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.

Thank you. Everyone, I'll begin the question and answer session. To ask a question, you may press stars and more on your touch-tone phone. If you're using your speakerphone, we do ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Greg Lewis at BTIG. Please go ahead.

Yeah, thank you and good afternoon, Desmond.

Hello, Greg. How are you?

Good, good. And congratulations on the start of the media sponsored approval in San Diego. Realizing that you're probably limited in what you can say and what you can't say, As I kind of think about Event Path, you called out the potential for other cities where you could roll this product out. Just in thinking about the path forward, is the right way to think about this where you'll probably get a sponsor in place and start deploying units before we could actually see you start to announce additional cities? Just kind of any color around the timing and how we should be thinking about how those two things which are clearly important for you as a company kind of play off of each other? That'd be my first question.

Yes, Greg. Well, so I have been very cautious and careful not to go heavily after sponsors until I had the contract in place with the city of San Diego. I thought it would be the kiss of death to get somebody to agree to this and then tell them that, in fact, we couldn't perform. Now that we have that in place, we are going to aggressively pursue sponsors. And as I said during my comments, the good news is there's no shortage of targets out there. There are lots of well-funded companies with very large media budgets, but also very ambitious goals where getting to carbon neutrality is concerned. Some might even say impossible goals. And so what we give them is a very Do you think about most of the time when you invest in a billboard or in a sign, there's no tangible economic benefit there. It's all sort of intangible. But in this case, they will actually get paid real hard dollars in a tangible benefit for this. So those are strong points for it. We believe that the types of sponsors that we go after will not be single city types of sponsors. It's our definite ambition and our fervent hope that we're going to end up with sponsors who want to do a regional, perhaps even a nationwide play. So all of that will happen aggressively from this point forward. At the same time, as I mentioned in my comments, we already have other cities. And I have been saying this for some time. I anticipated that other cities would quickly want to get involved in this. We already have cities right now, good cities. We can never guess at which cities the sponsors might want, but these are good cities who want to be involved in this and want to replicate the model. And as I said, with the presentation to the 200 plus members of the Urban Sustainability Development Network, I've no doubt that we're going to hear from a few more. So we're going to go after these things in parallel. We will take the best sponsor that we get when we get them, and we'll take the best cities that match the sponsor's needs. And if we end up with some cities that the first sponsors that we get are not interested in, then we'll look for other sponsors that are interested in those cities. It can be hyperlocal. And we'll address them one at a time. But expect us to go after both in parallel.

Okay, great. And then just one more for me. I mean, clearly, you know, congrats on the rebranding. And, you know, there's techie issues. You know, there's technology that clearly you guys are trying to position yourself with. So as you kind of look out at the landscape over the next, I don't know, one, two years as you think about positioning the company, Are there kind of bolt-on technologies you're thinking about acquiring? Is there anything that just, you know, as you think about improving the mousetrap or expanding the footprint makes sense? You know, any kind of color around that, you know, realizing that, hey, at the end of the day, the core business is driving the EV arc in the near term. But just kind of as I think about with an eye on the future in terms of, you know, building out your technology suite of offerings.

Yeah, so certainly we are going to pursue those new products for which we already have patents, you know, or patents pending, and that would have included the UAB ARC, but of course I now know, and as I've just announced, we will be receiving the patent for the UAB ARC on November 24th. So we're going to keep our discipline. We're going to keep our noses to the grindstone. We're going to put our engineering development resources into bringing the EV standard, which is our streetlight replacement product, which I actually believe in the long run might be our highest volume selling product. We're going to bring that through engineering into market. We're going to develop the UAB arc as well, now that we have the patent for it. And then without going into detail, I'll tell you that we are very interested in the broader electrification of transportation space. I think there's an awful lot of opportunity out there. And the key thing is, if you have a rapidly deployable, highly scalable, lowest total cost of ownership fueling infrastructure, you get to look at everyone who's playing in that space and frankly pick and choose. Who we think is going to do well and who isn't. And in the future, if it makes sense and if the timing's right, then organic growth or acquisitions to go into that, you'll certainly see us doing that. But we're going to be disciplined about what we do in the beginning here. We're definitely going to take the products that we've got patented through engineering into market. But my eyes are wide open. This is a gigantic opportunity. We've demonstrated we've got staying power. We've demonstrated we can win the very best customers, and we're aggressive and very ambitious.

Okay, great. Hey, thank you very much, and have a great day.

Thank you. Thank you.

Our next question today comes from Christopher Souther with B Riley. Please go ahead.

Hey, thanks for taking my question here. I just wanted to touch on one point on the marketing partnership in San Diego. Are there any minimum or maximum EV arc units the city and you guys have talked about as far as the deployments? Just trying to get a sense of the scope that you think you could kind of get through that.

Yes, there are no minimum and maximum requirements in the contract. We, of course, intend to go after the greatest number that we can. As I mentioned, the value of the network is big. worth much more than the sum of the individual units that go into it. The bigger the network we get, the more visibility for the sponsor, the better everybody's gonna like it. So really, the only guidance I can give you on that is what I've received from the experts. And I'm not casting myself as an expert here. The experts in outdoor media with whom we are working to help us sell these sponsorships are telling us that a couple of hundred units seems like a realistic number. It's not cast in a contract anywhere, but certainly the idea that something lower than that might not necessarily give the type of visibility that we're looking for or that the sponsor will be looking for. The dollars are perfectly in line with the kind of spend they do on these types of things. And honestly, we anticipate that first crunch to look like that and perhaps expansion thereafter or a good deal more. But there are no contractual limitations on it.

Understood. That's very helpful. And then just one other quick one. The Biden plan has obviously talked about zero emission vehicle procurement. It seems like something they could do without Congress. Can you just talk about how you see the opportunity developing with the GSA multiple award, early insight into what that opportunity might be like over the next couple years? Should we think about it as similar to some of the municipalities or maybe framing kind of the longer-term total opportunity you see there?

Yes. Three essential ingredients here. The first is that we have seen language and we've heard that the spending will be past through local government. So there's been quite a lot of discussion about that, you know, the federal government's not going to give money to local governments who are bankrupt or might give it to their retirement fund or whatever else. And frankly, I agree with that. But it will be earmarked specifically for this. Second one would be there has even been talk about passing money through enterprise type environments for workplace charging, et cetera, to get the adoption. Don't forget, Biden has committed to getting 500,000 chargers deployed across the United States in the next couple of years. We know it takes a very long time. It's very expensive and very disruptive to do that with a grid. We have an American-made product that's shovel-ready, ready to go. In fact, there is no shovel. It's the ultimate shovel-ready product. And then the last piece is the federal government themselves, and this is why GSA is so important to us. It's really crucial to have that type of multiple award contract that allows the federal government to place order after order after order without going through any type of a process to do that. And as I say, we've won federal contracts before just because the value of the product is so great. We've been able to get through the minutiae. But now, any federal agency we talk to says, hey, we're already on contract. Here's the number. Point and click. So I think there will be a lot of stimulus spending. I think there's going to be a tremendous amount of focus. And by the way, this is either way. Even if somehow it goes the other way, I think we're going to see stimulus spending on either side of the aisle. If the Republicans take the Senate, which looks certainly possible, if not likely, this will be one of the few things they can agree on. And so we think we're very well positioned to take advantage of that. And the GSA contract just greases the ways to allow us to take advantage of that.

Yeah, that's very helpful. I'll hop in the queue. Thank you. Thank you.

Hey, my next question today comes from Amit Dayal with HC Wainwright. Please go ahead.

Thank you. Hey, good afternoon, Desmond. Congrats on all the progress. Yes. Just one follow-up on the outdoor media opportunity. Once you get a sponsor, are there any additional clearances you need with the city of San Diego to move forward?

No, that's... No, that's the great thing. And as I said, not the not trivial work that we have done. It's now codified that we are able to do this in this very unique way. And so, you know, I can't overstress. how important and valuable it is to have that piece, not least because we are very confident, and frankly, we've heard this anecdotally from other cities, that if San Diego can accept what we're doing, it's basically just a blueprint for others to look at. So two great things will come out of this. The first of all, San Diego released an RFP last year to which we responded. We were the only qualified respondent, and that RFP has been awarded to us. And the second one is, as a result of the RFP, we put in place a contract which describes the rules of engagement, if you like, to do this deployment. We will be able to take those to other cities. And San Diego, frankly, has already offered them. If you look at the mayor's quote in the press release, you can see that he says, we're delighted we're doing this in San Diego and look forward to helping other cities do it as well. So we can take these documents to other cities. They do not need to reinvent the wheel. They do not need to write the RFP or the contract. They can just frankly swap out the names and we can roll into them again. So it's been a very long job of work, invested a great deal of time and energy into it. And I thank people for their patience as we've moved towards it, but we've done it now and we can take this now. And I genuinely believe that we're going to repeat this across the US. And as I said, I'm not stopping there. Our products uniquely work anywhere they can see the sky. And this business model ought to have the same length of legs. And so, yeah, we'll stay focused on the U.S. right now. We're going to make a fantastically profitable recurring revenue business out of this if I have anything to do with it. But then we'll take the same model elsewhere as well.

So with respect to now, you know, sort of the second half of the process in terms of getting a sponsor, how are you filtering out? for that opportunity, you know, have you identified targets? Are those discussions happening or any color on that process would be appreciated?

Yes. So first of all, yes, we've already identified prospects. That was probably one of the areas where I was a little bit more bullish in the past. I have had, should we say, unofficial conversations with people who control sites in the city in the past and found them, not surprisingly, to be quite enthusiastic. If you think about it, people don't want to dig up the parking lots. They don't want to spend money on EV charging. They don't want to receive a utility bill. And so the idea of a sponsored free unit, which is not just free economically, but also free of construction, free of disruption, free of permitting, and free of any kind of utility bill, is not an unattractive prospect for the type of targets that we're going after. But we also have some other very unique, brand new, and I think really very clever models that we're going to be engaged in, in terms of doing the so-called site acquisition And in fact, I'd take it as far as to say that we won't be doing site acquisition. Rather, we will be vetting prospective sites and selecting the best from them.

Got it. And with respect to your aviation opportunity, is this more sort of helping you with marketing and branding in the near term, or could this also materialize into some orders and revenues?

Well, look, I'll tell you something. There are 15,000... small airports in the United States and another 5,000 major airports in the United States. And we will certainly be recommending to government that some of this funding goes to enabling the electrification of aviation. It costs about $400 an hour to keep a helicopter in the air, $40 an hour to keep a light Cessna in the air, $4 an hour to keep an electric airplane in the air, and even less if you're flying on sunshine. And so this is just a worthy infrastructure project. It's another area where we will certainly be recommending that federal and other dollars are spent. But I'm not really viewing this right now. It's certainly not a replacement for what we're doing in the media business or in the EV space right now in terms of volume, although an EV arc in every one of 20,000 airports wouldn't be a bad piece of business for us. You are right, it gets a lot of attention. I've been interviewed by several aviation and business periodicals since we did this, and there was television coverage and everything else. And frankly, that's okay, because what ends up happening is people see the EV arc being used to power an airplane, but they also see that at the same time, while we were jetting around the skies, jetting is not the right word, but flying around the skies in that electric airplane, our electric vehicles were charging on that product And just remember that airports are very difficult to do any type of building or construction or disruptive work in. There's also all the normal permitting stuff, and then you've got all the FAA and everything else going on there too. So our ability to deploy that type of infrastructure with zero construction, zero electrical work, zero environmental impact is going to continue to be a great strength for us. But I'll take the media, I'll take the marketing, and then we'll also take the sales into those environments as well.

Thank you, Desmond. That's all I have. Thank you.

Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press stars and one. Our next question today comes from Tate Sullivan at Maxim Group. Please go ahead.

Hi, thank you. A couple of follow-ups. Can you repeat the backlog number as of end of the quarter? I didn't hear it that well. 2.1 million. Okay, and then related to the sponsorship and when you do secure a sponsor, can you just go over how, I mean, will those units that they agreed to go into backlog or how do you envision that rolling out? Will there be an upfront payment? Can you just give any extra detail on how you envision that?

Yeah, so the first and most important thing is to recognize that, as I've said, I think more than once in this call already, because the value of the network is so much greater than the value of the individual units or the sum of the individual units, We're able to charge the same for these units for five years of sponsorship as we would charge if we sold them. And frankly, the sponsors in many cases wouldn't want to own them anyway. They prefer to just take the branding and everything else out of them. So what will happen is when we identify a sponsor and there's an agreed upon number of units, say 200 units, then that's going to end up being something in the order of 13 plus million dollars in revenue. To be honest with you, we are not fully sure how and when we will account for that revenue. A lot of it will come down to how the contract's written. If, as you know, GAAP requires us to have fulfilled the requirements of the contract to recognize the revenue associated with those requirements. So in the event that a sponsor says to us, well, we'll sign a contract for five years, but we're going to pay you annually, maybe we take the revenue across the five years. If they say we're going to do a five-year sponsorship and we'll pay you immediately upon the deployment of these things and we have fulfilled our requirement in deploying them and there's a separate fee for maintaining and operating, then maybe we take the revenue earlier. That's an accounting thing that as yet will not be, it hasn't been fully baked and some of it's going to come out in the negotiation of the contract. In either event, it will be fantastically profitable, particularly in the following tranches, because remember that at the second tranche, we will not have to have the cost to deploy the network. And the third and fourth tranches, we won't have the cost to deploy the network, and yet we're taking the revenue as though we were selling the units again. Now, the cost to operate the network is very low. No rent, no utility bills, and we know from our many years of doing this that O&M and other warranty-type costs are de minimis There'll be some de minimis insurance in there as well. All of that will be baked into the sponsorship price, so not diluted to the money that comes out of it. So there's still some accounting stuff to be worked out, but anyway, looking at fantastically profitable. Then it's just a question of cash flow. How do we cash flow the thing? Clearly, if we're getting paid over an extended period of time, then there's going to be an operating capital delta there. But the good news for that is that's a not difficult to finance opportunity, particularly because we're not the credit risk. At that point, the sponsor is the credit risk. And clearly, anyone who's going to be sponsoring a very large network like this for media and carbon offsets is not going to be a credit problem. So that would be a very inexpensive opportunity. And I have done the work to identify the dollars to make that work in the event that we need them.

Okay, thank you. And just a couple more. Was it the UAV patent that you will finalize in November? And do you get any indication of timing on the wireless patent? Or did I swap those two?

No, you got it right. Thanks, Tate. So, yes, it's the UAV or drone recharging patent that we're going to get on November 24th. We've already, of course, received the patent on the EV standard, which is the streetlight curbside charging solution. That one we'll be taking into engineering. And then the other couple of patents that we have, the one that you mentioned is the wireless. And that certainly, I mean, one of the questions we had earlier was what did I see going on in the future? Well, I certainly think that wireless charging is going to play an important role in the future, both for fleet vehicles and for consumer. The standard, by the way, has just been passed by the SAE. Forgive me, but I've forgotten the four digits on the number of it for the moment, 12912 something or other. But anyway, it's been passed now. So there's certainty around that. So I think you'll see the OEM start to adopt that. Having a patent on our EBR for wireless charging is just another barrier to entry for us. And again, remember, where wireless charging is concerned, we are going to be uniquely positioned to take advantage of this because unlike everybody else who will have to go back out into the street, get building permits, electrical permits, and start saw cutting the pavement and everything else so they can embed the transmitters, which will be required to transmit the power wireless up to the cars, we will be able to embed those in our base place. So in the not too distant future, you'll see EVRs going out wireless ready, even if they don't have the transmitter and the cost associated with it, so that when wireless does come, we're able to just drop the transmitter into it And even those several hundred that we have deployed right now, retrofitting them, while it would be a job of work, won't require the permitting and all the other disruption and time and money and risk that anyone else in the space is going to have. So I think we're very well positioned for that. As I say, we can never guarantee that we're going to get a patent, but we've had a pretty bloody good run at it so far in the past, only ever losing one of them because there were some prior arcs.

Thank you. And last, is the GSA contract structure final? Is there any other steps? When was the date that that was finalized?

Contract's final and issued at the moment. Our marketing team are putting up all the nice pictures and everything.

Perfect. Okay. Thank you, Desmond.

Thank you, Tate.

And our next question today comes from Richard Batts with Dark Horse Investments. Please go ahead.

Hey, Desmond, congratulations on your new patent. My question about the sponsorship and the EV standard, I know you've got the EV standard supposed to be coming out here this coming year. Is that sponsorship program limited to the ARC? Or I was reading like San Francisco wanted to change out all their streetlights. So I was thinking, what better way to do it than to have curbside EV charging?

You're absolutely right. So the EV standard is a product that's very timely for a couple of reasons. First of all, the curbside charging, San Francisco is a great example of this. San Francisco is like many East Coast cities, most European cities and most Asian cities, a vertical city where there are not a lot of flat surface parking lots. Lots and lots of people have to park on the street. But New York, our biggest customer, they park their fleet vehicles on the street. They don't have sufficient surface lots to park their fleet vehicles, and so they park fleet vehicles on the street, which means as they electrify those vehicles, they're going to need somewhere to charge them. Now, there are 300,000 lamp standards in New York City. Is it unreasonable to suggest that at some point in the future, every fifth one is an EV standard to charge cars? I don't think so. That's why we're doing this. So I think that's a great opportunity for us. The question about whether or not that ends up being rolled into the sponsor thing, definitely, of course. The fact is if we end up with a sponsor that wants to be in a city where it's a vertical city, there aren't a lot of flat lots that lend themselves to the EVR, then we'll sponsor the EV standard and we'll deploy those for them as well. The great thing is the business model works. And I don't want to claim authorship on that. As I've said in my comments, this is not a new business model. There are countless... Similar models out there. We just have a better mousetrap, a more compelling offering. And the fact is, as the people in outdoor media tell me, the fact that the EV arc is sort of large and visible and attractive product. Remember, it's tracking, following the sun. It's got good real estate on it. It's just so much more valuable for these types of branding things, even than a bicycle or bike sharing product. Really important for everybody to hear, we're not targeting the EV driver with this network. I mean, certainly the charging is targeting them, but the branding and the image and the naming rights and all that, that's for everybody else. If you're a large corporate sponsor, you want everyone else seeing that you're providing this clean, renewable, American-made driving on sunshine experience. Even if they don't drive an EV, they're still seeing it and you're still getting that positive imaging from it.

Right. It's kind of hard to miss the advertising on a street lamp. And they're all over the place. And you've got one every fifth, like you said, or every fourth. I see even more than that than you do. But my question is, have you guys come up with a price on those or have you even gotten that far with it?

So what we've done is we've done the engineering. Again, the good news for us is we're using the same technology in the EV standard as was already successful in the EV arc. It's just a different form factor. So as I sort of jokingly often say, the EV standard is just an EV arc that's been squeezed through a sausage machine, and it's now long and tall and skinny instead of sort of short and squat, which is what the EV arc is necessarily, so that it can survive hurricane force winds and that sort of thing. The EV standard will have the same technology in it. It's all down to form factor now. The one thing with EV standard that's slightly different is we are adding a light generator to it. And that's because lots of the environments that we'll be going into, Manhattan and other places like that, there's quite often quite a lot of wind and shade and other things. So we're trying to maximize the energy density on that thing. But we're just going through engineering. Once we're finished the engineering, we will develop the BOM. The BOM, of course, will drive the costing model, and the costing model will drive the pricing.

I've got you. So it's probably not going to be too far off, seeing as it's the same technology and the same components. But you guys will probably have it out probably before summertime, I guess. Yes.

We certainly intend to – I've got my engineering team up to their bloody eyeballs in activities right now. Nobody has any life of it here at this company, although we love what we do. As soon as they're finished with the tasks that are in front of them, EB Standard is next on their list.

Okay. Well, I appreciate that. Thank you, Devin.

Thank you for the questions.

And our next question today comes from Brent Bottom with Professional Profit Improvement. Please go ahead.

All right.

Yes, hello, Desmond, and congratulations on what looks to be a really good business model.

Thank you.

I'm interested in particular in giving any thought to, I'm sure you have, manufacturing scale-up, and can you speak to that a little bit?

Yes.

So we are in a facility in San Diego where we do all of our manufacturing. And to be clear, our products are a combination of of our own in-house manufactured components and then others best of breed off-the-shelf stuff so anything that's a commodity Anything that others are investing large sums of money making better and cheaper, we do not invest in that process. We take advantage of that process. So solar modules is a good example. If solar modules get better and less expensive, we benefit from that, but we don't invest in it. Batteries, same thing. The cells that we buy, if they get better and less expensive, we benefit from it, but we don't invest in it. We only invest in stuff that we do that nobody else does, and then we combine all that together and wrap it up under our own IP blanket. Now, in our current facility in San Diego, we're staffed to produce up to sort of 200-plus units a year, let's say 15 or so million in revenue there. But we've done the analysis. We could get to 2,200 units a year here for $140-plus million in revenue in this facility. Now, that will mean moving from one shift five days a week to three shifts seven days a week. And it's going to mean changing some of the way we do things. And part of that will be we will start to identify components and sub-assemblies of our products that we can send out for contract manufacturing so that our team, instead of making things, is just clicking things together, makes us much more efficient. But if you want to know the long term, where my mind is in the long term, I think we're going to need to open five or six of these facilities, even California alone. will need about 3 million publicly available EV chargers to fulfill its goal of not selling internal combustion engine vehicles here as of 2035. That's 15 years from now. That means we're going to need a couple of hundred thousand publicly available charges a year to fulfill that goal. That's a very, very tall order. With us producing 2,200 units a year, that clearly is not going to touch the 200,000 a year that they need just in California. And so actually we could probably own five or six factories here in this state and still not dent their requirements. And that's just one state. There's the rest of the U.S. And then we're called Beam Global for a reason. We've got international ambitions. I intend to go to Europe with this and Asia as well. We definitely intend to expand manufacturing.

Thank you for that. Just one follow-on question, if I may, and that is related to the San Diego contract. Are those units already built or when do you expect them to actually be built?

No, as with any orders that we get, we're very careful to do as close to just-in-time manufacturing as we can. That said, we have, as a discipline, started to approach some of the low-cost but lengthy process components of the products in some cases. So we can get a bit of a jump start on order. This means that when we do get a purchase order from somebody, we may have made a bit of a head start on the things that don't cost us very much, but take quite a long time to perform. However, we will not commit dollars to manufacturing the units with San Diego contract until we have certainty with the revenue associated with that, which of course will come from the sponsor. So all efforts and all focus right now is on getting out to the sponsors. Luckily, it's a very broad universe for us to go after there. I mean, you think about it, oil majors, technology companies, you guys can go through the names Any of them are perfect sponsors for this. Think of it as the driving on Sunshine Network brought to you by fill in the blanks. There's plenty of them out there. We're going to have our hands full going after them. My intention is to turn this into a bit of an auction, frankly. I as bidder take fit because it's such an attractive prospect. And then once we've got certainty on that, then you'll see us go crazy building the products.

Great. Thank you.

And ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to the management team for any final remarks.

Well, I'm not going to take any more of your time except to say thank you very much for your support. Thanks for your interest. Excellent questions. And, you know, watch this space. As I say, we've had a fantastic quarter moving the business forward, even in the time of uncertainty and duress. And we think that 2021, the stars and the planets are definitely aligning in a very major way for us. And I, for one, can't wait to get my teeth into it. So thank you very much. And I look forward to speaking to any of you whenever you want to contact me.

Thank you. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a while.