Beam Global 10-Q

Item 1A. Risk Factors In addition to the other information set forth in this Form 10-Q and the risk factors set forth below, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition, liquidity or future results. If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, our common stock may be delisted. Our common stock is currently listed on Nasdaq. In order to maintain such listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. On June 2, 2023, the Company notified Nasdaq that effective as of June 30, 2023 it will not be in compliance with Nasdaq Listing Rule 5605(c)(2)(A) as a result of the upcoming resignation, for personal reasons, of a member of the Company’s board who was also a member of the Company’s Audit Committee. Nasdaq Listing Rule 5605(c)(2)(A) requires the Audit Committee to have at least three independent members (as defined by Nasdaq Listing Rule 5605(a)(2) and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934), at least one of whom is an audit committee financial expert. As a result of the resignation of Nancy Floyd, the Company no longer has an Audit Committee comprised of three independent directors. The Nasdaq Listing Rules provide for a cure period during which the Company may regain compliance with Nasdaq Listing Rule 5605(c)(2)(A). Under Nasdaq Listing Rule 5605(c)(4), the Company shall have until the earlier of its next annual meeting of stockholders or one year from the occurrence of the event that caused the failure to comply with Nasdaq Listing Rule 5605(c)(2)(A); provided, however, that if the next annual meeting of stockholders occurs no later than 180 days following the event that caused the vacancy, the Company shall instead have 180 days from such event to regain compliance. The Company is currently interviewing candidates to fill this board vacancy and to chair the audit committee and intends to do so within the applicable cure period. There can be no assurances that we will be able to regain compliance with Nasdaq’s listing standards or if we do later regain compliance with Nasdaq’s listing standards, will be able to continue to comply with the applicable listing standards. If we are unable to maintain compliance with these Nasdaq requirements, our common stock will be delisted from Nasdaq. If Nasdaq delists our common stock, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our securities; ● a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; ● a limited amount of news and analyst coverage for our company; and ● a decreased ability to issue additional securities or obtain additional financing in the future. 25 Risks Relating to the Potential Amiga Acquisition While we have entered into a binding letter of intent with Amiga, we have not entered into negotiations for a purchase and sale agreement therewith and we cannot assure you that the transactions contemplated by our letter of intent will be consummated or, that if such transactions are consummated, they will be accretive to stockholder value. We entered into the LOI with Amiga pursuant to which we agreed to explore an acquisition of the equity stock of Amiga. However, the LOI did not include many of the material terms to any potential transaction with Amiga and there is no guarantee that we will agree to terms or definitive documentation with Amiga in order to effect the proposed acquisition or that we will elect to proceed with the transaction at all after the completion of our due diligence of Amiga, including receipt of audited financial statements of Amiga utilizing U.S. GAAP standards. Accordingly, this offering is taking place prior to the consummation of the proposed acquisition of Amiga. The closing of the proposed acquisition of Amiga, if any, is subject to the negotiation and execution of definitive documentation and will be subject to customary closing conditions including but not limited to the full satisfaction of Beam of its due diligence of Amiga, including review of Amiga’s audited financial statements. As a result, the possible timing and likelihood of the completion of the acquisition are uncertain, and, accordingly, there can be no assurance that such acquisition will be completed on the expected terms, anticipated schedule or at all. This proposed acquisition is in the early stages and due diligence efforts have just commenced. As a result, we may not be able to complete the proposed acquisition on the terms or timetable that we currently contemplate, or at all, and it is possible that one or more conditions to closing will not be satisfied or waived or that other events will intervene to delay or prevent the completion of the proposed acquisition. We may fail to realize all of the anticipated benefits of the proposed acquisition of Amiga or those benefits may take longer to realize than expected and our business, financial condition and results of operation could be materially and adversely affected. We may also encounter significant difficulties in integrating Amiga with Beam and its operations. While our goal is to structure the proposed acquisition of Amiga in a manner that is beneficial and accretive to us over the long term, our accretion analysis and beliefs about the benefits of the proposed acquisition of Amiga are subject to a variety of market and other factors, including, among others: (i) the completion of our due diligence; (ii) the final agreed upon terms of the proposed acquisition; and (iii) our current estimates, assumptions and projections about the current and future operation of Amiga, including, without limitation, estimates, assumptions, and projections about (a) Amiga future origination volumes, operating expenses, financing costs, and ability to profitably sell its products and/or services, and (b) the cost and process of integrating Amiga with our current operations, as well as any one-time costs or charges associated with the proposed acquisition and subsequent integration. Our ability to realize the anticipated benefits of the proposed acquisition will depend, in part, on our ability to integrate Amiga, which may be a complex, costly and time-consuming process. If we are successful in completing the proposed acquisition, we will be required to devote significant management attention and resources to integrate the business practices and operations of the acquired business. The integration process may disrupt our business and, if implemented ineffectively, could restrict the realization of the full expected benefits. In addition, the integration of the acquired business may result in material unanticipated issues, expenses, liabilities, competitive responses, and diversion of management’s attention. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the proposed acquisition could cause an interruption of, or a loss of momentum in, our operations and could materially and adversely affect our business, financial condition and results of operations. Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected benefits and diversion of management’s time and energy, which could adversely affect our business, financial condition and results of operations and result in us becoming subject to litigation. In addition, even if the proposed acquisition were to be integrated successfully, the full anticipated benefits of the proposed acquisition may not be realized within the anticipated time frame, or at all. We may not be able to maintain the results of operations or operating efficiency that we and the acquired business have achieved or might achieve separately. Further, additional unanticipated costs may be incurred in the integration process as a result of risks currently unknown to us. All of these factors could cause reductions in our earnings per share, decrease or delay any accretive or other beneficial effect of the proposed acquisition and negatively impact the price of our common stock. 26 Amiga is a private Serbian company that has not been subject to an audit by an accounting firm under U.S. GAAP standards and has not previously been subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC or other corporate governance requirements. Amiga is a private Serbian company. To date, Amiga has not had its financial statements reviewed or audited by an accounting firm under U.S. GAAP standards and has not been subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements to which public reporting companies may be subject. As a result, if we successfully complete our due diligence and if we elect to proceed with the acquisition, we will be required to implement the appropriate internal control processes and procedures over Amiga’s financial accounting and reporting. The combined company may incur significant legal, accounting and other expenses in efforts to ensure that Amiga meets these requirements. Implementing the controls and procedures at Amiga that are required to comply with the various applicable laws and regulations may place a significant burden on our management and internal resources. The diversion of management’s attention and any difficulties encountered in such an implementation could adversely affect our business, financial condition and operating results. Our inability to successfully integrate Amiga’s operations could adversely affect our operations; potential need for additional financing. Our potential acquisition of Amiga represents a significant investment. The proposed acquisition requires our and Amiga’s significant attention and resources, which could reduce the likelihood of achievement of other corporate goals. Both we and Amiga have experienced significant operating losses. As a result, we may need additional financing to help fund our business and satisfy our obligations, which will require additional management time to address. There is no assurance that we will realize the benefits of the acquisition of Amiga that we hope will be achieved. If the acquisition of Amiga is successful, Beam expects to generate an increasing portion of its revenue internationally in the future and may become subject to various additional risks relating to its international activities, which could adversely affect its business, operating results and financial condition. Beam has limited experience operating internationally and engaging in international business involves a number of difficulties and risks, including: · the challenges associated with building local brand awareness, obtaining local key opinion leader support and clinical support, implementing reimbursement strategies and building local marketing and sales teams; · required compliance with foreign regulatory requirements and laws, including regulations and laws; · trade relations among the United States and those foreign countries in which Beam’s future customers, distributors, manufacturers and suppliers have operations, including protectionist measures such as tariffs and import or export licensing requirements, whether imposed by the United States or such foreign countries; · difficulties and costs of staffing and managing foreign operations; · difficulties protecting, procuring or enforcing intellectual property rights internationally; · required compliance with anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act, data privacy requirements, labor laws and anti-competition regulations; · laws and business practices that may favor local companies; 27 · longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; · political and economic instability; and · potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers. In the event that Beam dedicates significant resources to its international operations and is unable to manage these risks effectively, Beam’s business, operating results and financial condition may be adversely affected. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable.