Beam (BEEM) - 2019 Q4 - Annual Report

Part I Item 1. Business Envision Solar International, Inc. designs and manufactures solar-powered products for EV charging, outdoor media, and energy security, leveraging rapid deployment and grid independence as key differentiators - The company's core business involves inventing, designing, and manufacturing solar-powered products for three primary markets: EV charging infrastructure, outdoor media advertising, and energy security/disaster preparedness[12][13] - Key products include the patented EV ARC™ (a transportable, solar-powered EV charger) and the Solar Tree® (a fixed, sun-tracking solar structure for larger applications), with EV-Standard™ and UAV ARC™ under development[16][19][21] - The company's main competitive advantages are the rapid deployment of its products, lower total cost of ownership, and the ability to operate during power outages[15][45][46] - Major customers include the City of New York and the State of California, with the City of New York and Monterey Bay Air Resources District representing 44% and 22% of 2019 revenue, respectively[36][50] - As of December 31, 2019, the company had a sales backlog of $2.0 million, representing firm purchase orders for future deliveries[51] Item 1A. Risk Factors The company faces significant risks including recurring losses, capital needs, customer concentration, COVID-19 impacts, EV adoption dependency, intense competition, supply chain disruptions, and intellectual property challenges - The company has a history of recurring losses, with net losses of $3.9 million in 2019 and $3.6 million in 2018, and an accumulated deficit of $45.8 million as of December 31, 2019[57] - Revenue is highly concentrated, with the City of New York accounting for 44% of 2019 revenues and 50% in 2018, and Monterey Bay Air Resources District for 22% in 2019[61] - The business is exposed to risks from the COVID-19 pandemic, which could disrupt manufacturing, operations, sales, and negatively impact demand due to a potential economic downturn[60] - Growth is highly dependent on the consumer adoption of electric vehicles, and any slowdown in the EV market could harm the company's financial results[62] - The company faces intense competition from traditional grid-tied EV charging stations and other solar energy companies, many with substantially greater resources[64] - Material weaknesses in internal controls have been identified, specifically related to the segregation of duties and the lack of automated manufacturing or purchasing systems, which could impact timely and accurate financial reporting[96] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[101] Item 2. Properties The company's headquarters and manufacturing facility are in a leased 50,000 square foot space in San Diego, California, with the sublease extending through August 30, 2020 - The company leases approximately 50,000 square feet of office and warehouse space for its headquarters in San Diego, California[102] - The current sublease extends through August 30, 2020[102] Item 3. Legal Proceedings As of the report date, the company is not involved in any open litigation matters - The Company is not involved in any open litigation matters as of December 31, 2019, and the date of the report[103] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not Applicable[103] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ under "EVSI", with no history or anticipation of cash dividends, and details provided on 2019 stock issuances and director compensation changes - The company's common stock is traded on the NASDAQ Capital Market under the symbol "EVSI"[104] - The company has not declared or paid any cash dividends and does not anticipate paying any in the foreseeable future[105] - In 2019, the company issued a total of 33,750 shares of common stock to directors that vested from restricted stock grants for their services[105][106] - On September 17, 2019, the Board approved a new compensation structure for non-employee directors, including a quarterly cash retainer, annual restricted stock grants, and meeting attendance fees[107] Item 6. Selected Financial Data This item is not applicable - Not applicable[110] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2019, revenue decreased 17% to $5.1 million due to fewer unit sales, while gross loss improved 20% despite a 33% rise in operating expenses, leading to a 9% higher net loss of $3.9 million, though liquidity significantly improved from a $12 million public offering Results of Operations In FY2019, revenues decreased 17% to $5.1 million due to fewer EV ARC™ unit sales, while gross loss narrowed 20% to $153,774, but operating expenses increased 33% to $3.1 million, resulting in a 9% wider net loss of $3.9 million Comparison of Results of Operations (FY 2019 vs. FY 2018) | Financial Metric | FY 2019 | FY 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $5,111,545 | $6,162,402 | -17% | | Gross Loss | ($153,774) | ($192,100) | -20% | | Operating Expenses | $3,117,793 | $2,337,446 | +33% | | Interest Expense | $716,337 | $1,089,223 | -34% | | Net Loss | ($3,933,922) | ($3,598,780) | +9% | - The 17% decrease in revenue was primarily due to the sale of 65 EVARC™ units in 2019 compared to 90 units in 2018, with delays in some orders pushing them into fiscal 2020[136] - The 33% increase in operating expenses was mainly due to higher R&D costs for new products (EV ARC 2020, DC Fast Charging), severance and recruiting costs, investor relations, and Nasdaq fees[138] Liquidity and Capital Resources The company's cash increased to $3.8 million in 2019 from $0.2 million in 2018, driven by a public offering that repaid debt and improved working capital from a $2.8 million deficit to a $5.1 million surplus, though it still relies on capital raises Summary of Cash Flows (FY 2019 vs. FY 2018) | Cash Flow Activity | FY 2019 | FY 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,826,340) | ($712,456) | | Net cash used in investing activities | ($109,586) | ($32,282) | | Net cash provided by financing activities | $8,541,358 | $585,287 | - Cash position increased from $244,024 at year-end 2018 to $3,849,456 at year-end 2019[142] - In April 2019, the company closed a public offering, raising gross proceeds of approximately $12 million, which was used to repay debt[153] - Working capital improved from a deficit of $2,759,580 at the end of 2018 to a positive $5,142,719 at the end of 2019, mainly due to the payoff of debt and reduction of accounts payable[148] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable - Not applicable[158] Item 8. Financial Statements and Supplementary Data The company's financial statements are provided, beginning on page F-1 of the report - The financial statements required by this item begin on page F-1[158] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[158] Item 9A. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of December 31, 2019, due to material weaknesses including lack of segregation of duties and absence of automated systems, with corrective actions planned for 2020 - Management concluded that disclosure controls and procedures were not effective as of December 31, 2019, due to material weaknesses in internal controls[161] - Material weaknesses identified include: lack of segregation of duties due to limited staff, and the absence of automated manufacturing or purchasing systems for inventory tracking and costing[164][165] - Corrective actions include hiring a new accounting staff member in February 2020 to improve segregation of duties and searching for a new ERP system to implement in 2020[169][170] Item 9B. Other Information The company reports no other information - None[171] Part III Item 10. Directors, Executive Officers and Corporate Governance Information for this item will be incorporated by reference from the company's definitive proxy statement, to be filed within 120 days of the fiscal year-end - Information will be incorporated by reference from the definitive proxy statement[173] Item 11. Executive Compensation Information for this item will be incorporated by reference from the company's definitive proxy statement, to be filed within 120 days of the fiscal year-end - Information will be incorporated by reference from the definitive proxy statement[174] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item will be incorporated by reference from the company's definitive proxy statement, to be filed within 120 days of the fiscal year-end - Information will be incorporated by reference from the definitive proxy statement[175] Item 13. Certain Relationships and Related Transactions, and Director Independence Information for this item will be incorporated by reference from the company's definitive proxy statement, to be filed within 120 days of the fiscal year-end - Information will be incorporated by reference from the definitive proxy statement[176] Item 14. Principal Accounting Fees and Services Information for this item will be incorporated by reference from the company's definitive proxy statement, to be filed within 120 days of the fiscal year-end - Information will be incorporated by reference from the definitive proxy statement[177] Part IV Item 15. Exhibits, Financial Statement Schedules This section confirms financial statements begin on page F-1, notes the absence of financial statement schedules, and lists various exhibits filed with the report - The financial statements are submitted in a separate section beginning on page F-1[179] - No financial statement schedules are included[179] Item 16. Form 10-K Summary This item is not applicable - Not applicable[187] Financial Statements Financial Statements Overview In 2019, Envision Solar reported a net loss of $3.93 million, but its financial position significantly improved with total assets increasing to $7.29 million and stockholders' equity turning positive to $5.82 million, primarily due to a public offering that repaid debt and boosted cash to $3.85 million Key Financial Statement Data (2019 vs. 2018) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Total Assets | $7,286,999 | $3,487,192 | | Total Liabilities | $1,462,837 | $5,967,871 | | Total Stockholders' Equity (Deficit) | $5,824,162 | ($2,480,679) | | Revenues | $5,111,545 | $6,162,402 | | Net Loss | ($3,933,922) | ($3,598,780) | | Net Loss Per Share | ($0.88) | ($1.24) | Notes to Financial Statements The notes detail accounting policies, liquidity, debt, and equity, highlighting the 2019 adoption of ASC 842, the impact of a public offering on working capital and debt repayment, and significant customer concentration risk - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, recognizing a right-of-use asset and a corresponding lease liability for its operating lease[218][254] - In April and May 2019, the company closed a public offering that generated gross proceeds of $13.2 million, which was used to pay off debt and fund operations[245][295] - The company has significant customer concentration, with two customers accounting for 44% and 22% of total revenues in 2019, and one customer for 50% in 2018[209] - Following the public offering in April 2019, the company paid off its convertible line of credit and all outstanding convertible notes payable (except for a related-party note to the CEO), and another note payable[257][270][283] - As of December 31, 2019, the company has a net operating loss carryforward of $32.2 million to offset future taxable income, though its utilization may be subject to limitations[335]