ENVISION SOLAR INTERNATIONAL, INC. This report contains forward-looking statements that are based on current
expectations, estimates, forecasts and projections about
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 inability
to raise additional capital or financing to implement its business
plans;
(e) unavailability of capital or financing to prospective customers of
the Company to enable them to purchase products and services from
the Company;
(f) failure to commercialize the Company's technology or to make sales;
(g) reductions in demand for the Company's products and services,
whether because of competition, general industry conditions, loss of
tax incentives for solar power, technological obsolescence or other
reasons;
(h) rapid and significant changes in markets;
(i) inability of the Company to pay its liabilities, including without
limitation its loans from lenders;
(j) litigation with or legal claims and allegations by outside parties;
(k) insufficient revenues to cover operating costs, resulting in
persistent losses;
(l) potential dilution of the ownership of existing shareholders in the
Company due to the issuance of new securities by the Company in the
future; and
(m) rapid and significant changes to costs of raw materials.
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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
Overview
Envision invents, designs, engineers, manufactures and sells renewably energized products and proprietary technology solutions serving three markets with annual global spending in the billions of dollars and that are experiencing significant growth:
· electric vehicle (EV) charging infrastructure; · outdoor media advertising; and · energy security and disaster preparedness.
The Company focuses on creating renewably energized, high-quality products for electric vehicle ("EV") charging, outdoor media and branding, and energy security that are rapidly deployable and attractively designed.
Electric Vehicle Charging Infrastructure
We currently produce two categories of products: the patented EV ARC™ (Electric
Vehicle Autonomous Renewable Charger) and the patented Solar Tree®. In late
2019, we began deploying our upgraded version of our EV ARC™, the EV ARC™ 2020,
which provides all of the features of the original EV ARC™ in addition to
elevating the electronics under the solar canopy to make the unit flood-proof up
to 9.5 feet, provides more space to park and provides added security for the
electrical components. In addition, we have two new categories of products in
development. On
We believe that there is a clear need for a rapidly deployable and highly scalable EV charging infrastructure, and that our products fulfill that requirement. We are agnostic as to the EV charging service equipment 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, Juice Box, Bosch, AeroVironment and other high quality EV charging solutions. We can make recommendations to customers or we can comply with their specifications and/or existing charger networks. Our products replace the infrastructure required to support EV chargers, not the chargers themselves. We do not sell EV charging, rather we sell products which enable it.
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We believe our chief differentiators for our electric vehicle charging infrastructure products are:
· our ability to invent, design, engineer, and manufacture 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 products' capability to operate during grid outages and to provide a
source of emergency power rather than becoming inoperable during times of
emergency or other grid interruptions; and
· our ability to create new and patentable inventions which are a complex
integration of our own proprietary technology and parts, with other commonly
available engineered components, creating a further barrier to entry for our
competition.
Historically, we have recognized revenue primarily from the sale of EV ARCs™ to
large commercial businesses, such as Google,
Outdoor Media Advertising
This business opportunity involves a partnership with a third party media company, whereby we solicit revenue from potential sponsors and from advertisers willing to pay fees to us or to our media partners to display their brands, messages and advertisements on the surfaces of our products or on outdoor digital or static screens mounted on our EV charging solutions. We have yet to launch our outdoor media advertising program other than initial discussions with media companies and cities and developing our revenue model.
Energy Security and Disaster Preparedness
Our energy security business is connected with the deployment of our EV charging
infrastructure products which includes an integrated emergency power panel,
powered by solar power and battery storage, which can continue to operate and
deliver emergency power during utility grid failures or blackouts and brownouts.
Our onboard state-of-the-art storage batteries installed on our EV chargers
provide another reason for certain customers such as municipalities, counties,
states, the federal government, hospitals, fire departments, large private
enterprises with substantial facilities, and vehicle fleet operators, to buy our
products. As an example of the benefit our emergency power capability provides,
in
Our current list of products includes:
1. EV ARC™ Electric Vehicle Autonomous Renewable Charger (patented).
2. Transformer (patented) EV ARC™ 2020 Stowable Electric Vehicle
Autonomous Renewable Charger (EV ARC™ 2020).
3. EV ARC™ DC Fast Charging Electric Vehicle Autonomous Renewable Charger
(EV ARC™ DCFC).
4. EV ARC™ Media Electric Vehicle Autonomous Renewable Charger with
advertising screen and or branding/messaging.
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5. EV ARC™ Autonomous Renewable Motorcycle Charger.
6. EV ARC™ Autonomous Renewable Bicycle Charger.
7. ARC Mobility™ Transportation System.
8. The patented Solar Tree® DCFC product, a single column mounted smart
generation and energy storage system with the capability to provide a
50kW DC fast charge to one or more medium or heavy duty electric
vehicles.
Our current products can be upgraded with the addition of the following features:
1. EnvisionTrak™ sun tracking technology (patented), 2. Data capture and management (IoT), 3. SunCharge™ solar powered EV charging, 4. ARC™ technology energy storage, 5.E-Power emergency power panels, 6. LED lighting, 7. Media and branding screens, and 8. Security cameras, WiFi, sound, and emergency call boxes.
Critical Accounting Policies
Please refer to Note 1 in the financial statements for further information on the Company's critical accounting policies which are summarized as follows:
Use of Estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in
Accounts Receivable. Accounts receivable are customer obligations due under normal trade terms. Management reviews accounts receivable on a periodic basis to determine if any receivables may become uncollectible. Management's evaluation includes several factors including the aging of the accounts receivable balances, a review of significant past due accounts, dialogue with the customer, the financial profile of a customer, our historical write-off experience, net of recoveries, and economic conditions. The Company includes any accounts receivable balances that are determined to be uncollectible in its overall allowance for doubtful accounts. Further, the Company may record a general reserve in its allowance for doubtful accounts to account for future changes that may negatively impact our overall collections. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.
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Inventory. Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method of accounting. Inventory costs primarily relate to purchased raw materials and components used in the manufacturing of our products, work in process for products being manufactured, and finished goods. Included in these costs are direct labor and certain manufacturing overhead costs associated with the manufacturing process. The Company regularly reviews inventory components and quantities on hand and performs annual physical inventory counts. A reserve is established if this review process determines the net realizable value of such inventory may be below the carrying value.
Impairment of Long-lived Assets. The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-15 "Impairment or Disposal of Long-Lived Assets." This guidance requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Revenue and Cost Recognition.Envision follows the revenue standards of Financial Accounting Standards Board Update No. 2014-09: "Revenue from Contracts with Customers (Topic 606)." The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) we satisfy a performance obligation.
Revenues are primarily derived from the direct sales of manufactured products. Revenues may also consist of maintenance fees for the maintenance of previously sold products and revenues from sales of professional services.
Revenues from inventoried product sales are recognized upon the final delivery of such product to the customer or when legal transfer of ownership takes place. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for such products within a 30-45 day period after delivery.
Revenues from maintenance fees for services provided by the Company are recognized equally over the period of the maintenance term. Revenue values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment for the service in advance of the maintenance period.
Extended maintenance or warranty services, where the customer has the option to purchase this extension as a separate purchase option, are considered a separate performance obligation. If the company does not control the extended services, in terms of having the responsibility for fulfillment of the obligation or the option to choose who will perform the services, the Company is acting as an agent and would report the revenues on a net basis.
Revenues from professional services are recognized as services are performed. Revenue values are based upon fixed fee arrangements or hourly fee-based arrangements with agreed to hourly rates of service categories in line with expertise requirements. These services are billed to a customer as such services are provided and the customer will be obligated to make payments for such services typically within a 30-45 day period.
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Revenues on a bill-and-hold arrangement are recognized when control of the product is transferred to the customer, but physical possession of the product transfers at a point in time in the future. To determine this, the reason for the arrangement must be substantive, the product must be separately identified and ready for physical transfer, and the product cannot be directed to another customer.
The Company has a policy of recording sales incentives as a contra revenue.
The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.
Any deposits received from a customer prior to delivery of the purchased product or monies paid prior to the period for which a service is provided are accounted for as deferred revenue on the balance sheet.
Sales tax is recorded on a net basis and excluded from revenue.
The Company generally provides a standard one-year warranty on its products for
materials and workmanship but may provide multiple year warranties as
negotiated, and it will pass on the warranties from its vendors, if any, which
generally exceeds this one-year period. In accordance with ASC 450-20-25, the
Company accrues for product warranties when the loss is probable and can be
reasonably estimated. At
Cost of Revenues. The Company records direct material and component costs, direct labor and associated benefits, and manufacturing overhead costs such as supervision, manufacturing equipment depreciation, rent, and utility costs, all of which are included in inventory prior to a sale, as costs of revenues. The Company further includes shipping and handling fees billed to customers as revenues and shipping and handling costs as cost of revenues.
Changes in Accounting Principles. There were no significant changes in
accounting principles that were adopted during the six months ended
Results of Operations
Comparison of Results of Operations for the Three Months Ended
Revenues. For the three months ended
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Gross Profit. For the three months ended
Operating Expenses. Total operating expenses were
Other Income and Expense.Interest expense was
Net Loss. Our net loss was
Comparison of Results of Operations for the Six Months Ended
Revenues. For the six months ended
Gross Profit. For the six months ended
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Operating Expenses. Total operating expenses were
Other Income and Expense.Interest expense was
Net Loss. We had a net loss of
Liquidity and Capital Resources
At
Our cash flows from operating, investing and financing activities, as reflected in the condensed statements of cash flows, are summarized in the table below:
June 30,
2020 2019
Cash provided by (used in):
Net cash used in operating activities $ (2,356,727 ) $ (2,845,691 )
Net cash used in investing activities $ (184,323 ) $ (27,785 )
Net cash provided by financing activities $ 643,988 $ 8,546,670
Operating Activities
Our operating activities resulted in cash used in operations of
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Our operating activities resulted in cash used in operations of
Cash used in investing activities included
During the six months ended
While the Company has been attempting to grow market awareness and focusing on the generation of sales, the Company has historically had negative gross profits and is just starting to earn a small gross profit on its sales of products in the current year and we believe that our gross profits will improve as our revenues grow. Management believes that with increased production volumes that we believe are forthcoming, efficiencies will continue to improve, and total per unit production costs will decrease, thus allowing for increasing gross profits on the EV ARC™ product in the future.
On
Management believes that evolution in the operations of the Company may allow it to execute on its strategic plan and enable it to experience profitable growth in the future. This evolution is anticipated to include the following continual steps: addition of sales personnel and independent sales channels, continued management of overhead costs, increased overhead absorption resulting from revenue growth, process improvements and vendor negotiations leading to cost reductions, increased public awareness of the Company and its products, and the maturation of certain long sales cycle opportunities. Management believes that these steps, if successful, may enable the Company to generate sufficient revenue to continue operations. There is no assurance, however, as to if or when the Company will be able to achieve those operating objectives.
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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