electrical work. This product will continue to charge during grid failures and greatly reduces the cost of electricity when compared to an all grid-powered solution. We believe that in some instances EV charging may be deployed at every five lamp standards or even greater density. We believe our patented EV Standard™ product, when developed, will create a significant additional opportunity for product sales and revenue generation. |
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UAV ARC™ drone charging product – On November 24, 2020, we were issued a patent for this product from the United States Patent and Trademark Office. This product is currently in development. The UAV ARC™ is a rapidly deployable, highly scalable, range extending drone recharging product which forms a network intended to provide a range-extending source of battery recharging for drones that would otherwise be limited by range or payload restrictions. UAV ARC™ also captures various data from the drone, such as, its state of health. This and other information will be transmitted to Beam and potentially can be monetized through a variety of business models such as making such data available to the operator of the drone fleet. Beam is considering business models, including a subscription-based model for fuel and data. The ability to recharge on a network of UAV ARC™ products deployed on rooftops in built up areas, undeveloped regions or at sea (marinized version) should dramatically increase the potential range and utility of UAVs. Each UAV ARC™ unit generates and stores all its power from renewable sources so drones will receive clean renewable electricity with no cost-per-unit of energy. The units are completely independent from the power grid, allowing them to provide charging during grid outages and in remote locations. UAV ARC™ will be deployed without the requirement for construction or electrical work. |
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Energy Storage
– The global lithium-ion battery market size
is projected to grow from USD 41.1 billion in 2021 to USD 116.6 billion by 2030;
it is expected to grow at a CAGR of 12.3% from 2021 to 2030 according to MarketsandMarkets Analysis. We are living in an
increasingly electrified world and more of the devices we rely on are no longer connected to a wall socket or any kind of utility
connection. This untethering requires energy storage to be more energy dense and packaged in increasingly smaller and lighter
formats. Physics dictates that the storage and release of electrical energy will create a thermal event. In extreme cases this has
led to some well publicized fires. Our energy storage business unit creates high
performance energy storage solutions used in electric vehicles, micro mobility, aviation, robotics, stationary storage and maritime
applications. We believe that we are unique in the EV charging industry in that we have our own proprietary energy storage
solutions. Our proprietary and patented passive thermal management, modular platform architecture, and scalable battery management
systems (BMS), enhance safety and performance while extending battery life and reducing lifetime stored energy costs. We provide
safe, scalable and high-powered energy storage solutions which have enabled electrified applications in many formats for Fortune 100
companies in the U.S and Internationally. |
Energy Security and Disaster Preparedness
Power outages cost the United
States up to $200 billion per year according to the United States Department of Energy. Our products are fully sustainable and include
battery energy storage that can be used during times of grid or hydrocarbon fueled generator failure or during public safety power shutoff
(PSPS) as may be required in certain jurisdictions. Our primary focus in energy security is to ensure access to EV recharging infrastructure
during grid failures, such as blackouts. As the adoption of EVs increases, it will be critical to have fuel (recharging) infrastructure
that is not reliant on the utility grid with its centralized vulnerabilities. We have witnessed power outages in Texas due to cold weather,
in California and New York due to hot weather and in other parts of the nation whenever inclement conditions such as high winds or flooding
occur. California has also been susceptible to public safety power shutoffs (PSPS) to prevent fires during high wind events. There have
been kinetic and cyber attacks on the grid and the U.S. government has evidence of intrusions by nefarious nation state actors. All of
these events constitute significant vulnerabilities which are expensive, disruptive, inconvenient, and dangerous. As we electrify our
transportation fleets, these events may become catastrophic. The U.S. has a Strategic Petroleum Reserve (SPR) to ensure that it never
runs out of gasoline and diesel, but there is no strategic electric reserve. In fact, many markets are operating at capacity during peak
events.
Beam’s products provide
a hedge against grid failures. Our EV ARC™ and Solar Tree® provide locally generated and stored electricity and are a highly
robust and secure source of power to EVs. We are engaged with government officials at every level to increase awareness of our products
and the benefits they can bring to energy security. We are increasingly hearing suggestions that 25% of all EV charging infrastructure
should be independent of the centralized grid. We believe that our products are uniquely positioned to fulfill this need. Our current
contracts with California, Florida, New York City, and the Federal government through our General Services Administration (GSA) Multiple
Award Schedule Contract should ideally position us to take advantage of what we believe will be a significant increase for the requirements
of robust and sustainable EV charging infrastructure. The Biden administration has stressed increased commitment to:
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American made products |
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Clean Energy |
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Energy Security |
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Electrified transportation |
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Transportation infrastructure |
We believe that our products
are ideally suited to fulfill all of these requirements.
Outdoor Media Advertising
As the value of traditional
advertising media such as television, radio, and print diminish, advertisers in the United States and abroad are looking for new outlets
to capture the attention of consumers. The Company believes there is opportunity in the outdoor advertising space to place outdoor content
on Beam’s infrastructure products. One objective is to sell advertising space on our products to a company, with the proceeds being
used to fund the delivery of EV ARC™ systems. Beam’s current focus in the media space is selling sponsorship and naming rights
to networks of EV ARC™ systems deployed across major cities, using a similar model to the Citibike program in New York City. In
2012, Citigroup Inc. paid $41 million for five years of naming rights on New York’s bike sharing program. Citibank extended the
naming rights agreement for $70 million to cover the period from 2019 to 2024. Beam intends to replicate this model with our Driving
on Sunshine network. Because EV ARC™ systems are highly visible, we believe that they are an ideal platform for sponsored deployments
wherein networks of EV ARC™ systems are deployed and owned by us and monetized through sponsorship and naming-rights agreements
with corporate sponsors who are eager to have their brands associated with the “Driving on Sunshine” network. Our products
also create significant reductions in greenhouse gas and CO2 emissions which, we believe, can be used as a further inducement to encourage
corporations to sponsor the networks as they may benefit from the carbon offsets generated by a network of EV ARC™ systems. We believe
that the EV ARC™ will provide 20 years of service (we have had them operating in the field for almost a decade to date) and will
create a long-term recurring revenue stream from sponsorships. We believe that our Driving on Sunshine network will become more valuable
as more EVs are purchased and used by the public.
In 2020, the Company entered
into a collaboration agreement with the City of San Diego to deploy our solar-powered EV charging infrastructure products across San Diego
(Driving on Sunshine network) and we have engaged a consultant to identify potential sponsors to take advantage of this naming rights
platform.
Strategy
Target Markets
Beam’s target markets
consist of several broad segments: state, municipal and federal governments and agencies, auto manufacturers, corporations, energy utility
companies, universities, retail, hospitality and international markets. These segments can further be broken down into increasingly granular
segments as different market opportunities are identified.
Beam’s largest customers
include the U.S. Federal Government, including the United States Marine Corps, and many other federal agencies, the State of California,
which is a conglomeration of California state agencies and municipalities, and the City of New York. The most attractive markets for Beam
have been New York and California, but we are now seeing growing opportunities throughout the U.S.
The factors below have been
considered in determining favorable markets for our products:
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Political Factors. Political statements, mandates and laws supporting policy to reduce carbon emissions through the electrification of transportation. State and local governments focusing on the transportation industry and the electrification of fleet vehicles to reduce carbon emissions. |
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Economic Factors. The use of grants and incentives to advance the adoption of EVs and EV charging infrastructure. Regions with difficult, time consuming permitting and regulatory requirements and high construction costs. |
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Sociocultural Factors. High concentration of EV drivers and a cultural desire to be good stewards of the environment. |
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Technological Factors. Regions with good insolation, expensive energy costs, and poor or degraded air quality, and a lack of capacity or expensive upgrade requirements for their utility grid. |
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Consumer Products. Auto manufacturers are delivering more diverse and
popular EV models such as Ford’s F150 Lightning, GM’s electric Hummer, Rivian’s RT1, Ford’s E Mustang and Kia’s
EV6 |
Many of these factors have
been important since the early days of EV adoption. Government tail winds are stronger than ever with many nations and states announcing
the outright banning of gasoline and diesel vehicle sales during the next two decades. In the U.S., California has announced a ban starting
in 2035 and the State of Washington has a ban starting in 2030, less than eight years away. In addition, automotive manufacturers have
started production of electric vehicles which are more consistent with traditional car models that have been popular with U.S. consumers.
Ford announced an all-electric F150 pickup truck, available in 2022. Since 1981, the F150 has been the most popular vehicle in the US
and the top selling pickup truck for forty-two years in a row. The electric version of the F150 will have the same towing and payload
capacity and will be able to accelerate from 0 to 60 mph in under four seconds. GM has announced an electric Hummer which will have 1000HP
(compared to the gasoline version with 300HP) with a similar acceleration rate as the F150. A record number of new electric vehicles in
the light-, medium- and heavy-duty categories will be coming to market in 2022.
We believe that the consumer
will adopt EVs faster than many experts are predicting and that as a result, the requirement for growth in EV charging infrastructure
will be more urgent than is currently forecasted or contemplated. We also believe that as the easiest (low hanging fruit) locations for
grid-tied chargers are used up, the process of deploying traditionally installed and powered grid-tied EV chargers will become more expensive
and time consuming. At the same time, we believe that we will continue to reduce the costs to produce our products and become faster at
deploying them. During a period of significant and increasing demand, we believe that our scalability and rapid deployment will create
a significant advantage for our products and our position in the market.
Growth Strategy
The electric vehicle market
is expected to grow at a rapid pace. According to Goldman Sachs, the EV infrastructure market is expected to receive $6 trillion in investments.
Bloomberg forecasts 559M EVs on the road by 2040. In addition, General Motors has committed to only offer zero-emissions vehicles by 2035.
California’s Governor has also issued an executive order that by 2035, all new cars and passenger trucks sold in California must
be zero-emission vehicles. Massachusetts and New Jersey have followed suit and others are expected to follow.
We currently operate in three rapidly growing markets: EV charging infrastructure, outdoor media advertising and energy security and disaster
preparedness. Our products are being used in 29 U.S. states, 170 municipalities, three international countries, and the U.S. Virgin Islands
in the Caribbean. We believe that our products have a global appeal and that we are only at a very early stage in the development
of our sector. We believe that our strategic growth plan will enable us to increase our user base and revenues while increasing profitability.
Our strategic growth plan includes:
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Engaging government relations experts to educate decision makers on the value of our “Made in America” products. |
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Increase marketing efforts to educate potential customers. |
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Expanding our geographic footprint and customer base. |
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Increasing our gross margins by increasing production volumes, improving operating efficiencies and reducing the cost of materials and production. |
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Increase leverage of outsourcing as our manufacturing process scales. |
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Expand our recurring revenue business. |
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Educate potential customers regarding federal and other government grants, investment tax credits, and other incentives available to our customers. |
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Capture market share of the electrified personal and public transportation space, which is at a nascent phase. |
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Continue to expand our Outdoor Media Business unit. |
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Continue to develop and innovate new products and building a strong IP portfolio. |
Sales and Marketing
Beam utilizes a combination
of an in-house sales team and outside consultants and sells through a direct sales and marketing channel, pairing customers with our sales
specialists, or Clean Mobility Experts, to ensure their needs are met.
Our sales process is heavily
focused on educating prospective customers about our products. We have been heavily investing more in marketing materials and videos,
and we have engaged a public relations firm to help us to educate the market. Beam uses research to identify potential customers, as well
as contacts established through trade show events and in-bound calls. We also utilize a combination of regional and industry focused campaigns,
nurturing campaigns, speaking opportunities, product demonstrations, press releases and social media (Facebook, Instagram, Twitter, and
LinkedIn). Beam is, we believe, an industry leader in the sustainable EV charging infrastructure space, and we use our website and social
media to highlight our innovative products and offerings.
The sale of our products often
have long sales cycles due to the large capital expense and sophisticated nature of our products though we have observed a reduction in
the length of certain sales cycles along with an increase in the number of units ordered recently. We believe this is attributable to
an increase in awareness and acceptance of our products as well as an increase in the urgency surrounding the deployment of EV charging
infrastructure. Sales often rely on bureaucratic processes and funding approval which can result in extended sales cycles. We also support
our customers by identifying grants and the federal grant process to reduce the cost of their purchase.
Our products may be eligible
for various tax and other incentives which can significantly reduce the out-of-pocket expense paid by a customer for our products. Examples
of these incentives include:
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Federal Solar Investment Tax Credit (ITC) (Section 48 of the tax code). This may provide a tax credit, which is currently at 26% of the amount of a solar energy system purchase. |
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Rule 179 Depreciation or Bonus Depreciation - allows our customers to accelerate depreciation of their solar energy system up to 100% of the cost of the system in the first year it is in service. |
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Rule 30 C is a tax credit of up to 30% of the cost of the EVSE |
In addition, President Biden
has made several commitments to the funding of clean energy and EV charging at the federal level and we believe the current administration
will continue incentives for products such as ours in the future. Some of the federal and state funding programs include:
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A federal infrastructure bill passed in November 2021 designated $7.5
billion for the deployment of 500,000 EV charging stations across the US, $5.0 billion of which will be made available under the new
National Electric Vehicle Infrastructure (NEVI) Formula Program which is allocated to state transportation departments and an
additional $2.5 billion is available in grant opportunities to help connect rural and marginalized communities to electric vehicles. The Federal Government released a guidance manual on how NEVI funds
should be spent in the first quarter of 2022. A picture of Beam Global’s products was used to illustrate the front cover of that
manual. |
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In January 2022, Governor Newsom presented the California Blueprint, which is his budget proposal that includes $6.1 billion for electric vehicle related initiatives. |
We believe that because our
products are rapidly deployed, enhance energy security and are made in America, that we are well positioned to benefit from these and
other initiatives.
Major Customer Contracts
In 2021 and 2020, we had three
major customer contracts, the State of California, the General Services Administration (GSA) Multiple Award Schedule (MAS) and Electrify
America, LLC that accounted for a substantial portion of our revenue.
Contract with the California
Department of General Services. On June 12, 2015, our bid for solicitation was accepted by the California Department of General
Services (the “California Contract”). The term of the California Contract was initially for one year with two extension options
for one year. California elected to exercise both options to extend. In June 2018, the California Contract was renewed for up to four
more years (two years with two additional one-year options), and its scope was expanded to include more of our products, including our
EV ARC™ DC Fast Charging Electric Vehicle Autonomous Renewable Charger, with a California estimated value of over $20 million. In
January 2021, the contract was extended through June 2022 and was expanded to be utilized by agencies across the U.S. The California Contract
permits California state and local government agencies, including cities, counties, special districts, California State universities,
University of California systems, K-12 school districts, and community colleges, to purchase EV ARCs™, ARC Mobility Trailers, and
related accessories from us. We have sold 161 EV ARCsTM for a total of $11,187,513 through December 31, 2021, which includes
75 units totaling $5,097,631 in 2021.
GSA MAS Contract.
This is a five-year contract effective as of November 1, 2020. It was awarded by the GSA following an extensive evaluation process. This
contract simplifies the federal procurement process and ensures best pricing for our customers. We sold 23 EV ARCs through this contract
totaling $1,853,374 in 2021.
Electrify America Contract.
In October 2019, Beam responded to a Request for Proposal with Electrify America, a subsidiary of Volkswagen Group of America. On February
21, 2020, Beam was awarded a contract for 30 EV ARC units to be deployed in rural areas in central California. During the years ended
December 31, 2021 and 2020, we recognized revenues totaling $1,833,698 for this contract. Beam continues to develop a business relationship
with Electrify America.
Competitors
We do not compete with
EV charging companies or utilities. In fact, we support the major EV charging product and service providers by factory integrating
installing their products into ours prior to deployment. We have deployed ChargePoint, Blink, Enel, Electrify America and many other
quality charging brands. We also do not compete with utilities who use our product as another tool to provide electricity, primarily
for EV charging to their customers. We currently have six utility customers and anticipate that that number will grow as more
utilities become engaged in EV charging and also in deploying distributed generation resources to enhance grid stability. We are not
aware of other companies that provide an infrastructure product similar to ours, utilizing solar energy to power EV charging in a
rapidly deployed and highly scalable construction-free format. We have responded to several competitively bid contracts issued by,
for example, New York City, California, Florida and Massachusetts where we were the only responding company with products that met
the specifications cited in the Request For Proposal. We do compete with a number of companies which are involved in the
design, construction and installation of fixed grid-connected EV charging stations that depend on the utility grid for a source of
power, and on the construction and civil and electrical engineering services for the installation of traditional infrastructure. Our
challenge is to market our products to ensure that potential customers are aware of our product offering.
Competition in the solar renewable
energy and EV charging industries is intense, and competition is fragmented among a wide variety of entities. Companies such as Schneider,
Eaton, Enel X, and Bosch manufacture EV charging units but do not offer charging services. There are many companies which offer installation
services for the EV charging market. They are typically electrical and general contracting companies as well as some larger project management
firms such as Black and Veatch, Bechtel, CH2M Hill and AECOM. Companies such as ChargePoint (NYSE: CHPT) and Blink (NASDAQ: BLNK) offer
EV charging services and hardware but not, typically, installation. Our EV ARC™ units incorporate whatever charger the customer
wants, so in most cases, we are not competing with the charger company, but rather creating opportunities for them which they might not
otherwise have had.
iSun, Inc. (Nasdaq: ISUN)
offers an off-grid charging solution using solar power to charge batteries, but their product is not transportable, does not have solar
tracking, does not fit in a standard parking space and requires permitting, construction and electrical work for its installation.
Volta (NYSE: SNPR) is a
San Francisco based EV charging company which derives revenue through the sale of advertising. Volta provides some free charging for
EVs and are deployed in shopping malls and other similar locations. While they do not have solar-powered, rapidly deployed
infrastructure solutions, their business model of using media revenue instead of EV charging fees most closely matches our media
business model.
Many solar companies are now
fixing EV chargers to their parking lot structures and some are offering packages combining solar rooftop installations and EV charger
installations for the residential marketplace. These installations are almost always grid-tied, require construction and electrical work
and do not include energy storage.
Another example of an entity
which is providing free or discounted EV charging infrastructure is Electrify America, the EV charging provider is required to spend approximately
$2 billion on EV charging infrastructure ($800 million in California) to satisfy the requirements of a settlement with the U.S. government.
Electrify America is a customer of Beam and has used our products to assist in the deployment of their EV charging network.
We also face competition,
to some extent, from entities which are offering free or discounted EV charging infrastructure to our prospective customers. Utilities
such as the three large IOUs (investor-owned utilities) in California (SDG&E, PG&E, SCE) have successfully lobbied the California
Public Utility Commission for permission to rate base the costs of installations of EV chargers. As a result, they can offer the installation,
or “make readies” of electrical circuits and other civil infrastructure, for a lower price or in some instances for free,
to certain customers. We are adding utilities to our customer base and have provided product to six utilities to date. We do not view
utilities as long-term competition and instead view them as a significant opportunity as they increasingly add off grid solutions to their
energy mix.
Where energy security is concerned,
we view the competition from companies that produce generators and combined solar and storage solutions. Companies in this space range
from small startup companies like Green Charge Networks to behemoths like General Electric and NEC. Siemens, Eaton, Schneider and other
large electrical component companies are all also working on combined renewables/storage product solutions. We are in contact with all
these companies and have not observed that any of them have a product which provides all the same value and differentiation that our EV
ARC™ product delivers because our EV ARC™ systems are transportable, rapidly deployed and offer multiple layers of value beyond
EV charging and emergency power. For example, during 2020, our EV ARC™ products were repurposed by our customers from customer locations
to Covid-19 Emergency Pop-Up Centers to provide remote emergency power and EV charging.
Our competitive advantage
over these other solutions includes:
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Rapid deployability and scalability of our products. Our products offer a turnkey product solution that is manufactured in our facility and delivered to a customer and deployed in minutes. This compares with requiring an entire ecosystem involving the design, engineering, permitting and constructing of civil projects which requires engaging a company, or group of companies, including architects, civil engineers, electrical engineers, zoning specialists, consultants, general contractors, electrical contractors, and EVSE vendors. These grid-tied projects can take six months to two years to complete. |
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Lower total cost of ownership. Beam’s products are powered by renewable sources. As a result, there is no charge for on-going energy to power vehicles because our products do not generate a utility bill. |
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Ability to operate during blackouts and brownouts. In addition, most units provide an emergency power panel that can be used for emergency power to charge other devices and emergency equipment during outages. Typical grid-tied solutions fail during grid failures and do not provide a source of emergency power. Even those grid-tied solutions that have back up battery integration rely on the grid to charge their batteries. During prolonged grid failures, those systems fail while Beam products continue to operate. |
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Because a grid connection is not required, Beam’s EV ARC™
can be located anywhere, including remote locations that are hard to connect to a grid. Most grid-tied chargers are deployed in locations
where the utility grid is easy and inexpensive to connect to. Many EV drivers have experienced this when they find charging units behind
supermarkets next to dumpsters. This is because the utility grid interconnection exists at the back of the store and as such that is the
cheapest place to deploy. We believe that early adopters of EVs are more willing to make these sorts of concessions than mainstream consumers
will be. We believe that in the future two impacts will drive the installation of EV chargers in more expensive and complicated locations
where grid connection is concerned. First, the locations close to grid connections will be used first and second mainstream consumers
will not be content with parking and charging in less convenient locations. Both impacts will drive the deployment of EV chargers
in front of stores and other locations where people want to park. Those locations typically do not have readily available grid connections
so the cost and complexity to bring the grid to the charger will increase dramatically. The cost and complexity to deploy our products
will not increase and in fact, we believe that, like any other manufacturing company, our costs will decrease while our efficiency and
deployment velocity increases. |
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Environmentally sound product using clean energy. Grid-tied chargers rely upon electricity, more than 60% of which is generated by burning fossil fuels. The electricity our products provide is 100% emissions free. Furthermore, the construction activities required to dig trenches, pour concrete and perform the other tasks related to the construction and electrical installation of a grid-tied charger are environmentally impactful and reduce the environmental benefits of EVs. Our products are deployed with minimal or no disruption or environmental impact making them a cleaner choice. |
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Beam products can be relocated which gives the customer the flexibility to move it if a job site changes or business needs change. Grid-tied installations are a permanent solution. Many of our customers operate in leased facilities. The transportability of our products means that a customer can remove them when a lease matures whereas grid-tied solutions become tenant improvements and a sunk investment. |
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BeamTrak™, our patented solar tracking solution which causes the solar array to follow the sun generating up to 25 percent more electricity than a fixed array, is a significant advantage for our products over any similar offering. Our unique ability to deliver 25% more driving miles to an EV from an off-grid solar installation is, we believe, a significant differentiator. |
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Our ability to continuously improve our product’s energy production while reducing costs means that while the grid-tied competition is stuck at a theoretical maximum amount of energy that can be delivered at a given location, our products have continued to deliver more power without costing more. |
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Beam offers a product that delivers DC fast charging solely from solar generation, which we have not seen in the market to date. |
Manufacturing
We are headquartered in San
Diego, California in a leased building of approximately 53,000 square feet professionally equipped to handle the significant growth possibilities
we believe are in front of us. The facility houses our corporate operations, sales, design, engineering and product manufacturing. We
are currently staffed for one shift, five days a week and believe that at that level we can produce approximately 260 EV ARC™ units
per year. We also believe that with an expansion of human resources, capital investment, increased engagement of contract manufacturing
and operating 3 shifts, seven days a week we could produce approximately 4,000 EV ARC™ units a year from our current facility. As
a result of our recent acquisition, we now also lease an 18,000 sq/ft facility in Broadview Il where we produce our energy storage products
for our own products and also for a variety of other customers who need energy storage solutions.
All of our products are currently
designed, developed and manufactured in this facility. We have been able to reduce our costs and improve our quality by performing fabrication
in-house. This also provides a good environment for improving the manufacturing process as well as for the development of new products.
Many of our suppliers are local which allows for shorter lead times and lower transportation costs. The EV ARC™ product family requires
no field installation work and is typically delivered to the customer site by us or by a third-party transportation company for a fee.
We sell our Solar Tree® products as an engineered kit of parts to be installed by third parties employed by the buyer of the Solar
Tree® kit.
We continually endeavor to
reduce component costs and make production improvements in both our products and our processes to reduce our manufacturing costs, while
maintaining the high quality for which we strive. As unit sales continue to increase, we anticipate that we will be able to spread our
fixed overhead costs over more units, reducing the cost per unit.
Customer Concentration
During 2021, 55% of our revenue
was attributable to the state agencies and municipalities in the State of California.
Backlog
Our backlog at December 31,
2021 was $4.1 million, of which $3.9 million is deliverable within twelve months. Reported backlog represents firm purchase orders or
contracts received by customers for deliveries scheduled in the future.
Government Regulation
Businesses in general are subject to extensive regulation at the federal, state, and local level. We are subject
to extensive government regulation relating to employment, health, safety, working conditions, labor relations, and the environment in
the course of the conduct of our business. In order for our customers to enable the installation of some of our products, they can be
required to obtain permits from local and other governmental agencies. In the case of our grid-tied products, they must comply with the
applicable rules and regulations of the relevant state public utility agencies. In order for our customers to take advantage of available
tax and other governmental incentives associated with the installation of solar power production facilities, and the production and use
or sale of solar power, they must comply with the applicable regulatory terms and conditions. Changes to new government regulations may
have a material adverse impact on our business, operating results, and financial condition.
Employees
As of the date
of this report, we have 86 employees, of which 8 are temporary employees. Most of the temporary employees are retained through a temporary
employment agency to maximize our flexibility and to reduce the risks and costs associated with permanent employees. We believe our employee
relations to be good. None of our employees are represented by a labor union or collective bargaining agreement.
You should carefully
consider the following risk factors, in addition to the other information contained in this report on Form 10-K, including the section
of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere
in this report occurs, our business, operating results and financial condition could be seriously harmed. This report on Form 10-K also
contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of factors that are described below and elsewhere in this report.
We have sustained recurring
losses since inception and expect to incur additional losses in the foreseeable future. We were formed on June 12, 2006 and
have reported annual net losses since inception. For our fiscal years ended December 31, 2021 and December 31, 2020, we experienced net
losses of $6,596,039 and $5,213,025, respectively (reflects cash and noncash expenses under generally accepted accounting principles).
Further, as of December 31, 2021, we had an accumulated deficit of $57,618,645. In addition, we expect to incur additional losses in the
future, and there can be no assurance that we will achieve profitability. Our future viability, profitability and growth depend upon our
ability to raise capital and successfully operate and expand our operations. We cannot assure that any of our efforts will prove successful
or that we will not continue to incur operating losses.
We may need to raise
additional capital or financing to continue to execute and expand our business. We expect that the net proceeds from the
public offering in 2020 will be sufficient to sustain our operations for at least the next twelve months, until we are able
to generate positive cashflow through our operations. However, we may need to raise additional capital to fund investment in our business
or if it takes longer than expected to achieve positive cashflow. We may be required to pursue sources of additional capital through various
means, including sale and leasing arrangements, and debt or equity financings. If the amount of capital we are able to raise from financing
activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may have to reduce our operations
accordingly.
We
face risks related to COVID-19 which could significantly disrupt our manufacturing, research and development, operations, sales and financial
results. Our business may be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic
effects, the COVID-19 outbreak, and any other related adverse public health developments may cause disruption to our business operations
and sales activities. Our employees, suppliers and customers have been and will continue to be disrupted by absenteeism, quarantines and
restrictions on employees’ ability to work, office and factory closures, delays on deliveries, or other travel or health-related
restrictions. Depending on the magnitude of such effects on our manufacturing, or the operations of our suppliers, manufacturing and product
shipments will be delayed, which could adversely affect our business, operations. In addition, COVID-19 or other disease outbreak will
in the short-run, and may over the longer term, adversely affect the economies and financial markets within the U.S., resulting in an
economic downturn that will affect demand for our products, impact our operating results, and have a negative impact on our stock price.
There can be no assurance that any decrease in sales resulting from COVID-19 will be offset by increased sales in subsequent periods.
Although the magnitude of the impact of the COVID-19 outbreak on our business and operations has been minor, it remains uncertain, the
continued spread of the COVID-19 or the occurrence of other epidemics may adversely impact our business, financial condition, operating
results and cash flows. Because we provide energy and transportation resources which we believe are considered essential services, we
are able to continue to produce and deliver products. However, it is possible that we will experience disruptions to our business operations
resulting from quarantines, self-isolations, or other restrictions on the ability of our employees to perform their jobs that may impact
our ability to manufacture and deliver products.
Our revenues are concentrated
in a small number of customers and they may decrease significantly if we were to lose one of these customers. We have a few large
customers including the State of California’s Department of General Services and Electrify America, LLC that generated 38% and 2%,
respectively, of revenues in 2021 and 6% and 30%, respectively, of revenues in 2020. We have a contract with the State of California which
can be used by a diverse group of state and local agencies within the state or across the country for the purchase of our products. The
receipt of orders under this contract has been irregular and can create fluctuation in our revenues. In addition, there is no obligation
for this customer to purchase any additional units, or to renew the contract when it expires. The State of California contract will expire
on June 23, 2022. We are in the process of renewing this contract with the state. If this customer significantly reduced their purchases
or terminates their contract, our results of operations would be adversely affected.
Our revenue growth depends
on consumers’ willingness to adopt electric vehicles. Our growth is highly dependent upon the adoption of electric
vehicles (“EV”), and we are subject to a risk of any reduced demand for EVs. If the market for EVs does not gain broad market
acceptance or develops more slowly than we expect, our business, prospects, financial condition and operating results may be harmed. The
market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition,
additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles
for EV original equipment manufacturers, and changing consumer demands and behaviors. Factors that may influence the purchase and use
of alternative fuel vehicles, and specifically EVs, include:
|
· |
perceptions about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of EVs; |
|
· |
the limited range over which EVs may be driven on a single battery charge and concerns about running out of power without access to sufficient charging infrastructure; |
|
· |
improvements in the fuel economy of the internal combustion engine; |
|
· |
the environmental consciousness of consumers; |
|
· |
volatility in the cost of oil and gasoline; |
|
· |
consumers’ perceptions of the dependency of the U.S. on oil from unstable or hostile countries and the impact of international conflicts; |
|
· |
government regulations and economic incentives promoting fuel efficiency and alternate forms of energy; |
|
· |
access to charging stations and consumers’ perceptions about convenience and cost to charge an EV; and |
|
· |
the availability of tax and other governmental incentives to purchase and operate EVs or future regulation requiring increased use of nonpolluting vehicles. |
The influence of any of these
factors may negatively impact the widespread consumer adoption of EVs, which could materially adversely affect our business, operating
results, financial condition and prospects.
We face intense competition,
and many of our competitors have substantially greater resources than we do. We are not aware of other companies that provide
a similar infrastructure product that we do, utilizing solar energy to power EV charging in a transportable product. However, we compete
with traditional grid-tied charging stations. Our challenge is to market our products in the industry to ensure that potential customers
in this industry are aware of our product offering. Competition in the solar renewable energy and EV charging industries is intense, and
competition is fragmented among a wide variety of entities. We operate in a highly competitive environment that is characterized by price
fluctuations and rapid technological change. Our competitors often have greater market recognition and substantially greater resources
than we do. Competition for Request For Proposals, and in our market in general, may intensify in the future. Competitors may develop
products based on new solar power technologies that may ultimately have costs similar to, or lower than, our projected costs. If we fail
to compete successfully, our business would suffer and we may lose or be unable to gain market share and our business and results of operations
would be adversely affected.
The solar energy industry
and in particular, as it is utilized for EV charging, is an emerging market that is constantly evolving and may not develop to the size
or at the rate we expect. The solar energy industry, especially as it applies to EV charging, is an emerging and constantly evolving
market. We believe the industry will take several years to fully develop and mature, and we cannot be certain that the market will grow
at the rate we expect. Any future growth of the solar energy market in general, and for EV charging in particular, and the success of
our products depend on many factors beyond our control. These factors include without limitation recognition and acceptance of EVs and
EV charging products by customers and users, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation
of expected tax benefits and other incentives and our ability to provide our product offerings cost-effectively. If the markets for EV
charging do not develop at the rate we expect, our business may be adversely affected.
Tariffs imposed pursuant
to Section 201 of the Trade Act of 1974 could significantly and adversely affect our business, revenues, margins, results of operations,
and cash flows. On January 23, 2018, the President of the United States issued Proclamation 9693, which approved recommendations
to impose safeguard tariffs on imported solar cells and modules, based on the investigations, findings, and recommendations of the U.S.
International Trade Commission (the “International Trade Commission”). Recently, we have purchased solar panels exclusively
from one supplier who is exempt from these tariffs. However, additional tariffs were imposed on other products, including cells used in
our batteries. It is possible that tariffs may increase the costs and restrict the supply of certain of our components, causing us harm.
The imposition of tariffs is likely to result in a wide range of impacts on the targeted U.S. industries and the global market in general.
Such tariffs, if our products or the parts we use to manufacture our products are ultimately determined to be subject to them, could result
in significant additional costs to us. If we elected to pass such increase in costs on to our customers, they could cause a significant
reduction in demand for our products. We currently have no plans to use modules which are subject to tariffs.
Existing regulations
and policies and changes to these policies may present technical, regulatory, and economic barriers to the purchase and use of solar power
products, which may significantly reduce demand for our products and services. The market for electric generation products is
heavily influenced by federal, state and local government laws, regulations and policies concerning the electric utility industry in the
United States and abroad, as well as policies adopted by electric utilities. Changes that make solar power less competitive with other
power sources could result in a significant reduction in the demand for our products. The market for electric generation equipment is
also influenced by trade and local content laws, regulations and policies that can discourage growth and competition in the solar industry
and create economic barriers to the purchase of solar power products, thus reducing demand for our products. Any new regulations or policies
pertaining to our products may result in significant additional expenses to us, which could cause a significant reduction in demand for
our solar power products.
In high demand locations,
the use of our products could exhaust their electricity supply on particular days, even with our storage batteries. Our solar
products create and store electricity during daylight hours. While this process has generally been effective to meet daily EV charging
and energy storage demand, it is possible that heavy charging could cause a power draw exceeding the onboard electricity generation and
storage capacity. In such instances, except for our grid-connected products, the EV charger would have to recharge through solar energy
replenishment or other direct outside charge before EV charging could resume.
Developments in alternative
technologies or improvements in distributed solar energy generation may have a material adverse effect on demand for our offerings. Significant
developments in alternative technologies, such as advances in other forms of distributed solar power generation, storage solutions, such
as batteries, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of
centralized power production, transmission and distribution, may have a material adverse effect on our business and prospects. Any failure
by us to adopt new or enhanced technologies or processes, or to react to changes in existing technologies, could result in product obsolescence,
the loss of competitiveness of our products, decreased revenue and a loss of market share to competitors.
Defects or performance
problems in our products could result in loss of customers, reputational damage, and decreased revenue, and we may face warranty, indemnity,
and product liability claims arising from defective products. Although our products meet our stringent quality requirements, they
may contain undetected errors or defects, especially when first introduced or when new generations are released. Errors, defects, or poor
performance can arise due to design flaws, defects in raw materials or components or manufacturing difficulties, which can affect both
the quality and the yield of the product. Any actual or perceived errors, defects, or poor performance in our products could result in
the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion
of our engineering personnel from our product development efforts, and increases in customer service and support costs, all of which could
have a material adverse effect on our business, financial condition, and results of operations.
We may be subject to
product liability claims. If one of our products were to cause injury to someone or cause property damage, including as a result
of product malfunctions, defects, or improper installation, then we could be exposed to product liability claims. We could incur significant
costs and liabilities if we are sued and if damages are awarded against us. Further, any product liability claim we face could be expensive
to defend and could divert management’s attention. The successful assertion of a product liability claim against us could result
in potentially significant monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive
position, and adversely affect sales of our products. In addition, product liability claims, injuries, defects, or other problems experienced
by other companies in the solar industry could lead to unfavorable market conditions for the industry as a whole and may have an adverse
effect on our ability to attract new customers, thus harming our growth and financial performance.
If we are unable to
keep up with advances in EV technology, we may suffer a decline in our competitive position. The EV industry is characterized
by rapid technological change. We do not manufacture the EV service equipment (EVSE) which connects to the EV, rather, we deliver power
to other vendors’ EVSE products. As such, we believe that we are less prone to impacts caused by changes in EV technology. Nevertheless,
if we are unable to keep up with changes in EV technology or the costs associated with such changes, our competitive position may deteriorate
which would materially and adversely affect our business, prospects, operating results and financial condition. As technologies change,
we plan to upgrade or adapt our EV products in order to continue to provide EV charging services with the latest technology.
If a third party asserts
that we are infringing upon its intellectual property, it could be costly and time-consuming litigation, and our business may be harmed.
The EV and EV charging industries are characterized by the existence of a large number of patents, copyrights, trademarks and
trade secrets. Although we are not presently aware of any current or threatened third party intellectual property rights claims against
the Company, there is a risk that the Company could face third party intellectual rights claims against its products and challenges to
the validity or enforceability of its products and trademarks in the future which could harm our relationships with our customers, may
deter future customers from subscribing to our services or could expose us to litigation with respect to these claims.
The success of our business
depends in large part on our ability to protect and enforce our intellectual property rights. We rely on a combination of patent,
copyright, service mark, trademark, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish
and protect our proprietary rights. We cannot assure you, however, that we will be successful in obtaining these patents, service marks
or trademarks, or that these applications will not be challenged, that others will not attempt to infringe upon our rights, or that these
filings will afford us adequate protection or competitive advantages. If we are unable to protect our rights to our intellectual property
or if such property infringes on the rights of others, our business could be materially adversely affected.
The success of our business
depends on the continuing contributions of Desmond Wheatley and other key personnel who may terminate their employment with us at any
time, and we will need to hire additional qualified personnel. We rely heavily on the services of Desmond Wheatley, our chairman
and chief executive officer, as well as other management personnel. The Compensation Committee is working with a compensation consultant
to structure a long-term compensation plan to retain key employees, however, loss of the services of any such individuals would adversely
impact our operations. In addition, we believe our technical personnel represent a significant asset and provide us with a competitive
advantage over many of our competitors. Our future success will depend upon our ability to retain these key employees and our ability
to attract and retain other skilled financial, engineering, technical and managerial personnel.
If we are unable to
attract, train and retain highly qualified personnel, the quality of our services may decline and we may not successfully execute our
growth strategies. Our success depends in large part upon our ability to continue to attract, train, motivate and retain highly
skilled and experienced employees, including technical personnel. The loss of personnel or our inability to hire or retain sufficient
personnel at competitive rates of compensation could impair our ability to secure and complete customer engagements and could harm our
business.
We are exposed to various
possible claims and hazards relating to our business, and our insurance may not fully protect us. Although we maintain modest
theft, casualty, liability, cyber and property insurance coverage, along with worker’s compensation and related insurance, we cannot
assure that we will not incur uninsured liabilities and losses as a result of the conduct of our business. In particular, we may incur
liability if one or more of our other products are deemed to have caused a personal injury. Should uninsured losses occur, they would
have a material adverse effect on our operating results, financial condition, and business performance.
We may face litigation
in the future. As a manufacturer and seller of goods, we are exposed to the risk of litigation for a variety of reasons in addition
to reasons relating to intellectual property rights, including product liability lawsuits, employee lawsuits, commercial contract disputes,
government enforcement actions, and other legal proceedings. We cannot assure that future litigation in which we may become involved will
not have a material adverse effect on our financial condition, operating results, business performance, and business reputation.
The costs incurred by
us to develop and manufacture our products may be higher than anticipated which could hurt our ability to earn a profit. We may
incur substantial cost overruns in the development, manufacture, and distribution of products. Unanticipated costs may force us to obtain
additional capital or financing from other sources and would hinder our ability to earn a profit. If we incur cost overruns, there is
no assurance that we could obtain the financing or capital to cover them. If a greater investment in the business is required because
of cost overruns, the probability of earning a profit or a return of the shareholders’ investment in Beam is diminished.
The equipment comprising
our products currently charge at rates that are comparable to the average charging speed of competitors, but that may change in the future.
Our standard EV ARC™ as a stand-alone does not provide a DC Fast Charge, rather, it charges EVs at a Level II pace which
is consistent with the majority of installed EV chargers in the U.S. To date, we have found that since most EV trips are relatively short
and local, the standard EV ARC™ has satisfied consumer demand. Our EV ARC™ HP DC Fast Charging Electric Vehicle Autonomous
Renewable Charger can provide a DC Fast Charge, so we believe we can compete in that market. Nevertheless, the demand for faster EV charging
may increase in the future, requiring us to adjust our marketing and sales strategies. There is no assurance that our equipment will remain
competitive in the market in the future, causing possible customer complaints and claims, and the loss of sales in the future.
Our Company depends
on key suppliers. The Company sources its materials and components from a wide variety of vendors. They are standard off-the-shelf components, but these components differ
between manufacturers in terms of their specifications and performance. If one of these components became unavailable, it could hinder
our ability to operate profitably and have a material adverse impact on our operating results, financial condition and business performance.
We would be able to secure supply from another source and incorporate it in our design, but it would require modifications which could
impact product deliveries. For these components, we maintain adequate supply to mitigate any supply risk.
We have experienced
technological changes in our industry. New technologies may prove inappropriate and result in liability to us or may not gain market acceptance
by our customers. The industries in which we operate are subject to constant technological change. Our future success will depend
on our ability to appropriately respond to changing technologies and changes in function of products and quality. If we adopt products
and technologies that are not attractive to consumers, we may not be successful in capturing or retaining a significant share of our market.
In addition, some new technologies are relatively untested and unperfected and may not perform as expected or as desired, in which event
our adoption of such products or technologies may cause us to lose money.
Existing regulations,
and changes to such regulations, may present technical, regulatory and economic barriers to the purchase and use of our products, which
may significantly reduce demand for our products. Installation of a small number of our products is subject to oversight and regulation
in accordance with national and local ordinances, building codes, zoning, environmental protection regulation, utility interconnection
requirements for metering and other rules and regulations. In particular, our new EV Standard™ product, designed to provide curbside
EV charging through existing or newly installed street lampposts owned by municipalities and utilities, will require close cooperation
with, and supervision by, local government agencies. We attempt to keep up-to-date about these requirements on a national, state, and
local level, and must design systems to comply with varying standards. Certain cities may have ordinances that increase the cost of installation
of our products. In addition, new government regulations or utility policies pertaining to power systems are unpredictable and may result
in significant additional expenses or delays in the installation of our grid-connected products and, as a result, could cause a significant
reduction in demand, especially for our EV Standard™ product.
Our media branding and
advertising strategy may not result in a profitable operation of that segment of our business. We are able to equip our EV
ARC™ and Solar Tree® platforms with digital advertising screens with content that can be controlled directly, and in some cases,
remotely. We may also sell other forms of media across our product platforms, such as naming rights or sponsorship deals, as well as traditional
fixed media. There is no assurance that the revenue model crafted for this capability will be successful or profitable or will not result
in operating losses or rejection by government regulators or consumers. Sponsors and advertisers for the service may not materialize or
be willing to pay the rates sought by us or our customers.
Our business is impacted
by the availability to our customers of rebates, tax credits and other financial incentives, the reduction, elimination or uncertainty
of which would reduce the demand for our products. Many states offer substantial incentives to offset the cost of solar power
systems, battery storage systems and EV charging infrastructure. These incentives can take many forms, including direct rebates, state
tax credits, system performance payments and Renewable Energy Credits (RECs). Moreover, the federal government currently offers a 30%
tax credit for the installation of solar power systems and associated energy storage systems. There are additional federal grants available
that encourage renewable investment. Businesses may also elect to accelerate the depreciation on their systems in the first year of ownership.
Uncertainty about the introduction of, reduction in, or elimination of such incentives, or delays or interruptions in the implementation
of favorable federal or state laws could substantially increase the cost of our systems to some of our customers, resulting in significant
reductions in demand for our products from non-governmental customers, which would negatively impact our sales.
Our business strategy
may depend on the widespread adoption of solar power and EV charging technology. The market for solar power products is emerging
and rapidly evolving, and its future success is uncertain. If solar power technology proves unsuitable for widespread commercial deployment
or if demand for solar power products fails to develop sufficiently, we could be unable to generate enough revenues to achieve and sustain
profitability and positive cash flow. The factors influencing the widespread adoption of solar power technology include but are not limited
to:
|
· |
cost-effectiveness and efficiency of solar power technologies as compared with conventional and non-solar alternative energy technologies; |
|
· |
performance and reliability of solar power products as compared with conventional and non-solar alternative energy products; |
|
· |
fluctuations in economic and market conditions which impact the viability of conventional and non-solar alternative energy sources, such as increases or decreases in the prices of oil and other fossil fuels; |
|
· |
continued deregulation of the electric power industry and broader energy industry; and |
|
· |
availability of governmental subsidies and incentives. |
Compliance with new
and existing environmental laws and rules is required. Compliance with new and existing environmental laws and rules could significantly
increase construction and start-up costs for our customers, deterring customers from purchasing a small sub-set of our products and services.
To install Beam’s Solar Tree® products, our customers may be required to obtain and comply with a number of permitting requirements.
As a condition of granting necessary permits, regulators could make demands that increase our customers’ expected costs of construction
and operations, in which case they may delay or cancel delivery of certain sub-sets of our products. Environmental issues, such as contamination
and compliance with applicable environmental standards could arise at any time during the construction and operation of a customer’s
project. If this occurs, it could require a customer to spend additional resources to remedy the issues and may delay or prevent construction
or operation of the project. This is why we have focused on the development of autonomous infrastructure products which do not require
construction for their deployment.
The success of our sales
is dependent upon a continued need for renewable energy. The topic of alternative fuels has retained a significant status in the
consciousness of the American people, but interest in developing and utilizing alternative fuels could wane unexpectedly at any time.
If such interest were lost or if the demand for alternative fuels were to decrease substantially, the Company could encounter problems
generating sufficient revenue to achieve or sustain profitability or meet its working capital requirements.
The success of our product
offering may in some instances require the availability of locations provided by municipalities or private owners of real estate. Our
ability to sell branding opportunities or licenses could be highly dependent on the availability of real estate to locate our product,
or municipal approval for visible branding. We cannot assure that these rights will be available to us in the future or will be available
on terms acceptable to us. The lack of availability of these rights could have a material adverse effect on our results of operations
and financial condition in our media business unit. We may operate part of our business in which leasing or licensing agreements with
venues or municipalities are necessary, so the long-term success of this aspect of our business could depend upon our ability to initiate
such agreements and to renew these agreements upon their termination. We cannot assure that we will be able to renew these agreements
on acceptable terms or at all, or that we will be able to obtain attractive agreements with substitute venues.
Risks Relating to our Organization and our Common Stock
The Company was formerly
a shell company. Because we merged with a non-operating shell company in 2010, our stock that is not registered with the SEC may
become subject to certain additional restrictions if we fail in the future to stay current in our reporting requirements with the SEC.
Our failure to meet
the continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market
price and liquidity of our common shares and our ability to access the capital markets. Our common stock is listed on the
Nasdaq Capital Market. If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements,
Nasdaq may take steps to delist our common stock. Such a delisting would have a negative effect on the price of our common stock, impair
the ability to sell or purchase our common stock when persons wish to do so, and any delisting materially adversely affect our ability
to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from the
Nasdaq Capital Market could also have other negative results, including the potential loss of institutional investor interest and fewer
business development opportunities. In the event of a delisting, we would attempt to take actions to restore our compliance with
Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to
become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below
the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
We have identified a
material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability
to report our results of operations and financial condition accurately and in a timely manner. If we fail to comply with the rules under
the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover material weaknesses and other deficiencies
in our internal controls over financial reporting, our stock price could decline and raising capital could be more difficult.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our
internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected
on a timely basis. If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures,
or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could
significantly decline, and our business and financial condition could be adversely affected. If material weaknesses or significant deficiencies
are discovered or if we otherwise fail to achieve and maintain the adequacy of our internal control, we may not be able to ensure that
we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404
of the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reports and
are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business
and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of
our common stock could decline significantly.
We currently do not have manufacturing
or purchasing systems in place to track inventory and purchasing transactions or a perpetual inventory system. The Company performs manual
processes during the year to track and control our inventory and purchases. 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. We plan to invest in new systems in 2022 to automate these functions. We intend to take certain remedial actions intended
to address the identified material weakness in our internal control over financial reporting. However, we can give no assurance that such
measures will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results
will not arise in the future.
Our stock price may
be volatile. The public market trading price of our common stock is likely to be highly volatile, may decline, and could fluctuate
widely in response to various factors, many of which are beyond our control, including the following:
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changes in our industry; |
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competitive pricing pressures; |
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our ability to obtain working capital financing; |
|
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additions or departures of key personnel; |
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· |
limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock; |
|
· |
sales of our common stock privately or in the public market, by us or by other shareholders; |
|
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our ability to execute our business plan; |
|
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operating results that fall below expectations; |
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loss of any strategic relationship; |
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adverse regulatory developments; |
|
· |
adverse economic and other external factors; |
|
· |
additional dilution of ownership because of the issuance of new securities by us, and period-to-period fluctuations in our financial condition or operating results. |
In addition, the securities
markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Offers or availability
for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline. If our
stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period
under Rule 144 or issued upon the exercise of outstanding options or warrants, the market price of our common stock could decline because
of or in anticipation of the selling pressure. The existence of anticipated sales, whether or not sales have occurred or are occurring,
also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the
future at a time and price that we deem reasonable or appropriate.
ITEM 1B. |
UNRESOLVED STAFF COMMENTS. |
None.
Our corporate headquarters
are located at 5660 Eastgate Dr., San Diego, California 92121. We lease approximately 53,000 square feet of office and warehouse space
pursuant to a five-year lease that extends through August 30, 2025, with two one-year renewal options.
ITEM 3. |
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 December 31, 2021, and the date of this
report, the Company is not involved in any material litigation matters.
ITEM 4. |
MINE SAFETY DISCLOSURES. |
Not Applicable.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
1. |
CORPORATE ORGANIZATION, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
CORPORATE ORGANIZATION
Beam Global (formerly Envision
Solar International, Inc.) was incorporated in June 2006 as a limited liability company (“LLC”). Through a series of transactions
and mergers, including a series of 2010 transactions where the then existing entity was acquired by an inactive publicly held company
in a transaction treated as a recapitalization of the company, the resulting entity became Envision Solar International, Inc., a Nevada
Corporation. On September 15, 2020, Envision Solar International, Inc. announced its rebranding and changed its corporate name to Beam
Global (hereinafter the “Company”, "us", "we", "our" or "Beam") and trading on Nasdaq:
BEEM and BEEMW.
NATURE OF OPERATIONS
Beam is a cleantech innovation
company based in San Diego, California. We develop, design, engineer, manufacture and sell high-quality, renewably energized infrastructure
products for electric vehicle (“EV”) charging, outdoor media and branding, 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.
Beam’s products and
proprietary technology solutions target three markets that are experiencing significant growth with annual global spending in the billions
of dollars:
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· |
electric vehicle (EV) charging infrastructure; |
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energy security and disaster preparedness; and |
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outdoor media advertising. |
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 saw seen some delays and cancellations of opportunities in our pipeline in 2020 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 years ended December 31, 2020 and December 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 accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable,
valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of intangible assets, 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.
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 December 31, 2021. As of December 31, 2021, approximately $22,070,000 of the Company’s
cash deposits were greater than the federally insured limits.
Major Customers
The Company continually assesses
the financial strength of its customers. For the year ended December 31, 2021, two customers accounted for 33%
and 13%
of total revenues each. For the year ended December 31, 2020, revenues from one customer accounted for 30%
of total revenues. At December 31, 2021, accounts receivable from four customers accounted for 30%, 22%, 13%
and 10%
of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At
December 31, 2020, accounts receivable from two customers accounted for 61%
and 13%
of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance. For
the years ended December 31, 2021 and 2020, the Company had a heavy concentration of sales to federal, state and local governments
which represented 86%
and 53%
of revenues, respectively.
CASH AND CASH EQUIVALENTS
For the purposes of the 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 December 31, 2021 or December 31, 2020.
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 December 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. There were no allowances for doubtful accounts as of the years ended December 31, 2021 and 2020.
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 normal capacity in the manufacturing process. The Company regularly reviews inventory components and quantities on hand and
performs annual physical inventory counts.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment is
recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of
3 to 7 years. Expenditures for maintenance and repairs, along with fixed assets below our capitalization threshold, are expensed as incurred.
PATENTS
The Company believes it will
achieve future economic value benefits for its patents. 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. Accumulated
amortization related to patents was $30,175 and $11,574 as of December 31, 2021 and 2020, respectively. Patent amortization expense was
$18,600 and $4,502 in the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the estimated patent amortization
expense for each of the five succeeding years is $13,307.
LEASES
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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived
assets in accordance with the provisions of Accounting Standards Codification (“ASC”) 360-10-35-15 “Impairment or Disposal
of Long-Lived Assets.” This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
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.
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.
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. The Company
accrues for product warranties when the loss is probable and can be reasonably estimated. At December 31, 2021, the Company has no
product warranty accrual based on 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 costs as cost of revenues.
RESEARCH AND DEVELOPMENT
In accordance with ASC 730-10,
“Research and Development,” expenditures for research and development of the Company’s products are expensed when incurred
and are included in operating expenses. The Company recognized research and development costs of $360,586 and $261,611 for the years ending
December 31, 2021 and 2020, respectively.
ADVERTISING
The Company conducts advertising
for the promotion of its products and services. In accordance with ASC 720-35, “Advertising Costs,” advertising costs are
charged to operations and included in operating expenses when incurred. Such amounts aggregated $138,072 in 2021 and $122,840 in 2020.
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 estimates the
fair value of each stock option at the grant date by using the Black-Scholes option pricing model. Forfeitures are accounted for as incurred,
as a reversal of share-based compensation expense related to awards that will not vest.
INCOME TAXES
The Company accounts for income
taxes pursuant to the provisions of ASC Topic 740, “Income Taxes,” which requires, among other things, an asset and liability
approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that
the net deferred asset will not be realized.
The Company follows the provisions
of ASC 740-10-25-5, “Basic Recognition Threshold.” When tax returns are filed, it is highly certain that some
positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits
of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10-25-6,
the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management
believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount
measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along
with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its
tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized
tax benefits. As of December 31, 2021, tax years 2018 through 2021 remain open for IRS audit. The Company has received no notice of audit
from the IRS for any of the open tax years.
The Company recognizes the
benefit of a tax position when it is effectively settled. ASC 740-10-25-10, “Basic Recognition Threshold” provides guidance
on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized
tax benefits. ASC 740-10-25-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing
authority. For tax positions considered effectively settled, the Company recognizes the full amount of the tax benefit.
NET LOSS PER SHARE
Basic net loss per share is
computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted
net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive,
potential common stock outstanding during the period. Potential common stock consists of the incremental shares of common stock issuable
upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive
securities are excluded from the computation if their effect is anti-dilutive.
Options to purchase 263,433
common shares and warrants to purchase 519,658 shares of common stock were outstanding at December 31, 2021. Options to purchase 341,808
common shares and warrants to purchase 965,584 shares of common stock were outstanding at December 31, 2020. These shares were not included
in the computation of diluted loss per share for the years ended December 31, 2021 and 2020 because the effects would have been anti-dilutive.
These options and warrants may dilute future earnings per share.
CONTINGENCIES
Certain conditions may exist
as of the date the financial statements are issued which may result in a loss to the Company, but which will only be resolved when one
or more future events occur or fail to occur. Company management and its legal counsel assess such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the
Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal
proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the
assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be reasonably
estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially
material loss contingency is not probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature
of the contingent liability, together with an estimate of the range of possible loss if determinable would be disclosed. The Company does
not include legal costs in its estimates of amounts to accrue.
SEGMENTS
The Company follows ASC 280-10
for “Disclosures about Segments of an Enterprise and Related Information.” During 2021 and 2020, the Company only operated
in one segment; therefore, segment information has not been presented.
RECLASSIFICATIONS
Where necessary, the prior
year’s information has been reclassified to conform to the current year 2021 statement presentation. On the Balance Sheets, $69,711
of deferred revenue was reclassified to deferred revenue, noncurrent.
RECENTLY ISSUED 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 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 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.
In June 2016, the FASB issued
ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326) requiring initial recognition of
credit losses, as well as any subsequent change in the estimate, when it is probable that a loss has been incurred. The standard eliminates
the threshold for initial recognition in current U.S. GAAP and it covers a broad range of financial instruments, including trade and other
receivables at each reporting date. The measurement of expected credit losses is based on historical experience, current conditions, and
reasonable and supportable forecasts that affect the collectability of the financial assets. The standard is effective for the Company
beginning January 1, 2023. The adoption of this guidance is not expected to have a material effect on our financial statements.
The Company has a history
of net losses, including the accompanying financial statements for the years ended December 31, 2021 and 2020 where the Company had net
losses of $6,596,039 (which includes $1,186,998 of non-cash stock-based compensation expense) and $5,213,025 (which includes $1,181,473
of non-cash stock-based compensation expense), respectively, and net cash used in operating activities of $6,406,707 and $4,138,138, respectively.
In May 2020, the Company filed a shelf registration statement on Form S-3 and subsequently closed two additional 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
and May 2019 offering, which has generated an additional $2,854,223 and $9,926,858 of proceeds during 2021 and 2020, respectively.
The Company expects to continue
to incur losses for a period of time into the future. In addition, there is no guarantee that the warrants will be exercised or that
additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable
to the Company. The Company continues to invest in sales and marketing resources and seek out sales contracts that should provide additional
revenues and, in time, generate operating profits.
The cash balance at December
31, 2021 was $21,948,512 and our working capital was $24,611,810 at December 31, 2021. With these financings, 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. |
PREPAID EXPENSES AND OTHER CURRENT ASSETS |
Prepaid expenses and other
current assets are summarized as follows:
Prepaid expenses and other current assets | |
| | | |
| | |
| |
December 31, | |
| |
2021 | | |
2020 | |
Prepaid insurance | |
$ | 65,653 | | |
$ | 33,320 | |
Vendor prepayments | |
| 87,557 | | |
| 83,049 | |
Related party receivable | |
| 26,984 | | |
| 10,574 | |
Cash due for warrant exercises | |
| – | | |
| 194,450 | |
Total prepaid expenses and other current assets | |
$ | 180,194 | | |
$ | 321,393 | |
Related party receivables
as of December 31, 2021 and 2020 consisted primarily of payroll related taxes due for an employee option exercise.
Inventories are stated at
the lower of cost and net realizable value. Costs are determined using the first in-first out (FIFO) method. As of December 31, 2021
and 2020, inventory consists of the following:
Schedule of inventory | |
| | | |
| | |
| |
December 31, |
| |
2021 | |
2020 |
Finished goods | |
$ | – | | |
$ | – | |
Work in process | |
| 424,761 | | |
| 559,582 | |
Raw materials | |
| 1,186,099 | | |
| 533,181 | |
Total inventory | |
$ | 1,610,860 | | |
$ | 1,092,763 | |
5. |
PROPERTY AND EQUIPMENT |
Property and equipment consist
of the following:
Schedule of property and equipment | |
| | | |
| | |
| |
December 31, |
| |
2021 | |
2020 |
Furniture and fixtures | |
$ | 129,075 | | |
$ | 85,333 | |
Computer equipment and software | |
| 73,517 | | |
| 87,303 | |
Leasehold improvements | |
| 27,928 | | |
| 13,918 | |
Autos | |
| 337,394 | | |
| 84,796 | |
Machinery and equipment | |
| 565,499 | | |
| 425,856 | |
Total property and equipment | |
| 1,133,413 | | |
| 697,206 | |
Less accumulated depreciation | |
| (483,218 | ) | |
| (462,170 | ) |
Property and Equipment, net | |
$ | 650,195 | | |
$ | 235,036 | |
Depreciation expense for 2021
and 2020 was $71,152 and $36,450, respectively. In 2021 and 2020, respectively, $32,136 and $20,363 of depreciation was capitalized into
inventory as manufacturing overhead costs. In addition, net property and equipment of $3,023 and $0 were disposed of in 2021 and 2020,
respectively.
The major components of accrued expenses
are summarized as follows:
Accrued expense schedule | |
| | | |
| | |
| |
December 31, |
| |
2021 | |
2020 |
Accrued vacation | |
$ | 238,147 | | |
$ | 205,809 | |
Accrued salaries and bonus | |
| 353,121 | | |
| 178,449 | |
Vendor accruals | |
| 35,520 | | |
| 4,400 | |
Other accrued expenses | |
| 99,900 | | |
| 2,909 | |
Total accrued expenses | |
$ | 726,688 | | |
$ | 391,567 | |
7. |
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 was 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 was 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.
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 on October 31, 2020.
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 December 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 (see note 10).
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.
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 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 the Company will extend the term of the lease and, therefore, the renewal periods have been excluded
from the right-of-use (“ROU”) asset. The present value of the lease payment stream was calculated using an effective borrowing
rate of 10% and recorded a ROU asset and operating lease liability each of $2,605,032 on September 1, 2020. The ROU asset and the corresponding
lease liability are being amortized on a straight-line basis over the term of the lease which expires on August 31, 2025.
The tables below show the
ROU assets and liabilities as of December 31, 2021 and December 31, 2020, including the changes during the periods.
Schedule of operating right-of use asset | |
| | |
| |
Operating right-of |
| |
use asset |
Sub-lease | |
| | |
Office lease initial measurement January 1, 2019 | |
$ | 872,897 | |
Less amortization of operating lease | |
| (523,738 | ) |
Straight-line lease expense in excess of cash payments | |
| (32,770 | ) |
Operating lease ROU asset December 31, 2019 | |
$ | 316,389 | |
Less amortization of operating lease | |
| (349,159 | ) |
Straight-line lease expense in excess of cash payments | |
| 32,770 | |
Operating lease ROU asset August 31, 2020 - end of sublease | |
$ | – | |
New lease | |
|
Office lease initial measurement September 1, 2020 | |
$ | 2,605,032 | |
Less amortization of operating lease | |
| (173,669 | ) |
Straight-line lease expense in excess of cash payments | |
| (12,860 | ) |
Operating lease ROU asset as of December 31, 2020 | |
| 2,418,503 | |
Less amortization of operating lease | |
| (388,591 | ) |
Operating lease ROU asset as of December 31, 2021 | |
$ | 2,029,912 | |
During the twelve months ended December 31, 2021,
cash paid for amounts included in the measurement of operating lease liabilities was $405,476.
As of December 31, 2021 and
2020, the current and non-current portions of the lease liability were recorded to the Balance Sheet as follows:
Schedule of lease liability | |
| | | |
| | |
| |
December 31, | |
| |
2021 | | |
2020 | |
Operating lease liabilities, current | |
$ | 467,891 | | |
$ | 521,006 | |
Operating lease liabilities, noncurrent | |
| 1,607,221 | | |
| 1,910,357 | |
Total lease liability | |
$ | 2,075,112 | | |
$ | 2,431,363 | |
The future minimum rental
commitments for our operating leases reconciled to the lease liability as of December 31, 2021 is as follows:
Schedule of operating leases reconciled lease liability | |
| | |
| |
December
31,
2021 | |
2022 | |
$ | 649,147 | |
2023 | |
| 668,622 | |
2024 | |
| 688,680 | |
2025 | |
| 468,212 | |
Total undiscounted future minimum payments | |
| 2,474,661 | |
Less imputed interest | |
| (399,549 | ) |
Total lease liability | |
$ | 2,075,112 | |
11. STOCKHOLDERS’
EQUITY
Stock Issued In Cash Sales
The Company filed a “shelf”
registration statement on Form S-3 and an accompanying prospectus with the Securities and Exchange Commission on May 26, 2020. On July
7, 2020, the Company closed an underwritten public offering issuing 1,393,900 shares, with a public offering price of $8.25 per share,
generating approximately $10.5 million after deducting underwriting discounts and commissions and estimated offering expenses payable
by the Company. On November 27, 2020, the Company closed a second underwritten public offering issuing 250,000 shares, with a public offering
price of $30.00 per share, generating approximately $6.9 million 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.
Other Securities
In July 2020, 3,000 stock
options were exercised on a cashless basis for 2,199 registered shares of the Company’s common stock at an exercise price of $4.09.
In August 2020, a stock grant
was issued for 2,700 unregistered shares of the Company’s common stock to a consultant as payment for services. The shares were
valued on the grant dates’ stock price of $5.46 per share or $14,742.
During the year ended December
31, 2020, 1,456,406 warrants to purchase shares of the Company’s registered common stock and 95,800 warrants to purchase shares
of the Company’s unregistered common stock were exercised generating $9,926,858, of which $9,732,408 in cash was received and $194,450
was included in other assets as a receivable (see note 3) which was collected in January 2021. 18,000 warrants were cashless exercises
in 2020 and the Company issued 11,304 unregistered shares of common stock.
The unregistered securities
described above were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as
amended.
Awards Under Stock Incentive Plans
On June 9, 2021, the Company’s
stockholders approved the Beam Global 2021 Equity Incentive Plan (the “2021 Plan”) under which 2,000,000 shares of the Company’s
common stock are allowed to be issued pursuant to the exercise of stock options or other awards granted under such plan in addition to
the 630,000 shares previously allowed under the Beam Global 2011 Stock Incentive Plan. The number of shares reserved for issuance under
the 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate
number of outstanding shares of the Company’s common stock as of the immediately preceding December 31, or a lesser number
as may be determined by our board of directors or compensation committee.
Stock Options
Stock options are granted
to new and existing employees. New employee option grants generally have a term of ten years and vest ratably over four years. Existing
employee option grants generally have a term of ten years and vest immediately upon grant. The Company follows the provisions of ASC Topic
718, “Compensation – Stock Compensation.” ASC Topic 718 establishes standards surrounding the accounting for transactions
in which an entity exchanges its equity instruments for goods or services. ASC Topic 718 focuses primarily on accounting for transactions
in which an entity obtains employee services in share-based payment transactions, such as options issued under the Company’s Stock
Option Plans.
During the year ended
December 31, 2021, the Company granted 43,300
stock options under the plans with a total valuation of $905,658 and a 10-year term. During the year ended December 31, 2020, the Company granted 105,604
stock options under the plans with a total valuation of $1,374,394
and a 10-year term.
The fair value of each option
is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs
including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected
volatility in the market value of the underlying common stock based on our historical volatility.
The Black-Scholes option-pricing
model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.
Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes
in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models
do not necessarily provide a reliable single measure of the fair value of such stock options.
We used the following assumptions
for options granted in fiscal 2021 and 2020:
Assumptions for options granted | |
| | | |
| | |
| |
2021 | | |
2020 | |
Expected volatility | |
| 93.03% - 99.32% | | |
| 74.16% - 115.78% | |
Expected term | |
| 5 - 7 Years | | |
| 5 - 7 Years | |
Risk-free interest rate | |
| 1.25% - 1.38% | | |
| 0.37% - 1.79% | |
Weighted average FV | |
$ | 19.55 | | |
$ | 12.38 | |
The Company’s stock
option compensation expense was $444,713 and $722,549 for the years ended December 31, 2021 and 2020, respectively, and there was
$1,040,700 of total unrecognized compensation costs related to outstanding stock options at December 31, 2021 which will be recognized
over 4.0 years.
Option activity for the years ended December 31,
2021 and 2020 is as follows:
Schedule of
option activity | |
| | | |
| | | |
|
| |
Number of
Options | |
Weighted
Average
Exercise
Price | |
Weighted
Average
Remaining
Contractual Life |
Outstanding at December 31, 2019 | |
| 239,704 | | |
$ | 9.25 | | |
|
Granted | |
| 105,604 | | |
| 15.63 | | |
|
Exercised | |
| (3,000 | ) | |
| 4.09 | | |
|
Forfeited | |
| (500 | ) | |
| 5.27 | | |
|
Outstanding at December 31, 2020 | |
| 341,808 | | |
| 11.27 | | |
|
Granted | |
| 43,300 | | |
| 24.63 | | |
|
Exercised | |
| (97,192 | ) | |
| 13.28 | | |
|
Forfeited | |
| (24,483 | ) | |
| 23.84 | | |
|
Outstanding at December 31, 2021 | |
| 263,433 | | |
$ | 11.56 | | |
7.24 Years |
Exercisable at December 31, 2021 | |
| 155,402 | | |
$ | 7.04 | | |
6.12 Years |
Total intrinsic value of options
exercised was $1,775,213 and $33,660 during the years ended December 31, 2021 and 2020, respectively. Total intrinsic value of options
outstanding and options exercisable were $2,391,810 and $1,796,153, respectively, as of December 31, 2021.
Restricted Stock
The Company issues restricted
stock to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over
four quarters. The Company also issues restricted stock to Mr. Wheatley, 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 vest. 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 years ended December 31, 2021 and 2020 is as follows:
Schedule
of restricted stock award activity
| |
Nonvested
Shares | |
Weighted-
Average Grant-
Date Fair Value |
Nonvested at December 31, 2019 | |
44,437 | | |
$ | 5.63 | |
Granted | |
61,908 | | |
| 12.44 | |
Vested | |
(59,782 | ) | |
| 7.51 | |
Nonvested at December 31, 2020 | |
46,563 | | |
| 12.28 | |
Granted | |
20,444 | | |
| 31.41 | |
Vested | |
(40,513 | ) | |
| 18.32 | |
Forfeited | |
(12,825 | ) | |
| 14.95 | |
Nonvested at December 31, 2021 | |
13,669 | | |
$ | 20.45 | |
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. During the year ended December 31, 2020, 10,203 shares vested generating an
expense of $75,000.
On October 20, 2020, upon recommendation of its
Compensation Committee, the Board granted two directors annual stock grants of 12,200 each and the lead director was issued an annual
grant of 17,100, 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 quoted trading price, or $620,425. During the year ended December 31, 2020, 10,375 shares vested generating an expense of
$155,107.
Fair values of restricted stock vested during
the year ended December 31, 2021 and 2020 were $1,367,138
and $1,539,637,
respectively.
As of December 31, 2021, there
were unreleased shares of common stock representing $279,578 of unrecognized restricted stock grant expense which will be recognized over
three years.
Warrants
A summary of activity of warrants outstanding
for the years ended December 31, 2021 and 2020 is as follows:
Warrant activity | |
| | |
| | |
| |
Number of
Warrants | | |
Weighted Average Exercise Price | |
Outstanding at December 31, 2019 | |
2,535,790 | | |
$ | 6.41 | |
Exercised | |
(1,570,206 | ) | |
$ | 6.47 | |
Outstanding at December 31, 2020 | |
965,584 | | |
$ | 6.33 | |
Exercised | |
(445,926 | ) | |
$ | 6.40 | |
Outstanding at December 31, 2021 | |
519,658 | | |
$ | 6.30 | |
Exercisable at December 31, 2021 | |
519,658 | | |
$ | 6.30 | |
Exercisable warrants as
of December 31, 2021 have a weighted average remaining contractual life of 2.30
years. The intrinsic value of the exercisable shares of the warrants at December 31, 2021 was $6,391,793.
During the year ended December 31, 2020, 1,552,206 warrants to purchase shares of the Company’s common stock were exercised
generating $9,926,858. 18,000 warrants were cashless exercises in 2020 and the Company issued 11,304 shares.
During the year ended December
31, 2021, 433,937 warrants to purchase shares of the Company’s registered common stock and 11,989 warrants to purchase shares of
the Company’s unregistered common stock were exercised generating $2,854,222. The unregistered securities were issued pursuant to
the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended.
For each of the identified
periods, revenues can be categorized into the following:
Schedule of revenues | |
| | | |
| | |
| |
For the Years Ended |
| |
December 31, |
| |
2021 | |
2020 |
Product sales | |
$ | 8,574,096 | | |
$ | 6,024,274 | |
Maintenance fees | |
| 44,068 | | |
| 30,957 | |
Professional services | |
| 98,134 | | |
| 57,506 | |
Shipping and handling | |
| 319,352 | | |
| 108,173 | |
Discounts and allowances | |
| (33,899 | ) | |
| (10,560 | ) |
Total revenues | |
$ | 9,001,751 | | |
$ | 6,210,350 | |
International revenues
were $0
and $84,081,
or 0% and 1%
of revenues, during the years ended December 31, 2021 and 2020, respectively.
During the year ended
December 31, 2021 and 2020, 62%
and 75% of revenues were derived from customers located in California, respectively.
At December 31, 2021 and 2020,
deferred revenue was $253,751 and $107,489, respectively. These amounts represented customer deposits in the amount of $91,651 and $0
for December 31, 2021 and 2020, respectively and prepaid multi-year maintenance plans for previously sold products which account for $162,100
and $107,489 for December 31, 2021 and 2020, respectively and pertain to services to be provided through 2027. Revenue recognized during
the year ended December 31, 2021 and 2020 which pertained to revenue deferred in prior years were $37,778 and $19,459, respectively.
There was no Federal income
tax expense for the years ended December 31, 2021 and 2020 due to the Company’s net losses. Income tax expense represents minimum
state taxes due.
The blended Federal and State
tax rate of 28.04%
applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income
tax purposes, (computed by applying the United States Federal tax rate of 21%
to loss before taxes), as follows:
Income tax reconciliation | |
| | | |
| | |
| |
Year ended December 31, |
| |
2021 | |
2020 |
Computed “expected” tax expense (benefit) | |
$ | (1,384,995 | ) | |
$ | (1,093,697 | ) |
State taxes, net of federal benefit | |
| (568,269 | ) | |
| (407,798 | ) |
Non-deductible stock options | |
| (328,295 | ) | |
| (6,933 | ) |
Non-deductible items | |
| 1,831 | | |
| 611 | |
True-up to tax return | |
| (41,173 | ) | |
| 683,476 | |
Change in deferred tax asset valuation allowance | |
| 2,321,726 | | |
| 829,285 | |
Income tax expense | |
$ | 825 | | |
$ | 4,944 | |
Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred
tax assets and liabilities are as follows:
Deferred tax assets and liabilities | |
| | | |
| | |
| |
2021 | |
2020 |
Deferred tax assets: | |
| | | |
| | |
Stock options | |
$ | 406,703 | | |
$ | 574,365 | |
Deferred Revenue | |
| 71,155 | | |
| 31,070 | |
Other | |
| 63,473 | | |
| 86,457 | |
Net operating loss carryforward | |
| 12,484,444 | | |
| 10,012,021 | |
Total gross deferred tax assets | |
| 13,055,775 | | |
| 10,703,913 | |
Less: Deferred tax asset valuation allowance | |
| (12,978,187 | ) | |
| (10,656,461 | ) |
Total net deferred tax assets | |
| 77,588 | | |
| 47,452 | |
Patents | |
| (24,393 | ) | |
| | |
Deferred tax liabilities: | |
| | | |
| | |
Depreciation | |
| (53,195 | ) | |
| (47,452 | ) |
Total deferred tax liabilities | |
| (77,588 | ) | |
| (47,452 | ) |
Total net deferred taxes | |
$ | – | | |
$ | – | |
As a result of the Company’s
history of incurring operating losses, a full valuation allowance has been established. The valuation allowance at December 31, 2021
was $12,978,187. The increase in the valuation allowance during 2021 was $2,321,726.
At December 31, 2021,
the Company has a net operating loss carry forward of $45,229,370, of which $25,107,807 is available to offset future net income through
2037. The net operating loss (“NOL”) expires during the years 2027 to 2037 and $20,121,563 may be carried forward indefinitely
and limited to offsetting 80% of taxable income. The utilization of the net operating loss carryforwards is dependent upon the ability
of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership
of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject
to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.
No liability related to uncertain
tax positions is recorded on the financial statements related to uncertain tax positions. There are no unrecognized tax benefits as of
December 31, 2021. The Company does not expect that uncertain tax benefits will materially change in the next 12 months.
The Company files U.S. federal,
California, New York, and Wisconsin State tax returns, and a New York City tax return. All tax returns will remain open for examination
by the federal and state taxing authorities for three and four years, respectively, from the date of utilization of any net operating
loss carryforwards.
On
March 4, 2022, the Company completed its acquisition of AllCell Technologies, LLC (“AllCell”), a leader in energy storage
solutions. This strategic acquisition is expected to increase and diversify our Company’s revenue, gross profitability, manufacturing
capabilities, intellectual portfolio and customer base. The Company purchased substantially all of the assets and business of AllCell
for 1,055,000 shares of Beam Common Stock (“Closing Consideration”) (on the closing date, based on the closing price of the
Beam Common Stock of $13.61, such shares had a value of approximately $14.4 million) plus an additional $911,711 in cash for the net working
capital of primarily inventory held by AllCell at closing. In addition, AllCell is eligible to earn an additional number of shares of
Beam Common Stock if it meets certain revenue milestones (the “Earnout Consideration”). The Earnout Consideration is: (i)
two times the amount of AllCell revenue and contracted backlog that is greater than $7.5 million for 2022, and (ii) two times the amount
of AllCell 2023 revenue only which exceeds the greater of either $13.5 million or 135% of the 2022 cumulative revenue, capped at $20.0
million. Revenues exceeding $20.0 million in 2023 will not be eligible for the Earnout Consideration. The maximum aggregate amount
of shares of Common Stock that Buyer will issue to Seller for the Closing Consideration and Earnout
Consideration will not exceed 1.8 million shares.
All
of the Company’s Common Stock issued to AllCell to satisfy the Closing Consideration and any Earnout Consideration will be issued
in a private placement and will be subject to transfer restrictions under the Securities Act of 1933, as amended. Beam has agreed to file
a resale registration statement with the SEC to register the resale of up to $10.0 million of the Common Stock issued to AllCell for the
Closing Consideration. Pursuant to the terms of the Purchase Agreement, AllCell agreed not to sell shares of Beam Common Stock (i) in
an amount greater than four percent (4%) of the average weekly volume of shares of Beam Common Stock during any trading week and (ii)
on more than three days in any week and (iii) in an amount greater than ten percent (10%) of the average daily trading volume on any trading
day.
The acquisition of AllCell will
be accounted for as a business combination using the acquisition method of accounting in the first quarter of 2022. Given the recent timing
of the transaction close, we are in the process of estimating the fair value of the Earnout Consideration as well as the assets acquired
and liabilities assumed in the business combination. As a result, we are currently unable to provide the estimate of the purchase consideration
or the preliminary allocation of purchase consideration based on the acquisition date fair values of the assets acquired and liabilities
assumed as well as other related information, including pro forma disclosures, determination of segments, reporting units, and the final
amount of transaction costs, which will be included in the Quarterly Report on Form 10-Q for the three months ending March 31, 2022.