Beam Global 2022 Form 10-K Summary
Business context and reporting period
Beam Global develops and manufactures renewable-energy infrastructure for electric-vehicle charging, energy storage, energy security, disaster preparedness and outdoor media. Its principal products include EV ARC, Solar Tree and AllCell energy-storage systems. The filing covers the fiscal year ended December 31, 2022, with comparisons to fiscal 2021.
On March 4, 2022, Beam acquired substantially all assets of All Cell Technologies for approximately $16.4 million, consisting primarily of 1.055 million Beam shares, $0.8 million of cash and contingent consideration. All Cell contributed $5.2 million of 2022 revenue and $10.1 million of operating loss.
Financial results and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $22.0 million | $9.0 million | Up 144% |
| Gross loss | $1.7 million | $1.0 million | Gross margin improved to approximately negative 7.6% from negative 10.8% |
| Operating expenses | $18.0 million | $5.6 million | Up primarily due to All Cell costs and $5.5 million of contingent-consideration remeasurement |
| Net loss | $19.7 million | $6.6 million | Loss per share was $1.99 versus $0.74 |
| Cash used in operating activities | $18.1 million | $6.4 million | Higher working-capital use, including inventory buildup |
| Cash and cash equivalents | $1.7 million | $21.9 million | Down $20.3 million |
| Working capital | $6.8 million | $24.6 million | Down $17.8 million |
| Backlog | $59.3 million | $4.1 million | Approximately $58.8 million deliverable within 12 months |
Product sales were $20.3 million, while maintenance fees were $0.1 million, professional services were $0.5 million and shipping and handling revenue was $1.1 million. Government customers represented 62% of revenue, down from 87% in 2021. California and New York represented 29% and 18% of total revenue, respectively.
Inventory increased to $12.2 million from $1.6 million, reflecting purchases of battery cells and higher work-in-process and finished goods. Current liabilities increased to $13.2 million from $3.0 million, including $6.8 million of current contingent consideration. The balance sheet reported no material conventional debt; lease liabilities totaled $1.7 million, and contingent consideration totaled approximately $6.8 million.
Financing activities used $0.3 million in 2022. Beam had 440,204 warrants outstanding at year-end that could provide approximately $2.8 million of proceeds if exercised. The company also entered into a B. Riley equity facility permitting, subject to conditions, sales of up to $30.0 million or 2.0 million shares. In January and February 2023, Beam issued 37,741 shares for $0.7 million under the facility.
Material changes versus the prior comparable period
- Revenue increased substantially, driven by federal orders, higher state and commercial demand, and the All Cell acquisition.
- Federal revenue increased by $4.5 million, while non-government revenue rose to 37% of total revenue from 13%.
- Large 2022 orders included approximately $29.4 million for the U.S. Army through TechFlow, $11.7 million for the Department of Veterans Affairs through the GSA, a $5.3 million New York City order and a 52-unit California order.
- Gross margin improved despite inflation and supply-chain pressures, but the company remained gross-loss generating.
- Operating expenses increased sharply because of the All Cell business, higher stock-based compensation, professional fees and the remeasurement of contingent consideration.
- Shares outstanding increased to approximately 10.2 million from 9.0 million, principally due to the All Cell acquisition and equity compensation.
- Backlog increased to $59.3 million from $4.1 million, but the filing cautions that order timing and government approvals can be uneven.
Guidance, outlook, risks and unusual items
Management expects revenue growth, higher production volumes, improved labor efficiency, lower component costs, greater fixed-overhead absorption and the AllCell acquisition to improve gross margins. Management stated that it expects profitability in the next few years but cannot predict when positive cash flow will be achieved. The filing provides no formal revenue, earnings or margin guidance.
Management believes current resources, including the B. Riley equity facility and potential warrant proceeds, can fund operations for at least twelve months from the filing date. On March 22, 2023, Beam entered into a five-year agreement with OCI Limited for a supply-chain line of credit of up to $100 million to support working capital; the filing does not state the amount drawn.
- The company has incurred annual net losses since inception and expects additional losses.
- Beam identified a material weakness in internal control over financial reporting related to manual inventory tracking, valuation and purchasing processes. Management planned implementation of an ERP system during the first half of 2023.
- Cash is concentrated at financial institutions, and approximately $2.2 million of deposits exceeded federal insurance limits at December 31, 2022. Following the Silicon Valley Bank failure, Beam stated that it had full access to its funds held at the successor bridge bank.
- Revenue remains concentrated among government customers and a limited number of contracts. The California contract, which generated 16% of 2022 revenue, expires June 23, 2025 and does not require additional purchases.
- Key operating risks include continued gross losses, additional financing and dilution, battery-cell and component supply constraints, inflation, tariffs, competition, dependence on EV adoption and government incentives, product liability, technology changes and execution of the All Cell integration.
- The All Cell contingent consideration liability was revalued upward by $5.5 million during 2022, increasing operating expenses without an equivalent cash payment.
- The company reported no material litigation as of December 31, 2022 and no material off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the $59.3 million backlog converts into shipments and cash collections on the stated schedule.
- Whether Beam can achieve positive gross margins and reduce its $18.1 million annual operating cash burn.
- Cash availability, borrowings or draws under the OCI facility, and potential equity issuance under the B. Riley agreement.
- The timing and ultimate amount of All Cell contingent consideration, including potential share dilution up to the disclosed 1.8 million-share aggregate acquisition consideration limit.
- Progress in remediating the inventory-control material weakness and implementing the ERP system.
- Customer concentration, renewal and purchasing activity under the California and federal contracts.
- Actual cost reductions from AllCell battery production, supply-chain normalization, outsourcing and increased manufacturing utilization.