What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-20 · 222 added, 171 removed, 188 unchanged (68% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Management’s Discussion

and Analysis of Financial Condition and Results of Operations

This report contains forward-looking

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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;

the factors set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

the factors set forth in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

New factors emerge from time

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and sells high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, energy storage, energy

security, disaster preparedness and outdoor media.

security, and disaster preparedness.

The Company has five product

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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.

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.

BeamSpot™ – patent issued on December 31, 2019 and currently

under development.

A lamp standard, EV charging and emergency power product which uses an existing streetlight’s foundation and

a combination of solar, wind, grid connection and onboard energy storage to provide curbside charging and emergency power.

UAV ARC™ - patent issued on November 24, 2020 and currently under development.

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We believe our chief differentiators

for our electric vehicle charging infrastructure products are:

for our electric vehicle charging and energy security 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;

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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.

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.

which provides a low-cost and passive (does not require energy) 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

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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.

Amiga has engineering, product development and manufacturing capabilities which are well suited to manufacture and

sell Beam’s current and future products in the European market.

As a large European manufacturer of streetlights, 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

three months of 2024 were $14.6 million, a 12% increase over $13.0 million for the same quarter in 2023, primarily derived from delivery

of EV ARC™ systems to federal, state and local governments.

We have invested in sales and marketing resources over the past three

plus years which has created increased demand for our EV ARC™ renewable chargers.

For the period, we reported revenues of $1.4 million

as a result of our acquisition of Amiga in October 2023.

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 in April 2022 which provides federal agencies a streamlined

procurement process for procuring EV ARC™ systems.

In the three months ended March 31, 2024, we recorded revenues of $12.2 million

for federal customers, compared to $11.2 million for the same period in 2023.

We expect to see uneven orders from quarter to quarter,

especially with our federal customers, but over time we expect our revenues to grow.

six months of 2024 were $29.4 million, a 5% decrease from $30.8 million for the first six months in 2023.

We believe that the decrease

in revenue is as a result of order timing, particularly from some of our larger federal customers rather than any fundamental reduction

in demand for our products.

Our pipeline of prospective customer orders has increased during the same period, although we cannot be sure

of when, or if, those prospective orders will turn into actual sales.

We have continued investment in our sales and marketing resources

over the past three years which we believe has created increased demand for our EV ARC™ renewable charging infrastructure products

during that time.

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 and 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 in April 2022 which provides federal agencies a streamlined procurement process for procuring EV ARC™ systems.

six months ended June 30, 2024, we recorded revenues of $22.4 million for federal customers, compared to $26.5 million for the same period

We expect to see uneven orders from quarter to quarter, especially with our federal customers, but over time we expect our revenues

Our commercial, non-government, revenues increased as a percentage of our revenues from 14% to 24% in the first six months of

2023 to the first six months of 2024.

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

market to continue to experience significant growth over the next decade which will in turn increase demand for additional EV charging

infrastructure.

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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 as a result of our storage technology solutions

engineered by our team of engineers and scientists in Illinois.

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.

October 2023, the Company acquired Amiga, 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

acquisition of All Cell, a battery technology company, will increase our new customer opportunities.

We now 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

With the continued growth of untethered electrification, we believe there is an opportunity for increased demand in these markets

October 2023, the Company acquired Amiga, an established manufacturer of specialized steel structures and equipment, producing streetlights,

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™

The addition of Amiga has expanded 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 BeamSpot™

products can play a major role in the provision of EV charging infrastructure in Europe.

Amiga is already producing components for EV

ARC™ systems in our factory in Kraljevo at the time of this filing.

Our energy security business

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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.

newest patented products - our BeamSpot™ 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.

Amiga is one of Europe’s largest manufacturers

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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.

on our new BeamSpot™ product.

We believe that BeamSpot™ may become our largest selling product when available for sale.

Our gross profit improved

as a percentage of sales reporting a positive 10.2% gross margin in Q1 2024, up 10.1% from the gross profit reported in Q1 2023.

Additionally,

our cost of goods sold included non-cash intellectual property amortization of $0.2 million for the first three months of both 2024 and

2023, related to the acquisition of All Cell in 2022.

Excluding this non-cash expense results in a gross profit of 11.4% for the three

months ended March 31, 2024.

We implemented engineering design changes to our EV ARC TM in Q4 2023 that resulted in cost reductions

to our bill of materials.

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.

We expect to see these costs continue to decrease over time.

implementing lean manufacturing process improvements and making engineering changes to our product where we expect to benefit from cost

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 we believe may further reduce our costs, increase our gross margins, and significantly increase the potential output from our factory.

There is no guarantee that our growth will continue at this same pace and we expect that the receipt of orders may be inconsistent quarter

over quarter.

We expect that in the long-term, our revenues will continue to grow as 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 continue to see improvement in our gross margins during the year.

Amiga has capabilities to 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 the US.

Critical 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, 2023.

have been no material changes in these policies or their application.

as a percentage of sales and was 15.9% in Q2 2024, up 13.1% from the gross profit reported in Q2 2023.

Additionally, our cost of goods

sold included non-cash intellectual property amortization of $0.2 million for the first three months of both 2024 and 2023, related to

the acquisition of All Cell in 2022.

Excluding this non-cash expense results in a gross profit of 17.1% for the three months ended June

30, 2024, up from 3.8% for the same period ending June 30, 2023.

We implemented engineering design changes to our EV ARC TM

in Q4 2023 that resulted in cost reductions to our bill of materials.

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.

We expect to see these

costs continue to decrease over time.

We are implementing lean manufacturing process improvements and making engineering changes to our

products which we expect to result in cost reductions.

We have observed that we are able to manufacture certain elements of our products

in Serbia and ship them to the U.S.

less expensively than we can manufacture them in the U.S.;

largely because we are better equipped

in Serbia and as a result can self-perform certain processes which we outsource in the U.S.

We anticipate further reductions in direct

costs as a result of having our Serbian operations support our U.S.

manufacturing.

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, and reducing cost, of various components and sub-assemblies which we integrate into our final product.

to identify components and sub-assemblies that may be more cost effective to outsource, which we believe may further reduce our costs,

increase our gross margins, and significantly increase the potential output from our factory.

We expect that the receipt of orders may

be inconsistent quarter over quarter, however, we expect that in the long-term, our revenues will continue to grow as 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 continue to see improvement in our gross margins in the future.

Beam Europe has capabilities to 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 the US.

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.

the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

Use of Estimates.

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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,

in the accompanying financial statements include the allowance for certain expected credit losses (CECL), 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 three months ended March 31, 2024.

Results of Operations

Comparison of Results of Operations for the

Three Months Ended March 31, 2024 and 2023

Three Months Ended June 30, 2024 and 2023

For the quarter

ended March 31, 2024, our revenues increased 12% to $14.6 million compared to $13.0 million for the same period in 2023.

ended June 30, 2024, our revenues decreased 17% to $14.8 million compared to $17.8 million for the same period in 2023.

Revenues to federal

customers increased by $1.0 million in Q1 2024 compared to the quarter ended March 31, 2023.

customers decreased by $5.1 million in Q2 2024 compared to the quarter ended June 30, 2023.

We also recorded revenues of $2.8 million

as a result of our acquisition of Amiga in 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 in the quarter.

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.

as a result of our acquisition of Amiga.

We continue to invest in sales and marketing employees, resources and programs to raise awareness

of the benefits and value of our products.

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.

quarter ended March 31, 2024, our gross profit was $1.5 million, or 10.2% of sales, compared to a gross profit of .04% of sales for the

same period in 2023.

As a percentage of sales, the margin improved by 10.1%, primarily because of cost reductions implemented in late

2023 as a result of design changes to the EV ARC TM as well as an increase in production levels in the current quarter compared

to the prior year, which resulted in favorable fixed overhead absorption.

Our gross profits included $0.2 million for non-cash intangible

amortization.

We began to see some improvements in the reduction of material costs in late 2023, which we believe should continue to improve.

In addition, as our revenues continue to increase in 2024 and beyond, we expect our fixed overhead absorption to continue to improve.

Our engineering and operations teams continue to identify further cost reductions and efficiencies which we believe will improve our gross

margins in future quarters.

the quarter ended June 30, 2024, our gross profit was $2.4 million, or 15.9% of sales, compared to a gross profit of 2.8% of sales for

the same period in 2023.

The margin improved by 13.1 percentage points, primarily because we have implemented cost improvements in late

2023 as a result of design changes to the EV ARC TM as well as operational improvements and positive margins generated from

the acquisition of Amiga.

Our gross profits included a negative impact of $0.3 million for non-cash depreciation and intangible amortization.

Our gross profits net of non-cash items was 18.0%.

We began to see some improvements in the reduction of material costs in late 2023,

which we believe should continue to improve.

Our engineering and operations teams continue to identify further cost reductions and efficiencies

which, along with support from our Serbian facilities, we believe will improve our gross margins in future quarters.

Operating Expenses.

operating expenses were $4.5 million, or 31% of revenues, for the quarter ended March 31, 2024, compared to $3.8 million, or 30% of revenues,

operating expenses were $7.1 million, or 48% of revenues, for the quarter ended June 30, 2024, compared to $4.0 million, or 23% of revenues,

for the same quarter in the prior year.

The $0.7 million increase is mostly attributable to a $0.4 million increase in consultant costs

related to the integration of our new ERP Accounting software, Sales and Marketing, Government Relations and engineering design support,

$0.3 million for operating expenses pertaining to our new Amiga operations, partially offset by $0.1 million reduction for favorable change

in the present value factor of our contingent consideration related to the earnout for the Amiga acquisition.

The $3.1 million increase is mostly attributable to $1.4 million related to the change in fair

value of contingent consideration, which is non-cash, for the Amiga acquisition, $0.6 million for operating expenses for Beam Europe,

$0.5 million in Audit and Accounting services, $0.4 million in commission expenses, $0.1 million in legal costs and $0.1 million allowance

for credit losses.

Total operating expenses excluding non-cash items were $4.3 million, 29% of revenues, which included $1.7 million

fair value of contingent consideration, $0.8 million for non-cash compensation, $0.3 million allowance for credit losses and $0.1 million

depreciation and amortization.

Comparison of Results of Operations for the

Six Months Ended June 30, 2024 and 2023

the six months ended June 30, 2024, our revenues decreased 5% to $29.4 million compared to $30.8 million for the same period in 2023.

Revenues to federal customers decreased by $5.1 million in 2024.

During the first six months of 2024, revenues from California represented

27% of total revenues.

Revenues were diverse across federal, state and local governments, as well as enterprise and education sector

International customers comprised 15% of the revenues through June 30, 2024, and were primarily from Beam Europe.

derived from non-government, commercial entities increased by 83% from Q2 2023 to Q2 2024.

We continue to invest in sales and marketing

employees, resources and programs to raise awareness of the benefits and value of our products.

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.

the six months ended June 30, 2024, our gross profit was $3.8 million, or 13% of sales, compared to a gross loss of $0.5 million, or

2% of sales in the same period of 2023.

The margin improved by 11.4 percentage points, compared to prior year.

This is primarily a result

of cost improvements developed during 2023 which are now being recognized and the positive margins we are generating from the acquisition

Our gross profits were negatively impacted by $0.6 million for non-cash depreciation and intangible amortization.

profits net of non-cash items was 14.9%.

We began to see some improvements on material pricing in 2023, which has continued to improve

We continue to make engineering changes and work with suppliers to improve our costs which, along with support from our Serbian

facilities, we believe will continue to improve our gross profit over time.

Operating Expenses.

operating expenses were $11.7 million, or 40% of revenues, for the six months ended June 30, 2024, compared to $7.9 million, or 26% of

revenues, for the same period in the prior year.

The $3.8 million increase is mostly attributable to $1.3 million related to the change

in fair value of contingent consideration, which is non-cash, for the Amiga acquisition, $0.9 million for operating expenses for Beam

Europe, $0.7 million in Audit and Accounting services, $0.4 million in commission expenses, $0.3 million in consultant costs for Design

Engineering, and $0.1 million allowance for credit losses.

Total operating expenses excluding non-cash items were $8.1 million, 28% of

revenues, which included $1.5 million fair value of contingent consideration, $1.3 million for non-cash compensation, $0.4 million allowance

for credit losses and $0.3 million depreciation and amortization.

Liquidity and Capital Resources

At March 31, 2024, we had

At June 30, 2024, we had

cash of $8.7 million, compared to cash of $10.4 million at December 31, 2023.

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Net cash provided by financing activities

For the three months ended

March 31, 2024, our cash used in operating activities was $3.0 million compared to $0.6 million for the three months ended March 31, 2023.

Net loss of $3.0 million for the three months ended March 31, 2024 was adjusted by $1.1 million of non-cash expense items that included

For the six months ended June

30, 2024, our cash used in operating activities was $0.1 million compared to cash used of $5.1 million for the six months ended June 30,

Net loss of $8.0 million for the six months ended June 30, 2024 was increased by $4.2 million of non-cash expense items that included

depreciation and amortization of $1.9 million, employee stock-based compensation expense of $1.3 million, offset by decreases of $0.6

million provision on credit losses and $1.5 million for a change in fair value of contingent consideration liabilities.

Further, cash

used in operations included a $3.9 million increase in accounts receivable due to the increase in revenues and the timing of customer

Cash generated from operations included a $1.0 million increase in accounts payable primarily for inventory, $1.1 million increase

in accrued expenses, $0.4 million decrease in inventory, $0.3 million increase in deferred revenue and $0.2 million decrease in prepaid

expenses and other current assets.

the three months ended March 31, 2023, our cash used in operating activities was $0.6 million.

Net loss of $4.1 million for the three

months ended March 31, 2023 was increased by $0.9 million of non-cash expense items that included depreciation and amortization of $0.3

million, common stock issued for services for director compensation of $0.1 million and employee stock-based compensation expense of $0.5

Further, cash used in operations included a $2.4 million increase in accounts receivable due to the increase in revenues in the

quarter, $0.3 million decrease in deferred revenue, and a $0.2 million increase in inventory.

Cash used in operations included a $4.2

million increase in accounts payable primarily for inventory, $0.9 million increase in accrued expenses and a $0.4 million decrease in

prepaid expenses and other current assets.

Cash used in operations

included a $3.3 million decrease in accounts receivable as well as a $1.7 million decrease in accounts payable primarily for inventory,

$0.3 million decrease in prepaid expenses and other current assets offset by $1.7 million increase in accrued expenses, $1.0 million increase

in inventory, and $0.3 million increase in deferred revenue.

the six months ended June 30, 2023, our cash used in operating activities was $5.1 million compared to $7.4 million for the six months

ended June 30, 2022.

Net loss of $7.4 million for the six months ended June 30, 2023 was increased by $2.1 million of non-cash expense

items that included depreciation and amortization of $0.7 million, common stock issued for services for director compensation of $0.2

million, employee stock-based compensation expense of $0.9 million, change in the fair value of contingent consideration liabilities of

$0.3 million and $0.1 million of other for stock compensation for non-employees.

Cash used in operations included a $6.0 million increase

in accounts receivable due to the increase in revenues in the quarter and $0.4 million decrease in deferred revenue.

Cash generated from

operations included a $4.3 million increase in accounts payable primarily for inventory, $1.9 million increase in accrued expenses, and

$0.3 million decrease in prepaid expenses and other current assets.

Cash used in investing activities

in the three months ended March 31, 2024 included $2.7 million reduction of deferred consideration for a cash payment for the Amiga acquisition

in the six months ended June 30, 2024 included $2.7 million reduction of deferred consideration for a cash payment for the Amiga acquisition

and $0.2 million for the purchase of equipment compared to $0.5 million purchased in the same period in the prior year.

For the three months ended

March 31, 2024, cash generated by our financing activities included $0.3 million for the exercise of warrants compared to $0.2 million

in proceeds from the public offering issuance of common stock, net of offering expenses, and $0.1 million from the exercise of warrants

for the same period in the prior year.

For the six months ended June

30, 2024, cash generated by our financing activities included $0.8 million for the exercise of warrants and $0.5 million in proceeds from

public offering issuance of common stock compared to $2.1 million in proceeds from the public offering issuance of common stock, net of

offering expenses, and $0.1 million from the exercise of warrants for the same period in the prior year.

Current assets were $36.3

million on March 31, 2024, a decrease from $40.7 million at December 31, 2023, primarily due to decreases of $5.4 million in cash, $0.5

million in inventory, $0.2 million in prepaid expenses and other current assets offset by an increase of $4.2 million in accounts receivable.

Current liabilities increased to $21.0 million at March 31, 2024 from $16.9 million at December 31, 2023, primarily due to a $1.0 million

increase accounts payable and $1.1 million increase in accrued expenses.

As a result, our working capital decreased to $17.8 million at

March 31, 2024 compared to $23.8 million at December 31, 2023.

million on June 30, 2024, a decrease of $4.4 million at December 31, 2023, primarily due to decreases of $3.3 million in accounts receivable,

$1.6 million in cash, $0.3 million in prepaid expenses and other current assets, offset by an increase of $1.0 million in inventory.

liabilities increased to $20.2 million at June 30, 2024 from $16.9 million at December 31, 2023, primarily due to a $1.7 million increase

accrued expenses and $5.4 million increase in the fair value of contingent consideration liabilities.

As a result, our working capital

decreased to $16.0 million at June 30, 2024 compared to $23.8 million at December 31, 2023.

The Company has been focused

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from as new orders are received and are shipped in future quarters.

Our Serbian operations are also able to contribute to further cost

reductions to produce our products both in Europe and the U.S.

On March 22, 2023, the Company

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of 24 months (see note 10 for further information.) In addition, we could pursue other equity or debt financing.

The rest of which could

potentially generate an additional $3.4 million of proceeds over the next 4.0 years, depending on 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, 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.

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, 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

2 unchanged sentences

condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.

Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis