Beam Global

Good day and welcome to the Beam Global Third Quarter 2020 Financial Results and Corporate Update Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Kathy McDermott, Chief Financial Officer. Please go ahead, ma'am.

Great, thank you, Rocco. Good afternoon and thank you for participating in today's conference call. We appreciate your support and interest in Beam Global and for taking the time to join our call. Joining me today is Desmond Wheatley, President, CEO, and Chairman of Beam. Desmond will be sharing his thoughts and observations about the recent third quarter and his perspective on the business. But first, I'd like to communicate to you that during this call, management will be making forward-looking statements, including statements that address BEAM's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about those risks, please refer to the risk factors described in BEAM's most recently filed periodic reports on Form 10-Q our most recent form 10-K, and other periodic reports filed with the SEC. The content of this call contains time-sensitive information that is accurate only as of today, November 12th, 2020. Except as required by law, the INGIS claims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. I would now like to recap the financial results for the third fiscal quarter. For the three months ended September 30th, 2020, revenues were $1,237,434 compared to $1,785,724 for the three months ended September 30th, 2019. There were some delays in the receipt of orders due to timing from our customers, as well as delays caused by funding or priority issues related to the COVID-19 virus. Revenues for the first nine months of fiscal 2020 were $4,009,644 compared to $4,615,669 in the same period in the previous year. As of September 30th, 2020, our contracted backlog was approximately $2.1 million. For the three months ended September 30th, 2020, we reported a gross loss of $188,732 compared to a gross profit of $340,836 in the third quarter of fiscal 2019. The first nine months of 2020 reported a gross loss of $173,037 compared to a gross profit of $349,279 for the same period in the prior year. Decrease in gross profit was primarily due to the decreased revenue and a reduction in fixed overhead absorption. Total operating expenses were $906,962 for the third quarter of 2020 compared to $963,487 for the same period in 2019, a 6% decrease. This was primarily due to a one-time severance payment in the prior year, reduced travel due to COVID-19, lower director's fees, and reduced commissions, partially offset by an increase in sales and marketing personnel and expenses. Year-to-date 2020 operating expenses were $2,697,418 compared to $2,226,667 in the prior year-to-date. driven primarily by increased sales and marketing expenses to help increase revenue and an increase in non-cash compensation expense. Our net loss was $1,100,023 for the three months end of September 30th, 2020, compared to a net loss of $610,363 for the third quarter of 2019. We had a net loss of $2,876,501 for the nine months end of September 30th, 2020, compared to a net loss of $2,543,868 for the same period in 2019. The increase in net loss is primarily due to the reduction in revenue. At September 30, 2020, we had cash of $12,332,223 compared to $3,849,456 at December 31, 2019, an increase of $8,482,768. During the third quarter, we closed a public offering that generated proceeds of $10.5 million net of offering expenses, and we also received cash from the exercise of warrants. At September 30th, 2020, we had working capital of $13,914,212 compared to $5,142,719 at December 31st, 2019. We should fund our operations for some time. I'll now turn the call over to Desmond to provide a business update. Well, thank you, Kati.

and thank all of you for joining the call. A special thanks to any veterans who are with us. I'm absolutely delighted to speak to you today for the first time as the CEO of Beam Global, our new brand, and one about which I cannot be more thrilled. There's never a dull moment at Beam, and it's safe to say that the third quarter of 2020 delivered more than its fair share of exciting activity for the company. In fact, I believe that what we accomplished sets Q3 as amongst the most impactful in our history. Since our last earnings call, we have firmly set the foundation for our recurring revenue high margin media business. We dramatically and strategically strengthened our balance sheet. As I mentioned, we've rebranded with new videos, websites, and marketing collateral. We've been awarded a federal GSA multiple award schedule contract. We've been told by the US Patent and Trademark Office that we're going to get another important patent, and we've applied for two more. We've deployed the first of our smart, solar-free, medium and heavy-duty vehicle charging products. We've won more utilities, federal government entities, and cities as customers. We've started deploying EVR terminals for Electrify America. We've strengthened our team with key employee ads. We've powered the EV corral at the Petit Le Mans race in Atlanta. And I'm looking careful to this one, my please. We powered the world's first solar-powered test flight of a production electric airplane. That's right, another world's first for being global. Now, each of these has profound beneficial effects on our future. But taken all together, perhaps you can see why I feel that Q3 of 2020 ranks as one of the most, if not the most, impactful in our history. I'll share a little color on some of these achievements now. I have to start with the media business because I feel so strongly that it will deliver the most growth, the most profit, and the most opportunity for us in the coming months and years. The great accomplishment here is that we finalized and signed a contract with the city of San Diego that permits us to deploy a network, the Driving on Sunshine network, of our EVR products in both public and private locations with, and this is the unique and important part, major corporate branding on them. This is by no means trivial. In 1981, San Diego went to the Supreme Court to prevent the outdoor media business from erecting what was considered urban blight and a menace to traffic safety. The result was one of the strictest signage ordinances in any U.S. city. Since that time, many media companies have tried to find ways around the rules, but without success. We've been successful in finding a way to deploy our network using corporate branding, sponsorship, and naming rights deals because of the fantastic benefit delivered by driving on Sunshine Network for the city's denizens. The business model creates a win-win-win-win for all involved. First, it's great for the city because it gets solar-powered EV charging infrastructure without expense to the taxpayer, without disruption from construction, or impacts the already overtashed utility grid. And it helps significantly with the city's climate action plan. It helps San Diegans because they can drive on sunshine for free if they have an EV, and more and more of them do. It's fantastic for the sponsor because they get to display their brand on a highly visible, green and sustainable platform in a city where there are no other advertising options available for them. They also get the naming rights to the network, which they can use in their other marketing efforts across the globe. And finally, perhaps harder to grasp, they get the carbon offset, the millions of pounds of CO2 offsets produced annually by the network. Any day you open the Wall Street Journal, you'll see some other large corporation committing to carbon neutrality by 2030 or 2040 or whenever. Those companies are perfect targets for us because they get a major marketing win. Uniquely, they also get the tangible economic benefit afforded to them by the meaningful carbon reductions which they will own. Finally, and most importantly for this call, great for BEME. because it should create a highly profitable recurring revenue stream for years to come. You may already be familiar with the business model. In New York, the bike share program is sponsored by Citibank. That's why it's called Citibank. Citibank does not own or operate those bikes. They just pay to put their brand on them. In 2012, Citibank paid $41 million to be the lead sponsor on those bikes for five years. Clearly, they've renewed since then. Beam will offer five-year sponsorship and naming right deals to large corporate customers for their driving on Sunshine Network. At the end of the five years, they can renew, as Citibank did, and I'm told most corporate sponsors do. Or we'll sell the next five years to someone else. The network will only be more valuable if there are more EVs on the road. Whether the first taker renews or someone else picks it up, we'll get paid again, and again in 10 years, and so on. It's a 20-year product. And because of the amenity value we provide, we don't plan on paying rent, and we won't get a utility bill because all of our power comes from the solar panels. And because the value of the network is so much greater than the sum of the units, we'll charge the same and get paid the same as if we sold the units, but we retain title stuff. That means the second, third, and fourth times we get paid, but we don't have any cost to produce the network. As I said, it's a 20-year product. really is a win for everyone involved, and I believe it will generate years of very high margin recurring revenue. As always, we've done what we said we would do. We closed the deal with San Diego. Now, I'm saying we're going to get a sponsor, and I believe we will. I've also said that we believe that other cities will want to replicate the deal we've done with San Diego. What city wouldn't want a driving on sunshine network? powered by an American-made product which has passed the very high standards of San Diego's strict signage ordinance. Well, I can tell you today that we already have other interested cities. I can also tell you that the Urban Sustainability Directors Network, which is a member-based organization with over 200 cities in it, has already asked San Diego to present to them and tell them how this deal was done. We're delighted to help our good partners at San Diego with getting the word out, and so are they. Just one last comment on this. Sometimes I'm asked if these three media networks will cannibalize our other sales. Quite the opposite is true. First, these networks will not be deployed for fleet or workplace charging, our two largest markets today. Second, we know that nothing sells EV arcs as well as EV arcs do. In other words, the more of these things we have in the public domain, the more we seem to sell. I believe that the media networks will be the best marketing tool we'll have for sales of our EVR terminals to other customers. Now our job is to get them across every major city in the US, and I don't want to stop there. Our products work anywhere in the world, and so should this business model. And speaking of other customers, we've had some success selling to federal facilities over the past few years. We've been adopted by federally funded institutions in several states, but we've not penetrated that market as deeply as we have the municipal market. I think a big contributor to that slow penetration has been the complexity of product selection and contracting within the federal sphere. We needed to make that easier, especially if you believe, as I do, that there will be a sharp increase in federal spending on infrastructure of this sort in 2021 and the years that follow. There will be stimulus spending, and both sides of the aisle have supported transportation spending. We have an American-made product that's shovel-ready and appeals to both sides of the aisle. We're green and renewable, but we're also an American energy security product, manufactured here by a great team of Americans, including veterans, disabled workers, and others. But we have to make it easier for the feds to buy from us. Well, just this month, we've been awarded the Federal Multiple Award Schedule Contract. This vehicle means that federal agencies do not need an RFP or any technology or price investing before placing an order with us. It was designed to streamline federal purchasing, and it means that we can sell to federal agencies with point-and-click efficiency. I don't think the timing could be better for us. We have what they need at a time when they are prepared to fund it, and we have a quick and efficient means to take these orders. GSA is an important win for us. Of course, we think that the EVR product will continue to be the biggest seller in the short term, but the fact that we've just successfully deployed our smart solar tree product with DC fast charging for medium and heavy-duty vehicles means that we'll be able to go after a much larger segment of the transportation electrification market. Whether it has two wheels, three wheels, four wheels, or 18 wheels, we can provide a rapidly deployed, robust product solution with low or no construction costs and no utility bill, which will continue to charge vital vehicles during times of grid outages. SolarTree is an important new tool in our kit to capture that rapidly growing segment. There's been a lot of talk about Governor Newsom banning the sale of gas and diesel vehicles in California in 2035. And by the way, there are seven other states already with similar plans. But what's talked less about is that all heavy-duty vehicles have to be emissions-free by 2045 with a process measured in percentages, which must start three years from now in 2024. Yes, we will sell a lot of EVR terminals, but we also believe that solar tree will provide a steadily increasing source of revenue as more medium and heavy-duty vehicles electrify. All these new electric vehicles are going to need a lot of electricity to power them. The utilities are gearing up and trying to work out how they're going to provide it all. The answer is they aren't. It's not in the traditional way. New methods are going to have to be introduced. Now, a lot of people think that we compete with utilities, just like a lot of people think that we compete with EV charging companies like ChargePoint and Blink. We do not. Remember, our products replace the 100-year-old construction and electrical project required to connect to the grid. They don't replace the EV charger or the business model behind it. We support them all, and that means that we'll win no matter who wins or loses in that space. The same with utilities. We don't compete with them. We have several as customers, and we're seeing growing and very welcome interest from that sector. We've recently added Georgia Power, Baltimore Gas and Electric, and Southern California Edison to our growing list of utility customers. We want our products for the same reasons that everyone else wants them, faster deployments, Zero environmental impact, no permitting, and a source of electricity that does not tax the grid. We know that the grid already does not have enough capacity to support our current loads. That's why we have blackouts during heat waves when everyone turns their AC up. We also know that the grid is vulnerable to failures. There are thousands without power in the US today because of Hurricane Eta, and millions more have been without power this year. The utilities, like everyone else, are trying to figure out how not to let that happen, when we're relying on electricity for a source of our transportation fuel. Our products provide that solution for them, and that's why we're winning more of them. It could be a very large source of revenue for us if this thing evolves. In the meantime, we continue to add municipalities and other core customers to our backlog. We also continue to observe that the more people know about our products and the more they understand them, the more likely they are to buy them. Getting the word out is crucial and only gets you more important. Looking at our financials, you'll note that the only significant increase in SG&A we have come from the S part, selling and marketing. That money is going to several areas. Of course, the rebranding was a significant project. It took up lots of time and money. Though, of course, as with everything else, we were very careful and tight with our spend, and I think we got great value from that. Other increases have come from the addition of salespeople. We're hiring subject matter experts with proven histories selling products like ours to target customers like the federal government, for example. We've also hired a top notch public relations company, the same company that does public relations for Plug Power. I really feel that our stage of development, PR, is very important. In fact, I often say PR is the new IR. We want people to know about the exciting work we do and the paradigm shifting products we produce. We'll sell more products, and we'll get more interest in our stock as a result. It's early days, but Bullet Media has already got us published in Bloomberg, Forbes, Business Insider, and many others. The fact is, our product and the work we do just lends itself to coverage, and we're increasingly not shy about seeking out these high-profile opportunities. When Georgia Power bought the first EBR from us, and there will be more, by the way, we were delighted to support Georgia Utilities Commissioner Tim Eccles, and having that unit placed at the Michelin Raceway before going to its permanent home. One of the beautiful benefits of EVR, it's transportable. Georgia Power's unit covered the EV corral, or rather powered the EV corral, at the race, and I spent a couple of excellent days there meeting officials and giving press interviews. Porsche, Tesla, Audi, GM, Nissan, Ford, and countless others had EVs on display, and they all charged on the EV arc. There's no better marketing than showing off a product that's been bought by a major utility at such a high visibility event. Just to say a quick aside, while it was there, predictably, the power went down at the raceway. A falling tree knocked out the local substation. EVR was the only source of electrical power which was working there until the utility fixed the problem. You just can't make this stuff up. While I'm on the subject of high-profile events, I can't fail to mention the flying on sunshine test flight we made happen in Central California two weeks ago. In another world's first, Beam powered the first ever off-grid solar-powered flight in a production electric aircraft. What a story. First, the test flight was conducted four weeks after Joseph Oldham, the pilot, and I conceived of it. Kudos to the team here for pulling off such a momentous event in such short order. And then the day itself. The beam team delivered an EVR to the airport early in the morning, and Joseph plugged the plane in. Later that day, he and I pulled up in a Tesla and on an electric motorcycle, plugged into the EVR, unplugged the plane, and went for the test flight. We returned to find the car and the bike charged, plugged the plane in, and then pulled out in the Tesla and on the motorbike. Cycle complete. All this in front of TV cameras and local officials. It was an incredible demonstration of our technology and its multiple layers of value. And it was also just a tiny sneak peek at what's to come. I'm not going to go into details, but I think you should consider this act one, scene one in a much longer and very exciting movie. A quick note on this. The manufacturer of the electric plane is a company called Pipistrel. We just received word from them They received more hits on social media and more responses to their marketing outreach on this test flight than on any other activity they have ever marketed in their history. We're able to do this sort of thing because we keep driving the technology forward and we keep maintaining our first mover advantage with our solutions. This is admirably demonstrated by the fact that we've just received word that the U.S. Patent and Trademark Office has allowed our claims in our patent application for the UAV arc. Now, you're the first to know that last night I received notice that they will issue that patent to us on November 24th. Electric planes and drones may not represent immediate revenue opportunities for us, but there's no doubt that the markets for both, especially drones, both military and civilian package delivery, et cetera, will be huge. We have patented products which bring the same benefits to these markets as our EV charging products bring to cars, buses, and trucks. The future value can only be guessed at, but I don't imagine that when Amazon, FedEx, and others start to deliver packages by drone in earnest, it will be a bad thing for Beam equity holders that we have a rapidly deployed, renewably energized product to enable them. I did mention that we're patent pending on two other products since our last earnings call. I'll give you more details on those as we get closer to issuance. We can never be sure of that, of course, but I can tell you that we've received patents on all but one of the products that we've pursued in the past. So I'm not unduly concerned. I'll wrap up by recapping. I love the new brand. Beam will take us into the future without being confined to any one area of the massive transition to electrified transportation. Any way we can profitably engage at the intersection of clean energy and transportation, you'll see us taking an interest, either through organic growth or perhaps even acquisitions. Our focus is firmly on the media business units. I've long felt that it offered us the greatest opportunity for highly profitable recurring revenue. If we could just get that first city to contract with us. Well, we've done that now. The machine is turning. And to paraphrase Churchill, like the mighty Mississippi, let it roll, let it roll, and in full flood. The GSA contract promises to open new doors for us, and I doubt the timing could be better. Our technology continues to expand as does our access to the endless new opportunities that electrification of transportation offers. We've a strong contracted backlog of orders and an ever increasing pipeline, even at a time of uncertainty. We think that the new administration and a vaccine will accelerate orders of our products as we move into 2021. All of this with a very sound and healthy balance sheet and a clean cap table. Essentially debt free, many years of operating capital on hand, and a stock which is trading with increasing volume and price. Why wouldn't it? That concludes my comments for the moment. Thank you.