Item 7. Management’s Discussion and Analysis
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Beam develops, manufactures
and sells high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy storage, energy
security, disaster preparedness and outdoor media advertising.
The Company has designed 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. Our product lines include:
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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 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.
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Solar Tree® DCFC – Off-grid, renewably energized and rapidly deployed, patented 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.
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EV ARC™ DCFC – DC Fast Charging system for charging EVs comprised of four interconnected EV ARC™ systems and a 50kW DC fast charger.
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EVStandard TM – 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.
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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.
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With the acquisition of All
Cell Technologies, LLC (“All Cell”) in March 2022, we offer Beam AllCell™ energy storage technology with a highly flexible
lithium-ion and 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. They 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, we acquired Amiga DOO Kraljevo (“Amiga”) a business located in Serbia and engaged in the manufacture and
distribution of steel structures with electronic integration, such as streetlights, cell towers, and ski lift towers. In addition to their
current products, Amiga has engineering, product development and manufacturing capabilities which we believe are well suited to
manufacture and sell Beam’s current products in the European market. Also, Amiga is one of Europe’s leading manufacturers
of streetlights and Beam believes it is well positioned to develop and manufacture Beam’s patented EV Standard™ for sale in
both Europe and the U.S. We believe this provides Beam with a growth opportunity to sell its products in the European market through Amiga’s
extensive customer base.
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.
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 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 products which are marketable and are a complex integration of our proprietary technology and parts, and other commonly available engineered components, which create a further barrier to entry for our competition.
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Beam’s revenues increased
from $22.0 million in 2022 to $67.4 million in 2023. We believe this was the result of the ongoing maturation of the electric vehicle
ecosystem, increased urgency for charging infrastructure as more EVs are adopted, an increased understanding of the challenges facing
the installation and operation of utility grid-tied chargers and due to our increased investment in sales and marketing resources over
the past two years which has increased awareness of our products. During the year ended December 31, 2023, 64% of product sales were to
Federal customers, a 569% increase over the prior year, primarily due to several large orders received in late 2022, including a $29.4
million order through Techflow, Inc. for the US Army (IMCOM), an $11.7 million order for the General Services Administration for the Department
of Veterans Affairs, and several other orders for the Department of Homeland Security, US Navy Facilities, US Marine Corps, and others.
State and Local governments accounted for 16% of revenues driven by a $5.3 million order from New York City to deliver EV ARCs TM
throughout the city. Revenues from our energy storage products were $8.5 million in 2023, a 63% increase over 2022 revenues. In addition,
as a result of our acquisition of Amiga in October 2023, we reported revenues of $3.4 million for the period from October 20, 2023 through
December 31, 2023.
We have in place a Multiple
Award Schedule Contract with the General Services Administration (GSA) that helps streamline purchases from Federal agencies and state
and local governments. In addition, the General Services Administration (GSA) awarded Beam Global a federal blanket purchase agreement
(BPA) which provides federal agencies a streamlined procurement process for procuring EV ARC™ systems. We have also continued to
invest in our federal business channel which has helped us to identify federal opportunities and increased awareness of our product and
outreach with federal agencies. In addition, there continues to be support for funding EV charging infrastructure on the state and federal
level, as well as a number of federal grants available in addition to the 30% Federal Solar Investment Tax Credit and Rule 179 accelerated
depreciation which provide a strong financial incentive for many of our target commercial customers. Strength in federal orders continued
with a new order announced in January 2024 from the U.S. Army Corps of Engineers, Army Material Command (AMC) for $7.4 million. With our
acquisition of Amiga in October 2023, we now have a facility in Europe that can manufacture and sell Beam products for the European market.
Europe is the largest market in the world for electric vehicles and is a strong proponent of clean energy. We believe there is a lot of
potential for growth in this region. We also expect the electric vehicle market to continue to experience significant growth over the
next decade as evidenced by 61 new electric vehicles that were launched in 2022 which will require additional EV charging infrastructure.
We believe our products are uniquely positioned to benefit from this growth.
Our energy security business
is also connected with the deployment of our EV charging infrastructure products and serves as an additional benefit to the value proposition
of 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. Our 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 continue development of
our EV Standard™ and UAV ARC™, which we expect will expand our product offerings with the same proprietary technology as our
current products and allow us to expand into new markets. Beam Europe’s team of engineers is integrated with Beam’s U.S. based
team which Beam believes will provide a valuable enhancement and acceleration of product development cycles.
The Company reported a positive
gross profit of $1.2 million for 2023, compared to a $1.7 million gross loss in 2022. The gross profit benefited from increased volume
resulting in increased fixed overhead absorption, partially offset by an increase in fixed overhead spending (including indirect headcount,
service support, depreciation for capital to increase capacity, etc.). We realized labor efficiencies because of the higher volume being
produced, but this was partially offset by a higher labor rate due to the use of temporary agencies to meet our delivery requirements.
Material costs increased during the Covid-19 pandemic, but we have seen some reduction in costs in the second half of 2023 for certain
steel components and cells. Our engineering team has implemented some design changes during 2023 which reduced the bill of materials for
the EV ARC TM , improving our product margins especially in Q4 2023. This was partially offset by $0.1 million increase in warranty
cost and $0.5 million increase in scrap due to a favorable adjustment in 2022. We continually review the components and sub-assemblies
which we manufacture or assemble in-house to determine if costs can be reduced further if we outsource, and we are constantly looking
for cost reductions on our purchased parts. We implemented a price increase on our EV ARC TM which we began to quote in 2023
and we should begin to benefit from in 2024, after our proposals convert to orders and are delivered to our customers. We expect the increase
in demand for electric vehicle charging infrastructure to continue and as such we do not anticipate any negative impact on our price increase.
We expect to get a full-year benefit from the design changes implemented in 2023, which should also increase our 2024 gross profit. Increased
volumes will also continue to provide favorable fixed overhead absorption in the future. The combination of the 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 significant improvement in our gross profit margins in the near future.
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Critical Accounting Estimates
The
financial statements and related disclosures were prepared in accordance with U.S. generally accepted accounting principles which require
us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. We base our estimates and assumptions on historical experience
and on various other factors that we believe to be reasonable under the circumstances, and we continually evaluate our assumptions and
modify as needed. To the extent there are material differences between our estimates and the actual results, our future results of operations
will be affected.
Business Combination. The
purchase price of an acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated
fair values at the acquisition date. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible
assets assumed, such excess is allocated to goodwill. Contingent consideration liability is estimated using a Monte Carlo simulation model
to determine the probability of achieving certain milestones. There are a number of estimated inputs required to perform the fair value
calculations including future expected revenues, expenses, capital expenditures, discount rates, market values of assets, etc. The fair
value for contingent consideration is reviewed each quarter after the original valuation to determine if revised estimates are necessary.
It is often very difficult to obtain information to help in the estimation process, depending on the sophistication of the acquired company
or market data on this company’s products.
Valuation of Inventory
and standard cost allocations. Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in,
first-out method of accounting. Inventory costs primarily relate to purchased raw materials and components used in the manufacturing of
our products, work in process for products being manufactured, and finished goods. Included in these costs are direct labor and certain
manufacturing overhead costs associated with normal capacity in the manufacturing process. During 2023, the Company applied labor and
overhead based on a standard costing model that required a number of assumptions to determine an optimal labor and overhead allocation
which requires an estimate of total shipments and forecasted spending. In addition, a review of inventory is required to estimate whether
specific reserve estimates are needed for warranty or for excess or obsolete inventory. Changes in demand can significantly impact our
amount of excess inventory or inventory shortages. Availability of product and unusually long lead times that were not anticipated could
impact our production.
Valuation Allowance on
Deferred Income Taxes . The Company ensures that taxes are computed in accordance with ASC 740 and the appropriate valuation allowance
is recorded. Management estimates the percentage change in pre-tax book loss/income and makes projections of future taxable loss/income
in order to perform this assessment. We have recorded a valuation allowance to reduce our net deferred tax assets to zero, primarily
due to historical net operating losses (“NOLs”) and uncertainty of generating future taxable income. If we determine that
it is more likely than not that we will realize a deferred tax asset that currently has a valuation allowance, we would need to reverse
the valuation allowance, reflecting an income tax benefit in our statements of operations at that time. This type of adjustment
could result in a material adjustment to our financial statements.
Valuation of Share-Based
Costs . We currently have share-based awards that include warrants, stock options, restricted stock awards, restricted stock units
and performance stock units. We measure and recognize compensation expense for all share-based payments based on an estimation of grant
date fair value of our share-based awards. The fair value of stock options and the warrants are calculated using a black-scholes model
which requires input of interest rates, stock volatility, stock prices, etc. Share-based compensation expense is then recognized based
on an allocation of the fair value on a straight-line basis over the requisite service periods of the awards. The RSU and RSAs fair value
is based on the market price of our common stock on the date of grant. The determination of the amount of share-based compensation expense
for our performance stock units requires the use of certain estimates and assumptions that affect the amount of share-based compensation
expense recognized in our consolidated statements of operations. For performance RSUs, at each reported period, we reassess the probability
of the achievement of corporate performance goals to estimate the number of shares to be recorded as a liability. Stock compensation expense
is a very large expense on our statement of operations and poor estimates could have a material effect on our financial statements.
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Results of Operations
Comparison of Results of Operations for
Fiscal Years Ended December 31, 2023 and 2022
Revenues. For the year
ended December 31, 2023, our revenues increased 206% to $67.4 million compared to $22.0 million for 2022. During the year ended December
31, 2023, $41.2 million, or 64% of product sales, were to Federal customers which increased by 544% over the prior year, primarily due
to several large orders received in late 2022, including a $29.4 million order through Techflow, Inc. for the US Army (IMCOM), an $11.7
million order for the General Services Administration for the Department of Veterans Affairs, and several other orders for the Department
of Homeland Security, US Navy Facilities, US Marine Corps, and others. State and Local governments accounted for 16% of revenues and included
a $5.3 million order from New York City to deliver EV ARCs TM throughout the city. Revenues from our energy storage products
were $8.5 million in 2023, a 63% increase over 2022 revenues. In addition, as a result of our acquisition of Amiga in October 2023, we
reported revenues of $3.4 million for the period from October 20, 2023 through December 31, 2023. 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. 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/(Loss). The
Company reported a positive gross profit of $1.2 million for the year ended December 31, 2023, compared to a $1.7 million gross loss in
2022. As a percentage of sales, the margin improved by nine percentage points. The gross profit includes a non-cash negative impact of
$0.8 million for amortization of intangible assets resulting from the All Cell acquisition. Without this non-cash expense, gross profit
for 2023 would be $2.0 million. The gross profit benefited from the increased volume resulting in increased fixed overhead absorption,
partially offset by an increase in fixed overhead spending (including indirect headcount, service support, depreciation for capital to
increase capacity, etc.). Direct headcount realized labor efficiencies as a result of the increased throughput, with a partial offset
due to higher temporary agency labor rates when rapid delivery of products to customers were required. Material costs increased during
the Covid 19 pandemic but are finally showing some reduction in the second half of 2023 for certain materials and components. Our engineering
team has implemented design changes during 2023 which reduced the bill of materials for the EV ARC TM , improving the product
margins especially in Q4 2023. Gross profit on EV ARC™ products at the unit level increased by 197% from Q4 2022 to Q4 2023. We
had a $0.1 million increase in warranty cost and a $0.1 million scrap cost which was a $0.5 million increase due to a favorable adjustment
in 2022. We expect to benefit from a price increase that was introduced in 2023 and should be reflected in orders delivered in 2024. Additionally,
we expect to get a full-year benefit from the design changes and material cost reductions that began in late 2023 which should improve
our 2024 gross profit margin. In addition, as we expect the Company to grow in the future, we expect our fixed overhead absorption to
continue to improve.
Operating Expenses. Total
operating expenses were $17.5 million for the year ended December 31, 2023, compared to $18.0 million in the prior year. The 2022 operating
expenses included a $5.5 million expense to increase ithe fair value of contingent consideration related to the All Cell acquisition but
the 2023 expense was only $0.3 million resulting in a $5.3 million benefit in. 2023 operating expense increases included $1.1 million
for commissions due to the increase in revenues, $0.8 million for operating expense for Amiga for Q4 following the acquisition, $0.8 million
for salaries, benefits and related costs due to increased headcount, $0.7 million for increased consultants primarily for R&D related
to the development of the new EV Standard™ product as well as for public relations, investor relations and recruiting, $0.3 million
for audit, legal and filing fees primarily due to the acquisition, $0.2 million for increased board fees, $0.2 million of expenses related
to the ERP implementation and $0.7 million of additional increases.
Liquidity and Capital Resources
At December 31, 2023, we had
cash of $10.4 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 financings and more recently through gross profit contributions. Our cash requirements are generally for operating
activities and acquisitions.
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Our cash flows from operating,
investing and financing activities, as reflected in the statements of cash flows, are summarized in the table below:
December 31,
2023
2022
Cash provided by (used in):
Net cash used in operating activities
$ (13,307 )
$ (18,114 )
Net cash used in investing activities
$ (5,708 )
$ (1,812 )
Net cash (used in) provided by financing activities
$ 27,717
$ (342 )
For the year ended December
31, 2023, our cash used in operating activities was $13.3 million compared to $18.1 million for the year ended December 31, 2022. Net
loss of $16.1 million for the year ended December 31, 2023 was increased by $4.3 million of non-cash expense items that included $2.7
million for Stock-based compensation, $1.9 million for depreciation and amortization and $0.2 million for change in fair value of contingent
consideration liabilities pertaining to the true-up of the 2022 earnout payment for All Cell, offset by a $0.5 million decrease in provision
on credit losses pertaining to Amiga. Cash used in operations included a $9.5 million increase in accounts receivable due to the revenue
increase and the acquisition of Amiga, $1.2 million decrease in deferred revenue because of lower customer deposits, $0.6 million for
a decrease in operating lease liability, $0.9 million for an increase in prepaid expenses and other current assets and $0.3 million decrease
in noncurrent liabilities. In addition, cash provided by operations included $4.8 million increase in accounts payable, $2.6 million decrease
in inventory, $1.0 million increase in accrued expenses, $0.6 million decrease in operating lease right of use asset and $0.2 million
increase in sales tax payable.
For the year ended December
31, 2022, our cash used in operating activities was $18.1 million compared to $6.4 million for the year ended December 31, 2021. Net loss
of $19.7 million for the year ended December 31, 2022, was increased by $9.1 million of non-cash expense items that included a change
in fair value of contingent consideration of $5.5 million, depreciation and amortization of $1.1 million, common stock issued for services
for director compensation of $0.4 million and employee stock-based compensation expense of $2.0 million. Further, cash used in operations
included a $0.6 million increase in accounts receivable, $0.8 million increase in prepaid expenses and other current assets, primarily
related to the prepayment of battery cells, and $8.2 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 TM
units as well as finished EV ARC TM units awaiting final delivery at December 31, 2022. Cash provided by operations included
a $1.3 million increase in accounts payable primarily for inventory and $0.9 million increase in accrued expenses.
For the year ended December
31, 2023, cash used in investing activities included $4.7 million cash for the acquisition of Amiga, net of cash acquired, $0.9 million
for the purchase of equipment to increase the throughput in our facilities to meet the increased production levels and $0.1 million for
spending on patents. Cash used in investing activities in the year ended December 31, 2022, included $0.8 million cash payment for working
capital payment related to the acquisition of All Cell, $0.9 million to purchase equipment and $0.1 million in patent costs.
For the year ended December
31, 2023, cash generated by our financing activities included $25.4 million proceeds from a public offering to fund our acquisition of
Amiga and for working capital, $2.1 million from the sale of stock under our committed equity facility and $0.2 million proceeds from
public warrant exercises. In 2022, cash generated by our financing activities included $0.5 million from the exercise of warrants, $0.5
million used to cover payroll taxes related to stock-based compensation and $0.3 million payment of equity offering costs related to the
committed equity line agreement entered into with B. Riley.
Current assets increased to
$40.7 million at December 31, 2023 from $19.9 million at December 31, 2022, primarily due to an $8.7 million increase in cash and $11.5
million increase in accounts receivable. Current liabilities increased to $16.9 million at December 31, 2023 from $13.2 million at December
31, 2022, primarily due to a $6.9 million increase in accounts payable, $2.7 million deferred consideration, current for a cash payment
owed for the Amiga acquisition and $1.0 million increase in accrued expenses, partially offset by a decrease of $6.8 million for contingent
consideration, due to payment of the 2022 earnout for All Cell in 2023. As a result, our working capital increased to $23.8 million at
December 31, 2023 compared to $6.8 million at December 31, 2022.
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The Company has been focused
on marketing and sales efforts to increase our revenues and we believe those efforts have led to an increase in revenues by 144% from
2021 to 2022 and 206% from 2022 to 2023. The Company reached a positive gross profit in 2023 and it is expected to continue to improve
in the future as a result of a price increase and a full year benefit from cost reductions from several design changes implemented in
2023, most of which occurred later in the year. As revenues increase, we expect to continue to see our fixed overhead costs spread over
more units, which will reduce the cost per unit further. The Company started to see some material cost reductions in the latter part of
2023, especially with steel and battery cells, and we expect this trend to continue. This combined with engineering and manufacturing
improvements should result in increasing gross profit margin on the EV ARC™ in the future.
The Company may be required
to raise capital to fund its operations until it achieves positive cash flow, which is predicated on increasing sales volumes and the
continuation of production cost reduction measures. Currently, the Company has the right to sell up to $30.0 million or two million shares
of its common stock over a period of 24 months (see note 12 for further information) to B. Riley pursuant to a Common Stock Purchase Agreement
entered in September 2022. Otherwise, we could pursue other equity or debt financing. Furthermore, there are outstanding warrants to purchase
610,745 shares of our Common Stock at December 31, 2023, of which 410,745 will expire in April 2024. 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.
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 receivable assigned to OCI and agrees to establish a designated bank account for the purpose of collecting payment on any
applicable account receivable 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.
On
October 20, 2023, Beam completed an acquisition of Amiga DOO Kraljevo (“Amiga”). Amiga is a business located in Serbia
and engaged in the manufacture and distribution of steel structures with electronic integration, such as streetlights, cell towers, and
ski lift towers. Amiga currently has engineering, product development and manufacturing capabilities which we believe are well
suited to manufacture and sell Beam’s current products into the European market. Also, Amiga is one of Europe’s leading manufacturers
of streetlights and Beam believes it is well positioned to develop and manufacture Beam’s patented EV Standard™ for sale in
both Europe and the U.S. This will provide a growth opportunity for Beam to sell its products in the European market through Amiga’s
extensive customer base.
Management believes
that evolution in the operations of the Company may allow it to execute its strategic plan and enable it to experience profitable growth
in the future. This evolution is anticipated to include the following continual steps: addition of sales personnel and independent sales
channels, reductions in direct costs due to engineering and manufacturing improvements, continued management of overhead costs, increased
overhead absorption resulting from volume growth, process improvements and vendor negotiations leading to cost reductions, increased public
awareness of the Company and its products, and the continued acceleration of average sales cycle opportunities. Management believes that
these steps, if successful, may enable the Company to generate sufficient revenue to continue operations. There is no assurance, however,
as to if or when the Company will be able to achieve those operating objectives.
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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.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required
by this item begin on page F-1 with the index to financial statements followed by the financial statements.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.