10-Q

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

FORM 10-Q

Quarterly Report under Section 13 or 15 (d) of Securities Exchange Act of 1934

For the Period ended September 30, 2020

Commission File Number 000-53204

Beam Global
(Exact name of Registrant as specified in its charter)

Nevada	26-1342810
(State of Incorporation)	(IRS Employer ID Number)

5660 Eastgate Dr.

San Diego, California 92121

(858) 799-4583

(Address and telephone number of principal executive offices)

Envision Solar International, Inc.

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

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

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

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

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

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

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

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

The number of registrant's shares of common stock, $0.001 par value outstanding as of November 9, 2020 was 7,023,951.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	3
Item 1	Financial Statements (Unaudited)	3
	Condensed Balance Sheets at September 30, 2020 (Unaudited) and December 31, 2019	3
	Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	4
	Condensed Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	5
	Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)	6
	Condensed Notes To Condensed Financial Statements as of September 30, 2020 (Unaudited)	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4	Controls and Procedures	27
PART II	OTHER INFORMATION	28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
	SIGNATURES	29

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Beam Global

Condensed Balance Sheets

	September 30,			December 31,
	2020			2019
	(Unaudited)
Assets
Current assets
Cash	$	12,332,224		$	3,849,456
Accounts receivable, net of $0 and $2,429 reserve for bad debt at September 30, 2020 and December 31, 2019, respectively		1,310,153			764,534
Prepaid and other current assets		261,449			147,686
Inventory, net		1,918,712			1,843,880
Total current assets		15,822,538			6,605,556
Property and equipment, net		137,009			103,031
Operating lease right of use asset		2,558,399			316,389
Patents, net		271,432			205,154
Deposits		52,000			56,869
Total assets	$	18,841,378		$	7,286,999
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	370,791		$	485,019
Accrued expenses		482,755			305,115
Sales tax payable		80,916			6,213
Deferred revenue		112,577			93,609
Convertible note payable - related party, net of debt discount of $5,990 at December 31, 2019		–			214,427
Note payable		339,262			–
Operating lease liabilities, current		521,006			349,160
Auto loan		1,019			9,294
Total current liabilities		1,908,326			1,462,837
Operating lease liabilities, noncurrent		2,040,608			–
Total liabilities		3,948,934			1,462,837
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock, $0.001 par value, 10,000,000 authorized, 0 outstanding as of September 30, 2020 and December 31, 2019, respectively.		–			–
Common stock, $0.001 par value, 9,800,000 shares authorized, 6,778,827 and 5,208,170 shares issued or issuable and outstanding at September 30, 2020 and December 31, 2019, respectively.		6,778			5,207
Additional paid-in-capital		63,571,748			51,628,536
Accumulated deficit		(48,686,082	)		(45,809,581	)
Total stockholders' equity		14,892,444			5,824,162
Total liabilities and stockholders' equity	$	18,841,378		$	7,286,999

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

3

Beam Global

Condensed Statements of Operations

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Revenues	$	1,237,434		$	1,785,724		$	4,009,644		$	4,615,669
Cost of revenues		1,426,166			1,444,887			4,182,681			4,266,390
Gross profit (loss)		(188,732	)		340,836			(173,037	)		349,279
Operating expenses		906,962			963,487			2,697,418			2,226,667
Loss from operations		(1,095,695	)		(622,651	)		(2,870,455	)		(1,877,388	)
Other income (expense)
Interest income		761			21,739			10,280			45,768
Interest expense		(920	)		(7,182	)		(11,357	)		(709,148	)
Total other income (expense)		(159	)		14,557			(1,077	)		(663,380	)
Loss before tax expense		(1,095,854	)		(608,094	)		(2,871,532	)		(2,540,768	)
Tax expense		4,169			2,269			4,969			3,100
Net loss	$	(1,100,023	)	$	(610,363	)	$	(2,876,501	)	$	(2,543,868	)
Net loss per share - basic and diluted	$	(0.17	)	$	(0.12	)	$	(0.50	)	$	(0.60	)
Weighted average shares outstanding - basic and diluted		6,615,893			5,114,296			5,702,262			4,220,398

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

4

Beam Global

Condensed Statements of Changes in Stockholders' Equity (Deficit)

(Unaudited)

													Total
	Common Stock						Additional			Accumulated			Stockholders'
	Stock			Amount			Paid-in-Capital			Deficit			Equity (Deficit)
Balance at December 31, 2018		2,906,630		$	2,907		$	39,392,073		$	(41,875,659	)	$	(2,480,679	)
Stock issued for director services		3,750			3			31,247			–			31,250
Value of warrants and beneficial conversion features related to debt instruments		–			–			3,967			–			3,967
Stock option expense		–			–			2,301			–			2,301
Net loss for the three months ended March 31, 2019		–			–			–			(949,631	)		(949,631	)
Balance at March 31, 2019		2,910,380		$	2,910		$	39,429,588		$	(42,825,290	)	$	(3,392,792	)
Stock Issued for Director Services		3,750			4			31,246			–			31,250
Stock option expense		–			–			1,531			–			1,531
Shares issued for cash		2,200,000			2,200			13,195,800			–			13,198,000
Warrants issued for cash		–			–			3,000			–			3,000
Cash fees related to stock offering		–			–			(1,370,879	)		–			(1,370,879	)
Fractional Share Cash Payment		(21	)		–			(171	)		–			(171	)
Fractional Shares Issued from Reverse Split		187			–			–			–			–
Net Loss for the Three Months Ended June 30, 2019		–			–			–			(983,874	)		(983,874	)
Balance at June 30, 2019		5,114,296		$	5,114		$	51,290,115		$	(43,809,164	)	$	7,486,065
Stock issued for director services		26,250			26			154,974			–			155,000
Stock option expense		–			–			8,260			–			8,260
Net loss for the three months ended September 30, 2019		–			–			–			(610,363	)		(610,363	)
Balance at September 30, 2019		5,140,546		$	5,140		$	51,453,349		$	(44,419,527	)	$	7,038,962
														Total
		Common Stock						Additional			Accumulated			Stockholders'
		Stock			Amount			Paid-in-Capital			Deficit			Equity (Deficit)
Balance at December 31, 2019		5,208,170		$	5,207		$	51,628,536		$	(45,809,581	)	$	5,824,162
Stock issued for director services		14,813			15			78,432			–			78,447
Stock issued to escrow account - unvested		(14,813	)		(15	)		15			–			–
Stock option expense		–			–			27,068			–			27,068
Warrants exercised		43,993			44			282,306			–			282,350
Net loss for the three months ended March 31, 2020		–			–			–			(942,521	)		(942,521	)
Balance at March 31, 2020		5,252,163		$	5,251		$	52,016,357		$	(46,752,102	)	$	5,269,506
Stock issued for director services		15,073			15			89,674			–			89,689
Stock issued to escrow account - unvested		5,335			6			(6	)		–			–
Stock option expense		–			–			27,068			–			27,068
Warrants exercised		5,278			5			34,830			–			34,835
Net loss for the three months ended June 30, 2020		–			–			–			(833,957	)		(833,957	)
Balance at June 30, 2020		5,277,849		$	5,277		$	52,167,923		$	(47,586,059	)	$	4,587,141
Stock issued for director services		15,073			15			89,674			–			89,689
Stock issued to escrow account - unvested		(15,073	)		(15	)		15			–			–
Stock option expense		–			–			27,068			–			27,068
Proceeds from issuance of common stock, pursuant to public offering		1,393,900			1,394			11,498,281			–			11,499,675
Warrants exercised		102,179			102			749,625			–			749,727
Stock option exercise (cashless)		2,199			2			(2	)		–			–
Stock issued for services		2,700			3			(3	)		–			–
Cash fees related to stock offering		–			–			(960,833	)		–			(960,833	)
Net loss for the three months ended September 30, 2020		–			–			–			(1,100,023	)		(1,100,023	)
Balance at September 30, 2020		6,778,827		$	6,778		$	63,571,748		$	(48,686,082	)	$	14,892,444

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

5

Beam Global

Condensed Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended
	September 30,
	2020			2019
Operating Activities:
Net loss	$	(2,876,501	)	$	(2,543,868	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		30,434			30,018
Common stock issued for services		257,825			217,500
Compensation expense related to grant of stock options		81,204			12,092
Amortization of debt discount		5,990			524,925
Amortization of operating lease right of use asset		(29,554	)		(21,290	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(545,619	)		220,875
Prepaid expenses and other current assets		(239,863	)		(490,264	)
Inventory		143,224			(3,670	)
Deposits		4,869			48,672
Increase (decrease) in:
Accounts payable		(114,228	)		(654,814	)
Accrued expenses		177,640			(203,978	)
Convertible note payable issued in lieu of salary - related party		(220,417	)		35,417
Sales tax payable		74,703			133,211
Deferred revenue		18,968			(749,108	)
Net cash used in operating activities		(3,231,325	)		(3,444,282	)
Investing Activities:
Purchase of equipment		(153,097	)		(9,977	)
Funding of patent costs		(69,551	)		(41,554	)
Net cash used in investing activities		(222,648	)		(51,531	)
Financing Activities:
Borrowings (repayments) on convertible line of credit, net		–			(960,000	)
Repayments of convertible notes payable, net		–			(1,650,616	)
Borrowings (repayments) on notes payable		339,262			(862,500	)
Repayments of auto loan		(8,275	)		(7,843	)
Proceeds from warrant exercises		1,066,912			–
Payments of deferred equity offering costs		(960,833	)		(1,175,852	)
Fractional share payments		–			(171	)
Proceeds from issuance of common stock and warrants, pursuant to public offering		11,499,675			13,201,000
Net cash provided by financing activities		11,936,741			8,544,018
Net increase in cash		8,482,768			5,048,205
Cash at beginning of period		3,849,456			244,024
Cash at end of period	$	12,332,224		$	5,292,229
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	54,156		$	363,899
Cash paid for taxes	$	4,969		$	3,100
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Recording of debt discount	$	–		$	3,967
Transfer of prepaid asset to inventory	$	126,100		$	541,307
Recording of right of use asset and corresponding liability	$	2,605,032		$	872,897
Depreciation capitalized into inventory	$	15,010		$	19,976
Reclassification of deferred equity offering costs to APIC	$	960,833		$	1,370,879
Transfer of fixed asset to inventory	$	76,946		$	–

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

6

BEAM GLOBAL

CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

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

Nature of Operations

Beam Global (formerly Envision Solar International, Inc.), a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”) is a cleantech innovation company based in San Diego, California. We develop, design, engineer, manufacture and sell renewably energized high-quality products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security, that enable vital and highly valuable services 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:

· electric vehicle (EV) charging infrastructure;

· out of home advertising platforms; and

· energy security and disaster preparedness.

On September 15, 2020, the Company announced its rebranding and changed its corporate name from Envision Solar International, Inc. to Beam Global (Nasdaq: BEEM and BEEMW).

Basis of Presentation

The interim unaudited condensed financial statements included herein have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three and nine months ended September 30, 2020 and 2019, and our financial position as of September 30, 2020, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2019. The December 31, 2019 balance sheet is derived from those statements.

7

Risks and Uncertainties

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders as well as the shutdown of many businesses around the world. To date, while we have seen some delays and cancellations of opportunities in our pipeline as a result of funding issues, priority issues or temporary business closures, the pandemic has not had a material adverse effect on the Company’s financial position or results of operations for the three and nine months ended September 30, 2020. 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 unaudited condensed 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 right of use assets and corresponding lease liabilities, valuation of share-based payments, 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 September 30, 2020. As of September 30, 2020, $12,181,713 of the Company’s cash deposits were greater than the federally insured limits.

Major Customers

For the three months ended September 30, 2020, revenues from four customers accounted for 41%, 27%, 14% and 11% of total revenues, and for the nine months ended September 30, 2020, revenues from two customers accounted for 14% and 13% of total revenues, with no other single customer accounting for more than 10% of revenues. At September 30, 2020, accounts receivable from four customers accounted for 42%, 29%, 14% and 10% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

For the three months ended September 30, 2019, revenues from two customers accounted for 62% and 14% of total revenues, and for the nine months ended September 30, 2019, revenues from two customer accounted for 49% and 24% of total revenues, with no other single customer accounting for more than 10% of revenues. At September 30, 2019, accounts receivable from three customers accounted for 47%, 25% and 14% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

8

Cash and Cash Equivalents

For the purposes of the unaudited condensed statements of cash flows, the Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at September 30, 2020 and December 31, 2019, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments, including accounts receivable, accounts payable, accrued expenses, and short-term loans, are carried at historical cost basis. At September 30, 2020, 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. Further, the Company may record a general reserve in its allowance for doubtful accounts to account for future changes that may negatively impact our overall collections. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Inventory

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

Patents

The Company believes it will achieve future economic value benefits for its various patents and patent ideas. All administrative costs for obtaining patents are accumulated on the balance sheet as a patent asset until such time as a patent is issued. The costs of these intangible assets are classified as a long-term asset and amortized on a straight-line basis over the legal life of such asset, which is typically 20 years. In the event a patent is denied or abandoned, all accumulated administrative costs will be expensed in the period in which the patent was denied or abandoned. Patent amortization expense was $3,273 and $2,397 in the nine-month periods ended September 30, 2020 and 2019, respectively.

9

Leases

The Company uses Financial Accounting Standards Board Accounting Standards 842 “Leases” to account for its leases whereby almost all leases are recognized on the balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019 using the effective date method and applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases, and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment will be 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 will allocate 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 not to recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less. The Company entered into a new 5-year lease of our manufacturing facility which began September 1, 2020. Monthly lease payments range from $52,000 to $58,526 through the initial term of the lease. We calculated the present value of the remaining lease payment stream using our effective borrowing rate of 10% and recorded a right-of-use asset and operating lease liability each amounting to $2,605,032 at September 1, 2020.

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 sales 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 as 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.

10

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

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

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

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

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

The Company generally provides a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and it will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably estimated. At September 30, 2020, the Company has no product warranty accrual given the Company’s fluctuating historical financial warranty expense.

Cost of Revenues

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

Stock-Based Compensation

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

The Company adopted ASU 2018-07 on January 1, 2019 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on January 1, 2019.

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

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Net Loss Per Share

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

Options to purchase 305,308 common shares and warrants to purchase 2,384,340 common shares were outstanding at September 30, 2020. These shares were not included in the computation of diluted loss per share for the three or nine months ended September 30, 2020 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.

Reclassifications

Where necessary, the prior year’s information has been reclassified to conform to the current period 2020 statement presentation. On the Condensed Balance Sheets, the operating lease right of use asset of $316,389 was reclassified from the property and equipment, net line item and the operating lease liabilities, current of $349,160 was reclassified from accrued expenses to conform to the September 30, 2020 presentation.

Segments

The Company follows ASC 280-10 "Disclosures about Segments of an Enterprise and Related Information." During the nine months ended September 30, 2020 and 2019, the Company only operated in one segment; therefore, segment information has not been presented.

2. LIQUIDITY

As reflected in the accompanying unaudited condensed financial statements for the nine months ended September 30, 2020, the Company had a net loss and net cash used in operating activities of $2,876,501 and $3,231,325, respectively. Additionally, at September 30, 2020, the Company had an accumulated deficit of $48,686,082. The Company has incurred significant losses from operations since inception, and such losses are expected to continue.

In April and May 2019, the Company received approximately $8.5 million of cash, net of offering costs and repayment of certain debt, under an equity offering. This cash eliminated most of the Company debt and provided working capital for ongoing operations. Also, in July 2020, the Company sold shares of common stock in a public offering and received net proceeds of approximately $10.5 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the proceeds for working capital and general corporate purposes.

The cash balance at September 30, 2020 was $12,332,224 and our working capital was $13,914,212 at September 30, 2020. With these financings, management believes it has sufficient cash to fund its liabilities and operations for the next twelve months from the issue date of this report. In addition, we have warrants that are exercisable to purchase shares of the Company’s common stock and, if all warrants are fully exercised, the Company would receive additional proceeds of $15,193,848.

3. INVENTORY

Inventory consists of the following:

	September 30,			December 31,
	2020			2019
Finished goods	$	306,293		$	716,478
Work in process		583,217			303,594
Raw materials		1,040,626			835,232
Inventory allowance		(11,424	)		(11,424	)
Total inventory	$	1,918,712		$	1,843,880

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4. ACCRUED EXPENSES

The major components of accrued expenses are summarized as follows:

	September 30,		December 31,
	2020		2019
Accrued vacation	$	207,301	$	175,231
Accrued salaries		196,295		75,829
Accrued interest		1,432		48,884
Other accrued expense		77,727		5,171
Total accrued expenses	$	482,755	$	305,115

5. CONVERTIBLE NOTE PAYABLE - RELATED PARTY AND NOTE PAYABLE

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

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

On September 17, 2019, the Board of Directors adopted a resolution to pay off the convertible promissory note issued to Mr. Wheatley for his deferred compensation in the near future (subject to a recommendation on timing from Mr. Wheatley), and no additional salary will be deferred after September 15, 2019. As a result, this note was presented as a short-term liability as of December 31, 2019 with a balance of $214,427, net of debt discount of $5,990, with accrued and unpaid interest of $48,884 which was included in accrued expenses (See Note 4). 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. We are reporting this as a current liability because we plan to repay it in the quarter ending December 31, 2020.

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6. AUTO LOAN

In October 2015, the Company purchased a new vehicle and financed the purchase through a dealer auto loan. The loan has a term of 60 months, requires minimum monthly payments of approximately $950, and bears interest at a rate of 5.99 percent. As of September 30, 2020, the loan has a short-term balance of $1,019.

7. COMMITMENTS AND CONTINGENCIES

Legal Matters:

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 30, 2020, 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 is the same term of the master lease for which the Company is the subtenant. Monthly lease payments ranged from $48,672 to $50,619 per month in the final year of the lease.

On March 31, 2020, the Company entered into a new 5-year lease agreement for our manufacturing facility which began September 2020 through August 2025. Monthly lease payments range from $52,000 per month to $58,526 per month in the final year of the initial term of the lease. The lease includes two additional one-year options to renew at the Company’s option. We calculated the present value of the remaining lease payment stream using our effective borrowing rate of 10% and recorded a right-of-use asset and operating lease liability each amounting to $2,605,032 at September 1, 2020.

Other Commitments:

The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company. All expenses and liabilities relating to such contracts were recorded in accordance with generally accepted accounting principles during the periods. Although such agreements increase the risk of legal actions against the Company for potential non-compliance, there were no financial exposures that were not accounted for in our financial statements.

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8. COMMON STOCK

Director Compensation

On September 17, 2019, the Board, upon the recommendation of its Compensation Committee, granted two directors annual grants of 12,500 shares each, and the lead director was issued an annual grant of 17,500 shares, which vest quarterly in four (4) equal installments. The grant date was determined to be September 17, 2019 as that was when a mutual understanding of the key terms and conditions of the grants was reached. On the grant date, these shares had a per share fair value of $5.50 based on the quoted trading price, or $233,750. 10,625 shares vested in 2019. During the three and nine months ended September 30, 2020, 10,625 of these shares vested generating an expense of $58,439 and 31,875 shares vested generating an expense of $170,325, respectively. At September 30, 2020, there were no shares remaining unvested in escrow. 

On October 1, 2019, the Board approved two grants of restricted stock of the Company 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 October 1, 2019. On the grant date, the shares had a per share fair value of $5.97 and 25,124 shares were granted. In addition, on June 17, 2020, the Board approved two additional 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. 12,562 shares vested in 2019. During the three and nine months ended September 30, 2020, 4,448 shares vested generating an expense of $31,250 and 13,084 shares vested generating an expense of $87,500, respectively. At September 30, 2020, 19,886 shares were held unvested in escrow for Mr. Wheatley representing $137,500 of unrecognized restricted stock grant expense which will be recognized through the quarter ending March 31, 2023.

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. The Company intends to use the aggregate net proceeds primarily for working capital and general corporate purposes.

Other Registered Securities

On August 27, 2020, the Company filed a registration statement on Form S-8 to register 630,000 shares issued or to be issued under the Company’s 2011 Stock Incentive Plan.

9. STOCK OPTIONS AND WARRANTS

Stock Options

During the three months ended March 31, 2020, an option was granted to an employee to purchase up to 49,104 shares of the Company’s common stock. These options will vest over 4 years and have an exercise price of $4.57 per share. The Company estimated the fair value of these options at $222,612 utilizing the Black-Scholes pricing model. The assumptions used in the valuation of these options include volatility of 198.91% based on historical volatility, expected dividends of 0.0%, a discount rate of 1.79% and expected term of 7.0 years based on the simplified method.

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During the three months ended September 30, 2020, an option was granted to an employee to purchase up to 20,000 shares of the Company’s common stock. These options will vest over 4 years and have an exercise price of $12.76 per share. The Company estimated the fair value of these options at $204,185 utilizing the Black-Scholes pricing model. The assumptions used in the valuation of these options include volatility of 96.2% based on historical volatility, expected dividends of 0.0%, a discount rate of 0.46% and expected term of 7.0 years based on the simplified method.

During the three months ended September 30, 2020, 3,000 stock options were exercised on a cashless basis for 2,199 shares of common stock at an exercise price of $4.09.

During the nine months ended September 30, 2020 and 2019, the Company recorded non-cash stock option based compensation expense of $81,204 and $12,092, respectively. As of September 30, 2020, there was $534,157 of unrecognized stock option-based compensation expense that will be recognized over the next four years.

There were stock options outstanding to purchase 305,308 shares of common stock at September 30, 2020. During the nine months ended September 30, 2020, 3,000 stock options were exercised for 2,199 shares of common stock at an exercise price of $4.09, there were 500 options forfeited and there were no options that expired.

Warrants

During the three months ended September 30, 2020, 102,179 warrants to purchase shares of the Company’s common stock were exercised generating $749,727 of proceeds and during the nine months ended September 30, 2020, 151,450 warrants to purchase shares of the Company’s common stock were exercised generating $1,066,913 At September 30, 2020, there were warrants outstanding to purchase up to 2,384,340 shares of the Company’s common stock at a weighted average exercise price of $6.37.

10. REVENUES

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

	For the Nine Months Ended
	September 30,
	2020			2019
Product sales	$	3,948,801		$	4,607,237
Maintenance fees		18,877			8,432
Professional services		47,031			–
Discounts and allowances		(5,065	)		–
Total revenues	$	4,009,644		$	4,615,669

International revenues were $84,081, or 2% of revenues, and $0 during the nine months ended September 30, 2020 and 2019, respectively.

At September 30, 2020 and December 31, 2019, deferred revenue was $112,577 and $93,609, respectively. The September 30, 2020 balance consists of deferred maintenance fees pertaining to services to be provided through the third quarter of 2026.

At December 31, 2018, the Company accrued expected contract losses of $71,744 on an order for a customer that shipped in 2019. As the units were delivered, the loss accrual was proportionally reduced during the nine months ended September 30, 2019.

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11. SUBSEQUENT EVENTS

Subsequent to September 30, 2020, 203,624 warrants were exercised to purchase shares of the Company’s common stock generating proceeds of $1,293,484.

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.

In October 2020, an option was granted to an employee to purchase up to 20,000 shares of the Company’s common stock. This option will vest over 4 years and has an exercise price of $17.44 per share. The Company estimated the fair value of these options at $285,002 utilizing the Black-Scholes pricing model. The assumptions used in the valuation of these options include volatility of 99.9% based on historical volatility, expected dividends of 0.0%, a discount rate of 0.55% and expected term of 7.0 years based on the simplified method.

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

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

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

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

(b) fluctuation in quarterly results;

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

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

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

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

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

(h) rapid and significant changes in markets;

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

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

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

(l) rapid and significant changes to costs of raw materials.

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New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Because factors referred to elsewhere in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2019 (sometimes referred to as the “2019 Form 10-K”) that we previously filed with the Securities and Exchange Commission, including without limitation the “Risk Factors” section in the 2019 Form 10-K, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-looking statements or to reflect events or circumstances arising after the date of this report on Form 10-Q.

Overview

Beam develops, designs, engineers, manufactures and sells renewably energized products and proprietary technology solutions serving three markets with annual global spending in the billions of dollars and that are experiencing significant growth:

· electric vehicle (EV) charging infrastructure;

· outdoor media advertising; and

· energy security and disaster preparedness.

The Company focuses on creating renewably energized, high-quality products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security that are rapidly deployable and attractively designed.

Electric Vehicle Charging Infrastructure

We currently produce two categories of products: the patented EV ARC™ (Electric Vehicle Autonomous Renewable Charger) and the patented Solar Tree®. In late 2019, we began deploying our upgraded version of our EV ARC™, the EV ARC™ 2020, which provides all of the features of the original EV ARC™. New features of the product include the elevation of the electronics to the underside of the solar canopy making the unit flood-proof up to 9.5 feet. This change also provides more space to park on the product’s base pad and adds security for the electrical components. In addition, we have two new categories of products in development. On December 31, 2019, our patent for the EV-Standard™ product was issued, and a fourth category of product, the UAV ARC™ drone charging product, is awaiting patent approval. All four product lines incorporate the same underlying technology and value, having a built-in renewable energy source in the form of attached solar panels and/or light wind generator, along with battery storage. The EV ARC™ product is a permanent solution in a transportable format and the Solar Tree® product is a permanent solution in a fixed format. The EV-Standard™ is also fixed but uses an existing streetlamp’s foundation and grid connection for curbside charging. The UAV ARC™ is a permanent solution in a transportable format and will be used to charge drone (UAV) fleets. Our EV charging solutions for electric vehicles and aerial drones can, or in the case of the products currently under development, are expected to, produce, deliver, and store power without the time and expense of having to be connected to the utility grid.

We believe that there is a clear need for rapidly deployable and highly scalable EV charging infrastructure, and that our products fulfill that requirement. We are agnostic as to the EV charging service equipment and integrate best of breed solutions based upon our customer’s requirements. For example, our EV ARC™ and Solar Tree® products have been deployed with Chargepoint, Blink, Juice Box, Bosch, AeroVironment and other high quality EV charging solutions. We can make recommendations to customers or we can comply with their specifications and/or existing charger networks. Our products replace the infrastructure required to support EV chargers, not the chargers themselves. We do not sell EV charging, or compete with those who do, rather we sell products which enable it.

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

· our ability to invent, design, engineer, and manufacture renewably energized products which dramatically reduce the cost, time and complexity of the installation and operation of EV charging infrastructure and outdoor media platforms when compared to traditional, utility grid tied alternatives;

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

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

Historically, we have recognized revenue primarily from the sale of EV ARCs™ to large commercial businesses, such as Google, Genentech, and Johnson & Johnson, and government agencies such as the City of New York, the State of California and the U.S. Navy. Our contract with the City of New York was renewed in March 2020 to extend through April 2021 and our State of California contract will expire on June 23, 2021 unless the State of California exercises its one-year renewal option through June 23, 2022.

Outdoor Media Advertising

This business opportunity involves a partnership with a third party media company, whereby we solicit revenue from potential sponsors and from advertisers willing to pay fees to us or to our media partners to display their brands, messages and advertisements on the surfaces of our products or on outdoor digital or static screens mounted on our EV charging solutions. In October 2020, we entered into an agreement with the City of San Diego which allows us to deploy a network of our EV ARC^TM solar-powered EV charging terminals across the city. We are currently seeking a corporate sponsor who will receive global naming rights to the network and highly visible corporate brand placement on the EV ARC^TM units in the city for periods of five years at a time. We intend to renew these agreements each time they expire, creating a new recurring revenue source for Beam. We believe that this model can then be expanded to other cities.

Energy Security and Disaster Preparedness

Our energy security business is connected with the deployment of our EV charging infrastructure products which includes an integrated emergency power panel, powered by solar power and battery storage, which can continue to operate and deliver emergency power during utility grid failures or blackouts and brownouts. Our onboard state-of-the-art storage batteries installed on our EV chargers provide another reason for certain customers such as municipalities, counties, states, the federal government, hospitals, fire departments, large private enterprises with substantial facilities, and vehicle fleet operators, to buy our products. As an example of the benefit our emergency power capability provides, in April 2020, one of our California municipal customers re-deployed two of their EV ARC™ units to COVID-19 response facilities to charge their EVs and provide emergency power for medical equipment without the fumes and noise of a power generator.

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Our current list of products includes:

1.	EV ARC™ Electric Vehicle Autonomous Renewable Charger (patented).
2.	Transformer (patented) EV ARC™ 2020 Stowable Electric Vehicle Autonomous Renewable Charger (EV ARC™ 2020).
3.	EV ARC™ DC Fast Charging Electric Vehicle Autonomous Renewable Charger (EV ARC™ DCFC).
4.	EV ARC™ Media Electric Vehicle Autonomous Renewable Charger with advertising screen and or branding/messaging.

5.	EV ARC™ Autonomous Renewable Motorcycle Charger.
6.	EV ARC™ Autonomous Renewable Bicycle Charger.
7.	ARC Mobility™ Transportation System.
8.	The patented Solar Tree® DCFC product, a single column mounted smart generation and energy storage system with the capability to provide a 50kW DC fast charge to one or more medium or heavy duty electric vehicles.

Our current products can be upgraded with the addition of the following features:

1.	BeamTrak™ sun tracking technology (patented),
2.	Data capture and management (IoT),
3.	SunCharge™ solar powered EV charging,
4.	ARC™ technology energy storage,
5.	E-Power emergency power panels,
6.	LED lighting,
7.	Media and branding screens, and
8.	Security cameras, WiFi, sound, and emergency call boxes.

All of the above products can be equipped with the EV charger (EVSE) of our customers choice and do not require a connection to the utility grid to operate. With the exception of the Solar Tree® (which requires some onsite work for the installation) they can be deployed without permitting, construction, electrical work or engineering. They will not generate a utility bill and they will continue to operate during grid outages.

Critical Accounting Policies

Please refer to Note 1 in the financial statements for further information on the Company’s critical accounting policies which are summarized as follows:

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 right of use assets and corresponding lease liabilities, valuation of share-based payments, and the valuation allowance on deferred tax assets.

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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. Further, the Company may record a general reserve in its allowance for doubtful accounts to account for future changes that may negatively impact our overall collections. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

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

Impairment of Long-lived Assets. The Company accounts for long-lived assets in accordance with the provisions of 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 and Cost 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 sales 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.

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

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

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

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

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

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

The Company generally provides a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and it will pass on the warranties from its vendors, if any, which generally exceeds this one-year period. In accordance with ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably estimated. At September 30, 2020 and 2019, the Company has no product warranty accrual given the Company’s fluctuating historical financial warranty expense.

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

Changes in Accounting Principles. There were no significant changes in accounting principles that were adopted during the nine months ended September 30, 2020.

Results of Operations

Comparison of Results of Operations for the Three Months Ended September 30, 2020 and 2019

Revenues. For the three months ended September 30, 2020, revenues were $1,237,434, compared to $1,785,724 for the three months ended September 30, 2019, a 31% decrease, primarily due to delays in the receipt of orders compared to a strong quarter in the prior year. Revenues in the three months ended September 30, 2020 included the delivery of the first of two of our latest generation of Solar Tree® products to a customer in northern California which will provide charging for electric buses, electric heavy-duty vehicles, electric agricultural equipment, public transportation and growing electric vehicle options in the construction industry. We also deployed the first 8 of 30 EV ARC^TM units to Electrify America throughout Fresno County in California. We also delivered several additional units to Renewable Energy Laboratories and other customers. This compares to revenues for the three months ended September 30, 2019 which included the installation of two EV ARC™ HP DC Fast-Charging stations at the Camp Roberts Rest Area on U.S. California Highway 101. They were the first solar-powered EV charging stations installed for the public on a U.S. highway in California rest areas controlled by the California Department of Transportation. The decline in revenue was partially related to the COVID-19 virus which caused some delays and cancellations of opportunities in our pipeline as a result of customer funding issues, priority issues or business closures. Our shipments will continue to fluctuate each quarter due to the varying size of orders and timing of deliveries.

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Gross Profit (Loss). For the three months ended September 30, 2020, we had a gross loss of $188,732 compared to a gross profit of $340,836 for the three months ended September 30, 2019. The gross loss resulted from the decrease in revenue in the current quarter, which caused an underabsorption of our fixed overhead costs and inefficient use of our labor resources. We expect our margins to improve as we increase our revenue levels, which will reduce our overhead costs per unit and improve our labor efficiency. In addition, we are working to negotiate better volume pricing and to engineer cost improvements into our processes. Warranty costs increased by $15,034 in the three months ended September 30, 2020 compared to the same period in the prior year due to the addition of a full-time technical support person to support the units in the field and an increase in repairs.

Operating Expenses. Total operating expenses were $906,962 for the three months ended September 30, 2020, compared to $963,487 for the same period in 2019, a decrease of 6%. The decrease in operating expense was primarily due to a $46,503 decrease in non-cash compensation expense for stock option expense and vesting of director restricted shares due to Board stock grants in the prior year, a severance payment of $82,500 to an employee in the prior year, a $33,990 reduction in travel due to the COVID-19 pandemic, a reduction in R&D of $23,628 due to lower third party Engineering costs that are no longer required, partially offset by higher R&D headcount and other reductions of $11,643. This reduction was partially offset by an increase in sales and marketing expenditures of $65,913 to support our sales growth and our marketing re-brand, and a $75,826 bonus accrual for meeting certain management goals.

Other Income and Expense. Interest expense was $920 for the three months ended September 30, 2020 compared to $7,182 for the same period in 2019, due to the repayment of debt in 2019 following the Company’s public offering. Interest income decreased by $20,978 due to the high cash deposits last year following the public offering, prior to the payment of debt and cash usage.

Net Loss. Our net loss was $1,100,023 for the three months ended September 30, 2020, a $489,660 increase from a net loss of $610,363 for the same period in 2019, primarily due to the reduction revenues and corresponding gross margin, partially offset by a decrease in operating expenses.

Comparison of Results of Operations for the Nine Months Ended September 30, 2020 and 2019

Revenues.  For the nine months ended September 30, 2020, revenues were $4,009,644, compared to $4,615,669 for the nine months ended September 30, 2019, a 13% decrease. Revenues in the nine months ended September 30, 2020 included a wide variety of customers, including several municipalities and state agencies in various states and in Canada, colleges, a large commercial business and two nonprofit organizations. We have also sold a variety of different products during this period, including our traditional EV ARC™, our new EV ARC™ 2020, a DC fast charging station for a California rest stop and the first two of three Solar Tree® solar-powered sustainable infrastructure products sold to charge large vehicles. This compares to revenues for the nine months ended September 30, 2019 where almost half of our revenue resulted from the delivery of units to one customer, the City of New York. We also sold two DC fast charging stations for California rest stops last year. Our shipments will continue to fluctuate each quarter due to the varying size of orders and timing of deliveries.

Gross Profit (Loss).  For the nine months ended September 30, 2020, we had a gross loss of $173,037 compared to gross profit of $349,279 for the period ended September 30, 2019. The gross profit in the period ended September 30, 2019 benefited from the reversal of $71,744 of expense for losses that were accrued at December 31, 2018. The gross loss resulted from the decrease in revenue in the current quarter, which caused an underabsorption of our fixed overhead costs and inefficient use of our labor resources. We expect our margins to improve as we increase our revenue levels, which will reduce our overhead costs per unit and improve our labor efficiency. In addition, we are working to negotiate better volume pricing and to engineer cost improvements into our processes. Warranty costs increased by $71,647 in the nine months ended September 30, 2020 compared to the same period in the prior year due to the addition of a full-time technical support person to support the units in the field and an increase in repairs.

Operating Expenses. Total operating expenses were $2,697,418 for the nine months ended September 30, 2020 compared to $2,226,667 for the same period in 2019, a 21% increase. The increase in operating expense was primarily attributable to an investment in our sales and marketing resources to build Company and product awareness and increase revenues. Operating expenses increased by $333,628 for sales personnel and sales and marketing consultants, $109,437 for non-cash compensation expense for stock option expense and vesting of director restricted shares, $75,826 bonus accrual for meeting certain management goals, $41,357 for medical insurance which was not provided in the prior year, and $55,253 of other increases. These increases in expenses were partially offset by a severance payment of $82,500 to an employee in the prior year that was not repeated in the current year and $62,250 for travel reductions due to the COVID-19 pandemic.

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Other Income and Expense. Interest expense was $11,357 for the nine months ended September 30, 2020 compared to $709,148 for the same period in 2019, due to the repayment of debt in 2019 following the Company’s public offering. Interest income decreased by $35,488 due to the high cash deposits last year following the public offering, prior to the payment of debt and cash usage.

Net Loss. We had a net loss of $2,876,501 for the nine months ended September 30, 2020, compared to a net loss of $2,543,868 for the same period in 2019. The increase in net loss was primarily due to the reduction in revenue and corresponding gross margin and increased operating expenses, partially offset by a reduction of interest expense.

Liquidity and Capital Resources

At September 30, 2020, we had cash of $12,332,224. We have historically met our cash needs through a combination of private and public offerings of our securities and loans. Our cash requirements are generally for operating activities.

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

	September 30,
	2020			2019
Cash provided by (used in):
Net cash used in operating activities	$	(3,231,325	)	$	(3,444,282	)
Net cash used in investing activities	$	(222,648	)	$	(51,531	)
Net cash provided by financing activities	$	11,936,741		$	8,544,018

Operating Activities

Our operating activities resulted in cash used in operations of $3,231,325 for the nine months ended September 30, 2020, compared to cash used in operations of $3,444,282 for the same period in 2019. Net loss of $2,876,501 for the nine months ended September 30, 2020 was decreased by $345,899 for non-cash expense items that included depreciation and amortization of $30,434, common stock issued for services for director compensation of $257,825, non-cash compensation expense related to stock options of $81,204, $5,990 for amortization of debt discount associated with the related party note, and an increase in net loss of $29,554 for amortization of operating lease right of use asset. Cash used in operations for the period included a $545,619 increase in accounts receivable due to higher revenues in Q3 2020 compared to Q4 2019, a $239,863 increase in prepaid expenses and other current assets for inventory prepayments and insurance deposits, payment of a convertible note originally issued in lieu of salary for a related party of $220,417, and a decrease in accounts payable of $114,228. Cash provided by operations included an increase of $177,640 for accrued expenses, primarily for payroll and related expenses, $143,224 for a decrease in inventory purchases, $74,703 for an increase for sales tax payable, $18,968 for increased deferred revenue for maintenance contracts, and $4,869 for deposits.

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Cash used in investing activities included $153,097 to purchase equipment, primarily for a demo EV ARC™ unit and a forklift truck and $69,551 for patent related costs during the nine months ended September 30, 2020. In the nine months ended September 30, 2019, $41,554 was used to fund patent related costs while $9,977 was used to purchase manufacturing equipment.

During the nine months ended September 30, 2020, cash generated by our financing activities included $11,499,675 in proceeds from the issuance of common stock pursuant to a public offering, offset by funding of deferred equity offering costs of $960,833, $1,066,912 in proceeds received from the exercise of warrants and we borrowed $339,262 through the Small Business Administration Paycheck Protection Program made available through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and we paid $8,275 toward the repayment of an auto loan. During the nine months ended September 30, 2019, cash generated by our financing activities included $13,201,000 in proceeds from issuance of common stock pursuant to a public offering, offset by funding of deferred equity offering costs of $1,175,852, net repayments of our line of credit facility of $960,000, repayment of debt of $2,520,959 and fractional share payments of $171.

While the Company has been attempting to grow market awareness and focusing on the generation of sales, the Company has historically had negative gross profits and is getting closer to earning a gross profit on its sales of products and we believe that our gross profits will improve as our revenues grow. Management believes that with increased production volumes that we believe are forthcoming, efficiencies will continue to improve, and total per unit production costs will decrease, thus allowing for increasing gross profits on the EV ARC™ product in the future.

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

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

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

During the period covered by this filing, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2020, we do not yet have sufficient controls and procedures to ensure that all the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.

The Company intends to improve its internal control over financial reporting and improve its disclosure controls and procedures. As of December 31, 2019, we had identified the following material weaknesses, of which the items below still exist as of September 30, 2020 and through the date of this report:

· Because of the size of the Company and the Company’s limited administrative staff, controls related to the segregation of certain duties had not yet been developed or instituted by the Company as of December 31, 2019. During the three months ended March 31, 2020, we hired an accounting staff member who is now providing segregation of duties procedures pertaining to cash payments, payroll, general ledger procedures and banking transactions. We expect to have our internal control procedures documented by the end of December 2020.

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

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

Corrective Action and Changes in Internal Control Over Financial Reporting

During the three months ended September 30. 2020, we continued to document and refine our control procedures to ensure that we have identified any disclosure weaknesses related to segregation of duties so that there are checks and balances with regard to cash disbursement, payroll, banking transactions and general ledger transactions. In addition, we have been improving our manual processes for managing our purchasing and inventory activities. In the same period, we have hired a Director of Operations who is implementing procedures that will track and control our transactions in manufacturing, including purchasing, production labor, and inventory transactions. We also hired a Director of Engineering to support this process. We expect to evaluate and choose a new Enterprise Resource Planning (ERP) system by the end of 2020 and implement it in early 2021. These additional implementations will provide significantly improved disclosure controls.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

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

In July 2020, 3,000 stock options were cashless exercised for 2,199 unregistered shares of the Company’s common stock which generated no proceeds.

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 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.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description
10.1	Lease Agreement - 5660 Eastgate Dr.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

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

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SIGNATURES

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

Dated: November 12, 2020	Beam Global
	By: /s/ Desmond Wheatley
	Desmond Wheatley, Chairman and Chief Executive Officer, (Principal Executive Officer)
	By: /s/ Katherine H. McDermott
	Katherine H. McDermott, Chief Financial Officer, (Principal Financial/Accounting Officer)

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EX-10.1

Exhibit 10.1

Lessor’s Brokerage Firm License No. Is the broker of (check one): the Lessor; or both the Lessee and Lessor (dual agent). Lessor’s Agent License No. is (check one): the Lessor’s Agent (salesperson or broker associate); or both the Lessee’s Agent and the Lessor’s Agent (dual agent). the Lessee; or both the Lessee’s Brokerage Firm Hughes Marino, Inc. License No. 01898886 Is the broker of (check one): Lessee and Lessor (dual agent). the Lessee’s Agent (salesperson or broker associate); or Lessee’s Agent Shane Poppen License No. 01701190 is (check one): both the Lessee’s Agent and the Lessor’s Agent (dual agent). (b) Payment to Brokers. Upon execution and delivery of this Lease by both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a separate written agreement (or if there is no such agreement, the sum of or 1.5 % of the total Base Rent) for the brokerage services rendered by the Brokers. 10. Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by (" Guarantor "). (See also Paragraph 37) 11. Attachments. Attached hereto are the following, all of which constitute a part of this Lease: an Addendum consisting of Paragraphs 53 through 55 ; a plot plan depicting the Premises; a current set of the Rules and Regulations; a Work Letter; other (specify): Exhibit A . 2. Premises. 1. Letting . Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. While the approximate square footage of the Premises may have been used in the marketing of the Premises for purposes of comparison, the Base Rent stated herein is NOT tied to square footage and is not subject to adjustment should the actual size be determined to be different. NOTE: Lessee is advised to verify the actual size prior to executing this Lease. 2. Condition . Lessor shall deliver the Premises to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever STANDARD INDUSTRIAL/COMMERCIAL SINGLE TENANT LEASE NET (DO NOT USE THIS FORM FOR MULTI TENANT BUILDINGS) 1. Basic Provisions ("Basic Provisions"). 1. Parties. This Lease (" Lease "), dated for reference purposes only Fe bruary 7, 2020 , is made by and between P N N Holdings, LP (" Lessor ") and Envision Solar International, Inc. (" Lessee "), (collectively the " Parties ," or individually a " Party "). 2. Premises: That certain real property, including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known as (street address, city, state, zip): 5660 Eastgate Drive, San Diego, CA 92121 and includes the "Annex Premises" located in the northwest corner of the property (" Premises "). The Premises are located in the County of San Diego , and are generally described as (describe briefly the nature of the property and , if applicable, the " Project ," if the property is located within a Project): a two story building consisting of 52,827 square feet. . (See also Paragraph 2) 3. Term: Five years and zero months (" Original Term ") commencing September 1, 2020 (" Commencement Date ") and ending August 31, 2025 (" Expiration Date "). (See also Paragraph 3) 4. Early Possession: If the Premises are available Lessee may have non exclusive possession of the Premises commencing (" Early Possession Date "). (See also Paragraphs 3.2 and 3.3) 5. Base Rent: $52,000.00 per month (" Base Rent "), payable on the first day of each month commencing September 1, 2020 . (See also Paragraph 4) If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted. See Paragraph . 6. Base Rent and Other Monies Paid Upon Execution: (a) Base Rent: $52,000.00 for the period September 1, 2020 - September 30, 2020 . (b) Security Deposit: $52,000.00 (" Security Deposit "). (See also Paragraph 5) (c) Association Fees : for the period . (d) Other: for . (e) Total Due Upon Execution of this Lease: $104,000.00 . 7. Agreed Use : office, research and development, manufacturing, distribution, and any other use permitted under all applicable laws and zoning . (See also Paragraph 6) 8. Insuring Party. Lessor is the " Insuring Party " unless otherwise stated herein. (See also Paragraph 8) 9. Real Estate Brokers. (See also Paragraph 15 and 25) (a) Representation : Each Party acknowledges receiving a Disclosure Regarding Real Estate Agency Relationship, confirms and consents to the following agency relationships in this Lease with the following real estate brokers (" Broker(s) ") and/or their agents ("Agent(s)"): INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 1 of 16

first occurs (" Start Date "), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems (" HVAC "), loading doors, sump pumps, if any, and all other such elements in the Premises, other than those constructed by Lessee, shall be in good operating condition on said date, that the structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the " Building ") shall be free of material defects, and that the Premises do not contain hazardous levels of any mold or fungi defined as toxic under applicable state or federal law. If a non compliance with said warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fail within the appropriate warranty period, Lessor shall, as Lessor's sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non compliance, malfunction or failure, rectify same at Lessor's expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the Building. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non compliance, malfunction or failure shall be the obligation of Lessee at Lessee's sole cost and expense. Lessor also warrants, that unless otherwise specified in writing, Lessor is unaware of (i) any recorded Notices of Default affecting the Premise; (ii) any delinquent amounts due under any loan secured by the Premises; and (iii) any bankruptcy proceeding affecting the Premises. 3. Compliance . Lessor warrants that to the best of its knowledge the improvements on the Premises comply with the building codes, applicable laws, covenants or restrictions of record, regulations, and ordinances (" Applicable Requirements ") that were in effect at the time that each improvement, or portion thereof, was constructed. Said warranty does not apply to the use to which Lessee will put the Premises, modifications which may be required by the Americans with Disabilities Act or any similar laws as a result of Lessee's use (see Paragraph 49), or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee's intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non compliance, rectify the same at Lessor's expense. If Lessee does not give Lessor written notice of a non compliance with this warranty within 6 months following the Start Date, correction of that non - compliance shall be the obligation of Lessee at Lessee's sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building (" Capital Expenditure "), Lessor and Lessee shall allocate the cost of such work as follows: (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee's termination notice that Lessor has elected to pay the difference between the actual cost thereof and an amount equal to 6 months' Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure. (b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor shall pay for such Capital Expenditure and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease or any extension thereof, on the date that on which the Base Rent is due, an amount equal to 1/144th of the portion of such costs reasonably attributable to the Premises. Lessee shall pay Interest on the balance but may prepay its obligation at any time. If, however, such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until Lessor's share of such costs have been fully paid. If Lessee is unable to finance Lessor's share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor. (c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall either: (i) immediately cease such changed use or intensity of use and/or take such other steps as may be necessary to eliminate the requirement for such Capital Expenditure, or (ii) complete such Capital Expenditure at its own expense. Lessee shall not, however, have any right to terminate this Lease. 4. Acknowledgements . Lessee acknowledges that: (a) it has been given an opportunity to inspect and measure the Premises, (b) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the size and condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee's intended use, (c) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, (d) it is not relying on any representation as to the size of the Premises made by Brokers or Lessor, (e) the square footage of the Premises was not material to Lessee's decision to lease the Premises and pay the Rent stated herein, and (f) neither Lessor, Lessor's agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, promises or warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor's sole responsibility to investigate the financial capability and/or suitability of all proposed tenants. 5. Lessee as Prior Owner/Occupant . The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work. 3. Term. 1. Term . The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3. 2. Early Possession . Any provision herein granting Lessee Early Possession of the Premises is subject to and conditioned upon the Premises being available for such possession prior to the Commencement Date . Any grant of Early Possession only conveys a non exclusive right to occupy the Premises . If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such Early Possession . All other terms of this Lease (including but not limited to the obligations to pay Real Property Taxes and insurance premiums and to maintain the Premises) shall be in effect during such period . Any such Early Possession shall not affect the Expiration Date . 3. Delay In Possession . Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession by such date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or change the Expiration Date. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until Lessor delivers INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 2 of 16

possession of the Premises and any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession is not delivered within 60 days after the Commencement Date, as the same may be extended under the terms of any Work Letter executed by Parties, Lessee may, at its option, by notice in writing within 10 days after the end of such 60 day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said 10 day period, Lessee's right to cancel shall terminate. If possession of the Premises is not delivered within 120 days after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing. 3.4 Lessee Compliance . Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied. 4. Rent. 1. Rent Defined . All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent (" Rent "). 2. Payment . Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. All monetary amounts shall be rounded to the nearest whole dollar. In the event that any invoice prepared by Lessor is inaccurate such inaccuracy shall not constitute a waiver and Lessee shall be obligated to pay the amount set forth in this Lease. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance of such Rent, regardless of Lessor's endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any Late Charge and Lessor, at its option, may require all future Rent be paid by cashier's check. Payments will be applied first to accrued late charges and attorney's fees, second to accrued interest, then to Base Rent, Insurance and Real Property Taxes, and any remaining amount to any other outstanding charges or costs. 3. Association Fees . In addition to the Base Rent, Lessee shall pay to Lessor each month an amount equal to any owner's association or condominium fees levied or assessed against the Premises. Said monies shall be paid at the same time and in the same manner as the Base Rent. 4. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount already due Lessor, for Rents which will be due in the future, and/ or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodatea sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 90 days after the expiration or termination of this Lease, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. Lessor shall upon written request provide Lessee with an accounting showing how that portion of the Security Deposit that was not returned was applied. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease. THE SECURITY DEPOSIT SHALL NOT BE USED BY LESSEE IN LIEU OF PAYMENT OF THE LAST MONTH'S RENT. 5. Use. 1. Use . Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Other than guide, signal and seeing eye dogs, Lessee shall not keep or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the premises or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor's objections to the change in the Agreed Use. 2. Hazardous Substances . (a) Reportable Uses Require Consent . The term " Hazardous Substance " as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all Applicable Requirements. " Reportable Use " shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, ordinary office supplies (copier toner, liquid paper, glue, etc.) and common household cleaning materials, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 3 of 16

Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit. (b) Duty to Inform Lessor . If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance. (c) Lessee Remediation . Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, comply with all Applicable Requirements and take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party. (d) Lessee Indemnification . Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from adjacent properties not caused or contributed to by Lessee). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement. (e) Lessor Indemnification . Except as otherwise provided in paragraph 8.7, Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which result from Hazardous Substances which existed on the Premises prior to Lessee's occupancy or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. (f) Investigations and Remediations . Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to Lessee's occupancy, unless such remediation measure is required as a result of Lessee's use (including "Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and remedial responsibilities. (g) Lessor Termination Option . If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor's notice of termination. 3. Lessee's Compliance with Applicable Requirements . Except as otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said Applicable Requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. Likewise, Lessee shall immediately give written notice to Lessor of: (i) any water damage to the Premises and any suspected seepage, pooling, dampness or other condition conducive to the production of mold; or (ii) any mustiness or other odors that might indicate the presence of mold in the Premises. In addition, Lessee shall provide copies of all relevant material safety data sheets ( MSDS ) to Lessor within 10 days of the receipt of a written request therefor. In addition, Lessee shall provide Lessor with copies of its business license, certificate of occupancy and/or any similar document within 10 days of the receipt of a written request therefor. 4. Inspection; Compliance . Lessor and Lessor's " Lender " (as defined in Paragraph 30) and consultants authorized by Lessor shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times after reasonable notice, for the purpose of inspecting and/or testing the condition of the Premises and/or for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a Hazardous Substance Condition (see paragraph 9.1) is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination. In addition, Lessee shall provide copies of all relevant material safety data sheets ( MSDS ) to Lessor within 10 days of the receipt of a written request therefor. Lessee acknowledges that any failure on its part to allow such inspections or testing will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain. Accordingly, should the Lessee fail to allow such inspections and/or testing in a timely fashion the Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater for the remainder to the Lease. The Parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/costs that Lessor will incur by reason of Lessee's failure to allow such inspection and/or testing. Such increase in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect to such failure nor prevent the exercise of any of the other rights and remedies granted hereunder. 7. Maintenance; Repairs; Utility Installations; Trade Fixtures and Alterations. 1. Lessee's Obligations . (a) In General . Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises, Utility Installations (intended for INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 4 of 16

Lessee's exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fire protection system, fixtures, walls (interior and exterior), foundations, ceilings, roofs, roof drainage systems, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. Lessee shall, during the term of this Lease, keep the exterior appearance of the Building in a first class condition (including, e.g. graffiti removal) consistent with the exterior appearance of other similar facilities of comparable age and size in the vicinity, including, when necessary, the exterior repainting of the Building. (b) Service Contracts . Lessee shall, at Lessee's sole expense, procure and maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any, if and when installed on the Premises : (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation systems , (v) roof covering and drains, and (vi) clarifiers . However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and Lessee shall reimburse Lessor, upon demand, for the cost thereof. (c) Failure to Perform . If Lessee fails to perform Lessee's obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days' prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee's behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly pay to Lessor a sum equal to 115% of the cost thereof. (d) Replacement . Subject to Lessee's indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee's failure to exercise and perform good maintenance practices, if an item described in Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is 144 (ie. 1/144th of the cost per month). Lessee shall pay Interest on the unamortized balance but may prepay its obligation at any time. 2. Lessor's Obligations . Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the Parties hereto that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, all of which obligations are intended to be that of the Lessee. It is the intention of the Parties that the terms of this Lease govern the respective obligations of the Parties as to maintenance and repair of the Premises. 3. Utility Installations; Trade Fixtures; Alterations . (a) Definitions . The term " Utility Installations " refers to all floor and window coverings, air and/or vacuum lines, power panels, electrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term " Trade Fixtures " shall mean Lessee's machinery and equipment that can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. " Lessee Owned Alterations and/or Utility Installations " are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). (b) Consent . Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non structural Alterations or Utility Installations to the interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, will not affect the electrical, plumbing, HVAC, and/or life safety systems, do not trigger the requirement for additional modifications and/or improvements to the Premises resulting from Applicable Requirements, such as compliance with Title 24, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 month's Base Rent in the aggregate or a sum equal to one month's Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as built plans and specifications. For work which costs an amount in excess of one month's Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor. (c) Liens; Bonds . Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's attorneys' fees and costs. 4. Ownership; Removal; Surrender; and Restoration . (a) Ownership . Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises. (b) Removal . By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent. (c) Surrender; Restoration . Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing and the provisions of Paragraph 7.1(a), if the Lessee occupies the Premises for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 5 of 16

to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Premises) to the level specified in Applicable Requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. Any personal property of Lessee not removed on or before the Expiration Date or any earlier termination date shall be deemed to have been abandoned by Lessee and may be disposed of or retained by Lessor as Lessor may desire. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below. 8. Insurance; Indemnity. 1. Payment For Insurance . Lessee shall pay for all insurance required under Paragraph 8 except to the extent of the cost attributable to liability insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per occurrence. Premiums for policy periods commencing prior to or extending beyond the Lease term shall be prorated to correspond to the Lease term. Payment shall be made by Lessee to Lessor within 10 days following receipt of an invoice. 2. Liability Insurance . (a) Carried by Lessee . Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $2,000,000. Lessee shall add Lessor as an additional insured by means of an endorsement at least as broad as the Insurance Service Organization's "Additional Insured Managers or Lessors of Premises" Endorsement. The policy shall not contain any intra insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an " insured contract " for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. Lessee shall provide an endorsement on its liability policy(ies) which provides that its insurance shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only. (b) Carried by Lessor . Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein . 3. Property Insurance Building, Improvements and Rental Value . (a) Building and Improvements . The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor, with loss payable to Lessor, any ground lessor, and to any Lender insuring loss or damage to the Premises . The amount of such insurance shall be equal to the full insurable replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee not by Lessor. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $5,000 per occurrence, and Lessee shall be liable for such deductible amount in the event of an Insured Loss. (b) Rental Value . The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days ("Rental Value insurance"). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period. Lessee shall be liable for any deductible amount in the event of such loss. (c) Adjacent Premises . If the Premises are part of a larger building, or of a group of buildings owned by Lessor which are adjacent to the Premises, the Lessee shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises. 4. Lessee's Property; Business Interruption Insurance; Worker's Compensation Insurance . (a) Property Damage . Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. (b) Business Interruption . Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils. (c) Worker's Compensation Insurance . Lessee shall obtain and maintain Worker's Compensation Insurance in such amount as may be required by Applicable Requirements. Such policy shall include a 'Waiver of Subrogation' endorsement. Lessee shall provide Lessor with a copy of such endorsement along with the certificate of insurance or copy of the policy required by paragraph 8.5. (d) No Representation of Adequate Coverage . Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease. 4. Insurance Policies . Insurance required herein shall be by companies maintaining during the policy term a "General Policyholders Rating" of at least A , VII, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates with copies of the required endorsements evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 10 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may increase his liability insurance coverage and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same. 6. Waiver of Subrogation . Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 6 of 16

their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby. 7. Indemnity . Except for Lessor's gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, a Breach of the Lease by Lessee and/or the use and/or occupancy of the Premises and/or Project by Lessee and/or by Lessee's employees, contractors or invitees. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified. 8. Exemption of Lessor and its Agents from Liability . Notwithstanding the negligence or breach of this Lease by Lessor or its agents, neither Lessor nor its agents shall be liable under any circumstances for: (i) injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, indoor air quality, the presence of mold or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places, (ii) any damages arising from any act or neglect of any other tenant of Lessor or from the failure of Lessor or its agents to enforce the provisions of any other lease in the Project, or (iii) injury to Lessee's business or for any loss of income or profit therefrom. Instead, it is intended that Lessee's sole recourse in the event of such damages or injury be to file a claim on the insurance policy(ies) that Lessee is required to maintain pursuant to the provisions of paragraph 8. 9. Failure to Provide Insurance . Lessee acknowledges that any failure on its part to obtain or maintain the insurance required herein will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain. Accordingly, for any month or portion thereof that Lessee does not maintain the required insurance and/or does not provide Lessor with the required binders or certificates evidencing the existence of the required insurance, the Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater. The parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/costs that Lessor will incur by reason of Lessee's failure to maintain the required insurance. Such increase in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect to the failure to maintain such insurance, prevent the exercise of any of the other rights and remedies granted hereunder, nor relieve Lessee of its obligation to maintain the insurance specified in this Lease. 9. Damage or Destruction. 1. Definitions . (a) " Premises Partial Damage " shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 6 months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (b) " Premises Total Destruction " shall mean damage or destruction to the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 6 months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (c) " Insured Loss " shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved. (d) " Replacement Cost " shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation. (e) " Hazardous Substance Condition " shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance, in, on, or under the Premises which requires restoration. 1. Partial Damage Insured Loss . If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds (except as to the deductible which is Lessee's responsibility) as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. 3. Partial Damage Uninsured Loss . If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice. 4. Total Destruction . Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor's damages from Lessee, except as provided in Paragraph 8.6. INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 7 of 16

5. Damage Near End of Term . If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee's option shall be extinguished. 6. Abatement of Rent; Lessee's Remedies . (a) Abatement . In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein. (b) Remedies . If Lessor is obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. "Commence" shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs. 7. Termination; Advance Payments . Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor. 10. Real Property Taxes. 1. Definition . As used herein, the term " Real Property Taxes " shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Premises or the Project, Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Building address. Real Property Taxes shall also include any tax, fee, levy, assessment or charge, or any increase therein: (i) imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Premises, and (ii) levied or assessed on machinery or equipment provided by Lessor to Lessee pursuant to this Lease. 2. Payment of Taxes . In addition to Base Rent, Lessee shall pay to Lessor an amount equal to the Real Property Tax installment due at least 20 days prior to the applicable delinquency date . If any such installment shall cover any period of time prior to or after the expiration or termination of this Lease, Lessee's share of such installment shall be prorated . In the event Lessee incurs a late charge on any Rent payment, Lessor may estimate the current Real Property Taxes, and require that such taxes be paid in advance to Lessor by Lessee monthly in advance with the payment of the Base Rent. Such monthly payments shall be an amount equal to the amount of the estimated installment of taxes divided by the number of months remaining before the month in which said installment becomes delinquent. When the actual amount of the applicable tax bill is known, the amount of such equal monthly advance payments shall be adjusted as required to provide the funds needed to pay the applicable taxes. If the amount collected by Lessor is insufficient to pay such Real Property Taxes when due, Lessee shall pay Lessor, upon demand, such additional sum as is necessary. Advance payments may be intermingled with other moneys of Lessor and shall not bear interest. In the event of a Breach by Lessee in the performance of its obligations under this Lease, then any such advance payments may be treated by Lessor as an additional Security Deposit. 3. Joint Assessment . If the Premises are not separately assessed, Lessee's liability shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. 4. Personal Property Taxes . Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee's property. 11. Utilities and Services. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered or billed to Lessee, Lessee shall pay a reasonable proportion, to be determined by Lessor, of all charges jointly metered or billed. There shall be no abatement of rent and Lessor shall not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor's reasonable control or in cooperation with governmental request or directions. Within fifteen days of Lessor’s written request, Lessee agrees to deliver to Lessor such information, documents and/or authorization as Lessor needs in order for Lessor to comply with new or existing Applicable Requirements relating to commercial building energy usage, ratings, and/or the reporting thereof. 12. Assignment and Subletting. 1. Lessor's Consent Required . (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, " assign or assignment ") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent. (b) Unless Lessee is a corporation and its stock is publicly traded on a national stock exchange, a change in the control of Lessee shall constitute an assignment requiring consent . The transfer, on a cumulative basis, of 50 25 % or more of the voting control of Lessee shall constitute a change in control for this purpose . (c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 8 of 16

Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. " Net Worth of Lessee " shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles. (d) An assignment or subletting without consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1(d), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent. (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief. (f) Lessor may reasonably withhold consent to a proposed assignment or subletting if Lessee is in Default at the time consent is requested. (g) Notwithstanding the foregoing, allowing a de minimis portion of the Premises, ie. 20 square feet or less, to be used by a third party vendor in connection with the installation of a vending machine or payphone shall not constitute a subletting. 2. Terms and Conditions Applicable to Assignment and Subletting . (a) Regardless of Lessor's consent, no assignment or subletting shall : (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee. (b) Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach. (c) Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting. (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor. (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $500 as consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. (See also Paragraph 36) (f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment, entering into such sublease, or entering into possession of the Premises or any portion thereof, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing. (g) Lessor's consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2) 2. Additional Terms and Conditions Applicable to Subletting . The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein: (a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. In the event that the amount collected by Lessor exceeds Lessee's then outstanding obligations any such excess shall be refunded to Lessee. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary. (b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor. (c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor. (d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice . The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee . 13. Default; Breach; Remedies. 1. Default; Breach . A " Default " is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A " Breach " is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period: (a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism. (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 3 business days following written notice to Lessee. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF LESSOR'S RIGHTS, INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE PREMISES. (c) The failure of Lessee to allow Lessor and/or its agents access to the Premises or the commission of waste, act or acts constituting public or private nuisance, and/or an illegal activity on the Premises by Lessee, where such actions continue for a period of 10 3 business days following written notice to Lessee. In the INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 9 of 16

event that Lessee commits waste, a nuisance or an illegal activity a second time then, the Lessor may elect to treat such conduct as a non curable Breach rather than a Default. (d) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate or financial statements, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 42, (viii) material safety data sheets (MSDS), or (ix) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee. (e) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof, other than those described in subparagraphs 13.1(a), (b), (c) or (d), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee's Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion. (f) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a " debtor " as defined in 11 U.S.C. Α 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions. (g) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false. (h) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease. 2. Remedies . If Lessee fails to perform any of its affirmative duties or obligations, within 30 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs and expenses incurred by Lessor in such performance upon receipt of an invoice therefor. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach: (a) Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not waive Lessor's right to recover any damages to which Lessor is otherwise entitled. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute. (b) Continue the Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession. (c) Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises. 3. Inducement Recapture. Any agreement for free or abated rent or other charges, the cost of tenant improvements for Lessee paid for or performed by Lessor, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as " Inducement Provisions ," shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance. 4. Late Charges . Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within 10 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall immediately pay to Lessor a one time late charge equal to 2 10 % of each such overdue amount or $100, whichever is greater. The Parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 10 of 16

advance. 5. Interest . Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due shall bear interest from the 31st day after it was due. The interest (" Interest ") charged shall be computed at the rate of 10% per annum but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4. 6. Breach by Lessor . (a) Notice of Breach . Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished to Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion. (b) Performance by Lessee on Behalf of Lessor . In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset from Rent the actual and reasonable cost to perform such cure, provided, however, that such offset shall not exceed an amount equal to the greater of one month's Base Rent or the Security Deposit, reserving Lessee's right to seek reimbursement from Lessor for any such expense in excess of such offset. Lessee shall document the cost of said cure and supply said documentation to Lessor. 14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively " Condemnation "), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the Building, or more than 25% of that portion of the Premises not occupied by any building, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation paid by the condemnor for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation. 15. Brokerage Fees. 1. Additional Commission . In addition to the payments owed pursuant to Paragraph 1.9 above, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee or anyone affiliated with Lessee acquires any rights to the Premises or other premises owned by Lessor and located within the same Project, if any, within which the Premises is located, (c) if Lessee remains in possession of the Premises, with the consent of Lessor, after the expiration of this Lease, or (d) if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the fee schedule of the Brokers in effect at the time the Lease was executed. 2. Assumption of Obligations . Any buyer or transferee of Lessor's interest in this Lease shall be deemed to have assumed Lessor's obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.9, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts to Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within 10 days after said notice, Lessee shall pay said monies to its Broker and offset such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor's Broker for the limited purpose of collecting any brokerage fee owed. 3. Representations and Indemnities of Broker Relationships . Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker, agent or finder (other than the Brokers and Agents, if any) in connection with this Lease, and that no one other than said named Brokers and Agents is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys' fees reasonably incurred with respect thereto. 16. Estoppel Certificates. (a) Each Party (as " Responding Party ") shall within 10 days after written notice from the other Party (the " Requesting Party ") execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current " Estoppel Certificate " form published BY AIR CRE, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party. (b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party's performance, and (iii) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the Requesting Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate. In addition, Lessee acknowledges that any failure on its part to provide such an Estoppel Certificate will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain. Accordingly, should the Lessee fail to execute and/or deliver a requested Estoppel Certificate in a timely fashion the monthly Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater for remainder of the Lease. The Parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/costs that Lessor will incur by reason of Lessee's failure to provide the Estoppel Certificate. Such increase in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect to the failure to provide the Estoppel Certificate nor prevent the exercise of any of the other rights and remedies granted hereunder. (c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall within 10 days after written notice from Lessor deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 17. Definition of Lessor. The term " Lessor " as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 11 of 16

sublease, of the Lessee's interest in the prior lease. In the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. 18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 19. Days. Unless otherwise specifically indicated to the contrary, the word " days " as used in this Lease shall mean and refer to calendar days. 20. Limitation on Liability. The obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, or its partners, members, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against Lessor's partners, members, directors, officers or shareholders, or any of their personal assets for such satisfaction. 21. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease. 22. No Prior or Other Agreements; Broker Disclaimer . This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. 23. Notices. 1. Notice Requirements . All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, or by email, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing. 2. Date of Notice . Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 72 hours after the same is addressed as required herein and mailed with postage prepaid . Notices delivered by United States Express Mail or overnight courier that guarantees next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier . Notices delivered by hand, or transmitted by facsimile transmission or by email shall be deemed delivered upon actual receipt . If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day . 3. Options. Notwithstanding the foregoing, in order to exercise any Options (see paragraph 39), the Notice must be sent by Certified Mail (return receipt requested), Express Mail (signature required), courier (signature required) or some other methodology that provides a receipt establishing the date the notice was received by the Lessor. 18. Waivers. (a) No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition hereof. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. (b) The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of monies or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. (c) THE PARTIES AGREE THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS INCONSISTENT WITH THIS LEASE. 25. Disclosures Regarding The Nature of a Real Estate Agency Relationship. (a) When entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows: (i) Lessor's Agent . A Lessor's agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A Lessor's agent or subagent has the following affirmative obligations: To the Lessor : A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and the Lessor : (a) Diligent exercise of reasonable skills and care in performance of the agent's duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above. (ii) Lessee's Agent . An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor's agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations. To the Lessee : A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee and the Lessor : (a) Diligent exercise of reasonable skills and care in performance of the agent's duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above. (iii) Agent Representing Both Lessor and Lessee . A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has the following affirmative obligations to both the Lessor and the Lessee: (a) A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either Lessor or the Lessee. (b) Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent may not, without the express permission of the respective Party, disclose to the other Party confidential information, including, but not limited to, facts relating INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 12 of 16

to either Lessee’s or Lessor’s financial position, motivations, bargaining position, or other personal information that may impact rent, including Lessor’s willingness to accept a rent less than the listing rent or Lessee’s willingness to pay rent greater than the rent offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully read all agreements to assure that they adequately express their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional. Both Lessor and Lessee should strongly consider obtaining tax advice from a competent professional because the federal and state tax consequences of a transaction can be complex and subject to change. (b) Brokers have no responsibility with respect to any default or breach hereof by either Party. The Parties agree that no lawsuit or other legal proceeding involving any breach of duty, error or omission relating to this Lease may be brought against Broker more than one year after the Start Date and that the liability (including court costs and attorneys' fees), of any Broker with respect to any such lawsuit and/or legal proceeding shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker. (c) Lessor and Lessee agree to identify to Brokers as "Confidential" any communication or information given Brokers that is considered by such Party to be confidential. 26. No Right To Holdover . Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding the expiration or termination. Holdover Base Rent shall be calculated on monthly basis. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. 27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. 28. Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it. 29. Binding Effect ; Choice of Law . This Lease shall be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located . Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located . Signatures to this Lease accomplished by means of electronic signature or similar technology shall be legal and binding . 30. Subordination; Attornment; Non Disturbance. 1. Subordination . This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, " Security Device "), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as " Lender ") shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof. 2. Attornment . In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of the new owner, this Lease will automatically become a new lease between Lessee and such new owner, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor's obligations, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month's rent, or (d) be liable for the return of any security deposit paid to any prior lessor which was not paid or credited to such new owner. 3. Non Disturbance . With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease shall be subject to receiving a commercially reasonable non disturbance agreement (a " Non Disturbance Agreement ") from the Lender which Non Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall, if requested by Lessee, use its commercially reasonable efforts to obtain a Non Disturbance Agreement from the holder of any pre existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non Disturbance Agreement within said 60 days, then Lessee may, at Lessee's option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non Disturbance Agreement. 4. Self Executing . The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non Disturbance Agreement provided for herein. 31. Attorneys' Fees. If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, " Prevailing Party " shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation). 32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times after reasonable prior notice for the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary or desirable and the erecting, using and maintaining of utilities, services, pipes and conduits through the Premises and/or other premises as long as there is no material adverse effect on Lessee's use of the Premises. All such activities shall be without abatement of rent or liability to Lessee. INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 13 of 16

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction. 34. Signs. Lessor may place on the Premises ordinary "For Sale" signs at any time and ordinary "For Lease" signs during the last 6 months of the term hereof. Except for ordinary "for sublease" signs, Lessee shall not place any sign upon the Premises without Lessor's prior written consent. All signs must comply with all Applicable Requirements. 35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor's failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest. 36. Consents. All requests for consent shall be in writing. Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request. 37. Guarantor. 1. Execution . The Guarantors, if any, shall each execute a guaranty in the form most recently published BY AIR CRE, and each such Guarantor shall have the same obligations as Lessee under this Lease. 2. Default . It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect. 38. Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof. 39. Options. If Lessee is granted any Option, as defined below, then the following provisions shall apply. 1. Definition . " Option " shall mean: (a) the right to extend or reduce the term of or renew this Lease or to extend or reduce the term of or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase, the right of first offer to purchase or the right of first refusal to purchase the Premises or other property of Lessor. 2. Options Personal To Original Lessee . Any Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting. 3. Multiple Options . In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised. 4. Effect of Default on Options . (a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or more notices of separate Default, whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option. (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a). (c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term or completion of the purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), or (ii) if Lessee commits a Breach of this Lease. 40. Multiple Buildings. If the Premises are a part of a group of buildings controlled by Lessor, Lessee agrees that it will abide by and conform to all reasonable rules and regulations which Lessor may make from time to time for the management, safety, and care of said properties, including the care and cleanliness of the grounds and including the parking, loading and unloading of vehicles, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessee also agrees to pay its fair share of common expenses incurred in connection with such rules and regulations. 41. Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties. 42. Reservations . Lessor reserves to itself the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions. 43. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 14 of 16

was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay. A Party who does not initiate suit for the recovery of sums paid "under protest" within 6 months shall be deemed to have waived its right to protest such payment. 44. Authority; Multiple Parties; Execution. (a) If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each Party shall, within 30 days after request, deliver to the other Party satisfactory evidence of such authority. (b) If this Lease is executed by more than one person or entity as "Lessee", each such person or entity shall be jointly and severally liable hereunder. It is agreed that any one of the named Lessees shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document. (c) This Lease may be executed by the Parties in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 44. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 45. Offer . Preparation of this Lease by either Party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto. 46. Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. 47. Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT. 48. Arbitration of Disputes. An Addendum requiring the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease is is not attached to this Lease. 49. Accessibility; Americans with Disabilities Act. (a) The Premises: have not undergone an inspection by a Certified Access Specialist (CASp). Note: A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction related accessibility standards within the premises. have undergone an inspection by a Certified Access Specialist (CASp) and it was determined that the Premises met all applicable construction related accessibility standards pursuant to California Civil Code Α 55.51 et seq. Lessee acknowledges that it received a copy of the inspection report at least 48 hours prior to executing this Lease and agrees to keep such report confidential. have undergone an inspection by a Certified Access Specialist (CASp) and it was determined that the Premises did not meet all applicable construction related accessibility standards pursuant to California Civil Code Α 55.51 et seq. Lessee acknowledges that it received a copy of the inspection report at least 48 hours prior to executing this Lease and agrees to keep such report confidential except as necessary to complete repairs and corrections of violations of construction related accessibility standards. In the event that the Premises have been issued an inspection report by a CASp the Lessor shall provide a copy of the disability access inspection certificate to Lessee within 7 days of the execution of this Lease. (b) Since compliance with the Americans with Disabilities Act (ADA) and other state and local accessibility statutes are dependent upon Lessee's specific use of the Premises, Lessor makes no warranty or representation as to whether or not the Premises comply with ADA or any similar legislation. In the event that Lessee's use of the Premises requires modifications or additions to the Premises in order to be in compliance with ADA or other accessibility statutes, Lessee agrees to make any such necessary modifications and/or additions at Lessee's expense. LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY AIR CRE OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE. WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED. The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures. Executed at: Executed at: INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 15 of 16

B y: By: Name Printed: Title: Phone: Fax: Email: Address: Federal ID No.: By: Name Printed: Title: Phone: Fax: Email: Address: Federal ID No.: BRO K E R Attn: Title: Address: Phone: Fax: Email: Federal ID No.: Broker DRE License #: Agent DRE License #: BROKER Hughes Marino, Inc. Attn: Shane Poppen Title: Address: Phone: Fax: Email: Federal ID No.: Broker DRE License #: Agent DRE License #: AIR CRE * https: //w ww .aircre.com * 213 687 8777 * contracts@aircre.com NOTICE: No part of these works may be reproduced in any form without permission in writing. By: /s/ Katherine McDermott Name Printed: Katherine M cDermott Title: CFO Phone: Fax: Email: /s/ Peter Aardema Name Printed: Peter Aardem a Title: Phone: Fax: Email: On: 3/23/2020 By LESSEE : Envision Solar International, Inc. On: 3/31/2020 By LESSOR : P NN Hol dings, LP INITIALS © 2019 AIR CRE. All Rights Reserved. STN 27.22, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 16 of 16

OPTION(S) TO EXTEND STANDARD LEASE ADDENDUM Dated: February 7, 2020 By and Between Les s o r : P NN Holdings, LP Lessee: Envision Solar International, Property Addres I s: nc. 5660 Eastgate Drive, San Diego, CA 92121 and includes the "Annex Premises" located in the northwest corner of the property (street address, city, state, zip) Paragraph: 51 A. OPTION(S) TO EXTEND: Lessor hereby grants to Lessee the option to extend the term of this Lease for two (2) additional twelve (12) month period(s) commencing when the prior term expires upon each and all of the following terms and conditions: (i) In order to exercise an option to extend, Lessee must give written notice of such election to Lessor and Lessor must receive the same at least six (6) but not more than nine (9) months prior to the date that the option period would commence, time being of the essence. If proper notification of the exercise of an option is not given and/or received, such option shall automatically expire. Options (if there are more than one) may only be exercised consecutively. (ii) The provisions of paragraph 39, including those relating to Lessee's Default set forth in paragraph 39.4 of this Lease, are conditions of this Option. (iii) Except for the provisions of this Lease granting an option or options to extend the term, all of the terms and conditions of this Lease except where specifically modified by this option shall apply. (iv) This Option is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and without the intention of thereafter assigning or subletting. (v) The monthly rent for each month of the option period shall be calculated as follows, using the method(s) indicated below: (Check Method(s) to be Used and Fill in Appropriately) I. Cost of Living Adjustment(s) (COLA) a. On (Fill in COLA Dates): the Base Rent shall be adjusted by the change, if any, from the Base Month specified below, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for (select one): CPI W (Urban Wage Earners and Clerical Workers) or CPI U (All Urban Consumers), for (Fill in Urban Area): . All Items (1982 1984 = 100), herein referred to as "CPI". b. The monthly Base Rent payable in accordance with paragraph A.I.a. of this Addendum shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease, shall be multiplied by a fraction the numerator of which shall be the CPI of the calendar month 2 months prior to the month(s) specified in paragraph A.I.a. above during which the adjustment is to take effect, and the denominator of which shall be the CPI of the calendar month which is 2 months prior to (select one): the first month of the term of this Lease as set forth in paragraph 1.3 ("Base Month") or (Fill in Other "Base Month"): . The sum so calculated shall constitute the new monthly Base Rent hereunder, but in no event, shall any such new monthly Base Rent be less than the Base Rent payable for the month immediately preceding the rent adjustment. c. In the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the index most nearly the same as the CPI shall be used to make such calculation. In the event that the Parties cannot agree on such alternative index, then the matter shall be submitted for decision to the American Arbitration Association in accordance with the then rules of said Association and the decision of the arbitrators shall be binding upon the parties. The cost of said Arbitration shall be paid equally by the Parties. II. Market Rental Value Adjustment(s) (MRV) a. On (Fill in MRV Adjustment Date(s)) the Base Rent shall be adjusted to the "Market Rental Value" of the property as follows: 1) Four months prior to each Market Rental Value Adjustment Date described above, the Parties shall attempt to agree upon what the new MRV will be on the adjustment date. If agreement cannot be reached, within thirty days, then: (a) Lessor and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish the new MRV within the next 30 days. Any associated costs will be split equally between the Parties, or (b) Both Lessor and Lessee shall each immediately make a reasonable determination of the MRV and submit such determination, in writing, to INITIALS © 2017 AIR CRE. All Rights Reserved. OE 6.02, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 1 of 2

arbitration in accordance with the following provisions: (i) Within 15 days thereafter, Lessor and Lessee shall each select an independent third party appraiser or broker ("Consultant" check one) of their choice to act as an arbitrator (Note: the parties may not select either of the Brokers that was involved in negotiating the Lease). The two arbitrators so appointed shall immediately select a third mutually acceptable Consultant to act as a third arbitrator. (ii) The 3 arbitrators shall within 30 days of the appointment of the third arbitrator reach a decision as to what the actual MRV for the Premises is, and whether Lessor's or Lessee's submitted MRV is the closest thereto. The decision of a majority of the arbitrators shall be binding on the Parties. The submitted MRV which is determined to be the closest to the actual MRV shall thereafter be used by the Parties. (iii) If either of the Parties fails to appoint an arbitrator within the specified 15 days, the arbitrator timely appointed by one of them shall reach a decision on his or her own, and said decision shall be binding on the Parties. (iv) The entire cost of such arbitration shall be paid by the party whose submitted MRV is not selected, ie. the one that is NOT the closest to the actual MRV. 2) When determining MRV, the Lessor, Lessee and Consultants shall consider the terms of comparable market transactions which shall include, but not limited to, rent, rental adjustments, abated rent, lease term and financial condition of tenants. 3) Notwithstanding the foregoing, the new Base Rent shall not be less than the rent payable for the month immediately preceding the rent adjustment. b. Upon the establishment of each New Market Rental Value: 1) the new MRV will become the new "Base Rent" for the purpose of calculating any further Adjustments, and 2) the first month of each Market Rental Value term shall become the new "Base Month" for the purpose of calculating any further Adjustments. III. Fixed Rental Adjustment(s) (FRA) The Base Rent shall be increased to the following amounts on the dates set forth below: On (Fill in FRA Adjustment Date(s)): The New Base Rent shall be: IV. Initial Term Adjustments The formula used to calculate adjustments to the Base Rate during the original Term of the Lease shall continue to be used during the extended term. B. NOTICE: Unless specified otherwise herein, notice of any rental adjustments, other than Fixed Rental Adjustments, shall be made as specified in paragraph 23 of the Lease. C. BROKER'S FEE : The Brokers shall be paid a Brokerage Fee for each adjustment specified above in accordance with paragraph 15 of the Lease or if applicable, paragraph 9 of the Sublease. AIR CRE * https: //w ww .aircre.com * 213 687 8777 * contracts@aircre.com NOTICE: No part of these works may be reproduced in any form without permission in writing. INITIALS © 2017 AIR CRE. All Rights Reserved. OE 6.02, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 2 of 2

RENT ADJUSTMENT(S) STANDARD LEASE ADDENDUM Dated: February 7, 2020 By and Between Les s o r : P NN Ho ldings, LP Lessee: Envision Solar International, Property Addres I s: nc. 5660 Eastgate Drive, San Diego, CA 92121 and includes the "Annex Premises" located in the northwest corner of the property (street address, city, state, zip) Paragraph: 52 A. RENT ADJUSTMENTS: The monthly rent for each month of the adjustment period(s) specified below shall be increased using the method(s) indicated below: (Check Method(s) to be Used and Fill in Appropriately) I. Cost of Living Adjustment(s) (COLA) a. On (Fill in COLA Dates): the Base Rent shall be adjusted by the change, if any, from the Base Month specified below, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for (select one): CPI W (Urban Wage Earners and Clerical Workers) or CPI U (All Urban Consumers), for (Fill in Urban Area): , All Items (1982 1984 = 100), herein referred to as "CPI". b. The monthly Base Rent payable in accordance with paragraph A.I.a. of this Addendum shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease, shall be multiplied by a fraction the numerator of which shall be the CPI of the calendar month 2 months prior to the month(s) specified in paragraph A.I.a. above during which the adjustment is to take effect, and the denominator of which shall be the CPI of the calendar month which is 2 months prior to (select one): the first month of the term of this Lease as set forth in paragraph 1.3 ("Base Month") or (Fill in Other "Base Month"): . The sum so calculated shall constitute the new monthly Base Rent hereunder, but in no event, shall any such new monthly Base Rent be less than the Base Rent payable for the month immediately preceding the Base Rent adjustment. c. In the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the index most nearly the same as the CPI shall be used to make such calculation. In the event that the Parties cannot agree on such alternative index, then the matter shall be submitted for decision to the American Arbitration Association in accordance with the then rules of said Association and the decision of the arbitrators shall be binding upon the parties. The cost of said Arbitration shall be paid equally by the Parties. I. Market Rental Value Adjustment(s) (MRV) a. On (Fill in MRV Adjustment Date(s): the Base Rent shall be adjusted to the "Market Rental Value" of the property as follows: 1) Four months prior to each Market Rental Value Adjustment Date described above, the Parties shall attempt to agree upon what the new MRV will be on the adjustment date. If agreement cannot be reached within thirty days, then: (a) Lessor and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish the new MRV within the next 30 days. Any associated costs will be split equally between the Parties, or (b) Both Lessor and Lessee shall each immediately make a reasonable determination of the MRV and submit such determination, in writing, to arbitration in accordance with the following provisions: (i) Within 15 days thereafter, Lessor and Lessee shall each select an independent third party appraiser or broker ("Consultant" − check one) of their choice to act as an arbitrator (Note: the parties may not select either of the Brokers that was involved in negotiating the Lease). The two arbitrators so appointed shall immediately select a third mutually acceptable Consultant to act as a third arbitrator. (ii) The 3 arbitrators shall within 30 days of the appointment of the third arbitrator reach a decision as to what the actual MRV for the Premises is, and whether Lessor's or Lessee's submitted MRV is the closest thereto. The decision of a majority of the arbitrators shall be binding on the Parties. The submitted MRV which is determined to be the closest to the actual MRV shall thereafter be used by the Parties. (iii) If either of the Parties fails to appoint an arbitrator within the specified 15 days, the arbitrator timely appointed by one of them shall reach a decision on his or her own, and said decision shall be binding on the Parties. (iv) The entire cost of such arbitration shall be paid by the party whose submitted MRV is not selected, i.e., the one that is NOT the closest to the actual MRV. 2) When determining MRV, the Lessor, Lessee and Consultants shall consider the terms of comparable market transactions which shall include, but no limited to, rent, rental adjustments, abated rent, lease term and financial condition of tenants. INITIALS © 2017 AIR CRE. All Rights Reserved. RA 7.03, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 1 of 2

3) Notwithstanding the foregoing, the new Base Rent shall not be less than the rent payable for the month immediately preceding the rent adjustment. b. Upon the establishment of each New Market Rental Value: 1) the new MRV will become the new "Base Rent" for the purpose of calculating any further Adjustments, and 2) the first month of each Market Rental Value term shall become the new 'Base Month' for the purpose of calculating any further Adjustments. III. Fixed Rental Adjustment(s) (FRA) The Base Rent shall be increased to the following amounts on the dates set forth below: On (Fill in FRA Adjustment Date(s)): The New Base Rent shall be: 9/1/20 - 8/31/21 $52,000.00 9/1/21 - 8/31/22 $53,560.00 9/1/22 - 8/31/23 $55,166.80 9/1/23 - 8/31/24 $56,821.80 9/1/24 - 8/31/25 $58,526.46 AIR CRE * https: //w ww .aircre.com * 213 687 8777 * contracts@aircre.com NOTICE: No part of these works may be reproduced in any form without permission in writing. INITIALS © 2017 AIR CRE. All Rights Reserved. RA 7.03, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 2 of 2

ADDENDUM TO LEASE Date: February 7, 2020 By and Between P NN Holdings, LP Property Addres I s: nc. Lessor: Lessee: Envision Solar International, 5660 Eastgate Drive, San Diego, CA 92121 and includes the "Annex Premises" located in the northwest corner of the property (street address, city, state, zip) Paragraph: 53 - 55 53. LANDLORD’S WORK: Landlord, at Landlord’s sole cost and expense, shall provide turnkey Tenant Improvements per a mutually agreed upon space plan. The cost of work shall include but not be limited to monies allocated for preliminary space plans, architectural, electrical and mechanical working drawings including engineering, permits, plus a general contractor's fee and a construction management fee (the “Landlord’s Work”). The scope of the Landlord’s Work shall include: • New Paint and Carpet in office area in front of the building ("Front Offices"). • Repair Grates in the Production Floor • HVAC Distribution/Rezoning: Tenant is having major issues with HVAC distribution and zoning. Landlord to engage mechanical contractor to evaluate existing HVAC zoningi n the upstairs office area in the front of the Building. Landlord shall complete necessary repairs recommended by mechanical contractor. • Removal of Vanguard Equipment: This will include the autoclave and other equipment surrounding the Building and within the Premises. • Replace all damaged/water - stained ceiling tiles in the Front Offices and back offices ("Oroweat Offices"). • The heating unit/furnace serving the Oroweat Offices is non - functional and shall be replaced or repaired . • In the Oroweat Offices and Desmond’s office, there is some leakage through the roof of rainwater when it rains and needs to be repaired. It’s likely just the edges, because our understanding is that the roof membrane was replaced. 54. NNN EXPENSES : Taxes, Landscape, Insurance would begin at $ 7 , 000 per month to increase annually upon a recap of the actual expenses . The items circled on the Exhibit “A” shall be the only NNN Expense line - items passed through to Lessee . Lessee shall have industry standard audit rights of Landlord’s Operating Expense accounting 55. SOLAR PANELS: Tenant and Landlord shall use commercially reasonable efforts to discuss a mutually agreeable structure to add solar panels to the Building. In the event of any conflict between the provisions of this Addendum and the printed provisions of the Lease, this Addendum shall control. AIR CRE * https: //w ww .aircre.com * 213 687 8777 * contracts@aircre.com NOTICE: No part of these works may be reproduced in any form without permission in writing. INITIALS © 2017 AIR CRE. All Rights Reserved. ADD 1.03, Revised 06 10 2019 INITIALS Last Edited: 3/19/2020 4:38 PM Page 1 of 1

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Desmond Wheatley, certify that:

1. I have reviewed this report on Form 10-Q of Beam Global;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (of persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: November 12, 2020

/s/ Desmond Wheatley

Desmond Wheatley, Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Katherine H. McDermott, certify that:

1. I have reviewed this report on Form 10-Q of Beam Global;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (of persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: November 12, 2020

/s/ Katherine H. McDermott

Katherine H. McDermott

Chief Financial Officer

(Principal Financial/Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Beam Global (the “Company”) on Form 10-Q for the period ending September 30, 2020 (the “Report”) I, Desmond Wheatley, Chief Executive Officer of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Desmond Wheatley	Date: November 12, 2020
Desmond Wheatley, Chief Executive Officer
(Principal Executive Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Beam Global (the “Company”) on Form 10-Q for the period ending September 30, 2020 (the “Report”) I, Katherine H. McDermott, Chief Financial Officer (Principal Financial/Accounting Officer) of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Katherine H. McDermott	Date: November 12, 2020
Katherine H. McDermott
Chief Financial Officer
(Principal Financial/Accounting Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 09, 2020
Cover [Abstract]
Entity Registrant Name	Beam Global
Entity Central Index Key	0001398805
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Incorporation State County Code	NV
Entity File Number	000-53204
Entity Common Stock, Shares Outstanding		7,023,951
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020

XML

Condensed Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Current Assets
Cash	$ 12,332,224	$ 3,849,456
Accounts receivable, net of $0 and $2,429 reserve for bad debt at September 30, 2020 and December 31, 2019, respectively	1,310,153	764,534
Prepaid and other current assets	261,449	147,686
Inventory, net	1,918,712	1,843,880
Total current assets	15,822,538	6,605,556
Property and equipment, net	137,009	103,031
Operating lease right of use asset	2,558,399	316,389
Patents, net	271,432	205,154
Deposits	52,000	56,869
Total Assets	18,841,378	7,286,999
Current Liabilities
Accounts Payable	370,791	485,019
Accrued Expenses	482,755	305,115
Sales Tax Payable	80,916	6,213
Deferred Revenue	112,577	93,609
Convertible note payable - related party, net of debt discount of $5,990 at December 31, 2019	0	214,427
Note payable	339,262	0
Operating lease liabilities, current	521,006	349,160
Auto Loan	1,019	9,294
Total current liabilities	1,908,326	1,462,837
Operating lease liabilities, noncurrent	2,040,608	0
Total liabilities	3,948,934	1,462,837
Commitments and Contingencies (Note 7)
Stockholders' Equity
Preferred stock, $0.001 par value, 10,000,000 authorized, 0 outstanding as of September 30, 2020 and December 31, 2019, respectively.	0	0
Common stock, $0.001 par value, 9,800,000 shares authorized, 6,778,827 and 5,208,170 shares issued or issuable and outstanding at September 30, 2020 and December 31, 2019, respectively.	6,778	5,207
Additional Paid-in-Capital	63,571,748	51,628,536
Accumulated Deficit	(48,686,082)	(45,809,581)
Total Stockholders' Equity	14,892,444	5,824,162
Total Liabilities and Stockholders' Equity	$ 18,841,378	$ 7,286,999

XML

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares outstanding	0	0
Common Stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common Stock shares authorized	9,800,000	9,800,000
Common Stock shares issued	6,778,827	5,208,170
Common Stock shares outstanding	6,778,827	5,208,170
Allowance for accounts receivable	$ 0	$ 2,429
Convertible Notes Payable [Member] | Related Party [Member]
Unamortized discount		$ 5,990

XML

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Revenues	$ 1,237,434	$ 1,785,724	$ 4,009,644	$ 4,615,669
Cost of revenues	1,426,166	1,444,887	4,182,681	4,266,390
Gross profit (loss)	(188,732)	340,836	(173,037)	349,279
Operating expenses
Operating expenses	906,962	963,487	2,697,418	2,226,667
Loss From operations	(1,095,695)	(622,651)	(2,870,455)	(1,877,388)
Other income (expense)
Interest income	761	21,739	10,280	45,768
Interest Expense	(920)	(7,182)	(11,357)	(709,148)
Total other income (expense)	(159)	14,557	(1,077)	(663,380)
Loss before tax expense	(1,095,854)	(608,094)	(2,871,532)	(2,540,768)
Tax expense	4,169	2,269	4,969	3,100
Net Loss	$ (1,100,023)	$ (610,363)	$ (2,876,501)	$ (2,543,868)
Net loss per share - basic and diluted	$ (0.17)	$ (0.12)	$ (0.50)	$ (0.60)
Weighted average shares outstanding - basic and diluted	6,615,893	5,114,296	5,702,262	4,220,398

XML

Condensed Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2018	2,906,630
Beginning balance, value at Dec. 31, 2018	$ 2,907	$ 39,392,073	$ (41,875,659)	$ (2,480,679)
Stock issued for director services, shares	3,750
Stock issued for director services, value	$ 3	31,247		31,250
Value of warrants and beneficial conversion features related to debt instruments		3,967		3,967
Stock option expense		2,301		2,301
Net loss			(949,631)	(949,631)
Ending balance, shares at Mar. 31, 2019	2,910,380
Ending balance, value at Mar. 31, 2019	$ 2,910	39,429,588	(42,825,290)	(3,392,792)
Beginning balance, shares at Dec. 31, 2018	2,906,630
Beginning balance, value at Dec. 31, 2018	$ 2,907	39,392,073	(41,875,659)	(2,480,679)
Stock option expense				12,092
Net loss				(2,543,868)
Ending balance, shares at Sep. 30, 2019	5,140,546
Ending balance, value at Sep. 30, 2019	$ 5,140	51,453,349	(44,419,527)	7,038,962
Beginning balance, shares at Mar. 31, 2019	2,910,380
Beginning balance, value at Mar. 31, 2019	$ 2,910	39,429,588	(42,825,290)	(3,392,792)
Stock issued for director services, shares	3,750
Stock issued for director services, value	$ 4	31,246		31,250
Stock option expense		1,531		1,531
Stock issued for cash, shares	2,200,000
Stock issued for cash, value	$ 2,200	13,195,800		13,198,000
Warrants issued for cash, value		3,000		3,000
Cash Fees Related to Stock Offering		(1,370,879)		(1,370,879)
Fractional shares cash payment, shares	(21)
Fractional shares, cash payment, value		(171)		(171)
Fractional shares issued from reverse stock split	187
Net loss			(983,874)	(983,874)
Ending balance, shares at Jun. 30, 2019	5,114,296
Ending balance, value at Jun. 30, 2019	$ 5,114	51,290,115	(43,809,164)	7,486,065
Stock issued for director services, shares	26,250
Stock issued for director services, value	$ 26	154,974		155,000
Stock option expense		8,260		8,260
Net loss			(610,363)	(610,363)
Ending balance, shares at Sep. 30, 2019	5,140,546
Ending balance, value at Sep. 30, 2019	$ 5,140	51,453,349	(44,419,527)	7,038,962
Beginning balance, shares at Dec. 31, 2019	5,208,170
Beginning balance, value at Dec. 31, 2019	$ 5,207	51,628,536	(45,809,581)	5,824,162
Stock issued for director services, shares	14,813
Stock issued for director services, value	$ 15	78,432		78,447
Stock issued to escrow account - unvested, shares	(14,813)
Stock issued to escrow account - unvested, value	$ (15)	15		0
Stock option expense		27,068		27,068
Warrants exercised, shares	43,993
Warrants exercised, value	$ 44	282,306		282,350
Net loss			(942,521)	(942,521)
Ending balance, shares at Mar. 31, 2020	5,252,163
Ending balance, value at Mar. 31, 2020	$ 5,251	52,016,357	(46,752,102)	5,269,506
Beginning balance, shares at Dec. 31, 2019	5,208,170
Beginning balance, value at Dec. 31, 2019	$ 5,207	51,628,536	(45,809,581)	5,824,162
Stock option expense				81,204
Net loss				(2,876,501)
Ending balance, shares at Sep. 30, 2020	6,778,827
Ending balance, value at Sep. 30, 2020	$ 6,778	63,571,748	(48,686,082)	14,892,444
Beginning balance, shares at Mar. 31, 2020	5,252,163
Beginning balance, value at Mar. 31, 2020	$ 5,251	52,016,357	(46,752,102)	5,269,506
Stock issued for director services, shares	15,073
Stock issued for director services, value	$ 15	89,674		89,689
Stock issued to escrow account - unvested, shares	5,335
Stock issued to escrow account - unvested, value	$ 6	(6)		0
Stock option expense		27,068		27,068
Warrants exercised, shares	5,278
Warrants exercised, value	$ 5	34,830		34,835
Net loss			(833,957)	(833,957)
Ending balance, shares at Jun. 30, 2020	5,277,849
Ending balance, value at Jun. 30, 2020	$ 5,277	52,167,923	(47,586,059)	4,587,141
Stock issued for director services, shares	15,073
Stock issued for director services, value	$ 15	89,674		89,689
Stock issued to escrow account - unvested, shares	(15,073)
Stock issued to escrow account - unvested, value	$ (15)	15		0
Proceeds from issuance of common stock, pursuant to public offering, shares	1,393,900
Proceeds from issuance of common stock, pursuant to public offering, value	$ 1,394	11,498,281	0	11,499,675
Warrants exercised, shares	102,179
Warrants exercised, value	$ 102	749,625		$ 749,727
Stock option exercise (cashless), shares	2,199			3,000
Stock option exercise (cashless), value	$ 2	(2)		$ 0
Stock issued for services, shares	2,700
Stock issued for services, value	$ 3	(3)		0
Cash Fees Related to Stock Offering		(960,833)		(960,833)
Net loss			(1,100,023)	(1,100,023)
Ending balance, shares at Sep. 30, 2020	6,778,827
Ending balance, value at Sep. 30, 2020	$ 6,778	$ 63,571,748	$ (48,686,082)	$ 14,892,444

XML

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Operating Activities:
Net Loss	$ (2,876,501)	$ (2,543,868)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	30,434	30,018
Common stock issued for services	257,825	217,500
Compensation expense related to grant of stock options	81,204	12,092
Amortization of debt discount	5,990	524,925
Amortization of operating lease right of use asset	(29,554)	(21,290)
(Increase) decrease in:
Accounts receivable	(545,619)	220,875
Prepaid expenses and other current assets	(239,863)	(490,264)
Inventory	143,224	(3,670)
Deposits	4,869	48,672
Increase (decrease) in:
Accounts payable	(114,228)	(654,814)
Accrued expenses	177,640	(203,978)
Convertible note payable issued in lieu of salary - related party	(220,417)	35,417
Sales tax payable	74,703	133,211
Deferred revenue	18,968	(749,108)
Net cash used in operating activities	(3,231,325)	(3,444,282)
Investing Activities:
Purchase of equipment	(153,097)	(9,977)
Funding of patent costs	(69,551)	(41,554)
Net cash used in investing activities	(222,648)	(51,531)
Financing Activities:
Borrowings (repayments) on convertible line of credit, net	0	(960,000)
Repayments of convertible notes payable, net	0	(1,650,616)
Borrowings (repayments) of note payable	339,262	(862,500)
Repayments of auto loan	(8,275)	(7,843)
Proceeds from warrant exercises	1,066,912	0
Payments of deferred equity offering costs	(960,833)	(1,175,852)
Fractional share payments	0	(171)
Proceeds from issuance of common stock and warrants, pursuant to public offering	11,499,675	13,201,000
Net cash provided by financing activities	11,936,741	8,544,018
Net increase in cash	8,482,768	5,048,205
Cash at beginning of period	3,849,456	244,024
Cash at end of period	12,332,224	5,292,229
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	54,156	363,899
Cash paid for taxes	4,969	3,100
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Recording of debt discount	0	3,967
Transfer of prepaid asset to inventory	126,100	541,307
Recording of right of use asset and corresponding liability	2,605,032	872,897
Depreciation capitalized into inventory	15,010	19,976
Reclassification of deferred equity offering costs to APIC	960,833	1,370,879
Transfer of fixed asset to inventory	$ 76,946	$ 0

XML

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

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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

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

Nature of Operations

Beam Global (formerly Envision Solar International, Inc.), a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”) is a cleantech innovation company based in San Diego, California. We develop, design, engineer, manufacture and sell renewably energized high-quality products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security, that enable vital and highly valuable services 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:

· electric vehicle (EV) charging infrastructure;

· out of home advertising platforms; and

· energy security and disaster preparedness.

On September 15, 2020, the Company announced its rebranding and changed its corporate name from Envision Solar International, Inc. to Beam Global (Nasdaq: BEEM and BEEMW).

Basis of Presentation

The interim unaudited condensed financial statements included herein have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three and nine months ended September 30, 2020 and 2019, and our financial position as of September 30, 2020, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2019. The December 31, 2019 balance sheet is derived from those statements.

Risks and Uncertainties

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders as well as the shutdown of many businesses around the world. To date, while we have seen some delays and cancellations of opportunities in our pipeline as a result of funding issues, priority issues or temporary business closures, the pandemic has not had a material adverse effect on the Company’s financial position or results of operations for the three and nine months ended September 30, 2020. 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 unaudited condensed 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 right of use assets and corresponding lease liabilities, valuation of share-based payments, 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 September 30, 2020. As of September 30, 2020, $12,181,713 of the Company’s cash deposits were greater than the federally insured limits.

Major Customers

For the three months ended September 30, 2020, revenues from four customers accounted for 41%, 27%, 14% and 11% of total revenues, and for the nine months ended September 30, 2020, revenues from two customers accounted for 14% and 13% of total revenues, with no other single customer accounting for more than 10% of revenues. At September 30, 2020, accounts receivable from four customers accounted for 42%, 29%, 14% and 10% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

For the three months ended September 30, 2019, revenues from two customers accounted for 62% and 14% of total revenues, and for the nine months ended September 30, 2019, revenues from two customer accounted for 49% and 24% of total revenues, with no other single customer accounting for more than 10% of revenues. At September 30, 2019, accounts receivable from three customers accounted for 47%, 25% and 14% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

Cash and Cash Equivalents

For the purposes of the unaudited condensed statements of cash flows, the Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at September 30, 2020 and December 31, 2019, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments, including accounts receivable, accounts payable, accrued expenses, and short-term loans, are carried at historical cost basis. At September 30, 2020, 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. Further, the Company may record a general reserve in its allowance for doubtful accounts to account for future changes that may negatively impact our overall collections. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Inventory

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

Patents

The Company believes it will achieve future economic value benefits for its various patents and patent ideas. All administrative costs for obtaining patents are accumulated on the balance sheet as a patent asset until such time as a patent is issued. The costs of these intangible assets are classified as a long-term asset and amortized on a straight-line basis over the legal life of such asset, which is typically 20 years. In the event a patent is denied or abandoned, all accumulated administrative costs will be expensed in the period in which the patent was denied or abandoned. Patent amortization expense was $3,273 and $2,397 in the nine-month periods ended September 30, 2020 and 2019, respectively.

Leases

The Company uses Financial Accounting Standards Board Accounting Standards 842 “Leases” to account for its leases whereby almost all leases are recognized on the balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019 using the effective date method and applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases, and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment will be 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 will allocate 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 not to recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less. The Company entered into a new 5-year lease of our manufacturing facility which began September 1, 2020. Monthly lease payments range from $52,000 to $58,526 through the initial term of the lease. We calculated the present value of the remaining lease payment stream using our effective borrowing rate of 10% and recorded a right-of-use asset and operating lease liability each amounting to $2,605,032 at September 1, 2020.

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

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

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

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

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

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

The Company generally provides a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and it will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably estimated. At September 30, 2020, the Company has no product warranty accrual given the Company’s fluctuating historical financial warranty expense.

Cost of Revenues

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

Stock-Based Compensation

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

The Company adopted ASU 2018-07 on January 1, 2019 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on January 1, 2019.

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

Net Loss Per Share

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

Options to purchase 305,308 common shares and warrants to purchase 2,384,340 common shares were outstanding at September 30, 2020. These shares were not included in the computation of diluted loss per share for the three or nine months ended September 30, 2020 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.

Reclassifications

Where necessary, the prior year’s information has been reclassified to conform to the current period 2020 statement presentation. On the Condensed Balance Sheets, the operating lease right of use asset of $316,389 was reclassified from the property and equipment, net line item and the operating lease liabilities, current of $349,160 was reclassified from accrued expenses to conform to the September 30, 2020 presentation.

Segments

The Company follows ASC 280-10 "Disclosures about Segments of an Enterprise and Related Information." During the nine months ended September 30, 2020 and 2019, the Company only operated in one segment; therefore, segment information has not been presented.

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2. LIQUIDITY

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LIQUIDITY

2. LIQUIDITY

As reflected in the accompanying unaudited condensed financial statements for the nine months ended September 30, 2020, the Company had a net loss and net cash used in operating activities of $2,876,501 and $3,231,325, respectively. Additionally, at September 30, 2020, the Company had an accumulated deficit of $48,686,082. The Company has incurred significant losses from operations since inception, and such losses are expected to continue.

In April and May 2019, the Company received approximately $8.5 million of cash, net of offering costs and repayment of certain debt, under an equity offering. This cash eliminated most of the Company debt and provided working capital for ongoing operations. Also, in July 2020, the Company sold shares of common stock in a public offering and received net proceeds of approximately $10.5 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the proceeds for working capital and general corporate purposes.

The cash balance at September 30, 2020 was $12,332,224 and our working capital was $13,914,212 at September 30, 2020. With these financings, management believes it has sufficient cash to fund its liabilities and operations for the next twelve months from the issue date of this report. In addition, we have warrants that are exercisable to purchase shares of the Company’s common stock and, if all warrants are fully exercised, the Company would receive additional proceeds of $15,193,848.

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3. INVENTORY

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

INVENTORY

3. INVENTORY

Inventory consists of the following:

	September 30,			December 31,
	2020			2019
Finished goods	$	306,293		$	716,478
Work in process		583,217			303,594
Raw materials		1,040,626			835,232
Inventory allowance		(11,424	)		(11,424	)
Total inventory	$	1,918,712		$	1,843,880

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4. ACCRUED EXPENSES

9 Months Ended

Sep. 30, 2020

Payables and Accruals [Abstract]

ACCRUED EXPENSES

4. ACCRUED EXPENSES

The major components of accrued expenses are summarized as follows:

	September 30,		December 31,
	2020		2019
Accrued vacation	$	207,301	$	175,231
Accrued salaries		196,295		75,829
Accrued interest		1,432		48,884
Other accrued expense		77,727		5,171
Total accrued expenses	$	482,755	$	305,115

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5. CONVERTIBLE NOTE PAYABLE - RELATED PARTY AND NOTE PAYABLE

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

CONVERTIBLE NOTE PAYABLE - RELATED PARTY AND NOTE PAYABLE

5. CONVERTIBLE NOTE PAYABLE - RELATED PARTY AND NOTE PAYABLE

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

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

On September 17, 2019, the Board of Directors adopted a resolution to pay off the convertible promissory note issued to Mr. Wheatley for his deferred compensation in the near future (subject to a recommendation on timing from Mr. Wheatley), and no additional salary will be deferred after September 15, 2019. As a result, this note was presented as a short-term liability as of December 31, 2019 with a balance of $214,427, net of debt discount of $5,990, with accrued and unpaid interest of $48,884 which was included in accrued expenses (See Note 4). 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. We are reporting this as a current liability because we plan to repay it in the quarter ending December 31, 2020.

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6. AUTO LOAN

9 Months Ended

Sep. 30, 2020

Notes Payable [Abstract]

AUTO LOAN

6. AUTO LOAN

In October 2015, the Company purchased a new vehicle and financed the purchase through a dealer auto loan. The loan has a term of 60 months, requires minimum monthly payments of approximately $950, and bears interest at a rate of 5.99 percent. As of September 30, 2020, the loan has a short-term balance of $1,019.

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7. COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

7. COMMITMENTS AND CONTINGENCIES

Legal Matters:

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 30, 2020, 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 is the same term of the master lease for which the Company is the subtenant. Monthly lease payments ranged from $48,672 to $50,619 per month in the final year of the lease.

On March 31, 2020, the Company entered into a new 5-year lease agreement for our manufacturing facility which began September 2020 through August 2025. Monthly lease payments range from $52,000 per month to $58,526 per month in the final year of the initial term of the lease. The lease includes two additional one-year options to renew at the Company’s option. We calculated the present value of the remaining lease payment stream using our effective borrowing rate of 10% and recorded a right-of-use asset and operating lease liability each amounting to $2,605,032 at September 1, 2020.

Other Commitments:

The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company. All expenses and liabilities relating to such contracts were recorded in accordance with generally accepted accounting principles during the periods. Although such agreements increase the risk of legal actions against the Company for potential non-compliance, there were no financial exposures that were not accounted for in our financial statements.

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8. COMMON STOCK

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

COMMON STOCK

8. COMMON STOCK

Director Compensation

On September 17, 2019, the Board, upon the recommendation of its Compensation Committee, granted two directors annual grants of 12,500 shares each, and the lead director was issued an annual grant of 17,500 shares, which vest quarterly in four (4) equal installments. The grant date was determined to be September 17, 2019 as that was when a mutual understanding of the key terms and conditions of the grants was reached. On the grant date, these shares had a per share fair value of $5.50 based on the quoted trading price, or $233,750. 10,625 shares vested in 2019. During the three and nine months ended September 30, 2020, 10,625 of these shares vested generating an expense of $58,439 and 31,875 shares vested generating an expense of $170,325, respectively. At September 30, 2020, there were no shares remaining unvested in escrow. 

On October 1, 2019, the Board approved two grants of restricted stock of the Company 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 October 1, 2019. On the grant date, the shares had a per share fair value of $5.97 and 25,124 shares were granted. In addition, on June 17, 2020, the Board approved two additional 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. 12,562 shares vested in 2019. During the three and nine months ended September 30, 2020, 4,448 shares vested generating an expense of $31,250 and 13,084 shares vested generating an expense of $87,500, respectively. At September 30, 2020, 19,886 shares were held unvested in escrow for Mr. Wheatley representing $137,500 of unrecognized restricted stock grant expense which will be recognized through the quarter ending March 31, 2023.

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. The Company intends to use the aggregate net proceeds primarily for working capital and general corporate purposes.

Other Registered Securities

On August 27, 2020, the Company filed a registration statement on Form S-8 to register 630,000 shares issued or to be issued under the Company’s 2011 Stock Incentive Plan.

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9. STOCK OPTIONS AND WARRANTS

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK OPTIONS AND WARRANTS

9. STOCK OPTIONS AND WARRANTS

Stock Options

During the three months ended March 31, 2020, an option was granted to an employee to purchase up to 49,104 shares of the Company’s common stock. These options will vest over 4 years and have an exercise price of $4.57 per share. The Company estimated the fair value of these options at $222,612 utilizing the Black-Scholes pricing model. The assumptions used in the valuation of these options include volatility of 198.91% based on historical volatility, expected dividends of 0.0%, a discount rate of 1.79% and expected term of 7.0 years based on the simplified method.

During the three months ended September 30, 2020, an option was granted to an employee to purchase up to 20,000 shares of the Company’s common stock. These options will vest over 4 years and have an exercise price of $12.76 per share. The Company estimated the fair value of these options at $204,185 utilizing the Black-Scholes pricing model. The assumptions used in the valuation of these options include volatility of 96.2% based on historical volatility, expected dividends of 0.0%, a discount rate of 0.46% and expected term of 7.0 years based on the simplified method.

During the three months ended September 30, 2020, 3,000 stock options were exercised on a cashless basis for 2,199 shares of common stock at an exercise price of $4.09.

During the nine months ended September 30, 2020 and 2019, the Company recorded non-cash stock option based compensation expense of $81,204 and $12,092, respectively. As of September 30, 2020, there was $534,157 of unrecognized stock option-based compensation expense that will be recognized over the next four years.

There were stock options outstanding to purchase 305,308 shares of common stock at September 30, 2020. During the nine months ended September 30, 2020, 3,000 stock options were exercised for 2,199 shares of common stock at an exercise price of $4.09, there were 500 options forfeited and there were no options that expired.

Warrants

During the three months ended September 30, 2020, 102,179 warrants to purchase shares of the Company’s common stock were exercised generating $749,727 of proceeds and during the nine months ended September 30, 2020, 151,450 warrants to purchase shares of the Company’s common stock were exercised generating $1,066,913 At September 30, 2020, there were warrants outstanding to purchase up to 2,384,340 shares of the Company’s common stock at a weighted average exercise price of $6.37.

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10. REVENUES

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

REVENUES

10. REVENUES

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

	For the Nine Months Ended
	September 30,
	2020			2019
Product sales	$	3,948,801		$	4,607,237
Maintenance fees		18,877			8,432
Professional services		47,031			–
Discounts and allowances		(5,065	)		–
Total revenues	$	4,009,644		$	4,615,669

International revenues were $84,081, or 2% of revenues, and $0 during the nine months ended September 30, 2020 and 2019, respectively.

At September 30, 2020 and December 31, 2019, deferred revenue was $112,577 and $93,609, respectively. The September 30, 2020 balance consists of deferred maintenance fees pertaining to services to be provided through the third quarter of 2026.

At December 31, 2018, the Company accrued expected contract losses of $71,744 on an order for a customer that shipped in 2019. As the units were delivered, the loss accrual was proportionally reduced during the nine months ended September 30, 2019. 

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11. SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

11. SUBSEQUENT EVENTS

Subsequent to September 30, 2020, 203,624 warrants were exercised to purchase shares of the Company’s common stock generating proceeds of $1,293,484.

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.

In October 2020, an option was granted to an employee to purchase up to 20,000 shares of the Company’s common stock. This option will vest over 4 years and has an exercise price of $17.44 per share. The Company estimated the fair value of these options at $285,002 utilizing the Black-Scholes pricing model. The assumptions used in the valuation of these options include volatility of 99.9% based on historical volatility, expected dividends of 0.0%, a discount rate of 0.55% and expected term of 7.0 years based on the simplified method.

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

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

Beam Global (formerly Envision Solar International, Inc.), a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”) is a cleantech innovation company based in San Diego, California. We develop, design, engineer, manufacture and sell renewably energized high-quality products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security, that enable vital and highly valuable services 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:

· electric vehicle (EV) charging infrastructure;

· out of home advertising platforms; and

· energy security and disaster preparedness.

On September 15, 2020, the Company announced its rebranding and changed its corporate name from Envision Solar International, Inc. to Beam Global (Nasdaq: BEEM and BEEMW).

Basis of Presentation

Basis of Presentation

The interim unaudited condensed financial statements included herein have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three and nine months ended September 30, 2020 and 2019, and our financial position as of September 30, 2020, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2019. The December 31, 2019 balance sheet is derived from those statements.

Risks and Uncertainties

Risks and Uncertainties

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders as well as the shutdown of many businesses around the world. To date, while we have seen some delays and cancellations of opportunities in our pipeline as a result of funding issues, priority issues or temporary business closures, the pandemic has not had a material adverse effect on the Company’s financial position or results of operations for the three and nine months ended September 30, 2020. 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

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 unaudited condensed 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 right of use assets and corresponding lease liabilities, valuation of share-based payments, and the valuation allowance on deferred tax assets.

Concentrations

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 September 30, 2020. As of September 30, 2020, $12,181,713 of the Company’s cash deposits were greater than the federally insured limits.

Major Customers

For the three months ended September 30, 2020, revenues from four customers accounted for 41%, 27%, 14% and 11% of total revenues, and for the nine months ended September 30, 2020, revenues from two customers accounted for 14% and 13% of total revenues, with no other single customer accounting for more than 10% of revenues. At September 30, 2020, accounts receivable from four customers accounted for 42%, 29%, 14% and 10% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

For the three months ended September 30, 2019, revenues from two customers accounted for 62% and 14% of total revenues, and for the nine months ended September 30, 2019, revenues from two customer accounted for 49% and 24% of total revenues, with no other single customer accounting for more than 10% of revenues. At September 30, 2019, accounts receivable from three customers accounted for 47%, 25% and 14% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

Cash and Cash Equivalents

Cash and Cash Equivalents

For the purposes of the unaudited condensed statements of cash flows, the Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at September 30, 2020 and December 31, 2019, respectively.

Fair Value of Financial Instruments

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 September 30, 2020, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

Accounts Receivable

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. Further, the Company may record a general reserve in its allowance for doubtful accounts to account for future changes that may negatively impact our overall collections. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Inventory

Inventory

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

Patents

Patents

The Company believes it will achieve future economic value benefits for its various patents and patent ideas. All administrative costs for obtaining patents are accumulated on the balance sheet as a patent asset until such time as a patent is issued. The costs of these intangible assets are classified as a long-term asset and amortized on a straight-line basis over the legal life of such asset, which is typically 20 years. In the event a patent is denied or abandoned, all accumulated administrative costs will be expensed in the period in which the patent was denied or abandoned. Patent amortization expense was $3,273 and $2,397 in the nine-month periods ended September 30, 2020 and 2019, respectively.

Leases

Leases

The Company uses Financial Accounting Standards Board Accounting Standards 842 “Leases” to account for its leases whereby almost all leases are recognized on the balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019 using the effective date method and applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases, and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment will be 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 will allocate 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 not to recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less. The Company entered into a new 5-year lease of our manufacturing facility which began September 1, 2020. Monthly lease payments range from $52,000 to $58,526 through the initial term of the lease. We calculated the present value of the remaining lease payment stream using our effective borrowing rate of 10% and recorded a right-of-use asset and operating lease liability each amounting to $2,605,032 at September 1, 2020.

Revenue Recognition

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

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

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

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

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

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

The Company generally provides a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and it will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably estimated. At September 30, 2020, the Company has no product warranty accrual given the Company’s fluctuating historical financial warranty expense.

Cost of Revenues

Cost of Revenues

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

Stock-Based Compensation

Stock-Based Compensation

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

The Company adopted ASU 2018-07 on January 1, 2019 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on January 1, 2019.

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

Net Loss Per Share

Net Loss Per Share

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

Options to purchase 305,308 common shares and warrants to purchase 2,384,340 common shares were outstanding at September 30, 2020. These shares were not included in the computation of diluted loss per share for the three or nine months ended September 30, 2020 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.

Reclassifications

Reclassifications

Where necessary, the prior year’s information has been reclassified to conform to the current period 2020 statement presentation. On the Condensed Balance Sheets, the operating lease right of use asset of $316,389 was reclassified from the property and equipment, net line item and the operating lease liabilities, current of $349,160 was reclassified from accrued expenses to conform to the September 30, 2020 presentation.

Segments

Segments

The Company follows ASC 280-10 "Disclosures about Segments of an Enterprise and Related Information." During the nine months ended September 30, 2020 and 2019, the Company only operated in one segment; therefore, segment information has not been presented.

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3. INVENTORY (Tables)

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Inventory

	September 30,			December 31,
	2020			2019
Finished goods	$	306,293		$	716,478
Work in process		583,217			303,594
Raw materials		1,040,626			835,232
Inventory allowance		(11,424	)		(11,424	)
Total inventory	$	1,918,712		$	1,843,880

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4. ACCRUED EXPENSES (Tables)

9 Months Ended

Sep. 30, 2020

Payables and Accruals [Abstract]

Accrued expense schedule

	September 30,		December 31,
	2020		2019
Accrued vacation	$	207,301	$	175,231
Accrued salaries		196,295		75,829
Accrued interest		1,432		48,884
Other accrued expense		77,727		5,171
Total accrued expenses	$	482,755	$	305,115

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10. REVENUES (Tables)

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Schedule of revenues

	For the Nine Months Ended
	September 30,
	2020			2019
Product sales	$	3,948,801		$	4,607,237
Maintenance fees		18,877			8,432
Professional services		47,031			–
Discounts and allowances		(5,065	)		–
Total revenues	$	4,009,644		$	4,615,669

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1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Aug. 31, 2020	Dec. 31, 2019
Uninsured cash	$ 12,181,713		$ 12,181,713
Cash equivalents	0		0
Patent amortization			3,273	$ 2,397
Accrued warranty reserve	$ 0		$ 0
Lease borrowing rate	10.00%		10.00%
Right-of-use asset	$ 2,558,399		$ 2,558,399		$ 2,605,032	$ 316,389
Operating lease liability					$ 2,605,032
Revenues [Member] | One Customer [Member]
Concentration percentage	41.00%	62.00%	14.00%	49.00%
Revenues [Member] | Another Customer [Member]
Concentration percentage	27.00%	14.00%	13.00%	24.00%
Revenues [Member] | Another Customer [Member]
Concentration percentage	14.00%
Revenues [Member] | Another Customer [Member]
Concentration percentage	11.00%
Accounts Receivable [Member] | One Customer [Member]
Concentration percentage			42.00%	47.00%
Accounts Receivable [Member] | Another Customer [Member]
Concentration percentage			29.00%	25.00%
Accounts Receivable [Member] | Another Customer [Member]
Concentration percentage			14.00%	14.00%
Accounts Receivable [Member] | Another Customer [Member]
Concentration percentage			10.00%
Options [Member]
Potentially dilutive stock equivalents outstanding			305,308
Warrants [Member]
Potentially dilutive stock equivalents outstanding			2,384,340

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2. LIQUIDITY (Details Narrative) - USD ($)	2 Months Ended	3 Months Ended						6 Months Ended	9 Months Ended
	May 31, 2019	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Jul. 07, 2020	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Net losses		$ (1,100,023)	$ (833,957)	$ (942,521)	$ (610,363)	$ (983,874)	$ (949,631)		$ (2,876,501)	$ (2,543,868)
Net cash used in operations									(3,231,325)	(3,444,282)
Accumulated deficit		(48,686,082)							(48,686,082)		$ (45,809,581)
Proceeds from sale of equity	$ 8,500,000								11,499,675	$ 13,201,000
Cash		12,332,224							12,332,224
Working capital		$ 13,914,212							13,914,212
Possible proceeds from warrant exercises									$ 15,193,848
Public Offering [Member]
Proceeds from sale of equity								$ 10,500,000

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3. INVENTORY (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Finished goods	$ 306,293	$ 716,478
Work in process	583,217	303,594
Raw materials	1,040,626	835,232
Inventory Allowance	(11,424)	(11,424)
Total Inventory	$ 1,918,712	$ 1,843,880

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4. ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued vacation	$ 207,301	$ 175,231
Accrued salaries	196,295	75,829
Accrued interest	1,432	48,884
Other accrued expense	77,727	5,171
Total accrued expenses	$ 482,755	$ 305,115

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5. CONVERTIBLE NOTE PAYABLE - RELATED PARTY (Details Narrative) - USD ($)	2 Months Ended	3 Months Ended	12 Months Ended
	Feb. 28, 2020	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2020	Dec. 31, 2019
Note payable				$ 339,262	$ 0
Convertible Note - Related Party [Member] | Wheatley [Member]
Debt discount for beneficial conversion feature		$ 3,967	$ 8,672
Convertible note payable related party balance outstanding					214,427
Unamortized discount					5,990
Accrued interest	$ 3,442				$ 48,884
Interest expense debt	5,990
Repayment of note payable	220,417
Payment of interest	$ 52,326
PPP Loan [Member]
Note payable				$ 339,262

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6. AUTO LOAN (Details Narrative) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Auto loan current	$ 1,019	$ 9,294
Automobile Loan [Member]
Auto loan current	$ 1,019

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7. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 01, 2020	Aug. 31, 2020	Dec. 31, 2019
Operating lease right-to-use asset	$ 2,558,399		$ 2,605,032	$ 316,389
Operating lease right-to-use liability			$ 2,605,032
Lease [Member]
Lease expiration date	August 2025
Monthly lease payments	$52,000 per month to $58,526 per month for the final year of the lease.
Lease effective borrowing rate		10.00%
Operating lease right-to-use asset		$ 2,605,032
Operating lease right-to-use liability		$ 2,605,032

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8. COMMON STOCK (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Jul. 07, 2020	Jun. 17, 2020	Sep. 30, 2020	Oct. 01, 2019	Dec. 31, 2019
Proceeds from sale of stock	$ 11,499,675
Shelf Registration [Member]
Stock issued new, shares		1,393,900
Proceeds from sale of stock		$ 10,500,000
Restricted Stock [Member] | Directors [Member]
Share based compensation	$ 58,439			$ 170,325
Stock grant vested	10,625			31,875
Restricted Stock [Member] | Wheatley [Member] | 2011 Stock Incentive Plan [Member]
Stock granted for compensation, shares			20,408		25,124
Share based compensation	$ 31,250			$ 87,500
Stock grant vested	4,448			13,084		12,562
Stock grant unvested	19,886			19,886
Unrecognized restricted stock grant expense	$ 137,500			$ 137,500

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9. STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Stock options exercised, shares	3,000
Options exercised, common shares issued	2,199
Stock option compensation expense		$ 27,068	$ 27,068	$ 8,260	$ 1,531	$ 2,301	$ 81,204	$ 12,092
Total unrecognized compensation cost related to unvested options	$ 534,157						$ 534,157
Options outstanding	305,308						305,308
Options forfeited							500
Options expired							0
Proceeds from warrant exercises							$ 1,066,912	$ 0
Employee Stock Option [Member]
Stock options granted, shares	20,000		49,104
Option exercise price	$ 12.76		$ 4.57
Stock options granted, value	$ 204,185		$ 222,612
Weighted average remaining contractual life	4 years		4 years
Volatility rate	96.20%		198.91%
Expected dividend rate	0.00%		0.00%
Discount rate	0.46%		1.79%
Expected term	7 years		7 years
Warrants [Member]
Warrants exercised	102,179						151,450
Proceeds from warrant exercises	$ 749,727						$ 1,066,913
Warrants outstanding	2,384,340						2,384,340
Warrant exercise price	$ 6.37						$ 6.37

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10. REVENUES (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues	$ 1,237,434	$ 1,785,724	$ 4,009,644	$ 4,615,669
Discounts and allowances			(5,065)	0
Product Sales [Member]
Revenues			3,948,801	4,607,237
Maintenance Fees [Member]
Revenues			18,877	8,432
Professional Services [member]
Revenues			$ 47,031	$ 0

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10. REVENUES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Deferred revenue	$ 112,577		$ 112,577		$ 93,609
Deferred revenue recorded in prior year				$ 71,744
Revenues	$ 1,237,434	$ 1,785,724	4,009,644	4,615,669
International Sales [Member]
Revenues			$ 84,081	$ 0
Concentration risk percent			2.00%