UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Period ended
OR
For the transition period from _________________ to ________________
Commission File Number
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
|
|
|
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
_____________________________________________
(Former name, former address and formal fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange in which registered |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company under Rule 12b-2 of the Exchange Act. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
The number of registrant's shares of common stock, $0.001 par value outstanding as of August 1, 2023 was .
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Beam Global
Condensed Balance Sheets
(In thousands)
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Deposits | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Sales tax payable | ||||||||
| Deferred revenue, current | ||||||||
| Note payable, current | ||||||||
| Contingent consideration, current | ||||||||
| Operating lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Deferred revenue, noncurrent | ||||||||
| Note payable, noncurrent | ||||||||
| Contingent consideration, noncurrent | ||||||||
| Operating lease liabilities, noncurrent | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock, $ par value, authorized, outstanding as of June 30, 2023 and December 31, 2022. | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively. | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying unaudited notes are an integral part of these unaudited condensed financial statements
| 3 |
Beam Global
Condensed Statement of Operations
(Unaudited, in thousands except per share data)
| Three Months
Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Loss before income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
The accompanying unaudited notes are an integral part of these unaudited condensed financial statements
| 4 |
Beam Global
Statements of Changes in Stockholders’ Equity
(Unaudited, in thousands)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Stock | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ||||||||||||||||||||
| Stock issued for acquisition | ||||||||||||||||||||
| Stock option expense | – | |||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||
| Stock issued to escrow account - unvested | ( | ) | – | – | – | – | ||||||||||||||
| Stock issued for acquisition | – | – | – | – | – | |||||||||||||||
| Stock option expense | – | |||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Stock | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ( | ) | ||||||||||||||||||
| Stock-based compensation to consultants | ||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||
| Sale of stock under Committed Equity Facility | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock issued for director services - vested | ||||||||||||||||||||
| Stock issued to (released from) escrow account - unvested | ||||||||||||||||||||
| Settlement of earnout related to acquisition | ||||||||||||||||||||
| Employee stock-based compensation expense | – | |||||||||||||||||||
| Proceeds from issuance of common stock, pursuant to public offering | ||||||||||||||||||||
| Warrants exercised for cash | ||||||||||||||||||||
| Sale of stock under Committed Equity Facility | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying unaudited notes are an integral part of these unaudited condensed financial statements
| 5 |
Beam Global
Condensed Statements of Cash Flows
(Unaudited, in thousands)
| Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Common stock issued for services | ||||||||
| Change in fair value of contingent consideration liabilities | ( | ) | ||||||
| Employee stock-based compensation | ||||||||
| Stock Compensation expense for non-employees | ||||||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Increase (decrease) in: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Sales tax payable | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities: | ||||||||
| Working capital payment for acquisition | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Funding of patent costs | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from sale of common stock under committee equity facility, net of offering costs | ||||||||
| Proceeds from warrant exercises | ||||||||
| Proceeds from issuance of common stock and warrants, pursuant to public offering | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Fair value of common stock issued as consideration for business combination | $ | $ | ||||||
| Purchase of property and equipment by incurring debt | $ | $ | ||||||
| Depreciation cost capitalized into inventory | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | ||||||
| Warrants issued for services to non-employee | $ | $ | ||||||
| Shares issued for services to non-employee | $ | $ | ||||||
The accompanying unaudited notes are an integral part of these unaudited condensed financial statements
| 6 |
BEAM GLOBAL
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
| 1. | NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Operations
Beam Global, a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”), is a sustainable technology innovation company based in San Diego, California.
We develop, manufacture, and sell high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy security, disaster preparedness and outdoor media advertising. We also produce proprietary energy storage battery products. Our Electric Vehicle (EV) charging infrastructure products are powered by locally generated renewable energy and enable vital and highly valuable services in locations where it is either too expensive, too disruptive, or impossible to connect to a utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. We do not compete with EV charging companies; rather, we enable such companies by providing infrastructure solutions that replace the time consuming and expensive process of construction and electrical work which are usually required to install traditional grid-tied EV chargers. We also do not compete with utilities. Our products provide utilities with another tool to deliver reliable and low-cost electricity to EV chargers and, in the case of a grid failure, to first responders and others, through our integrated emergency power panels. We also provide energy storage technologies that make commodity battery cells safer, longer lasting and more energy efficient and our battery management systems (BMS) and associated packaging make batteries safe and usable in a variety of mobility, energy-security, and stationary applications.
Our charging infrastructure products are rapidly deployed without the need for construction or electrical work. We compete with the highly fragmented and disintegrated ecosystem of general contractors, electrical contractors, consultants, engineers, permitting specialists and others who are required to perform a traditional grid-tied EV charger installation construction and electrical project. Our clean-technology products are designed to replace a complicated, expensive, time-consuming and risk prone process with an easy, low total cost of ownership, robust and reliable product.
Basis of Presentation
The interim unaudited condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three months and six months ended June 30, 2023 and 2022, and our financial position as of June 30, 2023, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.
Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2022. The December 31, 2022 balance sheet is derived from those statements.
| 7 |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of contingent consideration liability, valuation of intangible assets, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326) requiring initial recognition of credit losses, as well as any subsequent change in the estimate, when it is probable that a loss has been incurred. The standard eliminates the threshold for initial recognition in current U.S. GAAP and it covers a broad range of financial instruments, including trade and other receivables at each reporting date. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. The Company adopted this standard effective January 1, 2023 with no material effect on the financial statements.
Concentrations
Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable.
The Company maintains its
cash in banks and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any
losses in such accounts from inception through June 30, 2023. As of June 30, 2023, approximately $
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which immediately appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. At the time, the Company maintained all of its cash deposits with SVB. All deposits and substantially all of the assets of SVB were transferred to Silicon Valley Bridge Bank, N.A. (“SVBB”), which is no longer affiliated with SVB. On March 27, 2023, First-Citizens Bank & Trust Company entered into an agreement with the FDIC to purchase substantially all loans and certain other assets and assume all customer deposits and certain other liabilities of SVBB. The Company has full access to all of its deposited funds with SVBB and we have also established deposit accounts at Bank of America.
Major Customers
The Company continually
assesses the financial strength of its customers. We are not aware of any material credit risks associated with our customers.
| 8 |
Significant Accounting Policies
During the six months ended June 30, 2023, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2022, except for the adoption of ASC Topic 326 effective January 1, 2023 with no material effect on the financial statements.
Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock consists of shares of common stock issuable upon the exercise of stock options, stock warrants, or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.
Options to purchase shares of common stock and warrants to purchase shares of common stock were outstanding at June 30, 2023. Options to purchase common shares and warrants to purchase shares of common stock were outstanding at June 30, 2022. These options and warrants were not included in the computation of diluted loss per share for the three months ended June 30, 2023 and 2022 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.
Segments
The Company assesses its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. Management reviews financial results, manages the business and allocates resources on an aggregate basis. Therefore, financial results are reported in a single operating segment.
| 2. | LIQUIDITY |
The Company had net
losses of $
In 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC (“B. Riley”) under which the Company has the right, but not the obligation, to sell up to $30.0 million shares or a maximum of 2.0 million shares of its common stock over a period of 24 months in its sole discretion (see note 11 for further information). The Company issued shares for $2.5 million for the first six months of 2023 under this agreement, compared to none for the same period in 2022.
The Company’s
outstanding warrants generated $
In
March 2023, the Company secured a $
| 9 |
| 3. | BUSINESS COMBINATION |
All Cell Technologies, LLC
On March 4, 2022, the Company completed its acquisition of substantially all the assets of All Cell Technologies, LLC (“All Cell”), a leader in energy storage solutions. This acquisition has increased and diversified our Company’s revenue, intellectual property portfolio and customer base, and improved our gross profitability and manufacturing capabilities. The Company purchased substantially all of the assets and business of All Cell for shares of our common stock (“Closing Consideration”) plus an additional $0.8 million in cash for the net working capital held by All Cell at closing.
In addition, All Cell is eligible to earn an additional number of shares of our common stock if the acquired energy storage business meets certain revenue milestones (the “Earnout Consideration”). The Earnout Consideration is: (i) two times the amount of energy storage products revenue and contracted backlog that is greater than $7.5 million for 2022, and (ii) two times the amount of energy storage products 2023 revenue which exceeds the greater of either $13.5 million or 135% of the 2022 cumulative revenue, capped at $20.0 million. Any revenues exceeding $20.0 million in 2023 will not be eligible for the Earnout Consideration. The maximum aggregate number of shares of our common stock that we will issue to All Cell for the Closing Consideration and Earnout Consideration will not exceed 1.8 million shares. Revenue from energy storage products used in Beam Global products will not be considered as contributing to revenue in the Earnout calculation.
The valuation of the Earnout Consideration was performed using a two-factor Monte Carlo simulation, which includes estimates and assumptions such as forecasted revenues of All Cell, volatility, discount rates, share price and the milestone settlement value. As such valuation includes the use of unobservable inputs, it is considered to be a Level 3 measurement. The fair value of the Earnout Consideration is reassessed on a quarterly basis with the change recorded to operating expenses. Change in the fair value of the Earnout Consideration during the year ended December 31, 2022 and the six months ended June 30, 2023 is as follows (in thousands):
| Balance as of December 31, 2021 | $ | |||
| Acquisition of All Cell | ||||
| Change in estimated fair value | ||||
| Balance as of December 31, 2022 | $ | |||
| Issue earnout shares for 2022 | ( | ) | ||
| Change in estimated fair value | ||||
| Balance as of June 30, 2023 | $ |
| 10 |
Amiga DOO Kralievo
On June 12, 2023, the Company and the stockholders (the “Sellers”) of Amiga DOO Kraljevo, a Serbian Company that manufactures specialized structures and equipment (“Amiga”), executed a binding Letter of Intent (the “LOI”) for Beam to acquire all the equity stock of Amiga subject to customary closing conditions including but not limited to the full satisfaction of Beam of its due diligence of Amiga.
Amiga is a private, family-owned company, founded in 1990 in Kraljevo, Serbia. It employs approximately 210 employees, including a team of engineers. Its business includes, without limitation, production of (i) poles for public lighting; (ii) poles for mobile telephone, networks and transmission lines; (iii) poles for tram, trolleybus, and railways; (iv) poles for contact networks, masts, portals and semi-portals for road and railway signaling; (v) large steel lattice structures for specific purposes (e.g., stadiums, factories, power plants, etc.); and (vi) distribution and command electrical cabinets. Amiga currently has engineering, product development and manufacturing capabilities which we believe are well suited to manufacturing and perfecting Beam’s current products for the European market. Amiga is one of Europe’s leading manufacturers of streetlights and Beam believes it is well positioned to bring Beam’s patented EV Standard™ to market both in the EU and USA. Amiga’s team of engineers will be integrated with Beam’s current team which Beam believes will provide a valuable enhancement and acceleration of product development cycles. Amiga has disclosed to Beam that it generated over EUR 8.5M in revenue in 2022 and had a gross profit during that period.
Amiga’s current customer list includes entities in 16 international nations which are similar to Beam’s current customers in the United States, creating what Beam believes will be a significant post-acquisition advantage in selling Beam’s products to an international customer base.
Pursuant to the terms of the LOI, Beam will acquire all the equity stock of Amiga from the Sellers in exchange for cash and Beam common stock as set forth below. With respect to the cash portion of the purchase price, Beam will pay to the Sellers, (i) EUR 4,550,000 at closing and (ii) EUR 2,450,000 on or before December 31, 2023 (assuming closing has occurred on or before such date). With respect to the equity portion of the purchase price, Beam will also issue to the Sellers a certain number of shares of Beam common stock (at a price per share equal to the volume weighted average price of Beam’s common stock for the five trading days prior to the closing): (i) at the closing, such number of shares of Beam common stock equal to an aggregate of EUR 1,950,000, and (ii) on or before December 31, 2023, such number of shares of Beam common stock equal to an aggregate of EUR 1,050,000. In addition, each of the Sellers are eligible to earn additional shares of Beam common stock if such Seller is providing services to Beam and Amiga meets certain revenue milestones for fiscal years 2023 and 2024 (the “Earnout Consideration”). The Earnout Consideration that Sellers are eligible to receive for 2023 is equal to two times the amount of net revenue of Amiga (“Amiga Net Revenue”) that is greater than EUR 10,000,000 for 2023. The Earnout Consideration that Sellers are eligible to receive for 2024 is equal to (i) two times the amount of Amiga Net Revenue for 2024 that exceeds the greater of (i) EUR 13,500,000 or (ii) 135% of the Amiga Net Revenue for 2023. The Earnout Consideration for each period will be calculated based on the volume weighted average price of Beam’s common stock for the thirty trading days prior to the end of the applicable measurement period. In no event and under no circumstances will the Sellers receive from Beam or will Beam issue to the Sellers in connection with the Transaction Beam’s common stock in an amount that exceeds 19.99% of the outstanding common stock of Beam immediately prior to the closing. We expect the acquisition of Amiga to assist in introducing our products to the European Union, increasing and diversifying our revenues, enhancing our manufacturing and engineering capabilities, accelerating the development of EV Standard™ and other products both in Europe and the US, adding new customer segments in both Europe and the US, increasing barriers to entry for future competition, and advancing Beam’s position as a leader in the green economy.
| 4. | INVENTORY |
Inventory consists of the following (in thousands):
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Total inventory | $ | $ | ||||||
| 11 |
| 5. | PROPERTY AND EQUIPMENT |
Property and equipment consist of the following (in thousands):
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Office furniture and equipment | $ | $ | ||||||
| Computer equipment and software | ||||||||
| Leasehold improvements | ||||||||
| Autos | ||||||||
| Machinery and equipment | ||||||||
| Total property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, net | $ | $ | ||||||
| 6. | INTANGIBLE ASSETS |
The intangible assets consist of the following (in thousands):
| December 31, 2022 | ||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted-average Amortization Period (yrs) | |||||||||||||
| Developed technology | $ | $ | ( | ) | $ | |||||||||||
| Trade name | ( | ) | ||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||
| Backlog | ( | ) | ||||||||||||||
| Patents | ( | ) | ||||||||||||||
| Intangible assets | $ | $ | ( | ) | $ | |||||||||||
| June 30, 2023 | ||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted-average Amortization Period (yrs) | |||||||||||||
| Developed technology | $ | $ | ( | ) | $ | |||||||||||
| Trade name | ( | ) | ||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||
| Backlog | ( | ) | ||||||||||||||
| Patents | ( | ) | ||||||||||||||
| Intangible assets | $ | $ | ( | ) | $ | |||||||||||
| 12 |
| 7. | ACCRUED EXPENSES |
The major components of accrued expenses are summarized as follows (in thousands):
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accrued vacation | $ | $ | ||||||
| Accrued salaries and bonus | ||||||||
| Vendor accruals | ||||||||
| Accrued warranty | ||||||||
| Other accrued expense | ||||||||
| Total accrued expenses | $ | $ | ||||||
| 8. | NOTE PAYABLE |
In May 2023, the Company purchased
two new trucks and financed the purchase through an auto loan. The loan has a term of 60 months, requires monthly payments of approximately
$
| 9 | COMMITMENTS AND CONTINGENCIES |
Legal Matters:
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
Other Commitments:
The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, software licenses, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company.
| 13 |
| 10. | INCOME TAXES |
There was no Federal income tax expense for the six months ended June 30, 2023 or 2022 due to the Company’s net losses. Income tax expense represents minimum state taxes due. As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established to offset all deferred tax assets as of June 30, 2023 and no benefit has been provided for the year-to-date loss. On a quarterly basis, the company evaluates the positive and negative evidence to assess whether the more likely than not criteria have been satisfied in determining whether there will be further adjustments to the valuation allowance.
| 11. | STOCKHOLDERS’ EQUITY |
Committed Equity Facility
On September 2, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B. Riley. Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B. Riley up to $30.0 million, or a maximum of 2.0 million shares of the Company’s common stock at 97% of the volume weighted average price (“VWAP”) of the Company’s common stock on the trading day, calculated in accordance with the Purchase Agreement, over a period of 24 months subject to certain limitations and conditions contained in the Purchase Agreement. Sales and timing of any sales are solely at the election of the Company, and the Company is under no obligation to sell any common stock to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of the Company’s common stock, in September 2022, the Company issued B. Riley shares of its common stock, and, in April 2023 issued an additional shares of its common stock.
The Company incurred an aggregate cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value of the 10,484 shares of common stock issued to B. Riley upon the execution of the agreement and the additional shares of 10,484 executed in April 2023, which were recorded as equity on the Balance Sheet and offset proceeds from the sale of the Company’s common stock under the Purchase Agreement.
During
the six months ended June 30, 2023, the Company issued shares under the Purchase Agreement for
$2.5 million in proceeds, of which $
Stock Issued For Services
During the six months ended
June 30, 2023, the Company issued shares of its common stock in exchange for marketing services to be provided over a six-month
period. The fair value of such stock issued is $
Stock Options
Option activity for the six months ended June 30, 2023 is as follows:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | ||||||||||
| Outstanding at December 31, 2022 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Outstanding at June 30, 2023 | $ | Years | ||||||||||
The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the table below and we assumed there would not be dividends granted for the options granted during the six months ended June 30, 2023 and 2022:
| Six months ended | |
| June 30, 2023 | |
| Expected volatility | % - % |
| Expected term | - Years |
| Risk-free interest rate | % - % |
| Weighted-average FV | $ |
| 14 |
The Company’s stock option compensation expense
was $ and $ for the three and six months ended June 30, 2023 respectively, and $ and $ for
each of the three and six months ended June 30, 2022. There was $
Restricted Stock Units
In November 2022, the Company granted restricted stock units (“RSUs”) and up to 142,500 performance stock units (“PSU”) to its Chief Executive Officer (“CEO”). 50% of the RSUs vested upon grant, with 25% vesting on February 1st of 2024 and 2025. The number of shares that will be earned under the PSUs will be determined based on the achievement of specific performance metrics during the three-years ending December 31, 2024.
There was no activity during
the six months ended June 30, 2023.
Stock compensation expense related to the RSUs and PSUs was $ during the six months ended June 30, 2023, with $ in unrecognized stock compensation expense remaining to be recognized over years as of June 30, 2023.
Restricted Stock Awards
The Company issues restricted stock to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters. The Company also previously issued restricted stock awards to its CEO, for which generally 50% of the shares granted vest ratably over four quarters and the remaining 50% vest ratably over twelve quarters. The common stock related to these awards are issued to an escrow account on the date of grant and released to the grantee upon vesting. The fair value is determined based on the closing stock price of the Company’s common stock on the date granted and the related expense is recognized ratably over the vesting period.
A summary of activity of the restricted stock awards for the six months ended June 30, 2023 is as follows:
| Nonvested Shares | Weighted-Average Grant Date Fair Value | |||||||
| Nonvested at December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Nonvested at June 30, 2023 | $ | |||||||
Stock compensation expense related to restricted stock awards was $ during each of the six months ended June 30, 2023 and 2022.
As of June 30, 2023, there
were unreleased shares of common stock representing $ of unrecognized restricted stock grant expense which will be recognized
over
| 15 |
Warrants
During the six months
ended June 30, 2023, the Company issued warrants to purchase up to
shares of the Company’s common stock at a price per share equal to $17.00 to a consultant for investor relations services to
be provided over a five-year period. The warrants are immediately exercisable but are subject to repurchase by the Company until the
required service is provided. The fair value of such warrants was $8.05 per share or $
on the date of grant using the Black-Scholes option-pricing model. This model incorporated certain assumptions for inputs
including a risk-free market interest rate of 3.86%, expected dividend yield of the underlying common stock of 0%, expected life of
2.5 years and expected volatility in the market value of the underlying common stock based on our historical volatility of 99.6%.
The fair value of the warrants was recorded to prepaid expenses and other current assets to be recognized over the service period.
During the six months ended June 30, 2023, $
A summary of activity of warrants outstanding for the six months ended June 30, 2023 is as follows:
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Outstanding at December 31, 2022 | ||||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Outstanding at June 30, 2023 | $ | |||||||
| Exercisable at June 30, 2023 | $ | |||||||
Exercisable warrants as of June 30, 2023 have a weighted average remaining contractual life of years. The intrinsic value of the exercisable shares of the warrants at June 30, 2023 was $.
| 12. | REVENUES |
For each of the identified periods, revenues can be categorized into the following (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Maintenance fees | ||||||||||||||||
| Professional services | ||||||||||||||||
| Shipping and handling | ||||||||||||||||
| Discounts and allowances | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
During the six months ended
June 30, 2023 and 2022,
At June 30, 2023 and December
31, 2022, deferred revenue was $
| 16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements that are based on current expectations, estimates, forecasts, and projections about us, the industry in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” and variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause the Company’s actual results to be materially different from any future results expressed or implied by the Company in those statements. The most important factors that could prevent the Company from achieving its stated goals include, but are not limited to, the following:
| (a) | volatility or decline of the Company’s stock price, or absence of stock price appreciation; | |
| (b) | fluctuation in quarterly results; | |
| (c) | failure of the Company to earn revenues or profits; | |
| (d) | inadequate capital to continue or expand its business, and the inability to raise additional capital or financing to implement its business plans; | |
| (e) | reductions in demand for the Company’s products and services, whether because of competition, general industry conditions, loss of tax incentives for solar power, technological obsolescence or other reasons; | |
| (f) | litigation with or legal claims and allegations by outside parties; | |
| (g) | insufficient revenues to cover operating costs, resulting in persistent losses; | |
| (h) | rapid and significant changes to costs of raw materials from government tariffs or other market factors; | |
| (i) | the preceding and other factors discussed in Part I, Item 1A, “Risk Factors,” and other reports we may file with the Securities and Exchange Commission from time to time; and | |
| (j) | the factors set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” |
New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Because factors referred to elsewhere in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022 (sometimes referred to as the “2022 Form 10-K”) that we previously filed with the Securities and Exchange Commission, including without limitation the “Risk Factors” section in the 2022 Form 10-K, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-looking statements or to reflect events or circumstances arising after the date of this report on Form 10-Q.
| 17 |
Overview
Beam Global develops, manufactures, and sells high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy storage, energy security, disaster preparedness and outdoor media.
The Company has five product lines that incorporate our proprietary technology for producing a unique alternative to grid-tied charging, having a built-in renewable energy source in the form of attached solar panels and/or light wind generator to produce power and battery storage to store the power. These products are rapidly deployable and attractively designed and include:
| - | EV ARC™ Electric Vehicle Autonomous Renewable Charger – a patented, rapidly deployed, infrastructure product that uses integrated solar power and battery storage to provide a mounting asset and a source of power for factory installed electric vehicle charging stations of any brand. The electronics are elevated to the underside of the sun-tracking solar array making the unit flood-proof up to nine and a half feet and allowing adequate space to park a vehicle on the engineered ballast and traction pad which gives the product stability. |
| - | Solar Tree® DCFC – Patented off-grid, renewably energized and rapidly deployed, single-column mounted smart generation and energy storage system with the capability to provide a 150kW DC fast charge to one or more electric vehicles or larger vehicles. |
| - | EV ARC™ DCFC – DC Fast Charging system for charging EVs comprised of four interconnected EV ARC™ systems and a 50kW DC fast charger. |
| - | EV-Standard™ – patent issued on December 31, 2019 and currently under development. A lamp standard, EV charging and emergency power product which uses an existing streetlamp’s foundation and a combination of solar, wind, grid connection and onboard energy storage to provide curbside charging. |
| - | UAV ARC™ - patent issued on November 24, 2020 and currently under development. An off-grid, renewably energized and rapidly deployed product and network used to charge aerial drone (UAV) fleets. |
In addition, with the acquisition of All Cell Technologies, LLC (“All Cell”) in March 2022, we now offer Beam AllCell™ energy storage technology with a highly flexible lithium-ion and/or lithium iron phosphate battery platform architecture. The battery design uses a proprietary phase change material which provides a low-cost thermal management solution and a unique safety mechanism to prevent propagation of thermal runaway. They are ideally suited for applications where energy density, safety and specialized enclosures require high power in small spaces. Drones, submersibles, medical and recreational products and a host of micro mobility products benefit from this technology. Beam is already using AllCell™ energy storage products in EV ARC™ products for EV charging and plans to incorporate this battery technology in our new product designs that are under development.
We believe that there is a clear need for a rapidly deployable and highly scalable EV charging infrastructure, and that our products fulfill that requirement. Unlike grid-tied installations which require general and electrical contractors, engineers, consultants, digging trenches, permitting, pouring concrete, wiring, and ongoing utility bills, the EV ARC™ system can be deployed in minutes, not months, and is powered by renewable energy so there is no utility bill. We are agnostic as to the EV charging service equipment or provider and integrate best of breed solutions based upon our customer’s requirements. For example, our EV ARC™ and Solar Tree® products have been deployed with Chargepoint, Blink, Enel X, Electrify America and other high quality EV charging solutions. We can make recommendations to customers, or we can comply with their specifications and/or existing charger networks. Our products replace the infrastructure required to support EV chargers, not the chargers themselves. We do not sell EV charging, rather we sell products which enable it.
| 18 |
We believe our chief differentiators for our electric vehicle charging infrastructure products are:
| · | our patented, renewable energy products dramatically reduce the cost, time and complexity of the installation and operation of EV charging infrastructure and outdoor media platforms when compared to traditional, utility grid tied alternatives; | |
| · | our proprietary and patented energy storage solutions; | |
| · | our first-to-market advantage with EV charging infrastructure products which are renewably energized, rapidly deployed and require no construction or electrical work on site; | |
| · | our products’ capability to operate during grid outages and to provide a source of EV charging and emergency power rather than becoming inoperable during times of emergency or other grid interruptions; and | |
| · | our ability to continuously create new and patentable inventions which are marketable and a complex integration of our proprietary technology and parts, and other commonly available engineered components, which create a further barrier to entry for our competition. |
Overall Business Outlook
Our revenues for the first six months of 2023 were $30.8 million, a 312% increase over $7.5 million for the first six months in 2022, primarily derived from delivery of EV ARC™ systems to federal customers. We have invested in sales and marketing resources over the past three years which has created increased demand for our EV ARC™ renewable chargers. Additionally, we had an increase of $2.1 million in sales from our battery storage business as a result of our acquisition of All Cell in March 2022. The Company believes there continues to be a high level of support for funding EV charging infrastructure from both government and commercial entities, including a number of federal grants available under the Inflation Reduction Act in 2022. In addition, certain of our commercial customers can benefit from the Federal Solar Investment Tax Credit and accelerated depreciation as allowed under Section 179 of IRS code which, we believe, provide a competitive advantage for our products over traditionally installed EV charging infrastructure which is not eligible for these incentives. Given these available resources, we have invested in a federal lobbyist, a federal business development resource and a government relations employee, who have helped to identify opportunities on the federal side and have increased awareness of our product and outreach with federal agencies. In addition, the General Services Administration (GSA) awarded Beam Global a federal blanket purchase agreement which provides federal agencies a streamlined procurement process for procuring EV ARC™ systems. As a direct result, Beam Global was awarded a number of federal government orders in September through November 2022 that have or will be delivered in 2023. In the six months ended June 30, 2023, we recorded revenues of $23.4 million for federal customers, compared to $0.9 million for the same period in 2022.
Ongoing efforts to expand revenues to state agencies have also been successful. In June 2022, we were awarded a new three-year statewide contract with the State of California which can be used by state, local and municipal government entities throughout the U.S., not just California, and provides previously negotiated pricing and contract terms to make the procurement process easier. In addition, in early October 2022, we were awarded a $5.3 million contract from the Department of Citywide Administrative Services to deploy units throughout New York City.
In addition, partially due to companies requiring employees to return to the workplace rather than working remotely from home as was the case during the pandemic, we are seeing an increase in orders for workplace charging and corporate which we expect to continue. We expect the electric vehicle market to continue to experience significant growth over the next decade which will in turn cause a requirement for additional EV charging infrastructure. We believe our products are positioned to benefit significantly from this growth.
We believe the Company’s acquisition of the assets of All Cell, a battery technology company, will increase our new customer opportunities. As a result of the acquisition of All Cell, we believe Beam’s gross margin will continue to improve by utilizing the Beam All-Cell™ battery in its EV ARCs™, because we can reduce costs by retaining gross profits previously paid to battery vendors. We now also have the ability to value engineer bespoke battery solutions for our products. Beam All-Cell™ batteries are ideally suited for applications where energy density, safety and bespoke enclosures require high power in small spaces. Drones, submersibles, recreational products and a host of micro mobility and electric vehicle products are already benefiting from our Beam All-Cell™ highly differentiated products. With the continued growth of untethered electrification, we believe there is opportunity for increased demand in these markets and others.
| 19 |
In June 2023, the Company announced that it executed a binding Letter of Intent to acquire Europe based Amiga DOO Kraljevo (“Amiga”). Amiga is an established manufacturer of specialized structures and equipment, producing street lights, communications and energy infrastructure whose manufacturing, engineering and sales teams service municipalities, states and commercial customers in 16 nations. The closing of the acquisition of Amiga, which we expect to occur in Q4 2023, is subject to customary closing conditions, including but not limited to, the completion of our due diligence of Amiga to our satisfaction. The Company believes that should this transaction close, it will expand Beam Global’s presence into the European market and increase its production, engineering, sales and product development expertise. The EU has mandated a transition to zero emission vehicles by 2035 and they are heavily focused on green and sustainable energy. An increase in electric vehicles adoptions will increase the demand for charging infrastructure. We believe that our sustainably energized EV ARCTM and EV Standard™ products can play a major role in the provision of EV charging infrastructure in Europe.
We continued to make progress in finding a sponsor for our outdoor media advertising business during 2022 and 2023, working with The Superlative Group (“Superlative”), an industry leading consultant engaged in selling corporate sponsorships. They have identified several potential corporate sponsors for a global naming rights agreement to our network of EV ARC™ systems. Superlative is compensated only when they are successful in securing a sponsor for our “Driving on Sunshine” network. This business model, if successful, can be replicated in other cities throughout the country. Our energy security business is connected with the deployment of our EV charging infrastructure products and serves as an additional benefit and value proposition for our charging products which, along with their integrated emergency power panels, can continue to operate, charge EVs, and deliver emergency power during utility grid failures. Our state-of-the-art storage batteries installed on our EV charging systems are immune to grid failures and provide another benefit for customers such as municipalities, counties, states, the federal government, hospitals, fire departments, large private enterprises with substantial facilities, and vehicle fleet operators.
We are in development on our newest patented products - our EV Standard™ and UAV ARC™, which we expect will expand our product offerings leveraging the same proprietary technology as our current products and allow us to expand into new markets.
Our gross profit improved as a percentage of sales reporting a continued positive gross margin in Q2 2023 of 2.8% of revenues, compared to a .03% gross profit in the Q1 2023 and -$8.8% in Q2 2022. Gross margins improved to 1.6% as a percentage of revenues in the six months ended June 30, 2023, compared to an 8.4% loss as a percentage of revenue for the same period in 2022. Additionally, our cost of goods sold included non-cash intellectual property amortization of $0.4 million and $0.3 million for the first six months of 2023 and 2022, respectively, related to the acquisition of All Cell in 2022. Excluding this non-cash expense results in a positive gross profit of 2.9% for the six months ended June 30, 2023. We increased the number of EV ARC deliveries from 74 in the first six months of 2022 to 354 in the first six months of 2023 which resulted in favorable fixed overhead absorption and improved labor efficiencies gained by the higher volume. Our gross profit improvements were achieved in spite of ongoing inflation and the high costs of many of our components, including steel, that began during the Covid pandemic and are only starting to decrease on new supply chain orders placed in 2023. We expect to see these costs continue to decrease over time. Batteries are the highest cost contributor to our bill of materials, but with the March 2022 purchase of All Cell’s assets, we have seen these costs decrease. We are implementing lean manufacturing process improvements and making engineering changes to our product where we expect to benefit from cost reductions. Many of the components that we integrate into our products are manufactured by others. This is consistent with our strategy to take advantage of the investment by large and well-funded organizations in the improvement of various components and sub-assemblies which we integrate into our final product. We continue to identify components and sub-assemblies that may be more cost effective to outsource, which may further reduce our costs, increase our gross margins, and significantly increase the potential output from our factory. We expect to see a significant increase in the demand for electric vehicle charging infrastructure and as such we do not anticipate significant pricing pressure on our products. The combination of this increase in demand for electric vehicle charging infrastructure and our revenues, and the cost cutting measures described above lead us to believe that we will see improvement in our gross margins over the next year.
Significant Accounting Policies and Estimates
The Company’s significant accounting policies are described in Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes in these policies or their application.
| 20 |
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of intangible assets, valuation of contingent consideration liability, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets.
Changes in Accounting Principles. There were no significant changes in accounting principles that were adopted during the six months ended June 30, 2023.
Results of Operations
Comparison of Results of Operations for the Three Months Ended June 30, 2023 and 2022
Revenues. For the quarter ended June 30, 2023, our revenues increased 379% to $17.8 million compared to $3.7 million for the same period in 2022. Revenues to federal customers increased by $12.7 million in Q2 2023. During the quarter, revenues from Florida accounted for 20% of total revenues and included federal, state and enterprise customers. We also recorded energy storage revenues of $2.1 million as a result of our acquisition of All Cell in 2022. We continue to invest in sales and marketing employees, resources and programs to raise awareness of the benefits and value of our products, which is reflected in the strong year over year sales growth in the quarter. The receipt of orders may continue to be uneven due to the timing of customer approvals or budget cycles, however we believe that as EV adoption increases in concert with increased availability of infrastructure funding, our business will be less impacted by specific variations in order timing.
Gross Profit. For the quarter ended June 30, 2023, our gross profit was $0.5 million, or 3% of sales, compared to a gross loss of $0.3 million, or 9% of sales for the same period in 2022. As a percentage of sales, the margin improved by 12%, primarily due to the increase in production levels in the current quarter compared to the prior year, which resulted in favorable fixed overhead absorption. Our gross profits were negatively impacted by $0.2 million for non-cash intangible amortization. We began to see some improvements on material pricing in 2023, which we believe will continue to improve over time. Our labor efficiency improved during the quarter as a result of a steady flow of units through the factory. We also implemented some new equipment and design changes in Q1 and Q2 2023 which helped to increase our production to meet the growing demand and which is helping to reduce the labor and material cost of our product. In addition, as our revenues continue to increase in 2023 and beyond, we expect our fixed overhead absorption to also improve.
Operating Expenses. Total operating expenses were $4.0 million, or 23% of revenues, for the quarter ended June 30, 2023, compared to $2.5 million, or 67% of revenues, for the same quarter in the prior year, a decrease of 44% as a percentage of revenues. The $1.5 million increase is attributable to $0.5 million for the change in fair value of contingent consideration, $0.4 million for sales and marketing expenses, primarily for commissions due to higher revenues, $0.4 million for non-cash compensation expenses, $0.2 million for admin salaries and bonus accrual.
Comparison of Results of Operations for the Six Months Ended June 30, 2023 and 2022
Revenues. For the six months ended June 30, 2023, our revenues increased 312% to $30.8 million compared to $7.5 million for the same period in 2022. Revenues to federal customers increased by $22.5 million in 2023. During the first six months of 2023, revenues from California and Florida represented 13% and 12% of total revenues. In both instances revenues were diverse across federal, state and local governments, as well as enterprise and education sector customers. International customers comprised 10% of the revenues through June 30, 2023, and were primarily from our energy storage business. Revenues derived from non-government, commercial entities increased by 42% from Q2 2022 to Q2 2023 representing a partial return to pre-COVID levels. We recorded energy storage revenues of $3.9 million as a result of our acquisition of All Cell in 2022. We continue to invest in sales and marketing employees, resources and programs to raise awareness of the benefits and value of our products, which is reflected in the strong year over year sales growth in the quarter. The receipt of orders may continue to be uneven due to the timing of customer approvals or budget cycles, however we believe that as EV adoption increases in concert with increased availability of infrastructure funding, our business will be less impacted by specific variations in order timing.
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Gross Profit. For the six months ended June 30, 2023, our gross profit was $0.5 million, or 2% of sales, compared to a gross loss of $0.6 million, or 8% of sales in the same period of 2022. As a percentage of sales, the margin improved by 10%, primarily due to the increase in production levels in the current quarter compared to the prior year, which resulted in favorable fixed overhead absorption. Our gross profits were negatively impacted by $0.4 million for non-cash intangible amortization. We began to see some improvements on material pricing in 2023, which we believe will continue to improve over time. In addition, our labor efficiency improved during the quarter as a result of a steady flow of units through the factory. We continue to make engineering changes and work with suppliers to improve our costs which will continue to improve our gross profit over time.
Operating Expenses. Total operating expenses were $7.9 million, or 26% of revenues, for the six months ended June 30, 2023, compared to $4.5 million, or 60% of revenues, for the same quarter in the prior year, an improvement of 34% as a percentage of revenues. Due to the acquisition of All Cell that closed in March 2022, expenses for the first six months of 2022 do not include operating expenses for January and February, which accounts for approximately $0.5 million of the increase. In addition, increases are also attributable to, $0.7 million for non-cash compensation expenses, $0.6 million for administrative salaries and bonus accrual, $0.5 million for the change in fair value of contingent consideration, $0.4 million for investment in R&D salaries and expenses, $0.3 million for sales and marketing expenses, primarily for commissions due to higher revenues and $0.3 million of other expenses.
Liquidity and Capital Resources
At June 30, 2023, we had cash of $23.7 million, compared to cash of $1.7 million at December 31, 2022. We have historically met our cash needs through a combination of debt and equity financing. Our cash requirements are generally for operating activities.
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash provided by (used in): | ||||||||
| Net cash used in operating activities | $ | (5,062 | ) | $ | (7,425 | ) | ||
| Net cash used in investing activities | $ | (601 | ) | $ | (1,086 | ) | ||
| Net cash (used in) provided by financing activities | $ | 27,664 | $ | 316 | ||||
Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the table below:
For the six months ended June 30, 2023, our cash used in operating activities was $5.1 million compared to $7.4 million for the six months ended June 30, 2022. Net loss of $7.4 million for the six months ended June 30, 2023 was increased by $2.1 million of non-cash expense items that included depreciation and amortization of $0.7 million, common stock issued for services for director compensation of $0.2 million, employee stock-based compensation expense of $0.9 million, change in the fair value of contingent consideration liabilities of $0.3 million and $0.1 million of other for stock compensation for non-employees. Further, cash used in operations included a $6.0 million increase in accounts receivable due to the increase in revenues in the quarter and $0.4 million decrease in deferred revenue. Cash generated from operations included a $4.3 million increase in accounts payable primarily for inventory, $1.9 million increase in accrued expenses, and $0.3 million decrease in prepaid expenses and other current assets.
For the six months ended June 30, 2022, our cash used in operating activities was $7.4 million. Net loss of $5.1 million for the six months ended June 30, 2022 was increased by $0.7 million of non-cash expense items that included depreciation and amortization of $0.5 million, common stock issued for services for director compensation of $0.2 million and non-cash compensation expense related to the grant of stock options of $0.2 million. Further, cash used in operations included an increase in prepaid expenses and other current assets by $3.0 million, primarily related to the purchase of cells and $3.5 million increase in inventory based on the sales forecast. Cash used in operations included a $0.9 million decrease in accounts receivable due to the collection of accounts from 2021, $2.1 million increase in accounts payable, $0.1 million increase in accrued expenses and $0.3 million increase in deferred revenue.
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Cash used in investing activities in the six months ended June 30, 2023 included $0.5 million for the purchase of equipment; primarily transportation equipment, a sleeving machine and an automated welder used in our battery manufacturing and $0.1 million for patent costs. The six months ended June 30, 2022 included $0.8 million cash payment for working capital payment related to the acquisition of All Cell and $0.3 million to purchase equipment and patent costs.
For the six months ended June 30, 2023, cash generated by our financing activities included $25.4 million in proceeds from the public offering issuance of common stock, net of offering expenses, $2.1 million for shares sold through the Company’s equity facility and $0.1 million from the exercise of warrants, compared to $0.3 million for the exercise of warrants for the same period in the prior year.
Current assets were $49.3 million on June 30, 2023, an increase from $19.9 million at December 31, 2022, primarily due to increases of $22.0 million in cash, $6.0 million in accounts receivable and $1.2 million in prepaid expenses and other current assets. Current liabilities decreased to $12.1 million at June 30, 2023 from $13.2 million at December 31, 2022, primarily due to a $6.8 million decrease in a non-cash contingent consideration reserve attributable to our March 2022 acquisition of All Cell, and a $0.4 million decrease in deferred revenue, offset by a $4.3 million increase in accounts payable and $1.8 million increase in accrued expenses. As a result, our working capital increased to $37.1 million at June 30, 2023 compared to $6.8 million at December 31, 2022.
The Company has been focused on marketing and sales efforts to increase our revenues. Revenues increased by 45% from 2020 to 2021, 144% from 2021 to 2022, and the first half of 2023 was 312% higher than the first half of 2022 demonstrating that this investment has been successful. Improvements to gross profitability have been made despite the current inflationary period. As revenues increase, we expect to continue to see our fixed overhead costs spread over more units, which will reduce the cost per unit. Our engineering and operations teams have made several design changes and process improvements in our product development and manufacturing operations in 2022 and early 2023 which has helped to increase labor efficiency and reduce material costs. At the same time, the Company is still recovering from supply chain issues related to the COVID-19 virus which caused an increase in certain of our material costs, most notably in steel purchases. However, we are seeing these costs start to decline in 2023, which will help us to continue to increase gross profit on products in the future.
On March 22, 2023, the Company entered into a supply chain line of credit agreement with OCI Group (“OCI”). Subject to the terms of the agreement, OCI will make available to the Company funding based on amounts owed to the Company by Customers. The Company will make a transaction request to drawdown a portion of the line of credit along with documents to support the specific customer receivable being requested and a repayment date. OCI has sole discretion to accept or refuse a transaction request. Once accepted, the funds are provided to Beam, net of fees. The maximum amount of the line of credit is $100 million. The initial term of the agreement is five years, and it can be renewed for additional one year terms until such time as notice is given per the terms of the agreement.
The Company may be required to raise capital until it achieves positive cash flow from its business, which is predicated on increasing sales volumes and the continuation of production cost reduction measures. In September 2022, the Company entered into a Common Stock Purchase Agreement with B. Riley under which the Company has the right to sell up to $2 million shares of its common stock over a period of 24 months (see note 10 for further information.) In addition, we could pursue other equity or debt financing. Furthermore, the Company has warrants to purchase 620,105 shares of our Common Stock outstanding at June 30, 2023, which could potentially generate an additional $6.0 million of proceeds over the next 4.8 years, depending the warrant holders’ ability and decision to exercise them. The proceeds from these offerings are expected to provide working capital to fund business operations and the development of new products. Management cannot currently predict when or if it will achieve positive cash flow. There is no guarantee that profitable operations will be achieved, the warrants will be exercised or that additional capital or debt financing will be available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to meet our obligations or enable us to continue to implement our long-term business strategy. In addition, obtaining additional funding or entering into other strategic transactions could result in significant dilution to our stockholders.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining 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 internal controls over financial reporting. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2023, we do not have sufficient internal controls over financial reporting and procedures to ensure that all the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.
We identified the following material weakness which existed as of December 31, 2022:
| · | The Company currently does not have sufficient controls in place to ensure that all inventory is appropriately tracked and recorded on a timely basis, given the lack of an automated tracking system and the manual nature of its current processes and controls surrounding inventory. | |
| · | The Company performs manual processes during the year to track and control inventory transactions, apply labor and overheads to inventory and to perform a wall-to-wall physical inventory at the end of the year to confirm the ending inventory balance and valuation. While these processes provide good results in determining inventory and cost of sales transactions, as we grow, it has become a very time-consuming process and could impact our ability to submit timely reporting. While manual controls improved significantly in 2022 and 2023 at our San Diego location, we determined we had similar issues with manufacturing systems at our Chicago facility that was added in 2022 as a result of the All Cell acquisition. We believe an enterprise resource planning (ERP) system will provide automated processes, better controls, and improved management tools to analyze and plan production while assisting in the avoidance of over-purchasing or inventory shortages. |
Since these controls have a pervasive effect across the inventory transaction cycle, management has determined that these circumstances constitute a material weakness, based on the criteria established in the “Internal Integrated Framework” issued by COSO in 2013 and as a result, we did not maintain effective internal control over financial reporting as of June 30, 2023.
Changes in Internal Control Over Financial Reporting
During the six months ended June 30, 2023, we began to implement stronger processes related to ordering, counting, warehousing, valuing and transacting our inventory at our energy storage facility in Broadview, IL. We also are in the process of implementing a new enterprise resource planning (ERP) system to replace our existing QuickBooks system. The implementation of the new ERP is scheduled for completion in 2023.
| 24 |
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 and the risk factors set forth below, 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, 2022, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition, liquidity or future results.
If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, our common stock may be delisted.
Our common stock is currently listed on Nasdaq. In order to maintain such listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements.
On June 2, 2023, the Company notified Nasdaq that effective as of June 30, 2023 it will not be in compliance with Nasdaq Listing Rule 5605(c)(2)(A) as a result of the upcoming resignation, for personal reasons, of a member of the Company’s board who was also a member of the Company’s Audit Committee. Nasdaq Listing Rule 5605(c)(2)(A) requires the Audit Committee to have at least three independent members (as defined by Nasdaq Listing Rule 5605(a)(2) and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934), at least one of whom is an audit committee financial expert. As a result of the resignation of Nancy Floyd, the Company no longer has an Audit Committee comprised of three independent directors. The Nasdaq Listing Rules provide for a cure period during which the Company may regain compliance with Nasdaq Listing Rule 5605(c)(2)(A). Under Nasdaq Listing Rule 5605(c)(4), the Company shall have until the earlier of its next annual meeting of stockholders or one year from the occurrence of the event that caused the failure to comply with Nasdaq Listing Rule 5605(c)(2)(A); provided, however, that if the next annual meeting of stockholders occurs no later than 180 days following the event that caused the vacancy, the Company shall instead have 180 days from such event to regain compliance. The Company is currently interviewing candidates to fill this board vacancy and to chair the audit committee and intends to do so within the applicable cure period.
There can be no assurances that we will be able to regain compliance with Nasdaq’s listing standards or if we do later regain compliance with Nasdaq’s listing standards, will be able to continue to comply with the applicable listing standards. If we are unable to maintain compliance with these Nasdaq requirements, our common stock will be delisted from Nasdaq.
If Nasdaq delists our common stock, we could face significant material adverse consequences, including:
● a limited availability of market quotations for our securities;
● a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;
● a limited amount of news and analyst coverage for our company; and
● a decreased ability to issue additional securities or obtain additional financing in the future.
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Risks Relating to the Potential Amiga Acquisition
While we have entered into a binding letter of intent with Amiga, we have not entered into negotiations for a purchase and sale agreement therewith and we cannot assure you that the transactions contemplated by our letter of intent will be consummated or, that if such transactions are consummated, they will be accretive to stockholder value.
We entered into the LOI with Amiga pursuant to which we agreed to explore an acquisition of the equity stock of Amiga. However, the LOI did not include many of the material terms to any potential transaction with Amiga and there is no guarantee that we will agree to terms or definitive documentation with Amiga in order to effect the proposed acquisition or that we will elect to proceed with the transaction at all after the completion of our due diligence of Amiga, including receipt of audited financial statements of Amiga utilizing U.S. GAAP standards. Accordingly, this offering is taking place prior to the consummation of the proposed acquisition of Amiga. The closing of the proposed acquisition of Amiga, if any, is subject to the negotiation and execution of definitive documentation and will be subject to customary closing conditions including but not limited to the full satisfaction of Beam of its due diligence of Amiga, including review of Amiga’s audited financial statements. As a result, the possible timing and likelihood of the completion of the acquisition are uncertain, and, accordingly, there can be no assurance that such acquisition will be completed on the expected terms, anticipated schedule or at all. This proposed acquisition is in the early stages and due diligence efforts have just commenced. As a result, we may not be able to complete the proposed acquisition on the terms or timetable that we currently contemplate, or at all, and it is possible that one or more conditions to closing will not be satisfied or waived or that other events will intervene to delay or prevent the completion of the proposed acquisition.
We may fail to realize all of the anticipated benefits of the proposed acquisition of Amiga or those benefits may take longer to realize than expected and our business, financial condition and results of operation could be materially and adversely affected. We may also encounter significant difficulties in integrating Amiga with Beam and its operations.
While our goal is to structure the proposed acquisition of Amiga in a manner that is beneficial and accretive to us over the long term, our accretion analysis and beliefs about the benefits of the proposed acquisition of Amiga are subject to a variety of market and other factors, including, among others: (i) the completion of our due diligence; (ii) the final agreed upon terms of the proposed acquisition; and (iii) our current estimates, assumptions and projections about the current and future operation of Amiga, including, without limitation, estimates, assumptions, and projections about (a) Amiga future origination volumes, operating expenses, financing costs, and ability to profitably sell its products and/or services, and (b) the cost and process of integrating Amiga with our current operations, as well as any one-time costs or charges associated with the proposed acquisition and subsequent integration.
Our ability to realize the anticipated benefits of the proposed acquisition will depend, in part, on our ability to integrate Amiga, which may be a complex, costly and time-consuming process. If we are successful in completing the proposed acquisition, we will be required to devote significant management attention and resources to integrate the business practices and operations of the acquired business. The integration process may disrupt our business and, if implemented ineffectively, could restrict the realization of the full expected benefits. In addition, the integration of the acquired business may result in material unanticipated issues, expenses, liabilities, competitive responses, and diversion of management’s attention. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the proposed acquisition could cause an interruption of, or a loss of momentum in, our operations and could materially and adversely affect our business, financial condition and results of operations.
Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected benefits and diversion of management’s time and energy, which could adversely affect our business, financial condition and results of operations and result in us becoming subject to litigation. In addition, even if the proposed acquisition were to be integrated successfully, the full anticipated benefits of the proposed acquisition may not be realized within the anticipated time frame, or at all. We may not be able to maintain the results of operations or operating efficiency that we and the acquired business have achieved or might achieve separately. Further, additional unanticipated costs may be incurred in the integration process as a result of risks currently unknown to us. All of these factors could cause reductions in our earnings per share, decrease or delay any accretive or other beneficial effect of the proposed acquisition and negatively impact the price of our common stock.
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Amiga is a private Serbian company that has not been subject to an audit by an accounting firm under U.S. GAAP standards and has not previously been subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC or other corporate governance requirements.
Amiga is a private Serbian company. To date, Amiga has not had its financial statements reviewed or audited by an accounting firm under U.S. GAAP standards and has not been subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements to which public reporting companies may be subject. As a result, if we successfully complete our due diligence and if we elect to proceed with the acquisition, we will be required to implement the appropriate internal control processes and procedures over Amiga’s financial accounting and reporting. The combined company may incur significant legal, accounting and other expenses in efforts to ensure that Amiga meets these requirements. Implementing the controls and procedures at Amiga that are required to comply with the various applicable laws and regulations may place a significant burden on our management and internal resources. The diversion of management’s attention and any difficulties encountered in such an implementation could adversely affect our business, financial condition and operating results.
Our inability to successfully integrate Amiga’s operations could adversely affect our operations; potential need for additional financing.
Our potential acquisition of Amiga represents a significant investment. The proposed acquisition requires our and Amiga’s significant attention and resources, which could reduce the likelihood of achievement of other corporate goals. Both we and Amiga have experienced significant operating losses. As a result, we may need additional financing to help fund our business and satisfy our obligations, which will require additional management time to address. There is no assurance that we will realize the benefits of the acquisition of Amiga that we hope will be achieved.
If the acquisition of Amiga is successful, Beam expects to generate an increasing portion of its revenue internationally in the future and may become subject to various additional risks relating to its international activities, which could adversely affect its business, operating results and financial condition.
Beam has limited experience operating internationally and engaging in international business involves a number of difficulties and risks, including:
| · | the challenges associated with building local brand awareness, obtaining local key opinion leader support and clinical support, implementing reimbursement strategies and building local marketing and sales teams; |
| · | required compliance with foreign regulatory requirements and laws, including regulations and laws; |
| · | trade relations among the United States and those foreign countries in which Beam’s future customers, distributors, manufacturers and suppliers have operations, including protectionist measures such as tariffs and import or export licensing requirements, whether imposed by the United States or such foreign countries; |
| · | difficulties and costs of staffing and managing foreign operations; |
| · | difficulties protecting, procuring or enforcing intellectual property rights internationally; |
| · | required compliance with anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act, data privacy requirements, labor laws and anti-competition regulations; |
| · | laws and business practices that may favor local companies; |
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| · | longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; |
| · | political and economic instability; and |
| · | potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers. |
In the event that Beam dedicates significant resources to its international operations and is unable to manage these risks effectively, Beam’s business, operating results and financial condition may be adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On March 22, 2023, the Company entered into that certain Supply Chain Line of Credit with OCI Limited (“OCI”), whereby OCI may provide a supply chain line of credit in the amount of up to $100 million based on the amounts of approved accounts receivable of the Company (the “Credit Facility”). In order to request a drawdown on the Credit Facility, the Company is required to submit a transaction request to OCI which sets forth the terms of the applicable account receivables, including but not limited to the name of the party responsible for the applicable account receivables (the “Obligor”), the terms of repayment and the amount of such receivables. The Company has no obligation to submit a drawdown request and OCI is not obligated to accept any drawdown request from the Company. In the event OCI accepts a drawdown request of the Company and upon satisfaction of certain conditions required by OCI to issue the drawdown, OCI will disburse funds to the Company for such drawdown in an amount equal to the full value of the applicable account receivables assigned to OCI minus any transaction expenses incurred by OCI and the full amount of interest to be incurred for such receivables over the term of the drawdown. The Company will pay interest on any drawdown at the Secured Overnight Financing Rate +300 basis points. Upon the disbursement of funds to the Company for a drawdown, the Company will assign all rights to such account receivables of the Obligor to OCI. The Company will act as collection agent on any account receivables assigned to OCI and agrees to establish a designated bank account for the purpose of collecting payment on any applicable account receivables that are assigned to OCI. In the event (i) the Company is in material breach of the Credit Facility, (ii) the Company or the Obligor is insolvent or is subject to reorganization or liquidation, or (iii) any dispute related to an agreement with an Obligor or non-payment by an Obligor, OCI has the right to exercise any contractual rights it may have against Obligor, increase the interest rate to the agreed upon default interest rate, and demand immediate repayment by the Company for the outstanding amounts owed under such account receivables. The Company has also agreed to indemnify OCI for any losses incurred by OCI in connection with the Credit Facility. Either party may terminate the Credit Facility at any time by providing fifteen (15) days prior written notice to the other party. To date, Beam Global has not drawn on this line of credit. The foregoing description of the Credit Facility contained herein does not purport to be complete and is qualified in its entirety by reference to the Credit Facility, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
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Item 6. Exhibits
| Incorporated by Reference | ||||||||||||
|
Exhibit Number |
Exhibit Description | Form | File No. | Exhibit |
Filing Date |
Filed Herewith | ||||||
| 3.1 | Articles of Incorporation | SB-2 | 333-147104 | 3.1 | 11/2/2007 | |||||||
| 3.2 | Amendment to Articles of Incorporation dated December 23, 2016 | S-1/A | 333-226040 | 3.1.2 | 4/4/2019 | |||||||
| 3.3 | Certificate of Change to Articles of Incorporation dated April 11, 2019 | 8-K | 001-38868 | 3.1 | 4/18/2019 | |||||||
| 3.4 | Certificate of Amendment to Articles of Incorporation dated September 14, 2020 | 8-K | 000-53204 | 3.1 | 9/14/2020 | |||||||
| 3.5 | Certificate of Amendment to Articles of Incorporation dated July 20, 2021 | 8-K | 001-38868 | 3.1 | 7/20/2021 | |||||||
| 3.6 | Bylaws of Registrant | SB-2 | 333-147104 | 3.2 | 11/2/2007 | |||||||
| 3.7 | Amendment to Bylaws | 8-K | 000-53204 | 10.2 | 7/16/2014 | |||||||
| 10.1 | Binding Letter of Intent Agreement dated June 12, 2023 | 8-K | 001-38868 | 10.1 | 6/16/2023 | |||||||
| 10.2 | OCI Limited Line of Credit Agreement | X | ||||||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | X | ||||||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | X | ||||||||||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act | X | ||||||||||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act | X | ||||||||||
| 101.INS | Inline XBRL Instance Document | X | ||||||||||
| 101.SCH | Inline XBRL Schema Document | X | ||||||||||
| 101.CAL | Inline XBRL Calculation Linkbase Document | X | ||||||||||
| 101.DEF | Inline XBRL Definition Linkbase Document | X | ||||||||||
| 101.LAB | Inline XBRL Labels Linkbase Document | X | ||||||||||
| 101.PRE | Inline XBRL Presentation Linkbase Document | X | ||||||||||
| 104 | The cover page to this Quarterly Report on Form 10-Q has been formatted in Inline XBRL | X | ||||||||||
| 29 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: August 14, 2023 | 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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Exhibit 10.2
AGREEMENT
FOR SUPPLY CHAIN LINE OF CREDIT
dated March 22, 2023
between
Beam Global
as Company
and
OCI Limited
as Supply Chain Participant
| 1 |
THIS AGREEMENT FOR SUPPLY CHAIN LINE OF CREDIT (this "Agreement") shall remain in full force in effect for a first period, starting at signing and ending March 12th, 2028 (the “Initial Term”). Upon expiration of the Initial Term and provided that this Agreement has not been terminated pursuant to Section 16, or otherwise, this Agreement will be automatically extended by successive periods of one (1) calendar year each, unless during the Initial Term or a successive term either Party provides to the other party written notice of non-renewal no less than fifteen (15) calendar days prior to the expiration of the Initial Term or successive term, as the case may be. The Initial Term and any subsequent renewals shall collectively be referred to as the “Term”.
BETWEEN:
| 1. | Beam Global, organized under the laws of the state of Nevada whose registered office is 5660 Eastgate Drive, San Diego CA 92121 (hereinafter referred to as the "Company"); and | |
| 2. | OCI Limited, registered under the laws of England & Wales whose trading office is 33 Cannon Street, London, EC4M 5SB (hereinafter referred to as the "Participant"), |
(each a "Party" and collectively the "Parties").
WHEREAS:
At the request of the Company, the Participant hereby agrees to grant/extend to the Company, a Supply Chain Line of Credit based on the amounts owed to the Company by the Obligors under Transactions (as defined below), subject to the terms and conditions set out in this Agreement, for an amount not exceeding the Total Limit.
IT IS HEREBY AGREED as follows:
| 1. | Definitions and Interpretation |
| 1.1 | Definitions: |
"Accepted Transactions" means the Transactions submitted by the Company and accepted by the Participant in accordance with the Transaction Acceptance and the terms of this Agreement.
"Account Agreement" means the Deposit Account Control Agreement among the such bank as may be acceptable to the Participant, the Participant and the Company in form, scope and substance satisfactory to the Participant.
"Affiliate" means any person, partnership, joint venture, corporation or other form of enterprise, domestic or foreign, including but not limited to subsidiaries, that directly or indirectly, controls or is controlled by, or is under common control with a Party.
"AML CTF Laws" means any law and regulation under any applicable jurisdiction which relates to the prevention of money laundering, terrorism financing or similar activities.
"Business Day" means a day (other than a Saturday or a Sunday) on which banks are open for business in the place(s) specified in Annexure to Transaction Acceptance and in relation to a day on which payments are to be made, a day on which banks are open for business in the principal financial centre of the currency concerned and the relevant place of payment.
| 2 |
"Commercial Dispute" means a dispute raised prior to the occurrence of a Credit Event (and evidenced in writing to the Participant through email or letter or other writings by the Company or the Obligor or any other entity citing or alleging such dispute) with respect to such Obligor in relation to the right by such Obligor to discharge, set off, counterclaim or deduct (including without limitation, in relation to any liquidated damages) payment of an Accepted Transaction in accordance to the terms of the related Sales Contract whether as a result of defects in products, returns of products, the validity of deductions or otherwise. For the sake of clarity, late payment by the Obligor due to financial difficulties of the Obligor will not constitute a Commercial Dispute.
"Confidential Information" shall take the meaning ascribed to it in Clause 15.1.
"Credit Event" means, due to an Obligor's financial inability to pay its debts, the failure of Obligor to pay the Obligor's debts as such debts become due and payable in the ordinary course of business, or the Obligor's admission in writing of its inability to pay its debts in the ordinary course of business, or any corporate action, legal proceedings or other step (which has not been withdrawn or set aside within ten business days of initiation) in relation to (a) suspension of payments, moratorium of indebtedness, bankruptcy, winding up, dissolution, rehabilitation, administration and reorganisation (other than a solvent liquidation or reorganisation) or composition or arrangement with creditors; (b) a composition, assignment or arrangement with any material creditors; (c) the appointment of a liquidator (other than in respect of a solvent liquidation), receiver, administrator or similar officer in respect of the Obligor or any of the Obligor's assets; or (d) any analogous procedure or step in any jurisdiction.
"Currency" means the United States Dollar.
"Default Interest" means the fee which is calculated on each amount (including fees) payable by the Company to the Participant under the Transaction Documents which is not paid when it is due, at a rate being the aggregate of Default Margin and SOFR for such period from the due date of such amount until but excluding the date of actual payment by the Company. No Payment Default Fee shall be payable where an amount is not paid on the Repayment Date, plus Grace Period, (if applicable), to the Participant.
"Default Margin" means the default margin specified in Annexure to Transaction Acceptance with respect to the Payment Default Fee.
"Designated Account" means an account of the Company maintained with a bank for the purpose of receiving payment from Obligors and the Participant as specified in Annexure to Transaction Acceptance, which in all events shall be subject to the Account Agreement.
"Drawdown Date" means the date of disbursement of the Transaction Value by the Participant to the Company in relation to an Accepted Transaction.
"Effective Control" exists when a person owns beneficially, directly or indirectly, more than 50% of another person's issued voting rights or where a person (other than any regulatory authority) has the ability to direct or cause the direction of the management and policies of another person, whether through the ownership of voting rights, by contract, or otherwise.
"Force Majeure" means any event unforeseen, insurmountable and unavoidable by the Participant or Company, which normally includes natural disasters, social disorders and governmental actions, etc.
“Grace Period” means, in relation to an Accepted Transaction, any period, identified in the Transaction Acceptance.
"Interest Method" means Interest on the exact number of days of the Interest Period over a 360 days or 365 days as applicable in accordance with Clause 2.6.
| 3 |
"Interest Period" means, in relation to an Accepted Transaction, any period, measured in calendar days, agreed between the Company and the Participant and detailed in the Transaction Acceptance.
"Interest Rate" means the aggregate of (i) the Reference Rate, as determined two (2) Business Days prior to each Drawdown Date and (ii) the Margin.
"Interest" means the amount payable by which the Transaction Value of an Accepted Transaction is accrued at the Interest Rate based on the Interest Method.
"Interpolated Term SOFR" means, in relation to any Transaction, the rate (rounded to the same number of decimal places as Term SOFR) which results from interpolating on a linear basis between:
| (a) | either: |
| (i) | the applicable Term SOFR (as of the Specified Time) for the longest period (for which Term SOFR is available) which is less than the Interest Period of that Transaction; or | |
| (ii) | if no such Term SOFR is available for a period which is less than the Interest Period of that Transaction, SOFR for the day which is two US Government Securities Business Days before the proposed Drawdown Date; and |
| (b) | the applicable Term SOFR (as of the Specified Time) for the shortest period (for which Term SOFR is available) which exceeds the Interest Period of that Transaction. |
"Invoice" means any invoice issued in the ordinary course of the Company's business with an Obligor arising from Transactions.
"Loss" means any loss, claim, liability, damage, cost and expense arising under any or related to applicable circumstance.
"Margin" means the margin specified in Annexure to Transaction Acceptance.
"Material Adverse Effect" means a material adverse effect on the: (i) business, operation, property, condition (financial or otherwise) or prospects of the Company that affects the performance in full of the Company's obligations under the Sales Contract relevant to the Accepted Transactions; and (ii) ability of the Company to materially perform its obligations under a Transaction Document.
"Obligor Limit" means for each Obligor, the maximum amount for the respective Obligor up to USD 100.0 million or as may be agreed between the Parties in writing.
"Obligor" means such obligor(s) as specified in Annexure to Transaction Acceptance herein and which may be amended from time to time (subject to prior written consent by the Participant).
"Participant's Account" means an account of the Participant, to receive payment under this Agreement as specified in Annexure to Transaction Acceptance.
"Ratio" means such proportion of the face value of the Invoice (expressed in percentage and not exceeding 90%), requested by the Company in a Transaction Request.
"Receivable" means the monetary obligation of the Obligor to the Company arising under a Sales Contract which is evidenced by an Invoice (including any itemized line items set forth in such Invoice), all Related Assets with respect thereto, and all collections and other proceeds with respect to the foregoing (including the right to receive payment of any interest or finance charges or other liabilities of the Obligor under such Sales Contract).
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"Recourse Event" means the occurrence of any of the following events: (i) the Participant receives any notice of fraud, forgery or other defect or any notice of demand, cancellation, order or direction from the Company or any other person that is not curable by the Company within three days from the date of receipt of the notice; or (ii) any corporate action, legal proceedings or other procedure or step is taken in relation to the suspension of payment, moratorium, winding-up, administration, provisional supervision or reorganisation of the Company or any Obligor; or (iii) any Commercial Dispute or any rejection, non-delivery or non-performance of Sales Contracts; or (iv) the Company’s breaches of representation, warranty or covenant of the Company set forth in this Agreement which has a Material Adverse Effect.
"Reference Rate" means SOFR or as specified in Annexure to Transaction Acceptance.
"Related Assets" means with respect to any Accepted Transaction pursuant to this Agreement, all of the Company’s rights, title and interests in and to (i) the products, if any, the sale of which gave rise to the Receivable, (ii) all guarantees, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the underlying Sales Contract related to the Accepted Transaction or otherwise, (iii) all material books and records relating to the Receivable and the related Obligor, (iv) all payments with respect to, and other proceeds of, such Receivable or any of the foregoing and (v) all other related rights, claims, supporting obligations, remedies, benefits and other rights and interests as described in the definition of “Receivable.”
"Relevant Person" means any director, officer, employee, service provider or agent of the Participant, as the case may be.
“Repayment Date” means, in relation to the Accepted Transaction, the date specified in the Invoice on which the Obligor is required to pay full face value of the Invoice, plus the Grace Period (if applicable), as detailed in the Transaction Acceptance.
"Sales Contract" means any sales contract (including the purchase order) set out in Annexure to Transaction Acceptance hereof which has been executed by the Company and an Obligor for the sale by the Company to the Obligor of the Company's products.
"SOFR" means the secured overnight financing rate (SOFR) administered by the Federal Reserve Bank of New York (or any other person which takes over the administration of that rate) published (before any correction, recalculation or republication by the administrator) by the Federal Reserve Bank of New York (or any other person which takes over the publication of that rate).
"Termination Date" means the termination date specified in Annexure to Transaction Acceptance, subject to the terms of Clause 16 (Termination).
"Termination Event" means the occurrence of any of the following events: (i) the Company is in breach of any of its representations, warranties, undertakings or obligations under this Agreement or under any Transaction Documents, (ii) the Company becomes insolvent, (iii) an event or circumstance occurs which has a Material Adverse Effect on the Company, (iv) any event or circumstances of Force Majeure occurs, which has Material Adverse Effect on the performance in full of the Company's obligation under the Agreement or (v) it becomes unlawful in any relevant jurisdiction for either the Participant or the Company to perform its obligations under this Agreement.
"Total Limit" means the aggregate sum of the Obligor Limits not exceeding USD 100.00 million.
"Tranche" means a payment of the Transaction Price by the Participant to the Company on the Drawdown Date against the Transactions in accordance with the terms of this Agreement and the relevant Transaction Acceptance.
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"Transaction" means all Receivables (which shall include all interest) owing by an Obligor to the Company arising under a Sales Contract, provided that (a) the Receivables must be held in the ordinary course of the Company's business; (b) all representations and warranties in Clause 5 (Representations and Warranties) hereof in respect of such Receivables are true and correct in all material respects when made; and (c) the Receivables are evidenced by Invoices.
"Transaction Acceptance" means the acceptance by the Participant of the Company's request to fund the Transaction under a Transaction Request substantially in the form as set out in Schedule I– B hereof (Transaction Acceptance ).
"Transaction Costs" means those costs identified under a Transaction Acceptance or as otherwise defined in Clause 2.11.
"Transaction Documents" means this Agreement, the Account Agreement, a Transaction Request, a Transaction Acceptance, an Invoice and a Sales Contract.
"Transaction Price" means the amount calculated in accordance with Clause 2.6, with respect to each Transaction.
"Transaction Request" means a Transaction Request substantially in the form as set out in Schedule I-A hereof (Transaction Request).
"Transaction Value" means with respect to a Transaction, the full-face value of the applicable Invoice multiplied by the Ratio.
| 1.2 | Interpretation |
In this Agreement: (a) terms in the singular form herein shall include the plural and vice versa, (b) references to any law or regulation include any amendment or re-enactment thereof; (c) all headings are for ease of reference only; and (d) any capitalized terms not defined in this Agreement shall have the meaning defined in the Transaction Documents.
| 1.3 | Third Party Rights |
A person who is not a Party has no rights to enforce or enjoy the benefit of any term of this Agreement.
| 2. | Line of Credit |
| 2.1 | Subject to the terms of this Agreement, the Participant makes available to the Company, a Supply Chain Line of Credit based on the amounts owed to the Company by the Obligors under Accepted Transactions, for an amount not exceeding the Obligor Limit and the Total Limit. |
| 2.2 | The Company shall share the details regarding Transactions with the Participant, in any event not later than five (5) Business Days prior to the proposed Drawdown Date. |
| 2.3 | The Participant may, but shall not be obligated to, agree to the Company's request to drawdown on a Transaction under a relevant Transaction Request issued in accordance with Clause 2.2, as long and in so far as (i) the Receivables are Transactions, (ii) all of the conditions precedent set out in Clause 3 (Conditions Precedent) have been fulfilled to the satisfaction of the Participant or waived by the Participant, (iii) the Repayment Date of the Transactions is not later than the Termination Date (unless otherwise permitted in writing by the Participant), (iv) the Transaction Value of such Transaction mentioned in the relevant Transaction Request together with all outstanding Accepted Transactions due from the same Obligor and not yet repaid will not cause the Obligor Limit to be exceeded, and (v) the representations and warranties made by the Company in this Agreement are true and correct in all material aspects on the date of submission of a Transaction Request by the Company. |
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| 2.4 | Subject to Clause 2.3, the Participant shall indicate its acceptance of a relevant Transaction Request by delivering a Transaction Acceptance to the Company prior to the proposed Drawdown Date. |
| 2.5 | Subject to the fulfilment of the conditions precedent referred to in Clause 3 (to the satisfaction of the Participant before the relevant Drawdown Date), the Participant shall disburse to the Company the Transaction Price (less Transaction Costs) as specified in the relevant Transaction Acceptance for Transactions covered thereunder into the Designated Account on the Drawdown Date. |
| 2.6 | For the avoidance of doubt, the Transaction Price shall be calculated according to the following formula: |
TP=TV / [(1+(Z x (X/360))]
Whereas:
TP: Transaction Price
TV: Transaction Value
X: Number of days in the Interest Period
Z: Interest Rate
| 2.7 | The Participant shall have sole discretion to accept or refuse any Transaction Request issued by the Company in accordance with Clause 2.2. The Participant shall, as soon as reasonably practicable but in no event later than five (5) Business Days from receipt of the Transaction Request, notify the Company in the event that the Participant refuses any such request (but the failure of the Participant to provide such notice shall be deemed a refusal by the Participant of such request). |
| 2.8 | Upon the payment of the Transaction Price on every Drawdown Date, the respective Accepted Transactions and all right, title and interest in and to the Receivables related thereto are sold, assigned and transferred to and acquired by to the Participant free and clear of any liens or other encumbrances. For the avoidance of doubt, any assignment under this Clause shall be subject to the Transaction Value in respect of that Accepted Transaction. |
| 2.9 | Unless written approval is obtained from the Participant on a case by case basis, the maximum aggregate amount of all Transactions owed by an Obligor and purchased by the Participant cannot exceed the relevant Obligor Limit. |
| 2.10 | If the Obligor pays an amount equal to the Transaction Value for an Accepted Transaction to the Collection Account, prior to the Repayment Date, the Participant will refund such portion of the Interest attributed to the period from the date of receipt of such payment to the Repayment Date subject to payment of a prepayment premium at the rate of 40% of the Interest levied for a period from the date of receipt of such payment to the Repayment Date for the Accepted Transaction by the Company. |
| 2.11 | The Company hereby authorises the Participant to deduct from any Transaction Price any applicable expenses or fees due and payable to the Participant (or any other third party) under this Agreement covering the relevant Transaction ("Transaction Costs"). |
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| 2.12 | If the ownership of any Accepted Transaction and the Related Receivable shall, for any reason fail to vest in the Participant, the Company shall hold such Accepted Transaction and the Related Receivable in trust for and for the sole benefit of the Participant. |
| 2.13 | In relation to the Accepted Transactions, the Company shall also act as collection agent ("Collection Agent") for and on behalf of the Participant, to collect from the Obligor, funds received in relation to each Accepted Transaction. It is agreed by the Parties that, any payment under the Accepted Transaction made by the Obligor to the Company shall be deemed to be received by the Company on behalf of and in trust for the Participant. As Collection Agent, the Company shall (i) keep and maintain accounting record and other information reasonably necessary and advisable for the collection of such Accepted Transaction; and (ii) deliver to the Participant any invoice or document evidencing or relating to the Accepted Transaction and any extracts from or copies of its accounting records relating to the Accepted Transactions. In the event,a payment under an Accepted Transaction is not received by the Company, the Company shall take all appropriate and reasonable steps, including those steps reasonably requested by the Participant, to collect all amounts due under such Accepted Transaction. At the direction of the Participant, the Company shall cease its activities as Collection Agent and allow such other person as may be designated by the Participant to assume all duties of Collection Agent. |
| 2.14 | The Company agrees and undertakes that all amounts received by the Company for any Accepted Transaction (in its capacity as the Collection Agent for and on behalf of the Participant), be deposited by the Company to the Designated Account. All such amounts shall, pending deposit with the Participant, in accordance with the terms hereof, be held by the Company in trust for and on behalf of and for the benefit of the Participant as the Participant's exclusive property. In accordance with the Account Agreement, the Participant shall have the right to instruct the bank holding the Designated Account to transfer directly to the Participant's Account the Transaction Value of each Accepted Transaction. It is clarified that in case the Transaction Price is adjusted in accordance with Clause 2.10, the Participant shall withhold such additional funds to cover payment for Interest payable for the extension in Interest Period for each Accepted Transaction. |
| 2.15 | The Company agrees and undertakes to provide to the Participant the Sales Contract and any substantive written communication received by the Company from the Obligor within 5 Business Days of receipt by the Company. |
| 2.16 | The Company hereby grants, pledges and assigns to the Participant, its successors and assigns, a present, continuing perfected first priority security interest in such Accepted Transaction purported to be sold by the Company to the Participant, to secure all of the Company’s obligations to the Participant under this Agreement. The Company authorizes the Participant and its counsel (or their respective designees) to prepare and file from time to time (including prior to the purchase of any Accepted Transaction hereunder) one or more UCC financing statements and continuation statements and amendments thereto or other related instruments (and any other documents and filings having a similar purpose) covering the applicable Accepted Transaction as the Participant or such designee may determine is necessary or advisable to perfect and maintain the Participant’s ownership (or as contemplated in this Clause 2.16, the Participant’s first priority perfected security interest) in such Receivables. |
| 3. | Conditions Precedent |
| 3.1 | Before the Company delivers a Transaction Request, the Company shall ensure that the following documents or conditions have been submitted or fulfilled in form and substance satisfactory to the Participant (save for those documents or conditions waived by the Participant in writing): |
| (a) | In relation to the Company: |
| (i) | a copy of its organizational documents. |
| (ii) | a copy of the documents evidencing approval and execution of the Agreement. |
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| (b) | Delivery of such documentation and other evidence as may be reasonably requested by the Participant to carry out and be satisfied with all necessary "know-your- customer" or other similar checks and identification procedures (including but not limited to confirmation on authorised signatories for the Transaction Documents) with which the Company must comply; |
| (c) | copies of each fully executed Sales Contract, together with copies of the Invoices related to the Transactions; |
| (d) | evidence that each person who has signed the Transaction Documents on behalf of the Company (to which the Company is a party) was duly authorized to sign; and |
| (e) | copy of the Account Agreement executed by the parties hereto; |
| (f) | if required by the Participant, copies of any other authorisation or other document, legal opinion or any other assurance as specified in Annexure to Transaction Acceptance which the Participant has notified the Company is necessary in connection with the entry into and performance of, and the transactions contemplated by, this Agreement or for the validity and enforceability of any Transaction Document; and |
| (g) | Such filings under the Uniform Commercial Code as the Participant may require. |
| 4. | Payment Mechanism |
| 4.1 | The Company shall pay Interest on each Accepted Transaction on a prepaid basis, on the Drawdown Date and, when applicable, in compliance with Clause 2.10 of this Agreement. |
| 4.2 | Any amount due under this Agreement on a day which is not a Business Day shall be payable on the following Business Day. |
| 4.3 | Without limiting any other representation and warranty of the Company in this Agreement, the Company represents and warrants to the Participant that neither the Company nor any other person benefiting in any capacity, either directly or indirectly, in connection with or from this Agreement and/or any instruments and/or payments thereunder is a Specially Designated National ("SDN") and/or otherwise sanctioned, under the sanctions promulgated by the United States (including its Office of Foreign Assets Control's ("OFAC")), United Nations, European Union, the jurisdiction of the Services office and/or any other country/jurisdiction (collectively, the "Sanctions"). |
| 4.4 | The Company further acknowledges, covenants and agrees that: |
| (a) | the Sanctions may become applicable with respect to the Accepted Transactions, including disbursements and/or payments made by the Participant pursuant to this Agreement. Sanctions may pertain inter alia, to the purpose and/or end use of the Agreement, goods manufactured in or originated from/through certain countries, shipment from/to/using certain countries, ports, vessels, liners and/or due to involvement of certain persons and entities (including correspondent banks and the office of the Participant). Consequently, disbursement, issuance, payment and/or processing under the Agreement by the Participant may become subjected to the Sanctions and the Participant shall have the unconditional right to refuse to process any transactions that violate/may violate any Sanctions. |
| (b) | it shall ensure that the transactions entered into pursuant to this Agreement do not violate any Sanctions and that no persons, entities or otherwise, currently subject to any Sanctions are involved in any transactions hereunder. The Company agrees that it shall not avail any services or use the proceeds arising pursuant to this Agreement in any transaction with, or for the purpose of financing the activities of, any person currently subject to any Sanctions as aforesaid. |
| (c) | it shall indemnify and hold harmless the Participant, to the fullest extent permitted by applicable laws, for all Losses (including due to claims by a third party), incurred by the Participant as a result of any breach by the Company of its representations and undertakings pertaining to the Sanctions and/or due to any action taken by the Participant pursuant to the Sanctions. No action taken by the Participant pursuant to this Agreement, including grant of the supply chain line of credit, or processing of any payments or transactions, nor any action taken by the Company in relation thereto, shall be deemed to be a waiver of any of the Participant's rights under any provisions of this Agreement related to the Sanctions nor shall they act to relieve the Company of its obligations or liabilities in relation thereto. |
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| 5. | Representations and warranties |
| 5.1 | The Company hereby represents and warrants to the Participant that: |
| (a) | it is a duly incorporated and validly existing corporation under the laws of its jurisdiction of incorporation; |
| (b) | it has the power, authority and right to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, this Agreement and the transactions contemplated by it; |
| (c) | it has not taken any action nor have any other steps been taken or legal proceedings been started by any other person for its winding-up, dissolution, administration or re- organisation or for the appointment of a receiver or administrator; |
| (d) | all/any funds received from the Obligor in relation to the Accepted Transaction shall be credited to the Designated Account and the Company shall not have any control over the funds so received; |
| (e) | The Company has filed in a timely manner all documents that the Company was required to file with the Securities and Exchange Commission, such documents, together with the exhibits thereto (the “SEC Documents”), under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of their respective filing dates, all SEC Documents complied in all material respects with the requirements of the Exchange Act. To the knowledge of the executive officers of the Company, none of the SEC Documents as of their respective dates contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents (the “Financial Statements”) comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied and, to the knowledge of the executive officers of the Company, fairly present the consolidated financial position of the Company and its subsidiaries, if any, at the dates thereof and the consolidated results of their operations and consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring adjustments or to the extent that such unaudited statements do not include footnotes). |
| 5.2 | The Company hereby represents and warrants to the Participant that at the relevant Drawdown Date for the Accepted Transactions: |
| (a) | neither the execution nor delivery, nor the exercise of any rights or performance of any obligations pursuant to the Transaction Documents will result in (i) any violation of any order, law or regulation to which it is subject, (ii) any breach of its constitutional documents, (iii) the Transaction Documents not being binding on it, (iv) a default of any nature in any agreement or document relating to it such as to cause a Material Adverse Effect on it, and (v) do not result and will not result in or require the creation of any adverse claim with respect to the Accepted Transaction; |
| (b) | Effective Control of the Company has not changed to any material extent from that subsisting at the date of this Agreement; |
| (c) | each Transaction Document constitutes its legally binding, valid and enforceable obligations against it; |
| (d) | each Transaction Document is in the proper form for its enforcement in the jurisdiction of its incorporation; |
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| (e) | it is in compliance in all material respects with the laws and regulations applicable to it in the countries in which it carries on its business in respect of each Transaction Document; |
| (f) | except as disclosed in writing to the Participant, (i) it has complied with obligations under the Sales Contract relevant to the validity, amount and enforceability of the Accepted Transactions; (ii) the Obligor is liable for the payment of the full amount stated in the Invoice and the relevant Transaction Request; and (iii) no payment has been received by the Company in respect of the Accepted Transaction; |
| (g) | such Accepted Transactions are existing and enforceable debts are not overdue and, to the knowledge of the Company, Obligor is not in breach of the related Sales Contract; |
| (h) | all information and identification data relating to the Accepted Transaction given to the Participant are true and accurate in all material respects; |
| (i) | the Accepted Transactions (i) are owed to and beneficially owned by the Company without any restriction whatsoever, (ii) are freely assignable without infringing on any third party's right (or where there is any restriction on assignment, that such restriction has been waived) and (iii) are free and clear of any and all liens, encumbrances, negative undertaking obligation and other limitations or any other adverse claims of the Accepted Transactions and all rights in connection therewith, including without limitation the right to contact any Obligor or any other party at any time, bring suit and otherwise enforce collection of Accepted Transactions after the relevant Repayment Date are preserved; |
| (j) | the Company has not exercised any right of set-off between the Company and the Obligor which is likely to terminate or limit any payment right transferred to the Participant with respect to the Accepted Transactions; |
| (k) | it is not in default in the payment or performance of any of its financial obligations under any agreement binding on it or any of its assets which may have a Material Adverse Effect on its ability to perform or observe its obligations under this Agreement and the Transaction Documents; |
| (l) | there are no litigation, arbitration or other proceedings or claims pending or threatened against it or any of its assets which may have a Material Adverse Effect on its ability to perform its obligations under this Agreement and the Transaction Documents; |
| (m) | at the relevant Drawdown Date, any person who signs a Transaction Document or related document on behalf of the Company is authorized to act; |
| (n) | at the relevant Drawdown Date for the Accepted Transactions, the original Invoice and all copies thereof relating to the Accepted Transactions are consistent with all the relevant Sales Contract; and |
| (o) | at the relevant Drawdown Date, the Company has not waived, modified or altered any terms of the Sales Contract between the Company and the Obligor to which such Transaction relates which is likely to have a Material Adverse Effect on the due payment of such Transaction and/or any rights and interest of the Participant to such Transaction. |
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| 5.3 | Repetition of representations and warranties |
| (a) | All the representations and warranties set out in this Clause 5 (Representations and Warranties) are made with reference to the facts and circumstances then existing on the date of execution of this Agreement. |
| (b) | The representations and warranties set out in this Clause 5 (Representations and Warranties) are deemed to be repeated with reference to the facts and circumstances then existing on (i) the date of delivery of every Transaction Request; and (ii) the Drawdown Date of each Accepted Transaction. |
| 6. | Undertakings and Indemnities |
| 6.1 | The Company hereby undertakes to: |
| (a) | Prior to the submitting any Transaction Request, execute and procure relevant parties to execute the Account Agreement. |
| (b) | as soon as practically possible, notify the Participant of (i) any delay on the part of an Obligor in relation to the payment of any Transaction (including where the Obligor has provided notice to Company of any Invoice in Commercial Dispute), (ii) the commencement of any blocking, suspension, postponement or moratorium proceedings with respect to the payment of any Transactions, (iii) any challenge or forbearance likely to affect the payment of any Transactions when due or (iv) any documentary fraud in relation to any of the Transactions; |
| (c) | [Reserved] |
| (d) | notify the Participant promptly as soon as it becomes aware of the same, of any Commercial Dispute (including any legal or arbitral proceedings for the recovery of any Transactions between the Company and the Obligor) and of any event which might impede the full and timely payment of the amounts due in respect of any Transactions; |
| (e) | pay any sum received as recovery of any of the Accepted Transactions into the Participant's Account within five (5) Business Days after collection or payment of any such sums and until such payment, to hold such money in trust for/ for the sole benefit of the Participant; |
| (f) | pay any amount owed to the Participant by the Company under this Agreement into the Participant's Account in accordance with the terms of the Account Agreement; |
| (g) | at the Participant's written request, (i) take commercially reasonable steps, actions and/or proceedings, in its own name to recover the Accepted Transactions under the relevant Sales Contracts; and/or (ii) provide all commercially reasonable assistance to the Participant if the Participant takes any administrative action or judicial proceedings it may deem necessary in order to obtain the full benefit of rights expressed to be created under this Agreement; |
| (h) | promptly notify the Participant of any fact or other circumstance of which it has knowledge and of any litigation or proceedings initiated against the Company by any court or administration agency, which might have a Material Adverse Effect on the ability of the Company or the Obligor to perform its obligations under this Agreement and the Transaction Documents; |
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| (i) | not to assign, transfer or create any encumbrance over, or attempt to assign or transfer or create any encumbrance over the Accepted Transaction thereunder or any part thereof to any other party, nor provide as collateral to any third party, or otherwise dispose of, in whole or in part, any of the Accepted Transactions or security interests thereon to any third party without the prior written consent from the Participant; |
| (j) | pay the Participant for its own account: (a) the Interest; (b) Transaction Costs due and payable by the Company to the Participant in connection with this Agreement, when such payments are due; and (c) an amount equal to any Loss which the Participant has suffered in respect of the Tranche within three (3) days of demand by the Participant; |
| (k) | forthwith inform the Participant if the Company has knowledge of the occurrence of any event that may adversely affect or has adversely affected the rights of the Participant or any other person claiming through it; |
| (l) | not otherwise in any manner deal, compromise or interfere with (or take any action which may prejudice or limit) the Participant's rights, interest, title or benefits under or in respect any Accepted Transactions; |
| (m) | not, without the prior written consent of the Participant, grant any extension or waiver or reschedule or modify or otherwise enter into any compromise in relation to the terms of payment of an Obligor in respect of any Accepted Transactions; |
| (n) | upon the Participant's written request, the Company undertakes to endeavour to assist the Participant in the exercise or enforcement of all or any of the Participant's rights powers and remedies with respect to all or any of the Accepted Transactions; and |
| (o) | promptly notify the Participant in writing, if any Obligor becomes more than fifteen (15) days past due in any payment obligations to the Company. |
| 6.2 | Without prejudice to Clause 6.3 below, the Company indemnifies and agrees to defend the Participant and each Relevant Person against, and must pay the Participant on demand for, any Loss the Participant or any Relevant Person may incur in connection with (a) any Transaction contemplated by this Agreement; (b) any instruction given by the Company to the Participant under this Agreement; (c) a breach by the Company of this Agreement; (d) any legal, arbitration or arbitration proceedings brought about by the Company or any third party in connection with any Transaction contemplated by this Agreement where the Participant is joined as a party to the proceedings; (e) occurrence or existence of one or more events, conditions or circumstances caused by the action or inaction of the Company, which has a Material Adverse Effect; or (f) an obligation under this Agreement ceasing to be valid or legal or enforceable. Each Relevant Person shall have the right to enforce this Clause 6.2 against the Company. |
| 6.3 | Each indemnity under this Agreement is separate and gives rise to a separate cause of action and survives any termination of this Agreement. |
| 7. | Payments of Accepted Transaction and Holding the Money in Trust |
| 7.1 | The Company shall hold any sums received or recovered from any Obligor or any third party under a Accepted Transaction in trust and for the sole benefit of the Participant and shall comply with the provisions of Clause 5.1(d) above. |
| 8. | Preservation of the Transactions |
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| 8.1 | Without prior consent of the Participant in writing, the Company will not: |
| (a) | agree with the Obligor to extend the Repayment Date for any Accepted Transaction, or otherwise extend, amend or modify the terms of any Accepted Transaction (or any terms of the related Sales Contract) which will extend the Repayment Date of the Accepted Transaction; |
| (b) | compromise or reduce the amount of any Accepted Transaction; or |
| (c) | do, or omit to do, anything which enables an Obligor to deny payment of all or any part of a Transaction for any reason or to make an Obligor entitled to any right of set- off, counterclaim, deduction, withholding or defence to the full payment of any Accepted Transaction. |
| 9. | Further assurance |
| 9.1 | The Company shall, at the reasonable request of the Participant, promptly do or cause to be done anything (including signing and delivering documents) which may be required to give full effect to this Agreement and each of the documents contemplated hereby. |
| 9.2 | The Company will assist the Participant with such collection and enforcement of any Accepted Transactions. |
| 9.3 | If the Company seeks to increase the Obligor Limit, the Company may, with prior written notice of at least 30 days prior to the enhancement of the Obligor Limits, submit a request to the Participant. The Participant may request the Company to provide such other information as it may require, to evaluate the request for enhancement of the said Obligor Limits. The Participant shall reserve the right to accept or deny the request for enhancement of the Obligor Limits. |
| 10. | Fees & Taxes |
| 10.1 | If the Company or the Obligor fails to make payment in accordance with the Transaction Documents, on the due date, as applicable, the Company shall pay to the Participant the Default Interest, which shall accrue daily, from the respective due date to the date when the amount is repaid in full. |
| 10.2 | Taxes |
| (a) | The Company shall pay to the Participant all amounts due hereunder exclusive of any taxes, duties, fees, levies, charges or other fees and free from any set-off, counterclaim or any other deductions or withholdings whatever unless required under applicable law, together with any goods and services tax and other value added tax payable (together, the "Taxes"). For avoidance of doubt, Taxes shall not include any tax assessed on the Participant under the law of the jurisdiction in which the Participant is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Participant is treated as resident for tax purposes, if that tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Participant. |
| (b) | If any payments due under this Agreement by the Company are reduced by any Taxes, the Company will increase such payments so that after deduction of any Taxes the Participant will receive an amount equal to the amount that it would have received had no Taxes been deducted with respect to such payments. |
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| 10.3 | Without prejudice to the payment of Transaction Costs, all reasonable and documented out- of-pocket expenses (the "Expenses") incurred by the Participant in connection with this Agreement, including, among others,: |
| (a) | the negotiation, settlement, execution or amendment of the documentation of the Transaction Documents, or |
| (b) | the completion of any formality requested by the Company, or |
| (c) | the enforcement or preservation of any of the rights of the Participant (including reasonable legal fees but excluding the allocated internal legal costs) in case of the occurrence of a Recourse Event, shall be borne by the Company, provided that (i) the Participant shall provide all invoices under or in connection with any claims for Expenses under this Clause 10.3; and (ii) the Expenses in relation to the negotiation, settlement, amendment (if requested by the Participant) or execution of the Transaction Documents have been approved in writing by the Company prior to their incurrence; and shall be up to an aggregate of USD 100,000. |
| 10.4 | A written confirmation from the Participant as to any Interest Rate, Interest Period, Obligor Limit, and the amount of any Interest or any other amount payable to the Participant or to which the Participant is entitled under this Agreement shall, in the absence of manifest error, be final, conclusive and binding on the Company for all purposes. |
| If there is a manifest error in any of the foregoing the Company shall be permitted to require the Participant to correct such manifest error. |
| 11. | Consequences of the Credit Event and the Recourse Event |
| 11.1 | Upon the occurrence of an Recourse Event and/or Credit Event, the Participant shall have the right to (a) exercise any of the rights available to it under contract, law and equity; (b) charge Default Interest on the value of the outstanding amount (as defined below) that is the subject of the Recourse Event, at the Default Rate over the Interest Rate on the Transaction Value; and (c) demand the immediate repayment of all or any of the Transaction Value(s) of the Accepted Transactions along with Default Interest and any other costs and charges incurred or to be incurred by the Participant; and (d) terminate this Agreement. |
| 12. | Anti-Money Laundering and Other Laws |
| 12.1 | The Company agrees that the Participant may delay, block or refuse to process any Accepted Transaction without incurring any liability if the Participant reasonably suspects that (i) the transaction is likely to breach any applicable AML CTF Laws, or (ii) the transaction may directly or indirectly involve the proceeds of, or be applied for the purposes of, unlawful conduct under AML CTF Laws. |
| 12.2 | The Company will provide the necessary information to the Participant which the Participant reasonably requests in order to process a Transaction and to manage any risk and comply with all of its obligations in connection with Clause 12.1. |
| 12.3 | Unless the Company has disclosed that it is acting in a trustee capacity or on behalf of another party, the Company warrants that it is acting on its own behalf in entering into this document. |
| 12.4 | The Company declares and undertakes to the Participant that processing of any transaction by the Participant fully in accordance with the Company's instructions will not breach any AML CTF Laws on each relevant Drawdown Date. |
| 15 |
| 13. | Accounts and Accounting |
| 13.1 | The Parties will maintain such accounts as appropriate to record all transactions between the Participant and the Company. |
| 13.2 | The Company will keep books of account in relation to the Accepted Transactions, and will, upon the Participant's reasonable written request, permit the Participant or the Participant's authorised representative at all reasonable times to inspect and copy such books and any other documents in the Company's possession, custody or control relating to any Accepted Transaction subject to the terms of confidentiality hereunder. |
| 14. | Records |
| 14.1 | The Participant acknowledges that Company is a public company in the United States of America and is required to file its financial statements with the United States Securities and Exchange Commission (the "SEC") on a periodic basis and will be required to disclose this Agreement to the SEC on its periodic filings. |
| 14.2 | The Company will at all times maintain documents and information relating to the terms of and validity of all Accepted Transactions. |
| 15. | Confidential Undertakings |
| 15.1 | Each Party hereby undertakes to keep any information relating to the Company, this Agreement, each Transaction Request, the Sales Contracts, any Transactions, and the transactions contemplated thereunder respectively (including but not limited to information relating to the Obligor) (the "Confidential Information") confidential and not disclose to anyone the fact the Agreement has been made or that discussions or negotiations are taking place or have taken place between us in connection with this Agreement. Each Party shall ensure that the Confidential Information is treated with the same degree of care as if such Confidential Information is its own confidential information. "Confidential Information" shall not include information that (i) is or becomes generally available to the public other than as a result of a voluntary disclosure or release by the receiving party or its representatives, (ii) was available to the receiving party on a non-confidential basis prior to the disclosure in connection with this Agreement, provided that such source is not actually known to the receiving party to be bound by a confidentiality agreement with or other obligation of secrecy to the disclosing party, (iii) is lawfully obtained by the receiving party from a third party under no duty of confidentiality to the disclosing party, (iv) is already in receiving party’s possession and not subject to confidentiality obligations in connection with such possession, or (v) is or was independently developed by the receiving party without violating the obligations of the receiving party hereunder. |
| 15.2 | The disclosing party agrees that the receiving party may disclose the Confidential Information: |
| (a) | to members of its group (including its head office, branches and subsidiaries) and their officers, directors, employees, any person who provides services to them to assist it in its function and activities and professional adviser on a need-to-know basis; |
| (b) | (1) where requested or required by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body, including but not limited to the SEC, (2) where required by the rules of any stock exchange on which the shares or other securities of any member of the receiving party's group are listed, or (3) where required by the laws or regulations of any country with jurisdiction over the affairs of any member of the receiving party's group (provided that the Participant shall provide prompt notice to the Company (only to the extent not prohibited) prior to such disclosure so that the Company may have a reasonable opportunity to seek protective order); |
| 16 |
| (c) | to any person with whom it is proposing to enter or has entered, into any kind of arrangement permissible under Clause 18; or |
| (d) | with the prior written consent of the disclosing party. |
The disclosing party shall procure that any recipient of Confidential Information under Clause 15.2(a), (c) and (d) above shall be under a duty of confidentiality as if it is the disclosing party.
| 16. | Termination |
| 16.1 | Notwithstanding anything contained in this Agreement, the Parties may terminate this Agreement by giving the other Party (15) fifteen days prior written notice at any time of its intention to terminate the Agreement, provided that, the Participant shall have the right to terminate this Agreement immediately if a Termination Event occurs. |
| 16.2 | Notwithstanding the termination of the Agreement, any termination shall be without prejudice to the rights of the Parties in respect of any outstanding obligations or rights accruing prior to termination in favour of such Parties nor shall such termination affect the rights and obligations of the Parties in respect of any/ all Accepted Transactions. In addition, the provisions of Clause 2.16, 4.4, 6.2, 9.2, 10.3, 15, this Clause 16, 17 and 19 shall survive any termination of this Agreement. |
| 17. | Notices |
| 17.1 | Any communication under this Agreement shall be made in writing. E-mail shall be sufficient for notice purposes and shall be deemed received upon confirmation of delivery. Any other written communication from the Parties to the other Party will be deemed to be received by the other Party three (3) Business Days after being deposited in the post. |
| 17.2 | Each Party acknowledges and confirms that any notice provided by it to the other Party shall be treated as sufficient and reasonable notice to such other Party and agrees to assume the liability for any non-delivery of a notice as aforesaid, by reason of any error, electronic or otherwise |
for the Company:
Address: 5660 Eastgate Drive, San Diego, CA, 92091
Email id Kathy.McDermott@beamforall.com
for the Participant:
Address: 33 Cannon Street, London, EC 4M 5SB United Kingdom
Email id operations@oci-group.co.uk
| 18. | Assignments and Transfer |
| 18.1 | The Company may not assign, transfer or novate any of its rights or obligations under this Agreement to any third party without the prior written consent of the Participant and any purported assignment without such consent shall be null and void. |
| 17 |
| 18.2 | The Participant may not assign, transfer or novate any of its rights or obligations under this Agreement in whole or in part, to any party without prior written consent of the Company and any purported assignment without such consent shall be null and void. Upon assignment, transfer or novation of any /all rights and/or obligations of the Participant under the Transaction Documents and/or any Accepted Transaction, such rights and/or obligations of the Participant may be exercised by such transferee. |
| 19. | Governing Law and Jurisdiction |
| 19.1 | The validity, construction and performance of this Agreement will be governed by the laws of the State of New York, without regard to principles of conflicts of laws (other than Sections 5- 1401 and 5-1402 of New York's General Obligations Law). The Company hereby waives presentment, notice of non-payment, notice of dishonor, protest, demand and diligence. Each Party hereto hereby irrevocably submits to the exclusive jurisdiction of any New York state or federal court sitting in New York City, New York in any action or proceeding arising out of or relating to this Agreement, and each Party hereto hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York state court or, to the extent permitted by applicable law, in such federal court. Each Party hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue in any such suit, action or proceeding brought in any such court, any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum and the right to object, with respect to any such suit, action or proceeding brought in any such court, that such court does not have jurisdiction over the Company. The Parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. In any such suit, action or proceeding the Company waives to the fullest extent it may effectively do so, personal service of any summons, complaint or other process and agrees that service thereof may be made by certified or registered mail, addressed to the Company at its address set forth in Clause 17.2 of this Agreement. The Company agrees that a final, non-appealable judgment in any such suit, action or proceeding shall be conclusive and binding. THE PARTIES HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, IN ANY MANNER CONNECTED WITH THIS AGREEMENT OR ANY TRANSACTIONS HEREUNDER. |
| 20. | Miscellaneous |
| 20.1 | This Agreement may be executed in any number of separate counterparts, and this has the same effect if the signatures of the counterparts were on a single document. Delivery of signatures by pdf or other electronic submission shall be legal, valid and binding. |
| 20.2 | Subject to Clause 20.4, this Agreement (together with each Transaction Request, Transaction Acceptance which has been duly accepted by the Participant and Company pursuant to this Agreement) and all the terms and conditions herein constitute the entire agreement between the Participant and the Company in connection with any matter relating to any Transactions and may not be amended or modified except in writing by all of the Parties. |
| 20.3 | The Participant may specifically waive any breach of this Agreement by the Company, but no such waiver shall be deemed as being given unless such waiver is in writing, signed by the Participant and specifically designates the breach waived, nor shall any such waiver constitute a continuing waiver of similar or other breaches. |
| 20.4 | Notwithstanding Clause 19.2, it is hereby acknowledged and declared by the Parties hereto that this Agreement only governs the relationship between the Participant and the Company in respect of the subject matter herein. Accordingly, this Agreement is separate and independent from, and does not nor shall it be construed to supersede nor in any way affect, any other agreement relating to supply chain line of credit now entered into or after to be entered into between the Company and any other Affiliate of the Participant. This Agreement does not constitute a partnership or joint venture agreement of any kind between the Parties. In all events a Party’s relationship to the other Party hereunder shall be that of an independent contractor. Neither Party shall be the agent of the other Party and shall have no authority to act on behalf of the other Party in any manner except in the manner and to the extent that the other Party may expressly agree in writing. Without limiting the generality of the foregoing, under no circumstances shall a Party have any authority to incur on behalf of the other Party any debt, obligation or liability. Persons retained by a Party as employees or agents shall not be deemed to be employees or agents of the other Party, and the Party effecting any such retention shall be solely responsible for all remuneration, benefits and associated taxes for such persons . |
This Agreement is entered into by the Parties on the date stated at the beginning of this Agreement.
(the rest of this page is intentionally left blank)
| 18 |
Signed for and on behalf of
the Participant
OCI Limited
By its duly authorized signatories
/s/ Oliver Chapman
Name: Oliver Chapman
Date: March 22, 2023
Signed for and on behalf of
the Company
Beam Global
By its duly authorized signatory
/s/ Desmond Wheatley
Name: Desmond Wheatley
Date: March 22, 2023
| 19 |
SCHEDULE I – A
TRANSACTION REQUEST
[THIS DOCUMENT IS TO BE PRINTED ON THE COMPANY'S LETTERHEAD]
Date:
From: [Name of Company]
To:
Attention: [__________]
Dear Sir,
AGREEMENT FOR SUPPLY CHAIN LINE OF CREDIT
- TRANSACTION REQUEST
We refer to the Agreement for Supply Chain Line of Credit dated ________[XXX] and entered into between Beam Global and OCI Limited (the "Agreement"). This is a Transaction Request issued pursuant to Clause 2.2 of the Agreement.
Capitalised terms in this Transaction Request shall have the same meaning given to those terms in the Agreement unless a different meaning is indicated in this Transaction Request.
Pursuant to the Agreement and subject to the terms and conditions therein, we hereby offer the following details on a Transaction. The Drawdown Date shall be [•].
The relevant details in connection with the Transactions are as follows:
|
Company Invoice Number |
Invoice Date |
Repayment Date |
Transaction Value |
Interest Period |
Interest Rate |
Transaction Price |
Payment Terms |
We confirm that the Obligor has accepted the goods in accordance with and pursuant to the Sales Contract attached thereto.
In accordance with Clause 5.2 (Repetition of Representations and Warranties) of the Agreement, we hereby confirm that all the representations and warranties set out in Clause 5 are true and correct and that no Recourse Event has occurred, as of the date hereof.
In accordance with Clause 3 (Conditions Precedent) of the Agreement, we attach hereto copies of the documents specified in Clause 3.
If you agree to purchase the Transactions as detailed above, this Transaction Request shall be supplemental to and form an integral part of the Agreement and be subject to the terms therein.
This Transaction Request is irrevocable and may not be varied or discharged without your prior written consent.
This Transaction Request shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws (other than Section 5-1401 and 5-1402 of New York's General Obligations Law).
Yours faithfully,
For and on behalf of [Name of Company]
Name:
Title:
| 20 |
SCHEDULE I – B
TRANSACTION ACCEPTANCE
[THIS DOCUMENT IS TO BE PRINTED ON THE PARTNER'S LETTERHEAD]
Date:
From: [Name of Participant]
To :
Attention: [__________]
Dear Sir,
AGREEMENT FOR SUPPLY CHAIN LINE OF CREDIT
- TRANSACTION REQUEST DATED [INSERT DATE]
We refer to your Transaction Request dated [●]. Pursuant to the terms of the Agreement for Supply Chain Line of Credit dated _______[XXX] and entered into between Beam Global and OCI Limited (the "Agreement"), we hereby accept your offer to purchase the Transactions below as detailed in your Transaction Request dated [•]:
|
Company Invoice Number |
Invoice Date |
Repayment Date |
Transaction Value |
Interest Period |
Interest Rate |
Transaction Price |
Payment Terms |
Capitalised terms in this Transaction Acceptance shall have the same meaning given to those terms in the Agreement unless a different meaning is indicated in this Transaction Acceptance.
This Transaction Acceptance shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. (other than Section 5-1401 and 5- 1402 of New York's General Obligations Law).
Yours faithfully,
For and on behalf of [XXXX]
Name:
Title:
| 21 |
Annexure to Transaction Acceptance
OPERATIVE PROVISIONS
(to be annexed to Schedule I-B issued in relation to the Accepted Transactions)
Obligor
|
|
Sales Contract
|
|
Obligor Limit
|
|
Currency
|
|
Ratio
|
|
Transaction Costs
|
|
Interest Rate
|
|
Reference Rate
|
|
Margin
|
|
Interest Period
|
|
Grace Period
|
|
Default Rate
|
|
Termination Date
|
|
Business Day
|
|
Designated Account
|
|
Participant's Account
|
|
Further Conditions Precedent
|
|
Additional Documents
|
|
Governing Laws
|
|
Nature of Transaction
|
|
| Other Provisions | [insert the agreed changes to the Agreement for Supply Chain Line of Credit under this section]
This Annexure shall be subject to the Agreement for Supply Chain Line of Credit between the parties. Save as specifically recorded in this Schedule, wherever any provisions of this Annexure may conflict with the provisions of the Agreement for Supply Chain Line of Credit, the provisions of this Annexure shall prevail for the relevant Accepted Transaction. |
| 22 |
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: August 14, 2023
| /s/ Desmond Wheatley | |
| Desmond Wheatley, Chief Executive Officer | |
| (Principal Executive Officer) |
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: August 14, 2023
| /s/ Katherine H. McDermott | |
| Katherine H. McDermott | |
| Chief Financial Officer | |
| (Principal Financial/Accounting Officer) |
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 June 30, 2023 (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: August 14, 2023 |
| 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.
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 June 30, 2023 (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: August 14, 2023 |
| 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.
Condensed Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| 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 | 350,000,000 | 350,000,000 |
| Common Stock shares issued | 13,941,056 | 10,178,306 |
| Common Stock shares outstanding | 13,941,056 | 10,178,306 |
Condensed Statement of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 17,819 | $ 3,718 | $ 30,839 | $ 7,488 |
| Cost of revenues | 17,318 | 4,044 | 30,333 | 8,119 |
| Gross profit (loss) | 501 | (326) | 506 | (631) |
| Operating expenses | 4,042 | 2,490 | 7,888 | 4,465 |
| Loss from operations | (3,541) | (2,816) | (7,382) | (5,096) |
| Other income (expense) | ||||
| Interest income | 24 | 15 | 25 | 17 |
| Other income | 1 | 0 | 11 | 0 |
| Interest expense | (2) | (1) | (2) | (1) |
| Other income | 23 | 14 | 34 | 16 |
| Loss before income tax expense | (3,518) | (2,802) | (7,348) | (5,080) |
| Income tax expense | 12 | 1 | 13 | 1 |
| Net loss | $ (3,530) | $ (2,803) | $ (7,361) | $ (5,081) |
| Net loss per share - basic | $ (0.32) | $ (0.28) | $ (0.69) | $ (0.52) |
| Net loss per share - diluted | $ (0.32) | $ (0.28) | $ (0.69) | $ (0.52) |
| Weighted average shares outstanding - basic | 10,990 | 10,075 | 10,604 | 9,694 |
| Weighted average shares outstanding - diluted | 10,990 | 10,075 | 10,604 | 9,694 |
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 | |||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Operations
Beam Global, a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”), is a sustainable technology innovation company based in San Diego, California.
We develop, manufacture, and sell high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy security, disaster preparedness and outdoor media advertising. We also produce proprietary energy storage battery products. Our Electric Vehicle (EV) charging infrastructure products are powered by locally generated renewable energy and enable vital and highly valuable services in locations where it is either too expensive, too disruptive, or impossible to connect to a utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. We do not compete with EV charging companies; rather, we enable such companies by providing infrastructure solutions that replace the time consuming and expensive process of construction and electrical work which are usually required to install traditional grid-tied EV chargers. We also do not compete with utilities. Our products provide utilities with another tool to deliver reliable and low-cost electricity to EV chargers and, in the case of a grid failure, to first responders and others, through our integrated emergency power panels. We also provide energy storage technologies that make commodity battery cells safer, longer lasting and more energy efficient and our battery management systems (BMS) and associated packaging make batteries safe and usable in a variety of mobility, energy-security, and stationary applications.
Our charging infrastructure products are rapidly deployed without the need for construction or electrical work. We compete with the highly fragmented and disintegrated ecosystem of general contractors, electrical contractors, consultants, engineers, permitting specialists and others who are required to perform a traditional grid-tied EV charger installation construction and electrical project. Our clean-technology products are designed to replace a complicated, expensive, time-consuming and risk prone process with an easy, low total cost of ownership, robust and reliable product.
Basis of Presentation
The interim unaudited condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three months and six months ended June 30, 2023 and 2022, and our financial position as of June 30, 2023, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.
Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2022. The December 31, 2022 balance sheet is derived from those statements.
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 contingent consideration liability, valuation of intangible assets, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326) requiring initial recognition of credit losses, as well as any subsequent change in the estimate, when it is probable that a loss has been incurred. The standard eliminates the threshold for initial recognition in current U.S. GAAP and it covers a broad range of financial instruments, including trade and other receivables at each reporting date. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. The Company adopted this standard effective January 1, 2023 with no material effect on the financial statements.
Concentrations
Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable.
The Company maintains its cash in banks and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through June 30, 2023. As of June 30, 2023, approximately $26.4 million of the Company’s cash deposits were greater than the federally insured limits.
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which immediately appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. At the time, the Company maintained all of its cash deposits with SVB. All deposits and substantially all of the assets of SVB were transferred to Silicon Valley Bridge Bank, N.A. (“SVBB”), which is no longer affiliated with SVB. On March 27, 2023, First-Citizens Bank & Trust Company entered into an agreement with the FDIC to purchase substantially all loans and certain other assets and assume all customer deposits and certain other liabilities of SVBB. The Company has full access to all of its deposited funds with SVBB and we have also established deposit accounts at Bank of America.
Major Customers
The Company continually assesses the financial strength of its customers. We are not aware of any material credit risks associated with our customers. 86% of our second quarter revenues were derived from pre-funded federal, state and local government programs, and the remaining 14% were derived from commercial customers that we believe have good credit or, alternatively, favorable payment terms which minimizes our credit risk with respect to such customers. For the three months ended June 30, 2023, four customers accounted for 40%, 30%, 10% and 10% of total revenues and for the six months ended June 30, 2023, three customers accounted for 51%, 23% and 10% of total revenues each. For the three months ended June 30, 2022, revenues from three customers accounted for 41%, 34% and 14% of total revenues and for the six months ended June 30, 2022, revenues from three customers accounted for 58%, 23% and 12% of total revenues. At June 30, 2023, accounts receivable from two customers accounted for 50% and 17% of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At December 31, 2022, accounts receivable from three customers accounted for 30%, 15% and 11% of total accounts receivable each with no other single customer accounting for more than 10% of the accounts receivable balance. For the three months ended June 30, 2023 and 2022, the Company’s sales to federal, state and local governments represented 86% and 50% of revenues, respectively.
Significant Accounting Policies
During the six months ended June 30, 2023, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2022, except for the adoption of ASC Topic 326 effective January 1, 2023 with no material effect on the financial statements.
Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock consists of shares of common stock issuable upon the exercise of stock options, stock warrants, or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.
Options to purchase shares of common stock and warrants to purchase shares of common stock were outstanding at June 30, 2023. Options to purchase common shares and warrants to purchase shares of common stock were outstanding at June 30, 2022. These options and warrants were not included in the computation of diluted loss per share for the three months ended June 30, 2023 and 2022 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.
Segments
The Company assesses its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. Management reviews financial results, manages the business and allocates resources on an aggregate basis. Therefore, financial results are reported in a single operating segment.
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LIQUIDITY |
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Jun. 30, 2023 | |||
| Liquidity | |||
| LIQUIDITY |
The Company had net losses of $7.4 million (which includes $2.1 million of non-cash expenses) and $5.1 million (which includes $0.7 million of non-cash expenses) and net cash used in operating activities of $5.1 million and $7.4 million for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023, the Company had a cash balance of $23.7 million and working capital of $37.1 million. In June of 2023, the Company sold shares of its common stock in a public offering and received net proceeds of approximately $25 million after deducting underwriting discounts and commissions and offering expenses paid by the Company. The Company intends to use the proceeds to fund the acquisition of Amiga DOO Kraljevo (See note 3 below for further information), a European based manufacturer of smart street lights, street furniture and communications and security infrastructure products, in furtherance of the Company’s strategy to expand its business in Europe as well as for working capital and general corporate purposes. Based on the Company’s current operating plan, the Company believes that it has the ability to fund its operations and meet contractual obligations for at least twelve months from the date of this report.
In 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC (“B. Riley”) under which the Company has the right, but not the obligation, to sell up to $30.0 million shares or a maximum of 2.0 million shares of its common stock over a period of 24 months in its sole discretion (see note 11 for further information). The Company issued shares for $2.5 million for the first six months of 2023 under this agreement, compared to none for the same period in 2022.
The Company’s outstanding warrants generated $0.1 million of proceeds during each of the six months ended June 30, 2023 and 2022. There are remaining 420,105 warrants issued as part of our 2019 Nasdaq up-listing which have an exercise price of $6.30 and which expire in April of 2024. The Company has total warrants outstanding to purchase 620,105 shares of our Common Stock at June 30, 2023, which could potentially generate an additional $6.0 million of proceeds over the next 4.8 years, conditioned upon the warrant holders’ ability and decision to exercise them. The proceeds from these offerings are expected to provide working capital to fund business operations and the development of new products.
In March 2023, the Company secured a $100 million credit facility with OCI Group to support our working capital requirements. Furthermore, we could pursue other equity or debt financings. The Company believes that it will become profitable in the next few years as our revenues continue to grow, we improve our gross margins and we leverage our overhead costs, but we expect to continue to incur losses for a period of time. There is no guarantee that profitable operations will be achieved, the warrants will be exercised or that additional capital or debt financing will be available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to meet our obligations or enable us to continue to implement our long-term business strategy. In addition, obtaining additional funding or entering into other strategic transactions could result in significant dilution to our stockholders.
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BUSINESS COMBINATION |
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| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| BUSINESS COMBINATION |
All Cell Technologies, LLC
On March 4, 2022, the Company completed its acquisition of substantially all the assets of All Cell Technologies, LLC (“All Cell”), a leader in energy storage solutions. This acquisition has increased and diversified our Company’s revenue, intellectual property portfolio and customer base, and improved our gross profitability and manufacturing capabilities. The Company purchased substantially all of the assets and business of All Cell for shares of our common stock (“Closing Consideration”) plus an additional $0.8 million in cash for the net working capital held by All Cell at closing.
In addition, All Cell is eligible to earn an additional number of shares of our common stock if the acquired energy storage business meets certain revenue milestones (the “Earnout Consideration”). The Earnout Consideration is: (i) two times the amount of energy storage products revenue and contracted backlog that is greater than $7.5 million for 2022, and (ii) two times the amount of energy storage products 2023 revenue which exceeds the greater of either $13.5 million or 135% of the 2022 cumulative revenue, capped at $20.0 million. Any revenues exceeding $20.0 million in 2023 will not be eligible for the Earnout Consideration. The maximum aggregate number of shares of our common stock that we will issue to All Cell for the Closing Consideration and Earnout Consideration will not exceed 1.8 million shares. Revenue from energy storage products used in Beam Global products will not be considered as contributing to revenue in the Earnout calculation.
The valuation of the Earnout Consideration was performed using a two-factor Monte Carlo simulation, which includes estimates and assumptions such as forecasted revenues of All Cell, volatility, discount rates, share price and the milestone settlement value. As such valuation includes the use of unobservable inputs, it is considered to be a Level 3 measurement. The fair value of the Earnout Consideration is reassessed on a quarterly basis with the change recorded to operating expenses. Change in the fair value of the Earnout Consideration during the year ended December 31, 2022 and the six months ended June 30, 2023 is as follows (in thousands):
Amiga DOO Kralievo
On June 12, 2023, the Company and the stockholders (the “Sellers”) of Amiga DOO Kraljevo, a Serbian Company that manufactures specialized structures and equipment (“Amiga”), executed a binding Letter of Intent (the “LOI”) for Beam to acquire all the equity stock of Amiga subject to customary closing conditions including but not limited to the full satisfaction of Beam of its due diligence of Amiga.
Amiga is a private, family-owned company, founded in 1990 in Kraljevo, Serbia. It employs approximately 210 employees, including a team of engineers. Its business includes, without limitation, production of (i) poles for public lighting; (ii) poles for mobile telephone, networks and transmission lines; (iii) poles for tram, trolleybus, and railways; (iv) poles for contact networks, masts, portals and semi-portals for road and railway signaling; (v) large steel lattice structures for specific purposes (e.g., stadiums, factories, power plants, etc.); and (vi) distribution and command electrical cabinets. Amiga currently has engineering, product development and manufacturing capabilities which we believe are well suited to manufacturing and perfecting Beam’s current products for the European market. Amiga is one of Europe’s leading manufacturers of streetlights and Beam believes it is well positioned to bring Beam’s patented EV Standard™ to market both in the EU and USA. Amiga’s team of engineers will be integrated with Beam’s current team which Beam believes will provide a valuable enhancement and acceleration of product development cycles. Amiga has disclosed to Beam that it generated over EUR 8.5M in revenue in 2022 and had a gross profit during that period.
Amiga’s current customer list includes entities in 16 international nations which are similar to Beam’s current customers in the United States, creating what Beam believes will be a significant post-acquisition advantage in selling Beam’s products to an international customer base.
Pursuant to the terms of the LOI, Beam will acquire all the equity stock of Amiga from the Sellers in exchange for cash and Beam common stock as set forth below. With respect to the cash portion of the purchase price, Beam will pay to the Sellers, (i) EUR 4,550,000 at closing and (ii) EUR 2,450,000 on or before December 31, 2023 (assuming closing has occurred on or before such date). With respect to the equity portion of the purchase price, Beam will also issue to the Sellers a certain number of shares of Beam common stock (at a price per share equal to the volume weighted average price of Beam’s common stock for the five trading days prior to the closing): (i) at the closing, such number of shares of Beam common stock equal to an aggregate of EUR 1,950,000, and (ii) on or before December 31, 2023, such number of shares of Beam common stock equal to an aggregate of EUR 1,050,000. In addition, each of the Sellers are eligible to earn additional shares of Beam common stock if such Seller is providing services to Beam and Amiga meets certain revenue milestones for fiscal years 2023 and 2024 (the “Earnout Consideration”). The Earnout Consideration that Sellers are eligible to receive for 2023 is equal to two times the amount of net revenue of Amiga (“Amiga Net Revenue”) that is greater than EUR 10,000,000 for 2023. The Earnout Consideration that Sellers are eligible to receive for 2024 is equal to (i) two times the amount of Amiga Net Revenue for 2024 that exceeds the greater of (i) EUR 13,500,000 or (ii) 135% of the Amiga Net Revenue for 2023. The Earnout Consideration for each period will be calculated based on the volume weighted average price of Beam’s common stock for the thirty trading days prior to the end of the applicable measurement period. In no event and under no circumstances will the Sellers receive from Beam or will Beam issue to the Sellers in connection with the Transaction Beam’s common stock in an amount that exceeds 19.99% of the outstanding common stock of Beam immediately prior to the closing. We expect the acquisition of Amiga to assist in introducing our products to the European Union, increasing and diversifying our revenues, enhancing our manufacturing and engineering capabilities, accelerating the development of EV Standard™ and other products both in Europe and the US, adding new customer segments in both Europe and the US, increasing barriers to entry for future competition, and advancing Beam’s position as a leader in the green economy. |
INVENTORY |
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| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY |
Inventory consists of the following (in thousands):
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PROPERTY AND EQUIPMENT |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT |
Property and equipment consist of the following (in thousands):
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INTANGIBLE ASSETS |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS |
The intangible assets consist of the following (in thousands):
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ACCRUED EXPENSES |
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| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCRUED EXPENSES |
The major components of accrued expenses are summarized as follows (in thousands):
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NOTE PAYABLE |
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| Debt Disclosure [Abstract] | |||
| NOTE PAYABLE |
In May 2023, the Company purchased two new trucks and financed the purchase through an auto loan. The loan has a term of 60 months, requires monthly payments of approximately $4,452, and bears interest at a rate of 7.55 percent per year. Payment on the loan begins in July 2023, and the loan has a short-term balance of $37,000.
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COMMITMENTS AND CONTINGENCIES |
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Jun. 30, 2023 | |||
| Commitments and Contingencies Disclosure [Abstract] | |||
| COMMITMENTS AND CONTINGENCIES |
Legal Matters:
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
Other Commitments:
The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, software licenses, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company.
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INCOME TAXES |
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| Income Tax Disclosure [Abstract] | |||
| INCOME TAXES |
There was no Federal income tax expense for the six months ended June 30, 2023 or 2022 due to the Company’s net losses. Income tax expense represents minimum state taxes due. As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established to offset all deferred tax assets as of June 30, 2023 and no benefit has been provided for the year-to-date loss. On a quarterly basis, the company evaluates the positive and negative evidence to assess whether the more likely than not criteria have been satisfied in determining whether there will be further adjustments to the valuation allowance.
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STOCKHOLDERS’ EQUITY |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY |
Committed Equity Facility
On September 2, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B. Riley. Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B. Riley up to $30.0 million, or a maximum of 2.0 million shares of the Company’s common stock at 97% of the volume weighted average price (“VWAP”) of the Company’s common stock on the trading day, calculated in accordance with the Purchase Agreement, over a period of 24 months subject to certain limitations and conditions contained in the Purchase Agreement. Sales and timing of any sales are solely at the election of the Company, and the Company is under no obligation to sell any common stock to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of the Company’s common stock, in September 2022, the Company issued B. Riley shares of its common stock, and, in April 2023 issued an additional shares of its common stock.
The Company incurred an aggregate cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value of the 10,484 shares of common stock issued to B. Riley upon the execution of the agreement and the additional shares of 10,484 executed in April 2023, which were recorded as equity on the Balance Sheet and offset proceeds from the sale of the Company’s common stock under the Purchase Agreement.
During the six months ended June 30, 2023, the Company issued shares under the Purchase Agreement for $2.5 million in proceeds, of which $0.5 million was offset by the offering costs.
Stock Issued For Services
During the six months ended June 30, 2023, the Company issued shares of its common stock in exchange for marketing services to be provided over a six-month period. The fair value of such stock issued is $0.1 million and was recorded to prepaid expenses and other current assets upon issuance to be recognized over the service period which ends in the third quarter of 2023.
Stock Options
Option activity for the six months ended June 30, 2023 is as follows:
The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the table below and we assumed there would not be dividends granted for the options granted during the six months ended June 30, 2023 and 2022:
The Company’s stock option compensation expense was $ and $ for the three and six months ended June 30, 2023 respectively, and $ and $ for each of the three and six months ended June 30, 2022. There was $1.0 million of total unrecognized compensation costs related to outstanding stock options at June 30, 2023 which will be recognized over years. Total intrinsic value of options outstanding and options exercisable were $ and $, respectively, as of June 30, 2023. The number of stock options vested and unvested as of June 30, 2023 were and , respectively.
Restricted Stock Units
In November 2022, the Company granted restricted stock units (“RSUs”) and up to 142,500 performance stock units (“PSU”) to its Chief Executive Officer (“CEO”). 50% of the RSUs vested upon grant, with 25% vesting on February 1st of 2024 and 2025. The number of shares that will be earned under the PSUs will be determined based on the achievement of specific performance metrics during the three-years ending December 31, 2024.
There was no activity during the six months ended June 30, 2023. 142,500 PSUs and 71,250 RSUs remain outstanding as of June 30, 2023, with weighted-average grant-date fair values of $ each.
Stock compensation expense related to the RSUs and PSUs was $ during the six months ended June 30, 2023, with $ in unrecognized stock compensation expense remaining to be recognized over years as of June 30, 2023.
Restricted Stock Awards
The Company issues restricted stock to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters. The Company also previously issued restricted stock awards to its CEO, for which generally 50% of the shares granted vest ratably over four quarters and the remaining 50% vest ratably over twelve quarters. The common stock related to these awards are issued to an escrow account on the date of grant and released to the grantee upon vesting. The fair value is determined based on the closing stock price of the Company’s common stock on the date granted and the related expense is recognized ratably over the vesting period.
A summary of activity of the restricted stock awards for the six months ended June 30, 2023 is as follows:
Stock compensation expense related to restricted stock awards was $ during each of the six months ended June 30, 2023 and 2022.
As of June 30, 2023, there were unreleased shares of common stock representing $ of unrecognized restricted stock grant expense which will be recognized over 1.50 years.
Warrants
During the six months ended June 30, 2023, the Company issued warrants to purchase up to shares of the Company’s common stock at a price per share equal to $17.00 to a consultant for investor relations services to be provided over a five-year period. The warrants are immediately exercisable but are subject to repurchase by the Company until the required service is provided. The fair value of such warrants was $8.05 per share or $ on the date of grant using the Black-Scholes option-pricing model. This model incorporated certain assumptions for inputs including a risk-free market interest rate of 3.86%, expected dividend yield of the underlying common stock of 0%, expected life of 2.5 years and expected volatility in the market value of the underlying common stock based on our historical volatility of 99.6%. The fair value of the warrants was recorded to prepaid expenses and other current assets to be recognized over the service period. During the six months ended June 30, 2023, $0.1 million was recorded as expense and at June 30, 2023, $1.5 million of cost has not been recognized and will be recognized over the next 4.75 years.
A summary of activity of warrants outstanding for the six months ended June 30, 2023 is as follows:
Exercisable warrants as of June 30, 2023 have a weighted average remaining contractual life of years. The intrinsic value of the exercisable shares of the warrants at June 30, 2023 was $.
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REVENUES |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| REVENUES |
For each of the identified periods, revenues can be categorized into the following (in thousands):
During the six months ended June 30, 2023 and 2022, 13% and 43% of revenues were derived from customers located in California, respectively. In addition, 10.3% and 10.4% of revenues in the six months ended June 30, 2023 and 2022 were international sales, respectively.
At June 30, 2023 and December 31, 2022, deferred revenue was $1.1 million and $1.4 million, respectively. These amounts consisted mainly of customer deposits in the amount of $0.7 million and $1.1 million for June 30, 2023 and December 31, 2022, respectively and prepaid multi-year maintenance plans for previously sold products which account for $0.4 million and $0.3 million for June 30, 2023 and December 31, 2022, respectively, and pertain to services to be provided through 2029.
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NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Nature of Operations | Nature of Operations
Beam Global, a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”), is a sustainable technology innovation company based in San Diego, California.
We develop, manufacture, and sell high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy security, disaster preparedness and outdoor media advertising. We also produce proprietary energy storage battery products. Our Electric Vehicle (EV) charging infrastructure products are powered by locally generated renewable energy and enable vital and highly valuable services in locations where it is either too expensive, too disruptive, or impossible to connect to a utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. We do not compete with EV charging companies; rather, we enable such companies by providing infrastructure solutions that replace the time consuming and expensive process of construction and electrical work which are usually required to install traditional grid-tied EV chargers. We also do not compete with utilities. Our products provide utilities with another tool to deliver reliable and low-cost electricity to EV chargers and, in the case of a grid failure, to first responders and others, through our integrated emergency power panels. We also provide energy storage technologies that make commodity battery cells safer, longer lasting and more energy efficient and our battery management systems (BMS) and associated packaging make batteries safe and usable in a variety of mobility, energy-security, and stationary applications.
Our charging infrastructure products are rapidly deployed without the need for construction or electrical work. We compete with the highly fragmented and disintegrated ecosystem of general contractors, electrical contractors, consultants, engineers, permitting specialists and others who are required to perform a traditional grid-tied EV charger installation construction and electrical project. Our clean-technology products are designed to replace a complicated, expensive, time-consuming and risk prone process with an easy, low total cost of ownership, robust and reliable product.
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| Basis of Presentation | Basis of Presentation
The interim unaudited condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three months and six months ended June 30, 2023 and 2022, and our financial position as of June 30, 2023, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.
Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2022. The December 31, 2022 balance sheet is derived from those statements.
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| 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 financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of contingent consideration liability, valuation of intangible assets, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326) requiring initial recognition of credit losses, as well as any subsequent change in the estimate, when it is probable that a loss has been incurred. The standard eliminates the threshold for initial recognition in current U.S. GAAP and it covers a broad range of financial instruments, including trade and other receivables at each reporting date. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. The Company adopted this standard effective January 1, 2023 with no material effect on the financial statements.
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| 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 June 30, 2023. As of June 30, 2023, approximately $26.4 million of the Company’s cash deposits were greater than the federally insured limits.
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which immediately appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. At the time, the Company maintained all of its cash deposits with SVB. All deposits and substantially all of the assets of SVB were transferred to Silicon Valley Bridge Bank, N.A. (“SVBB”), which is no longer affiliated with SVB. On March 27, 2023, First-Citizens Bank & Trust Company entered into an agreement with the FDIC to purchase substantially all loans and certain other assets and assume all customer deposits and certain other liabilities of SVBB. The Company has full access to all of its deposited funds with SVBB and we have also established deposit accounts at Bank of America.
Major Customers
The Company continually assesses the financial strength of its customers. We are not aware of any material credit risks associated with our customers. 86% of our second quarter revenues were derived from pre-funded federal, state and local government programs, and the remaining 14% were derived from commercial customers that we believe have good credit or, alternatively, favorable payment terms which minimizes our credit risk with respect to such customers. For the three months ended June 30, 2023, four customers accounted for 40%, 30%, 10% and 10% of total revenues and for the six months ended June 30, 2023, three customers accounted for 51%, 23% and 10% of total revenues each. For the three months ended June 30, 2022, revenues from three customers accounted for 41%, 34% and 14% of total revenues and for the six months ended June 30, 2022, revenues from three customers accounted for 58%, 23% and 12% of total revenues. At June 30, 2023, accounts receivable from two customers accounted for 50% and 17% of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At December 31, 2022, accounts receivable from three customers accounted for 30%, 15% and 11% of total accounts receivable each with no other single customer accounting for more than 10% of the accounts receivable balance. For the three months ended June 30, 2023 and 2022, the Company’s sales to federal, state and local governments represented 86% and 50% of revenues, respectively.
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| Significant Accounting Policies | Significant Accounting Policies
During the six months ended June 30, 2023, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2022, except for the adoption of ASC Topic 326 effective January 1, 2023 with no material effect on the financial statements.
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| Net Loss Per Share |
Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock consists of shares of common stock issuable upon the exercise of stock options, stock warrants, or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.
Options to purchase shares of common stock and warrants to purchase shares of common stock were outstanding at June 30, 2023. Options to purchase common shares and warrants to purchase shares of common stock were outstanding at June 30, 2022. These options and warrants were not included in the computation of diluted loss per share for the three months ended June 30, 2023 and 2022 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.
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| Segments | Segments
The Company assesses its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. Management reviews financial results, manages the business and allocates resources on an aggregate basis. Therefore, financial results are reported in a single operating segment.
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BUSINESS COMBINATION (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||
| Schedule of fair value earnout |
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INVENTORY (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory |
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PROPERTY AND EQUIPMENT (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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INTANGIBLE ASSETS (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of intangible assets |
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ACCRUED EXPENSES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accrued expense |
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STOCKHOLDERS’ EQUITY (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of option activity |
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| Assumptions for options granted |
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| Schedule of restricted stock award activity |
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| Schedule of common stock warrant activity |
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REVENUES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of disaggregated revenues |
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BUSINESS COMBINATION (Details - Fair value earnout) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Business Combination and Asset Acquisition [Abstract] | ||
| Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value | $ 1 | $ 6,791 |
| Acquisition of All Cell | 1,251 | |
| Change in estimated fair value | 261 | 5,540 |
| Fair value of earnout consideration, beginning | 6,791 | 0 |
| Issue earnout shares for 2022 | (7,051) | |
| Fair value of earnout consideration, ending | $ 1 | $ 6,791 |
BUSINESS COMBINATION (Details Narrative) |
Mar. 04, 2022
shares
|
|---|---|
| All Cell Technologies [Member] | |
| Business Acquisition [Line Items] | |
| Share issued | 1,055,000 |
INVENTORY (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Finished goods | $ 428 | $ 2,814 |
| Work in process | 2,155 | 1,771 |
| Raw materials | 9,747 | 7,661 |
| Total inventory | $ 12,330 | $ 12,246 |
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Gross | $ 3,116 | $ 2,377 |
| Less accumulated depreciation | (1,114) | (829) |
| Property, Plant and Equipment, Net | 2,002 | 1,548 |
| Office Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Gross | 225 | 186 |
| Computer Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Gross | 135 | 118 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Gross | 222 | 180 |
| Autos [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Gross | 595 | 337 |
| Machinery and Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, Plant and Equipment, Gross | $ 1,939 | $ 1,556 |
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accrued vacation | $ 278 | $ 190 |
| Accrued salaries and bonus | 1,821 | 1,220 |
| Vendor accruals | 1,184 | 85 |
| Accrued warranty | 62 | 160 |
| Other accrued expense | 179 | 32 |
| Total accrued expenses | $ 3,524 | $ 1,687 |
NOTE PAYABLE (Details Narrative) |
1 Months Ended |
|---|---|
|
May 31, 2023
USD ($)
| |
| Debt Disclosure [Abstract] | |
| Monthly payments | $ 4,452 |
| Bears interest rate | 7.55% |
| Loan short-term blance | $ 37,000 |
STOCKHOLDERS' EQUITY Schedule of option activity (Details) - Equity Option [Member] |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Number of Options Outstanding, Beginning | shares | 336,758 |
| Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 12.54 |
| Number of Options Granted | shares | 28,000 |
| Weighted Average Exercise Price Granted | $ / shares | $ 14.56 |
| Number of Options Exercised | shares | 0 |
| Weighted Average Exercise Price Exercised | $ / shares | $ 0 |
| Number of Options Forfeited | shares | (10,260) |
| Weighted Average Exercise Price Forfeited | $ / shares | $ 21.85 |
| Number of Options Outstanding, Ending | shares | 354,498 |
| Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 12.43 |
| Weighted Average Remaining Contractual Life | 6 years 9 months |
STOCKHOLDERS' EQUITY Assumptions for options granted (Details) - Share-Based Payment Arrangement, Option [Member] |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
| |
| Weighted-average FV | $ 11.74 |
| Minimum [Member] | |
| Expected volatility | 91.60% |
| Expected remaining term | 6 years 6 months |
| Risk-free interest rate | 3.55% |
| Maximum [Member] | |
| Expected volatility | 94.50% |
| Expected remaining term | 7 years |
| Risk-free interest rate | 3.77% |
STOCKHOLDERS' EQUITY Schedule of restricted stock award activity (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Equity [Abstract] | |
| Number of Nonvested Shares Outstanding, Beginning | shares | 17,865 |
| Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 14.11 |
| Number of Nonvested Shares Granted | shares | 18,375 |
| Weighted Average Exercise Price Granted | $ / shares | $ 11.40 |
| Number of Nonvested Shares Vested | shares | (17,928) |
| Weighted Average Exercise Price Vested | $ / shares | $ 12.49 |
| Number of Nonvested Shares Outstanding, Ending | shares | 18,312 |
| Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 12.97 |
STOCKHOLDERS' EQUITY Warrant activity (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Number of Warrants Outstanding, Ending | 620,105 |
| Warrant [Member] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Number of Warrants Outstanding, Beginning | 440,204 |
| Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 9.73 |
| Number of Warrants Granted | 200,000 |
| Weighted Average Exercise Price Granted | $ / shares | $ 17.00 |
| Number of Warrants Exercised | (20,099) |
| Weighted Average Exercise Price Exercised | $ / shares | $ 6.30 |
| Number of Warrants Outstanding, Ending | 620,105 |
| Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 9.75 |
| Number of Warrants Exercisable | 620,105 |
| Weighted Average Exercise Price Exercisable | $ / shares | $ 9.75 |
REVENUES (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | $ 17,819 | $ 3,718 | $ 30,839 | $ 7,488 |
| Discounts and allowances | (130) | (2) | (189) | (13) |
| Product [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 17,103 | 3,192 | 29,914 | 6,754 |
| Maintenance [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 18 | 9 | 34 | 20 |
| Service, Other [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 24 | 405 | 60 | 431 |
| Shipping and Handling [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | $ 804 | $ 114 | $ 1,020 | $ 296 |
REVENUES (Details Narrative) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Disaggregation of Revenue [Line Items] | |||
| Contract with Customer, Liability | $ 1,100,000 | $ 1,400,000 | |
| Product Deposits [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Contract with Customer, Liability | 700,000 | 1,100,000 | |
| Maintenance Fees [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Contract with Customer, Liability | $ 400,000 | $ 300,000 | |
| Revenue Benchmark [Member] | Customer Concentration Risk [Member] | International Sales [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Concentration percentage | 10.30% | 10.40% | |
| Revenue Benchmark [Member] | Customer Concentration Risk [Member] | California Customers [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Concentration percentage | 13.00% | 43.00% | |
VC++4TUL+@=#*9S6[OY]