10-K 1 beam_10k-123120.htm FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

☒ Annual Report under Section 13 or 15 (d) of Securities Exchange Act of 1934

For the fiscal year ended December 31, 2020

☐ Transition Report under Section 13 or 15 (d) of Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number 000-53204

Beam Global

(Exact name of Registrant as specified in its charter)

Nevada	26-1342810
(State of Incorporation)	(IRS Employer ID Number)

5660 Eastgate Dr.

San Diego, California 92121

(858) 799-4583

(Address and telephone number of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of principal U.S. market on which traded
Common stock, $0.001 par value	BEEM	Nasdaq Capital Market

Warrants	BEEMW	Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company under Rule 12b-2 of the Exchange Act. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting common stock held by nonaffiliates of the registrant as of June 30, 2020 (the last business day of the registrant’s most recently completed second fiscal quarter) was $42,384,404 based upon the closing price of the shares on the NASDAQ Capital Market on that date. This calculation does not reflect a determination that such persons are affiliates for any other purpose.

The number of registrant's shares of common stock, $0.001 par value, issuable and outstanding as of March 24, 2021 was 8,867,605.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the registrant’s 2021 Annual Meeting of Stockholders which will be filed with the Commission no later than 120 days after the registrant’s fiscal year ended December 31, 2020, are incorporated by reference into Part III of this report.

TABLE OF CONTENTS

	PART I	1

ITEM 1	Business	3
ITEM 1A	Risk Factors	12
ITEM 1B	Unresolved Staff Comments	20
ITEM 2	Properties	20
ITEM 3	Legal Proceedings	20
ITEM 4	Mine Safety Disclosures	20

	PART II	21

ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	21
ITEM 6	Selected Financial Data	21
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk	29
ITEM 8	Financial Statements and Supplementary Data	29
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	29
ITEM 9A	Controls and Procedures	29
ITEM 9B	Other Information	31

	PART III	32

ITEM 10	Directors, Executive Officers, and Corporate Governance	32
ITEM 11	Executive Compensation	32
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	32
ITEM 14	Principal Accounting Fees and Services	32

	PART IV	33

ITEM 15	Exhibits, Financial Statement Schedules	33
ITEM 16	Form 10-K Summary	35
	Signatures	S-1

PART I

Unless specifically noted otherwise, this annual report on Form 10-K reflects the business and operations of Beam Global, a Nevada corporation (hereinafter the “Company,” “us,” “we,” “our” or “Beam”).

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on current expectations, estimates, forecasts, and projections about us, the industry in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believe,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” and variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act).

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause the Company’s actual results to be materially different from any future results expressed or implied by the Company in those statements. The most important factors that could prevent the Company from achieving its stated goals include, but are not limited to, the following:

(a)

volatility or decline of the Company’s stock price, or absence of stock price appreciation;

(b)

potential fluctuation in quarterly results;

(c)

failure of the Company to earn revenues or profits;

(d)

inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans;

(e)

unavailability of capital or financing to prospective customers of the Company to enable them to purchase products and services from the Company;

(f)

failure to commercialize the Company’s technology or to make sales;

(g)

reductions in demand for the Company’s products and services, whether because of competition, general industry conditions, loss of tax incentives for solar power, technological obsolescence or other reasons;

(h)

rapid and significant changes in markets;

(i)

litigation with or legal claims and allegations by outside parties;

(j)

insufficient revenues to cover operating costs, resulting in persistent losses;

(k)

potential dilution of the ownership of existing shareholders in the Company due to the issuance of new securities by the Company in the future; and

	(l)	rapid and significant changes to costs of raw materials from government tariffs or other market factors;

	(m)	increasing spread of the COVID-19 pandemic and its impact on the Company’s business as well as worldwide financial markets;

	(n)	the preceding and other factors discussed in Part I, Item 1A, “Risk Factors,” and other reports we may file with the Securities and Exchange Commission from time to time; and

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

We caution you that the foregoing list may not contain all of the forward-looking statements made in this annual report on Form 10-K.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this annual report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled "Risk Factors" and elsewhere in this annual report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this annual report on Form 10-K. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this annual report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances or to reflect new information or the occurrence of unanticipated events, except as required by law.

ITEM 1.

BUSINESS.

Overview

Beam is a sustainable clean-technology innovation company based in San Diego, California. We develop, engineer, manufacture and sell renewably energized infrastructure products for transportation, outdoor media and energy security. Our renewably energized products enable vital and highly valuable services in locations where it is either too expensive, too disruptive or impossible to connect to the utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. We do not compete with EV charging companies; rather, we enable them through providing infrastructure solutions that replace the time consuming and expensive process of construction and electrical work required to installed traditional grid-tied EV chargers. We also do not compete with utilities. Our products provide utilities with another tool to deliver reliable and low-cost electricity to EV chargers and, in the case of a grid failure, to first responders or others, through our integrated emergency power panels.

Our products are rapidly deployed without the need for construction or electrical work. We compete with the highly fragmented and disintegrated ecosystem of general contractors, electrical contractors, consultants, engineers, permitting specialists and others who are required to perform a traditional grid-tied EV charger installation construction project. Our clean-technology products are designed to replace a complicated, expensive, time consuming and risk prone process with an easy, low total cost of ownership, robust and reliable product.

Beam’s renewably energized products and proprietary technology solutions target three markets that are experiencing significant growth with annual global spending in the billions of dollars.

electric vehicle charging infrastructure;

outdoor media advertising; and

energy security and disaster preparedness.

The Company focuses on creating renewably energized, high-quality products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security that are rapidly deployable and attractively designed. We believe that there is a clear need for a rapidly deployable and highly scalable EV charging infrastructure, and that our EV ARC™ and Solar Tree™ products fulfill that requirement. We are agnostic as to the EV charging service equipment (“EVSE”) as we do not sell EV charging, rather we sell products which enable it. Our EV ARC™ and Solar Tree™ products replace the infrastructure required to support EV chargers, not the chargers themselves.

We believe our chief differentiators are:

our patented, renewably energized products dramatically reduce the cost, time and complexity of the installation and operation of EV charging infrastructure and outdoor media platforms when compared to traditional, utility grid tied alternatives;

	·	our first-to-market advantage with EV charging infrastructure products which are renewably energized, rapidly deployed and require no construction or electrical work on site;

	·	our products’ capability to operate during grid outages and to provide a source of EV charging and emergency power rather than becoming inoperable during times of emergency or other grid interruptions; and

our ability to continuously create new and patentable products using our own proprietary technology and parts, and other commonly available engineered components, creating a further barrier to entry for our competition.

Products and Technologies

Electric vehicle charging infrastructure

All of our products currently incorporate the same underlying technology and multiple layers of value, having a built-in renewable energy source in the form of attached solar panels and/or light wind generator, along with battery storage enabling them to generate and store all of their own electricity and operate without connecting to the grid. They are all also capable of connecting to the grid in the event that a customer values that capability. We believe that the U.S. and global utility grids lack sufficient capacity to supply enough electricity to all the new EVs which are becoming more available to consumers. This is especially the case when one considers the number of national and state governments that have announced outright bans on the sale of gasoline and diesel vehicles, such as Norway starting in 2025, with most bans being put in place no later than 2040. Even locations where a grid connection is available often lack circuits which are large enough to support EV charging in any meaningful way. For example, parking lots might have enough electrical capacity to power lighting but not enough to power EV charging. Beam products provide that power without a requirement to increase the electrical grid capacity at that site which can often be, and we believe will increasingly be, expensive, disruptive, complex and time consuming.

We believe that the need for rapidly deployed and highly scalable EV charging infrastructure products which do not require construction or electrical work, and which do not rely on the utility grid for a supply of electricity will become increasingly urgent during the coming months and years. We are not aware of any other products which provide a solution for this opportunity as effectively as our patented products which are listed below:

EV ARC™ (Electric Vehicle Autonomous Renewable Charger) – Our most popular product, we believe this patented product is the world’s first and only transportable, solar powered EV charger on the market. The EV ARC™ generates and stores all its own energy and supports Level I, Level II and DC Fast Charging (requiring 4 interconnected units). It does not need a grid connection and therefore needs no trenching, switch gear, or transformer upgrades. Because there is no foundation, trench or electrical infrastructure, the EV ARC™ typically does not require a building or any other kind of permit, and it is easily transportable if a different location is desired. EV ARC™ products can charge between one and six EVs simultaneously and a single unit can provide EV charging to as many as 12 parking spaces.

EV ARC™ systems are immune to grid interruptions such as black-outs or brown-outs which is becoming increasingly important as more transportation relies on electricity as fuel. There are no utility bills to pay and, as the number of EVs increase at the host locations, more EV ARC™ units can be added without disruptive planning or permission from the utility. Current grid-tied EV chargers are often placed in locations where a suitable circuit is most easily accessed and cheapest to install, rather than in the most convenient and desirable locations for EV drivers to charge their EVs. EV ARC™ systems do not need to be connected to the grid and as such, can be placed anywhere, making them a rapidly deployable and highly scalable EV charging infrastructure solutions.

In 2019, we began deploying an upgraded version of our EV ARC™, the EV ARC™ 2020, which provides all of the features of the original EV ARC™ in addition to elevating the electronics under the solar canopy to make the unit flood-proof up to nine and a half feet. Also in 2019, we deployed our first EV ARC™ DC Fast Charging units that provide a 50kW DC fast charge which provides up to 1,100 miles per day to one or more electric vehicles. We are also working with a partner to develop inductive charging as a feature to offer to our customers. A patent has been filed for our EV ARC™ system equipped with this technology.

Because EV ARC™ systems are highly visible and, it has been independently represented to us, very attractive, we believe that they are an ideal platform for sponsored deployments wherein networks of EV ARC™ systems are deployed and owned by us and monetized through sponsorship and naming-rights agreements with corporate sponsors who are eager to have their brands associated with the “Driving on Sunshine” network. Our products also create significant reductions in greenhouse gas and CO2 emissions which, we believe, can be used as a further inducement to encourage corporations to sponsor the networks as they might benefit from the carbon offsets generated by a network of EV ARC™ systems.

SolarTree® Products – This patented product is used for larger scale solar powered EV charging applications. We believe our Solar Tree® product to be the only single column, sun tracking, solar support structure with integrated energy storage, EV charging and media platforms available today. The design makes Solar Tree® systems ideal for charging electric buses, electric heavy-duty vehicles, electric agricultural equipment, public transportation and increasing electric vehicle options in the construction industry. In 2020, we launched our new generation of Solar Tree® DCFC products with on-board battery storage that do not require a connection to the utility grid (though grid connection capability is available). As a result, they can be rapidly deployed and enable EV charging in locations where it would otherwise be impossible or economically infeasible, such as rest areas, park and ride locations, construction sites, or any location with insufficient grid connectivity. The costs and environmental impact associated with delivering a 50kW or greater circuit to a remote rest area may be prohibitive, whereas a Solar Tree® DCFC can be deployed with minimal site disturbance.

We believe Solar Tree® products with on-board battery storage can provide a highly reliable source of energy to provide emergency power to users such as first responders during times of emergency or other grid failures. We also believe that Solar Tree® products optimized for branding can create visually stunning platforms for the delivery of a business’ brand message with a less onerous planning and entitlement process than that experienced with traditional signage.

EV-Standard™ Product – On December 31, 2019, we received a patent for this product from the United States Patent and Trademark Office. The EV-Standard™ is currently in development and will use an existing streetlamp’s foundation and grid connection. Combining solar, wind-power and the street lamp grid connection into on board batteries which are stored in the EV Standard’s column, the product will deliver meaningful Level II EV charging at “curbside” or “on street”. The EV-Standard™ design combines a tracking solar panel, wind energy and utility-generated electricity from the existing streetlamp grid connection in a bank of integrated batteries. While most traditional streetlamps do not have sufficient electrical capacity to provide meaningful EV charging, the combination of all three sources of power will do so in a sustainable and economical manner. Densely populated areas do not have large open parking lots and will require EV charging solutions where drivers park on the street. The EV Standard^TM can provide that without having to invest in expensive, disruptive and time-consuming construction or electrical work. It will continue to charge during grid failures and greatly reduce the cost of electricity when compared to an all grid-powered solution. We believe that in some instances EV charging might be deployed at every five lamp standards or even greater density. We believe the patented EV Standard™ creates a significant additional opportunity for product sales and revenue generation.

UAV ARC™ drone charging product – On November 24, 2020, we received a patent for this product from the United States Patent and Trademark Office. This product is currently in development. The UAV ARC™ network is a rapidly deployable, highly scalable, range extending drone recharging product which forms a network intended to provide a range-extending source of battery recharging for drones that would otherwise be limited by range or payload restrictions. UAV ARC™ is also intended to exchange data with the drone on, for example, its state of health. This and other information will be transmitted to Beam and monetized through a variety of business models such as making it available to the operator of the drone fleet. Beam is considering business models that might include a subscription based model for fuel and data. The ability to recharge on a network of UAV ARC™ products deployed on rooftops in built up areas, undeveloped regions or at sea (marinized version) should dramatically increase the potential range and utility of UAVs. Each UAV ARC™ unit generates and stores all its power from renewable sources so drones will receive clean renewable electricity with no cost-per-unit of energy. The units are completely independent from the power grid, allowing them to provide charging during grid outages and in remote locations. UAV ARC™ will be deployed without the requirement for site activities such as construction or electrical work.

Outdoor Media Advertising

As the value of traditional advertising media such as television, radio, and print diminishes, advertisers in the United States and abroad are looking for new outlets to capture the attention of consumers. Industry experts believe that there will be significant growth in spending on outdoor advertising platforms particularly when mounted on street furniture. We believe the digital out of home industry (“DOOH”) is enjoying a period of rapid growth and may continue to do so for the foreseeable future. The Company believes there is opportunity in the outdoor advertising space to place outdoor content on Beam’s infrastructure products and disperse them throughout cities. One objective is to sell advertising to a company, and the proceeds would then be used to fund the delivery of EV ARC™ systems, which would be placed in visible locations and would display the advertisements. This is a growing area with companies such as Google. Beam’s current main focus in the media space is to sell sponsorship and naming rights to networks of EV ARC™ systems deployed across major cities, using a similar model to the Citibike program in New York City. In 2012, Citigroup Inc. paid $41 million for five years of naming rights on New York’s bike sharing program. Citibank extended the naming rights agreement for $70 million to cover the period from 2019 to 2024. Beam intends to replicate this model with the Driving on Sunshine network. Because EV ARC™ systems are highly visible and, it has been independently represented to us, very attractive, we believe that they are an ideal platform for sponsored deployments wherein networks of EV ARC™ systems are deployed and owned by us and monetized through sponsorship and naming-rights agreements with corporate sponsors who are eager to have their brands associated with the “Driving on Sunshine” network. Our products also create significant reductions in greenhouse gas and CO2 emissions which, we believe, can be used as a further inducement to encourage corporations to sponsor the networks as they might benefit from the carbon offsets generated by a network of EV ARC™ systems. We intend to offer five-year sponsorship agreements. We believe that the EV ARC™ will provide 20 years of service (we have had them operating in the field for almost a decade to date) and as such intend to create a long-term recurring revenue stream from renewing the sponsorships. We believe that the Driving on Sunshine network will become more valuable as more EVs are purchased and the public perception of free solar powered driving improves and increases.

In 2020, the Company entered into a collaboration agreement with the City of San Diego to deploy solar-powered EV charging infrastructure across the city (Driving on Sunshine network) and is currently working with qualified partners to engage sponsors to take advantage of this naming rights platform.

Energy Security and Disaster Preparedness

Power outages cost the United States up to 200 billion per year according to the Department of Energy. Our renewably-energized products are fully sustainable and include battery energy storage that can dispatch power during times of grid or hydrocarbon fueled generator failure or during public safety power shutoff (PSPS) in certain jurisdictions. Our chief area of focus in energy security is to ensure that there is EV recharging infrastructure during grid failures, such as blackouts. As the adoption of EVs increases, it will be critical to have fuel (recharging) infrastructure that is not reliant on the utility grid with its centralized vulnerabilities. We have witnessed power outages in Texas due to cold weather, in California and New York due to hot weather and in other parts of the nation whenever inclement conditions such as high winds or flooding take place. California has also been susceptible to public safety power shutoffs (PSPS) to prevent fires during high wind events. There have been kinetic and cyber attacks on the grid and the U.S. government has evidence of intrusions by nefarious nation state actors. All of these events constitute significant vulnerabilities which are expensive, disruptive, inconvenient, and dangerous today. As we electrify our fleets, they will become catastrophic. The U.S. has a Strategic Petroleum Reserve (SPR) to ensure that we never run out of gasoline and diesel but there is no strategic electric reserve. In fact, many markets are operating at capacity during peak events.

Beam’s products provide a hedge against grid failures because they are invulnerable to the centralized nature and other aspects of the utility infrastructure. Locally generated and stored electricity of the sort delivered by EV ARC™ and Solar Tree® provides a highly robust and secure source of power to EVs of every sort. We are engaged with government officials at every level to increase awareness of our products and the benefits they can bring to U.S. energy security. We are increasingly hearing suggestions that 25% of all EV charging infrastructure should be independent of the centralized grid. We believe that our products are uniquely positioned to provide this sort of solution and our contracts with states like California and Florida, cities like New York, and the Federal government through our General Services Administration (GSA) Multiple Award Schedule Contract should ideally position us to take advantage of what we believe will be a significant increase for the requirements of robust and sustainable EV charging infrastructure. The Biden administration has stressed increased commitment to:

	1.	American made products
	2.	Clean Energy
	3.	Energy Security
	4.	Electrified transportation
	5.	Transportation infrastructure

We believe that our products are ideally suited to fulfill all of these requirements.

Strategy

Target Markets

Beam’s markets consist of several broad segments: state, municipal and federal government agencies, corporations, energy utility companies, universities, retail, hospitality and international markets. These segments can further be broken down into increasingly granular segments as different market opportunities are identified. Beam’s largest market is currently Municipal.

Beam’s largest customers include the State of California, which is a conglomeration of California state agencies and municipalities, the City of New York, and Electrify America, LLC a subsidiary of Volkswagen Group of America. The most attractive markets for Beam have been New York and California, but we are now seeing growing opportunities throughout the U.S.

The factors below have been considered in determining favorable markets for our products:

Political Factors. Political statements, mandates and laws supporting and driving policy to reduce carbon emissions through the electrification of transportation. State and local governments focusing on the transportation industry and the electrification of fleet vehicles to reduce carbon emissions.

Economic Factors. The use of grants and incentives to advance the adoption of EVs and EV charging infrastructure. Regions with difficult, time consuming permitting and regulatory requirements and high construction costs.

Sociocultural Factors. High concentration of EV drivers and a cultural desire to be good stewards of the environment.

Technological Factors. Regions with good insolation, expensive energy costs, and poor or degraded air quality, and a lack of capacity or expensive upgrade requirements for their utility grid.

These factors have been important in the early days of EV adoption. Government tail winds are stronger than ever with many nations and states announcing the outright banning of gasoline and diesel vehicle sales during the next two decades. In the U.S., California has announced a ban starting fourteen years from now in 2035 and the State of Washington has improved upon that with a ban starting in 2030, less than nine years away. Beam believes that a perhaps more powerful force is starting to shape the industry; automotive OEMs are announcing the delivery of electric vehicles which are much more consistent with models which have traditionally been popular with U.S. consumers. Ford has announced an all-electric F150 pickup truck, available in 2022. The F150 is the most popular vehicle in the US since 1981 and the top selling pickup truck for forty-two years in a row. The electric version will have the same towing and payload capacity but will be able to accelerate for 0 to 60mph in around three seconds. GM has announced an electric Hummer which will have 1000HP (compared to the gasoline version with 300HP) and will accelerate at about the same rate as the F150. Neither vehicle will need to go to the gas station ever. Neither vehicle will require anything but the most basic and minor maintenance. There will be at least 100 new EV models released in the next 24 months.

We believe that the consumer will adopt EVs faster than many experts are predicting and that as a result, the requirement for growth in EV charging infrastructure will be more urgent than is currently forecasted or contemplated. We also believe that as the easiest (low hanging fruit) locations for grid-tied chargers are used up, the process of deploying traditionally installed and powered grid-tied EV chargers will become more expensive and time consuming. At the same time, we believe that we will continue to reduce the costs to produce our products and become faster at deploying them. During a period of significant and increasing demand, we believe that our scalability and rapid deployment will create a significant advantage for our products and our position in the market.

Growth Strategy

The electric vehicle market is expected to grow at a rapid pace. According to Goldman Sachs, the EV infrastructure market is expected to receive $6 trillion in investments for infrastructure around EVs. Bloomberg forecasts 559M EVs on the road by 2040. In addition, General Motors recently announced that they aspire to offer only zero-emissions vehicles by 2035. California’s Governor has also issued an executive order that by 2035, all new cars and passenger trucks sold in California will be zero-emission vehicles. Massachusetts has followed suit and others are expected to follow. We currently operate in three rapidly growing markets: EV charging infrastructure, outdoor media advertising and energy security and disaster preparedness. Our products are being used in 23 U.S. states, 122 municipalities, three international countries, and the U.S. Virgin Islands in the Caribbean. We believe that our products have a global appeal and that we are only at a nascent period in the development of our sector. We believe that our strategic growth plan will enable us to increase our user base and revenues while leading to increased profitability and includes:

	·	Investment in Government Relations expert services to ensure that decision makers are aware of the value that our made in America products provide

	·	Increase sales and marketing to educate our universe of potential customers.

Continue to expand our geographic footprint and customer base.

Enhance our gross margins by increasing production volumes, improving operating efficiencies and reducing the cost of materials and production.

Increase leverage of outsourcing as our manufacturing process scales.

	·	Expand our recurring revenue business.

	·	Educate and communicate information about federal and other government grants, investment tax credits, and other incentives to provide funding opportunities for our customers.

Capture market share of the electrified personal and public transportation space, which is at a nascent phase.

Continue to expand our Outdoor Media Business unit.

Develop and innovate new products while building a strong IP portfolio.

Sales and Marketing

Beam utilizes an in-house sales team and sells through a direct sales and marketing channel, pairing customers with sales specialists (Clean Mobility Experts) to ensure their needs are met. The Company hired a new Vice President of Sales and Marketing on January 1, 2020 who currently leads the team.

Our sales process is heavily focused on educating prospective customers about our product so that they are aware that they have other options, before they select a traditional grid-tied solution. As a result, we have begun investing more in marketing materials and videos, as well as a public relations firm to help us to educate the market. Beam uses research to identify potential customers, as well as contacts established through trade show events and in-bound calls. We also utilize a combination of regional and industry focused campaigns, nurturing campaigns, speaking opportunities, product demonstrations, press releases and social media (Facebook, Instagram, Twitter, and LinkedIn). Beam is, we believe, an industry leader in the sustainable EV charging infrastructure space and our website is used to highlight that together with webinars and industry news to automate the education of our markets, helping them confidently make informed decisions about the purchase of our products. Presentation and execution continues to remain a priority while we keep sales and marketing materials updated to ensure messaging is on point and consistent with our product offering, customer’s needs and industry standards.

Beam products can have a long sales cycle. This is a sophisticated sale and often a large capital expense for our customers. Sales often hinge on bureaucratic processes and funding approval. Political mandates do not always equal availability of resources to execute policy into action. We also utilize a consultant to support our customers with the federal grant process to identify grants that may be available to reduce the cost of their purchase.

Our products are eligible for various tax and other incentives which can significantly reduce the out-of-pocket expense paid by a customer for our products. Examples of these sorts of incentives include:

	·	Federal Solar Investment Tax Credit (ITC) (Section 48 of the tax code). This may provide a tax credit, which is currently at 26% of the amount of your solar energy system purchase.
	·	Rule 179 Depreciation or Bonus Depreciation - allows our customers to accelerate depreciation of their solar energy system up to 100% of the cost of the system in the first year it is in service.
	·	Code Section 30C, Alternative Fuel Vehicle Refueling Property, may allow a tax credit of 30% of the cost of the purchase up to $30,000.

The combination of these incentives can provide significant tax benefit for our customers. There are often other state, local and utility incentives which can provide further savings.

We believe that the current administration will continue and perhaps enhance incentives to deploy products such as ours in the coming years. President Biden has made several commitments to the funding of clean energy and EV charging infrastructure including the deployment of 500,000 publicly available EV charging stations on U.S. highways. We believe that because our products are rapidly deployed, enhance energy security and are made in America, that we are well positioned to benefit from these, and other, initiatives.

Major Customer Contracts

In 2020 and 2019, we have had three major customers, the State of California, the City of New York and Electrify America, LLC that have accounted for a substantial portion of our revenue.

City of New York Requirement Contract. We entered into a Requirement Contract with the City of New York on April 17, 2017 that extends through April 16, 2021. We have received 3 purchase orders to date on this contract. The first was for 36 EV ARCs™ and one ARC Mobility™ trailer, all of which were delivered in 2017 and 2018, for a total contract price of $2,416,356. On September 10, 2018, we received a new $3,300,000 order from the City of New York for 50 EV ARC™ units which we delivered 16 units during 2018 and 34 units in the first half of 2019. On March 12, 2021, we received a purchase order for two of the new EV ARC™ 2020 systems. New York expressed that they want to test the new flood proof EV ARC™ model before the current contract expires. We anticipate that a Request for Proposal will be initiated by the City of New York in 2021 to provide a new contract, to which, in that event, Beam will respond.

Contract with the California Department of General Services. On June 12, 2015, our bid for solicitation was accepted by the California Department of General Services (the “California Contract”). The term of the California Contract was initially for one year with two extension options for one year. California elected to exercise both options to extend. In June 2018, the California Contract was renewed for up to four more years (two years with two additional one-year options), and its scope was expanded to include more of our products, including our EV ARC™ DC Fast Charging Electric Vehicle Autonomous Renewable Charger, with a California estimated value of over $20 million. In January 2021, the contract was extended through June 2022 and was expanded to be utilized by agencies across the U.S. The California Contract permits California state and local government agencies, including cities, counties, special districts, California State universities, University of California systems, K-12 school districts, and community colleges, to purchase EV ARCs™, ARC Mobility Trailers, and related accessories from us. We have sold 86 EV ARCs^TM for a total of $6,089,882 through December 31, 2020, which includes 18 units totaling $1,850,268 in 2020.

Electrify America Contract. In October 2019, Beam responded to a Request for Proposal with Electrify America, a subsidiary of Volkswagen Group of America. On February 21, 2020, Beam was awarded a $2 million contract for 30 EV ARC units to be deployed in rural areas in central California. During the year ended December 31, 2020, we recognized revenues for 29 units totaling $1,833,698 to Electrify America, with one EV ARC™ system remaining to deploy in the first quarter of 2021. Beam continues to develop a business relationship with Electrify America.

Competitors

We do not compete with EV charging companies or utilities. In fact, we support the major EV charging product and service providers by factory installing their products onto ours before shipping for a rapid and construction free deployment at the customer site. We have deployed ChargePoint, Blink, Enel, Electrify America and many other quality charging brands. We also do not compete with utilities who use our product as another tool to provide electricity, primarily for EV charging to their constituency. We currently have six utility customers and anticipate that that number will grow as more utilities become engaged in EV charging and also in deploying distributed generation resources to enhance grid stability. We are not aware of other companies that provide an infrastructure product similar to ours, utilizing solar energy to power EV charging in a rapidly deployed and highly scalable construction-free format. We have responded to several competitively bid contracts issued by, for example, New York City, California, Florida and Massachusetts where we were the only responding company with products that met the specifications cited in the RFP. We believe that if there were other competing products that we would have become aware of them during those processes. We are, however, subject to competition from a number of companies which are involved in the design, construction and installation of fixed grid-connected EV charging stations that depend on the utility grid for a source of power, and on the construction and civil and electrical engineering services for the installation of traditional infrastructure. Our challenge is to market our products to ensure that potential customers are aware of our product offering.

Competition in the solar renewable energy and EV charging industries is intense, and competition is fragmented among a wide variety of entities. Companies such as Schneider, Eaton, Enel X, and Bosch manufacture EV charging units but do not offer charging services. There are many companies which offer installation services for the EV charging market. They are typically from electrical and general contracting backgrounds as well as some larger project management firms such as Black and Veatch, Bechtel, CH2M Hill and AECOM. Companies such as Chargepoint (NYSE: CHPT) and Blink (NASDAQ: BLNK) offer EV charging services and hardware but not, typically, installation. Our EV ARC™ units will incorporate whatever charger the customer wants, so in most cases, we are not competing with the charger company, but rather creating opportunities for them which they might not otherwise have had.

iSun, Inc. (Nasdaq: ISUN) offers an off-grid charging solution using solar power to charge batteries, but their product is not transportable, does not have solar tracking, does not fit in a standard parking space and requires permitting, construction and electrical work for its installation.

Volta (NYSE: SNPR) is a San Francisco based EV charging company which derives revenue through the sale of advertising. Volta gives charging away for free. They are deployed in shopping malls and other similar locations. While they do not have solar-powered, rapidly deployed infrastructure solutions and they do require construction, electrical work and a utility bill, their business model of using media revenue instead of EV charging fees most closely matches our media business model.

Many solar companies are now fixing EV chargers to their parking lot structures and some are offering packages combining solar rooftop installations and EV charger installations for the residential marketplace. These installations are almost always grid-tied, require construction and electrical work and do not include energy storage.

Another example of an entity which is providing free or discounted EV charging infrastructure is Electrify America, the EV charging provider is required to spend approximately $2B on EV charging infrastructure ($800M in California) to satisfy the requirements of a settlement with the U.S. government. Electrify America is a customer of Beam and has used our products to assist in the deployment of their EV charging network.

We also face competition, to some extent, from entities which are offering free or discounted EV charging infrastructure to our prospective customers. Utilities such as the three large IOUs (investor owned utilities) in California (SDG&E, PG&E, SCE) have successfully lobbied the California Public Utility Commission for permission to rate base the costs of installations of EV chargers. As a result, they can offer the installation, or “make readies” of electrical circuits and other civil infrastructure, for a lower price or in some instances for free, to certain customers. We are adding utilities to our customer base and have provided product to six utilities to date. We do not view utilities as long term competition and instead view them as a significant opportunity as they increasingly add off grid solutions to their energy mix.

Where energy security is concerned, we view the competition from companies that produce generators and combined solar and storage solutions to be most relevant to our business. Companies in this space range from small startup companies like Green Charge Networks to behemoths like General Electric and NEC. Siemens, Eaton, Schneider and other large electrical component companies are all also working on combined renewables/storage product solutions. We are in contact with all these companies and have not observed that any of them have a product which provides all the same value and differentiation that our EV ARC™ product delivers because our EV ARC™ systems are transportable, rapidly deployed and offer multiple layers of value beyond EV charging and emergency power. For example, during 2020, our EV ARC™ products were repurposed by our customers from customer locations to Covid-19 Emergency Pop-Up Centers to provide remote emergency power and EV charging.

Our competitive advantage over these other solutions includes:

o	Rapid deployability and scalability of our products. Our products offer a turnkey product solution that is manufactured in our facility and delivered to a customer and deployed in minutes. This competes with an entire ecosystem involving the design, engineering, permitting and constructing of civil projects which requires engaging a company, or group of companies, including architects, civil engineers, electrical engineers, zoning specialists, consultants, general contractors, electrical contractors, and EVSE vendors. These grid-tied projects can take six months to two years to complete.
o		Lower total cost of ownership. Beam’s products are powered by renewable sources. As a result, there is no charge for on-going energy to power vehicles because our products do not generate a utility bill.
o		Ability to operate during blackouts and brownouts. In addition, most units provide an emergency power panel that can be used for emergency power to charge other devices and emergency equipment during outages. Typical grid-tied solutions fail during grid failures and do not provide a source of emergency power. Even those grid-tied solutions that have back up battery integration rely on the grid to charge their batteries. During prolonged grid failures, those systems fail while Beam products continue to operate.

	o		Because a grid connection is not required, Beam’s EV ARC™ can be located anywhere, including remote locations that are hard to connect to a grid. Most grid-tied chargers are deployed in locations where the utility grid is easy and inexpensive to connect to. Many EV drivers have experienced this when they find charging units behind supermarkets next to dumpsters. This is because the utility grid interconnection exists at the back of the store and as such that is the cheapest place to deploy. We believe that early adopters of EVs are more willing to make these sorts of concessions than mainstream consumers will be. We believe that in the future two impacts will drive the installation of EV chargers in more expensive and complicated locations where grid connection is concerned. First, the locations close to grid connections will be used up and second mainstream consumers will not be content with parking and charging in less desirable locations. Both of these impacts will drive the deployment of EV chargers in front of stores and other locations where people want to park. Those sorts of locations typically do not have readily available grid connections so the cost and complexity to bring the grid to the charger will increase dramatically. The cost and complexity to deploy our products will not increase and in fact, we believe that, like any other manufacturing company, our costs will continue to decrease while our efficiency and deployment velocity increases.
	o		Environmentally sound product using clean energy. Grid-tied chargers rely upon electricity, more than 60% of which is generated by burning fossil fuels. The electricity our products provide is 100% emissions free. Furthermore, the construction activities required to dig trenches, pour concrete and perform the other tasks related to the construction and electrical installation of a grid-tied charger are environmentally impactful and reduce the environmental benefits of EVs. Our products are deployed with minimal or no disruption or environmental impact making them a cleaner choice.
	o		Beam products can be relocated which gives the customer the flexibility to move it if a job site changes or business needs change. Grid-tied installations are a permanent solution. Many of our customers operate in leased facilities. The transportability of our products means that a customer can remove them when a lease matures whereas grid-tied solutions become tenant improvements and a sunk investment.
	o		BeamTrak™, our patented solar tracking solution which causes the solar array to follow the sun generating up to 25 percent more electricity than a fixed array, is a significant advantage for our products over any similar offering. Our unique ability to deliver 25% more driving miles to an EV from an off-grid solar installation is, we believe, a significant differentiator.
	o		Our ability to continuously improve our product’s energy production when reducing costs means that while the grid-tied competition is stuck at a theoretical maximum amount of energy that can be delivered at a given location, our products have continued to deliver more power without costing more.
	o		Beam offers a product that delivers DC fast charging solely from solar generation, which we have not seen in the market to date.

Manufacturing

We are headquartered in San Diego, California in a leased building of approximately 53,000 square feet professionally equipped to handle the significant growth possibilities we believe are in front of us. The facility houses our corporate operations, sales, design, engineering and product manufacturing. We are currently staffed for one shift, five days a week and believe that at that level we can produce approximately 260 EV ARC™ units per year. We also believe that with an expansion of human resources, capital investment, increased engagement of contract manufacturing and operating 3 shifts, seven days a week we could produce approximately 2,200 EV ARC™ units a year from our current facility.

All of our products are currently designed, developed and manufactured in this facility. We have been able to reduce our costs and improve our quality by performing fabrication in-house. This also provides a good environment for improving the manufacturing process as well as for the development of new products. Many of our suppliers are local which allows for shorter lead times and lower transportation costs. The EV ARC™ product family requires no field installation work and is typically delivered to the customer site by us or by a third-party transportation company for a fee. We sell our Solar Tree® products as an engineered kit of parts to be installed by third parties employed by the buyer of the Solar Tree® kit.

We continually endeavor to reduce component costs and make production improvements in both our products and our processes to reduce our manufacturing costs, while maintaining the high quality for which we strive. As unit sales continue to increase, we will be able to spread our fixed overhead costs over more units, reducing the cost per unit and management believes that gross profits can be realized and maintained.

Customer Concentration

During 2020, the Company had one customer, Electrify America, that represented 30% of our revenue.

Backlog

Our backlog at December 31, 2020 was $1.1 million. Reported backlog represents firm purchase orders or contracts received by customers for deliveries scheduled in the future.

Government Regulation

Businesses in general are subject to extensive regulation at the federal, state, and local level. We are subject to extensive government regulation of employment, health, safety, working conditions, labor relations, and the environment in the course of the conduct of our business. In order for our customers to enable the installation of some of our products, they can be required to obtain permits from local and other governmental agencies. In the case of our grid-tied products, they must comply with the applicable rules and regulations of the relevant state public utility agencies. In order for our customers to take advantage of available tax and other governmental incentives associated with the installation of solar power production facilities, and the production and use or sale of solar power, they must comply with the applicable regulatory terms and conditions. Changes or new government regulation may have a material adverse impact on our business, operating results, and financial condition.

Employees

As of the date of this report, we have 29 employees, and 7 additional temporary employees. Most of the temporary employees are retained through a temporary employment agency to maximize our flexibility and to reduce the risks and costs associated with permanent employees. We believe our employee relations to be good. None of our employees are represented by a labor union or collective bargaining agreement.

Seasonality

Our operations are generally not materially affected by seasonality.

ITEM 1A.

RISK FACTORS.

You should carefully consider the following risk factors, in addition to the other information contained in this report on Form 10-K, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. This report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward looking statements as a result of factors that are described below and elsewhere in this report.

We have sustained recurring losses since inception and expect to incur additional losses in the foreseeable future. We were formed on June 12, 2006 and have reported annual net losses since inception. For our fiscal years ended December 31, 2020 and December 31, 2019, we experienced net losses of $5,213,025 and $3,933,922, respectively (reflects cash and noncash expenses under generally accepted accounting principles). Further, as of December 31, 2020, we had an accumulated deficit of $51,022,606. In addition, we expect to incur additional losses in the future, and there can be no assurance that we will achieve profitability. Our future viability, profitability and growth depend upon our ability to raise capital and successfully operate and expand our operations. We cannot assure that any of our efforts will prove successful or that we will not continue to incur operating losses.

We may need to raise additional capital or financing to continue to execute and expand our business. We expect that the net proceeds from the public offerings in 2019 and 2020 will be sufficient to sustain our operations for at least the next twelve months, until we are able to generate positive cashflow through our operations. However, we may need to raise additional capital to fund investment in our business or if it takes longer than expected to achieve positive cashflow. We may be required to pursue sources of additional capital through various means, including sale and leasing arrangements, and debt or equity financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may have to reduce our operations accordingly.

We face risks related to COVID-19 which could significantly disrupt our manufacturing, research and development, operations, sales and financial results. Our business may be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the COVID-19 outbreak and any other related adverse public health developments may cause disruption to our business operations and sales activities. Our employees, suppliers and customers have been and will continue to be disrupted by absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures, delays on deliveries, or other travel or health-related restrictions. Depending on the magnitude of such effects on our manufacturing, or the operations of our suppliers, manufacturing and product shipments will be delayed, which could adversely affect our business, operations. In addition, COVID-19 or other disease outbreak will in the short-run, and may over the longer term, adversely affect the economies and financial markets within the U.S., resulting in an economic downturn that will affect demand for our products, impact our operating results, and have a negative impact on our stock price. There can be no assurance that any decrease in sales resulting from COVID-19 will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the COVID-19 outbreak on our business and operations remains uncertain, the continued spread of the COVID-19 or the occurrence of other epidemics will adversely impact our business, financial condition, operating results and cash flows. Because we provide energy and transportation resources which we believe are considered essential services, we are able to continue to produce and deliver products. However, there is a high likelihood that we will experience disruptions to our business operations resulting from quarantines, self-isolations, or other restrictions on the ability of our employees to perform their jobs that may impact our ability to manufacture and deliver products.

Our revenues are concentrated in a small number of customers and they may decrease significantly if we were to lose one of these customers. We have a few large customers including the City of New York and the State of California that generated 44% and 22%, respectively, of revenues in 2019 and 0% and 30%, respectively, of revenues in 2020. Electrify America, LLC was a new customer that generated 30% of our revenues in 2020. We have contracts with the City of New York and the State of California which can be used by a diverse group of state and local agencies for the purchase of our products. The receipt of orders under these contracts has been irregular and can create fluctuation in our revenues. In addition, there is no obligation for these customers to purchase any additional units, or to renew the contracts when they expire. The City of New York contract will expire on April 16, 2021. The State of California contract will expire on June 23, 2022. If either of these customers significantly reduced their purchases or terminates their contracts, our results of operations would be adversely affected.

Our revenue growth depends on consumers’ willingness to adopt electric vehicles. Our growth is highly dependent upon the adoption of electric vehicles (“EV”), and we are subject to a risk of any reduced demand for EVs. If the market for EVs does not gain broad market acceptance or develops more slowly than we expect, our business, prospects, financial condition and operating results may be harmed. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles for EV original equipment manufacturers, and changing consumer demands and behaviors. Factors that may influence the purchase and use of alternative fuel vehicles, and specifically EVs, include:

perceptions about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of EVs;

the limited range over which EVs may be driven on a single battery charge and concerns about running out of power without access to sufficient charging infrastructure;

improvements in the fuel economy of the internal combustion engine;

the environmental consciousness of consumers;

volatility in the cost of oil and gasoline;

consumers’ perceptions of the dependency of the U.S. on oil from unstable or hostile countries and the impact of international conflicts;

government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;

access to charging stations and consumers’ perceptions about convenience and cost to charge an EV; and

the availability of tax and other governmental incentives to purchase and operate EVs or future regulation requiring increased use of nonpolluting vehicles.

The influence of any of these factors may negatively impact the widespread consumer adoption of EVs, which could materially adversely affect our business, operating results, financial condition and prospects.

We face intense competition, and many of our competitors have substantially greater resources than we do. We are not aware of other companies that provide a similar infrastructure product that we do, utilizing solar energy to power EV charging. However, we compete with traditional grid-tied charging stations. Our challenge is to market our products in the industry to ensure that potential customers in this industry are aware of our product offering. Competition in the solar renewable energy and EV charging industries is intense, and competition is fragmented among a wide variety of entities. We operate in a highly competitive environment that is characterized by price fluctuations and rapid technological change. Our competitors often have greater market recognition and substantially greater resources than we do. Competition for RFPs, and in our market in general, may intensify in the future. Competitors may develop products based on new solar power technologies that may ultimately have costs similar to, or lower than, our projected costs. If we fail to compete successfully, our business would suffer and we may lose or be unable to gain market share and our business and results of operations would be adversely affected.

The solar energy industry and in particular, as it is utilized for EV charging, is an emerging market that is constantly evolving and may not develop to the size or at the rate we expect. The solar energy industry, especially as it applies to EV charging, is an emerging and constantly evolving market. We believe the industry will take several years to fully develop and mature, and we cannot be certain that the market will grow at the rate we expect. Any future growth of the solar energy market in general, and for EV charging in particular, and the success of our products depend on many factors beyond our control. These factors include without limitation recognition and acceptance of EVs and EV charging products by customers and users, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation of expected tax benefits and other incentives and our ability to provide our product offerings cost-effectively. If the markets for EV charging do not develop at the rate we expect, our business may be adversely affected.

Tariffs imposed pursuant to Section 201 of the Trade Act of 1974 could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows. On January 23, 2018, the President of the United States issued Proclamation 9693, which approved recommendations to impose safeguard tariffs on imported solar cells and modules, based on the investigations, findings, and recommendations of the U.S. International Trade Commission (the “International Trade Commission”). We purchase solar panels exclusively from Sunpower who is exempt from these tariffs. However, additional tariffs were imposed on other products, including cells used in our batteries. It is possible that tariffs may increase the costs and restrict the supply of certain of our components, causing us harm. The imposition of tariffs is likely to result in a wide range of impacts on the targeted U.S. industries and the global market in general. Such tariffs, if our products or the parts we use to manufacture our products are ultimately determined to be subject to them, could result in significant additional costs to us. If we elected to pass such increase in costs on to our customers, they could cause a significant reduction in demand for our products. We currently have no plans to use modules which are subject to tariffs.

Existing regulations and policies and changes to these policies may present technical, regulatory, and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products and services. The market for electric generation products is heavily influenced by federal, state and local government laws, regulations and policies concerning the electric utility industry in the United States and abroad, as well as policies adopted by electric utilities. Changes that make solar power less competitive with other power sources could result in a significant reduction in the demand for our products. The market for electric generation equipment is also influenced by trade and local content laws, regulations and policies that can discourage growth and competition in the solar industry and create economic barriers to the purchase of solar power products, thus reducing demand for our products. Any new regulations or policies pertaining to our products may result in significant additional expenses to us, which could cause a significant reduction in demand for our solar power products.

In high demand locations, the use of our products could exhaust their electricity supply on particular days, even with our storage batteries. Our solar products create and store electricity during daylight hours. While this process has generally been effective to meet daily EV charging and energy storage demand, it is possible that heavy charging could cause a power draw exceeding the onboard electricity generation and storage capacity. In such instances, except for our grid-connected products, the EV charger would have to recharge through solar energy replenishment or other direct outside charge before EV charging could resume.

Developments in alternative technologies or improvements in distributed solar energy generation may have a material adverse effect on demand for our offerings. Significant developments in alternative technologies, such as advances in other forms of distributed solar power generation, storage solutions, such as batteries, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of centralized power production, transmission and distribution, may have a material adverse effect on our business and prospects. Any failure by us to adopt new or enhanced technologies or processes, or to react to changes in existing technologies, could result in product obsolescence, the loss of competitiveness of our products, decreased revenue and a loss of market share to competitors.

Defects or performance problems in our products could result in loss of customers, reputational damage, and decreased revenue, and we may face warranty, indemnity, and product liability claims arising from defective products. Although our products meet our stringent quality requirements, they may contain undetected errors or defects, especially when first introduced or when new generations are released. Errors, defects, or poor performance can arise due to design flaws, defects in raw materials or components or manufacturing difficulties, which can affect both the quality and the yield of the product. Any actual or perceived errors, defects, or poor performance in our products could result in the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel from our product development efforts, and increases in customer service and support costs, all of which could have a material adverse effect on our business, financial condition, and results of operations.

We may be subject to product liability claims. If one of our products were to cause injury to someone or cause property damage, including as a result of product malfunctions, defects, or improper installation, then we could be exposed to product liability claims. We could incur significant costs and liabilities if we are sued and if damages are awarded against us. Further, any product liability claim we face could be expensive to defend and could divert management’s attention. The successful assertion of a product liability claim against us could result in potentially significant monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position, and adversely affect sales of our products. In addition, product liability claims, injuries, defects, or other problems experienced by other companies in the solar industry could lead to unfavorable market conditions for the industry as a whole and may have an adverse effect on our ability to attract new customers, thus harming our growth and financial performance.

If we are unable to keep up with advances in EV technology, we may suffer a decline in our competitive position. The EV industry is characterized by rapid technological change. We do not manufacture the EV service equipment (EVSE) which connects to the EV, rather, we deliver power to other vendors’ EVSE products. As such, we believe that we are less prone to impacts caused by changes in EV technology. Nevertheless, if we are unable to keep up with changes in EV technology or the costs associated with such changes, our competitive position may deteriorate which would materially and adversely affect our business, prospects, operating results and financial condition. As technologies change, we plan to upgrade or adapt our EV products in order to continue to provide EV charging services with the latest technology.

If a third party asserts that we are infringing upon its intellectual property, it could be costly and time-consuming litigation, and our business may be harmed. The EV and EV charging industries are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets. Although we are not presently aware of any current or threatened third party intellectual property rights claims against the Company, there is a risk that the Company could face third party intellectual rights claims against its products and challenges to the validity or enforceability of its products and trademarks in the future which could harm our relationships with our customers, may deter future customers from subscribing to our services or could expose us to litigation with respect to these claims.

The success of our business depends in large part on our ability to protect and enforce our intellectual property rights. We rely on a combination of patent, copyright, service mark, trademark, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights. We cannot assure you, however, that we will be successful in obtaining these patents, service marks or trademarks, or that these applications will not be challenged, that others will not attempt to infringe upon our rights, or that these filings will afford us adequate protection or competitive advantages. If we are unable to protect our rights to our intellectual property or if such property infringes on the rights of others, our business could be materially adversely affected.

The success of our business depends on the continuing contributions of Desmond Wheatley and other key personnel who may terminate their employment with us at any time, and we will need to hire additional qualified personnel. We rely heavily on the services of Desmond Wheatley, our chairman and chief executive officer, as well as other management personnel. Loss of the services of any such individuals would adversely impact our operations. In addition, we believe our technical personnel represent a significant asset and provide us with a competitive advantage over many of our competitors. Our future success will depend upon our ability to retain these key employees and our ability to attract and retain other skilled financial, engineering, technical and managerial personnel.

If we are unable to attract, train and retain highly qualified personnel, the quality of our services may decline and we may not successfully execute our growth strategies. Our success depends in large part upon our ability to continue to attract, train, motivate and retain highly skilled and experienced employees, including technical personnel. The loss of personnel or our inability to hire or retain sufficient personnel at competitive rates of compensation could impair our ability to secure and complete customer engagements and could harm our business.

We are exposed to various possible claims and hazards relating to our business, and our insurance may not fully protect us. Although we maintain modest theft, casualty, liability, cyber and property insurance coverage, along with worker’s compensation and related insurance, we cannot assure that we will not incur uninsured liabilities and losses as a result of the conduct of our business. In particular, we may incur liability if one or more of our other products are deemed to have caused a personal injury. Should uninsured losses occur, they would have a material adverse effect on our operating results, financial condition, and business performance.

We may face litigation in the future. As a manufacturer and seller of goods, we are exposed to the risk of litigation for a variety of reasons in addition to reasons relating to intellectual property rights, including product liability lawsuits, employee lawsuits, commercial contract disputes, government enforcement actions, and other legal proceedings. We cannot assure that future litigation in which we may become involved will not have a material adverse effect on our financial condition, operating results, business performance, and business reputation.

The costs incurred by us to develop and manufacture our products may be higher than anticipated which could hurt our ability to earn a profit. We may incur substantial cost overruns in the development, manufacture, and distribution of products. Unanticipated costs may force us to obtain additional capital or financing from other sources and would hinder our ability to earn a profit. If we incur cost overruns, there is no assurance that we could obtain the financing or capital to cover them. If a greater investment in the business is required because of cost overruns, the probability of earning a profit or a return of the shareholders’ investment in Beam is diminished.

The equipment comprising our products currently charge at rates that are comparable to the average charging speed of competitors, but that may change in the future. Our standard EV ARC™ as a stand-alone does not provide a DC Fast Charge, rather, it charges EVs at a Level II pace which is consistent with the majority of installed EV chargers in the U.S. To date, we have found that since most EV trips are relatively short and local, the standard EV ARC™ has satisfied consumer demand. Our EV ARC™ HP DC Fast Charging Electric Vehicle Autonomous Renewable Charger can provide a DC Fast Charge, so we believe we can compete in that market. Nevertheless, the demand for faster EV charging may increase in the future, requiring us to adjust our marketing and sales strategies. There is no assurance that our equipment will remain competitive in the market in the future, causing possible customer complaints and claims, and the loss of sales in the future.

Our Company depends on key suppliers. The Company sources its materials and components from a wide variety of vendors. However, the Company has several components that are currently sourced from only one supplier. They are standard off-the-shelf components, but these components differ between manufacturers in terms of their specifications and performance. If one of these components became unavailable, it could hinder our ability to operate profitably and have a material adverse impact on our operating results, financial condition and business performance. We would be able to secure supply from another source and incorporate it in our design, but it would require modifications which could impact product deliveries. For these components, we maintain adequate supply to mitigate any supply risk.

We have experienced technological changes in our industry. New technologies may prove inappropriate and result in liability to us or may not gain market acceptance by our customers. The industries in which we operate are subject to constant technological change. Our future success will depend on our ability to appropriately respond to changing technologies and changes in function of products and quality. If we adopt products and technologies that are not attractive to consumers, we may not be successful in capturing or retaining a significant share of our market. In addition, some new technologies are relatively untested and unperfected and may not perform as expected or as desired, in which event our adoption of such products or technologies may cause us to lose money.

Existing regulations, and changes to such regulations, may present technical, regulatory and economic barriers to the purchase and use of our products, which may significantly reduce demand for our products. Installation of a small number of our products is subject to oversight and regulation in accordance with national and local ordinances, building codes, zoning, environmental protection regulation, utility interconnection requirements for metering and other rules and regulations. In particular, our new EV Standard™ product, designed to provide curbside EV charging through existing or newly installed street lampposts owned by municipalities and utilities, will require close cooperation with, and supervision by, local government agencies. We attempt to keep up-to-date about these requirements on a national, state, and local level, and must design systems to comply with varying standards. Certain cities may have ordinances that increase the cost of installation of our products. In addition, new government regulations or utility policies pertaining to power systems are unpredictable and may result in significant additional expenses or delays in the installation of our grid-connected products and, as a result, could cause a significant reduction in demand, especially for our EV Standard™ product.

Our media branding and advertising strategy may not result in a profitable operation of that segment of our business. We are able to equip our EV ARC™ and Solar Tree® platforms with digital advertising screens with content that can be controlled directly, and in some cases, remotely. We may also sell other forms of media across our product platforms, such as naming rights or sponsorship deals, as well as traditional fixed media. There is no assurance that the revenue model crafted for this capability will be successful or profitable or will not result in operating losses or rejection by government regulators or consumers. Sponsors and advertisers for the service may not materialize or be willing to pay the rates sought by us or our customers.

Our business is impacted by the availability to our customers of rebates, tax credits and other financial incentives, the reduction, elimination or uncertainty of which would reduce the demand for our products. Many states offer substantial incentives to offset the cost of solar power systems, battery storage systems and EV charging infrastructure. These incentives can take many forms, including direct rebates, state tax credits, system performance payments and Renewable Energy Credits (RECs). Moreover, the federal government currently offers a 30% tax credit for the installation of solar power systems and associated energy storage systems. Effective in 2009 and currently, the federal tax credit is 30% for commercial and residential installations. There are additional federal grants available that encourage renewable investment. Businesses may also elect to accelerate the depreciation on their systems in the first year of ownership. Uncertainty about the introduction of, reduction in, or elimination of such incentives, or delays or interruptions in the implementation of favorable federal or state laws could substantially increase the cost of our systems to some of our customers, resulting in significant reductions in demand for our products from non-governmental customers, which would negatively impact our sales.

Our business strategy may depend on the widespread adoption of solar power and EV charging technology. The market for solar power products is emerging and rapidly evolving, and its future success is uncertain. If solar power technology proves unsuitable for widespread commercial deployment or if demand for solar power products fails to develop sufficiently, we could be unable to generate enough revenues to achieve and sustain profitability and positive cash flow. The factors influencing the widespread adoption of solar power technology include but are not limited to:

cost-effectiveness and efficiency of solar power technologies as compared with conventional and non-solar alternative energy technologies;

performance and reliability of solar power products as compared with conventional and non-solar alternative energy products;

fluctuations in economic and market conditions which impact the viability of conventional and non-solar alternative energy sources, such as increases or decreases in the prices of oil and other fossil fuels;

continued deregulation of the electric power industry and broader energy industry; and

availability of governmental subsidies and incentives.

Compliance with new and existing environmental laws and rules is required. Compliance with new and existing environmental laws and rules could significantly increase construction and start-up costs for our customers, deterring customers from purchasing a small sub-set of our products and services. To install Beam’s Solar Tree® products, our customers may be required to obtain and comply with a number of permitting requirements. As a condition of granting necessary permits, regulators could make demands that increase our customers’ expected costs of construction and operations, in which case they may delay or cancel delivery of certain sub-sets of our products. Environmental issues, such as contamination and compliance with applicable environmental standards could arise at any time during the construction and operation of a customer’s project. If this occurs, it could require a customer to spend additional resources to remedy the issues and may delay or prevent construction or operation of the project. This is why we have focused on the development of autonomous infrastructure products which do not require construction for their deployment.

The success of our sales is dependent upon a continued need for renewable energy. The topic of alternative fuels has retained a significant status in the consciousness of the American people, but interest in developing and utilizing alternative fuels could wane unexpectedly at any time. If such interest were lost or if the demand for alternative fuels were to decrease substantially, the Company could encounter problems generating sufficient revenue to achieve or sustain profitability or meet its working capital requirements.

The success of our product offering may in some instances require the availability of locations provided by municipalities or private owners of real estate. Our ability to sell branding opportunities or licenses could be highly dependent on the availability of real estate to locate our product, or municipal approval for visible branding. We cannot assure that these rights will be available to us in the future or will be available on terms acceptable to us. The lack of availability of these rights could have a material adverse effect on our results of operations and financial condition in our media business unit. We may operate part of our business in which leasing or licensing agreements with venues or municipalities are necessary, so the long-term success of this aspect of our business could depend upon our ability to initiate such agreements and to renew these agreements upon their termination. We cannot assure that we will be able to renew these agreements on acceptable terms or at all, or that we will be able to obtain attractive agreements with substitute venues.

Risks Relating to our Organization and our Common Stock

The Company was formerly a shell company. Because we merged with a non-operating shell company in 2010, our stock that is not registered with the SEC may become subject to certain additional restrictions if we fail in the future to stay current in our reporting requirements with the SEC.

Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market price and liquidity of our common shares and our ability to access the capital markets. Our common stock is listed on the Nasdaq Capital Market. If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements, Nasdaq may take steps to delist our common stock. Such a delisting would have a negative effect on the price of our common stock, impair the ability to sell or purchase our common stock when persons wish to do so, and any delisting materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from the Nasdaq Capital Market could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities. In the event of a delisting, we would attempt to take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

On February 26, 2021, we notified Nasdaq, that due to the death of Mr. Robert C. Schweitzer, a member of our Board and member of the Audit, Compensation and Nominating and Governance committees, who passed away on February 21, 2021, Beam was no longer in compliance with Nasdaq Listing Rule 5605(c)(2)(A), which requires the Audit Committee to be comprised of a minimum of three independent directors. Pursuant to Nasdaq Listing Rule 5605(c)(4)(B), Beam is entitled to a cure period to regain compliance with Nasdaq Listing Rule 5605(c)(2)(A), which cure period will expire upon August 20, 2021.

On March 2, 2021, Nasdaq issued a letter to the Company confirming our noncompliance with the audit committee requirements of Nasdaq Listing Rule 5605 as a result of Mr. Schweitzer’s death and the cure period for the Company to regain compliance under Nasdaq Listing Rule 5605(c)(4). The Company intends to appoint an additional independent director to the Audit Committee of the Board prior to the end of the cure period.

We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner. If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover material weaknesses and other deficiencies in our internal controls over financial reporting, our stock price could decline and raising capital could be more difficult. Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could significantly decline, and our business and financial condition could be adversely affected. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieve and maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could decline significantly.

We currently do not have manufacturing or purchasing systems in place to track inventory and purchasing transactions or a perpetual inventory system. The Company performs manual processes during the year to track and control our inventory and purchases. While these processes provide good results in determining inventory and cost of sales transactions, as we grow, it has become a very time-consuming process and could impact our ability to submit timely reporting. We plan to invest in new systems in 2021 to automate these functions. We intend to take certain remedial actions intended to address the identified material weakness in our internal control over financial reporting. However, we can give no assurance that such measures will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future.

Our stock price may be volatile. The public market trading price of our common stock is likely to be highly volatile, may decline, and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:

changes in our industry;

competitive pricing pressures;

our ability to obtain working capital financing;

additions or departures of key personnel;

limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;

sales of our common stock privately or in the public market, by us or by other shareholders;

our ability to execute our business plan;

operating results that fall below expectations;

loss of any strategic relationship;

adverse regulatory developments;

adverse economic and other external factors;

additional dilution of ownership because of the issuance of new securities by us, and period-to-period fluctuations in our financial condition or operating results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline. If our stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period under Rule 144 or issued upon the exercise of outstanding options or warrants, the market price of our common stock could decline because of or in anticipation of the selling pressure. The existence of anticipated sales, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

ITEM 1B.

UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.

PROPERTIES.

Our corporate headquarters are located at 5660 Eastgate Dr., San Diego, California 92121. We lease approximately 53,000 square feet of office and warehouse space pursuant to a five-year lease that extends through August 30, 2025, with two one year renewal options.

ITEM 3.

LEGAL PROCEEDINGS.

The Company may be involved in legal actions and claims arising in the ordinary course of business from time to time. As of December 31, 2020, and the date of this report, the Company is not involved in any open litigation matters.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not Applicable.

Part II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is traded on the NASDAQ Capital Market under the symbol “BEEM.”

On March 24, 2021, there were approximately 236 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these record holders.

We have not declared or paid any cash dividends on our common stock and do not anticipate declaring or paying any cash dividends in the foreseeable future. We can give no assurances that we will ever have excess funds available to pay dividends.

Recent Sales of Unregistered Securities

During the year ended December 31, 2020, we issued the securities described below without registration under the Securities Act. Unless otherwise indicated below, the securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

In August 2020, a stock grant was issued for 2,700 unregistered shares of the Company’s common stock to a consultant as payment for services.

Warrants to purchase 107,104 shares of the Company’s common stock were exercised for an aggregate of $718,500.

Stock Issued for Director Services

2020

On June 17, 2020, the Board approved two restricted stock grants to Mr. Wheatley under the 2011 Stock Incentive Plan. The total number of shares granted was determined based on an award of $150,000 divided by the per share quoted trading price on June 17, 2020. On the grant date, the shares had a per share fair value of $7.35 and 20,408 shares were granted. During the year ended December 31, 2020, 10,203 shares vested generating an expense of $75,000.

ITEM 6.

SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW:

Beam develops, manufactures and sells high-quality, renewably energized infrastructure products for electric vehicle charging infrastructure, outdoor media advertising and energy security and disaster preparedness.

The Company has designed five product lines that incorporate the same underlying proprietary technology and value for producing a unique alternative to grid-tied charging, having a built-in renewable energy source in the form of attached solar panels and/or light wind generator to produce power and battery storage to store the power. These products are rapidly deployable and attractively designed. Our product lines include:

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. In 2019, we began deploying our upgraded version, the EV ARC™ 2020, which provides all of the features of the original EV ARC™ in addition to elevating the electronics to the underside of the solar array making the unit flood-proof up to nine feet and making more space available on the engineered ballast and traction pad which gives the product stability.

Solar Tree® DCFC – Off-grid, renewably energized and rapidly deployed, patented single-column mounted smart generation and energy storage system with the capability to provide a 50kW DC fast charge to one or more electric vehicles or larger vehicles.

EV ARC™ DCFC – DC Fast Charging system for charging EVs.

EV-Standard^TM – patent issued on December 31, 2019 and still under development. A lamp standard, EV charging and emergency power product which uses an existing streetlamp’s foundation and a combination of solar, wind, grid connection and onboard energy storage to provide curbside charging.

UAV ARC™ - patent issued on November 24, 2020 and still under development. An off-grid, renewably energized and rapidly deployed product and network used to charge aerial drone (UAV) fleets.

We believe that there is a clear need for a rapidly deployable and highly scalable EV charging infrastructure, and that our products fulfill that requirement. Unlike grid-tied installations which require general and electrical contractors, engineers, consultants, digging trenches, permitting, pouring concrete, wiring, and ongoing utility bills, the EV ARC™ system can be deployed in minutes, not months, and is powered by renewable energy so there is no utility bill. We are agnostic as to the EV charging service equipment or provider and integrate best of breed solutions based upon our customer’s requirements. For example, our EV ARC™ and Solar Tree® products have been deployed with Chargepoint, Blink, Enel X, Electrify America and other high quality EV charging solutions. We can make recommendations to customers or we can comply with their specifications and/or existing charger networks. Our products replace the infrastructure required to support EV chargers, not the chargers themselves. We do not sell EV charging, rather we sell products which enable it.

We believe our chief differentiators for our electric vehicle charging infrastructure products are:

Our patented, renewably energized products which dramatically reduce the cost, time and complexity of the installation and operation of EV charging infrastructure and outdoor media platforms when compared to traditional, utility grid tied alternatives;

Our first-to-market advantage with EV charging infrastructure products which are renewably energized, rapidly deployed and require no construction or electrical work on site.

our products’ capability to operate during grid outages and to provide a source of EV charging and emergency power rather than becoming inoperable during times of emergency or other grid interruptions; and

our ability to continuously create new and patentable inventions which are marketable and a complex integration of our own proprietary technology and parts, and other commonly available engineered components, creating a further barrier to entry for our competition.

Our revenues increased from $5.1 million in 2019 to $6.2 million in 2020. Historically, we have generated revenue primarily from the sale of EV ARCs™ to a few large customers, such as Google, the City of New York, and the State of California. During the year ended December 31, 2020, product sales were more diversified with sales to a wider variety of municipalities, colleges, commercial businesses, utilities, and federal customers such as the U.S. Navy and national laboratories. In addition, we are still maintaining our contracts with the City of New York and the State of California, as well as initiating state-wide contracts with Massachusetts and Florida, and we received a large award from Electrify America for the deployment of 30 units in central California. With a change of administration in Washington, we believe there is increased support for funding EV charging infrastructure, as well as a number of federal grants available in addition to the Federal Solar Investment Tax Credit, the code 30C Tax Credit and Rule 179 accelerated depreciation which provide a strong financial incentive for many of our target customers. In late 2020, we were awarded a General Services Administration (GSA) Multiple Award Schedule Contract that will help our customers to streamline purchases from Federal agencies and state and local governments. During 2020, we invested in sales in marketing resources including a seasoned Vice President of Sales and Marketing, an increase in our sales team, a strong public relations firm and a Company name change and rebranding to promote awareness of who we are. In addition, we expect the electric vehicle market to experience significant growth over the next decade, and with that will be the need for EV charging infrastructure. We believe our products are uniquely positioned to benefit from this growth, as well as increase market share as a result of the features our product ads.

We made strong progress in our outdoor media advertising business during 2020 with a collaboration agreement with the City of San Diego to deploy solar-powered EV charging infrastructure across the city. We are currently working with industry experts to identify a corporate sponsor who will receive global naming rights to the network and highly visible corporate brand placement on the EV ARC units as well as the benefits association with CO2 and other pollution offsets and credits. This business model can also be replicated in other cities throughout the country. Our energy security business is 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 onboard state-of-the-art storage batteries installed on our EV chargers, which make us immune to the sorts of grid failures recently experienced in Texas, provide another reason for certain customers such as municipalities, counties, states, the federal government, hospitals, fire departments, large private enterprises with substantial facilities, and vehicle fleet operators, to buy our products.

We have 2 new patents that were issued by the United States Patent and Trademark Office at the end of 2019 and in 2020 for our EV Standard^TM and UAV ARC™ which we expect will expand our product offerings with the same proprietary technology as our current products and allow us to expand into new markets.

Several contributing factors resulted in reporting a gross loss in both 2019 and 2020. We currently have a fixed overhead structure and facility that will support expected growth over the next several years. Until our revenues increase, we have underutilized capacity that adds a fixed cost burden to our margins. Once we are able to increase our production volumes, we will improve our fixed cost per unit, as well as benefit from improved labor efficiencies and utilization and cost improvements by negotiating volume purchase discounts. We are also implementing lean manufacturing process improvements and making engineering changes to our product where we can benefit from cost reductions. Many of the components that we integrate into our products are manufactured by others. This is consistent with our strategy to take advantage of the investment by large and well-funded organizations in the improvement of various components and sub-assemblies which we integrate into our final product. Components such as battery cells and solar panels are expected to continue to decrease in cost precipitously in the coming months and years. Battery cells are the highest cost contributor to our bill of materials. As we see significant decreases in the price of battery cells in the near future, we will in turn see a significant reduction in the cost of our bill of materials. We anticipate that this will have a further positive impact on our gross profits. We are in the process of identifying certain components and sub-assemblies which we manufacture or assemble in-house for which we intend to seek outsourced contracted manufacturing expertise. We believe that outsourcing these components and sub-assemblies will further reduce our costs, increase our gross margins, and significantly increase the potential output from our factory. We expect to see a significant increase in the demand for electric vehicle charging infrastructure and as such we do not anticipate significant pricing pressure on our products. The combination of this increase in demand for electric vehicle charging infrastructure and therefore our revenues, and the cost cutting measures described above lead us to believe that we will see significant improvement in our gross margins in the near future.

Critical Accounting Policies

Please refer to Note 1 in the financial statements for further information on the Company’s critical accounting policies which are summarized as follows:

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 doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, 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.

Accounts Receivable. Accounts receivable are customer obligations due under normal trade terms. Management reviews accounts receivable on a periodic basis to determine if any receivables may become uncollectible. Management’s evaluation includes several factors including the aging of the accounts receivable balances, a review of significant past due accounts, dialogue with the customer, the financial profile of a customer, our historical write-off experience, net of recoveries, and economic conditions. The Company includes any accounts receivable balances that are determined to be uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Inventory. Inventory is stated at the lower of cost and 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 the manufacturing process. The Company regularly reviews inventory components and quantities on hand and performs annual physical inventory counts. A reserve is established if this review process determines the net realizable value of such inventory may be below the carrying value.

Leases. In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)” whereby lessees need to recognize almost all leases on the balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019 using the effective date method and applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases, and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected to not recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less.

Impairment of Long-lived Assets. The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Accounting for Derivatives. The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives, and debt discounts, and recognizes a net gain or loss on extinguishment. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

Revenue Recognition. Beam follows the revenue standards of Financial Accounting Standards Board Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation.

Revenues are primarily derived from the direct sales of manufactured products. Revenues may also consist of maintenance fees for the maintenance of previously sold products and revenues from sales of professional services.

Revenues from inventoried product are recognized upon the final delivery of such product to the customer or when legal transfer of ownership takes place. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for such products within a 30-45 day period after delivery.

Revenues from maintenance fees for services provided by the Company are recognized equally over the period of the maintenance term. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for the service in advance of the maintenance period.

Extended maintenance or warranty services, where the customer has the option to purchase this extension as a separate purchase option, are considered a separate performance obligation. If the Company does not control the extended services, in terms of having the responsibility for fulfillment of the obligation or the option to choose who will perform the services, the Company is acting as an agent and would report the revenues on a net basis.

Revenues from professional services are recognized as services are performed. Revenue values are based upon fixed fee arrangements or hourly fee-based arrangements with agreed to hourly rates of service categories in line with expertise requirements. These services are billed to a customer as such services are provided and the customer will be obligated to make payments for such services typically within a 30-45 day period.

Revenues on a bill-and-hold arrangement are recognized when control of the product is transferred to the customer, but physical possession of the product transfers at a point in time in the future. To determine this, the reason for the arrangement must be substantive, the product must be separately identified and ready for physical transfer, the customer has the ability to direct the use of the product and the product cannot be directed to another customer.

The Company has a policy of recording sales incentives as a contra revenue.

The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.

Any deposits received from a customer prior to delivery of the purchased product or monies paid prior to the period for which a service is provided are accounted for as deferred revenue on the balance sheet.

Sales tax is recorded on a net basis and excluded from revenue.

The Company generally provides a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and it will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably estimated.

Cost of Revenues. The Company records direct material and component costs, direct labor and associated benefits, and manufacturing overhead costs such as supervision, manufacturing equipment depreciation, rent, and utility costs, all of which are included in inventory prior to a sale, as costs of revenues. The Company further includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.

Changes in Accounting Principles. Other than the adoption of Accounting Standards Update No. 2016-02: “Leases (Topic 842)” on January 1, 2019, there were no significant changes in accounting principles that were adopted during the years ended December 31, 2020 and 2019.

Results of Operations

Comparison of Results of Operations for Fiscal Years Ended December 31, 2020 and 2019

Revenue. For the year ended December 31, 2020, our revenues were $6,210,350 compared to $5,111,545 for the same period in 2019, an increase of $1,098,805 or 21%. Revenues for the year ended December 31, 2020 included the sale of 69 EV ARC™ units including 29 units to Electrify America for deployment in California, as well as to various municipalities, colleges, utilities and federal agencies. It also included the sale of three Solar Tree® systems and an EV ARC^™ DC fast charging system for a rest stop in California. Revenues for the Solar Tree® and EV ARC™ DCFC are significantly higher than those for EV ARC™ 2020 units because they are more complex, have more storage, and deliver more energy and power. Revenues for the year ended December 31, 2019 were derived primarily from the sale and delivery of 65 EVARC™ units which included 34 units to the City of New York and two EV ARC™ DC fast charging deployments to two rest stops in California. During fiscal 2020, we invested 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.

Gross Loss. For the year ended December 31, 2020, we had a gross loss of $710,974 compared to a gross loss of $153,774 for the same period in 2019. Despite the increase in revenues during the year ended December 31, 2020 compared to 2019, the gross loss increased to 11% of net revenues in the year ended December 31, 2020 from 3% of net revenues in 2019. The increase is primarily due to an increase in costs for the new EV ARC™ 2020 unit that was launched at the end of 2019 compared to the original EV ARC™. Our experience with the original EV ARC™ demonstrated that while the initial costs of the unit start out high, the operations and engineering teams improve the production process and reduce material costs. We anticipate that this process will be repeated with the EV ARC™ 2020. Further, more than half of the units delivered in the year ended December 31, 2020 were on contracts which include shipping and handling in the price. Typically for regional deliveries, it is very inexpensive for us to deliver the units with our ARC Mobility™ trailer, which was still in development for the new EV ARC™ 2020 model, until its launch in the second half of 2020. This caused higher than normal shipping costs, which we anticipate will be reduced with usage of the trailer, and with additional refinement of the ARC™ Mobility trailer. Finally, 2019 benefited by recording $71,744 of cost for losses for the City of New York in 2018 that pertained to shipments in 2019.

Several contributing factors resulted in our reporting a gross loss in both 2019 and 2020. We currently have a fixed overhead structure and facility that will support expected growth over the next several years. Until our revenues increase, we have underutilized capacity that adds a fixed cost burden to our margins. Once we are able to increase our production volumes, we will improve our fixed cost per unit, as well as benefit from improved labor efficiencies and utilization and cost improvements by negotiating volume purchase discounts. We are also implementing lean manufacturing process improvements and making engineering changes to our product where we can benefit from cost reductions. Many of the components that we integrate into our products are manufactured by others. This is consistent with our strategy to take advantage of the investment by large and well-funded organizations in the improvement of various components and sub-assemblies which we integrate into our final product. Components such as battery cells and solar panels are expected to continue to decrease in cost precipitously in the coming months and years. Battery cells are the highest cost contributor to our bill of materials. As we see significant decreases in the price of battery cells in the near future, we will in turn see a significant reduction in the cost of our bill of materials. We anticipate that this will have a further positive impact on our gross profits. We are in the process of identifying certain components and sub-assemblies which we manufacture or assemble in-house for which we intend to seek outsourced contracted manufacturing expertise. We believe that outsourcing these components and sub-assemblies will further reduce our costs, increase our gross margins, and significantly increase the potential output from our factory. We expect to see a significant increase in the demand for electric vehicle charging infrastructure and as such we do not anticipate significant pricing pressure on our products. The combination of this increase in demand for electric vehicle charging infrastructure and therefore our revenues, and the cost cutting measures described above lead us to believe that we will see significant improvement in our gross margins in the near future.

Operating Expenses. Total operating expenses were $4,496,660 for the year ended December 31, 2020 compared to $3,117,793 for the same period in 2019, a 44% increase. The increase in expense is primarily due to an increase of $776,627 for non-cash compensation expense due to new stock option grants issued to new members of the management team, annual stock grants for directors and December 2020 employee stock option grants all awarded at a higher stock valuation due to an increase in stock price in the quarter ended December 31, 2020. In addition, we increased $518,375 for sales and marketing expenses including salaries, commissions and marketing and sales consultants to support revenue growth, $96,382 for increased bonus expense for meeting business objectives, $47,339 for increased medical benefits that were initiated in November 2019, $46,955 for increased legal expenses due to a credit adjustment in the prior year and $124,563 for other increases. The increase in expense was partially offset by a reduction of $150,979 of R&D expense due to higher new product development expenses in 2019 and an $80,396 reduction in travel expenses due to travel restrictions related to the COVID-19 pandemic.

Provision for Income Taxes. Our tax expense for the year ended December 31, 2020 related to charges for the California Franchise Tax Board based on the minimum tax due and to New York City for Corporation Tax. We did not incur any federal tax liability for the years ended December 31, 2020 or December 31, 2019 because we incurred operating losses for tax purposes in these periods.

Other Income and Expense. Interest expense decreased from $716,337 for the year ended December 31, 2019 to $11,893 for the year ended December 31, 2020 due to the repayment of debt in 2019. Interest income decreased by $45,636 in the year ended December 31, 2020 due to lower interest rates.

Net Loss. We generated net losses of $5,213,025 for the year ended December 31, 2020, compared to a net loss of $3,933,922 for the same period in 2019. The major components of these losses and the changes between years are discussed in the above paragraphs.

Liquidity and Capital Resources

At December 31, 2020, we had cash of $26,702,804, compared to cash of $3,849,456 at December 31, 2019. We have historically met our cash needs through a combination of proceeds received from private and public offerings of our securities and loans. Our cash requirements are generally for operating activities.

Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the table below:

	December 31,
	2020			2019
Cash provided by (used in):
Net cash used in operating activities	$	(4,138,138	)	$	(4,826,340	)
Net cash used in investing activities	$	(358,901	)	$	(109,586	)
Net cash provided by financing activities	$	27,350,387		$	8,541,358

For the year ended December 31, 2020, our cash used in operating activities was $4,138,138 compared to $4,826,340 for the year ended December 31, 2019. Net loss of $5,213,025 for the year ended December 31, 2020 was increased by $1,208,504 of non-cash expense items that included depreciation and amortization of $40,952, common stock issued for services for director compensation of $458,924, non-cash compensation expense related to the grant of stock options of $722,549 primarily due to an increase in the stock price in the quarter ended December 31, 2020, amortization of debt discount of $5,990, offset by $19,911 for amortization of operating lease right of use asset. Further, cash used in operations included an increase in accounts receivable of $1,021,937 due to a strong fourth quarter revenue in 2020 compared to 2019, an increase in prepaid expenses and other current assets of $385,895 primarily due to warrants that were exercised but the payment was pending, and $220,417 for the payment of a convertible note to a related party for deferred compensation. Cash provided by operations included a reduction of inventory of $1,060,614, an increase in accounts payable of $242,900 due to inventory purchases to support Q4 2020 shipments, $86,452 increase in accrued expenses, $85,917 increase in sales tax payable for California Q4 2020 shipments, $13,880 for an increase in deferred revenue, and $4,869 for a decrease in deposits.

Our operating activities resulted in cash used in operations of $4,826,340 for the year ended December 31, 2019. Net loss of $3,933,922 for the year ended December 31, 2019 was increased by $974,198 of non-cash expense items that included depreciation and amortization of $40,500, common stock issued for services for director compensation of $355,931, non-cash compensation expense related to grant of stock options of $48,915, $526,423 of amortization of debt discount to interest expense associated with the financings of the current debt facilities, and $2,429 for a provision for doubtful accounts. Further, cash used in operations for the period included increases in prepaid expenses and other current assets of $468,313 for increased vendor prepayments, increased inventory by $110,455, decreases in accounts payable of $883,238, decrease in accrued expenses of $276,284 for the payment of interest and a reversal of the accrued loss for New York shipment, and a decrease in deferred revenue of $742,176 from the shipment of units that we had received prepayments for. Cash provided by operations included a reduction of accounts receivable of $523,739, a $48,672 decrease in deposits for our building lease, an increase of $35,417 for convertible note payable issued in lieu of salary – related party for increased deferred salary, and an increase in sales tax payable of $6,022.

Cash used in investing activities included $93,137 to fund patent related costs and $265,764 to purchase equipment, primarily for transportation equipment and a forklift truck, in the year ended December 31, 2020. The year ended December 31, 2019 used $76,746 on patent related costs and $32,840 to purchase equipment.

In 2020, cash generated by our financing activities included $18,999,675 in proceeds from the issuance of common stock pursuant to a public offering and $9,926,858 from the exercise of warrants, offset by the funding of equity offering costs of $1,566,852 and the payment of an auto loan. In 2019, cash generated by our financing activities included $13,201,000 in proceeds we received from issuance of common stock pursuant to a public offering, offset by funding of equity offering costs of $1,175,851, net repayments of our line of credit facility of $960,000, repayments of debt of $2,523,620 and fractional share payments of $171.

Current assets increased to $29,903,431 at December 31, 2020 from $6,605,556 at December 31, 2019, primarily due to a $22,853,348 increase in cash, while current liabilities increased to $1,840,111 at December 31, 2020 from $1,462,837 at December 31, 2019, primarily due to an increase in accounts payable due to strong sales in the quarter ended December 31, 2020 and the initiation of a new capital lease for the manufacturing facility. As a result, our working capital increased to $28,063,320 at December 31, 2020 compared to $5,142,719 at December 31, 2019.

In May 2020, the Company received a Small Business Administration Payroll Protection Plan loan for $339,262 for protection against potential impact from the COVID-19 virus which was repaid with interest in November 2020.

While the Company has been attempting to grow market awareness and focusing on the generation of sales, the Company has not generally earned a gross profit on its sales of products during recent years. However, we believe that we will improve our gross profit as our revenues grow. Management believes that with increased production volumes that we believe are forthcoming, efficiencies will continue to improve, and total per unit production costs will decrease, thus allowing for increasing gross profits on the EV ARC ™ and Solar Tree® products in the future. The Company may be required to raise capital from the private or public issuance of its securities or debt instruments until it achieves positive cash flow from its business, which is predicated on increasing sales volumes and the continuation of production cost reduction measures. Management cannot currently predict when or if it will achieve positive cash flow.

Management believes that evolution in the operations of the Company may allow it to execute on 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, continued management of overhead costs, increased overhead absorption resulting from revenue growth, process improvements and vendor negotiations leading to cost reductions, increased public awareness of the Company and its products, and the maturation of certain long 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.

Capitalization

On April 18, 2019, the Company closed an underwritten public offering with Maxim Group LLC (“Maxim”), as representative for the several underwriters (the “Underwriters”), pursuant to which the Company agreed to issue and sell to the Underwriters an aggregate of 2,000,000 units with each unit consisting of one (1) share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and a warrant to purchase one (1) share of Common Stock at an exercise price equal to $6.30 per share (the “Warrants”). In addition, the Company granted the Underwriters a 45-day option to purchase up to 300,000 additional shares of Common Stock, or Warrants, or any combination thereof, at the public offering price to cover over-allotments, if any. The Common Stock and the Warrants were offered and sold to the public (the “Offering”) pursuant to the Company’s registration statement on Form S-1 (File Nos. 333-226040), filed by the Company with the Securities and Exchange Commission (the “Commission”) on July 2, 2018, as amended, which became effective on April 15, 2019, and a related registration statement filed pursuant to Rule 462 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The offering price to the public was $6.00 per unit and the Underwriters purchased 2,000,000 units. In addition, the Underwriters purchased 300,000 Warrants for $3,000 upon the exercise of the Underwriters’ over-allotment option. The Company received gross proceeds of approximately $12,003,000, before deducting underwriting discounts and commissions and estimated offering expenses.

Concurrent with the offering, the Company effected a one-for-fifty reverse split of its issued and outstanding common stock (the “Reverse Stock Split”) and reduced the number of authorized shares of common stock from 490,000,000 to 9,800,000. No fractional shares were issued as a result of the Reverse Stock Split. Fractional shares were rounded up or down to the nearest whole share, after aggregating all fractional shares held by a stockholder, resulting in the issuance of 187 round-up shares. Any stockholder holding less than 24 shares of Common Stock on a pre-reverse stock basis were paid in cash for such fractional share of Common Stock, which totaled $171.

On May 15, 2019 the Company closed the Underwriters Second Over-Allotment partial exercise option to purchase 200,000 shares of Common Stock at $5.99 per share (the "Second Over-Allotment Exercise") for additional gross proceeds of $1.198 million, prior to deducting underwriting discounts and commissions and offering expenses payable by the Company, pursuant to and in compliance with the terms and conditions of the previously announced April 16, 2019 Underwriting Agreement and Offering.

On November 27, 2020, the Company closed a second underwritten public offering issuing 250,000 shares, with a public offering price of $30.00 per share, generating approximately $6.9 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the aggregate net proceeds primarily for working capital and general corporate purposes.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this item begin on page F-1 with the index to financial statements followed by the financial statements.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

At the end of the period covered by this Annual Report on Form 10-K, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the disclosure controls and procedures of our Company were not effective to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis due to material weaknesses in internal controls as identified below under “Management’s Report on Internal Control Over Financial Reporting”. Since the type of material weaknesses identified below have a pervasive effect across the organization, management has determined that these circumstances constitute material weaknesses that therefore affects disclosure controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. All internal control systems, no matter how well designed, have inherent limitations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

During the period covered by this filing, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our internal controls over financial reporting. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, we do not yet have sufficient internal controls over financial reporting and procedures to ensure that all the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.

The Company is aware of the shortfalls in internal controls over financial reporting and intends to continue to improve its internal control over financial reporting and procedures. We identified the following material weaknesses which exist as of December 31, 2020:

The Company currently does not have automated manufacturing or purchasing systems in place to track inventory purchases, transactions, bills of material, part numbers, product costing, labor or a perpetual inventory system. The Company performs manual processes during the year to track and control inventory transactions, apply labor and overheads to inventory and to perform a wall to wall physical inventory at the end of the year to confirm the ending inventory balance and valuation. While these processes provide good results in determining inventory and cost of sales transactions, as we grow, it has become a very time-consuming process and could impact our ability to submit timely reporting. A manufacturing system will also provide better management tools to analyze and plan production. This will avoid over-purchasing or shortages of inventory. We plan to implement a manufacturing and purchasing system during fiscal 2021.

Since these controls have a pervasive effect across the organization, management has determined that these circumstances constitute material weaknesses, based on the criteria established in the “Internal Integrated Framework” issued by COSO in 2013 and as a result, we did not maintain effective internal control over financial reporting as of December 31, 2020.

No Attestation Report by Independent Registered Accountant

The effectiveness of our internal control over financial reporting as of December 31, 2020 has not been audited by our independent registered public accounting firm by virtue of our exemption from such requirement as a smaller reporting company.

Changes in Internal Controls Over Financial Reporting

Since September 30, 2020, we implemented stronger manual processes through the use of spreadsheets to assist in our annual physical inventory, which improved our manual controls during the year-end physical inventory process. In addition, a Director of Operations and Director of Engineering were hired who were able to assist with the inventory at year-end which strengthened controls. With these two positions filled, we have begun to hold several demonstrations to review various Enterprise Resource Planning (ERP) systems which would include manufacturing and purchasing modules that are not available in our current ERP. We hope to make a decision in the first half of 2021 and begin the implementation shortly after.

In addition, Robert C. Schweitzer, the Company’s director and Audit Committee Chairman passed away in February 2021. This is a great loss to the Company. This role is an important position with regard to maintaining strong entity level controls and supporting governance requirements for the Company. We are currently in the process of searching for qualified candidates and anticipate that this role will be filled in April 2021.

ITEM 9B.

OTHER INFORMATION.

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE.

The information required by Item 10 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end or will be included in an amendment to this Form 10-K.

ITEM 11.

EXECUTIVE COMPENSATION.

The information required by Item 11 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Item 12 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Item 13 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by Item 14 will be incorporated herein by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

1.	Financial Statements

The financial statements required by this item are submitted in a separate section beginning on page F-1 of this annual report.

2.	Financial Statement Schedules

None

3.	Exhibits The following exhibits are included with this filing:

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith

1.1	Underwriting Agreement	8-K	001-38868	1.1	4/18/2019

1.2	Underwriting Agreement, dated July, 2020	8-K	000-53204	1.1	7/6/2020

1.3	Underwriting Agreement, dated November 23, 2020	8-K	000-53204	1.1	11/27/2020

3.1	Articles of Incorporation	SB-2	333-147104	3.1	11/2/2007

3.2	Amendment to Articles of Incorporation dated December 23, 2016	S-1/A	333-226040	3.1.2	4/4/2019

3.3	Certificate of Change to Articles of Incorporation dated April 11, 2019	8-K	001-38868	3.1	4/18/2019

3.4	Certificate of Amendment to Articles of Incorporation dated September 14, 2020	8-K	000-53204	3.1	9/14/2020

3.5	Bylaws of Registrant	SB-2	333-147104	3.2	11/2/2007

3.6	Amendment to Bylaws	8-K	000-53204	10.2	7/16/2014

4.1	Description of Registrant's Securities Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.	10-K	001-38868	4.1	3/30/2020

4.2	Form of Warrant issued to SFE VCF, LLC	8-K	000-53204	10.5	9/22/2017

4.3	Form of Investor Warrant	S-1	333-226040	4.2	4/11/2019

4.4	Warrant Agency Agreement by and between Envision Solar International, Inc. and Corporate Stock Transfer, Inc.	8-K	001-38868	4.2	4/18/2019

4.5	Form of Representative Warrant	8-K	001-38868	4.1	4/18/2019


4.6	Form of Warrant issued to bridge lender on August 27, 2018	8-K	001-38868	10.3	8/31/2018

4.7	Form of Warrant for Bridge Refinance Convertible Secured Promissory Note	S-1	333-226040	4.6	3/25/2019

10.1*	2011 Stock Incentive Plan of Envision Solar International, Inc., dated as of August 10, 2011	10-Q	001-38868	4.1	8/15/2011

10.2*	Form of Restricted Stock Agreement	10-Q	001-38868	10.3	11/14/2019

10.3*	Form of Stock Option Agreement	10-Q	001-38868	10.4	11/14/2019

10.4	10% Subordinated Convertible Promissory Note, dated December 17, 2009, issued to John Evey	8-K	000-53204	10.21	2/12/2010

10.5	Amended and Restated 10% Subordinated Convertible Promissory Note, dated as of December 31, 2010, issued to John Evey	8-K	000-53204	10.22	2/12/2010

10.6*	Employment Agreement by and between Envision Solar International, Inc. and Desmond Wheatley, effective as of January 1, 2016	8-K	000-53204	10.1	10/20/2016

10.7*	Amendment to Employment Agreement for Desmond Wheatley, effective as of January 1, 2016	S-1	333-226040	10.30	9/24/2018

10.8*	Amendment to Employment Agreement for Desmond Wheatley, effective as of January 1, 2021	8-K	000-53204	10.1	2/12/2021

10.9	Revolving Convertible Promissory Note, dated September 18, 2017	8-K	000-53204	10.1	9/22/2017


10.10	Convertible Secured Promissory Note, dated September 18, 2017	8-K	000-53204	10.2	9/22/2017

10.11	Security Agreement -Purchase Order Financing, dated September 18, 2017	8-K	000-53204	10.3	9/22/2017

10.12	Security Agreement – Convertible Secured Promissory Note, dated September 18, 2017	8-K	000-53204	10.4	9/22/2017

10.13	Promissory Note for bridge loan, dated August 27, 2018	8-K	001-38868	10.1	8/31/2018

10.14	Securities Purchase Agreement for the bridge loan, dated August 27, 2018	8-K	000-53204	10.2	8/31/2018

10.15*	Promissory Note for Deferred Compensation of Desmond Wheatley, dated effective January 15, 2016	S-1	333-226040	10.31	9/24/2018

10.16

Amendment to Promissory Note with SFE VCF, LLC, dated December 1, 2018

S-1

333-226040

10.35

3/25/2019

10.17*

Offer letter to Katherine H. McDermott, dated July 12, 2019

8-K

001-38868

10.1

7/23/2019

10.18*

Separation Agreement for Chris Caulson dated as of July 23, 2019

10-Q

001-38868

10.2

8/14/2019

10.19*

Change in Control Severance Benefit Plan

8-K

000-53204

10.2

2/12/2021

10.20

Lease Agreement – 5660 Eastgate Dr.

10-Q

000-53204

10.1

11/12/2020

23.1

Consent of Salberg & Company, P.A.

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

* Indicates a management contract or compensatory plan or arrangement

ITEM 16.

FORM 10-K SUMMARY

Not applicable

Beam Global

Index to Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets at December 31, 2020 and 2019	F-4
Statements of Operations for the Years Ended December 31, 2020 and 2019	F-5
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2020 and 2019	F-6
Statements of Cash Flows for the Years Ended December 31, 2020 and 2019	F-7
Notes to Financial Statements	F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of:

Beam Global

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Beam Global (the “Company”) as of December 31, 2020 and 2019, the related statements of operations, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-2

Analysis of Liquidity and Going Concern

As summarized in Footnote 2 “Liquidity” to the financial statements, the Company has a history of net losses and net cash used in operating activities and believes such conditions will continue for a period of time into the future. These are considered adverse conditions or events that led management to consider whether there is substantial doubt about the ability of the entity to continue as a going concern for a reasonable period of time.

However, management believes that cash raises through public offerings both in 2019 and 2020 which created a cash balance and positive working capital alleviates the substantial doubt related to going concern and the need for a going concern risk disclosure.

We identified the going concern risk analysis as a critical audit matter. Auditing management’s going concern analysis including their process to develop the analysis and the projections of future cash flows, operating trends, and assessments of internal and external matters that may affect the Company’s future operations and cash flows involved a high degree of subjectivity. Additionally, auditing management’s plans to address the going concern risk involved highly subjective auditor judgment.

The primary procedures we performed to address this critical audit matter included (a) Assessed the reasonableness of management’s process for developing their assessment of whether a going concern risk exists, (b) Assessed the reasonableness of assumptions management used in their future cash flow projections including comparison to prior year results, consideration of positive and negative evidence impacting management’s forecasts, and consideration of the Company’s financing arrangements in place as of the report date, (c) Developed our own independent calculation of expected source and use of funds and needs of the Company over the one year period from the date of issuance of the financial statements, (d) confirmed cash balances as of December 31, 2020 with the banks and tested management’s bank reconciliations, (e) Identified management’s plans for dealing with the adverse conditions and events discussed above and assessed the reasonableness of the assumptions of such plans, (f) Assessed whether it is probable that management’s plans, when implemented, will mitigate the adverse effects of the conditions and events discussed above, (g) Concluded whether substantial doubt exists as to whether the Company can continue as a going concern for a period of one year after the financial statements are issued and (h) considered the effect of such conclusion on the financial statement disclosures and our report of independent registered public accounting firm. We agreed with management’s assessment that the going concern risk is alleviated and a liquidity footnote would be sufficient.

/s/ Salberg & Company, P.A.

SALBERG & COMPANY, P.A.

We have served as the Company’s auditor since 2008

Boca Raton, Florida

March 30, 2021

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

F-3

Beam Global

Balance Sheets

	December 31,
	2020			2019
Assets
Current assets
Cash	$	26,702,804		$	3,849,456
Accounts receivable, net of $0 and $2,429 reserve for bad debt at December 31, 2020 and December 31, 2019, respectively		1,786,471			764,534
Prepaid and other current assets		321,393			147,686
Inventory, net		1,092,763			1,843,880
Total current assets		29,903,431			6,605,556

Property and equipment, net		235,036			103,031
Operating lease right of use asset		2,418,503			316,389
Patents, net		293,789			205,154
Deposits		52,000			56,869
Total assets	$	32,902,759		$	7,286,999

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	727,919		$	485,019
Accrued expenses		391,567			305,115
Sales tax payable		92,130			6,213
Deferred revenue		107,489			93,609
Convertible note payable - related party, net of debt discount of $5,990 at December 31, 2019		–			214,427
Operating lease liabilities, current		521,006			349,160
Auto loan		–			9,294
Total current liabilities		1,840,111			1,462,837

Operating lease liabilities, noncurrent		1,910,357			–
Total liabilities		3,750,468			1,462,837

Commitments and contingencies (Note 13)

Stockholders' equity
Preferred stock, $0.001 par value, 10,000,000 authorized, 0 outstanding as of December 31, 2020 and 2019, respectively.		–			–
Common stock, $0.001 par value, 9,800,000 shares authorized, 8,482,387 and 5,208,170 shares issued or issuable and outstanding at December 31, 2020 and December 31, 2019, respectively.		8,482			5,207
Additional paid-in-capital		80,166,415			51,628,536
Accumulated deficit		(51,022,606	)		(45,809,581	)

Total stockholders' equity		29,152,291			5,824,162

Total liabilities and stockholders' equity	$	32,902,759		$	7,286,999

The accompanying notes are an integral part of these Financial Statements

F-4

Beam Global

Statements of Operations

	For the Years Ended
	December 31,
	2020			2019

Revenues	$	6,210,350		$	5,111,545

Cost of revenues		6,921,324			5,265,319

Gross loss		(710,974	)		(153,774	)

Operating expenses		4,496,660			3,117,793

Loss from operations		(5,207,634	)		(3,271,567	)

Other income (expense)
Interest income		11,446			57,082
Interest expense		(11,893	)		(716,337	)
Total other income (expense), net		(447	)		(659,255	)

Loss before income tax expense		(5,208,081	)		(3,930,822	)

Income tax expense		4,944			3,100

Net loss	$	(5,213,025	)	$	(3,933,922	)

Net loss per share - basic and diluted	$	(0.84	)	$	(0.88	)

Weighted average shares outstanding - basic and diluted		6,170,283			4,466,563

The accompanying notes are an integral part of these Financial Statements

F-5

Beam Global

Statements of Changes in Stockholders' Equity

For the Years Ended December 31, 2020 and 2019

	Common Stock					Additional Paid-in-			Accumulated			Total Stockholders' Equity
	Stock			Amount		Capital			Deficit			(Deficit)
Balance at December 31, 2018		2,906,630		$	2,907	$	39,392,073		$	(41,875,659	)	$	(2,480,679	)

Stock issued for director services - vested		56,937			56		355,875			–			355,931
Stock issued to escrow account - unvested		44,437			44		(44	)		–			–
Stock option expense		–			–		48,915			–			48,915
Shares issued for cash		2,200,000			2,200		13,195,800			–			13,198,000
Warrants issued for cash		–			–		3,000			–			3,000
Cash fees related to stock offering		–			–		(1,370,879	)		–			(1,370,879	)
Fractional share cash payment		(21	)		–		(171	)		–			(171	)
Fractional shares issued from reverse split		187			–		–			–			–
Value of warrants and beneficial conversion features related to debt instruments		–			–		3,967			–			3,967
Net loss for 2019		–			–		–			(3,933,922	)		(3,933,922	)
Balance at December 31, 2019		5,208,170		$	5,207	$	51,628,536		$	(45,809,581	)	$	5,824,162

Stock issued for director services - vested		59,782			60		444,122			–			444,182
Stock issued to escrow account - unvested		2,126			3		(3	)		–			–
Stock option expense		–			–		722,549			–			722,549
Proceeds from issuance of common stock, pursuant to public offering		1,643,900			1,644		18,998,031			–			18,999,675
Warrants exercised for cash		1,552,206			1,552		9,925,306			–			9,926,858
Warrants exercised (cashless)		11,304			11		(11	)		–			–
Stock option exercise (cashless)		2,199			2		(2	)		–			–
Stock issued for services		2,700			3		14,739			–			14,742
Cash fees related to stock offerings		–			–		(1,566,852	)		–			(1,566,852	)
Net loss for 2020		–			–		–			(5,213,025	)		(5,213,025	)
Balance at December 31, 2020		8,482,387		$	8,482	$	80,166,415		$	(51,022,606	)	$	29,152,291

The accompanying notes are an integral part of these Financial Statements

F-6

Beam Global

Statements of Cash Flows

	For the Years Ended
	December 31,
	2020			2019

Operating Activities:
Net loss	$	(5,213,025	)	$	(3,933,922	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		40,952			40,500
Common stock issued for services		458,924			355,931
Compensation expense related to grant of stock options		722,549			48,915
Amortization of debt discount		5,990			526,423
Amortization of operating lease right of use asset		(19,911	)		–
Provision for doubtful accounts		–			2,429
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(1,021,937	)		523,739
Prepaid expenses and other current assets		(385,895	)		(468,313	)
Inventory		1,060,614			(110,455	)
Deposits		4,869			48,672
Increase (decrease) in:
Accounts payable		242,900			(883,238	)
Accrued expenses		86,452			(276,284	)
Convertible note payable issued (repaid) in lieu of salary - related party		(220,417	)		35,417
Sales tax payable		85,917			6,022
Deferred revenue		13,880			(742,176	)
Net cash used in operating activities		(4,138,138	)		(4,826,340	)

Investing Activities:
Purchases of equipment		(265,764	)		(32,840	)
Funding of patent costs		(93,137	)		(76,746	)
Net cash used in investing activities		(358,901	)		(109,586	)

Financing Activities:
Repayments on convertible line of credit, net		–			(960,000	)
Repayments of convertible notes payable, net		–			(1,650,616	)
Repayments on notes payable		–			(862,500	)
Repayments of auto loan		(9,294	)		(10,504	)
Borrowings on note payable - Paycheck Protection Program		339,262			–
Repayment on note payable - Paycheck Protection Program		(339,262	)		–
Proceeds from warrant exercises		9,926,858			–
Payments of equity offering costs		(1,566,852	)		(1,175,851	)
Fractional share payments		–			(171	)
Proceeds from issuance of common stock and warrants, pursuant to public offering		18,999,675			13,201,000
Net cash provided by financing activities		27,350,387			8,541,358

Net increase in cash		22,853,348			3,605,432

Cash at beginning of year		3,849,456			244,024

Cash at end of year	$	26,702,804		$	3,849,456

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	54,571		$	364,095
Cash paid for taxes	$	4,944		$	3,100

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Recording of debt discount	$	–		$	3,967
Transfer of prepaid asset to inventory	$	212,188		$	576,698
Recording of right of use asset and corresponding liability	$	2,605,032		$	872,897
Depreciation cost capitalized into inventory	$	20,363		$	25,761
Reclassification of deferred equity offering costs to additional paid in capital	$	1,566,852		$	195,028
Transfer of fixed asset to inventory	$	76,946		$	–

The accompanying notes are an integral part of these Financial Statements

F-7

BEAM GLOBAL

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

1.	CORPORATE ORGANIZATION, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CORPORATE ORGANIZATION

Beam Global (formerly Envision Solar International, Inc.) was incorporated in June 2006 as a limited liability company (“LLC”). Through a series of transactions and mergers, including a series of 2010 transactions where the then existing entity was acquired by an inactive publicly-held company in a transaction treated as a recapitalization of the company, the resulting entity became Envision Solar International, Inc., a Nevada Corporation. Additionally, the Company had formed various wholly owned subsidiaries to account for its planned future operations, but these entities were dissolved over the subsequent years. On September 15, 2020, Envision Solar International, Inc. announced its rebranding and changed its corporate name to Beam Global (hereinafter the “Company”, "us", "we", "our" or "Beam") and trading on Nasdaq: BEEM and BEEMW.

NATURE OF OPERATIONS

Beam is a cleantech innovation company based in San Diego, California. We develop, design, engineer, manufacture and sell renewably energized high-quality products for electric vehicle (“EV”) charging, outdoor media and branding, and energy security. 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. When competing with utilities or typical solar companies, we rely on our products’ ease of deployment, reliability, accessibility, and total cost of ownership, rather than producing the cheapest kilowatt hour with the help of subsidies.

Beam’s products and proprietary technology solutions target three markets that are experiencing significant growth with annual global spending in the billions of dollars:

electric vehicle (EV) charging infrastructure;

out of home advertising platforms; and

energy security and disaster preparedness.

REVERSE STOCK SPLIT

The Company completed a 1 for 50 reverse split of our common stock in April 2019, and all share and per share data in the accompanying financial statements and footnotes for all periods presented have been retroactively adjusted for this reverse stock split.

F-8

RISKS AND UNCERTAINTIES

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders as well as the shutdown of many businesses around the world. To date, while we have seen some delays and cancellations of opportunities in our pipeline as a result of funding issues, priority issues or temporary business closures, the pandemic has not had a material adverse effect on the Company’s financial position or results of operations for the year ended December 31, 2020. However, it is difficult to predict if these governmental actions and the widespread economic disruption arising from the pandemic will impact our business in the future. The Company will continue to monitor its progress and communicate changes in estimates and assumptions with shareholders, as necessary.

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 doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable lives of property and equipment, 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.

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 institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through December 31, 2020. As of December 31, 2020, approximately $26,889,000 of the Company’s cash deposits were greater than the federally insured limits.

Major Customers

The Company has a small, but growing customer base, which can result in a concentration of revenues and accounts receivable. The Company continually assesses the financial strength of its customers. For the year ended December 31, 2020, revenues from one customer accounted for 29% of total revenues, and for the year ended December 31, 2019, revenues from two customers accounted for 44% and 22% of total revenues, with no other single customer accounting for more than 10% of revenues. At December 31, 2020, accounts receivable from two customers accounted for 61% and 13% of total accounts receivable, and at December 31, 2019, accounts receivable from six customers accounted for 35%, 21%, 12%, 11%, 11% and 10% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

Major Suppliers

The Company sources its materials and components from a wide variety of vendors. The Company has several components that are currently sourced from only one supplier. They are standard off-the-shelf components, but these components differ between manufacturers in terms of their specifications and performance. If one of these components became unavailable, we would be able to secure supply from another source and incorporate in our design with some modifications. For these components, we maintain adequate supply to mitigate any supply risk.

F-9

CASH AND CASH EQUIVALENTS

For the purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at December 31, 2020 or December 31, 2019.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments, including accounts receivable, accounts payable, accrued expenses, and short-term loans, are carried at historical cost basis. At December 31, 2020, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

ACCOUNTS RECEIVABLE

Accounts receivable are customer obligations due under normal trade terms. Management reviews accounts receivable on a periodic basis to determine if any receivables may become uncollectible. Management’s evaluation includes several factors including the aging of the accounts receivable balances, a review of significant past due accounts, dialogue with the customer, the financial profile of a customer, our historical write-off experience, net of recoveries, and economic conditions. The Company includes any accounts receivable balances that are determined to be uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

INVENTORY

Inventory is stated at the lower of cost and 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 the manufacturing process. The Company regularly reviews inventory components and quantities on hand and performs annual physical inventory counts. A reserve is established if this review process determines the net realizable value of such inventory may be below the carrying value.

PROPERTY, EQUIPMENT AND DEPRECIATION

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of 3 to 7 years. Expenditures for maintenance and repairs, along with fixed assets below our capitalization threshold, are expensed as incurred.

PATENTS

The Company believes it will achieve future economic value benefits for its various patents and patent ideas. All administrative costs for obtaining patents are accumulated on the balance sheet as a patent asset until such time as a patent is issued. The costs of these intangible assets are classified as a long-term asset and amortized on a straight-line basis over the legal life of such asset, which is typically 20 years. In the event a patent is denied or abandoned, all accumulated administrative costs will be expensed in the period in which the patent was denied or abandoned. Patent amortization expense was $4,502 and $3,217 in the years ended December 31, 2020 and 2019, respectively.

F-10

LEASES

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)” whereby lessees need to recognize almost all leases on the balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of January 1, 2019 using the effective date method and applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases, and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected to not recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

ACCOUNTING FOR DERIVATIVES

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives, and debt discounts, and recognizes a net gain or loss on extinguishment. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

REVENUE RECOGNITION

Beam follows the revenue standards of Financial Accounting Standards Board Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation.

F-11

The Company has a policy of recording sales incentives as a contra revenue.

The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.

Sales tax is recorded on a net basis and excluded from revenue.

COST OF REVENUES

The Company records direct material and component costs, direct labor and associated benefits, and manufacturing overhead costs such as supervision, manufacturing equipment depreciation, rent, and utility costs, all of which are included in inventory prior to a sale, as costs of revenues. The Company further includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.

F-12

RESEARCH AND DEVELOPMENT

In accordance with ASC 730-10, “Research and Development,” expenditures for research and development of the Company’s products are expensed when incurred and are included in operating expenses. The Company recognized research and development costs of $261,611 and $412,590 for the years ending December 31, 2020 and 2019, respectively. These costs were related to the development of new products including the solar tree, the EV ARC™ 2020 and the DC Fast Charging unit. These costs include employee labor for our engineers and outside contracted engineers and materials.

ADVERTISING

The Company conducts advertising for the promotion of its products and services. In accordance with ASC 720-35, “Advertising Costs,” advertising costs are charged to operations and included in operating expenses when incurred. Such amounts aggregated $122,840 in 2020 and $126,120 in 2019.

STOCK-BASED COMPENSATION

The Company follows ASC 718, “Compensation – Stock Compensation.” ASC 718 requires companies to estimate and recognize the fair value of stock-based awards to employees and directors. The fair value of the portion of an award that is ultimately expected to vest is recognized as an expense over the shorter of the service periods or vesting periods using the straight-line attribution method.

The Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on January 1, 2019.

The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model.

INCOME TAXES

The Company accounts for income taxes pursuant to the provisions of ASC Topic 740, “Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

The Company follows the provisions of ASC 740-10-25-5, “Basic Recognition Threshold.” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10-25-6, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2020, tax years 2017 through 2020 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.

The Company recognizes the benefit of a tax position when it is effectively settled. ASC 740-10-25-10, “Basic Recognition Threshold” provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. ASC 740-10-25-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority. For tax positions considered effectively settled, the Company recognizes the full amount of the tax benefit.

F-13

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 common share is computed using the weighted average number of common shares outstanding for the period, and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.

Options to purchase 341,808 common shares and warrants to purchase 965,584 common shares were outstanding at December 31, 2020. Convertible debt convertible into 35,907 common shares, options to purchase 239,704 common shares and warrants to purchase 2,535,790 common shares were outstanding at December 31, 2019. These shares were not included in the computation of diluted loss per share for the years ended December 31, 2020 and 2019 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.

CONTINGENCIES

Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable would be disclosed. The Company does not include legal costs in its estimates of amounts to accrue.

SEGMENTS

The Company follows ASC 280-10 for “Disclosures about Segments of an Enterprise and Related Information." During 2020 and 2019, the Company only operated in one segment; therefore, segment information has not been presented.

RECLASSIFICATIONS

Where necessary, the prior year’s information has been reclassified to conform to the current year 2020 statement presentation. On the Balance Sheets, the operating lease right of use asset of $316,389 was reclassified from the property and equipment, net line item and the operating lease liabilities, current of $349,160 was reclassified from accrued expenses to conform to the December 31, 2020 presentation.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

There have not been any recent changes in accounting pronouncements or Accounting Standards Updates issued by the FASB that are of significance to the Company.

2.	LIQUIDITY

The Company has a history of net losses, including the accompanying financial statements for the years ended December 31, 2020 and 2019 where the Company had net losses of $5,213,025 (which includes $1,181,473 of non-cash stock-based compensation expense) and $3,933,922 (which includes $404,846 of non-cash stock-based compensation expense), and net cash used in operating activities of $4,138,138 and $4,826,340, respectively. In April and May of 2019, the Company closed a public offering that generated gross proceeds of $13,201,000, which was used to pay off the Company’s debt and to fund business operations. In May 2020, the Company filed a shelf registration statement on Form S-3 and subsequently closed two additional offerings generating gross proceeds of $11,499,675 in July 2020 and $7,500,000 in November 2020. In addition, the company issued warrants as part of the April and May 2019 offering which has generated an additional $9,926,858 of proceeds during 2020. The Company has 965,584 warrants remaining at December 31, 2020, which could potentially generate an additional $6,108,903 of proceeds over the next 4.5 years, depending on the market value of our stock and the warrant holders’ ability to exercise them. The proceeds from these offerings are expected to provide working capital to fund business operations and the development of new products.

F-14

The Company expects to continue to incur losses for a period of time into the future. In addition, there is no guarantee that the warrants will be exercised or that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to the Company. The Company continues to invest in sales and marketing resources and seek out sales contracts that should provide additional revenues and, in time, generate operating profits.

The cash balance at December 31, 2020 was $26,702,804 and our working capital was $28,063,320 at December 31, 2020. With these financings, management believes it has sufficient cash to fund its liabilities and operations for at least the next twelve months from the issue date of this report.

3.	ACCOUNTS RECEIVABLE AND DEFERRED REVENUE

Accounts Receivable

The Company records accounts receivable as it bills its customers for products and services. The allowance for doubtful accounts is based upon the Company’s policy (See Note 1). The bad debt expense was $0 and $2,429 for the years ended December 31, 2020 and 2019, respectively.

Deferred Revenue

Deferred revenues are deposits from customers for product sales which have not yet been delivered and multi period maintenance contracts (See Note 1 and 17). Deferred revenue was $107,489 and $93,609 at December 31, 2020 and December 31, 2019, respectively.

4.	PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets are summarized as follows:

	December 31,
	2020		2019
Cash due for warrant exercises	$	194,450	$	–
Vendor prepayments		83,049		115,682
Prepaid insurance		33,320		30,371
Related party receivable		10,574		1,633
Total prepaid expenses and other current assets	$	321,393	$	147,686

See Note 15 for subsequent collection of the cash due for warrant exercises.

5.	INVENTORY

Inventories are stated at the lower of cost and net realizable value. Costs are determined using the first in-first out (FIFO) method. As of December 31, 2020 and 2019, inventory consists of the following:

	December 31,
	2020			2019
Finished goods	$	–		$	716,478
Work in process		559,582			303,594
Raw materials		544,605			835,232
Inventory allowance		(11,424	)		(11,424	)
Total inventory	$	1,092,763		$	1,843,880

F-15

6.	PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	December 31,
	2020			2019
Computer equipment and software	$	87,303		$	59,390
Furniture and fixtures		85,333			82,529
Machinery and equipment		425,856			314,491
Autos		84,796			49,238
Leasehold improvements		13,918			6,790
Total property and equipment		697,206			512,438
Less accumulated depreciation		(462,170	)		(409,407	)
Property and Equipment, net	$	235,036		$	103,031

Depreciation expense for 2020 and 2019 was $36,450 and $37,283, respectively. In 2020 and 2019, respectively, $20,363 and $25,761 of depreciation was capitalized into inventory as manufacturing overhead costs.

7.	ACCRUED EXPENSES

The major components of accrued expenses are summarized as follows:

	December 31,
	2020		2019
Accrued vacation	$	205,809	$	175,231
Accrued salaries		178,449		75,829
Accrued interest		–		48,884
Other accrued expense		7,309		5,171
Total accrued expenses	$	391,567	$	305,115

8.	CONVERTIBLE LINE OF CREDIT

In April 2019, the Company used proceeds from its public offering to pay off the entire balance of a Convertible Line of Credit, along with all accrued and unpaid interest. As of December 31, 2019, the following summarizes the convertible line of credit:

F-16

On September 18, 2017, in addition to a convertible “Lender” note, the Company entered into a revolving secured convertible promissory note (the “Revolver”) with an unaffiliated lender (the “Lender”). Pursuant to the Revolver, the Company has the right to make borrowings from the Lender in amounts of up to 70% of the value of any specific purchase order (each a “PO”) received by the Company from a credit worthy customer (each a “Draw Down”), up to a maximum of $3,000,000, commencing on the date of the Revolver and terminating December 31, 2019. The Revolver bears simple interest at the floating rate per annum equal to the 12-month USD LIBOR index rate quoted from time to time in New York, New York by the Bloomberg Service plus 600 basis points (the “Interest Rate”). The Interest Rate will be adjusted on the first day of each calendar month during the term of this Note to reflect any changes in the 12 month LIBOR rate as quoted on that day, or if that day is not a business day, on the next business day thereafter. The principal and accrued unpaid interest with respect to each Draw Down is due and payable within five (5) business days of receipt from the Customer by the Company of a payment due under the applicable PO (with respect to each Draw Down, the “Maturity Date”). Each Draw Down is secured by a perfected recorded second priority security interest in all of the Company’s assets. The Lender will have the right at any time until the Maturity Date of a Draw Down, provided the Lender gives the Company written notice of the Lender’s election to convert prior to any prepayment of such Draw Down by the Company with respect to converting that portion of such Draw Down covered by the prepayment, to convert all or any portion of the outstanding principal and accrued unpaid interest (the “Conversion Amount”), into such number of the Company’s common stock as is determined by dividing the Conversion Amount by the greater of (i) seven dollars and fifty cents ($7.50) or (ii) 75% of the Volume Weighted Average Price of the Company’s common stock that is quoted on a public securities trading market (if more than one, the one with the then highest trading volume), during the five (5) consecutive trading days immediately prior to the date of the Lender’s written notice of the Lender’s election to convert.

As additional consideration for any Draw Downs made by the Company, the Company agreed to issue to the Lender common stock purchase warrants exercisable for a period of three years from the date of issuance with an exercise price equal to the greater of (i) $7.50 per share or (ii) 75% of the Volume Weighted Average Price of the Company’s common stock that is quoted on a public securities trading market (if more than one, the one with the then highest trading volume), during the five (5) consecutive trading days immediately prior to the date of the applicable Draw Down. The number of warrants issuable to the Lender will equal 25% of the increase over the highest dollar amount previously drawn down by the Company on the Revolver divided by the greater of (i) seven dollars and fifty cents ($7.50) or (ii) 75% of the Volume Weighted Average Price of the Company’s common stock that is quoted on a public securities trading market (if more than one, the one with the then highest trading volume), during the five (5) consecutive trading days immediately prior to the date of the applicable Draw Down which causes the increase over the previous highest amount borrowed.

As of December 31, 2018, the convertible line of credit had a principal balance outstanding amounting to $960,000 with accrued interest amounting to $12,909 which is included in accrued expenses.

During the three months ended March 31, 2019 the Company received other funds on Draw Downs totaling $158,442. No warrants were issued on these Draw Downs. At March 31, 2019, the convertible line of credit had a balance amounting to $1,118,442 with accrued interest amounting to $34,705 which was included in accrued expenses.

In April 2019, the Company paid back the full Draw Down balance of $1,118,442, and unpaid interest of $44,599, of which $9,893 was expensed in that quarter.

9.	CONVERTIBLE NOTE PAYABLE – RELATED PARTY

On October 18, 2016, the Company entered into a five-year employment agreement, effective as of January 1, 2016, with Mr. Desmond Wheatley, the Chief Executive Officer, President, and Chairman of the Company (the “Agreement”). Pursuant to the Agreement, Mr. Wheatley received an annual deferred salary of $50,000 which Mr. Wheatley deferred until such time as Mr. Wheatley and the Board of Directors agreed that payment of the deferred salary and/or cessation of the deferral was appropriate. In August 2018, the Agreement was amended to provide that his salary shall defer until the earliest to occur of the following: (i) a permissible event specified in Section 409A of the Code, (ii) December 31, 2020, (iii) a change of control as defined in the Agreement, or (iv) a sale of all or substantially all of the assets of the Company.

F-17

All deferred amounts were evidenced by an unsecured convertible promissory note payable by the Company to Mr. Wheatley bearing simple interest at the rate of 10% per annum, accruing until paid, convertible into shares of the Company’s common stock at $7.50 per share at any time in whole or in part at Mr. Wheatley’s discretion. As the conversion price was equivalent to the fair value of the common stock at various salary deferral dates prior to June 30, 2018, there was no beneficial conversion feature to this note through such date. Subsequent to June 30, 2018 through December 31, 2018 and based on the average daily closing price of our common stock, the Company recorded $8,672 of debt discount for the beneficial conversion feature value which was being amortized to interest expense over the term of the note. For the three months ended March 31, 2019 and based on the average daily closing price of our common stock, the Company recorded $3,967 of debt discount for the beneficial conversion feature value which was also being amortized to interest expense over the term of the note. There was no beneficial conversion value and therefore, no debt discount was recorded for any other periods subsequent to March 31, 2019. Additionally, on March 29, 2017 the Board of Directors granted Mr. Wheatley a $35,000 bonus for which Mr. Wheatley agreed to defer such bonus under the same terms of his salary deferral.

On September 17, 2019, the Board of Directors adopted a resolution to pay off the convertible promissory note issued to Mr. Wheatley for his deferred compensation in the near future (subject to a recommendation on timing from Mr. Wheatley), and no additional salary was deferred after September 15, 2019. As a result, this note was presented as a short-term liability as of December 31, 2019 with a balance of $214,427, net of debt discount of $5,990, with accrued and unpaid interest of $48,884 which was included in accrued expenses (See Note 7). In February 2020, the remaining debt discount of $5,990 was recorded as interest expense, additional interest of $3,442 was accrued, and the total note of $220,417 and interest of $52,326 was paid to Mr. Wheatley.

10. CONVERTIBLE NOTES PAYABLE

In April 2019, the Company used proceeds from its public offering to pay off the entire balances of all outstanding convertible notes payable, except for Mr. Wheatley’s convertible note which was paid off in February 2020 as discussed in Note 9. As of December 31, 2019, the following summarizes those convertible notes payable:

Pegasus Note

On December 19, 2009, the Company entered into a convertible promissory note for $100,000 to a new landlord in lieu of paying rent for one year for new office space. The interest was 10% per annum with the note principal and interest originally due December 18, 2010. If the Company receives greater than $1,000,000 of proceeds from debt or equity financing, 25% of the amount in excess of $1,000,000 would be used to pay down the note. This note was subordinate to all existing senior indebtedness of the Company. This note was convertible at $16.50 per share and had no beneficial conversion feature at the note date.

Through a series of amendments, the term of the note was extended until December 31, 2016, and the lender waived, through December 31, 2015, the requirement to pay down the note with financing proceeds received by the Company.

Effective June 13, 2018, the Company entered into a further amendment to extend the maturity date of this note to December 31, 2019, and the lender waived the past requirements to pay the note with financing proceeds received by the Company. There were no additional fees or discounts associated with this amendment. This modification was treated as an extinguishment as the change in fair value of the embedded conversion option just before and just after the modification was more than 10% of the carrying amount of the note. The market price of the Company’s stock was below the conversion price at the time of the modification, therefore no beneficial conversion feature needed to be recorded.

In April 2019, the Company repaid the $100,000 note, and unpaid interest of $93,096, of which $493 was expensed in that quarter.

F-18

Evey Note

Prior to fiscal 2011, the Company was advanced monies by John Evey, our former director, and executed a 10% convertible promissory note with compounding interest which was convertible into shares of common stock at $16.50 per share. There was no beneficial conversion feature at the note date and this note was subordinate to the then existing notes. Through a series of amendments from the original due date, the conversion price of the convertible note was reduced to $10.00 and the maturity date was extended to December 31, 2017.

Effective June 27, 2018, the Company entered into a further extension agreement to extend the maturity date of this note to July 1, 2019. There were no additional fees or discounts associated with this extension. This modification was treated as an extinguishment as the change in fair value of the embedded conversion option just before and just after the modification was more than 10% of the carrying amount of the note. The Company recorded debt discount amounting to $30,960 for the value of the beneficial conversion feature and is amortizing this to interest expense over the remaining term of the loan.

In April 2019, the Company repaid the note balance of $50,616 and unpaid interest of $77,066, of which $627 was expensed in that quarter. In addition, the Company paid $80,000 to Mr. Evey in April 2019 for consulting services.

“Lender” Note

On September 18, 2017, in addition to entering into a revolving convertible line of credit (See Note 8), the Company also entered into a $1,500,000 secured convertible promissory note with the same unaffiliated lender (the “Lender”). The Note bears simple interest at the floating rate per annum equal to the 12-month USD LIBOR index rate quoted from time to time in New York, New York by the Bloomberg Service plus 400 basis points (the “Interest Rate”). The Interest Rate will be adjusted on the first day of each calendar month during the term of the Note to reflect any changes in the 12 month LIBOR rate as quoted at on that day, or if that day is not a business day, on the next business day thereafter. Interest will only accrue on outstanding principal. Accrued unpaid interest was payable monthly on the first calendar day of each month for interest accrued during the previous month, with all outstanding principal and accrued unpaid interest originally payable in full on or before September 17, 2018 to the extent not converted into shares of the Company’s common stock. This note was initially amended to be payable in full by December 1, 2018 but the Company did not make the December 1, 2018 principal payment. In March 2019, and effective as of December 1, 2018, the Company entered into second amendment to extend the term of the note to be payable in full by (i) June 30, 2019 or (ii) the closing of the public offering by the Company. This modification was treated as a debt extinguishment as the change in fair value of the embedded conversion option just before and just after the modification was more than 10% of the carrying amount of the note. The Company recorded debt discount amounting to $472,718 for the value of the beneficial conversion feature and is amortizing this to interest expense over the remaining term of the note. Additionally, the Company paid $30,000 of lender fees which were also recorded as debt discount and are also being amortized to interest expense over the term of the note. The Note is secured by a perfected recorded first priority security interest in all of the Company’s assets, as set forth in a certain Security Agreement by and between the Company and the Lender, dated September 18, 2017. At any time until the maturity date, and provided Lender gives the Company written notice of Lender’s election to convert prior to any prepayment of this Note by the Company with respect to converting that portion of this Note covered by the prepayment, the Lender has the right to convert all or any portion of the outstanding principal and accrued interest (the “Conversion Amount”), into such number of shares of the Company’s common stock as is determined by dividing the Conversion Amount by the greater of (i) seven dollars and fifty cents ($7.50) or (ii) 75% of the Volume Weighted Average Price of the Company’s common stock that is quoted on a public securities trading market (if more than one, the one with the then highest trading volume), during the five (5) consecutive trading days immediately prior to the date of the Lender’s written notice of its election to convert.

As additional consideration for the loan evidenced by the Note, the Company agreed to issue to the Lender common stock purchase warrants exercisable for a period of three years from the date of issuance with an exercise price equal to $7.50 per share. The number of warrants issuable to the Lender is equal to 25% of the loan Amount divided by seven dollars and fifty cents ($7.50). As of September 18, 2017, the Company issued warrants to purchase up to 50,000 shares of common stock under this provision with a $7.50 exercise price having a fair value of $187,142 using the Black-Scholes valuation methodology. As a result of this transaction, the Company recorded $232,768 of debt discount consisting of the relative fair value of the warrants of $166,384 and a beneficial conversion feature of $66,384, which was amortized to interest expense over the original term of the note.

F-19

During any time when the Note is outstanding, or when the Lender holds any Company stock, or any warrants to acquire Company stock where the combination of both could result in the Lender owning stock with a current value of one million dollars or greater, in the Company, the Lender will have certain review and consulting rights as described in the Note.

In April 2019, the Company repaid the note balance of $1,500,000, unpaid interest of $22,029, of which $5,255 of interest was expensed in that quarter.

11.

NOTES PAYABLE

In April 2019, the Company used proceeds from its public offering to pay off the entire balance of this Note Payable, along with all accrued and unpaid interest. As of December 31, 2019, the following summarizes this note payable:

On August 27, 2018, the Company entered into an unsecured promissory note (the “Note”) in the amount of $750,000 (the “Principal Amount”) with Gemini Special Opportunities Fund, LP (“Gemini”). The Note bears simple interest at an annual rate of 10% and is subject to a Securities Purchase Agreement, dated August 27, 2018. This Note was due and payable on February 28, 2019 (the “Maturity Date”). Effective February 28, 2019, a forbearance agreement was granted by Gemini lender for any defaults, confirmed in writing, until Gemini and the Company complete an amendment extending the maturity date of the note, or the note is repaid by the Company. If the Company repays the Note after November 28, 2018, the Company shall pay 115% of the Principal Amount plus accrued interest. During the year ending December 31, 2018, the Company recorded an increase in the Note Payable balance of $112,500 with offsetting debt discount related to this repayment premium which is being amortized to interest expense over the term of the note. Additionally, the Company paid $5,000 of lender fees which were also recorded as debt discount and are also being amortized to interest expense over the term of the note.

As additional consideration for the loan evidenced by the Note, the Company issued to Gemini warrants to purchase up to 18,000 shares of common stock for a period of five years from the date of issuance with an exercise price equal to $12.50 per share. These warrants had a fair value of $115,521 using the Black-Sholes valuation methodology. As a result of this transaction, the Company recorded $100,102 of debt discount consisting of the relative fair value of the warrants which is being amortized to interest expense over the term of the note.

In April 2019, the Company repaid the note balance of $862,500, and unpaid interest of $47,466, of which $2,877 was expensed in that quarter. In addition, the Company paid $75,000 for an extension fee, which was recorded as interest expense in that quarter.

On May 1, 2020, the Company received a U.S. Small Business Administration Paycheck Protection Program loan of $339,262 which was offered through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This loan was recorded as a note payable, is subject to a 1% annual interest rate and has a two year term. This low interest loan was intended to support short term cash flow in the event we were more heavily impacted by the COVID-19 virus. In July 2020, we were able to raise capital and no longer required the loan. The full amount of the loan was repaid on November 13, 2020 in addition to $1,847 of interest.

12.

AUTO LOAN

In October 2015, the Company purchased a new vehicle and financed the purchase through a dealer auto loan. The loan has a term of 60 months, requires minimum monthly payments of approximately $950, and bears interest at a rate of 5.99 percent. As of December 31, 2019, the loan had a short term balance of $9,294. The loan was paid off in October 2020.

F-20

13.

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 December 31, 2020, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

Leases:

In August 2016, the Company entered into a sublease for its current corporate headquarters and manufacturing facility. The sublease expired in August 2020 which was the same term of the master lease for which the Company was the subtenant. In September 2020, the Company initiated a new five year master lease agreement, with two optional one year renewals. Monthly lease payments will range from $52,000 to $58,526 per month over the term of the lease (See note 14).

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, 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. All expenses and liabilities relating to such contracts were recorded in accordance with generally accepted accounting principles during the periods. Although such agreements increase the risk of legal actions against the Company for potential non-compliance, there were no financial exposures that were not accounted for in our financial statements.

14. LEASES

The Company adopted Leases (Topic 842) as of January 1, 2019 using the effective date method. We were subleasing our manufacturing facility under an operating lease which had monthly payments during 2019 and 2020 ranging from $48,672 to $50,619 through the end of the sublease on August 31, 2020. We calculated the present value of the remaining lease payment stream using our incremental effective borrowing rate of 10%. We initially recorded a right to use asset and corresponding lease liability of $872,897 on January 1, 2019. The right-of-use asset and the corresponding lease liability were equally amortized on a straight-line basis over the remaining term of the lease. The right-of-use asset was further reduced by our deferred rent of $32,771 as of December 31, 2019. As of December 31, 2019, we reported a right-of-use asset of $316,389, and corresponding liability of $349,160 related to this sublease. The right-of-use asset and the corresponding lease liability continued to amortize until fully amortized upon expiration of the sublease on August 31, 2020.

F-21

On September 1, 2020, the Company entered into a new five year operating lease with payments ranging from $52,000 to $58,526 using the same methodology. The lease has two one-year options to extend the term of the lease. At this time, it is not reasonably certain that we will extend the term of the lease and therefore the renewal periods have been excluded from the right-of-use asset. We calculated the present value of the remaining lease payment stream using our effective borrowing rate of 10% and recorded a right-of-use asset and operating lease liability each of $2,605,032 at September 1, 2020:

	Operating right-of
	use asset
Sub-lease
Office lease initial measurement January 1, 2019	$	872,897
Less amortization of operating lease		(523,738	)
Straight-line lease expense in excess of cash payments		(32,770	)
Operating lease ROU asset December 31, 2019	$	316,389
Less amortization of operating lease		(349,159	)
Straight-line lease expense in excess of cash payments		32,770
Operating lease ROU asset August 31, 2020 - end of sublease	$	–

New lease
Office lease initial measurement September 1, 2020	$	2,605,032
Less amortization of operating lease		(173,669	)
Straight-line lease expense in excess of cash payments		(12,860	)
Operating lease ROU asset December 31, 2020	$	2,418,503

As of December 31, 2020 and 2019, the current and non-current portions of the lease liability were recorded to the Balance Sheets as follows:

	December 31,
	2020		2019
Operating lease liabilities, current	$	521,006	$	349,160
Operating lease liabilities, noncurrent		1,910,357		–
Total lease liability	$	2,431,363	$	349,160

The future minimum rental commitments for our operating leases reconciled to the lease liability as of December 31, 2020 is as follows:

	December 31, 2020
2021	$	630,240
2022		649,147
2023		668,622
2024		688,680
2025		468,212
Total undiscounted future minimum payments		3,104,901
Present value discount		(673,538	)
Total lease liability	$	2,431,363

F-22

15. COMMON STOCK

Issuances of the Company’s common stock during the years ended December 31, 2020 and 2019, respectively, are as follows:

2020

Stock Issued in Cash Sales

The Company filed a “shelf” registration statement on Form S-3 and an accompanying prospectus with the Securities and Exchange Commission on May 26, 2020. On July 7, 2020, the Company closed an underwritten public offering issuing 1,393,900 shares, with a public offering price of $8.25 per share, generating approximately $10.5 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. On November 27, 2020, the Company closed a second underwritten public offering issuing 250,000 shares, with a public offering price of $30.00 per share, generating approximately $6.9 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the aggregate net proceeds primarily for working capital and general corporate purposes.

Other Securities

In July 2020, 3,000 stock options were exercised on a cashless basis for 2,199 registered shares of the Company’s common stock at an exercise price of $4.09.

In August 2020, a stock grant was issued for 2,700 unregistered shares of the Company’s common stock to a consultant as payment for services. The shares were valued on the grant dates’ stock price of $5.46 per share or $14,742.

During the year ended December 31, 2020, 1,456,406 warrants to purchase shares of the Company’s registered common stock and 95,800 warrants to purchase shares of the Company’s unregistered common stock were exercised generating $9,926,858, of which $9,732,408 in cash was received and $194,450 is included in other assets as a receivable (see Note 4) which was collected in January 2021. 18,000 warrants were cashless exercises in 2020 and the Company issued 11,304 unregistered shares of common stock.

The unregistered securities described above were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

Director Compensation

On October 20, 2020, upon recommendation of its Compensation Committee, the Board granted two directors annual stock grants of 12,200 each and the lead director was issued an annual grant of 17,100, which vest quarterly in four (4) equal installments. On the grant date, these shares had a per share fair value of $14.95 based on the quoted trading price, or $620,425. During the year ended December 31, 2020, 10,375 shares vested generating an expense of $155,107.

As of December 31, 2020, there were unreleased shares of common stock representing $571,568 of unrecognized restricted stock grant expense related to the Restricted Stock Grant Agreements for our Directors which will be recognized over 2.25 years. See a summary of unvested shares of common stock below.

F-23

2019

Reverse Stock Split

In April 2019, the Company effected a one-for-fifty reverse split of its issued and outstanding common stock (the “Reverse Stock Split”) and reduced the number of authorized shares of common stock from 490,000,000 to 9,800,000. No fractional shares were issued as a result of the Reverse Stock Split. Fractional shares were rounded up or down to the nearest whole share, after aggregating all fractional shares held by a stockholder, resulting in the issuance of 187 round-up shares. Any stockholder holding less than 24 shares of Common Stock on a pre-reverse stock basis were paid in cash for such fractional share of Common Stock, which totaled $171. All share and per share data in the accompanying financial statements and footnotes for all periods presented have been retroactively adjusted for this Reverse Stock Split.

Stock Issued in Cash Sales

In April 2019, the Company closed an underwritten public offering with Maxim Group LLC (“Maxim”), as representative for the several underwriters (the “Underwriters”), pursuant to which the Company agreed to issue and sell to the Underwriters an aggregate of 2,000,000 units with each unit consisting of one (1) share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and a warrant to purchase one (1) share of Common Stock at an exercise price equal to $6.30 per share (the “Warrants”). In addition, the Company granted the Underwriters a 45-day option to purchase up to 300,000 additional shares of Common Stock, or Warrants, or any combination thereof, at the public offering price to cover over-allotments, if any. The Common Stock and the Warrants were offered and sold to the public (the “Offering”) pursuant to the Company’s registration statement on Form S-1 (File Nos. 333-226040), filed by the Company with the Securities and Exchange Commission (the “Commission”) on July 2, 2018, as amended, which became effective on April 15, 2019, and a related registration statement filed pursuant to Rule 462 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The offering price to the public was $6.00 per unit and the Underwriters purchased 2,000,000 units. In addition, the Underwriters purchased 300,000 Warrants for $3,000 upon the exercise of the Underwriters’ over-allotment option. The Company received gross proceeds of approximately $12,003,000, before deducting underwriting discounts and commissions and estimated offering expenses. In addition, on May 15, 2019, the Company sold 200,000 shares of common stock in accordance with the terms of the Underwriting Agreement in connection with the partial exercise of the over-allotment option granted to the Underwriters (the “Over-allotment) for $5.99 per share. The Company received gross proceeds of approximately $1,198,000, before deductions from the Over-allotment. Total aggregate proceeds were $13,201,000 and the total expenses of the offering were approximately $1,371,000. In addition, the underwriters were issued 110,000 warrants as a fee based on 5% of total shares sold.

Director Compensation

During 2019, the Company issued a total of 25,000 shares of common stock to two directors that vested from restricted stock grants dated January 1, 2017, whereby each director was granted 15,000 shares that vest on a pro rata basis over a three year period (which represents 7,500 of these shares) and 15,000 shares that vest based on performance criteria (which represents 17,500 of these shares). The pro rata shares have a per share fair value of $7.50, or $56,250 (based on the market price at the time of the agreement) and the performance shares have a per share fair value of $5.50, or $96,250 (based on the market price on September 17, 2019, which is the date of grant based on when the performance criteria was defined). Additionally, during 2019, the Company issued 8,750 shares of common stock to one director that vested from restricted stock grants dated August 21, 2018, whereby the director was granted 15,000 shares that vest on a pro rata basis over a three year period (which represents 3,750 of these shares) and 15,000 shares that vest based on performance criteria (which represents 5,000 of these shares). The pro rata shares have a per share fair value of $10.00, or $37,500 (based on the market price at the time of the agreement) and the performance shares have a per share fair value of $5.50, or $27,500 (based on the market price on September 17, 2019, which is the date of grant based on when the performance criteria were defined).

F-24

On September 17, 2019, the Board of Directors (the “Board”), upon the recommendation of its Compensation Committee, and based on input from a third party, nationally recognized compensation consultant, approved the following compensation for non-employee directors of the Company: (1) a quarterly cash retainer of $2,500 to be paid retroactively as of April 1, 2019; (2) an annual grant of 12,500 shares of restricted stock to be issued under the Company’s 2011 Stock Incentive Plan (the “Plan”) annually on October 1 and which shall vest quarterly in four (4) equal installments; (3) a payment of $1,000 for attendance in person (or $500 for attendance telephonically) for regularly scheduled board meetings; and (4) to the independent lead director, who is currently Robert C. Schweitzer, an additional annual grant of 5,000 shares of restricted stock to be issued under the Plan annually on October 1 and which shall vest quarterly in four (4) equal installments. As a result of the above changes to the non-employee directors’ compensation, all unvested shares of restricted stock held by non-employee directors as of October 1, 2019 were cancelled. As a result of these changes, each director was paid $6,000 for retroactive and current board and meeting fees in the quarter ended September 30, 2019.

On September 17, 2019, the Board, upon the recommendation of its Compensation Committee, granted two directors annual grants of 12,500 shares each, and the lead director was issued an annual grant of 17,500 shares, which vest quarterly in four (4) equal installments. The grant date was determined to be September 17, 2019 as that was when a mutual understanding of the key terms and conditions of the grants was reached. On the grant date, these shares had a per share fair value of $5.50 based on the quoted trading price, or $233,750. 10,625 shares vested in 2019 generating an expense of $63,431 during the three months ended December 31, 2019. During the year ended December 31, 2020, the remaining 31,875 of these shares vested generating an expense of $170,325.

On October 1, 2019, the Board approved two grants of restricted stock of the Company to Mr. Wheatley under the 2011 Stock Incentive Plan. The total number of shares granted was determined based on an award of $150,000 divided by the per share quoted trading price on October 1, 2019. On the grant date, the shares had a per share fair value of $5.97 and 25,124 shares were granted. 12,562 shares vested in 2019 generating an expense of $75,000. During the year ended December 31, 2020, 7,329 of these shares vested generating an expense of $43,750.

Nonvested Shares

A summary of activity of the nonvested shares for the years ended December 31, 2020 and 2019 is as follows:

				Weighted-
	Nonvested			Average Grant-
	Shares			Date Fair Value
Nonvested at December 31, 2018		58,750		$	8.72
Granted		67,624			5.67
Vested		(56,937	)		6.16
Forfeited		(25,000	)		7.50
Nonvested at December 31, 2019		44,437		$	5.63
Granted		61,908			12.44
Vested		(59,782	)		7.51
Nonvested at December 31, 2020		46,563		$	12.28

F-25

16.

STOCK OPTIONS AND WARRANTS

On August 10, 2011, the Company’s Board of Directors approved and caused the Company to adopt the Beam Global 2011 Stock Incentive Plan (the “Plan”), which authorizes the issuance of up to 630,000 shares of the Company’s common stock pursuant to the exercise of stock options or other awards granted under the Plan.

Stock Options

The Company follows the provisions of ASC Topic 718, “Compensation – Stock Compensation.” ASC Topic 718 establishes standards surrounding the accounting for transactions in which an entity exchanges its equity instruments for goods or services. ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as options issued under the Company’s Stock Option Plans.

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock based on our historical volatility.

During the year ended December 31, 2020, the Company granted 105,604 stock options under the plans with a total valuation of $1,374,394 and a 10-year term.

During the year ended December 31, 2019, the Company granted 58,204 stock options under the plans with a total valuation of $58,204 and a 10-year term.

The Company’s stock option compensation expense was $722,549 and $48,915 for the years ended December 31, 2020 and 2019, respectively, and there was $823,680 of total unrecognized compensation costs related to outstanding stock options at December 31, 2020 which will be recognized over 3.75 years.

We used the following assumptions for options granted in fiscal 2020 and 2019:

	2020		2019
Expected volatility		74.16%-115.78%		78.47%-82.26%
Expected term		5-7 Years		5-7 Years
Risk-free interest rate		.37%-1.79%		1.73%-1.92%
Weighted average FV	$	12.38	$	4.02

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options.

F-26

Option activity for the years ended December 31, 2020 and 2019 under the 2011 Plan is as follows:

				Weighted
				Average
	Number of			Exercise
	Options			Price
Outstanding at December 31, 2018		296,406		$	11.50
Granted		58,204			5.52
Exercised		–			–
Forfeited		(84,350	)		11.71
Expired		(30,556	)		16.37
Outstanding at December 31, 2019		239,704		$	9.25
Granted		105,604			15.63
Exercised		(3,000	)		4.09
Forfeited		(500	)		5.27
Expired		–			–
Outstanding at December 31, 2020		341,808		$	11.27
Exercisable at December 31, 2020		233,475		$	12.23

The following table summarizes information about employee stock options outstanding at December 31, 2019:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding at December 31, 2019	Weighted Average Remaining Contractual life		Weighted Average Exercise Price		Aggregate Intrinsic Value	Number Exercisable at December 31, 2019		Weighted Average Exercise Price		Aggregate Intrinsic Value
$4.09 - $8.00	148,404	7.93 Years	$	6.73	$	5,187	104,415	$	7.13	$	5,187
$10.00 - $13.50	91,300	1.89 Years		13.33		–	91,300		13.33		–
	239,704	5.63 Years	$	9.25	$	5,187	195,715	$	10.02	$	5,187

The following table summarizes information about employee stock options outstanding at December 31, 2020:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding at December 31, 2020	Weighted Average Remaining Contractual life		Weighted Average Exercise Price		Aggregate Intrinsic Value	Number Exercisable at December 31, 2020		Weighted Average Exercise Price		Aggregate Intrinsic Value
$4.09 - $8.00	194,108	7.42 Years	$	6.23	$	13,111,999	125,567	$	6.83	$	8,406,649
$10.00 - $13.50	111,200	2.47 Years		13.23		6,732,736	92,450		13.33		5,588,611
$17.44 - $52.69	36,500	9.86 Years		32.08		1,522,010	15,458		49.59		374,001
	341,808	6.07 Years	$	11.27	$	21,366,745	233,475	$	12.23	$	14,369,261

Options exercisable have a weighted average remaining contractual life of 4.64 years as of December 31, 2020.

F-27

Warrants

2020

There were no warrants granted during the year ended December 31, 2020. During the year ended December 31, 2020, 1,552,206 warrants to purchase shares of the Company’s common stock were exercised generating $9,926,858, of which $9,732,408 in cash was received and $194,450 is included in other assets as a receivable (see Note 4) which was collected in January 2021. 18,000 warrants were cashless exercises in 2020 and the Company issued 11,304 shares. At December 31, 2020, there were warrants outstanding to purchase up to 965,584 shares of the Company’s common stock at a weighted average exercise price of $6.33.

2019

As part of the Company’s public offering (see Note 15), the Company issued 2,300,000 warrants in April 2019 to the Underwriters. These warrants are exercisable for five years at an exercise price of $6.30 per share. In April 2019, pursuant to the Underwriting Agreement, the Company issued as a fee to the Underwriters warrants to purchase up to a total of 110,001 shares of common stock (5% of the shares of common stock sold). The warrants are exercisable at $6.60 per share and have a term of five years. There was no financial statement accounting effect for the issuance of these warrants.

	Number of Warrants			Weighted Average Exercise Price
Outstanding at December 31, 2018		134,359		$	8.57
Granted		2,410,001		$	6.31
Expired		(8,570	)	$	12.50
Outstanding at December 31, 2019		2,535,790		$	6.41
Exercised		(1,570,206	)	$	6.47
Outstanding at December 31, 2020		965,584		$	6.33
Exercisable at December 31, 2020		965,584		$	6.33

Exercisable warrants have a weighted average remaining contractual life of 3.26 years as of December 31, 2020. The intrinsic value of the exercisable shares of the warrants at December 31, 2020 was $65,131,885.

17.

REVENUES

For each of the identified periods, revenues can be categorized into the following:

	For the year ended December 31,
	2020			2019
Product sales	$	6,132,447		$	5,091,571
Maintenance fees		30,957			13,055
Professional services		57,506			6,919
Discounts and allowances		(10,560	)		–
Total revenues	$	6,210,350		$	5,111,545

International revenues were $84,081, or 2% of revenues, and $0 during the year ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2020, 75% of revenues were derived from customers located in California.

F-28

At December 31, 2020 and 2019, deferred revenue was $107,489 and $93,609, respectively. These amounts represented customer deposits in the amount of $0 and $35,520 for December 31, 2020 and 2019, respectively and prepaid multi-year maintenance plans for previously sold products which account for $107,489 and $58,089 for December 31, 2020 and 2019, respectively and pertain to services to be provided through 2026. $35,520 of 2019 customer deposits were received in 2018 and recorded as revenue in 2020. $13,056 of revenue reported in fiscal 2019 pertained to revenue deferred from prior years. $19,459 of revenue reported in 2020 pertained to revenue deferred from prior years.

18.

INCOME TAXES

There was no Federal income tax expense for the years ended December 31, 2020 and 2019 due to the Company’s net losses. Income tax expense represents minimum state taxes due.

The blended Federal and State tax rate of 28.91% applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 21% to loss before taxes), as follows:

	Year ended December 31,
	2020			2019
Computed “expected” tax expense (benefit)	$	(1,093,697	)	$	(826,124	)
State taxes, net of federal benefit		(407,798	)		(271,629	)
Non-deductible stock options		(6,933	)		2,700,494
Non-deductible items		611			998
True-up to tax return		683,476			5,073
Change in deferred tax asset valuation allowance		829,285			(1,605,712	)
Income tax expense	$	4,944		$	3,100

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are as follows:

	2020			2019
Deferred tax assets:	$			$
Reserve for bad debt		–			680
Stock options		574,365			760,763
Deferred Revenue		31,070			24,077
Other		86,457			59,947
Net operating loss carryforward		10,012,021			8,996,569
Total gross deferred tax assets		10,703,913			9,842,036
Less: Deferred tax asset valuation allowance		(10,656,461	)		(9,827,176	)
Total net deferred tax assets		47,452			14,860

Deferred tax liabilities:
Depreciation		(47,452	)		(14,860	)
Total deferred tax liabilities		(47,452	)		(14,860	)
Total net deferred taxes	$	–		$	–

F-29

As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established. The valuation allowance at December 31, 2020 was $10,656,461. The increase in the valuation allowance during 2020 was $829,285.

At December 31, 2020, the Company has a net operating loss carry forward of $32,827,007, of which $25,107,807 is available to offset future net income through 2037. The net operating loss (“NOL”) expires during the years 2019 to 2037 and $11,721,225 may be carried forward indefinitely and limited to offsetting 80% of taxable income. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.

No liability related to uncertain tax positions is recorded on the financial statements related to uncertain tax positions. There are no unrecognized tax benefits as of December 31, 2020. The Company does not expect that uncertain tax benefits will materially change in the next 12 months.

The Company files U.S. federal, California, Illinois, New York, and Wisconsin State tax returns, and a New York City tax return. All tax returns will remain open for examination by the federal and state taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for businesses in the CARES Act include a five-year net operating loss carryback for certain net operating losses, suspension of the annual deduction limitation of 80% of taxable income for certain net operating losses, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined that there is no material impact to the income tax provision for the year ended December 31, 2020.

The Consolidated Appropriation Act (“CAA”) of 2021 was signed into law by the President on December 27, 2020, containing the most recent COVID-19 relief provisions as well as many tax provisions including renewals of several popular tax extenders. The Company evaluated the impact of the CAA and determined that there is no material impact to the income tax provision for the year ended December 31, 2020.

19.

SUBSEQUENT EVENTS

On January 26, 2021, 2,000 stock options were exercised on a cashless basis issuing 977 shares of common stock and on February 4, 2021, 300 stock options were exercised on a cashless basis issuing 86 shares of common stock.

Between January 1, 2021 through March 24, 2021, 375,999 public warrants were exercised at $6.30 per share and 8,156 private warrants were exercised at $8.89 per share to purchase a total of 384,155 shares of the Company’s common stock generating proceeds of $2,441,301.

On February 9, 2021, Beam Global entered into an Amended and Restated Employment Agreement with Desmond Wheatley, the Company’s president and chief executive officer. The agreement extends the prior agreement to December 31, 2024 and is on substantially the same terms and conditions. Pursuant to the Agreement, on April 1, 2021, the Company will grant Mr. Wheatley a number of shares of restricted stock equal to $112,500 based on the closing price of the Company’s common stock on such date. Fifty percent of the shares of restricted stock will vest in three (3) equal quarterly installments at the end of each calendar quarter following the grant date. The remaining fifty percent of the restricted stock will vest in eleven (11) equal amounts at the end of each calendar quarter following the grant date. In addition, commencing on January 1, 2022, the Company will grant Mr. Wheatley a number of shares of restricted stock equal to $150,000 based on the closing price of the Company’s common stock on such date. Fifty percent of the shares of restricted stock will vest in four (4) equal quarterly installments at the end of each calendar quarter following the grant date. The remaining fifty percent of the restricted stock will vest in twelve (12) equal amounts at the end of each calendar quarter following the grant date.

F-30

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Beam Global

Dated: March 30, 2021	By:	/s/ Desmond Wheatley
		Desmond Wheatley, Chief Executive Officer President and Chairman

Power of Attorney

Each person whose signature appears below constitutes and appoints each of Desmond Wheatley and Katherine H. McDermott, true and lawful attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated:

Name	Title	Date
Principal Executive Officer:

/s/ Desmond Wheatley	Chief Executive Officer, President and Chairman	March 30, 2021
Desmond Wheatley

Principal Financial Officer and Principal Accounting Officer:

/s/ Katherine H. McDermott	Chief Financial Officer	March 30, 2021
Katherine H. McDermott

Directors:

/s/ Peter Davidson	Director	March 30, 2021
Peter Davidson

/s/ Anthony Posawatz	Director	March 30, 2021
Anthony Posawatz

S-1