SEC Form 10-Q Summary
Registrant: Envision Solar International, Inc. (the source filing does not identify Beam Global). Reporting period: three months ended March 31, 2013; filed May 14, 2013. The company develops solar products and proprietary technology for shaded solar parking, including Solar Tree, Solar Tree Socket, EnvisionTrak and the planned EV ARC product.
Financial Results and Position
| Metric | Q1 2013 | Q1 2012 | Change |
|---|---|---|---|
| Revenue | $155,528 | $308,715 | Down 49.6% |
| Gross profit (loss) | $(40,218) | $145,971 | Declined by $186,189 |
| Gross margin | (25.9%) | 47.3% | Down 73.2 percentage points |
| Operating expenses | $512,900 | $576,673 | Down 11.1% |
| Operating loss | $(553,118) | $(430,702) | Loss increased 28.4% |
| Net loss | $(1,045,767) | $(983,959) | Loss increased 6.3% |
| Net loss per share | $(0.02) | $(0.02) | No stated change |
| Cash flow from operations | $(304,354) | $41,317 | Declined by $345,671 |
| Cash at period end | $1,646,179 | $510,093 | Increased by $1,136,086 |
Cash increased primarily from $1,843,700 of common-stock proceeds, less $147,496 of offering costs and $3,067 of convertible-note repayments, producing $1,693,137 of net financing cash flow. Current assets were $1,900,404 and current liabilities were $3,267,710 at March 31, 2013, resulting in a working-capital deficit of approximately $1.37 million. Total assets were $1,992,636, while stockholders’ deficit was $1,275,074.
Debt included $1,164,271 of convertible notes net of discount, $901,034 of embedded conversion-option liability, $119,616 owed under a related-party convertible note, and $97,000 of notes payable. Most relevant debt maturities were extended to December 31, 2013. The company had no material off-balance-sheet arrangements.
Material Changes Versus Q1 2012
- Revenue fell because Q1 2012 included completion of two large projects, while Q1 2013 revenue came from one deployment project.
- The company reported a gross loss in Q1 2013, primarily because the first Cadillac-branded Solar Tree deployment encountered unforeseen design and site-cost challenges.
- Operating expenses declined as stock-option compensation fell to $85,085 from $207,921, partly offset by higher payroll and investor-relations consulting costs.
- Interest expense decreased to $160,705 from $355,156, but the fair-value loss on the embedded conversion option increased to $444,961 from $218,235.
- Shares issued or issuable increased to 70,638,942 from 58,097,609, reflecting dilution from the private placement and other equity issuances.
- The company raised $1.84 million through a private placement of 12,291,333 shares at $0.15 per share and issued 6,145,667 investor warrants exercisable at $0.20 per share, plus 614,567 placement-agent warrants exercisable at $0.25 per share.
Outlook, Risks and Unusual Items
Management expected to launch EV ARC near the end of the second quarter of 2013 and believed its product standardization, additional sales channels, process improvements and longer sales-cycle opportunities could support future growth. The filing provides no formal revenue, earnings or margin guidance.
Management stated that the company did not have sufficient capital to meet current cash needs, including ongoing SEC compliance costs. It planned to raise approximately $100,000 more through a private offering, seek additional financing, renegotiate debt due in December 2013, and secure new contracts. The filing states that these plans may not succeed.
The financial statements include a going-concern disclosure. Management and the filing identified substantial doubt regarding the company’s ability to continue as a going concern because of recurring losses, a $25.9 million accumulated deficit, a $1.37 million working-capital deficit and limited liquidity. The company’s auditors had included a going-concern qualification in the 2012 annual report.
Additional risks include dependence on a single customer for 100% of Q1 2013 revenue and 96% of March 31 accounts receivable, reliance on outsourced fabrication and installation, competition, uncertain customer financing and government incentives, potential inability to pay liabilities, further equity dilution, and volatility in the stock price. Approximately $1,537,287 of cash exceeded federally insured limits.
Disclosure controls and internal control over financial reporting were reported as ineffective. Material weaknesses included the absence of an audit-committee financial expert, insufficient segregation of duties, limited administrative staffing and the lack of a formally adopted written code of business conduct and ethics.
Investor Verification Checklist
- Verify the issuer identity: the supplied filing is for Envision Solar International, Inc., not Beam Global.
- Verify the company’s ability to raise additional capital and refinance or renegotiate debt due in December 2013.
- Assess the going-concern risk, working-capital deficit and recurring operating cash burn.
- Review dilution exposure from convertible debt, 23,049,863 options, 10,973,899 warrants and price-protection provisions.
- Validate customer concentration and the collectability of the receivable balance.
- Monitor whether the EV ARC launch and expected new contracts generated actual revenue and positive margins.
- Review remediation of the disclosed material weaknesses in disclosure controls and internal control over financial reporting.