Beam Global Form 10-Q Summary
Business Context and Reporting Period
Beam Global develops and manufactures renewable, off-grid EV charging infrastructure, energy storage, energy security products and related services. This unaudited Form 10-Q covers the three and six months ended June 30, 2022, filed August 12, 2022. The company operates as a single reportable segment.
On March 4, 2022, Beam acquired substantially all assets of All Cell Technologies, an energy-storage company. The acquisition added battery-storage revenue, manufacturing capabilities, intellectual property and customer relationships.
Financial Performance and Liquidity
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $3.718 million, versus $2.121 million | $7.488 million, versus $3.493 million |
| Gross loss | $0.326 million; 9% negative gross margin | $0.631 million; 8% negative gross margin |
| Operating expenses | $2.490 million, versus $1.369 million | $4.465 million, versus $2.472 million |
| Loss from operations | $2.816 million | $5.096 million |
| Net loss | $2.803 million, or $0.28 per share | $5.081 million, or $0.52 per share |
| Net cash used in operating activities | Not separately presented | $7.425 million, versus $3.752 million |
Six-month revenue increased 114%, while second-quarter revenue increased 75%. Product sales were $6.754 million for the first six months, compared with $3.241 million in the prior-year period. All Cell contributed $1.8 million of energy-storage revenue during the six months and $1.4 million during the quarter.
Cash was $13.754 million at June 30, 2022, compared with $21.949 million at December 31, 2021. Working capital was $19.4 million, down from $24.6 million. Total assets were $45.722 million and total liabilities were $9.747 million. The filing does not report material conventional borrowings; liabilities primarily consisted of accounts payable, deferred revenue, contingent consideration and operating leases.
Operating cash usage included $3.0 million of increased prepaid expenses, primarily battery-cell prepayments, and a $3.5 million inventory increase to secure battery cells and support EV ARC production. Investing cash usage was $1.086 million, including $0.811 million paid for All Cell working capital. Financing cash inflow was $0.316 million from warrant exercises.
Material Changes Versus the Prior Comparable Period
- Revenue growth reflected higher EV ARC demand, increased government and corporate sales, and the All Cell acquisition.
- EV ARC units sold increased to 74 in the first six months of 2022 from 42 in the comparable 2021 period.
- Gross margin improved by approximately four percentage points, but remained negative, due primarily to improved production volume and labor efficiency. Inflation, steel and battery costs, and higher freight expenses offset part of the improvement.
- Operating expenses increased 81% for the six months, driven by All Cell expenses, acquisition-related legal and accounting costs, and higher sales and marketing spending.
- Shares outstanding increased substantially following the issuance of 1.055 million shares as All Cell acquisition consideration.
- Inventory increased to $7.357 million from $1.611 million, and prepaid expenses increased to $3.214 million from $0.180 million, primarily reflecting supply-chain mitigation efforts.
- Deferred revenue increased to $1.755 million from $0.254 million, primarily due to higher customer deposits.
Guidance, Outlook, Risks and Unusual Items
Management expects revenue growth, higher production volumes, manufacturing efficiencies, lower battery costs from All Cell and overhead absorption to improve gross margins. Management believes the company may become profitable in the next few years, but expects continued losses and cannot predict when positive cash flow will be achieved. No formal revenue or earnings guidance was provided.
Beam reported a three-year California statewide contract, with two optional one-year extensions, and a federal General Services Administration blanket purchase agreement intended to streamline federal procurement. Management also cited continued EV infrastructure funding, government demand and workplace and fleet charging opportunities.
The All Cell transaction had preliminary total consideration of $16.421 million, including $14.359 million of Beam stock, $0.811 million in cash and $1.251 million of estimated earnout consideration. The purchase-price allocation remained provisional. The earnout liability was $1.043 million at June 30, 2022, after a $0.208 million favorable fair-value adjustment.
Management stated that existing cash should fund operations and contractual obligations for at least twelve months from June 30, 2022, but noted that additional capital may be required. Potential sources include warrant exercises, equity offerings and debt financing. The filing states that 469,621 warrants remained outstanding and could generate approximately $3.0 million, subject to exercise conditions.
Principal risks include continued operating and cash losses, the need for additional financing, customer and government budget timing, supply constraints and price increases for battery cells and lithium, inflation, COVID-19 effects, competition, acquisition integration and possible shareholder dilution. Two customers represented 34% and 14% of second-quarter revenue; government customers represented 61% of first-half revenue.
Management concluded that internal control over financial reporting was not effective as of June 30, 2022 because of a material weakness involving inventory tracking and valuation processes and a weakness identified in the review of the All Cell business combination. The company is evaluating ERP systems and implemented additional review controls.
No material pending legal proceedings were reported. The company stated that it had no material off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Whether revenue growth converts into positive gross margins and operating cash flow.
- The pace at which inventory and vendor prepayments normalize and whether working capital improves.
- The final purchase-price allocation for All Cell and any changes to the contingent earnout liability.
- All Cell integration progress, battery-cost reductions and expected contribution to future margins.
- Availability and terms of future equity or debt financing if losses continue.
- Customer concentration, government procurement timing and the conversion of California and federal agreements into orders.
- Remediation of the inventory and business-combination internal-control material weaknesses.
- Potential dilution from outstanding warrants, stock options and the All Cell earnout provisions.