What changed in this filing

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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-31 · 236 added, 194 removed, 292 unchanged (60% of the section changed)

RISK FACTORS.

You should carefully

consider the following risk factors, in addition to the other information contained in this report on Form 10-K, including the section

of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our

financial statements and related notes.

If any of the events described in the following risk factors and the risks described elsewhere

in this report occurs, our business, operating results and financial condition could be seriously harmed.

This report on Form 10-K also

contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated

in the forward-looking statements as a result of factors that are described below and elsewhere in this report.

You should carefully consider

the following risk factors, in addition to the other information contained in this report on Form 10-K, including the section of this

report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial

statements and related notes.

If any of the events described in the following risk factors and the risks described elsewhere in this report

occurs, our business, operating results and financial condition could be seriously harmed.

This report on Form 10-K also contains forward-looking

statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in the forward-looking

statements as a result of factors that are described below and elsewhere in this report.

We have sustained recurring

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For our fiscal years ended December 31, 2022 and December 31, 2021, we experienced net

losses of $6,596,039 and $5,213,025, respectively (reflects cash and noncash expenses under generally accepted accounting principles).

Further, as of December 31, 2021, we had an accumulated deficit of $57,618,645.

In addition, we expect to incur additional losses in the

future, and there can be no assurance that we will achieve profitability.

Our future viability, profitability and growth depend upon our

ability to raise capital and successfully operate and expand our operations.

We cannot assure that any of our efforts will prove successful

or that we will not continue to incur operating losses.

losses of $19.7 million and $6.6 million, respectively, including cash and noncash expenses under generally accepted accounting principles).

Non-cash expenses including depreciation, amortization, non-cash compensation and contingent consideration included in the above losses

are $9.2 million and $1.3 million for fiscal years ended December 31, 2022 and December 31, 2021, respectively.

Further, as of December

31, 2022, we had an accumulated deficit of $77.3 million.

In addition, we expect to incur additional losses in the future, and there can

be no assurance that we will achieve profitability.

Our future viability, profitability and growth depend upon our ability to raise capital

and successfully operate and expand our operations.

We cannot assure that any of our efforts will prove successful or that we will not

continue to incur operating losses.

We may need to raise

additional capital or financing to continue to execute and expand our business.

We expect that the net proceeds from the

public offering in 2020 will be sufficient to sustain our operations for at least the next twelve months, until we are able

to generate positive cashflow through our operations.

However, we may need to raise additional capital to fund investment in our business

or if it takes longer than expected to achieve positive cashflow.

We may be required to pursue sources of additional capital through various

means, including sale and leasing arrangements, and debt or equity financings.

If the amount of capital we are able to raise from financing

activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may have to reduce our operations

face risks related to COVID-19 which could significantly disrupt our manufacturing, research and development, operations, sales and financial

Our business may be adversely impacted by the effects of the Novel Coronavirus (COVID-19).

In addition to global macroeconomic

effects, the COVID-19 outbreak, and any other related adverse public health developments may cause disruption to our business operations

and sales activities.

Our employees, suppliers and customers have been and will continue to be disrupted by absenteeism, quarantines and

restrictions on employees’ ability to work, office and factory closures, delays on deliveries, or other travel or health-related

restrictions.

Depending on the magnitude of such effects on our manufacturing, or the operations of our suppliers, manufacturing and product

shipments will be delayed, which could adversely affect our business, operations.

In addition, COVID-19 or other disease outbreak will

in the short-run, and may over the longer term, adversely affect the economies and financial markets within the U.S., resulting in an

economic downturn that will affect demand for our products, impact our operating results, and have a negative impact on our stock price.

There can be no assurance that any decrease in sales resulting from COVID-19 will be offset by increased sales in subsequent periods.

Although the magnitude of the impact of the COVID-19 outbreak on our business and operations has been minor, it remains uncertain, the

continued spread of the COVID-19 or the occurrence of other epidemics may adversely impact our business, financial condition, operating

results and cash flows.

Because we provide energy and transportation resources which we believe are considered essential services, we

are able to continue to produce and deliver products.

However, it is possible that we will experience disruptions to our business operations

resulting from quarantines, self-isolations, or other restrictions on the ability of our employees to perform their jobs that may impact

our ability to manufacture and deliver products.

Our revenues are concentrated

in a small number of customers and they may decrease significantly if we were to lose one of these customers .

We have a few large

customers including the State of California’s Department of General Services and Electrify America, LLC that generated 38% and 2%,

respectively, of revenues in 2021 and 6% and 30%, respectively, of revenues in 2020.

We have a contract with the State of California which

can be used by a diverse group of state and local agencies within the state or across the country for the purchase of our products.

receipt of orders under this contract has been irregular and can create fluctuation in our revenues.

In addition, there is no obligation

for this customer to purchase any additional units, or to renew the contract when it expires.

The State of California contract will expire

on June 23, 2022.

We are in the process of renewing this contract with the state.

If this customer significantly reduced their purchases

or terminates their contract, our results of operations would be adversely affected.

Our net proceeds from a public offering

in 2020 helped to fund our operations for recent years.

On September 2, 2022, we entered into a Common Stock Purchase Agreement with B.

Riley, under which the Company has the right, in its sole discretion, to sell to B.

Riley up to $30.0 million, or a maximum of 2.0 million

shares of the Company’s common stock at 97% of the volume weighted average price (“VWAP”) of the Company’s common

However, there is no guarantee that we can raise capital using this vehicle at terms that are acceptable to the Company if we need

to fund investment in our business or if it takes longer than expected to achieve positive cashflow.

We may be required to pursue sources

of additional capital through various means, including sale and leasing arrangements, and debt or equity financings.

If the amount of

capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital

needs, we may have to reduce our operations accordingly.

revenues are concentrated in a small number of customers and they may decrease significantly if we were to lose one of these customers .

We have a few large customers including the State of California’s Department of General Services and the City of New York that generated

16% and 6%, respectively, of revenues in 2022 and 38% and 2%, respectively, of revenues in 2021.

In addition, we were awarded several

federal contracts in 2022, that may not be repeated in the future.

The contract with the State of California can be used by a diverse

group of state and local agencies within the state or across the country for the purchase of our products.

The receipt of orders under

this contract has been irregular and can create fluctuation in our revenues.

In addition, there is no obligation for this customer to

purchase any additional units, or to renew the contract when it expires.

The State of California contract will expire on June 23, 2025.

Our revenue growth depends

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results, financial condition and prospects.

We may acquire other businesses, which could

require significant management attention, disrupt our business, dilute stockholder value and harm our business, revenue and financial

As part of our business strategy,

we intend to make acquisitions to add complementary companies, products or technologies, such as our recent acquisition of All Cell.

acquisitions may not achieve our goals, and we may not realize benefits from acquisitions.

Any integration process will require significant

time and resources, and we may not be able to manage the process successfully.

If we fail to successfully integrate acquisitions, or the

personnel or technologies associated with those acquisitions, the business, revenue and financial results of the combined company could

We may not successfully evaluate or utilize the acquired assets and accurately forecast the financial impact of an acquisition,

including accounting charges.

We may also incur unanticipated liabilities that we assume as a result of acquiring companies.

to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition

or the value of our securities.

We would expect to finance any future acquisitions through a combination of additional issuances of equity,

corporate indebtedness or cash from operations.

The sale of equity to finance any such acquisitions could result in dilution to our stockholders.

The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that

would impede our ability to manage our operations.

In the future, we may not be able to find other suitable acquisition candidates, and

we may not be able to complete acquisitions on favorable terms, if at all.

Our acquisition strategy could require significant management

attention, disrupt our business and harm our business, revenue and financial results.

We are dependent on

a limited number of suppliers for our battery cells, and in the current market, there is a risk that these suppliers will not be able

to provide cells at prices and volumes acceptable to us, which could have an adverse effect on our business.

We source battery cells from

a few suppliers, but the demand for cells and for lithium has increased over the past year with the increase in electrification and the

growing demand for electric vehicles.

It is possible that our suppliers will not have adequate supply to cover our demand, or the price

of the cells will increase due to shortages, impacting our ability to ship units and/or cause the price of our products to increase.

we believe that we will be able to establish additional supplier relationships for our battery cells, we may be unable to do so in the

short term or at all at prices, quality or costs that are favorable to us.

We face intense competition,

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with traditional grid-tied charging stations.

Our challenge is to market our products in the industry to ensure that potential customers

in this industry are aware of our product offering.

Competition in the solar renewable energy and EV charging industries is intense, and

competition is fragmented among a wide variety of entities.

We operate in a highly competitive environment that is characterized by price

fluctuations and rapid technological change.

Our competitors often have greater market recognition and substantially greater resources

Competition for Request For Proposals, and in our market in general, may intensify in the future.

Competitors may develop

products based on new solar power technologies that may ultimately have costs similar to, or lower than, our projected costs.

to compete successfully, our business would suffer and we may lose or be unable to gain market share and our business and results of operations

would be adversely affected.

The solar energy industry

and in particular, as it is utilized for EV charging, is an emerging market that is constantly evolving and may not develop to the size

or at the rate we expect.

The solar energy industry, especially as it applies to EV charging, is an emerging and constantly evolving

We believe the industry will take several years to fully develop and mature, and we cannot be certain that the market will grow

at the rate we expect.

Any future growth of the solar energy market in general, and for EV charging in particular, and the success of

our products depend on many factors beyond our control.

These factors include without limitation recognition and acceptance of EVs and

EV charging products by customers and users, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation

of expected tax benefits and other incentives and our ability to provide our product offerings cost-effectively.

If the markets for EV

charging do not develop at the rate we expect, our business may be adversely affected.

Our challenge is to market our products to ensure that potential customers in this industry

are aware of our product offering.

Competition in the solar renewable energy and EV charging industries is intense, and competition is

fragmented among a wide variety of entities.

We operate in a highly competitive environment that is characterized by price fluctuations

and rapid technological change.

Our competitors often have greater market recognition and substantially greater resources than we do.

Competition in our market may intensify in the future.

Competitors may develop products that may ultimately have costs similar to, or

lower than, our projected costs.

If we fail to compete successfully, our business would suffer and we may lose or be unable to gain market

share and our business and results of operations would be adversely affected.

significant portion of our revenue is derived from our core product category.

We are dependent on revenues from our EV ARC™

product to be successful in the future.

While we now have energy storage products following our acquisition of AllCell Technologies,

in 2022 and we offer our Solar Tree product and we intend to bring our EV Standard™ product to market, no assurance can be given

that our EV ARC™ sales will continue to have market acceptance or that they will continue to grow in the future.

The loss or reduction

of sales of this product category could have a material adverse effect on our business, results of operations, financial condition, and

The renewably energized

EV charging industry, is an emerging market that is constantly evolving and may not develop to the size or at the rate we expect.

and wind powered EV charging, is an emerging and constantly evolving market.

We believe the industry may take several years to fully develop

and mature, and we cannot be certain that the market will grow at the rate we expect.

Any future growth of EV charging, and the success

of our products depend on many factors beyond our control.

These factors include without limitation recognition and acceptance of EVs

and EV charging products by customers and users, the pricing of alternative sources of energy, a favorable regulatory environment, the

continuation of expected tax benefits and other incentives and our ability to provide our product offerings cost-effectively.

If the markets

for EV charging do not develop at the rate we expect, our business may be adversely affected.

Tariffs imposed pursuant

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and cash flows.

On January 23, 2018, the President of the United States issued Proclamation 9693, which approved recommendations

to impose safeguard tariffs on imported solar cells and modules, based on the investigations, findings, and recommendations of the U.S.

International Trade Commission (the “International Trade Commission”).

Recently, we have purchased solar panels exclusively

from one supplier who is exempt from these tariffs.

However, additional tariffs were imposed on other products, including cells used in

our batteries.

It is possible that tariffs may increase the costs and restrict the supply of certain of our components, causing us harm.

The imposition of tariffs is likely to result in a wide range of impacts on the targeted U.S.

We currently have no plans to use solar modules which are subject to tariffs, however on January 23, 2018, the

President of the United States issued Proclamation 9693, which approved recommendations to impose safeguard tariffs on imported solar

cells and modules, based on the investigations, findings, and recommendations of the U.S.

International Trade Commission (the “International

Trade Commission”).

Recently, we have purchased solar panels exclusively from one supplier who is exempt from these tariffs.

additional tariffs were imposed on other products, including cells used in our batteries.

It is possible that tariffs may increase the

costs and restrict the supply of certain of our components, causing us harm.

The imposition of tariffs is likely to result in a wide range

of impacts on the targeted U.S.

industries and the global market in general.

Such tariffs, if our products or the parts we use to manufacture our products are ultimately determined to be subject to them, could result

in significant additional costs to us.

If we elected to pass such increase in costs on to our customers, they could cause a significant

reduction in demand for our products.

We currently have no plans to use modules which are subject to tariffs.

Such tariffs, if our products or the parts we use to manufacture

our products are ultimately determined to be subject to them, could result in significant additional costs to us.

If we elected to pass

such increase in costs on to our customers, they could cause a significant reduction in demand for our products.

Existing regulations

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and chief executive officer, as well as other management personnel.

The Compensation Committee is working with a compensation consultant

to structure a long-term compensation plan to retain key employees, however, loss of the services of any such individuals would adversely

impact our operations.

In addition, we believe our technical personnel represent a significant asset and provide us with a competitive

advantage over many of our competitors.

Our future success will depend upon our ability to retain these key employees and our ability

to attract and retain other skilled financial, engineering, technical and managerial personnel.

The Compensation Committee has structured a long-term compensation

plan to retain key employees, however, loss of the services of any such individuals would adversely impact our operations.

we believe our technical personnel represent a significant asset and provide us with a competitive advantage over many of our competitors.

Our future success will depend upon our ability to retain these key employees and our ability to attract and retain other skilled financial,

engineering, technical and managerial personnel.

If we are unable to

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As a manufacturer and seller of goods, we are exposed to the risk of litigation for a variety of reasons in addition

to reasons relating to intellectual property rights, including product liability lawsuits, employee lawsuits, commercial contract disputes,

to reasons relating to intellectual property rights, product liability lawsuits, employee lawsuits, commercial contract disputes,

government enforcement actions, and other legal proceedings.

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incur substantial cost overruns in the development, manufacture, and distribution of products.

Unanticipated costs may force us to obtain

additional capital or financing from other sources and would hinder our ability to earn a profit.

If we incur cost overruns, there is

no assurance that we could obtain the financing or capital to cover them.

If a greater investment in the business is required because

of cost overruns, the probability of earning a profit or a return of the shareholders’ investment in Beam is diminished.

The cost of production materials increased

during the COVID-19 pandemic and they continue to be higher than pre-pandemic days.

Unanticipated costs may force us to obtain additional

capital or financing from other sources and would hinder our ability to earn a profit.

If we incur cost overruns, there is no assurance

that we could obtain the financing or capital to cover them.

The equipment comprising

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The Company sources its materials and components from a wide variety of vendors.

They are standard off-the-shelf components, but these components differ

between manufacturers in terms of their specifications and performance.

If one of these components became unavailable, it could hinder

our ability to operate profitably and have a material adverse impact on our operating results, financial condition and business performance.

We would be able to secure supply from another source and incorporate it in our design, but it would require modifications which could

impact product deliveries.

For these components, we maintain adequate supply to mitigate any supply risk.

They are standard off-the-shelf

components, but these components differ between manufacturers in terms of their specifications and performance.

If one of these components

became unavailable, it could hinder our ability to operate profitably and have a material adverse impact on our operating results, financial

condition and business performance.

We may be able to secure supply from another source and incorporate it in our design, but it would

require modifications which could impact product deliveries.

For these components, we maintain adequate supply to mitigate any supply

We have experienced

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reduction in demand, especially for our EV Standard™ product.

Our media branding and

advertising strategy may not result in a profitable operation of that segment of our business.

We are able to equip our EV

ARC™ and Solar Tree® platforms with digital advertising screens with content that can be controlled directly, and in some cases,

We may also sell other forms of media across our product platforms, such as naming rights or sponsorship deals, as well as traditional

There is no assurance that the revenue model crafted for this capability will be successful or profitable or will not result

in operating losses or rejection by government regulators or consumers.

Sponsors and advertisers for the service may not materialize or

be willing to pay the rates sought by us or our customers.

Our business is impacted

Our media branding and advertising

strategy may not be profitable.

We are able to equip our EV ARC™ and Solar Tree® platforms with digital advertising

screens with content that can be controlled directly, and in some cases, remotely.

We may also sell other forms of media across our product

platforms, such as naming rights or sponsorship deals, as well as traditional fixed media.

There is no assurance that the revenue model

crafted for this capability will be successful or profitable or will not result in operating losses or rejection by government regulators

or consumers.

Sponsors and advertisers for the service may not materialize or be willing to pay the rates sought by us or our customers.

Our business may be impacted

by the availability to our customers of rebates, tax credits and other financial incentives, the reduction, elimination or uncertainty

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tax credit for the installation of solar power systems and associated energy storage systems.

There are additional federal grants available

that encourage renewable investment.

Businesses may also elect to accelerate the depreciation on their systems in the first year of ownership.

Uncertainty about the introduction of, reduction in, or elimination of such incentives, or delays or interruptions in the implementation

of favorable federal or state laws could substantially increase the cost of our systems to some of our customers, resulting in significant

reductions in demand for our products from non-governmental customers, which would negatively impact our sales.

This credit is in effect until 2032.

are additional federal grants available that encourage renewable investment.

Businesses may also elect to accelerate the depreciation

on their systems in the first year of ownership.

Uncertainty about the introduction of, reduction in, or elimination of such incentives,

or delays or interruptions in the implementation of favorable federal or state laws could substantially increase the cost of our systems

to some of our customers, potentially resulting in significant reductions in demand for our products from non-governmental customers,

which would negatively impact our sales.

Our business strategy

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construction for their deployment.

The success of our sales

is dependent upon a continued need for renewable energy.

The topic of alternative fuels has retained a significant status in the

consciousness of the American people, but interest in developing and utilizing alternative fuels could wane unexpectedly at any time.

If such interest were lost or if the demand for alternative fuels were to decrease substantially, the Company could encounter problems

generating sufficient revenue to achieve or sustain profitability or meet its working capital requirements.

The success of our product

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on acceptable terms or at all, or that we will be able to obtain attractive agreements with substitute venues.

Our cash and cash

equivalents could be adversely affected if the financial institutions at which we hold our cash and cash equivalents fail.

We maintain substantially

all of our cash and cash equivalents in accounts with U.S.

banks and financial institutions, including Silicon Valley Bank ("SVB"),

and our deposits at these institutions exceed insured limits.

Market conditions can impact the viability of these institutions.

on March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit

Insurance Corporation (“FDIC”) as receiver.

The FDIC created a successor bridge bank, Silicon Valley Bridge Bank, N.A.

and all deposits of SVB were transferred to SVBB under a systemic risk exception approved by the Federal Reserve, the U.S.

Treasury Department,

and the FDIC.

While the Federal Reserve, the U.S.

Treasury Department, and the FDIC announced in a joint statement on March 12, 2023 that

all SVB deposits, including both insured and uninsured amounts, would be available in full to account holders, a similar failure of any

of the financial institutions where we maintain our cash and cash equivalents could impact our ability to access uninsured funds in a

timely manner or at all.

There is no guarantee that the Federal Reserve Board, the U.S.

Treasury Department and the FDIC will provide

access to uninsured funds in the future in the event of the closure of any other banks or financial institutions in a timely fashion or

Any inability to access or delay in accessing these funds could adversely affect our business, financial position, and liquidity.

If we do not effectively diversify

our bank deposits and investment portfolio, the value and liquidity of our investments may fluctuate substantially which could affect

our access to capital and results of operations in a material way.

Furthermore, our access to our cash and cash equivalents in amounts

adequate to finance our operations could be significantly impaired if the financial institutions with which we have arrangements directly

face liquidity constraints or failures.

Investor concerns regarding the U.S.

or international financial systems could result in less favorable

commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations

on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all.

Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our results of

operations and liquidity.

Risks Relating to our Organization and our Common Stock

The Company was formerly

a shell company.

Because we merged with a non-operating shell company in 2010, our stock that is not registered with the SEC may

become subject to certain additional restrictions if we fail in the future to stay current in our reporting requirements with the SEC.

Our failure to meet

the continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market

price and liquidity of our common shares and our ability to access the capital markets.

Our common stock is listed on the

Nasdaq Capital Market.

Our failure to meet the

continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market price

and liquidity of our common shares and our ability to access the capital markets.

Our common stock is listed on the Nasdaq

Capital Market.

If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements

Nasdaq may take steps to delist our common stock.

Such a delisting would have a negative effect on the price of our common stock, impair

the ability to sell or purchase our common stock when persons wish to do so, and any delisting materially adversely affect our ability

to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all.

Delisting from the

Nasdaq Capital Market could also have other negative results, including the potential loss of institutional investor interest and fewer

business development opportunities.

In the event of a delisting, we would attempt to take actions to restore our compliance with

Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to

become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below

the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

and the minimum bid price requirement, Nasdaq may take steps to delist our common stock.

Such a delisting would have a negative effect

on the price of our common stock, impair the ability to sell or purchase our common stock when persons wish to do so, and any delisting

materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable

terms, or at all.

Delisting from the Nasdaq Capital Market could also have other negative results, including the potential loss of institutional

investor interest and fewer business development opportunities.

In the event of a delisting, we would attempt to take actions to

restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would

allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common

stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

We have identified a

material weakness in our internal control over financial reporting.

material weakness in our internal controls over financial reporting.

This material weakness could continue to adversely affect our ability

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Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with U.S.

Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our

internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is

a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected

on a timely basis.

If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures,

or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could

significantly decline, and our business and financial condition could be adversely affected.

If material weaknesses or significant deficiencies

are discovered or if we otherwise fail to achieve and maintain the adequacy of our internal control, we may not be able to ensure that

we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes

in accordance with U.S.

Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal

controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.

weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable

possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we

discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could significantly

decline, and our business and financial condition could be adversely affected.

If material weaknesses or significant deficiencies are

discovered or if we otherwise fail to achieve and maintain the adequacy of our internal control, we may not be able to ensure that we

can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404

of the Sarbanes-Oxley Act.

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our common stock could decline significantly.

We currently do not have manufacturing

or purchasing systems in place to track inventory and purchasing transactions or a perpetual inventory system.

The Company performs manual

processes during the year to track and control our inventory and purchases.

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.

We plan to invest in new systems in 2022 to automate these functions.

We intend to take certain remedial actions intended

to address the identified material weakness in our internal control over financial reporting.

We currently do not have effective

manufacturing or purchasing systems in place to track inventory and purchasing transactions or a perpetual inventory system.

performs manual processes during the year to track and control our inventory and purchases.

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.

We are implementing new systems beginning in January 2023 with scheduled completion by the end of

Q2 to automate these functions which we believe will alleviate the material weakness in 2023.

However, we can give no assurance that such

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UNRESOLVED STAFF COMMENTS.

Our corporate headquarters

are located at 5660 Eastgate Dr., San Diego, California 92121.

We lease approximately 53,000 square feet of office and warehouse space

pursuant to a five-year lease that extends through August 30, 2025, with two one-year renewal options.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors