Beam Global Form 10-Q Summary
Reporting period: Three months ended March 31, 2022; filed May 24, 2022. Financial statements are unaudited and prepared under U.S. GAAP. Beam Global develops and sells renewable EV-charging infrastructure, energy-storage, energy-security and related products. The company completed its acquisition of All Cell Technologies, LLC on March 4, 2022.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $3.770 million | $1.372 million | Up 175% |
| Gross loss | $0.305 million | $0.149 million | Loss increased; margin improved |
| Gross margin | (8%) | (11%) | Improved by 3 percentage points |
| Operating expenses | $1.975 million | $1.103 million | Up 79% |
| Loss from operations | $2.280 million | $1.252 million | Loss increased |
| Net loss | $2.278 million | $1.251 million | Loss increased |
| Basic and diluted loss per share | $0.24 loss | $0.14 loss | Loss per share increased |
| Cash used in operations | $1.907 million | $0.856 million | Use increased |
| Cash at period end | $19.176 million | $28.214 million | Down from $21.949 million at Dec. 31, 2021 |
Revenue growth was driven primarily by increased EV ARC sales, higher federal and enterprise demand, and $0.4 million of All Cell energy-storage revenue recorded in March. EV ARC units sold increased from 18 to 45 year over year. Product sales were $3.562 million, compared with $1.265 million in the prior-year quarter.
Operating expenses increased by approximately $0.9 million, including higher sales and marketing costs, All Cell-related expenses, and legal and accounting costs. The company reported no federal income tax expense because of its operating losses and maintains a full valuation allowance against deferred tax assets.
Liquidity, capital resources and debt
- Current assets were $27.968 million and current liabilities were $6.128 million at March 31, 2022, resulting in working capital of approximately $21.8 million.
- Cash declined by $2.773 million during the quarter, reflecting $1.907 million of operating cash use and $0.954 million of investing cash use, partially offset by $0.088 million from warrant exercises.
- Investing cash use included $0.811 million paid for All Cell working capital and $0.131 million for equipment purchases.
- The filing does not report outstanding conventional debt. Liabilities primarily comprised accounts payable, accrued expenses, deferred revenue, lease liabilities and contingent consideration related to All Cell.
- Management believes existing cash is sufficient to fund liabilities and operations for at least twelve months from the report date, but states that additional capital may be required before the company achieves positive cash flow.
Material changes versus the prior comparable period
- Revenue increased 175%, while the net loss increased to $2.278 million from $1.251 million.
- Gross margin improved despite a continuing gross loss, supported by higher production volumes, fixed-overhead absorption and improved labor efficiency. Steel, battery, component and shipping costs partly offset these benefits.
- All Cell added approximately $0.4 million of revenue and $0.4 million of operating loss during the post-acquisition period included in Q1 2022.
- Cash used in operations more than doubled, primarily because of higher operating losses, a $1.5 million increase in prepaid expenses and other current assets, and a $0.6 million increase in inventory.
- Inventory increased to $4.403 million from $1.611 million at December 31, 2021, while deferred revenue increased to $1.547 million from $0.254 million, primarily due to customer deposits.
- Total assets increased to $46.510 million from $30.658 million, principally due to the All Cell acquisition, which added $4.600 million of goodwill and $10.676 million of net intangible assets at March 31, 2022.
Acquisition, outlook and unusual items
Beam acquired substantially all of All Cell’s assets and business for 1.055 million Beam shares valued at $14.359 million, $0.811 million in cash for working capital and preliminary earnout consideration of $1.251 million. Total preliminary consideration was $16.421 million. The transaction also requires at least $1.5 million of equipment investment. The purchase-price allocation remains provisional and could change materially. The earnout could result in additional shares, subject to revenue milestones and a maximum aggregate issuance of 1.8 million shares.
Management expects All Cell’s battery technology to diversify revenue, expand the customer base and reduce battery costs in Beam’s products. Management also expects higher production volumes, manufacturing improvements, outsourcing and easing supply-chain costs to improve gross margins, although no specific financial guidance was provided.
Management expects continued growth in EV-charging infrastructure demand, supported by government funding, tax incentives, federal procurement opportunities and corporate fleet and workplace-charging demand. Order timing may remain uneven because of customer approvals and budget cycles. The company is also developing EV Standard and UAV ARC products and pursuing corporate sponsorship opportunities for its EV ARC network.
- The company has a history of losses and expects to continue incurring losses for some time; management cannot predict when positive cash flow will be achieved.
- Supply-chain disruptions, inflation, higher steel and battery costs, fuel prices and limited battery-cell suppliers could impair margins, production and deliveries.
- Government and enterprise customers represented significant revenue concentrations. Government customers accounted for 69% of Q1 2022 revenue, and three customers represented 22%, 16% and 12% of revenue.
- Approximately $20.0 million of cash deposits exceeded federally insured limits at March 31, 2022.
- Management identified a material weakness in internal control over financial reporting related to manual inventory processes and, in Q1 2022, ineffective review controls over the All Cell purchase-price calculation. The company is researching an ERP system and implementing enhanced review procedures.
- No material pending or threatened litigation was reported as of March 31, 2022.
Most important facts for investors to verify
- Whether revenue growth converts into positive gross margins and operating cash flow.
- The final purchase-price allocation for All Cell, including goodwill, intangible assets and contingent consideration.
- The amount and timing of any additional All Cell earnout share issuance and the required $1.5 million equipment investment.
- Progress in remediating the inventory and acquisition-accounting control weaknesses.
- Cash burn, warrant exercises and the potential need for additional equity or debt financing.
- Customer concentration, government contract renewals, federal procurement activity and the sustainability of current order growth.
- Whether battery-cell availability, inflation and supply-chain conditions improve as management expects.