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," "believes," "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) fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue or expand its business, and the
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, technological obsolescence or other
reasons;
(h) litigation with or legal claims and allegations by outside parties;
(i) insufficient revenues to cover operating costs, resulting in
persistent losses;
(j) rapid and significant changes to costs of raw materials from
government tariffs or other market factors;
(k) increasing spread of the COVID-19 pandemic and its impact on
the Company's business as well as worldwide financial markets;
New factors emerge from time to time, and it is not possible for us to predict
which factors will arise. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. Because factors referred to elsewhere in this
report on Form 10-Q and in our Annual Report on Form 10-K for the year ended
December 31, 2021 (sometimes referred to as the "2021 Form 10-K") that we
previously filed with the Securities and Exchange Commission, including without
limitation the "Risk Factors" section in the 2021 Form 10-K, could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements made by us, you should not place undue reliance on
any forward-looking statements. Further, any forward-looking statement speaks
only as of the date on which it is made, and except as may be required by
applicable law, we undertake no obligation to release publicly the results of
any revisions to these forward-looking statements or to reflect events or
circumstances arising after the date of this report on Form 10-Q.
17
Overview
Beam develops, manufactures and sells high-quality, renewably energized
infrastructure products for electric vehicle charging infrastructure, energy
storage, energy security, disaster preparedness and outdoor media advertising.
The Company has designed five product lines for the electrification of
transportation, that incorporate the same underlying proprietary technology and
value for producing a unique alternative to utility 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, battery storage and electronics and computing, to provide a
mounting asset and a source of power for factory installed electric
vehicle charging stations of any brand. The electronics and energy
storage are elevated to the underside of the tracking solar array,
making the unit flood-proof up to nine and a half feet and allowing
adequate parking space 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 fast charging to one or more
electric vehicles or larger vehicles.
- EV ARC™ DCFC - DC Fast Charging system for charging EVs.
- EV-Standard™ - 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.
All Beam Global products are capable of operating completely
independent of the utility grid but can also connect to the grid where
it is advantageous to do so.
In addition, with the acquisition of All Cell Technologies, LLC ("All Cell") in
March 2022, we now offer Beam AllCell™ energy storage technology with a highly
flexible lithium-ion and lithium iron phosphate battery platform architecture.
The battery design uses a proprietary phase change material which provides a
low-cost thermal management solution and a unique safety mechanism to prevent
propagation of thermal runaway. They are ideally suited for applications where
energy density, safety and specialized enclosures require high power in small
spaces. Drones, submersibles, recreational products and a host of micro mobility
products benefit from this technology. Beam is already using AllCell™ energy
storage products in EV ARC™ products for EV charging and plans to incorporate
this battery technology in our new product designs that are under development.
We believe that we are living in an increasingly electrified era, where
electricity is replacing other forms of fuel and energy without being connected
to the utility grid through the use of batteries and other forms of energy
storage. We also believe that there is a clear need for a rapidly deployable and
highly scalable EV charging infrastructure, and that our products fulfill these
requirements. Unlike utility grid-tied installations which require general and
electrical contractors, engineers, consultants, digging trenches, permitting,
pouring concrete, wiring, and ongoing utility bills, the EV ARC™ systems,
equipped with our proprietary battery technologies, can be deployed in minutes,
not months, and are 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. Because they generate and store all their own
electricity, our products replace the utility grid and civil infrastructure
required to support EV chargers, but not the chargers themselves. We do not sell
EV charging, rather we sell products which enable it.
18
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 proprietary and patented energy storage solutions;
· 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.
Overall Business Outlook
Our revenues increased 114% from $3.5 million in the first six months of 2021 to
$7.5 million for the first six months of 2022, primarily due to our investment
in sales and marketing resources over the past two years which has created
increased demand for our EV ARC™ renewable chargers, as well as an increase of
$1.8 million of sales for our battery storage business since March following the
acquisition of All Cell. During the first six months of 2022, revenues from
federal, state and local governments increased by $1.8 million compared to the
prior year, primarily due to an increase in sales to the State of California and
federal customers. In June, we were awarded a new three-year statewide contract
with the State of California which can be used by state, local and municipal
government entities throughout the U.S., not just California, and provides
previously negotiated pricing to make the procurement process easier. We
invested in our federal business channel with the addition of a federal
lobbyist, a federal business development resource and a government relations
employee who are helping to identify opportunities on the federal side,
including increasing awareness of our product and outreach with federal
agencies. In addition, as companies are moving back to work from working from
home during the past two years due to the pandemic, we are seeing an increase in
orders for workplace charging and corporate fleets for enterprise customers.
There is increased support for funding EV charging infrastructure on the state
and federal level, as well as a number of federal grants available in addition
to the Federal Solar Investment Tax Credit and accelerated depreciation as
allowed under Section 179 of IRS code which provide a strong financial incentive
for many of our target customers. Net Zero Emission Initiatives continues to
expand at the federal, state and local levels and with private enterprise. We
expect the electric vehicle market to continue to experience significant growth
over the next decade (60 new electric vehicles are expected to launch in 2022
alone) which will require additional EV charging infrastructure. We believe our
products are uniquely positioned to benefit from this growth.
We believe the Company's acquisition of the assets of All Cell, a battery
storage company, will provide new customer opportunities for our Beam Global's
products. As a result of the acquisition of All Cell, we believe Beam's gross
margin will improve by utilizing the Beam All Cell battery in its EV ARCs™ as it
did for 8 years in the past, but now at lower cost. Beam's All Cell batteries
are ideally suited for applications where energy density, safety and bespoke
enclosures require high power in small spaces. Drones, submersibles,
recreational products and a host of micro mobility and electric vehicle products
are already benefiting from All Cell's highly differentiated products. With the
continued growth of untethered electrification, we believe there is opportunity
for increased demand in these markets and others.
19
We continue to work with The Superlative Group, an industry leading consultant
engaged in the selling of corporate sponsorships and have identified several
potential corporate sponsors to engage in a global naming rights agreement that
would provide their corporate branding to network(s) of EV ARC™ units deployed
throughout a city. Superlative is compensated when they are successful in
securing a sponsor for our Driving on Sunshine network. This business model can
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 proprietary and state-of-the-art storage batteries, combined with
solar or wind generation, integrated into our products and powering EV chargers
are immune to grid failures and provide another benefit for customers such as
municipalities, counties, states, the federal government, hospitals, fire
departments, large private enterprises with substantial facilities, and vehicle
fleet operators or anyone who needs a reliable source of electricity to fuel
electric vehicles.
We have begun development on our newest patented products - our EV Standard™ and
UAV ARC™, which we expect will expand our product offerings leveraging the same
proprietary technology as our current products and allow us to expand into new
markets.
Gross margins improved in the six months ended June 30, 2022 as a percentage of
sales, compared to the same period in 2021. The increase in EV ARC™systems sold
from 42 units in the first six months of 2021 to 74 units in the first six
months of 2022 resulted in favorable fixed overhead absorption and improved
labor efficiencies gained by the higher volume. This was partially offset by
ongoing inflation and supply chain driven cost increases on many of our
components, including steel, in addition to increased delivery charges due to
fuel price increases. We believe these cost increases are largely a temporary
increase brought on by supply chain issues resulting from plant closures and
staffing shortages due to the Covid-19 virus as well as other transitory
inflationary pressures. We believe the supply chain issues will resolve over
time and costs will begin to come back down in the coming months and years. We
also expect to see a reduction in the cost of our bill of materials. Batteries
are the highest cost contributor to our bill of materials, but with the March
2022 purchase of All Cell's assets, a battery manufacturer, we expect those
costs to be significantly reduced. We are implementing lean manufacturing
process improvements and making engineering changes to our product where we
expect to 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. We continue to identify components and
sub-assemblies that may be more cost effective to outsource, which may 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 our
revenues, and the cost cutting measures described above lead us to believe that
we will see significant improvement in our gross margins over the next year.
Significant Accounting Policies and Estimates
The Company's significant accounting policies are described in Note 1 in the
Company's Annual Report on Form 10-K for the year ended December 31, 2021. There
have been no material changes in these policies or their application.
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.
Changes in Accounting Principles. There were no significant changes in
accounting principles that were adopted during the three months ended June 30,
2022.
20
Results of Operations
Comparison of Results of Operations for the Three Months Ended June 30, 2022 and
2021
Revenues. For the quarter ended June 30, 2022, our revenues increased 75% to
$3.7 million compared to $2.1 million for the same period in 2021. Revenues to
customers in California represented 38% of the total, which continues to be a
strong market for EV ARC™ systems. Most of these customers were state agencies
or municipalities. Revenues to federal customers and corporate enterprises also
increased during the quarter compared to the prior year. We recorded energy
storage revenue of $1.4 million as a result of our acquisition of All Cell which
closed on March 4, 2022. We were awarded a new contract with the State of
California's Department of General Services in June 2022 for a three-year period
plus two optional one-year extensions. In addition, the General Services
Administration (GSA) awarded Beam Global a federal blanket purchase agreement
(BPA) which will provide federal agencies a streamlined procurement process for
procuring EV ARC™ systems. We continue to invest in sales and marketing
employees, resources and programs to raise awareness of the benefits and value
of our products, which is reflected in the strong year over year sales growth in
the quarter. The receipt of orders may continue to be uneven due to the timing
of customer approvals or budget cycles, however we believe that as EV adoption
increases in concert with increased availability of infrastructure funding, our
business will be less impacted by specific variations in order timing.
Gross Loss. For the quarter ended June 30, 2022, our gross loss was $0.3
million, or 9% of sales, compared to $0.3 million, or 13% of sales in the same
quarter of the prior year. As a percentage of sales, the margin improved by 4
percentage points, primarily due to the increase in production levels in the
current quarter compared to the second quarter of 2021, which resulted in
favorable fixed overhead absorption. In addition, our labor efficiency improved
during the quarter as a result of a steady flow of units through the factory.
This was partially offset by an increase in material costs for steel, batteries
and other components, due to the Covid-19 pandemic and other inflationary
pressures. Shipping costs have increased globally as well as gas prices which
have increased our delivery costs. We expect our cost per unit to continue to
decrease as we expect to see material costs return to normalcy post pandemic and
as our volumes increase. We also acquired a battery manufacturer, All Cell in
March 2022, which is expected to significantly reduce the cost of the batteries
in our units. In addition, as we expect the Company to grow in 2022 and beyond,
we expect our fixed overhead absorption to continue to improve.
Operating Expenses. Total operating expenses were $2.5 million for the quarter
ended June 30, 2022, compared to $1.4 million for the same period in the prior
year, an 82% increase. The increase was primarily due to $0.8 million in
expenses attributable to the newly acquired All Cell and $0.2 million increase
for accounting and legal services, primarily attributable to the acquisition.
Increases in other operating expenses were mostly offset by a gain recorded from
the favorable change in fair value of contingent consideration related to the
All Cell acquisition.
Comparison of Results of Operations for the Six Months Ended June 30, 2022 and
2021
Revenues. For the six months ended June 30, 2022, our revenues increased 114% to
$7.5 million compared to $3.5 million for the same period in 2021. Revenues to
customers in California represented 43% of the total, which continues to be a
strong market for EV ARC™ systems. Most of these customers were state agencies
or municipalities. Revenues to federal customers and corporate enterprises also
increased during the quarter compared to the prior year. We recorded energy
storage revenues of $1.8 million as a result of our acquisition of All Cell
which closed on March 4, 2022. We were awarded a new contract with the State of
California's Department of General Services in June 2022 for a three-year period
plus two optional one-year extensions. In addition, the General Services
Administration (GSA) awarded Beam Global a federal blanket purchase agreement
(BPA) which will provide federal agencies a streamlined procurement process for
procuring EV ARCs. We continue to invest in sales and marketing employees,
resources and programs to raise awareness of the benefits and value of our
products, which is reflected in the strong year over year sales growth in the
quarter. The receipt of orders may continue to be uneven due to the timing of
customer approvals or budget cycles, however we believe that as EV adoption
increases in concert with increased availability of infrastructure funding, our
business will be less impacted by specific variations in order timing.
21
Gross Loss. For the six months ended June 30, 2022, our gross loss was $0.6
million, or 8% of sales, compared to $0.4 million, or 12% of sales in the same
quarter of the prior year. As a percentage of sales, the margin improved by 4
percentage points, primarily due to the increase in production levels in the
current quarter compared to the same period in 2021, which resulted in favorable
fixed overhead absorption. In addition, our labor efficiency improved during the
quarter as a result of a steady flow of units through the factory. This was
partially offset by an increase in material costs for steel, batteries and other
components, due to the Covid-19 pandemic and other inflationary pressures.
Shipping costs have increased globally as well as gas prices which have
increased our delivery costs. We expect our cost per unit to continue to
decrease as we expect to see material costs return to normalcy post pandemic. We
also acquired a battery manufacturer, All Cell in March 2022, which should
significantly reduce the cost of the batteries in our units. In addition, as we
expect the Company to grow in 2022 and beyond, we expect our fixed overhead
absorption to continue to improve.
Operating Expenses. Total operating expenses were $4.5 million for the six
months ended June 30, 2022, compared to $2.5 million for the same period in the
prior year, an 81% increase, but a decrease as a percentage of revenue of 11
percentage points. The increase was primarily due to $1.1 million in expenses
attributable to the newly acquired All Cell, $0.4 million increase for legal and
accounting services, primarily attributable to the acquisition, and $0.3 million
increase for sales and marketing costs to generate increased sales levels.
Increases in other operating expenses were mostly offset by a $0.2 million gain
recorded from the favorable change in fair value of contingent consideration
related to the All Cell acquisition.
Liquidity and Capital Resources
At June 30, 2022, we had cash of $13.8 million, compared to cash of $21.9
million at December 31, 2021. We have historically met our cash needs through a
combination of debt and equity financings. 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 (in
thousands):
June 30,
2022 2021
Cash provided by (used in):
Net cash used in operating activities $ (7,425 ) $ (3,752 )
Net cash used in investing activities $ (1,086 ) $ (206 )
Net cash provided by financing activities $ 316 $ 2,562
For the six months ended June 30, 2022, our cash used in operating activities
was $7.4 million compared to $3.8 million for the same period in 2021. Net loss
of $5.1 million for the six months ended June 30, 2022 was increased by $0.7
million of non-cash expense items that included depreciation and amortization of
$0.5 million, common stock issued for services for director compensation of $0.2
million and non-cash compensation expense related to the grant of stock options
of $0.2 million. Further, cash used in operations included an increase in
prepaid expenses and other current assets by $3.0 million, primarily related to
the prepayment of battery cells, and $3.5 million increase in inventory (i) to
secure battery cells required for battery manufacturing in case of potential
future supply chain challenges and (ii) due to higher work in work in process
inventory nearly complete EV ARC units that were waiting for parts at June 30,
2022. The increases in prepayments and inventory are not expected to continue in
future quarters, but rather should reduce to lower levels over the next 12
months. Cash provided by operations included a $0.9 million decrease in accounts
receivable due to the collection of a couple of slow paying accounts from 2021,
$2.1 million increase in accounts payable primarily for inventory, $0.3 million
increase in deferred revenue and $0.1 million increase in accrued expenses.
22
Net loss of $2.9 million for the six months ended June 30, 2021 decreased by
$0.5 million for non-cash expense items that included depreciation and
amortization, common stock issued for services for director compensation,
non-cash compensation expense related to the grant of stock options, and
amortization of operating lease right of use asset. Cash used in operations for
the period included a $1.0 million increase in accounts receivable due to some
slow payments from Q1 shipments and a $0.8 increase in inventory based on
forecasted requirements. Cash provided by operations included a $0.3 increase in
accounts payable primarily due to increased inventory purchases.
Cash used in investing activities in the six months ended June 30, 2022 included
$0.8 million cash payment for working capital payment related to the acquisition
of All Cell and $0.2 million to purchase equipment. The three months ended June
30, 2021 included $0.2 million to fund patent related costs and to purchase
equipment.
In the six months ended June 30, 2022, cash generated by our financing
activities included $0.3 million from the exercise of warrants, compared to $2.6
million for the exercise of warrants for the same period in the prior year.
Current assets were $27.2 million at June 30, 2022 and $27.6 million at December
31, 2021. Current liabilities increased to $7.9 million at June 30, 2022 from
$3.0 million at December 31, 2021, primarily due to the acquisition of All Cell,
including additions of $2.3 million in accounts payable and accrued liabilities,
$0.7 million in contingent consideration, current, based on the terms of the
acquisition, and $1.5 million increase in deferred revenue for customer
deposits. As a result, our working capital decreased to $19.4 million at June
30, 2022 compared to $24.6 million at December 31, 2021.
The Company has been focused on marketing and sales efforts over the past two
years to support an increase in revenues. We saw a 45% increase in revenues in
2021 compared to 2020, and the first half of 2022 was 114% higher than the first
half of 2021 which shows continued improvement on revenues. While the Company
has still not earned a gross profit on its sale of products, as revenues
increase, we expect to see our fixed overhead costs spread over more units,
which will reduce the cost per unit. Management has made several design changes
and process improvements in our manufacturing operations in 2021 and the first
half of 2022 which has helped to increase labor efficiency and reduce costs. At
the same time, supply chain issues related to the COVID-19 virus have caused an
increase in certain of our material costs, most notably in steel purchases.
However, we believe that we will continue to improve our gross profit as our
revenues grow. Management believes that with anticipated increased production
volumes, efficiencies will continue to improve, and the fixed overhead cost per
unit will decrease. In addition, our suppliers believe that costs that have
increased over the past year should start to come back down in the later part of
2022. This should result in increasing gross profits on the EV ARC ™ and Solar
Tree® products in the future.
The Company may be required to raise capital until it achieves positive cash
flow from its business, which is predicated on increasing sales volumes and the
continuation of production cost reduction measures. The Company has warrants to
purchase 469,621 shares of our Common Stock outstanding at June 30, 2022, which
could potentially generate an additional $3.0 million of proceeds over the next
2 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. Management cannot currently predict when or if it will achieve
positive cash flow.
On March 4, 2022, the Company completed an acquisition of the assets of All Cell
Technologies, LLC ("All Cell"), a leader in energy storage solutions. This
strategic acquisition is expected to increase and diversify our Company's
revenue, gross profitability, manufacturing capabilities, intellectual portfolio
and customer base. The Company purchased substantially all of the assets and
business of All Cell for 1,055,000 shares of Beam Common Stock ("Closing
Consideration") (on the closing date, based on the closing price of the Beam
Common Stock of $13.61, such shares had a value of approximately $14.4 million)
plus an additional $0.8 million in cash for the net working capital of primarily
inventory held by All Cell at closing. In addition to the cash paid for the
working capital of $0.8 million, the Purchase Agreement requires a capital
investment of not less than $1.5 million of equipment to be used for the
business. All Cell is eligible to earn an additional number of shares of Beam
Common Stock if Beam's new energy storage business meets certain revenue
milestones (the "Earnout Consideration"). The Earnout Consideration is: (i) two
times the amount of energy storage products revenue and contracted backlog that
is greater than $7.5 million for 2022, and (ii) two times the amount of energy
storage products 2023 revenue only which exceeds the greater of either $13.5
million or 135% of the 2022 cumulative revenue, capped at $20.0 million.
Revenues exceeding $20.0 million in 2023 will not be eligible for the Earnout
Consideration. The maximum aggregate number of shares of Common Stock that the
Company will issue to All Cell for the Closing Consideration and Earnout
Consideration will not exceed 1.8 million shares.
23
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
volume 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.
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.
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