Beam Global 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This report contains forward-looking statements that are based on current expectations, estimates, forecasts, and projections about us, the industry in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” and variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause the Company’s actual results to be materially different from any future results expressed or implied by the Company in those statements. The most important factors that could prevent the Company from achieving its stated goals include, but are not limited to, the following: (a) volatility or decline of the Company’s stock price, or absence of stock price appreciation; (b) fluctuation in quarterly results; (c) failure of the Company to earn revenues or profits; (d) inadequate capital to continue or expand its business, and the inability to raise additional capital or financing to implement its business plans; (e) reductions in demand for the Company’s products and services, whether because of competition, general industry conditions, loss of tax incentives for solar power, technological obsolescence or other reasons; (f) litigation with or legal claims and allegations by outside parties; (g) insufficient revenues to cover operating costs, resulting in persistent losses; (h) rapid and significant changes to costs of raw materials from government tariffs or other market factors; (i) failure to realize the anticipated benefits of any acquisition or difficulties in integrating any acquisition with the Company and its operations; (j) the preceding and other factors discussed in Part I, Item 1A, “Risk Factors,” and other reports we may file with the Securities and Exchange Commission from time to time; and (k) the factors set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Because factors referred to elsewhere in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022 (sometimes referred to as the “2022 Form 10-K”) that we previously filed with the Securities and Exchange Commission, including without limitation the “Risk Factors” section in the 2022 Form 10-K, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-looking statements or to reflect events or circumstances arising after the date of this report on Form 10-Q. 17 Overview Beam Global develops, manufactures, and sells high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy storage, energy security, disaster preparedness and outdoor media. The Company has five product lines that incorporate our proprietary technology for producing a unique alternative to grid-tied charging, having a built-in renewable energy source in the form of attached solar panels and/or light wind generator to produce power and battery storage to store the power. These products are rapidly deployable and attractively designed and include: - EV ARC™ Electric Vehicle Autonomous Renewable Charger – a patented, rapidly deployed, infrastructure product that uses integrated solar power and battery storage to provide a mounting asset and a source of power for factory installed electric vehicle charging stations of any brand. The electronics are elevated to the underside of the sun-tracking solar array making the unit flood-proof up to nine and a half feet and allowing adequate space to park a vehicle on the engineered ballast and traction pad which gives the product stability and a certified wind rating of 160 miles per hour. - Solar Tree® DCFC – Patented off-grid, renewably energized and rapidly deployed, single-column mounted smart generation and energy storage system with the capability to provide a 150kW DC fast charge to one or more electric vehicles or larger vehicles. - EV ARC™ DCFC – DC Fast Charging system for charging EVs comprised of four interconnected EV ARC™ systems and a 50kW DC fast charger. - EV-Standard™ – patent issued on December 31, 2019 and currently under development. A lamp standard, EV charging and emergency power product which uses an existing streetlamp’s foundation and a combination of solar, wind, grid connection and onboard energy storage to provide curbside charging. - UAV ARC™ - patent issued on November 24, 2020 and currently under development. An off-grid, renewably energized and rapidly deployed product and network used to charge aerial drone (UAV) fleets. We believe that there is a clear need for a rapidly deployable and highly scalable EV charging infrastructure, and that our products fulfill that requirement. Unlike grid-tied installations which require general and electrical contractors, engineers, consultants, digging trenches, permitting, pouring concrete, wiring, and ongoing utility bills, the EV ARC™ system can be deployed in minutes, not months, and is powered by renewable energy so there is no utility bill. We are agnostic as to the EV charging service equipment or provider and integrate best of breed solutions based upon our customer’s requirements. For example, our EV ARC™ and Solar Tree® products have been deployed with Chargepoint, Blink, Enel X, Electrify America and other high quality EV charging solutions. We can make recommendations to customers, or we can comply with their specifications and/or existing charger networks. Our products replace the infrastructure required to support EV chargers, not the chargers themselves. We do not sell EV charging, rather we sell products which enable it. 18 We believe our chief differentiators for our electric vehicle charging infrastructure products are: · our patented, renewable energy products dramatically reduce the cost, time and complexity of the installation and operation of EV charging infrastructure and outdoor media platforms when compared to traditional, utility grid tied alternatives; · our proprietary and patented energy storage solutions; · our first-to-market advantage with EV charging infrastructure products which are renewably energized, rapidly deployed and require no construction or electrical work on site; · our products’ capability to operate during grid outages and to provide a source of EV charging and emergency power rather than becoming inoperable during times of emergency or other grid interruptions; and · our ability to continuously create new and patentable marketable inventions by integrating our proprietary technology and parts, and other commonly available engineered components, which create a further barrier to entry for our competition; · our international operations in two of the three largest automotive markets in the world today. With the acquisition of All Cell Technologies, LLC (“All Cell”) in March 2022, we now offer Beam AllCell™ energy storage technology with a highly flexible lithium-ion and/or lithium iron phosphate battery platform architecture. The battery design uses a proprietary phase change material which provides a low-cost thermal management solution and a unique safety mechanism to prevent propagation of thermal runaway. Our batteries are ideally suited for applications where energy density, safety and specialized enclosures require high power in small spaces. Drones, submersibles, medical and recreational products and a host of micro mobility products benefit from this technology. Beam is already using AllCell™ energy storage products in EV ARC™ products for EV charging and plans to incorporate this battery technology in our new product designs that are under development. On October 20, 2023, Beam acquired Amiga DOO Kraljevo (“Amiga”), pursuant to a Share Sale and Purchase Agreement dated October 6, 2023 (the “Purchase Agreement”) by and among Beam and the owners of Amiga (the “Sellers”). Amiga is a business located in Serbia and engaged in the manufacture and distribution of steel structures with electronic integration, including (i) infrastructure products for public lighting; (ii) infrastructure products for mobile telephone, networks and transmission lines; (iii) infrastructure products for tram, trolleybus, and railways; (iv) infrastructure products 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 has engineering, product development and manufacturing capabilities which we believe are well suited to manufacture and sell Beam’s current and future products in the European market. As a large European manufacturer of streetlights, we believe Amiga is well positioned to assist in the development of the EV-Standard ™ for both the European and US markets. Overall Business Outlook Our revenues for the first nine months of 2023 were $47.3 million, a 236% increase over $14.1 million for the first nine months in 2022, primarily derived from delivery of EV ARC™ systems to federal and other customers, as well as energy storage solutions in the U.S. and internationally. We have invested in sales and marketing resources over the past three years which has created increased demand for our EV ARC™ renewable chargers. Additionally, we reported revenues of $6.0 million year-to-date through September 30, 2023 from our battery storage business as a result of our acquisition of All Cell in March 2022. The Company believes there continues to be a high level of support for funding EV charging infrastructure from both government and commercial entities, including a number of federal grants available under the Inflation Reduction Act. In addition, certain of our commercial customers may benefit from the Federal Solar Investment Tax Credit and accelerated depreciation as allowed under Section 179 of IRS code which, we believe, provide a competitive advantage for our products over traditionally installed EV charging infrastructure which is not eligible for these incentives. Given these available incentives, we have invested in a federal lobbyist, a federal business development resource and a government relations employee, who have helped to identify opportunities on the federal side and have increased awareness of our product and outreach with federal agencies. In addition, the General Services Administration (GSA) awarded Beam Global a federal blanket purchase agreement which provides federal agencies a streamlined procurement process for procuring EV ARC™ systems. As a direct result, Beam Global was awarded a number of federal government orders in September through November 2022 that have or will be delivered in 2023. In the nine months ended September 30, 2023, we recorded revenues of $33.2 million for federal customers, compared to $3.2 million for the same period in 2022 due to these orders. We expect to see uneven orders from quarter to quarter, especially with our federal customers, but over time we expect our revenues to grow. 19 In addition, partially due to companies requiring employees to return to the workplace rather than working remotely from home as was the case during the pandemic, we are seeing an increase in requests for workplace charging and corporate which we expect to continue. We expect the electric vehicle market to continue to experience significant growth over the next decade which will in turn cause a requirement for additional EV charging infrastructure. We believe our products are positioned to benefit significantly from this growth. We believe the Company’s acquisition of the assets of All Cell, a battery technology company, will increase our new customer opportunities. As a result of the acquisition of All Cell, we believe Beam’s gross margin will continue to improve by utilizing the Beam All-Cell™ battery and other storage technology solutions engineered by our team of engineers and scientists in Broadview, IL, in its EV ARCs™ systems, because we can reduce costs by retaining gross profits previously paid to battery vendors. We now also have the ability to value engineer bespoke battery solutions for our products. Beam All-Cell ™ batteries are ideally suited for applications where energy density, safety and bespoke enclosures require high power in small spaces. Drones, submersibles, recreational products and a host of micro mobility and electric vehicle products are already benefiting from our Beam All-Cell ™ highly differentiated products. With the continued growth of untethered electrification, we believe there is opportunity for increased demand in these markets and others. In October 2023, the Company completed the acquisition of Amiga. Amiga is an established manufacturer of specialized steel structures and equipment, producing street lights, communications and energy infrastructure whose manufacturing, engineering and sales teams service municipalities, states and commercial customers in 16 nations. The Company believes that the addition of Amiga will expand Beam’s presence into the European market and increase its production, engineering, sales and product development expertise. The EU has mandated a transition to zero emission vehicles by 2035 and they are heavily focused on green and sustainable energy. An increase in electric vehicles adoptions will increase the demand for charging infrastructure. We believe that our sustainably energized EV ARC TM and EV Standard™ products can play a major role in the provision of EV charging infrastructure in Europe. Beam Europe is already producing components for EV ARC™ systems in our factory in Kraljevo at the time of this filing. Our energy security business is connected with the deployment of our EV charging infrastructure products and serves as an additional benefit and value proposition for our charging products which, along with their integrated emergency power panels, can continue to operate, charge EVs, and deliver emergency power during utility grid failures. The state-of-the-art storage batteries installed on our EV charging systems are immune to grid failures and provide another benefit for customers such as municipalities, counties, states, the federal government, hospitals, fire departments, large private enterprises with substantial facilities, and vehicle fleet operators. We are in development on our newest patented products - our EV Standard™ and UAV ARC™, which we expect will expand our product offerings leveraging the same proprietary technology as our current products and allow us to expand into new markets. Beam Europe is one of Europe’s largest manufacturers of streetlights and has a team of qualified structural, electrical and civil engineers who are experts in the field of development and deployment of street lighting. They are working with our engineers in San Diego and Chicago to finalize the engineering and product development on our new EV Standard™ product. We believe that EV Standard™ may become our largest selling product when available for sale. Our gross profit as a percentage of sales in Q3 2023 was 1.7% of revenues, compared to -$5.1% gross loss in Q3 2022. Gross margins improved to 1.7% as a percentage of revenues in the nine months ended September 30, 2023, compared to a -6.9% gross loss for the same period in 2022. Additionally, our cost of goods sold included non-cash intellectual property amortization of $0.6 million and $0.5 million for the first nine months of 2023 and 2022, respectively, related to the acquisition of All Cell in 2022. Excluding this non-cash expense results in a positive gross profit of 2.9% for the nine months ended September 30, 2023. We increased the number of EV ARC deliveries from 136 in the first nine months of 2022 to 537 in the first nine months of 2023 which resulted in favorable fixed overhead absorption and improved labor efficiencies gained by the higher volume. There is no guarantee that our growth will continue at this same pace and expect that the receipt of orders may be choppy quarter over quarter, but we expect that in the long-term, our revenues will continue to grow. Our gross profit improvements were achieved in spite of ongoing inflation and the high costs of many of our components, including steel, that began during the Covid pandemic and are only starting to decrease on new supply chain orders placed in 2023. We expect to see these costs continue to decrease over time. Batteries are the highest cost contributor to our bill of materials, but with the acquisition of All Cell, we have seen these costs decrease. We are implementing lean manufacturing process improvements and making engineering changes to our product where we expect to benefit from cost reductions. Many of the components that we integrate into our products are manufactured by others. This is consistent with our strategy to take advantage of the investment by large and well-funded organizations in the improvement of various components and sub-assemblies which we integrate into our final product. We continue to identify components and sub-assemblies that may be more cost effective to outsource, which may further reduce our costs, increase our gross margins, and significantly increase the potential output from our factory. We expect to see a significant increase in the demand for electric vehicle charging infrastructure and as such we do not anticipate significant pricing pressure on our products. The combination of this increase in demand for electric vehicle charging infrastructure and our revenues, and the cost cutting measures described above lead us to believe that we will see improvement in our gross margins over the next year. Beam Europe has capabilities to self perform several activities which we outsource in the US. We believe that in combination with a generally less expensive operating environment in Serbia, we will be able to produce our products in Europe less expensively than in the US even as we continue to reduce our costs in there. 20 Significant Accounting Policies and Estimates The Company’s significant accounting policies are described in Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes in these policies or their application. Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of intangible assets, valuation of contingent consideration liability, estimates of loss contingencies, estimates of the valuation of lease liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets. Changes in Accounting Principles . There were no significant changes in accounting principles that were adopted during the nine months ended September 30, 2023. Results of Operations Comparison of Results of Operations for the Three Months Ended September 30, 2023 and 2022 Revenues. For the quarter ended September 30, 2023, our revenues increased 149% to $16.5 million compared to $6.6 million for the same period in 2022. Revenues to federal customers increased by $7.5 million in Q3 2023 compared to the quarter ended September 30, 2022. We also recorded energy storage revenues of $2.1 million as a result of our acquisition of All Cell in 2022. We continue to invest in sales and marketing employees, resources and programs to raise awareness of the benefits and value of our products, which is reflected in the strong year over year sales growth in the quarter. The receipt of orders may continue to be uneven due to the timing of customer approvals or budget cycles, however we believe that as EV adoption increases in concert with increased availability of infrastructure funding, our business will be less impacted by specific variations in order timing. Gross Profit. For the quarter ended September 30, 2023, our gross profit was $0.3 million, or 2% of sales, compared to a gross loss of $0.3 million, or 5% of sales for the same period in 2022. As a percentage of sales, the margin improved by 7%, primarily due to the increase in production levels in the current quarter compared to the prior year, which resulted in favorable fixed overhead absorption. Our gross profits were negatively impacted by $0.2 million for non-cash intangible amortization. We began to see some improvements in material pricing in 2023, which we believe will continue to improve over time. Our labor efficiency improved during the quarter as a result of a steady flow of units through the factory. We also implemented some new equipment and design changes during 2023 which helped to increase our production to meet the growing demand and which is helping to reduce the labor and material cost of our product. In addition, as our revenues continue to increase in 2023 and beyond, we expect our fixed overhead absorption to also improve. Our engineering and operations teams have identified further cost reductions and efficiencies which we believe will improve our gross margins further in Q4 of 2023 and Q1 of 2024. Operating Expenses. Total operating expenses were $4.0 million, or 24% of revenues, for the quarter ended September 30, 2023, compared to $6.5 million, or 98% of revenues, for the same quarter in the prior year, a decrease of 73% as a percentage of revenues. The $2.4 million decrease is mostly attributable to $3.9 million increase in the fair value of contingent consideration in the prior year compared to no change in the third quarter of 2023, partially offset by increases of $0.5 million for sales and marketing expenses, primarily for commissions due to higher revenues, $0.3 million for non-cash compensation expenses, $0.1 million for recruiting fees, $0.3 admin salaries and bonus accrual, $0.1 million for facility costs and $0.2 million of other increases as we scale up the business. 21 Comparison of Results of Operations for the Nine Months Ended September 30, 2023 and 2022 Revenues. For the nine months ended September 30, 2023, our revenues increased 236% to $47.3 million compared to $14.1 million for the same period in 2022. Revenues to federal, state and local governments increased by $31.6 million in the first nine months of 2023 compared to the same period in the prior year. International customers comprised 10% of the revenues through September 30, 2023, and were primarily from our energy storage business. Revenues derived from non-government, commercial entities increased by 28% from Q3 2022 to Q3 2023 year to date representing a partial return to pre-COVID levels. We recorded energy storage revenues of $6.0 million as a result of our acquisition of All Cell in 2022. We continue to invest in sales and marketing employees, resources and programs to raise awareness of the benefits and value of our products, which is reflected in the strong year over year sales growth in the quarter. The receipt of orders may continue to be uneven due to the timing of customer approvals or budget cycles, however we believe that as EV adoption increases in concert with increased availability of infrastructure funding, our business will be less impacted by specific variations in order timing. Gross Profit. For the nine months ended September 30, 2023, our gross profit was $0.8 million, or 2% of sales, compared to a gross loss of $1.0 million, or 7% of sales in the same period of 2022. As a percentage of sales, the margin improved by 9%, primarily due to the increase in production levels in the current quarter compared to the prior year, which resulted in favorable fixed overhead absorption. Our gross profits were negatively impacted by $0.6 million for non-cash intangible amortization. We began to see some improvements on material pricing in 2023, which we believe will continue to improve over time. In addition, our labor efficiency improved during the quarter as a result of a steady flow of units through the factory. We continue to make engineering changes and work with suppliers to improve our costs which will continue to improve our gross profit over time. Operating Expenses. Total operating expenses were $11.9 million, or 25% of revenues, for the nine months ended September 30, 2023, compared to $10.9 million, or 78% of revenues, for the same period in the prior year, an improvement of 53% as a percentage of revenues. The $1.0 million increase is mostly attributable to $1.0 million for non-cash compensation expenses, $1.0 million for admin salaries and bonus accrual, $0.8 million increase in sales and marketing expense, primarily for commissions due to higher revenues, $0.6 million for R&D salaries and expenses, $0.2 million for recruiting costs, $0.2 million for accounting fees, $0.2 million for facility costs, and $0.4 million of other increases, offset by a $3.4 million decrease in the fair value of contingent consideration in the prior year to date compared to 2023. Due to the acquisition of All Cell that closed in March 2022, expenses for the first nine months of 2022 do not include operating expenses for January and February, which accounts for approximately $0.5 million of the increase. $3.0 million of the $11.9 million year to date 2023 operating expense is comprised on non-cash expense. Liquidity and Capital Resources At September 30, 2023, we had cash of $14.8 million, compared to cash of $1.7 million at December 31, 2022. We have historically met our cash needs through a combination of debt and equity financing. Our cash requirements are generally for operating activities. Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the table below: September 30, 2023 2022 Cash provided by (used in): Net cash used in operating activities $ (13,768 ) $ (15,724 ) Net cash used in investing activities $ (881 ) $ (1,645 ) Net cash (used in) provided by financing activities $ 27,726 $ 100 22 For the nine months ended September 30, 2023, our cash used in operating activities was $13.8 million compared to $15.7 million for the nine months ended September 30, 2022. Net loss of $11.0 million for the nine months ended September 30, 2023 was increased by $3.2 million of non-cash expense items that included depreciation and amortization of $1.1 million, common stock issued for services for director compensation of $0.3 million, employee stock-based compensation expense of $1.3 million, change in the fair value of contingent consideration liabilities of $0.3 million and $0.3 million of other for stock compensation for non-employees. Further, cash used in operations included a $10.5 million increase in accounts receivable due to the increase in revenues and the timing of customer payments, $1.1 million increase in inventory and $0.6 million decrease in deferred revenue for customer deposits. Cash generated from operations included a $4.3 million increase in accounts payable primarily for inventory, $1.4 million increase in accrued expenses, and $0.5 million decrease in prepaid expenses and other current assets. For the nine months ended September 30, 2022, our cash used in operating activities was $15.7 million. Net loss of $11.9 million for the nine months ended September 30, 2022 was increased by $5.1 million of non-cash expense items that included a change in fair value of contingent consideration of $3.7 million, depreciation and amortization of $0.8 million, common stock issued for services for director compensation of $0.3 million and non-cash compensation expense related to the grant of stock options of $0.3 million. Further, cash used in operations included a $2.2 million increase in accounts receivable, $1.0 million increase in prepaid expenses and other current assets, primarily related to the prepayment of battery cells, and $8.3 million increase in inventory (i) to secure battery cells required for battery manufacturing in case of potential future supply chain challenges and (ii) due to higher work in process inventory of nearly complete EV ARC units that were waiting for parts as well as finished EV ARC units awaiting final delivery at September 30, 2022. Cash provided by operations included a $2.3 million increase in accounts payable primarily for inventory, $0.2 million increase in deferred revenue and $0.2 million increase in accrued expenses. Cash used in investing activities in the nine months ended September 30, 2023 included $0.8 million for the purchase of equipment; primarily transportation equipment, a sleeving machine and an automated welder used in our battery manufacturing and $0.1 million for patent costs. The nine months ended September 30, 2022 included a $0.8 million working capital cash payment related to the acquisition of All Cell and $0.8 million to purchase equipment and patent costs. For the nine months ended September 30, 2023, cash generated by our financing activities included $25.4 million in proceeds from the public offering issuance of common stock, net of offering expenses, $2.1 million for shares sold through the Company’s equity facility, $0.2 million for repayment of note payable and $0.1 million from the exercise of warrants, compared to $0.3 million for the exercise of warrants for the same period in the prior year. Current assets were $45.8 million on September 30, 2023, an increase from $19.9 million at December 31, 2022, primarily due to increases of $13.1 million in cash, $10.5 million in accounts receivable, $1.1 million in prepaid expenses and other current assets and $1.3 million in inventory. Current liabilities decreased to $11.5 million at September 30, 2023 from $13.2 million at December 31, 2022, primarily due to a $6.8 million decrease in a non-cash contingent consideration reserve attributable to our March 2022 acquisition of All Cell, and a $0.7 million decrease in deferred revenue, offset by a $4.3 million increase in accounts payable and $1.3 million increase in accrued expenses. As a result, our working capital increased to $34.4 million at September 30, 2023 compared to $6.8 million at December 31, 2022. The Company has been focused on marketing and sales efforts to increase our revenues. Revenues increased by 45% from 2020 to 2021, 144% from 2021 to 2022, and the first nine months of 2023 was 236% higher than the first nine months of 2022 demonstrating that this investment has been successful. Improvements to gross profitability have been made despite the current inflationary period. As revenues increase, we expect to continue to see our fixed overhead costs spread over more units, which will reduce the cost per unit. Our engineering and operations teams have made several design changes and process improvements in our product development and manufacturing operations in 2023 which has helped to increase labor efficiency and reduce material costs. In addition, the Company has increased pricing for the first time to cover some of the inflationary cost increases, which we should benefit from as those proposals become orders and are shipped in future quarters. 23 On March 22, 2023, the Company entered into that certain Supply Chain Line of Credit with OCI Limited (“OCI”), whereby OCI may provide a supply chain line of credit in the amount of up to $100 million based on the amounts of approved accounts receivable of the Company (the “Credit Facility”). In order to request a drawdown on the Credit Facility, the Company is required to submit a transaction request to OCI which sets forth the terms of the applicable account receivables, including but not limited to the name of the party responsible for the applicable account receivables (the “Obligor”), the terms of repayment and the amount of such receivables. The Company has no obligation to submit a drawdown request and OCI is not obligated to accept any drawdown request from the Company. In the event OCI accepts a drawdown request of the Company and upon satisfaction of certain conditions required by OCI to issue the drawdown, OCI will disburse funds to the Company for such drawdown in an amount equal to the full value of the applicable account receivables assigned to OCI minus any transaction expenses incurred by OCI and the full amount of interest to be incurred for such receivables over the term of the drawdown. The Company will pay interest on any drawdown at the Secured Overnight Financing Rate +300 basis points. Upon the disbursement of funds to the Company for a drawdown, the Company will assign all rights to such account receivables of the Obligor to OCI. The Company will act as collection agent on any account receivables assigned to OCI and agrees to establish a designated bank account for the purpose of collecting payment on any applicable account receivables that are assigned to OCI. In the event (i) the Company is in material breach of the Credit Facility, (ii) the Company or the Obligor is insolvent or is subject to reorganization or liquidation, or (iii) any dispute related to an agreement with an Obligor or non-payment by an Obligor, OCI has the right to exercise any contractual rights it may have against Obligor, increase the interest rate to the agreed upon default interest rate, and demand immediate repayment by the Company for the outstanding amounts owed under such account receivables. The Company has also agreed to indemnify OCI for any losses incurred by OCI in connection with the Credit Facility. Either party may terminate the Credit Facility at any time by providing fifteen (15) days prior written notice to the other party. To date, Beam Global has not drawn on this line of credit. The Company may be required to raise capital until it achieves positive cash flow from its business, which is predicated on increasing sales volumes and the continuation of production cost reduction measures. In September 2022, the Company entered into a Common Stock Purchase Agreement with B. Riley under which the Company has the right to sell up to $2 million of its common stock over a period of 24 months (see note 10 for further information.) In addition, we could pursue other equity or debt financing. Furthermore, the Company has warrants to purchase 618,395 shares of our Common Stock outstanding at September 30, 2023, which could potentially generate an additional $6.0 million of proceeds over the next 4.5 years, depending 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. Management cannot currently predict when or if it will achieve positive cash flow. 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. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors. 24 Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable.