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Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 310 added, 271 removed, 330 unchanged (64% of the section changed)

FINANCIAL STATEMENTS

Condensed Balance Sheets

(In thousands, except share and per share data)

Balance Sheets

(In thousands)

Current assets

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Property and equipment, net

Operating lease right of use asset

Operating lease right of use assets

Intangible assets, net

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Deferred revenue, current

Note payable, current

Contingent consideration, current

2 unchanged sentences

Deferred revenue, noncurrent

Note payable, noncurrent

Contingent consideration, noncurrent

1 unchanged sentence

Total liabilities

Commitments and contingencies (Note 9)

Stockholders' equity

Preferred stock, $ 0.001 par value, 10,000,000 authorized, none outstanding as of March 31, 2023 and December 31, 2022.

Common stock, $ 0.001 par value, 350,000,000 shares authorized, 10,238,389 and 10,178,306 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.

Preferred stock, $ 0.001 par value, 10,000,000 authorized, none outstanding as of June 30, 2023 and December 31, 2022.

Common stock, $ 0.001 par value, 350,000,000 shares authorized, 13,941,056 and 10,178,306 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.

Additional paid-in-capital

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part of these unaudited condensed financial statements

Condensed Statements of Operations

(Unaudited, in thousands except per share data)

Three Months Ended

Statement of Operations

in thousands except per share data)

Six Months Ended

Cost of revenues

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Loss from operations

Other income (expense)

Interest income

Interest expense

Loss before income tax expense

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part of these unaudited condensed financial statements

Condensed Statements of Changes in Stockholders'

(Unaudited, in thousands)

Additional Paid-in

Total Stockholders'

Statements of Changes

in Stockholders’ Equity

(Unaudited, in

Stockholders’

Balance at December 31, 2021

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Balance at March 31, 2022

Stock issued for director services - vested

Stock issued to escrow account - unvested

Stock issued for acquisition

Stock option expense

Warrants exercised for cash

Balance at June 30, 2022

Total Stockholders’

Balance at December 31, 2022

Stock issued for director services - vested

Stock issued to (released from)

escrow account - unvested

Stock issued to

(released from) escrow account - unvested

Stock-based compensation to consultants

Employee stock-based compensation

Employee stock-based compensation expense

Warrants exercised for cash

Sale of stock under Committed Equity

Sale of stock under Committed Equity Facility

Balance at March 31, 2023

Stock issued for director services - vested

Stock issued to

(released from) escrow account - unvested

Settlement of earnout related to acquisition

Employee stock-based compensation expense

Proceeds from issuance

of common stock, pursuant to public offering

Warrants exercised for cash

Sale of stock under Committed Equity Facility

Balance at June 30, 2023

The accompanying unaudited notes are an integral

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(Unaudited, in thousands)

Three Months Ended

Six Months Ended

Operating Activities:

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Employee stock-based compensation

Amortization of operating lease right of use asset

Stock Compensation expense for non-employees

Changes in assets and liabilities:

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Prepaid expenses and other current assets

Increase (decrease) in:

Accounts payable

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Financing Activities:

Proceeds from sale of stock under committed equity facility, net of offering

Proceeds from sale of common stock under committee equity facility, net of offering costs

Proceeds from warrant exercises

Proceeds from issuance of common stock and warrants, pursuant to public offering

Net cash provided by financing activities

Net decrease in cash

Net increase (decrease) in cash

Cash at beginning of period

Cash at end of period

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

Cash paid for taxes

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

Fair value of common stock issued as consideration for business combination

Purchase of property and equipment by incurring current liabilities

Purchase of property and equipment by incurring debt

Depreciation cost capitalized into inventory

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Nature of Operations

Beam Global, a Nevada corporation (hereinafter the “Company,”

“us,” “we,” “our” or “Beam”), is a sustainable technology innovation company based in

San Diego, California.

We develop, manufacture

and sell high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy security,

disaster preparedness and outdoor media advertising.

Beam Global, a Nevada corporation

(hereinafter the “Company,” “us,” “we,” “our” or “Beam”), is a sustainable

technology innovation company based in San Diego, California.

We develop, manufacture, and

sell high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy security, disaster

preparedness and outdoor media advertising.

We also produce proprietary energy storage battery products.

Vehicle (EV) charging infrastructure products are powered by locally generated renewable energy and enable vital and highly valuable

services in locations where it is either too expensive, too disruptive or impossible to connect to a utility grid, or where the

requirements for electrical power are so important that grid failures, like blackouts, are intolerable.

We do not compete with EV

charging companies;

rather, we enable such companies by providing infrastructure solutions that replace the time consuming and

expensive process of construction and electrical work which are usually required to install traditional grid-tied EV chargers.

also do not compete with utilities.

Our products provide utilities with another tool to deliver reliable and low-cost electricity to

EV chargers and, in the case of a grid failure, to first responders and others, through our integrated emergency power panels.

also provide energy storage technologies that make commodity battery cells safer, longer lasting and more energy efficient and our

battery management systems (BMS) and associated packaging make batteries safe and usable in a variety of mobility, energy-security

and stationary applications.

Our Electric Vehicle (EV) charging

infrastructure products are powered by locally generated renewable energy and enable vital and highly valuable services in locations where

it is either too expensive, too disruptive, or impossible to connect to a utility grid, or where the requirements for electrical power

are so important that grid failures, like blackouts, are intolerable.

We do not compete with EV charging companies;

rather, we enable

such companies by providing infrastructure solutions that replace the time consuming and expensive process of construction and electrical

work which are usually required to install traditional grid-tied EV chargers.

We also do not compete with utilities.

Our products provide

utilities with another tool to deliver reliable and low-cost electricity to EV chargers and, in the case of a grid failure, to first responders

and others, through our integrated emergency power panels.

We also provide energy storage technologies that make commodity battery cells

safer, longer lasting and more energy efficient and our battery management systems (BMS) and associated packaging make batteries safe

and usable in a variety of mobility, energy-security, and stationary applications.

Our charging infrastructure

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In management’s opinion, all adjustments (consisting of normal recurring adjustments

and reclassifications) necessary to present fairly our results of operations and cash flows for the three months ended March 31, 2023

and 2022, and our financial position as of March 31, 2023, have been made.

The results of operations for such interim periods are not

necessarily indicative of the operating results to be expected for the full year.

and reclassifications) necessary to present fairly our results of operations and cash flows for the three months and six months ended

June 30, 2023 and 2022, and our financial position as of June 30, 2023, have been made.

The results of operations for such interim periods

are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures

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The Company has not experienced any

losses in such accounts from inception through March 31, 2023.

As of March 31, 2023, approximately $ 0.9 million of the Company’s

losses in such accounts from inception through June 30, 2023.

As of June 30, 2023, approximately $ 26.4 million of the Company’s

cash deposits were greater than the federally insured limits.

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assesses the financial strength of its customers.

For the three months ended March 31, 2023, two customers accounted for 80 %

Army) and 10 %

of total revenue, respectively.

For the three months ended March 31, 2022, three customers accounted for 22 %, 16 %

We are not aware of any material credit risks associated with our customers.

of our second quarter revenues were derived from pre-funded federal, state and local government programs, and the remaining 14 %

were derived from commercial customers that we believe have good credit or, alternatively, favorable payment terms which minimizes

our credit risk with respect to such customers.

For the three months ended June 30, 2023, four customers accounted for 40 %, 30 %, 10 %

of total revenues and for the six months ended June 30, 2023, three customers accounted for 51 %, 23 %

of total revenues each.

At March 31, 2023, accounts receivable from the U.S.

Army accounted for 76 %

For the three months ended June 30, 2022, revenues from three customers accounted for 41 %, 34 %

of total revenues and for the six months ended June 30, 2022, revenues from three customers accounted for 58 %, 23 %

of total revenues.

At June 30, 2023, accounts receivable from two customers accounted for 50 %

of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance.

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of total accounts receivable each with no other single customer accounting for more than 10% of the accounts receivable balance.

the three months ended March 31, 2023 and 2022, the Company’s sales to federal, state and local governments represented 86 %

the three months ended June 30, 2023 and 2022, the Company’s sales to federal, state and local governments represented 86 %

of revenues, respectively.

Significant Accounting Policies

During the three months ended

March 31, 2023, there were no changes to our significant accounting policies as described in in our Annual Report on Form 10-K for the

year ended December 31, 2022.

During the six months ended

June 30, 2023, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year

ended December 31, 2022, except for the adoption of ASC Topic 326 effective January 1, 2023 with no material effect on the financial statements.

Net Loss Per Share

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Options to purchase 354,498

shares of common stock and warrants to purchase 624,306 shares of common stock were outstanding at March 31, 2023.

shares of common stock and warrants to purchase 620,105 shares of common stock were outstanding at June 30, 2023.

Options to purchase

269,433 common shares and warrants to purchase 505,714 shares of common stock were outstanding at March 31, 2022.

284,433 common shares and warrants to purchase 469,621 shares of common stock were outstanding at June 30, 2022.

These options and warrants

were not included in the computation of diluted loss per share for the three months ended March 31, 2023 and 2022 because the effects

would have been anti-dilutive.

were not included in the computation of diluted loss per share for the three months ended June 30, 2023 and 2022 because the effects would

have been anti-dilutive.

These options and warrants may dilute future earnings per share.

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in a single operating segment.

The Company has a

history of net losses for the three months ended March 31, 2023 and 2022 where

the Company had net losses of $ 3.8

million (which includes $ 0.9

The Company had net

losses of $ 7.4 million (which includes $ 2.1

million of non-cash expenses) and $ 5.1

million , respectively, and net cash used in operating activities of $0.6 million and $1.9 million, At March 31, 2023, the

Company had a cash balance of $ 1.0

million (which includes $ 0.7

million of non-cash expenses) and net cash used in operating activities of $5.1 million and $7.4 million for the six months

ended June 30, 2023 and 2022, respectively.

At June 30, 2023, the Company had a cash balance of $ 23.7

million and working capital of $ 37.1

The working capital balance is reduced by a current liability of $6.8 million for contingent consideration, which is

a non-cash, all stock earn-out payment associated with the 2022 acquisition of AllCell Technologies.

Based on the Company’s

current operating plan, the Company believes that it has the ability to fund its operations and meet contractual obligations for at

least twelve months from the date of this report.

In 2022, the Company entered into a Common Stock Purchase Agreement and

Registration Rights Agreement with B.

In June of 2023, the Company sold shares of its common stock in a public offering and received net proceeds of

approximately $ 25

million after deducting underwriting discounts and commissions and offering expenses paid by the Company.

The Company intends to use

the proceeds to fund the acquisition of Amiga DOO Kraljevo (See note 3 below for further information), a European based manufacturer of smart

street lights, street furniture and communications and security infrastructure products, in furtherance of the Company’s

strategy to expand its business in Europe as well as for working capital and general corporate purposes.

Company’s current operating plan, the Company believes that it has the ability to fund its operations and meet contractual

obligations for at least twelve months from the date of this report.

In 2022, the Company entered

into a Common Stock Purchase Agreement and Registration Rights Agreement with B.

Riley Principal Capital II, LLC (“B.

Riley”) under which the Company has the

right, but not the obligation, to sell up to $30.0 million shares or a maximum of 2.0 million shares of its common stock over a

period of 24 months in its sole discretion (see note 11 for further information).

The Company issued 37,741

shares in January and February 2023 for $ 0.7

million under this agreement.

The Company’s outstanding warrants generated $ 0.1

million of proceeds during each of the three months ended March 31, 2023 and 2022.

In March 2023, the Company secured

under which the Company has the right, but not the obligation, to sell up to $30.0 million shares or a maximum of 2.0 million shares of

its common stock over a period of 24 months in its sole discretion (see note 11 for further information).

The Company issued 198,033 shares

for $2.5 million for the first six months of 2023 under this agreement, compared to none for the same period in 2022.

The Company’s

outstanding warrants generated $ 0.1

million of proceeds during each of the six months ended June 30, 2023 and 2022.

There are remaining 420,105

warrants issued as part of our 2019 Nasdaq up-listing which have an exercise price of $6.30 and which expire in April of 2024.

Company has total warrants outstanding to purchase 620,105

shares of our Common Stock at June 30, 2023, which could potentially generate an additional $6.0 million of proceeds over the next

4.8 years, conditioned upon the warrant holders’ ability and decision to exercise them.

The proceeds from these offerings are

expected to provide working capital to fund business operations and the development of new products.

March 2023, the Company secured a $ 100

million credit facility with OCI Group to support our working capital requirements.

Furthermore, we

could pursue other equity or debt financings.

The Company believes that it will become profitable in the next few years as our

revenues continue to grow, we improve our gross margins and we leverage our overhead costs, but we expect to continue to incur

losses for a period of time.

There is no guarantee that profitable operations will be achieved, the warrants will be exercised or

that additional capital or debt financing will be available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to meet

our obligations or enable us to continue to implement our long-term business strategy.

In addition, obtaining additional funding

or entering into other strategic transactions could result in significant dilution to our stockholders.

Furthermore, we could pursue other equity

or debt financings.

The Company believes that it will become profitable in the next few years as our revenues continue to grow, we

improve our gross margins and we leverage our overhead costs, but we expect to continue to incur losses for a period of time.

is no guarantee that profitable operations will be achieved, the warrants will be exercised or that additional capital or debt

financing will be available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to

meet our obligations or enable us to continue to implement our long-term business strategy.

In addition, obtaining additional

funding or entering into other strategic transactions could result in significant dilution to our stockholders.

BUSINESS COMBINATION

All Cell Technologies, LLC

On March 4, 2022, the

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in energy storage solutions.

We believe this strategic acquisition will 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 All Cell for 1,055,000

shares of our common stock (“Closing Consideration”) plus an additional $0.8 million in cash for the net working

capital held by All Cell at closing.

This acquisition has increased and diversified our Company’s revenue, intellectual property

portfolio and customer base, and improved our gross profitability and manufacturing capabilities.

The Company purchased

substantially all of the assets and business of All Cell for 1,055,000

shares of our common stock (“Closing Consideration”) plus an additional $0.8 million in cash for the net working capital

held by All Cell at closing.

In addition, All Cell is eligible

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used in Beam Global products will not be considered as contributing to revenue in the Earnout calculation.

The fair value of consideration

transferred consisted of the following (in thousands):

Schedule of Noncash or Part Noncash Acquisitions

Working Capital Cash Payment

Earnout Consideration

Total consideration transferred

The following table summarizes

the fair values of assets acquired and liabilities assumed as of the acquisition date (in thousands):

Schedule of assets acquired and liabilities assumed

Prepaid expenses

Property, plant and equipment

Right-of-use asset

Intangible assets, including goodwill

Total assets acquired

Customer deposits

Lease liability

Total liabilities assumed

Total assets and liabilities assumed

The Company incurred $ 0.1

million of transaction costs during the year ended December 31, 2022, directly related to the acquisition that is reflected in operating

expenses in the statement of operations.

Goodwill represents the excess

of the total purchase price over the fair value of the underlying net assets, largely arising from synergies expected to be achieved by

the combined company and expanded market opportunities.

The goodwill is expected to be fully deductible for tax purposes.

The valuation of the Earnout

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Change in the fair value of the Earnout Consideration during the year ended December

31, 2022 and the quarter ended March 31, 2023 is as follows (in thousands):

31, 2022 and the six months ended June 30, 2023 is as follows (in thousands):

Schedule of fair value earnout

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Balance as of December 31, 2022

Issue earnout shares for 2022

Change in estimated fair value

Balance as of March 31, 2023

The fair values assigned

to identifiable intangible assets and goodwill acquired are as follows ($ in thousands):

Schedule of acquired intangible assets

Useful Life (yrs.)

Developed technology

Customer relationships

The fair values of the developed

technology, trade name, customer relationships and backlog were estimated using an income approach.

Under the income approach, an intangible

asset’s fair value is equal to the present value of future economic benefits in the form of cash flows to be derived from ownership

of the asset.

The estimated fair values were developed by discounting future net cash flows to their present value at market-based rates

The useful lives of the intangible assets for amortization purposes were determined by considering the period of expected cash

flows used to measure the fair values of the intangible assets adjusted as appropriate for entity-specific factors including legal, competitive,

and other factors that may limit the useful life.

The identifiable intangible assets are amortized on a straight-line basis over their

estimated useful lives except for customer deposits which uses accelerated depreciation.

Pro Forma Unaudited Financial Information

The following pro forma unaudited

financial information summarizes the combined results of operations of Beam Global and All Cell as if the companies had been combined

as of the beginning of the year ended December 31, 2021 (unaudited and in thousands):

Schedule of Pro Forma Information

Year Ended December 31,

The pro forma unaudited financial

information is presented for information purposes only and is not indicative of the results of operations that would have been achieved

had the acquisition been completed at the beginning of the year ended December 31, 2021.

In addition, the pro forma unaudited financial

information is not a projection of future results of operations of the combined company, nor does it reflect the expected realization

of any synergies or cost savings associated with the acquisition.

The pro forma unaudited financial information includes adjustments to

reflect the incremental amortization expense of the identifiable intangible assets and transaction costs, as well as removes the impact

of the debt that was not acquired by the Company and payments to a non-employee.

The statement of operations

for the year ended December 31, 2022 includes revenues of $ 5.2 million and loss from operations of $ 10.1 million , respectively, from the

acquired All Cell business.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other

current assets are summarized as follows (in thousands):

Schedule of Other Current Assets

Vendor prepayments

Deferred equity offering costs

Prepaid insurance

Related party receivable

Total prepaid expenses and other current assets

Related party receivables

as of March 31, 2023 and December 31, 2022 consisted primarily of payroll related taxes due for stock-based compensation.

Balance as of June 30, 2023

Amiga DOO Kralievo

On June 12, 2023, the Company

and the stockholders (the “Sellers”) of Amiga DOO Kraljevo, a Serbian Company that manufactures specialized structures and

equipment (“Amiga”), executed a binding Letter of Intent (the “LOI”) for Beam to acquire all the equity stock

of Amiga subject to customary closing conditions including but not limited to the full satisfaction of Beam of its due diligence of Amiga.

Amiga is a private, family-owned

company, founded in 1990 in Kraljevo, Serbia.

It employs approximately 210 employees, including a team of engineers.

Its business includes,

without limitation, production of (i) poles for public lighting;

(ii) poles for mobile telephone, networks and transmission lines;

poles for tram, trolleybus, and railways;

(iv) poles for contact networks, masts, portals and semi-portals for road and railway signaling;

(v) large steel lattice structures for specific purposes (e.g., stadiums, factories, power plants, etc.);

and (vi) distribution and command

electrical cabinets.

Amiga currently has engineering, product development and manufacturing capabilities which we believe are well suited

to manufacturing and perfecting Beam’s current products for the European market.

Amiga is one of Europe’s leading manufacturers

of streetlights and Beam believes it is well positioned to bring Beam’s patented EV Standard™ to market both in the EU and

Amiga’s team of engineers will be integrated with Beam’s current team which Beam believes will provide a valuable enhancement

and acceleration of product development cycles.

Amiga has disclosed to Beam that it generated over EUR 8.5M in revenue in 2022 and had

a gross profit during that period.

Amiga’s current customer

list includes entities in 16 international nations which are similar to Beam’s current customers in the United States, creating

what Beam believes will be a significant post-acquisition advantage in selling Beam’s products to an international customer base.

Pursuant to the terms of

the LOI, Beam will acquire all the equity stock of Amiga from the Sellers in exchange for cash and Beam common stock as set forth below.

With respect to the cash portion of the purchase price, Beam will pay to the Sellers, (i) EUR 4,550,000 at closing and (ii) EUR 2,450,000

on or before December 31, 2023 (assuming closing has occurred on or before such date).

With respect to the equity portion of the purchase

price, Beam will also issue to the Sellers a certain number of shares of Beam common stock (at a price per share equal to the volume

weighted average price of Beam’s common stock for the five trading days prior to the closing):

(i) at the closing, such number

of shares of Beam common stock equal to an aggregate of EUR 1,950,000, and (ii) on or before December 31, 2023, such number of shares

of Beam common stock equal to an aggregate of EUR 1,050,000.

In addition, each of the Sellers are eligible to earn additional shares

of Beam common stock if such Seller is providing services to Beam and Amiga meets certain revenue milestones for fiscal years 2023 and

2024 (the “Earnout Consideration”).

The Earnout Consideration that Sellers are eligible to receive for 2023 is equal to two

times the amount of net revenue of Amiga (“Amiga Net Revenue”) that is greater than EUR 10,000,000 for 2023.

Consideration that Sellers are eligible to receive for 2024 is equal to (i) two times the amount of Amiga Net Revenue for 2024 that exceeds

the greater of (i) EUR 13,500,000 or (ii) 135% of the Amiga Net Revenue for 2023.

The Earnout Consideration for each period will be calculated

based on the volume weighted average price of Beam’s common stock for the thirty trading days prior to the end of the applicable

measurement period.

In no event and under no circumstances will the Sellers receive from Beam or will Beam issue to the Sellers in connection

with the Transaction Beam’s common stock in an amount that exceeds 19.99% of the outstanding common stock of Beam immediately prior

to the closing.

We expect the acquisition of Amiga to assist in introducing our products to the European Union, increasing and diversifying

our revenues, enhancing our manufacturing and engineering capabilities, accelerating the development of EV Standard™ and other

products both in Europe and the US, adding new customer segments in both Europe and the US, increasing barriers to entry for future competition,

and advancing Beam’s position as a leader in the green economy.

Inventory consists of the following (in thousands):

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Schedule of intangible assets

December 31, 2022

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Weighted-average Amortization Period (yrs)

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Intangible assets

June 30, 2023

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Weighted-average Amortization Period (yrs)

Developed technology

Customer relationships

Intangible assets

ACCRUED EXPENSES

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Total accrued expenses

In May 2023, the Company purchased

two new trucks and financed the purchase through an auto loan.

The loan has a term of 60 months, requires monthly payments of approximately

$ 4,452 , and bears interest at a rate of 7.55 percent per year.

Payment on the loan begins in July 2023, and the loan has a short-term

balance of $ 37,000 .

COMMITMENTS AND CONTINGENCIES

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be involved in litigation relating to claims arising out of our operations in the normal course of business.

As of March 31, 2023, there

As of June 30, 2023, there

were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

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There was no Federal income

tax expense for the three months ended March 31, 2023 or 2022 due to the Company’s net losses.

tax expense for the six months ended June 30, 2023 or 2022 due to the Company’s net losses.

Income tax expense represents minimum

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As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established

to offset all deferred tax assets as of March 31, 2023 and no benefit has been provided for the year-to-date loss.

to offset all deferred tax assets as of June 30, 2023 and no benefit has been provided for the year-to-date loss.

On a quarterly basis,

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STOCKHOLDERS’ EQUITY

Stock Issued For Services

During the three months

ended March 31, 2023, the Company issued 6,444

shares of its common stock in exchange for marketing services to be provided over a six-month period.

The fair value of such stock

issued is $ 0.1

million and was recorded to prepaid expenses and other current assets upon issuance to be recognized over the service

Committed Equity Facility

On September 2, 2022,

2, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B.

Pursuant to the

Purchase Agreement, the Company has the right, in its sole discretion, to sell to B.

the Purchase Agreement, 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 stock on the trading day, calculated in accordance with the Purchase Agreement, over a period of 24 months

subject to certain limitations and conditions contained in the Purchase Agreement.

Sales and timing of any sales are solely at the

election of the Company, and the Company is under no obligation to sell any common stock to B.

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

common stock on the trading day, calculated in accordance with the Purchase Agreement, over a period of 24 months subject to certain limitations

and conditions contained in the Purchase Agreement.

Sales and timing of any sales are solely at the election of the Company, and the Company

is under no obligation to sell any common stock to B.

Riley under the Purchase Agreement.

As consideration for B.

Riley’s commitment to purchase shares of the Company’s common stock, in September 2022, the

Company issued B.

shares of its common stock and will issue an additional 10,484 shares of its common stock or a cash payment of $150,000, at the

Company’s sole discretion, sometime after the first VWAP purchase occurs.

The Company incurred an aggregate

cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value of the 10,484 shares of common

stock issued to B.

Riley upon the execution of the agreement and the additional comment shares of 10,484, which was recorded to prepaid

expenses and other current assets on the Balance Sheet to be offset against future proceeds from the sale of the Company’s common

stock under the Purchase Agreement.

During the three months ended

March 31, 2023, the Company issued 37,741 shares under this agreement for $ 0.7 million in proceeds, of which $ 0.5 million was offset by

the offering costs.

Riley’s commitment

to purchase shares of the Company’s common stock, in September 2022, the Company issued B.

Riley 10,484 shares of its

common stock, and, in April 2023 issued an additional 10,484 shares of its common stock.

Company incurred an aggregate cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value

of the 10,484 shares of common stock issued to B.

Riley upon the execution of the agreement and the additional shares of 10,484 executed

in April 2023, which were recorded as equity on the Balance Sheet and offset proceeds from the sale of the Company’s common stock

under the Purchase Agreement.

the six months ended June 30, 2023, the Company issued 198,033 shares under the Purchase Agreement for

$2.5 million in proceeds, of which $ 0.5 million was offset by the offering costs.

Stock Issued For Services

During the six months ended

June 30, 2023, the Company issued 6,444 shares of its common stock in exchange for marketing services to be provided over a six-month

The fair value of such stock issued is $ 0.1 million and was recorded to prepaid expenses and other current assets upon issuance

to be recognized over the service period which ends in the third quarter of 2023.

Stock Options

Option activity for the three months ended March

Option activity for the six months ended June

30, 2023 is as follows:

Schedule of option activity

Contractual Life

Number of Options

Weighted Average

Exercise Price

Weighted Average Remaining Contractual Life

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Outstanding at June 30, 2023

The fair value of each option

is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the table below and we assumed

there would not be dividends granted for the options granted during the three months ended March 31, 2023 and 2022:

there would not be dividends granted for the options granted during the six months ended June 30, 2023 and 2022:

Assumptions for options granted

Three months ended March 31,

Six months ended

June 30, 2023

Expected volatility

1 unchanged sentence

Expected term

6.5 - 7 Years

Risk-free interest rate

1 unchanged sentence

Weighted-average FV

The Company’s

stock option compensation expense was $ 0.1

million for each of the three months ended March 31, 2023 and 2022, and there was $ 1.2

million of total unrecognized compensation costs related to outstanding stock options at March 31, 2023 which will be

recognized over 3.7

Total intrinsic value of options outstanding and options exercisable were $ 2 .0

million and $ 1.7

million , respectively, as of March 31, 2023.

The number of stock options vested and unvested as of March 31, 2023 were 267,975

respectively.

The Company’s stock option compensation expense

was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023 respectively, and $ 0.1 million and $ 0.2 million for

each of the three and six months ended June 30, 2022.

There was $ 1.0 million of total unrecognized compensation costs related to outstanding

stock options at June 30, 2023 which will be recognized over 4.0 years.

Total intrinsic value of options outstanding and options exercisable

were $ 0.8 million and $ 0.7 million , respectively, as of June 30, 2023.

The number of stock options vested and unvested as of June 30,

2023 were 276,836 and 77,662 , respectively.

Restricted Stock Units

In November 2022, the

Company granted 142,500

restricted stock units (“RSUs”) and up to 142,500 performance stock units (“PSU”) to its Chief Executive

Officer (“CEO”).

In November 2022, the Company

granted 142,500 restricted stock units (“RSUs”) and up to 142,500 performance stock units (“PSU”) to its Chief

Executive Officer (“CEO”).

50% of the RSUs vested upon grant, with 25% vesting on February 1 st of 2024 and 2025.

number of shares that will be earned under the PSUs will be determined based on the achievement of specific performance metrics

during the three-years ending December 31, 2024.

There was no activity during the three months ended

March 31, 2023.

142,500 PSUs and 71,250 RSUs remained outstanding as of March 31, 2023, with weighted-average grant-date fair values of

$ 13.05 each.

Stock compensation

expense related to the RSUs and PSUs was $ 0.3

million during the three months ended March 31, 2023, with $ 2.3

million in unrecognized stock compensation expense remaining to be recognized over 1.9

years as of March 31, 2023.

The number of shares that will be earned under the PSUs will be determined based on the achievement of specific performance metrics during

the three-years ending December 31, 2024.

There was no activity during

the six months ended June 30, 2023.

142,500 PSUs and 71,250 RSUs remain outstanding as of June 30, 2023, with weighted-average grant-date

fair values of $ 13.05 each.

Stock compensation expense

related to the RSUs and PSUs was $ 0.6 million during the six months ended June 30, 2023, with $ 2.0 million in unrecognized stock compensation

expense remaining to be recognized over 1.67 years as of June 30, 2023.

Restricted Stock Awards

3 unchanged sentences

four quarters.

The Company also issues restricted stock to its CEO, 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 vesting.

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.

The Company also previously issued restricted stock awards to its CEO, 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 vesting.

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 three months ended March 31, 2023 is as follows:

awards for the six months ended June 30, 2023 is as follows:

Schedule of restricted stock award activity

Average Grant-

Date Fair Value

Nonvested Shares

Weighted-Average

Grant Date Fair Value

Nonvested at December 31, 2022

Nonvested at March 31, 2023

Nonvested at June 30, 2023

Stock compensation expense

related to restricted stock awards was $ 0.1

million during each of the three months ended March 31, 2023 and 2022.

As of March 31, 2023, there

related to restricted stock awards was $ 0.2 million during each of the six months ended June 30, 2023 and 2022.

As of June 30, 2023, there

were unreleased shares of common stock representing $ 0.2 million of unrecognized restricted stock grant expense which will be recognized

over 1.50 years.

During the three months

ended March 31, 2023, the Company issued 200,000

warrants with a $17.00 strike price to purchase the Company’s common stock for investor relations services to be provided over a

five-year period.

The awards are immediately exercisable but are subject to repurchase by the Company until the required service is

The fair value of such warrants was $ 8.05

per share or $ 1.6

million on the date of grant using the Black-Scholes option-pricing model.

This model incorporated certain assumptions for

inputs including a risk-free market interest rate of 3.86 %,

expected dividend yield of the underlying common stock of 0 %,

expected life of 2.5

During the six months

ended June 30, 2023, the Company issued warrants to purchase up to 200,000

shares of the Company’s common stock at a price per share equal to $17.00 to a consultant for investor relations services to

be provided over a five-year period.

The warrants are immediately exercisable but are subject to repurchase by the Company until the

required service is provided.

The fair value of such warrants was $8.05 per share or $ 1.6 million

on the date of grant using the Black-Scholes option-pricing model.

This model incorporated certain assumptions for inputs

including a risk-free market interest rate of 3.86%, expected dividend yield of the underlying common stock of 0%, expected life of

2.5 years and expected volatility in the market value of the underlying common stock based on our historical volatility of 99.6%.

The fair value of the warrants was recorded to prepaid expenses and other current assets to be recognized over the service period.

At March 31, 2022, $ 1.6

million of cost has not been recognized and will be recognized over the next 5.0

During the six months ended June 30, 2023, $ 0.1

million was recorded as expense and at June 30, 2023, $1.5 million of cost has not been recognized and will be recognized over the

next 4.75 years.

A summary of activity of warrants outstanding

for the three months ended March 31, 2023 is as follows:

for the six months ended June 30, 2023 is as follows:

Schedule of common stock warrant activity

2 unchanged sentences

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Exercisable at March 31, 2023

Outstanding at June 30, 2023

Exercisable at June 30, 2023

Exercisable warrants as of

March 31, 2023 have a weighted average remaining contractual life of 1.05 years.

The intrinsic value of the exercisable shares of the

warrants at March 31, 2023 was $ 4.1 million .

June 30, 2023 have a weighted average remaining contractual life of 2.08 years.

The intrinsic value of the exercisable shares of the warrants

at June 30, 2023 was $ 1.7 million .

For each of the identified

2 unchanged sentences

Three Months Ended

Six Months Ended

Product sales

4 unchanged sentences

Total revenues

During the three months ended

March 31, 2023 and 2022, 60 % and 48 % of revenues were derived from customers located in California, respectively.

During the six months ended

June 30, 2023 and 2022, 13 % and 43 % of revenues were derived from customers located in California, respectively.

In addition, 10.3 % and

4 % of revenues in the three months ended March 31, 2023 and 2022 were international sales, respectively.

At March 31, 2023 and December

10.4 % of revenues in the six months ended June 30, 2023 and 2022 were international sales, respectively.

At June 30, 2023 and December

31, 2022, deferred revenue was $ 1.1 million and $ 1.4 million , respectively.

These amounts consisted mainly of customer deposits in the

amount of $ 0.7 million and $ 1.0 million for March 31, 2023 and December 31, 2022, respectively and prepaid multi-year maintenance plans

for previously sold products which account for $ 0.4 million and $ 0.3 million for March 31, 2023 and December 31, 2022, respectively, and

amount of $ 0.7 million and $ 1.1 million for June 30, 2023 and December 31, 2022, respectively and prepaid multi-year maintenance plans

for previously sold products which account for $ 0.4 million and $ 0.3 million for June 30, 2023 and December 31, 2022, respectively, and

pertain to services to be provided through 2029.

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-Q

Item 1. Financial Statements