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 multiple product
lines that incorporate our proprietary technology. Our off-grid EV charging and energy security products produce 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. Versions of our charging infrastructure products are modified to support EVs, eMotorcycles,
eBikes, desalination and auxiliary power. Our Smart Cities products combine structural elements with built in electronics, renewable energy
generation, battery storage, sensors and IoT capabilities. These products are scalable and attractively designed and 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 sun-tracking solar array making the unit flood-proof up to nine and a half feet and allowing adequate space to park a vehicle on the engineered ballast and traction pad which gives the product stability and a certified wind rating of 160 miles per hour.
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Solar Tree® DCFC – Patented off-grid, renewably energized and rapidly deployed, single-column mounted smart generation and energy storage system with the capability to provide a 150kW DC fast charge to one or more electric vehicles or larger vehicles.
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EV ARC™ DCFC – DC Fast Charging system for charging EVs comprised of four interconnected EV ARC™ systems and a 24kW DC fast charger.
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BeamSpot™ – patent issued on December 31, 2019 and currently.in the process of initial installation. A streetlight, 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.
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BeamBike™ - rapidly deployed, construction free, solar-powered charging system based on the patented EV ARC™ platform which generates and stores its own clean electricity, accessed through twelve integrated, weatherized 120 V outlets supporting any eBike charger. Supports 12 eBikes and is available with or without bundled eBike packages.
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BeamPatrol™ - Rapidly deployed and easily transported, the BeamPatrol™ station allows law enforcement and safety personnel to charge and quickly access nimble, quiet and responsive motorcycles without the need for any additional infrastructure or fuel. This innovative solution is ideal for law enforcement, customs and border patrol, the military, park services, air and seaport operations and any situation where the ability to rapidly gain access to an environment, without alerting targets of the operation, is required. BeamPatrol™ and the motorcycles it supports generate low to no maintenance or fuel costs and provide a highly reliable mobility solution while assisting in the carbon reduction efforts of the agencies that use the product. Available with, or without bundled eMotorcyles.
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BeamWell™ - based on the patented EV ARC™ system, is a self-sufficient, self-contained operational system for use in war zones and remote or disaster areas where only salt, brackish or dirty water is available because a reliable clean water supply is not available or has been interrupted. The BeamWell™ system provides three essential services to regions in crisis: it turns seawater into fresh water, which is then stored in an integrated 3000-liter tank that is replenished daily; it provides a source of electricity which can be used for medical or communications devices as well as cooking and lighting; and it charges four integrated and bundled Benzina Zero electric mopeds for the rapid distribution of food, water, medications or other vital resources, to those in need.
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Smart Cities Infrastructure products – Street lighting, street furniture, communications infrastructure products, energy infrastructure products, with electronics integration including renewable energy sources, battery storage, sensors and IoT integration.
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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.
Beam AllCell™ designs,
manufactures and sells custom, high-quality, bespoke lithium-ion energy storage solutions. Our world-class battery engineering team rigorously
creates unique battery formats and shapes to the highest standards, delivering highly flexible solutions that maximize power in compact
spaces. Our patented PCC™ phase change material, manufactured in-house, provides passive thermal management solution and critical
safety features against thermal runaway. Our proprietary Smart BMS, designed by the Company, further differentiates our products, ensuring
superior customer satisfaction. Our battery is ideal for applications requiring high energy density, high power, and safe, space
efficient enclosures. Our batteries power drones, submersibles, medical devices, recreational products and micro-mobility solutions. The
Company is integrating these advanced batteries and technologies into our new product designs under development.
On October 20, 2023, Beam
acquired Amiga DOO Kraljevo (“Amiga”), a business located in Serbia and engaged in the
manufacture and distribution of steel structures with electronic integration, including (i) infrastructure products for public
lighting; (ii) infrastructure products for mobile telephone, networks and transmission lines; (iii) infrastructure products for tram,
trolleybus, and railways; (iv) infrastructure products for contact networks, masts, portals and semi-portals for road and railway signaling;
(v) large steel lattice structures for specific purposes (e.g., stadiums, factories, power plants, etc.); and (vi) distribution and command
electrical cabinets. Amiga has engineering, product development and manufacturing capabilities which 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 BeamSpot™ for both the European and US markets.
On August 30, 2024, Beam acquired
Telcom d.o.o. Beograd (“Telcom”), a business located in Serbia and engaged in the manufacturing of power electronics and telecommunications
equipment. Telcom engineers and manufacturers specialized power electronics includer invertors, charge controllers, power supplies and
LED lighting. Telcom has electrical engineering, product development and manufacturing capabilities which Beam believes are ideally suited
to improve the Company’s current and future products for the global market. Telcom has a well-respected and highly talented team
of electrical engineers, focused on power electronics and the integration of renewables and energy storage.
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 customers’ 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.
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We believe our chief differentiators
for our electric vehicle charging and energy security infrastructure products are:
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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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our proprietary and patented energy storage solutions;
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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;
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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
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our ability to continuously create new and patentable marketable inventions by integrating our proprietary technology and parts, and other commonly available engineered components, which create a further barrier to entry for our competition;
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our international operations in two of the three largest automotive markets in the world today.
Beam’s revenue as of
December 31, 2024 was $49.3 million compared to $67.4 million in 2023. Although a decrease year over year, this was a 124% increase over
December 31, 2022 revenue of $22.0 million. We believe that the decrease in revenue is a result of order timing, uncertainty in the U.S.
government’s zero emission vehicle strategy related to, and following the presidential election and evolving certification requirements
for energy storage systems requiring updates to our EV ARC™ products which we believe will be completed in the first quarter of
2025. These matters have particularly impacted our larger federal customers and we do not believe that they signify 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. As we have continued investment in our sales resources, in September
of 2024, we hired a new Vice President of Sales in the U.S. and a new Director of Channel Partnerships in Europe to drive growth in commercial
and government sectors. Revenues were diverse across federal, state and local governments, as well as enterprise and education sector
customers. International customers comprised 25% of the revenues as of December 31, 2024 verses 15% for the year ended December 31, 2023.
Revenues derived from non-government commercial entities increased by 229% for the twelve months from 2023 to 2024 and were 38% of total
revenues in 2024. For the twelve months ended, December 31, 2024, the Company’s sales to federal, state and local governments represented
62% of revenues verses 80% of total revenues in 2023. We continue to invest in sales employees, marketing resources, diversifying our
product portfolio with new product offerings and expanding our geographic footprint to reduce our reliance on single large orders of our
EV ARC™ product by federal agencies, although we believe that that opportunity still exists. 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 and our new and
existing products are brought to larger international audiences, our business will be less impacted by specific variations in order timing.
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 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 the beginning of 2024, we saw strength in federal orders with a new order announced in January 2024 from the
U.S. Army Corps of Engineers, Army Material Command (AMC) for $7.4 million. A number of federal tax incentives remain, like the 30% federal
solar tax credit and Rule 179 accelerated depreciation, which provide strong financial incentives for many of our targeted commercial
customers. In addition, there continues to be support for funding EV charging infrastructure at the state level.
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With our acquisitions of Amiga
and Telcom, 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 geographic expansion into Europe and our additional business development activities
in the Middle East and Africa are, we believe, also providing opportunities for growth which are not dependent on, or impacted by, shifts
in US government and zero emission vehicle strategies. The new products we have brought to market offer values which are also not dependent
upon US federal government investment. 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.
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. 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 an opportunity for increased demand in these markets
and others.
We are in development on our
newest patented products which include- BeamSpot™, UAV ARC™ and others, which we expect will continue to 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 of streetlights and has a team of qualified structural, electrical and civil engineers who are experts
in the field of development and deployment of street lighting. They are working with our engineers in San Diego and Broadview to continually
improve the engineering and development of our new BeamSpot™ product. We believe that BeamSpot™ may become our largest selling
product when available for sale. BeamSpot™ is currently in the process of being installed and we received our first order for that
product within two months of it being launched.
In addition, EV ARC™,
BeamBike™, BeamWell™ and BeamPatrol™ products have fulfilled the requirements to receive the CE mark (Conformité
Européenne), a mandatory symbol indicating that a product meets European Union (EU) health, safety and environmental protection
requirements, allowing it to be freely traded within the European Economic Area (EEA).
The Company reported a positive
gross profit of $7.3 million for 2024, compared to $1.2 million gross profit in 2023. Our gross margin improved as a percentage of sales,
year over year, and was 14.8% for 2024, up thirteen percentage points from the gross margin reported in 2023. The increase was 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. Additionally, for the year ending December 31, 2024, 24.1%
of ARC sales reflected the price increase implemented in 2023. Our gross profits included a negative impact of $3.2 million for non-cash
depreciation and intangible amortization. Our gross margin net of non-cash items was 21.2%. We expect to see our costs of goods sold continue
to decrease over time. We have continued to implement lean manufacturing process improvements and making engineering changes to our products
which we expect to result in cost reductions. Many of the components that we integrate into our products are manufactured by others. This
is consistent with our strategy to take advantage of the investment by large and well-funded organizations in the improvement, and reducing
costs, 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. We expect that the receipt of orders may be inconsistent quarter over quarter, however,
we expect that in the long term, our revenues will grow as we expand our product offerings and geographic reach and because we expect
to see a significant increase in the demand for electric vehicle charging infrastructure. As such we do not anticipate significant pricing
pressure on our products. The increase in demand for electric vehicle charging infrastructure and, we believe, over the long term, our
revenues, combined with 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 the capability 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 U.S., even as we continue to reduce our costs in the U.S.
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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 will 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 expenses 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, 2024 and 2023
Revenues. For the year
ended December 31, 2024, our revenues decreased 27% to $49.3 million compared to $67.4 million for 2023. Although a decrease year over
year, this was a 124% increase over December 31, 2022 revenue of $22.0 million. During the year ended December 31, 2024, $15.5 million,
or 32% product sales, were to Federal customers. State and Local governments customers accounted for 30% of revenues. We continue to invest
in sales, marketing and government relation 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/(Loss). The
Company reported a positive gross profit of $7.3 million, a 14.8% gross margin for the year ended December 31, 2024, compared to a gross
profit of $1.2 million, a 1.8% gross margin in 2023. As a percentage of sales, the margin improved by thirteen 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. Additionally, 24.1% of ARC sales in 2024 reflected the price
increase implemented in 2023. The gross profit includes a non-cash negative impact of $0.7 million for amortization of intangible assets
resulting from the All Cell acquisition. Without this non-cash expense, gross profit for 2024 would be $8.0 million, a 16.3% gross margin.
Our engineering team has continued to implement design changes during 2024 which reduced the bill of materials for the EV ARC TM ,
improving the product margins throughout 2024. We expect the Company’s revenue to grow in the future and our fixed overhead absorption
to continue to improve.
Operating Expenses. Total
operating expenses were $19.0 million for the year ended December 31, 2024, compared to $17.5 million in the prior year. The 2024 operating
expenses included $3.8 million increase due to having a full year of operations of the Serbian acquisitions offset by a decrease in operating
expenses for our U.S. operations of $2.3 million. The $1.5 million increase in 2024 operating expense includes a benefit of $4.7 million related to the non-cash
change in fair value of contingent consideration for the Amiga acquisition, offset by $3.8 million increase in operating expenses for
Beam Europe (full year of operations), increase of $0.7 million for salaries, benefits and related costs, increase of $0.6 million for
stock option expenses, increase of $0.4 million for audit, tax and outside service consultants and $0.4 million increase in customer service
accommodation costs.
Liquidity and Capital Resources
At December 31, 2024, we had
cash of $4.6 million, compared to cash of $10.4 million at December 31, 2023. We have historically met our cash needs through a combination
of debt and equity financing and more recently through gross profit contributions. Our cash requirements are generally for operating activities
and acquisitions.
Management believes the Company’s
present cash flow will enable it to meet its obligations for twelve months from the date of these financial statements. Management will
continue to assess its operational needs and seek additional financing as needed to fund its operations.
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,
2024
2023
Cash provided by (used in):
Net cash used in operating activities
$ (2,193 )
$ (13,307 )
Net cash used in investing activities
$ (4,054 )
$ (5,708 )
Net cash provided by financing activities
$ 1,203
$ 27,717
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For the year ended December
31, 2024, our cash used in operating activities was $2.2 million compared to $13.3 million for the year ended December 31, 2023 Net loss
of $11.3 million for the year ended December 31, 2024 was decreased by $3.7 million of non-cash expense items that included $3.7 million
for depreciation and amortization, $3.6 million for stock-based compensation and $0.8 million in amortization of operating leases offset
by $4.4 million for change in fair value of contingent consideration liabilities pertaining to the true-up of the earnout payment for
Amiga. Cash used in operations included a $0.9 million decrease in accounts payable, $0.6 million decrease in noncurrent liabilities related
to the long term deferred tax liability, a $0.2 million decrease in accrued expenses related to short term taxes payable, $0.2 million
increase in inventory and $0.1 million increase in prepaid expenses and other current assets. In addition, cash provided by operations
included $8.2 million decrease in accounts receivable and $0.4 million increase in deferred revenue.
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, 2024, cash used in investing activities was $4.1 million which included $2.7 million cash for payment of deferred consideration in
connection with the acquisition of Amiga, $0.8 million for the purchase of equipment to increase the throughput in our facilities and
$0.5 million cash for the acquisition of Telcom, net of cash acquired. Cash used in investing activities in the year ended December 31,
2023, 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.
For the year ended December
31, 2024, cash generated by our financing activities was $1.2 million which included $0.8 million proceeds from public warrant exercises,
and $0.5 million from the sale of stock under our committed equity facility offset by $0.2 million used for restricted stock unit vesting.
In 2023, cash generated by our financing activities was $27.7 million which 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.
Current assets decreased
to $27.1 million at December 31, 2024 from $40.7 million at December 31, 2023, primarily due to a $7.9 million decrease in accounts receivable
and $5.8 million decrease in cash. Current liabilities decreased to $13.3 million at December 31, 2024 from $16.9 million at December
31, 2023, primarily due to a $2.7 million decrease in deferred consideration, current, for a cash payment owed for the Amiga acquisition
paid at the beginning of 2024, $0.8 million decrease in accounts payable and $0.3 million decrease in accrued expenses, partially offset
by an increase of $0.1 million contingent consideration and $0.1 million in other current lease liabilities. As a result, our working
capital decreased to $13.8 million at December 31, 2024 compared to $23.8 million at December 31, 2023. While the Company did not identify
an impairment as of December 31, 2024, it has noted a decline in stock price during the first quarter of 2025 that may indicate a decrease
in the fair value of the Company which could trigger an impairment. The Company is in the process of conducting an assessment to
determine if an impairment is indicated and believes a material impairment of goodwill is possible during 2025.
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. Even though there was a decrease in revenues by 27% from 2023 to 2024, we believe our marketing
and sales efforts have been impactful. The Company improved its gross profit in 2024, and it is expected to improve in the future as a
result of a price increases and benefits from cost reductions from several design changes. 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 continued to see material
cost reductions as synergies are recognized, 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.
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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. The Company could pursue other equity or debt financing. 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.
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.
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.
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.
37
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.