Beam Global 10-Q

ITEM 1. FINANCIAL STATEMENTS Beam Global Condensed Consolidated Balance Sheets (In thousands, except share and per share data) March 31, December 31, 2024 2023 (Unaudited) Assets Current assets Cash $ 4,962 $ 10,393 Accounts receivable, net of allowance for credit losses of $ 112 and $ 447 20,139 15,943 Prepaid expenses and other current assets 2,216 2,453 Inventory, net 11,474 11,933 Total current assets 38,791 40,722 Property and equipment, net 15,597 16,513 Operating lease right of use assets 2,249 1,026 Goodwill 10,150 10,270 Intangible assets, net 8,769 9,050 Deposits 98 62 Total assets $ 75,654 $ 77,643 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 10,778 $ 9,732 Accrued expenses 3,812 2,737 Sales tax payable 211 209 Deferred revenue, current 1,007 828 Note payable, current 45 40 Deferred consideration, current – 2,713 Contingent consideration, current 4,330 – Operating lease liabilities, current 851 615 Total current liabilities 21,034 16,874 Deferred revenue, noncurrent 470 402 Note payable, noncurrent 178 160 Contingent consideration, noncurrent 248 4,725 Other liabilities, noncurrent 3,716 3,787 Deferred tax liabilities, noncurrent 1,662 1,698 Operating lease liabilities, noncurrent 1,444 455 Total liabilities 28,752 28,101 Stockholders' equity Preferred stock, $ 0.001 par value, 10,000,000 authorized, none outstanding as of March 31, 2024 and December 31, 2023. – – Common stock, $ 0.001 par value, 350,000,000 shares authorized, 14,438,270 and 14,398,243 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively. 14 14 Additional paid-in-capital 142,991 142,265 Accumulated deficit ( 96,398 ) ( 93,361 ) Accumulated Other Comprehensive Income (AOCI) 295 624 Total stockholders' equity 46,902 49,542 Total liabilities and stockholders' equity $ 75,654 $ 77,643 The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements 3 Beam Global Condensed Consolidated Statement of Operations and Comprehensive Loss (Unaudited, in thousands except per share data) Three Months Ended March 31, 2024 2023 Revenues $ 14,561 $ 13,020 Cost of revenues 13,082 13,015 Gross profit 1,479 5 Operating expenses 4,527 3,846 Loss from operations ( 3,048 ) ( 3,841 ) Other income (expense) Interest income 71 1 Other (expense) income ( 56 ) 10 Interest expense ( 4 ) – Other income 11 11 Loss before income tax expense ( 3,037 ) ( 3,830 ) Income tax expense – 1 Net loss $ ( 3,037 ) $ ( 3,831 ) Net foreign currency translation adjustments ( 329 ) – Total Comprehensive Loss $ ( 3,366 ) $ ( 3,831 ) Net loss per share - basic $ ( 0.21 ) $ ( 0.38 ) Net loss per share - diluted $ ( 0.21 ) $ ( 0.38 ) Weighted average shares outstanding - basic 14,422 10,214 Weighted average shares outstanding - diluted 14,422 10,214 The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements 4 Beam Global Consolidated Statements of Changes in Stockholders’ Equity (Unaudited, in thousands) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Total Stockholders' Stock Amount Capital Deficit Income Equity Balance at December 31, 2022 10,178 $ 10 $ 100,498 $ ( 77,301 ) $ 0 $ 23,207 Stock issued for director services - vested 6 – 76 – – 76 Stock issued to (released from) escrow account - unvested ( 6 ) – – – – – Stock-based compensation to consultants 6 – 1,704 – – 1,704 Employee stock-based compensation expense – – 438 – – 438 Warrants exercised for cash 16 – 100 – – 100 Sale of stock under Committed Equity Facility 38 – 158 – – 158 Net loss – – – ( 3,831 ) – ( 3,831 ) Balance at March 31, 2023 10,238 $ 10 $ 102,974 $ ( 81,132 ) $ 0 $ 21,852 Balance at December 31, 2023 14,398 $ 14 $ 142,265 $ ( 93,361 ) $ 624 $ 49,542 Stock issued for director services - vested 0 – 6 – – 6 Stock issued to (released from) escrow account - unvested ( 0 ) – – – – – Stock-based compensation to consultants – – – – – – Employee stock-based compensation expense – – 468 – – 468 Warrants exercised for cash 40 – 252 – – 252 Impact of foreign currency translation – – – – ( 329 ) ( 329 ) Net loss – – – ( 3,037 ) – ( 3,037 ) Balance at March 31, 2024 14,438 $ 14 $ 142,991 $ ( 96,398 ) $ 295 $ 46,902 The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements 5 Beam Global Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) Three Months Ended March 31, 2024 2023 Operating Activities: Net loss $ ( 3,037 ) $ ( 3,831 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 930 332 Provision on credit losses ( 336 ) – Common stock issued for services – 76 Change in fair value of contingent consideration liabilities ( 147 ) ( 13 ) Employee stock-based compensation 554 438 Disposal of property and equipment 27 – Abandoned patent costs 36 – Stock Compensation expense for non-employees – 14 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable ( 3,901 ) ( 2,453 ) Prepaid expenses and other current assets 151 390 Operating lease right of use asset – – Inventory 425 ( 414 ) Deposits ( 36 ) – Increase (decrease) in: Accounts payable 956 4,235 Accrued expenses 1,082 932 Operating lease liability – – Sales tax payable 2 ( 20 ) Deferred revenue 258 ( 305 ) Other long term liabilities 10 – Net cash used in operating activities ( 3,026 ) ( 619 ) Investing Activities: Purchase of property and equipment ( 104 ) ( 314 ) Payment of Deferred Consideration ( 2,713 ) – Funding of patent costs – ( 16 ) Net cash used in investing activities ( 2,817 ) ( 330 ) Financing Activities: Proceeds from sale of common stock under committed equity facility, net of offering costs – 158 Proceeds from warrant exercises 252 100 Borrowings of note payable 25 – Net cash used in financing activities 277 258 Effect of exchange rate changes 135 – Net decrease in cash ( 5,431 ) ( 691 ) Cash at beginning of period 10,393 1,681 Cash at end of period $ 4,962 $ 990 Supplemental Disclosure of Cash Flow Information: Cash paid for interest $ 4 $ – Cash paid for taxes $ – $ 1 Supplemental Disclosure of Non-Cash Investing and Financing Activities: Purchase of property and equipment by incurring current liabilities $ 104 $ 21 Right-of-use assets obtained in exchange for lease liabilities $ 1,223 $ – Issuance of stock for Committed Equity Line $ – $ 140 Warrants issued for services to non-employee $ – $ 1,609 Shares issued for services to non-employee $ – $ 95 The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements 6 BEAM GLOBAL NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Beam is a clean technology innovator based in San Diego, California; Broadview, Illinois and Kraljevo, Serbia. We develop, design, engineer, manufacture and sell high-quality, renewably energized infrastructure products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security and disaster preparedness as well as safe and compact, highly energy-dense battery solutions. Beam’s products enable vital and highly valuable energy production in locations where it is either too expensive or too impactful to connect to the utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. Beam’s energy storage products provide high energy density in a safe, compact and bespoke form-factors ideal for the rapidly increasing numbers of mobile and stationary equipment and products which require electrical energy without being connected to the electrical grid. Beam’s products and proprietary technology solutions target four markets that are experiencing significant growth with annual global spending in the billions of dollars: · electric vehicle (EV) charging infrastructure; · energy storage solutions; · energy security and disaster preparedness; and · outdoor media advertising. Basis of Presentation The interim unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. 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 ending March 31, 2024 and 2023, and our financial position as of March 31, 2024, 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 normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023. The December 31, 2023 balance sheet is derived from those statements. 7 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 credit losses (CECL), valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of contingent consideration liability, valuation of intangible assets, 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. Recent Accounting Pronouncements In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements” (“ASU 2023-06”), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s disclosure update and simplification initiative issued in August 2018. The effective date for the amendments for each topic will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoptions prohibited.   In December 2023, the FASB issued ASU No. 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures ” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a company’s effective tax rate reconciliation and information on income taxes paid. This standard is effective for Beam beginning with our annual financial statements for the fiscal year ending December 31, 2025. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on our consolidated financial statements. Concentrations Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable. The Company maintains its cash in banks and financial institutions that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through March 31, 2024. As of March 31, 2024, approximately $ 4.8 million of the Company’s cash deposits were greater than the federally insured limits. Major Customers The Company continually assesses the financial strength of its customers. We are not aware of any material credit risks associated with our customers. 84 % of our first quarter revenues were derived from pre-funded federal, state and local government programs, and the remaining 16 % 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 March 31, 2024, two customers accounted for 30 % and 18 % of total revenues, with no other single customer accounting for more than 10 % of total revenues. At March 31, 2024, accounts receivable from three customers accounted for 22 %, 18 % and 14 % of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At December 31, 2023, accounts receivable from four customers accounted for 11 %, 10 %, 10 % and 10 % of total accounts receivable each with no other single customer accounting for more than 10% of the accounts receivable balance. For the three months ended March 31, 2024 and 2023, the Company’s sales to federal, state and local governments represented 84 % and 86 % of revenues, respectively. 8 Fair Value Measurement The Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and liabilities in the consolidated financial statements that are already required by generally accepted accounting principles to be measured at fair value. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market participant that holds the asset or owes the liability. The Company utilizes market data or assumptions that market participants who are independent, knowledgeable, and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the observability of those inputs. The guidance establishes a formal fair value hierarchy based on the inputs used to measure fair value. The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to level 3 measurements, and accordingly, Level 1 measurement should be used whenever possible. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities or published net asset value for alternative investments with characteristics similar to a mutual fund. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – Unobservable inputs for the asset or liability. The methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while management believes its valuation methods are appropriate, the fair value of certain financial instruments could result in a difference fair value measurement at the reporting date. There were no changes in the Company’s valuation methodologies from the prior year. For purpose of this disclosure, the carrying amounts for financial assets and liabilities such as cash and cash equivalents, accounts receivable – trade, other prepaid expenses and current assets, accounts payable and other current liabilities, all approximate fair value due to their short-term nature as of March 31, 2024. The Company had Level 3 liabilities as of March 31, 2024. There were no transfers between levels during the reporting period. Fair value of contingent consideration Level 1 Level 2 Level 3 Contingent Consideration as of December 31, 2023 $ – $ – $ 4,725 Additions – – – Change in fair value – – ( 147 ) Contingent Consideration as of March 31, 2024 $ – $ – $ 4,578 Significant Accounting Policies During the three months ended March 31, 2024, 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, 2023. 9 Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per share of common stock is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock outstanding consists of shares of common stock issuable upon the exercise of stock options, stock warrants, or other common stock equivalents. Potentially common stock outstanding are excluded from the computation if their effect is anti-dilutive. Options to purchase 592,658 shares of common stock and warrants to purchase 570,718 shares of common stock were outstanding at March 31, 2024. Options to purchase 346,758 common shares and warrants to purchase 624,306 shares of common stock were outstanding at March 31, 2023. These options and warrants were not included in the computation of diluted loss per share for the three months ended March 31, 2024 and 2023 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share. Segments The Company assesses its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. Management reviews financial results, manages the business and allocates resources on an aggregate basis. Therefore, financial results are reported in a single operating segment. 2. LIQUIDITY The Company had net losses of $ 3 .0 million (which includes $ 1.1 million of non-cash expenses) and $ 3.8 million (which includes $ 0.9 million of non-cash expenses) and net cash used in operating activities of $ 3 .0 million and $ 0.6 million for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the Company had a cash balance of $ 5 .0 million and working capital of $ 17.8 million. Based on the Company’s current operating plan and the available working capital that can be converted to cash, particularly the accounts receivable balance of approximately $ 20.1 million 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 worth of shares, but in any event, no more than 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 has issued 199,469 shares for $ 2.5 million since 2022 under this agreement. There is $ 27.5 million worth of shares of common stock remaining under this facility available to sell through Q4 2024. The Company’s outstanding warrants generated $ 0.3 million and $ 0.1 million of proceeds during each of the three months ended March 31, 2024 and 2023, respectively. Warrants to purchase 370,718 shares of common stock which were issued in our 2019 public offering expired on April 18, 2024. Excluding the warrants issued in our 2019 public offering which recently expired, the Company has a warrant outstanding to purchase up to 200,000 shares of our common stock at an exercise price equal to $ 17.00 per share that expires in March 2028 that could potentially generate an additional $3.4 million of proceeds, conditioned upon the market price of our common stock and the warrant holder’s ability and decision to exercise them. In March 2023, the Company entered into a supply chain line of credit agreement with OCI Group for up to $100 million to further support our working capital requirements. Subject to the terms of the agreement, OCI Group will make available to the Company funding based on amounts owed to the Company by its customers. The Company believes that it will become profitable in the next few years as our revenues continue to grow, we improve our gross margins and we leverage our overhead costs, but we expect to continue to incur losses for a period of time. If necessary, the Company may raise additional capital to finance its future operations through equity or debt financings. There is no guarantee that profitable operations will be achieved, or that additional capital or debt financing will be available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to meet our obligations or enable us to continue to implement our long-term business strategy. In addition, obtaining additional funding or entering into other strategic transactions could result in significant dilution to our stockholders. 10 3. BUSINESS COMBINATION Amiga DOO Kraljevo On October 20, 2023, the Company acquired Amiga DOO Kraljevo (“Amiga”), pursuant to a Share Sale and Purchase Agreement dated October 6, 2023 (the “Purchase Agreement”) by and among the Company and the owners of Amiga (the “Sellers”). Pursuant to the terms of the Purchase Agreement, the Company acquired all the equity stock of Amiga from the Sellers in exchange for cash and common stock. With respect to the cash portion of the purchase price, the Company paid to the Sellers 4.6 million euros ($ 4.9 million) at closing and an additional 2.5 million euros ($ 2.7 million) was deferred on December 31, 2023, and paid on January 2, 2024. With respect to the equity portion of the purchase price, the Company issued to the Sellers 293,675 shares of our common stock upon closing and an additional 158,132 shares before December 31, 2023. The Sellers are eligible to earn additional shares of the Company’s common stock if Amiga meets certain revenue milestones for the years ended December 31, 2024 and 2025 (the “Earnout Consideration”). The Earnout Consideration that Sellers are eligible to receive is equal to two times the amount of revenue of Amiga (“Amiga Net Revenue”) that is greater than specific revenue targets for each of the years ended December 31, 2024 and 2025. The Earnout Consideration will be paid in the Company’s stock for each annual target period and 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 Company issue to the Sellers an amount of the Company’s common stock that exceeds 19.99% of the total outstanding common stock of the Company immediately prior to the closing. An estimate of the fair value of the contingent consideration has been recorded in the opening balance sheet. Additionally , if within five years of the closing date of the acquisition Amiga receives a final award in specific legal proceedings in excess of EUR 3.8 million, the amount exceeding EUR 3.8 million is payable to the Sellers. This is not currently considered probable and therefore no accrual has been established. O n February 16, 2024, the Company and the Sellers entered into an amendment to the Purchase Agreement to remove the requirement that the Sellers shall be providing services to Amiga as a condition to receive the Earnout Consideration. During the three months ended March 31, 2024, the Company recorded $ 0.1 million of income related to the fair value adjustment of the liability for Earnout Consideration. Amiga, located in Serbia, is engaged in the manufacture and distribution of steel structures with integrated electronics, such as streetlights, cell towers, and ski lift towers. We expect the acquisition of Amiga to assist in introducing our products to Europe, 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. The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805, Business Combinations . Goodwill represents the premium the Company paid over net fair value of tangible and intangible assets acquired. On November 7, 2023, Amiga changed its name to Beam Europe LLC. Pro Forma Financial Information The following pro forma financial information summarizes the combined results of operations of Beam Global and Amiga as if the companies had been combined as of the beginning of the three months ended March 31, 2023 (in thousands): Schedule of pro forma financial information March 31, 2023 Revenues $ 14,425 Net Loss $ ( 4,298 ) The pro forma 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 three months ended March 31, 2023. In addition, the unaudited pro forma 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 unaudited pro forma financial information includes adjustments to reflect the incremental amortization expense of the identifiable intangible assets and transaction costs. The statement of operations, in the table above, for the three months ended March 31, 2023 includes revenues of $ 1.4 million and loss from operations of $ 0.5 million from the acquired Amiga business. 11 4. INVENTORY Inventory consists of the following (in thousands): Schedule of inventory March 31, December 31, 2024 2023 Finished goods $ 5,101 $ 1,953 Work in process 447 2,006 Raw materials 5,926 7,974 Total inventory, net $ 11,474 $ 11,933 5. PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands): Schedule of property and equipment March 31, December 31, 2024 2023 Office furniture and equipment $ 227 $ 227 Computer equipment and software 244 248 Land, buildings and leasehold improvements 7,771 7,935 Autos 649 616 Machinery and equipment 9,073 9,200 Total property and equipment 17,964 18,226 Less accumulated depreciation ( 2,367 ) ( 1,713 ) Property and Equipment, net $ 15,597 $ 16,513 Depreciation expense during the three months ended March 31, 2024 and March 31, 2023 was $ 0.7 million and $ 0.1 million, respectively. 6. INTANGIBLE ASSETS The intangible assets consist of the following (in thousands): Schedule of intangible assets December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted-average Amortization Period (yrs) Developed technology $ 8,074 $ ( 1,346 ) $ 6,728 11 Trade name 1,756 ( 322 ) 1,434 10 Customer relationships 444 ( 110 ) 334 13 Backlog 185 ( 185 ) – 1 Patents 611 ( 57 ) 554 20 Intangible assets $ 11,070 $ ( 2,020 ) $ 9,050 March 31, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted-average Amortization Period (yrs) Developed technology $ 8,074 $ ( 1,529 ) $ 6,545 11 Trade name 1,756 ( 366 ) 1,390 10 Customer relationships 444 ( 122 ) 322 13 Backlog 185 ( 185 ) – 1 Patents 573 ( 61 ) 512 20 Intangible assets $ 11,032 $ ( 2,263 ) $ 8,769 Amortization expense during the three months ended March 31, 2024 and March 31, 2023 was $ 0.2 million and $ 0.3 million, respectively. 12 7. ACCRUED EXPENSES The major components of accrued expenses are summarized as follows (in thousands): Schedule of accrued expenses March 31, December 31, 2024 2023 Accrued Expenses: Accrued vacation $ 255 $ 246 Accrued salaries and bonus 1,382 1,086 Vendor accruals 75 50 Accrued warranty 19 27 Customer prepayments 950 – Other accrued expense 1,132 1,328 Total accrued expenses $ 3,813 $ 2,737 Other Long-Term Liabilities: Long-term deferred tax liability $ 1,662 $ 1,698 Acquired long-term liability 3,716 3,787 Total long-term liabilities $ 5,378 $ 5,485 Acquired long-term liability of $ 3.8 million consists of a restructuring debt settlement from the acquisition of Amiga. The debt restructuring was entered into in 2021 for a nine year term with six years and nine months remaining at March 31, 2024. Payments are due quarterly as a percent of the remaining balance due. 8. NOTE PAYABLE 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 thousand, and bears interest at a rate of 7.55 percent per year. Payment on the loan began in July 2023, and the loan has a short-term balance of $ 40 thousand. In March 2024, the Company purchased a forklift and financed the purchase through an auto loan. The loan has a term of 60 months, requires monthly payments of approximately $ 661 , and bears interest at a rate of 6.54 percent per year. Payment on the loan began in February 2024, and the loan has a short-term balance of $ 6 thousand. 9. COMMITMENTS AND CONTINGENCIES Legal Matters: From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of March 31, 2024, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations. 13 Other Commitments: The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, software licenses, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company. 10. INCOME TAXES There was no Federal income tax expense for the three months ended March 31, 2024 or 2023 due to the Company’s net losses. Income tax expense represents the minimum state taxes due. 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, 2024 and no benefit has been provided for the quarter-to-date loss. On a quarterly basis, the company evaluates the positive and negative evidence to assess whether the more likely than not criteria have been satisfied in determining whether there will be further adjustments to the valuation allowance. 11. STOCKHOLDERS’ EQUITY Committed Equity Facility On September 2, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B. Riley. Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B. Riley up to $30.0 million, but in any event, a maximum of 2.0 million shares of the Company’s common stock at 97% of the volume weighted average price of the Company’s common stock, as 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 the Company issued B. Riley 10,484 shares of its common stock in both September 2022 and April 2023. The Company incurred an aggregate cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value of the shares of common stock issued to B. Riley, 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 Company has issued 199,469 shares under the Purchase Agreement for $ 2.5 million in proceeds, of which $ 0.5 million was offset by the offering costs as of March 31, 2024. 14 Stock Options Option activity for the three months ended March 31, 2024 is as follows: Schedule of option activity Weighted Average Number of Exercise Options Price Outstanding at December 31, 2023 481,858 $ 10.41 Granted 113,000 6.10 Forfeited ( 2,200 ) 10.74 Outstanding at March 31, 2024 592,658 $ 8.48 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 paid during the life of the options granted during the three months ended March 31, 2024 and 2023: Schedule of assumptions for options granted Three months ended March 31, 2024 2023 Expected volatility 90.28 % - 90.37 % 94.51 % Expected term 7 Years 7 Years Risk-free interest rate 4.01 % - 4.25 % 3.55 % Weighted-average FV $ 4.88 $ 14.28 The Company’s stock option compensation expense was $ 0.2 million for the three months ended March 31, 2024, and $ 0.1 million for the three months ended March 31, 2023. There was $ 1.6 million of total unrecognized compensation costs related to outstanding stock options at March 31, 2024 which will be recognized over 3.0 years. Total intrinsic value of options outstanding and options exercisable were $ 0.4 million and $ 0.2 million, respectively, as of March 31, 2024. The number of shares of common stock underlying stock options vested and unvested as of March 31, 2024 were 351,788 and 240,870 , 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”). For the RSUs, 50% vested upon the grant date, 25% vested on February 1, 2024 and 25% will vest on February 1, 2025. 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 three months ended March 31, 2024. 142,500 PSUs and 71,250 RSUs remain outstanding as of March 31, 2024, 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, 2024, with $ 1.1 million in unrecognized stock compensation expense remaining to be recognized over 1.0 years as of March 31, 2024. 15 Restricted Stock Awards The Company issues restricted stock to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters. 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, 2024 is as follows: Schedule of restricted stock awards Nonvested at December 31, 2023 1,238 $ 20.17 Vested ( 310 ) 20.17 Nonvested at March 31, 2024 928 $ 20.17 Stock compensation expense related to restricted stock awards was $ 37 thousand and $ 0.1 million during each of the three months ended March 31, 2024 and 2023 respectively. As of March 31, 2024, there were unvested shares of common stock representing $ 18 thousand of unrecognized restricted stock grant expense which will be recognized over 1 year. Warrants In 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 were 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. During the three months ended March 31, 2024, $ 0.3 million was recorded as expense and $1.3 million of cost has not been recognized and will be recognized over the next 4.0 years. A summary of activity of warrants outstanding for the three months ended March 31, 2024 is as follows: Schedule of warrants outstanding Number of Warrants Weighted Average Exercise Price Outstanding at December 31, 2023 610,745 $ 9.80 Granted – – Exercised ( 40,027 ) 6.30 Outstanding at March 31, 2024 570,718 $ 10.05 Exercisable at March 31, 2024 570,718 $ 10.05 16 Exercisable warrants as of March 31, 2024 have a weighted average remaining contractual life of 1.44 years. The intrinsic value of the exercisable shares of the warrants at March 31, 2024 was $ 0.2 million. . Warrants to purchase 370,718 shares of common stock at an exercise price equal to $ 6.30 which were issued in our 2019 public offering expired on April 18, 2024. 12. REVENUES For each of the identified periods, revenues can be categorized into the following (in thousands): Schedule of revenues Three Months Ended March 31, 2024 2023 Product sales $ 13,570 $ 12,811 Maintenance fees 27 16 Professional services 65 36 Shipping and handling 978 216 Discounts and allowances ( 80 ) ( 59 ) Total revenues $ 14,561 $ 13,020 During the three months ended March 31, 2024 and 2023, 27 % and 60 % of revenues were derived from customers located in California, respectively. In addition, 11 % and 10 % of revenues in the three months ended March 31, 2024 and 2023 were international sales, respectively. At March 31, 2024 and December 31, 2023, deferred revenue was $ 1.5 million and $ 1.2 million, respectively. These amounts consisted mainly of customer deposits in the amount of $ 0.9 million and $ 0.7 million for March 31, 2024 and December 31, 2023, respectively and prepaid multi-year maintenance plans for previously sold products which account for $ 0.6 million and $ 0.5 million for March 31, 2024 and December 31, 2023, respectively, and pertain to services to be provided through 2031. 13. SUBSEQUENT EVENTS Management has evaluated events that have occurred subsequent to the date of these condensed consolidated financial statements and has determined that no such reportable subsequent events exist through March 31, 2024. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. 17