Beam Global 10-Q

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. During the period covered by this filing, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, we do not yet have sufficient controls and procedures to ensure that all the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis. The Company intends to improve its internal control over financial reporting and improve its disclosure controls and procedures. As of December 31, 2020, we had identified the following material weaknesses, of which the items below still exist as of September 30, 2021 and through the date of this report: · The Company currently does not have automated manufacturing or purchasing systems in place to track inventory purchases, transactions, bills of material, part numbers, product costing, labor or a perpetual inventory system. The Company performs manual processes during the year to track and control inventory transactions, apply labor and overheads to inventory and to perform a wall to wall physical inventory at the end of the year to confirm the ending inventory balance and valuation. While these processes provide good results in determining inventory and cost of sales transactions, as we grow, it has become a very time-consuming process and could impact our ability to submit timely reporting. An enterprise planning system will also provide better management tools to analyze and plan production. This will avoid over-purchasing or shortages of inventory. This will avoid over-purchasing or shortages of inventory. We plan to implement a manufacturing and purchasing system during fiscal 2021. Since these controls have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. Corrective Action and Changes in Internal Control Over Financial Reporting During the three months ended September 30, 2021, we continued to develop our manual controls, including setting up inventory locations in production to assist in the tracking and counting of our inventory. We had some staffing turnover that caused a delay in the selection of the new Enterprise Resource Planning (ERP) software package. We plan to select the new ERP in early 2022. 28 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company may be involved in legal actions and claims arising in the ordinary course of business from time to time. As of the date of this report, there are no ongoing or pending legal claims or proceedings of which management is aware.