Beam Global Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. The filing is an annual report, not a standalone fourth-quarter filing; fourth-quarter discussion is included only where identified by management.
Business Context
Beam Global develops, manufactures and sells renewably energized infrastructure for electric-vehicle charging, outdoor media and energy security. Its principal products include EV ARC, Solar Tree DCFC, EV ARC DCFC, EV-Standard and UAV ARC systems. Products generally combine solar and/or wind generation with battery storage and are designed for rapid deployment without conventional construction or utility-grid interconnection.
Beam operated in one reportable segment. Its products were deployed in 23 U.S. states, 122 municipalities, three international countries and the U.S. Virgin Islands. The company had 29 employees and seven temporary employees as of the filing date.
Financial Performance and Liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $6.210 million | $5.112 million | Up 21% |
| Cost of revenues | $6.921 million | $5.265 million | Up 31% |
| Gross profit/(loss) | $(0.711) million | $(0.154) million | Loss increased |
| Gross margin | (11%) | (3%) | Down 8 percentage points |
| Operating expenses | $4.497 million | $3.118 million | Up 44% |
| Loss from operations | $(5.208) million | $(3.272) million | Loss increased |
| Net loss | $(5.213) million | $(3.934) million | Loss increased 33% |
| Basic and diluted loss per share | $(0.84) | $(0.88) | Improved per share due primarily to share issuance |
| Cash used in operating activities | $(4.138) million | $(4.826) million | Use decreased |
| Cash provided by financing activities | $27.350 million | $8.541 million | Increased substantially |
| Cash at year-end | $26.703 million | $3.849 million | Increased substantially |
| Working capital | $28.063 million | $5.143 million | Increased substantially |
Revenue included 69 EV ARC units, three Solar Tree systems and one EV ARC DC fast-charging system. Product sales were $6.132 million, supplemented by $30,957 of maintenance fees and $57,506 of professional services, less $10,560 of discounts and allowances.
Operating expenses increased primarily because of higher noncash stock compensation, expanded sales and marketing, bonuses, benefits and legal costs. Research and development and travel expenses decreased.
The company had no federal income-tax liability because of operating losses; reported income-tax expense was $4,944 of state minimum and local taxes. Accumulated deficit was $51.023 million at year-end.
Debt was substantially reduced before the period. The remaining related-party convertible note was repaid in February 2020, the auto loan was repaid in October 2020, and a $339,262 Paycheck Protection Program loan was repaid in November 2020. Year-end liabilities primarily consisted of operating lease liabilities totaling $2.431 million, including $1.910 million classified as noncurrent.
Material Changes Versus 2019
- Revenue increased 21%, but cost of revenues grew faster, producing a larger gross loss. Management attributed this principally to higher initial costs for the EV ARC 2020, elevated shipping costs and underutilized fixed manufacturing capacity.
- Net loss increased from $3.934 million to $5.213 million, notwithstanding a sharp reduction in interest expense from $716,337 to $11,893 following debt repayments.
- Operating cash use improved by $688,202, partly because inventory declined by $1.061 million and noncash expenses increased; accounts receivable increased by $1.022 million due to strong fourth-quarter shipments.
- Financing supplied $27.350 million of cash, including $18.999 million from public stock offerings and $9.927 million from warrant exercises. The company issued 1.644 million shares in public offerings and ended the year with 8.482 million shares outstanding.
- Customer concentration shifted. Electrify America represented approximately 29% to 30% of 2020 revenue, while the City of New York and State of California represented 44% and 22%, respectively, in 2019. Approximately 75% of 2020 revenue came from California.
- Backlog was $1.1 million at December 31, 2020. The company reported no material litigation.
Outlook, Commentary and Risks
Management expects continued losses until production volume, manufacturing efficiency and sales scale improve. It expects gross margins to benefit from higher volumes, lean manufacturing, vendor negotiations, lower battery-cell costs and potential outsourcing of selected components. Management cannot predict when, or whether, the company will achieve positive operating cash flow.
Management stated that cash and working capital should fund liabilities and operations for at least twelve months from the March 30, 2021 filing date. The auditor identified liquidity and going-concern analysis as a critical audit matter, although management and the auditor concluded that the financing raised alleviated substantial doubt for the relevant period.
Growth initiatives include expanded sales and marketing, government-relations efforts, broader geographic coverage, federal and state contracting, recurring sponsorship and naming-rights revenue, and development of new products. The company entered a collaboration with the City of San Diego for a solar-powered EV charging network and continued pursuing sponsors.
- Major customer and contract concentration remains significant. The New York requirement contract was scheduled to expire April 16, 2021, while the California contract was extended through June 2022. Orders under these contracts are not guaranteed.
- COVID-19 caused delays and cancellations in the sales pipeline, although management said it did not materially affect 2020 financial position or results. Future effects remained uncertain.
- The company depends on continued EV adoption, renewable-energy incentives, government funding and favorable regulatory policies.
- Competition includes traditional grid-tied charging infrastructure, contractors, utilities and larger solar, storage and electrical-equipment companies.
- Management identified a material weakness in internal control over financial reporting related to the lack of automated manufacturing and purchasing systems and reliance on manual inventory processes. Remediation efforts included evaluating an ERP system for implementation in 2021.
- The company was temporarily out of compliance with Nasdaq audit-committee composition requirements after the death of a director in February 2021 and had until August 20, 2021 to cure the deficiency.
- Approximately $26.889 million of cash deposits exceeded federally insured limits at December 31, 2020. The company also relied on several components sourced from single suppliers.
- Outstanding securities at year-end included options to purchase 341,808 shares and warrants to purchase 965,584 shares, creating potential future dilution. Remaining warrants could generate approximately $6.109 million if exercised, subject to market conditions and holder decisions.
Investor Verification Priorities
- Verify the sustainability of revenue growth and whether the company converts its $1.1 million backlog and newer government and commercial contracts into positive gross margins.
- Review customer concentration, renewal or replacement of the New York contract, utilization of the California contract and future Electrify America orders.
- Reconcile cash burn, lease commitments and additional financing needs against the $26.703 million year-end cash balance.
- Assess progress in remediating the material weakness, including implementation of automated manufacturing, purchasing and inventory systems.
- Track gross-margin performance for EV ARC 2020, Solar Tree and DC fast-charging products as production volumes increase.
- Evaluate dilution from outstanding options, warrants, restricted stock and future capital raises.
- Monitor Nasdaq audit-committee compliance, supplier concentration, tariff exposure, COVID-19 effects and dependence on EV incentives and government funding.