Beam Global 10-K

ITEM 9A. 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. At the end of the period covered by this Annual Report on Form 10-K, 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 December 31, 2021, the disclosure controls and procedures of our Company were not effective to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis due to material weakness in internal controls as identified below under “Management’s Report on Internal Control Over Financial Reporting”. Since the type of material weakness identified below have a pervasive effect across the inventory transaction cycle, management has determined that these circumstances constitute material weakness that therefore affects disclosure controls and procedures. 31 Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. All internal control systems, no matter how well designed, have inherent limitations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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 internal controls over financial reporting. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, we do not yet have sufficient internal controls over financial reporting 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. We identified the following material weakness which existed as of December 31, 2021: · The Company currently does not have sufficient controls in place to ensure that all inventory is appropriately tracked and recorded on a timely basis, given the lack of an automated tracking system and the manual nature of its current processes and controls surrounding inventory. · 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. A manufacturing system will also provide better management tools to analyze and plan production. This will avoid over-purchasing or shortages of inventory. We plan to implement a manufacturing and purchasing system during fiscal 2022. Since these controls have a pervasive effect across the inventory transaction cycle, management has determined that these circumstances constitute a material weakness, based on the criteria established in the “Internal Integrated Framework” issued by COSO in 2013 and as a result, we did not maintain effective internal control over financial reporting as of December 31, 2021. No Attestation Report by Independent Registered Accountant The effectiveness of our internal control over financial reporting as of December 31, 2021 has not been audited by our independent registered public accounting firm by virtue of our exemption from such requirement as a smaller reporting company. Changes in Internal Controls Over Financial Reporting During the quarter ended December 31, 2021, we continued to implement stronger manual processes. Our annual year-end wall-to-wall inventory process was improved over prior years. We still utilized spreadsheets to track our inventory counts and valuation, but our processes were improved to reduce the time required and the accuracy of the count. In October, we hired a Director of Operations who implemented improved warehouse organization, inventory procedures, order processing and more to add stronger processes and strengthen our controls. In late December, we also hired an experienced electro-mechanical assembly supervisor who will add oversight and process improvements to our inventory and manufacturing processes going forward. In addition, we hired a seasoned financial controller with accounting expertise to the Company to help insure we meet our closing timeline and assist in testing our manual controls. With these resources in place, we intend to implement a new Enterprise Resource Planning (ERP) system. ITEM 9B. OTHER INFORMATION. None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. None. 32 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by Item 10 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end or will be included in an amendment to this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. The information required by Item 11 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by Item 12 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required by Item 13 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information required by Item 14 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K. 33 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. 1. Financial Statements The financial statements required by this item are submitted in a separate section beginning on page F-1 of this annual report. 2. Financial Statement Schedules None 3. Exhibits The following exhibits are included with this filing: Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Herewith 1.1 Underwriting Agreement 8-K 001-38868 1.1 4/18/2019 1.2 Underwriting Agreement, dated July, 2020 8-K 000-53204 1.1 7/6/2020 1.3 Underwriting Agreement, dated November 23, 2020 8-K 000-53204 1.1 11/27/2020 2.1 Asset Purchase Agreement By and Between Beam Global and AllCell Technologies, LLC dated February 16, 2022 8-K 001-38868 10.1 2/23 /2022 3.1 Articles of Incorporation SB-2 333-147104 3.1 11/2/2007 3.2 Amendment to Articles of Incorporation dated December 23, 2016 S-1/A 333-226040 3.1.2 4/4/2019 3.3 Certificate of Change to Articles of Incorporation dated April 11, 2019 8-K 001-38868 3.1 4/18/2019 3.4 Certificate of Amendment to Articles of Incorporation dated September 14, 2020 8-K 000-53204 3.1 9/14/2020 3.5 Bylaws of Registrant SB-2 333-147104 3.2 11/2/2007 3.6 Amendment to Bylaws 8-K 000-53204 10.2 7/16/2014 34 4.1 Description of Registrant's Securities Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. 10-K 001-38868 4.1 3/30/2020 4.2 Form of Warrant issued to SFE VCF, LLC 8-K 000-53204 10.5 9/22/2017 4.3 Form of Investor Warrant S-1 333-226040 4.2 4/11/2019 4.4 Warrant Agency Agreement by and between Envision Solar International, Inc. and Corporate Stock Transfer, Inc. 8-K 001-38868 4.2 4/18/2019 4.5 Form of Representative Warrant 8-K 001-38868 4.1 4/18/2019 4.6 Form of Warrant issued to bridge lender on August 27, 2018 8-K 001-38868 10.3 8/31/2018 4.7 Form of Warrant for Bridge Refinance Convertible Secured Promissory Note S-1 333-226040 4.6 3/25/2019 10.1* 2011 Stock Incentive Plan of Envision Solar International, Inc., dated as of August 10, 2011 10-Q 001-38868 4.1 8/15/2011 10.2* Form of Restricted Stock Agreement 10-Q 001-38868 10.3 11/14/2019 10.3* Form of Stock Option Agreement 10-Q 001-38868 10.4 11/14/2019 10.4 10% Subordinated Convertible Promissory Note, dated December 17, 2009, issued to John Eve y 8-K 000-53204 10.21 2/12/2010 10.5 Amended and Restated 10% Subordinated Convertible Promissory Note, dated as of December 31, 2010, issued to John Evey 8-K 000-53204 10.22 2/12/2010 10.6* Employment Agreement by and between Envision Solar International, Inc. and Desmond Wheatley, effective as of January 1, 2016 8-K 000-53204 10.1 10/20/2016 10.7* Amendment to Employment Agreement for Desmond Wheatley, effective as of January 1, 2016 S-1 333-226040 10.30 9/24/2018 10.8* Amendment to Employment Agreement for Desmond Wheatley, effective as of January 1, 2021 8-K 000-53204 10.1 2/12/2021 10.9 Revolving Convertible Promissory Note, dated September 18, 2017 8-K 000-53204 10.1 9/22/2017 35 10.10 Convertible Secured Promissory Note, dated September 18, 2017 8-K 000-53204 10.2 9/22/2017 10.11 Security Agreement -Purchase Order Financing, dated September 18, 2017 8-K 000-53204 10.3 9/22/2017 10.12 Security Agreement – Convertible Secured Promissory Note, dated September 18, 2017 8-K 000-53204 10.4 9/22/2017 10.13 Promissory Note for bridge loan, dated August 27, 2018 8-K 001-38868 10.1 8/31/2018 10.14 Securities Purchase Agreement for the bridge loan, dated August 27, 2018 8-K 000-53204 10.2 8/31/2018 10.15* Promissory Note for Deferred Compensation of Desmond Wheatley, dated effective January 15, 2016 S-1 333-226040 10.31 9/24/2018 10.16 Amendment to Promissory Note with SFE VCF, LLC, dated December 1, 2018 S-1 333-226040 10.35 3/25/2019 10.17* Offer letter to Katherine H. McDermott, dated July 12, 2019 8-K 001-38868 10.1 7/23/2019 10.18* Separation Agreement for Chris Caulson dated as of July 23, 2019 10-Q 001-38868 10.2 8/14/2019 10.19* Change in Control Severance Benefit Plan 8-K 000-53204 10.2 2/12/2021 10.20 Lease Agreement – 5660 Eastgate Dr. 10-Q 000-53204 10.1 11/12/2020 10.21 2021 Beam Global Equity Incentive Plan 8-K 001-38868 10.1 6/14/2021 23.1 Consent of Independent Registered Public Accounting Firm (RSM US LLP) X 23.2 Consent of Independent Registered Public Accounting Firm (Salberg & Company, P.A. ) X 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 36 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). X * Indicates a management contract or compensatory plan or arrangement ITEM 16. FORM 10-K SUMMARY Not applicable 37 Beam Global Index to Financial Statements Page Reports of Independent Registered Public Accounting Firms (PCAOB ID 49 (2021)) (PCAOB ID 106 (2020)) F-2 Balance Sheets at December 31, 2021 and 2020 F-5 Statements of Operations for the Years Ended December 31, 2021 and 2020 F-6 Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 and 2020 F-7 Statements of Cash Flows for the Years Ended December 31, 2021 and 2020 F-8 Notes to Financial Statements F-9 F- 1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Beam Global Opinion on the Financial Statements We have audited the accompanying balance sheet of Beam Global (the Company) as of December 31, 2021, the related statements of operations, changes in stockholders’ equity and cash flows, for the year then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters. /s/ RSM US LLP We have served as the Company's auditor since 2021. Los Angeles, California March 31, 2022 F- 2 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of: Beam Global Opinion on the Financial Statement We have audited the accompanying balance sheet of Beam Global (the “Company”) as of December 31, 2020, the related statement of operations, changes in stockholders’ equity, and cash flow, for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for year then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the 2020 audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F- 3 Analysis of Liquidity and Going Concern As summarized in Footnote 2 “Liquidity” to the financial statements, the Company has a history of net losses and net cash used in operating activities and believes such conditions will continue for a period of time into the future. These are considered adverse conditions or events that led management to consider whether there is substantial doubt about the ability of the entity to continue as a going concern for a reasonable period of time. However, management believes that cash raises through public offerings both in 2019 and 2020 which created a cash balance and positive working capital alleviates the substantial doubt related to going concern and the need for a going concern risk disclosure. We identified the going concern risk analysis as a critical audit matter. Auditing management’s going concern analysis including their process to develop the analysis and the projections of future cash flows, operating trends, and assessments of internal and external matters that may affect the Company’s future operations and cash flows involved a high degree of subjectivity. Additionally, auditing management’s plans to address the going concern risk involved highly subjective auditor judgment. The primary procedures we performed to address this critical audit matter included (a) Assessed the reasonableness of management’s process for developing their assessment of whether a going concern risk exists, (b) Assessed the reasonableness of assumptions management used in their future cash flow projections including comparison to prior year results, consideration of positive and negative evidence impacting management’s forecasts, and consideration of the Company’s financing arrangements in place as of the report date, (c) Developed our own independent calculation of expected source and use of funds and needs of the Company over the one year period from the date of issuance of the financial statements, (d) confirmed cash balances as of December 31, 2020 with the banks and tested management’s bank reconciliations, (e) Identified management’s plans for dealing with the adverse conditions and events discussed above and assessed the reasonableness of the assumptions of such plans, (f) Assessed whether it is probable that management’s plans, when implemented, will mitigate the adverse effects of the conditions and events discussed above, (g) Concluded whether substantial doubt exists as to whether the Company can continue as a going concern for a period of one year after the financial statements are issued and (h) considered the effect of such conclusion on the financial statement disclosures and our report of independent registered public accounting firm. We agreed with management’s assessment that the going concern risk is alleviated and a liquidity footnote would be sufficient. /s/ Salberg & Company, P.A. SALBERG & COMPANY, P.A. We had served as the Company’s auditor from 2008 through March 31, 2021. Boca Raton, Florida March 30, 2021 F- 4 Beam Global Balance Sheets December 31, 2021 2020 Assets Current assets Cash $ 21,948,512 $ 26,702,804 Accounts receivable 3,827,254 1,786,471 Prepaid expenses and other current assets 180,194 321,393 Inventory 1,610,860 1,092,763 Total current assets 27,566,820 29,903,431 Property and equipment, net 650,195 235,036 Operating lease right of use asset 2,029,912 2,418,503 Patents, net 359,060 293,789 Deposits 52,000 52,000 Total assets $ 30,657,987 $ 32,902,759 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 1,567,069 $ 727,919 Accrued expenses 726,688 391,567 Sales tax payable 57,561 92,130 Deferred revenue 135,801 37,778 Operating lease liabilities, current 467,891 521,006 Total current liabilities 2,955,010 1,770,400 Deferred revenue, noncurrent 117,950 69,711 Operating lease liabilities, noncurrent 1,607,221 1,910,357 Total liabilities 4,680,181 3,750,468 Commitments and contingencies (Note 9) Stockholders' equity Preferred stock, $ 0.001 par value, 10,000,000 authorized, none outstanding as of December 31, 2021 and 2020, respectively. – – Common stock, $ 0.001 par value, 350,000,000 shares authorized, 8,971,711 and 8,482,387 shares issued or issuable and outstanding as of December 31, 2021 and 2020, respectively. 8,972 8,482 Additional paid-in-capital 83,587,479 80,166,415 Accumulated deficit ( 57,618,645 ) ( 51,022,606 ) Total stockholders' equity 25,977,806 29,152,291 Total liabilities and stockholders' equity $ 30,657,987 $ 32,902,759 The accompanying notes are an integral part of these Financial Statements F- 5 Beam Global Statements of Operations For the Years Ended 2021 2020 Revenues $ 9,001,751 $ 6,210,350 Cost of revenues 9,973,395 6,921,324 Gross loss ( 971,644 ) ( 710,974 ) Operating expenses 5,627,674 4,496,660 Loss from operations ( 6,599,318 ) ( 5,207,634 ) Other income (expense) Interest income 4,602 11,446 Interest expense ( 498 ) ( 11,893 ) Total other income (expense), net 4,104 ( 447 ) Loss before income tax expense ( 6,595,214 ) ( 5,208,081 ) Income tax expense 825 4,944 Net loss $ ( 6,596,039 ) $ ( 5,213,025 ) Net loss per share - basic and diluted $ ( 0.74 ) $ ( 0.84 ) Weighted average shares outstanding - basic and diluted 8,882,440 6,170,283 The accompanying notes are an integral part of these Financial Statements F- 6 Beam Global Statements of Changes in Stockholders' Equity For the Years Ended December 31, 2021 and 2020 Total Common Stock Additional Accumulated Stockholders' Stock Amount Paid-in-Capital Deficit Equity Balance at December 31, 2019 5,208,170 $ 5,207 $ 51,628,536 $ ( 45,809,581 ) $ 5,824,162 Stock issued for director services - vested 59,782 60 444,122 – 444,182 Stock issued to escrow account - unvested 2,126 3 ( 3 ) – – Stock option expense – – 722,549 – 722,549 Proceeds from issuance of common stock, pursuant to public offering 1,643,900 1,644 18,998,031 – 18,999,675 Warrants exercised for cash 1,552,206 1,552 9,925,306 – 9,926,858 Warrants exercised (cashless) 11,304 11 ( 11 ) – – Stock option exercise (cashless) 2,199 2 ( 2 ) – – Stock issued for services 2,700 3 14,739 – 14,742 Cash fees related to stock offerings – – ( 1,566,852 ) – ( 1,566,852 ) Net loss – – – ( 5,213,025 ) ( 5,213,025 ) Balance at December 31, 2020 8,482,387 8,482 80,166,415 ( 51,022,606 ) 29,152,291 Stock issued for director services - vested 40,513 41 742,244 – 742,285 Stock issued to escrow account - unvested ( 33,774 ) ( 34 ) 34 – – Stock option expense – – 444,713 – 444,713 Warrants exercised for cash 445,926 446 2,853,777 – 2,854,223 Stock option exercise (cashless) 35,820 36 ( 630,409 ) – ( 630,373 ) Stock option exercise (for cash) 839 1 10,705 – 10,706 Net loss – – – ( 6,596,039 ) ( 6,596,039 ) Balance at December 31, 2021 8,971,711 $ 8,972 $ 83,587,479 $ ( 57,618,645 ) $ 25,977,806 The accompanying notes are an integral part of these Financial Statements F- 7 Beam Global Statements of Cash Flows For the Years Ended 2021 2020 Operating Activities: Net loss $ ( 6,596,039 ) $ ( 5,213,025 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 92,775 40,952 Common stock issued for services 742,285 458,924 Compensation expense related to grant of stock options 444,713 722,549 Amortization of operating lease right of use asset 32,340 ( 19,911 ) Amortization of debt discount – 5,990 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable ( 2,040,783 ) ( 1,021,937 ) Prepaid expenses and other current assets 141,199 ( 385,895 ) Inventory ( 485,961 ) 1,060,614 Deposits – 4,869 Increase (decrease) in: Accounts payable 815,950 242,900 Accrued expenses 335,121 86,452 Convertible note payable repaid in lieu of salary - related party – ( 220,417 ) Sales tax payable ( 34,569 ) 85,917 Deferred revenue 146,262 13,880 Net cash used in operating activities ( 6,406,707 ) ( 4,138,138 ) Investing Activities: Purchases of equipment ( 498,270 ) ( 265,764 ) Funding of patent costs ( 83,871 ) ( 93,137 ) Net cash used in investing activities ( 582,141 ) ( 358,901 ) Financing Activities: Repayments of auto loan – ( 9,294 ) Borrowings on note payable - Paycheck Protection Program – 339,262 Repayment on note payable - Paycheck Protection Program – ( 339,262 ) Withhold shares to cover taxes for cashless stock option exercise ( 630,373 ) – Proceeds from stock option exercises 10,706 – Proceeds from warrant exercises 2,854,223 9,926,858 Payments of equity offering costs – ( 1,566,852 ) Proceeds from issuance of common stock and warrants, pursuant to public offering – 18,999,675 Net cash provided by financing activities 2,234,556 27,350,387 Net (decrease) increase in cash ( 4,754,292 ) 22,853,348 Cash at beginning of year 26,702,804 3,849,456 Cash at end of year $ 21,948,512 $ 26,702,804 Supplemental Disclosure of Cash Flow Information: Cash paid for interest $ 85 $ 54,571 Cash paid for taxes $ 825 $ 4,944 Supplemental Disclosure of Non-Cash Investing and Financing Activities: Purchase of property and equipment by incurring current liabilities $ 23,200 $ – Depreciation cost capitalized into inventory $ 32,136 $ 20,363 Recording of right of use asset and corresponding liability $ – $ 2,605,032 Reclassification of deferred equity offering costs into APIC $ – $ 1,566,852 Transfer of prepaid asset to inventory $ – $ 212,188 Transfer of fixed asset to inventory $ – $ 76,946 The accompanying notes are an integral part of these Financial Statements F- 8 BEAM GLOBAL NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 1. CORPORATE ORGANIZATION, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CORPORATE ORGANIZATION Beam Global (formerly Envision Solar International, Inc.) was incorporated in June 2006 as a limited liability company (“LLC”). Through a series of transactions and mergers, including a series of 2010 transactions where the then existing entity was acquired by an inactive publicly held company in a transaction treated as a recapitalization of the company, the resulting entity became Envision Solar International, Inc., a Nevada Corporation. On September 15, 2020, Envision Solar International, Inc. announced its rebranding and changed its corporate name to Beam Global (hereinafter the “Company”, "us", "we", "our" or "Beam") and trading on Nasdaq: BEEM and BEEMW. NATURE OF OPERATIONS Beam is a cleantech innovation company based in San Diego, California. We develop, design, engineer, manufacture and sell high-quality, renewably energized infrastructure products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security and disaster preparedness. Beam’s products enable vital and highly valuable energy production in locations where it is either too expensive or too impactful to connect to the utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. When competing with utilities or typical solar companies, we rely on our products’ ease of deployment, reliability, accessibility, and total cost of ownership, rather than producing the cheapest kilowatt hour with the help of subsidies. Beam’s products and proprietary technology solutions target three markets that are experiencing significant growth with annual global spending in the billions of dollars: · electric vehicle (EV) charging infrastructure; · energy security and disaster preparedness; and · outdoor media advertising. RISKS AND UNCERTAINTIES On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders as well as the shutdown of many businesses around the world. To date, while we saw seen some delays and cancellations of opportunities in our pipeline in 2020 as a result of funding issues, priority issues or temporary business closures, the pandemic has not had a material adverse effect on the Company’s financial position or results of operations for the years ended December 31, 2020 and December 31, 2021. However, it is difficult to predict if these governmental actions and the widespread economic disruption arising from the pandemic will impact our business in the future. The Company will continue to monitor its progress and communicate changes in estimates and assumptions with shareholders, as necessary. F- 9 USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of intangible assets, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets. CONCENTRATIONS Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable. The Company maintains its cash in banks and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through December 31, 2021. As of December 31, 2021, approximately $ 22,070,000 of the Company’s cash deposits were greater than the federally insured limits. Major Customers The Company continually assesses the financial strength of its customers. For the year ended December 31, 2021, two customers accounted for 33 % and 13 % of total revenues each. For the year ended December 31, 2020, revenues from one customer accounted for 30 % of total revenues. At December 31, 2021, accounts receivable from four customers accounted for 30 %, 22 %, 13 % and 10 % of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At December 31, 2020, accounts receivable from two customers accounted for 61 % and 13 % of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance. For the years ended December 31, 2021 and 2020, the Company had a heavy concentration of sales to federal, state and local governments which represented 86 % and 53 % of revenues, respectively. F- 10 CASH AND CASH EQUIVALENTS For the purposes of the statements of cash flows, the Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at December 31, 2021 or December 31, 2020. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company’s financial instruments, including accounts receivable, accounts payable, accrued expenses, and short-term loans, are carried at historical cost basis. At December 31, 2021, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments. ACCOUNTS RECEIVABLE Accounts receivable are customer obligations due under normal trade terms. Management reviews accounts receivable on a periodic basis to determine if any receivables may become uncollectible. Management’s evaluation includes several factors including the aging of the accounts receivable balances, a review of significant past due accounts, dialogue with the customer, the financial profile of a customer, our historical write-off experience, net of recoveries, and economic conditions. The Company includes any accounts receivable balances that are determined to be uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. There were no allowances for doubtful accounts as of the years ended December 31, 2021 and 2020. INVENTORY Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method of accounting. Inventory costs primarily relate to purchased raw materials and components used in the manufacturing of our products, work in process for products being manufactured, and finished goods. Included in these costs are direct labor and certain manufacturing overhead costs associated with normal capacity in the manufacturing process. The Company regularly reviews inventory components and quantities on hand and performs annual physical inventory counts. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment is recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of 3 to 7 years . Expenditures for maintenance and repairs, along with fixed assets below our capitalization threshold, are expensed as incurred. PATENTS The Company believes it will achieve future economic value benefits for its patents. All administrative costs for obtaining patents are accumulated on the balance sheet as a patent asset until such time as a patent is issued. The costs of these intangible assets are classified as a long-term asset and amortized on a straight-line basis over the legal life of such asset, which is typically 20 years. In the event a patent is denied or abandoned, all accumulated administrative costs will be expensed in the period in which the patent was denied or abandoned. Accumulated amortization related to patents was $ 30,175 and $ 11,574 as of December 31, 2021 and 2020, respectively. Patent amortization expense was $ 18,600 and $ 4,502 in the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the estimated patent amortization expense for each of the five succeeding years is $ 13,307 . F- 11 LEASES At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected to not recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less. IMPAIRMENT OF LONG-LIVED ASSETS The Company accounts for long-lived assets in accordance with the provisions of Accounting Standards Codification (“ASC”) 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. REVENUE RECOGNITION Beam follows the revenue standards of Financial Accounting Standards Board Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation. Revenues are primarily derived from the direct sales of manufactured products. Revenues may also consist of maintenance fees for the maintenance of previously sold products and revenues from sales of professional services. F- 12 Revenues from inventoried product are recognized upon the final delivery of such product to the customer or when legal transfer of ownership takes place. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for such products within a 30-45 day period after delivery. Revenues from maintenance fees for services provided by the Company are recognized equally over the period of the maintenance term. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for the service in advance of the maintenance period. Extended maintenance or warranty services, where the customer has the option to purchase this extension as a separate purchase option, are considered a separate performance obligation. If the Company does not control the extended services, in terms of having the responsibility for fulfillment of the obligation or the option to choose who will perform the services, the Company is acting as an agent and would report the revenues on a net basis. Revenues from professional services are recognized when services are performed. Revenue values are based upon fixed fee arrangements or hourly fee-based arrangements with agreed to hourly rates of service categories in line with expertise requirements. These services are billed to a customer as such services are provided and the customer will be obligated to make payments for such services typically within a 30-45 day period. The Company has a policy of recording sales incentives as a contra revenue. The Company includes shipping and handling fees billed to customers as revenues. Any deposits received from a customer prior to delivery of the purchased product or monies paid prior to the period for which a service is provided are accounted for as deferred revenue on the balance sheet. Sales tax is recorded on a net basis and excluded from revenue. The Company generally provides a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and it will pass on the warranties from its vendors, if any, which generally covers this one-year period. The Company accrues for product warranties when the loss is probable and can be reasonably estimated. At December 31, 2021, the Company has no product warranty accrual based on the Company’s historical financial warranty expense. COST OF REVENUES The Company records direct material and component costs, direct labor and associated benefits, and manufacturing overhead costs such as supervision, manufacturing equipment depreciation, rent, and utility costs, all of which are included in inventory prior to a sale, as costs of revenues. The Company further includes shipping and handling costs as cost of revenues. RESEARCH AND DEVELOPMENT In accordance with ASC 730-10, “Research and Development,” expenditures for research and development of the Company’s products are expensed when incurred and are included in operating expenses. The Company recognized research and development costs of $ 360,586 and $ 261,611 for the years ending December 31, 2021 and 2020, respectively. F- 13 ADVERTISING The Company conducts advertising for the promotion of its products and services. In accordance with ASC 720-35, “Advertising Costs,” advertising costs are charged to operations and included in operating expenses when incurred. Such amounts aggregated $ 138,072 in 2021 and $ 122,840 in 2020. STOCK-BASED COMPENSATION The Company follows ASC 718, “Compensation – Stock Compensation.” ASC 718 requires companies to estimate and recognize the fair value of stock-based awards to employees and directors. The fair value of the portion of an award that is ultimately expected to vest is recognized as an expense over the shorter of the service periods or vesting periods using the straight-line attribution method. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model. Forfeitures are accounted for as incurred, as a reversal of share-based compensation expense related to awards that will not vest. INCOME TAXES The Company accounts for income taxes pursuant to the provisions of ASC Topic 740, “Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provisions of ASC 740-10-25-5, “ Basic Recognition Threshold .” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10-25-6, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2021, tax years 2018 through 2021 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years. The Company recognizes the benefit of a tax position when it is effectively settled. ASC 740-10-25-10, “Basic Recognition Threshold” provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. ASC 740-10-25-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority. For tax positions considered effectively settled, the Company recognizes the full amount of the tax benefit. F- 14 NET LOSS PER SHARE Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock consists of the incremental shares of common stock issuable upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. Options to purchase 263,433 common shares and warrants to purchase 519,658 shares of common stock were outstanding at December 31, 2021. Options to purchase 341,808 common shares and warrants to purchase 965,584 shares of common stock were outstanding at December 31, 2020. These shares were not included in the computation of diluted loss per share for the years ended December 31, 2021 and 2020 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share. CONTINGENCIES Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable would be disclosed. The Company does not include legal costs in its estimates of amounts to accrue. SEGMENTS The Company follows ASC 280-10 for “Disclosures about Segments of an Enterprise and Related Information.” During 2021 and 2020, the Company only operated in one segment; therefore, segment information has not been presented. RECLASSIFICATIONS Where necessary, the prior year’s information has been reclassified to conform to the current year 2021 statement presentation. On the Balance Sheets, $69,711 of deferred revenue was reclassified to deferred revenue, noncurrent. F- 15 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. This ASU includes amendments that significantly change the guidance on convertible instruments and the derivative scope exception for contracts in an entity's own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. The prior conditions were difficult to apply and resulted in circumstances where warrants may have been required to be accounted for as a liability rather than as equity if issued under a registration statement. The Company, in consultation with legal counsel, determined that its outstanding public warrants issued under a Registration Statement on Form S-1 met, and continues to meet, the criteria for equity based on the terms of the warrant. Had the warrants been determined that liability treatment was required, the liability would have been approximately $64 million for the 953,595 public warrants at December 31, 2020 with a non-cash charge to the statement of operations of $61 million for the year ended December 31, 2020. The ASU is effective for smaller reporting companies in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, although early adoption is permitted, as early as fiscal years beginning after December 15, 2020. As such, the Company adopted ASU 2020-06 effective January 1, 2021, on a full retrospective basis, which will allow the Company to continue to classify the warrants as equity, and as a result, had no effect on its financial statements and related disclosures. If the Company had recorded the warrants as a liability in prior periods, with the full retrospective adoption on January 1, 2021, the liability would have been recast as equity and retained earnings adjusted to reverse the effect of the liability entries and as a result, there would be no impact on the financial statements for any periods presented. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326) requiring initial recognition of credit losses, as well as any subsequent change in the estimate, when it is probable that a loss has been incurred. The standard eliminates the threshold for initial recognition in current U.S. GAAP and it covers a broad range of financial instruments, including trade and other receivables at each reporting date. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. The standard is effective for the Company beginning January 1, 2023. The adoption of this guidance is not expected to have a material effect on our financial statements. 2. LIQUIDITY The Company has a history of net losses, including the accompanying financial statements for the years ended December 31, 2021 and 2020 where the Company had net losses of $ 6,596,039 (which includes $ 1,186,998 of non-cash stock-based compensation expense) and $ 5,213,025 (which includes $ 1,181,473 of non-cash stock-based compensation expense), respectively, and net cash used in operating activities of $ 6,406,707 and $ 4,138,138 , respectively. In May 2020, the Company filed a shelf registration statement on Form S-3 and subsequently closed two additional offerings generating gross proceeds of $ 11,499,675 in July 2020 and $ 7,500,000 in November 2020. In addition, the Company issued warrants as part of the April and May 2019 offering, which has generated an additional $ 2,854,223 and $ 9,926,858 of proceeds during 2021 and 2020, respectively. The Company expects to continue to incur losses for a period of time into the future. In addition, there is no guarantee that the warrants will be exercised or that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to the Company. The Company continues to invest in sales and marketing resources and seek out sales contracts that should provide additional revenues and, in time, generate operating profits. The cash balance at December 31, 2021 was $ 21,948,512 and our working capital was $ 24,611,810 at December 31, 2021. With these financings, management believes it has sufficient cash to fund its liabilities and operations for at least the next twelve months from the issue date of this report. F- 16 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets are summarized as follows: Prepaid expenses and other current assets December 31, 2021 2020 Prepaid insurance $ 65,653 $ 33,320 Vendor prepayments 87,557 83,049 Related party receivable 26,984 10,574 Cash due for warrant exercises – 194,450 Total prepaid expenses and other current assets $ 180,194 $ 321,393 Related party receivables as of December 31, 2021 and 2020 consisted primarily of payroll related taxes due for an employee option exercise. 4. INVENTORY Inventories are stated at the lower of cost and net realizable value. Costs are determined using the first in-first out (FIFO) method. As of December 31, 2021 and 2020, inventory consists of the following: Schedule of inventory December 31, 2021 2020 Finished goods $ – $ – Work in process 424,761 559,582 Raw materials 1,186,099 533,181 Total inventory $ 1,610,860 $ 1,092,763 5. PROPERTY AND EQUIPMENT Property and equipment consist of the following: Schedule of property and equipment December 31, 2021 2020 Furniture and fixtures $ 129,075 $ 85,333 Computer equipment and software 73,517 87,303 Leasehold improvements 27,928 13,918 Autos 337,394 84,796 Machinery and equipment 565,499 425,856 Total property and equipment 1,133,413 697,206 Less accumulated depreciation ( 483,218 ) ( 462,170 ) Property and Equipment, net $ 650,195 $ 235,036 Depreciation expense for 2021 and 2020 was $ 71,152 and $ 36,450 , respectively. In 2021 and 2020, respectively, $ 32,136 and $ 20,363 of depreciation was capitalized into inventory as manufacturing overhead costs. In addition, net property and equipment of $ 3,023 and $ 0 were disposed of in 2021 and 2020, respectively. F- 17 6. ACCRUED EXPENSES The major components of accrued expenses are summarized as follows: Accrued expense schedule December 31, 2021 2020 Accrued vacation $ 238,147 $ 205,809 Accrued salaries and bonus 353,121 178,449 Vendor accruals 35,520 4,400 Other accrued expenses 99,900 2,909 Total accrued expenses $ 726,688 $ 391,567 7. CONVERTIBLE NOTE PAYABLE – RELATED PARTY AND NOTE PAYABLE On October 18, 2016, the Company entered into a five-year employment agreement, effective as of January 1, 2016, with Mr. Desmond Wheatley, the Chief Executive Officer, President, and Chairman of the Company (the “Agreement”). Pursuant to the Agreement, Mr. Wheatley received an annual deferred salary of $50,000 which Mr. Wheatley deferred until such time as Mr. Wheatley and the Board of Directors agreed that payment of the deferred salary and/or cessation of the deferral was appropriate. In August 2018, the Agreement was amended to provide that his salary shall defer until the earliest to occur of the following: (i) a permissible event specified in Section 409A of the Code, (ii) December 31, 2020, (iii) a change of control as defined in the Agreement, or (iv) a sale of all or substantially all of the assets of the Company. All deferred amounts were evidenced by an unsecured convertible promissory note payable by the Company to Mr. Wheatley bearing simple interest at the rate of 10% per annum, accruing until paid, convertible into shares of the Company’s common stock at $7.50 per share at any time in whole or in part at Mr. Wheatley’s discretion. As the conversion price was equivalent to the fair value of the common stock at various salary deferral dates prior to June 30, 2018, there was no beneficial conversion feature to this note through such date. Subsequent to June 30, 2018 through December 31, 2018 and based on the average daily closing price of our common stock, the Company recorded $ 8,672 of debt discount for the beneficial conversion feature value which was being amortized to interest expense over the term of the note. For the three months ended March 31, 2019 and based on the average daily closing price of our common stock, the Company recorded $ 3,967 of debt discount for the beneficial conversion feature value which was also being amortized to interest expense over the term of the note. There was no beneficial conversion value and therefore, no debt discount was recorded for any other periods subsequent to March 31, 2019. Additionally, on March 29, 2017 the Board of Directors granted Mr. Wheatley a $35,000 bonus for which Mr. Wheatley agreed to defer such bonus under the same terms of his salary deferral. On September 17, 2019, the Board of Directors adopted a resolution to pay off the convertible promissory note issued to Mr. Wheatley for his deferred compensation in the near future (subject to a recommendation on timing from Mr. Wheatley), and no additional salary was deferred after September 15, 2019. In February 2020, the remaining debt discount of $ 5,990 was recorded as interest expense, additional interest of $ 3,442 was accrued, and the total note of $ 220,417 and interest of $ 52,326 was paid to Mr. Wheatley. On May 1, 2020, the Company received a U.S. Small Business Administration Paycheck Protection Program loan of $ 339,262 which was offered through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This loan was recorded as a note payable, is subject to a 1 % annual interest rate and has a two year term. This low interest loan was intended to support short term cash flow in the event we were more heavily impacted by the COVID-19 virus. In July 2020, we were able to raise capital and no longer required the loan. The full amount of the loan was repaid on November 13, 2020 in addition to $ 1,847 of interest. F- 18 8. AUTO LOAN In October 2015, the Company purchased a new vehicle and financed the purchase through a dealer auto loan. The loan has a term of 60 months, requires minimum monthly payments of approximately $950, and bears interest at a rate of 5.99 percent. The final payment was made on this loan on October 31, 2020. 9. COMMITMENTS AND CONTINGENCIES Legal Matters: From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations. Leases: In August 2016, the Company entered into a sublease for its current corporate headquarters and manufacturing facility. The sublease expired in August 2020 which was the same term of the master lease for which the Company was the subtenant. In September 2020, the Company initiated a new five year master lease agreement, with two optional one year renewals. Monthly lease payments will range from $52,000 to $58,526 per month over the term of the lease (see note 10). Other Commitments: The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company. 10. LEASES The Company evaluates new leases at inception based on the criteria defined in Leases (Topic 842). On September 1, 2020, the Company entered into a five-year operating lease with payments ranging from $52,000 to $58,526. The lease has two one-year options to extend the term of the lease. At this time, it is not reasonably certain that the Company will extend the term of the lease and, therefore, the renewal periods have been excluded from the right-of-use (“ROU”) asset. The present value of the lease payment stream was calculated using an effective borrowing rate of 10 % and recorded a ROU asset and operating lease liability each of $ 2,605,032 on September 1, 2020. The ROU asset and the corresponding lease liability are being amortized on a straight-line basis over the term of the lease which expires on August 31, 2025. F- 19 The tables below show the ROU assets and liabilities as of December 31, 2021 and December 31, 2020, including the changes during the periods. Schedule of operating right-of use asset Operating right-of use asset Sub-lease Office lease initial measurement January 1, 2019 $ 872,897 Less amortization of operating lease ( 523,738 ) Straight-line lease expense in excess of cash payments ( 32,770 ) Operating lease ROU asset December 31, 2019 $ 316,389 Less amortization of operating lease ( 349,159 ) Straight-line lease expense in excess of cash payments 32,770 Operating lease ROU asset August 31, 2020 - end of sublease $ – New lease Office lease initial measurement September 1, 2020 $ 2,605,032 Less amortization of operating lease ( 173,669 ) Straight-line lease expense in excess of cash payments ( 12,860 ) Operating lease ROU asset as of December 31, 2020 2,418,503 Less amortization of operating lease ( 388,591 ) Operating lease ROU asset as of December 31, 2021 $ 2,029,912 During the twelve months ended December 31, 2021, cash paid for amounts included in the measurement of operating lease liabilities was $ 405,476 . As of December 31, 2021 and 2020, the current and non-current portions of the lease liability were recorded to the Balance Sheet as follows: Schedule of lease liability December 31, 2021 2020 Operating lease liabilities, current $ 467,891 $ 521,006 Operating lease liabilities, noncurrent 1,607,221 1,910,357 Total lease liability $ 2,075,112 $ 2,431,363 The future minimum rental commitments for our operating leases reconciled to the lease liability as of December 31, 2021 is as follows: Schedule of operating leases reconciled lease liability December 31, 2021 2022 $ 649,147 2023 668,622 2024 688,680 2025 468,212 Total undiscounted future minimum payments 2,474,661 Less imputed interest ( 399,549 ) Total lease liability $ 2,075,112 F- 20 11. STOCKHOLDERS’ EQUITY Stock Issued In Cash Sales The Company filed a “shelf” registration statement on Form S-3 and an accompanying prospectus with the Securities and Exchange Commission on May 26, 2020. On July 7, 2020, the Company closed an underwritten public offering issuing 1,393,900 shares, with a public offering price of $ 8.25 per share, generating approximately $ 10.5 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. On November 27, 2020, the Company closed a second underwritten public offering issuing 250,000 shares, with a public offering price of $ 30.00 per share, generating approximately $ 6.9 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the aggregate net proceeds primarily for working capital and general corporate purposes. Other Securities In July 2020, 3,000 stock options were exercised on a cashless basis for 2,199 registered shares of the Company’s common stock at an exercise price of $ 4.09 . In August 2020, a stock grant was issued for 2,700 unregistered shares of the Company’s common stock to a consultant as payment for services. The shares were valued on the grant dates’ stock price of $ 5.46 per share or $ 14,742 . During the year ended December 31, 2020, 1,456,406 warrants to purchase shares of the Company’s registered common stock and 95,800 warrants to purchase shares of the Company’s unregistered common stock were exercised generating $ 9,926,858 , of which $ 9,732,408 in cash was received and $ 194,450 was included in other assets as a receivable (see note 3) which was collected in January 2021. 18,000 warrants were cashless exercises in 2020 and the Company issued 11,304 unregistered shares of common stock. The unregistered securities described above were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended. Awards Under Stock Incentive Plans On June 9, 2021, the Company’s stockholders approved the Beam Global 2021 Equity Incentive Plan (the “2021 Plan”) under which 2,000,000 shares of the Company’s common stock are allowed to be issued pursuant to the exercise of stock options or other awards granted under such plan in addition to the 630,000 shares previously allowed under the Beam Global 2011 Stock Incentive Plan. The number of shares reserved for issuance under the 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of the Company’s common stock as of the immediately preceding December 31, or a lesser number as may be determined by our board of directors or compensation committee. Stock Options Stock options are granted to new and existing employees. New employee option grants generally have a term of ten years and vest ratably over four years. Existing employee option grants generally have a term of ten years and vest immediately upon grant. The Company follows the provisions of ASC Topic 718, “Compensation – Stock Compensation.” ASC Topic 718 establishes standards surrounding the accounting for transactions in which an entity exchanges its equity instruments for goods or services. ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as options issued under the Company’s Stock Option Plans. During the year ended December 31, 2021, the Company granted 43,300 stock options under the plans with a total valuation of $ 905,658 and a 10-year term. During the year ended December 31, 2020, the Company granted 105,604 stock options under the plans with a total valuation of $ 1,374,394 and a 10-year term. The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock based on our historical volatility. F- 21 The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options. We used the following assumptions for options granted in fiscal 2021 and 2020: Assumptions for options granted 2021 2020 Expected volatility 93.03 % - 99.32 % 74.16 % - 115.78 % Expected term 5 - 7 Years 5 - 7 Years Risk-free interest rate 1.25 % - 1.38 % 0.37 % - 1.79 % Weighted average FV $ 19.55 $ 12.38 The Company’s stock option compensation expense was $ 444,713 and $ 722,549 for the years ended December 31, 2021 and 2020, respectively, and there was $ 1,040,700 of total unrecognized compensation costs related to outstanding stock options at December 31, 2021 which will be recognized over 4 .0 years. Option activity for the years ended December 31, 2021 and 2020 is as follows: Schedule of option activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding at December 31, 2019 239,704 $ 9.25 Granted 105,604 15.63 Exercised ( 3,000 ) 4.09 Forfeited ( 500 ) 5.27 Outstanding at December 31, 2020 341,808 11.27 Granted 43,300 24.63 Exercised ( 97,192 ) 13.28 Forfeited ( 24,483 ) 23.84 Outstanding at December 31, 2021 263,433 $ 11.56 7.24 Years Exercisable at December 31, 2021 155,402 $ 7.04 6.12 Years Total intrinsic value of options exercised was $ 1,775,213 and $ 33,660 during the years ended December 31, 2021 and 2020, respectively. Total intrinsic value of options outstanding and options exercisable were $ 2,391,810 and $ 1,796,153 , respectively, as of December 31, 2021. F- 22 Restricted Stock The Company issues restricted stock to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters. The Company also issues restricted stock to Mr. Wheatley, for which generally 50% of the shares granted vest ratably over four quarters and the remaining 50% vest ratably over twelve quarters. The common stock related to these awards are issued to an escrow account on the date of grant and released to the grantee upon vest. The fair value is determined based on the closing stock price of the Company’s common stock on the date granted and the related expense is recognized ratably over the vesting period. A summary of activity of the restricted stock awards for the years ended December 31, 2021 and 2020 is as follows: Schedule of restricted stock award activity Nonvested Shares Weighted- Average Grant- Date Fair Value Nonvested at December 31, 2019 44,437 $ 5.63 Granted 61,908 12.44 Vested ( 59,782 ) 7.51 Nonvested at December 31, 2020 46,563 12.28 Granted 20,444 31.41 Vested ( 40,513 ) 18.32 Forfeited ( 12,825 ) 14.95 Nonvested at December 31, 2021 13,669 $ 20.45 On June 17, 2020, the Board approved two restricted stock grants to Mr. Wheatley under the 2011 Stock Incentive Plan. The total number of shares granted was determined based on an award of $150,000 divided by the per share quoted trading price on June 17, 2020. On the grant date, the shares had a per share fair value of $7.35 and 20,408 shares were granted. During the year ended December 31, 2020, 10,203 shares vested generating an expense of $ 75,000 . On October 20, 2020, upon recommendation of its Compensation Committee, the Board granted two directors annual stock grants of 12,200 each and the lead director was issued an annual grant of 17,100 , which vest quarterly in four (4) equal installments. On the grant date, these shares had a per share fair value of $14.95 based on the quoted trading price, or $ 620,425 . During the year ended December 31, 2020, 10,375 shares vested generating an expense of $ 155,107 . Fair values of restricted stock vested during the year ended December 31, 2021 and 2020 were $ 1,367,138 and $ 1,539,637 , respectively. As of December 31, 2021, there were unreleased shares of common stock representing $ 279,578 of unrecognized restricted stock grant expense which will be recognized over three years. Warrants A summary of activity of warrants outstanding for the years ended December 31, 2021 and 2020 is as follows: Warrant activity Number of Warrants Weighted Average Exercise Price Outstanding at December 31, 2019 2,535,790 $ 6.41 Exercised ( 1,570,206 ) $ 6.47 Outstanding at December 31, 2020 965,584 $ 6.33 Exercised ( 445,926 ) $ 6.40 Outstanding at December 31, 2021 519,658 $ 6.30 Exercisable at December 31, 2021 519,658 $ 6.30 F- 23 Exercisable warrants as of December 31, 2021 have a weighted average remaining contractual life of 2.30 years. The intrinsic value of the exercisable shares of the warrants at December 31, 2021 was $ 6,391,793 . During the year ended December 31, 2020, 1,552,206 warrants to purchase shares of the Company’s common stock were exercised generating $ 9,926,858 . 18,000 warrants were cashless exercises in 2020 and the Company issued 11,304 shares. During the year ended December 31, 2021, 433,937 warrants to purchase shares of the Company’s registered common stock and 11,989 warrants to purchase shares of the Company’s unregistered common stock were exercised generating $ 2,854,222 . The unregistered securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended. 12. REVENUES For each of the identified periods, revenues can be categorized into the following: Schedule of revenues For the Years Ended December 31, 2021 2020 Product sales $ 8,574,096 $ 6,024,274 Maintenance fees 44,068 30,957 Professional services 98,134 57,506 Shipping and handling 319,352 108,173 Discounts and allowances ( 33,899 ) ( 10,560 ) Total revenues $ 9,001,751 $ 6,210,350 International revenues were $ 0 and $ 84,081 , or 0 % and 1 % of revenues, during the years ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2021 and 2020, 62 % and 75 % of revenues were derived from customers located in California, respectively. At December 31, 2021 and 2020, deferred revenue was $ 253,751 and $ 107,489 , respectively. These amounts represented customer deposits in the amount of $ 91,651 and $ 0 for December 31, 2021 and 2020, respectively and prepaid multi-year maintenance plans for previously sold products which account for $ 162,100 and $ 107,489 for December 31, 2021 and 2020, respectively and pertain to services to be provided through 2027. Revenue recognized during the year ended December 31, 2021 and 2020 which pertained to revenue deferred in prior years were $ 37,778 and $ 19,459 , respectively. 13. INCOME TAXES There was no Federal income tax expense for the years ended December 31, 2021 and 2020 due to the Company’s net losses. Income tax expense represents minimum state taxes due. F- 24 The blended Federal and State tax rate of 28.04 % applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 21 % to loss before taxes), as follows: Income tax reconciliation Year ended December 31, 2021 2020 Computed “expected” tax expense (benefit) $ ( 1,384,995 ) $ ( 1,093,697 ) State taxes, net of federal benefit ( 568,269 ) ( 407,798 ) Non-deductible stock options ( 328,295 ) ( 6,933 ) Non-deductible items 1,831 611 True-up to tax return ( 41,173 ) 683,476 Change in deferred tax asset valuation allowance 2,321,726 829,285 Income tax expense $ 825 $ 4,944 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are as follows: Deferred tax assets and liabilities 2021 2020 Deferred tax assets: Stock options $ 406,703 $ 574,365 Deferred Revenue 71,155 31,070 Other 63,473 86,457 Net operating loss carryforward 12,484,444 10,012,021 Total gross deferred tax assets 13,055,775 10,703,913 Less: Deferred tax asset valuation allowance ( 12,978,187 ) ( 10,656,461 ) Total net deferred tax assets 77,588 47,452 Patents ( 24,393 ) Deferred tax liabilities: Depreciation ( 53,195 ) ( 47,452 ) Total deferred tax liabilities ( 77,588 ) ( 47,452 ) Total net deferred taxes $ – $ – As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established. The valuation allowance at December 31, 2021 was $12,978,187. The increase in the valuation allowance during 2021 was $ 2,321,726 . At December 31, 2021, the Company has a net operating loss carry forward of $ 45,229,370 , of which $ 25,107,807 is available to offset future net income through 2037. The net operating loss (“NOL”) expires during the years 2027 to 2037 and $ 20,121,563 may be carried forward indefinitely and limited to offsetting 80% of taxable income. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred. F- 25 No liability related to uncertain tax positions is recorded on the financial statements related to uncertain tax positions. There are no unrecognized tax benefits as of December 31, 2021. The Company does not expect that uncertain tax benefits will materially change in the next 12 months. The Company files U.S. federal, California, New York, and Wisconsin State tax returns, and a New York City tax return. All tax returns will remain open for examination by the federal and state taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards. 14. SUBSEQUENT EVENTS On March 4, 2022, the Company completed its acquisition of AllCell Technologies, LLC (“AllCell”), a leader in energy storage solutions. This strategic acquisition is expected to increase and diversify our Company’s revenue, gross profitability, manufacturing capabilities, intellectual portfolio and customer base. The Company purchased substantially all of the assets and business of AllCell for 1,055,000 shares of Beam Common Stock (“Closing Consideration”) (on the closing date, based on the closing price of the Beam Common Stock of $13.61, such shares had a value of approximately $14.4 million) plus an additional $911,711 in cash for the net working capital of primarily inventory held by AllCell at closing. In addition, AllCell is eligible to earn an additional number of shares of Beam Common Stock if it meets certain revenue milestones (the “Earnout Consideration”). The Earnout Consideration is: (i) two times the amount of AllCell revenue and contracted backlog that is greater than $7.5 million for 2022, and (ii) two times the amount of AllCell 2023 revenue only which exceeds the greater of either $13.5 million or 135% of the 2022 cumulative revenue, capped at $20.0 million. Revenues exceeding $20.0 million in 2023 will not be eligible for the Earnout Consideration. The maximum aggregate amount of shares of Common Stock that Buyer will issue to Seller for the Closing Consideration and Earnout Consideration will not exceed 1.8 million shares. All of the Company’s Common Stock issued to AllCell to satisfy the Closing Consideration and any Earnout Consideration will be issued in a private placement and will be subject to transfer restrictions under the Securities Act of 1933, as amended. Beam has agreed to file a resale registration statement with the SEC to register the resale of up to $10.0 million of the Common Stock issued to AllCell for the Closing Consideration. Pursuant to the terms of the Purchase Agreement, AllCell agreed not to sell shares of Beam Common Stock (i) in an amount greater than four percent (4%) of the average weekly volume of shares of Beam Common Stock during any trading week and (ii) on more than three days in any week and (iii) in an amount greater than ten percent (10%) of the average daily trading volume on any trading day. The acquisition of AllCell will be accounted for as a business combination using the acquisition method of accounting in the first quarter of 2022. Given the recent timing of the transaction close, we are in the process of estimating the fair value of the Earnout Consideration as well as the assets acquired and liabilities assumed in the business combination. As a result, we are currently unable to provide the estimate of the purchase consideration or the preliminary allocation of purchase consideration based on the acquisition date fair values of the assets acquired and liabilities assumed as well as other related information, including pro forma disclosures, determination of segments, reporting units, and the final amount of transaction costs, which will be included in the Quarterly Report on Form 10-Q for the three months ending March 31, 2022. F- 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Beam Global Dated: March 31, 2022 By: /s/ Desmond Wheatley Desmond Wheatley, Chief Executive Officer President and Chairman Power of Attorney Each person whose signature appears below constitutes and appoints each of Desmond Wheatley and Katherine H. McDermott, true and lawful attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated: Name Title Date Principal Executive Officer: /s/ Desmond Wheatley Chief Executive Officer, President and Chairman March 31, 2022 Desmond Wheatley Principal Financial Officer and Principal Accounting Officer: /s/ Katherine H. McDermott Chief Financial Officer March 31, 2022 Katherine H. McDermott Directors: /s/ Peter Davidson Director March 31, 2022 Peter Davidson /s/ Anthony Posawatz Director March 31, 2022 Anthony Posawatz /s/ Nancy Floyd Director March 31, 2022 Nancy Floyd 38