Beam Global

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nature of Operations

References in this Report to “we,” “us,” “our,” the “Company” or “Beam” means Beam Global, a Nevada corporation, and its subsidiaries.

Beam is a sustainable technology innovation company based in San Diego, California; Broadview, Illinois; Belgrade and Kraljevo, Serbia. We develop, design, engineer, manufacture and sell high-quality, renewably energized infrastructure products for electric vehicle (“EV”) charging, energy security and disaster preparedness. We also manufacture highly energy-dense battery solutions in safe, compact and unique form-factors. Additionally, we manufacture street lighting, communications and energy infrastructure products. Beam’s products enable vital and highly valuable energy production in locations where it is either too expensive or too impactful to connect to the utility grid, or where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. Beam’s energy storage products provide high energy density in a safe, compact and bespoke form-factors, which we believe are ideal for the rapidly growing mobile and stationary equipment product market which often requires electrical energy without being connected to the electrical grid.

Beam’s products and proprietary technology solutions target the following markets:

Basis of Presentation

The interim unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly our results of operations and cash flows for the three months and nine months ending September 30, 2024 and 2023, and our financial position as of September 30, 2024, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023. The December 31, 2023 balance sheet is derived from those statements.

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 certain expected credit losses (CECL), valuation of inventory and standard cost allocations, depreciable lives of property and equipment, valuation of contingent consideration liability, 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.

Recent Accounting Pronouncements

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements” (“ASU 2023-06”), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s disclosure update and simplification initiative issued in August 2018. The effective date for the amendments for each topic will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoptions prohibited.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 requiring enhanced segment disclosures. ASU 2023-07 requires disclosure of significant segment expenses regularly provided to the chief operating decision maker (“CODM”) included within segment operating profit or loss. Additionally, ASU 12 2023-07 requires a description of how the CODM utilizes segment operating profit or loss to assess segment performance. The requirements of ASU 2023-07 are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company's annual reporting requirements will be effective for the year ending 2024 and interim reporting requirements will be effective beginning with the first quarter of fiscal 2025. Early adoption is permitted, and retrospective application is required for all periods presented. The Company is in the process of analyzing the impact of ASU 2023-07 on its related Condensed Consolidated Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a company’s effective tax rate reconciliation and information on income taxes paid. This standard will be effective for Beam beginning with our annual financial statements for the fiscal year ending December 31, 2025. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on our consolidated financial statements.

Concentrations

Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable.

The Company maintains its cash in banks and financial institutions that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through September 30, 2024. As of September 30, 2024, approximately $4.1 million of the Company’s cash deposits were greater than the federally insured limits.

Major Customers

The Company continually assesses the financial strength of its customers. We are not aware of any material credit risks associated with our customers.52% of our third quarter revenues were derived from pre-funded federal, state and local government programs, and the remaining 48% were derived from commercial customers that we believe have good credit or, alternatively, favorable payment terms which minimizes our credit risk with respect to such customers. For the three months ended September 30, 2024, no single customer accounted for more than 10% of total revenues and for the nine months ended September 30, 2024, one customer accounted for 18% of total revenues, with no other single customer accounting for more than 10% of total revenues. At September 30, 2024, accounts receivable from two customers accounted for 19% and 11% of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At December 31, 2023, accounts receivable from four customers accounted for 11%,10%,10% and 10% of total accounts receivable each with no other single customer accounting for more than 10% of the accounts receivable balance. For the three months ended September 30, 2023, the Company’s sales to federal, state and local governments represented 82% of revenues.

A summary of the allowance for credit losses for the nine months ending September 30, 2024 and December 31, 2023:

Fair Value Measurement

The Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and liabilities in the consolidated financial statements that are already required by generally accepted accounting principles to be measured at fair value. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market participant that holds the asset or owes the liability.

The Company utilizes market data or assumptions that market participants who are independent, knowledgeable, and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company is able to classify fair value balances based on the observability of those inputs. The guidance establishes a formal fair value hierarchy based on the inputs used to measure fair value. The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to level 3 measurements, and accordingly, Level 1 measurement should be used whenever possible.

The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities or published net asset value for alternative investments with characteristics similar to a mutual fund.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs for the asset or liability.

The methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while management believes its valuation methods are appropriate, the fair value of certain financial instruments could result in a difference fair value measurement at the reporting date. There were no changes in the Company’s valuation methodologies from the prior year.

For purpose of this disclosure, the carrying amounts for financial assets and liabilities such as cash and cash equivalents, accounts receivable – trade, other prepaid expenses and current assets, accounts payable and other current liabilities, all approximate fair value due to their short-term nature as of September 30, 2024. The Company had Level 3 liabilities as of September 30, 2024. There were no transfers between levels during the reporting period.

Significant Accounting Policies

During the nine months ended September 30, 2024, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Net Earnings (Loss) Per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the periods presented using the treasury stock method for options, restricted stocks and warrants. Diluted net income (loss) per share is computed By giving effect to all potential dilutive common share equivalents outstanding for the period. For periods in which Beam has reported net losses, diluted loss per share is the same as basic loss per share, as the effects of common stock equivalents outstanding and shares issuable upon conversion of convertible debt instruments are antidilutive and, therefore, excluded from the calculation of diluted loss per share.

Options to purchase 703,658 shares of common stock and warrants to purchase 200,000 shares of common stock were outstanding at September 30, 2024. Options to purchase 363,598 common shares and warrants to purchase 618,395 shares of common stock were outstanding at September 30, 2023.

The following table presents the calculation of basic and diluted loss per share:

Segments

The Company assesses its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. Management reviews financial results, manages the business and allocates resources on an aggregate basis. Therefore, financial results are reported in a single operating segment.

The Company had net losses of $6.7 million (which includes $0.4 million of non-cash expenses) and $11.0 million (which includes $3.0 million of non-cash expenses) and net cash used in operating activities of $3.1 million and $13.8 million for the nine months ended September 30, 2024 and 2023, respectively. At September 30, 2024, the Company had a cash balance of $4.9 million and working capital of $17.9 million. Based on the Company’s current operating plan and the available working capital that can be converted to cash (specifically the accounts receivable balance of approximately $11.3 million), the Company believes that it has the ability to fund its operations and meet contractual obligations for at least twelve months from the date of this report.

In 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC under which the Company issued 281,157 shares for approximately $3.0 million. The facility was terminated on October 1, 2024.

The Company’s outstanding warrants generated $0.7 million and $0.3 million of proceeds during each of the nine months ended September 30, 2024 and 2023, respectively. Warrants to purchase 282,334 shares of common stock which were issued as part of our 2019 public offering expired on April 18, 2024. The Company has a warrant outstanding to purchase up to 200,000 shares of our common stock at an exercise price equal to $17.00 per share that expires in March 2028 and that could generate up to an additional $3.4 million of proceeds, conditioned upon the market price of our common stock and the warrant holder’s ability and decision to exercise them.

In March 2023, the Company entered into a supply chain line of credit agreement with OCI Group for up to $100 million to further support our working capital requirements. Subject to the terms of the agreement, OCI Group will make available to the Company funding based on amounts owed to the Company by its customers. To date, the Company has not borrowed against this line of credit.

Although the Company believes that it will become profitable in the next few years as our revenues grow, we improve our gross profit and we leverage our overhead costs, we expect to continue to incur losses for a period of time. If necessary, the Company may raise additional capital to finance its future operations through equity or debt financings. There is no guarantee that profitable operations will be achieved, or that additional capital or debt financing will be available on a timely basis, on favorable terms, or at all, and such funding, if raised, may not be sufficient to meet our obligations or enable us to continue to implement our long-term business strategy. In addition, obtaining additional funding or entering into other strategic transactions could result in significant dilution to our stockholders.

Amiga DOO Kraljevo

On October 20, 2023, the Company acquired Amiga DOO Kraljevo (“Amiga”), pursuant to a Share Sale and Purchase Agreement dated October 6, 2023 (the “Purchase Agreement”) by and among the Company and the owners of Amiga (the “Sellers”). Pursuant to the terms of the Purchase Agreement, the Company acquired all the equity stock of Amiga from the Sellers in exchange for cash and common stock. With respect to the cash portion of the purchase price, the Company paid to the Sellers 4.6 million euros ($4.9 million) at closing and an additional 2.5 million euros ($2.7 million) was paid on January 2, 2024. With respect to the equity portion of the purchase price, the Company issued to the Sellers an aggregate of 451,807 shares of our common stock.

The Sellers are eligible to earn additional shares of the Company’s common stock if Amiga meets certain revenue milestones for the years ended December 31, 2024 and 2025 (the “Earnout Consideration”). The Earnout Consideration that Sellers are eligible to receive is equal to two times the amount of revenue of Amiga (“Amiga Net Revenue”) that is greater than specific revenue targets for each of the years ended December 31, 2024 and 2025. The Earnout Consideration will be paid in the Company’s stock for each annual target period and will be calculated based on the volume weighted average price of Beam’s common stock for the thirty trading days prior to the end of the applicable measurement period. In no event and under no circumstances will the Company issue to the Sellers an amount of the Company’s common stock that exceeds 19.99% of the total outstanding common stock of the Company immediately prior to the closing. An estimate of the fair value of the contingent consideration has been recorded in the opening balance sheet. On February 16, 2024, the Company and the Sellers entered into an amendment to the Purchase Agreement to remove the requirement that the Sellers shall be providing services to Amiga as a condition to receive the Earnout Consideration. During the nine months ended September 30, 2024, the Company recorded $4.5 million of income related to the fair value adjustment of the liability for Earnout Consideration.

Amiga, located in Serbia, is engaged in the manufacture and distribution of steel structures with integrated electronics, such as streetlights, cell towers, and ski lift towers. The acquisition of Amiga is assisting in introducing our products to Europe, increasing and diversifying our revenues, enhancing our manufacturing and engineering capabilities, accelerating the development of BeamSpot™ (formerly named EV Standard™) and other products both in Europe and the US, adding new customer segments in both Europe and the US, and we believe, increasing barriers to entry for future competition, and advancing Beam’s position as a leader in the green economy.

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805,Business Combinations. Goodwill represents the premium the Company paid over net fair value of tangible and intangible assets acquired.

On November 7, 2023, Amiga changed its name to Beam Europe LLC.

Telcom

On August 30, 2024, the Company acquired Telcom d.o.o Beograd (“Telcom”), pursuant to a Share Sale and Purchase Agreement dated as of August 30, 2024 (the “Agreement”) with the owners (the “Sellers”) of Telcom. Telcom is a business located in Serbia and engaged in the manufacturing of telecommunications equipment. Beam acquired all of the equity stock of Telcom from the Sellers in exchange for cash and Beam common stock. The total purchase price was subject to adjustment based on the amount of cash held by Telcom at closing. Based on Telcom’s cash balance at closing equal to approximately EUR 220,298, Beam paid to the Sellers a purchase price equal to EUR 815,298 which was paid to the Sellers as follows: (i) EUR 430,000 cash and (ii) issued 82,506 shares of Beam common stock. At closing, Telcom had a positive working capital balance of approximately EUR 500,000 which consisted of (i) a cash balance equal to EUR 220,000, accounts receivables of approximately EUR 115,000, inventory of approximately EUR 275,000 and accounts payable of approximately EUR 110,000.

In addition to the above payments, the Sellers are eligible to earn up to EUR 250,000 (the “Earnout Cap”) in additional shares of Beam common stock if Telcom meets certain revenue milestones for fiscal years 2024 and 2025 (the “Earnout Consideration”). The Telcom Earnout Consideration that Sellers are eligible to receive for 2024 will be equal to the amount the net revenue of Telcom (“Telcom Net Revenue”) exceeds EUR 850,000 for 2024 up to the Earnout Cap. Provided that Sellers Earnout Consideration was less than the Earnout Cap, the Sellers will be eligible for additional Telcom Earnout Consideration in 2025 if (i) 2025 Telcom Net Revenue exceeds 2024 Telcom Net Revenue, and (ii) 2025 Telcom Net Revenue exceeds $850,000. The Telcom Earnout Consideration for 2025 will be calculated based on the amount the 2025 Net Revenue exceeds the 2024 Net Revenue subject to the Earnout Cap. In no event, will the Sellers Earnout Consideration for 2024 and 2025, in the aggregate, exceed the Earnout Cap. The Earnout Consideration for each period will be calculated based on the volume weighted average price of Beam’s common stock for the thirty trading days prior to the end of the applicable calendar year. In no event and under no circumstances will the Sellers receive from Beam or will Beam issue to the Sellers in connection with the transaction Beam’s common stock in an amount that exceeds 19.99% of the outstanding common stock of Beam immediately prior to closing.

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805,Business Combinations. Goodwill represents the premium the Company paid over net fair value of tangible and intangible assets acquired.

The valuation of the Earnout Consideration was performed using a discounted cash flow analysis to determine the fair value of the contingent consideration, which includes estimates and assumptions such as forecasted revenues of Telcom, discount rates, and the milestone settlement value. As such valuation includes the use of unobservable inputs, it is considered to be a Level 3 measurement. The fair value of the Earnout Consideration will be reassessed on a quarterly basis with the change recorded to operating expenses. Change in the fair value of the Earnout Consideration during the nine months ended September 30, 2024 is as follows (in thousands):

The following table summarizes the estimated fair value allocation of consideration exchanged for the estimated fair value of tangible assets acquired and liabilities assumed at the acquisition date. The estimated fair value for working capital is generally equivalent to the net book value of the acquired assets and liabilities on the acquisition date. Fair value assigned to property, plant and equipment is based on real estate appraisals, market value comparisons, or acquired net book value of recently acquired assets. The valuation of the contingent consideration is based on a discounted cash flow analysis using the Company’s forecasted results for the operations for the two years subject to revenue earn-out targets.

Consideration is comprised of the following (in thousands):

The following table shows the allocation of consideration to assets and liabilities at fair value (in thousands):

The estimated fair values assigned to identifiable assets acquired and liabilities assumed are provisional pending the finalization of the working capital and purchase price allocation and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize those fair values. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to complete the allocation of purchase price as soon as practicable, but no later than one year after the acquisition date.

Pro Forma Unaudited Financial Information

The unaudited pro forma financial information summarizes the combined results of operations of Beam Global, Amiga and Telcom as if the companies had been combined as of the beginning of the nine months ended September 30, 2024 and 2023 (in thousands):

The pro forma financial information is presented for information purposes only and may not be indicative of the results of operations that would have been achieved had the acquisition been completed at the beginning of the nine months ended September 30, 2024 and 2023. In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition. The unaudited pro forma financial information includes adjustments to reflect the incremental amortization expense of the identifiable intangible assets and transaction costs.

The statement of operations, in the table above, for the nine months ended September 30, 2024 includes revenues of $0.5 million and loss from operations of $50 thousand from the acquired Telcom business. For the nine months ended September 30, 2023 includes revenues of $4.1 million and loss from operations of $0.4 million from the acquired Amiga business and revenues of $0.5 million and gain from operations of $5 thousand from the acquired Telcom business.

Inventory consists of the following (in thousands):

Property and equipment consist of the following (in thousands):

Depreciation expense during the three months and nine months ended September 30, 2024 and September 30, 2023 was $0.7 million, $2.1 million, $0.1 million and $0.3 million, respectively.

The intangible assets consist of the following (in thousands):

Amortization expense during the three and nine months ended September 30, 2024 and September 30, 2023 was $0.2 million, $0.7 million, $0.2 million and $0.8 million, respectively.

The major components of accrued expenses are summarized as follows (in thousands):

Acquired long-term liability of $3.4 million consists of $3.3 million restructuring debt settlement from the acquisition of Amiga. The debt restructuring was entered into in 2021 for a nine-year term with six years and three months remaining at September 30, 2024. Payments are due quarterly as a percentage of the remaining balance due and carry no interest. $63 thousand consists of non-current liabilities related to the acquisition of Telcom.

In May 2023, the Company purchased two new trucks and financed the purchase through an auto loan. The loan has a term of 60 months, requires monthly payments of approximately $4 thousand, and bears interest at a rate of 7.55% per year. Payment on the loan began in July 2023, and the loan has a short-term balance of $40 thousand. In March 2024, the Company purchased a forklift and financed the purchase through an auto loan. The loan has a term of 60 months, requires monthly payments of approximately $661, and bears interest at a rate of 6.54% per year. Payment on the loan began in February 2024, and the loan has a short-term balance of $6 thousand. In April 2024, a second forklift was purchased and financed through an auto loan. The loan has a term of 60 months, requires monthly payments of approximately $1,661, and bears interest at a rate of 7.89% per year. Payment on the loan began in April 2024, and the loan has a short-term balance of $14 thousand.

Legal Matters:

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 30, 2024, after consulting with legal counsel, management believes there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

Other Commitments:

The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, software licenses, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company.

There was no Federal income tax expense for the nine months ended September 30, 2024 or 2023 due to the Company’s net losses. Income tax expense represents the minimum state taxes due. As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established to offset all deferred tax assets as of September 30, 2024 and no benefit has been provided for the quarter-to-date loss. On a quarterly basis, the Company evaluates the positive and negative evidence to assess whether the more likely than not criteria have been satisfied in determining whether there will be further adjustments to the valuation allowance.

Committed Equity Facility

In 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC under which the Company issued 281,157 shares for approximately $3.0 million. As consideration for B. Riley’s commitment to purchase shares of the Company’s common stock, the Company issued B. Riley 10,484 shares of its common stock in both September 2022 and April 2023. The facility was terminated on October 1, 2024.

The Company issued 281,157 shares under the Purchase Agreement for $3.0 million in proceeds, of which $0.5 million was offset by the offering costs as of September 30, 2024.

Stock Options

Option activity for the nine months ended September 30, 2024 is as follows:

The stock options terminate ten (10) years from the date of grant or upon termination of employment.

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the table below and we assumed there would not be dividends paid during the life of the options granted during the nine months ended September 30, 2024 and 2023:

The Company’s stock option compensation expense was $0.2 million and $0.4 million for the three and nine months ended September 30, 2024, and $0.1 million and $0.3 million for the three and nine months ended September 30, 2023. There was $1.8 million of total unrecognized compensation costs related to outstanding stock options at September 30, 2024 which will be recognized over 4.0 years. Total intrinsic value of options outstanding and options exercisable were $18 thousand and $0.2 million, respectively, as of September 30, 2024. The number of shares of common stock underlying stock options vested and unvested as of September 30, 2024 were 355,034 and 348,624, respectively.

Restricted Stock Units

In November 2022, the Company granted 142,500 restricted stock units (“RSUs”) and up to 142,500 performance stock units (“PSU”) to its Chief Executive Officer (“CEO”). For the RSUs, 50% vested upon the grant date, 25% vested on February 1, 2024 and 25% will vest on February 1, 2025. The number of shares that will be earned under the PSUs will be determined based on the achievement of specific performance metrics during the three-year period ending December 31, 2024.

142,500 PSUs and 35,625 RSUs remain outstanding as of September 30, 2024, with weighted-average grant-date fair values of $13.05 each.

Stock compensation expense related to the RSUs and PSUs was $0.3 million and $0.9 million during the three and nine months ended September 30, 2024, with $0.5 million in unrecognized stock compensation expense remaining to be recognized over 5 months as of September 30, 2024.

Restricted Stock Awards

The Company issues restricted stock to its non-employee members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters.

The Company also previously issued restricted stock awards to its CEO, for which generally 50% of the shares granted vest ratably over four quarters and the remaining 50% vest ratably over twelve quarters. The common stock related to these awards are issued to an escrow account on the date of grant and released to the grantee upon vesting. The fair value is determined based on the closing stock price of the Company’s common stock on the date granted and the related expense is recognized ratably over the vesting period.

A summary of activity of the restricted stock awards for the nine months ended September 30, 2024 is as follows:

Stock compensation expense related to restricted stock awards was $0.4 million and $0.3 million during each of the nine months ended September 30, 2024 and 2023 respectively.

As of September 30, 2024, there were unvested shares of common stock representing $0.1 million of unrecognized restricted stock grant expense which will be recognized over 3 months.

Warrants

In 2023, the Company issued warrants to purchase up to 200,000 shares of the Company’s common stock at a price per share equal to $17.00 to a consultant for services to be provided over a five-year period. The warrants were immediately exercisable but are subject to repurchase by the Company until the required service is provided. The fair value of such warrants was $8.05 per share or $1.6 million on the date of grant using the Black-Scholes option-pricing model. This model incorporated certain assumptions for inputs including a risk-free market interest rate of 3.86%, an expected dividend yield of the underlying common stock of 0%, expected life of 2.5 years and expected volatility in the market value of the underlying common stock based on our historical volatility of 99.6%. The fair value of the warrants was recorded to prepaid expenses and other current assets to be recognized over the service period. During the nine months ended September 30, 2024, $0.2 million was recorded as expense and $1.1 million of cost has not been recognized and will be recognized over the next 3.5 years.

A summary of activity of warrants outstanding for the nine months ended September 30, 2024 is as follows:

Exercisable warrants as of September 30, 2024 have a weighted average remaining contractual life of 3.5 years. The intrinsic value of the exercisable shares of the warrants at September 30, 2024 was $0.0. Warrants to purchase 282,334 shares of common stock at an exercise price equal to $6.30 which were issued in our 2019 public offering expired on April 18, 2024.

For each of the identified periods, revenues are categorized as follows (in thousands):

Percentages of our revenues derived from customers located in California during the three months ended September 30, 2024 and 2023 were 21% and 14%, respectively. During the nine months ended September 30, 2024 and 2023, California customer revenues were 25% and 28%, respectively. Our international sales represented 20% and 8% of revenues in the nine months ended September 30, 2024 and 2023, respectively.

At September 30, 2024 and December 31, 2023, deferred revenue was $1.6 million and $1.2 million, respectively. These amounts consisted mainly of customer deposits in the amount of $1.0 million and $0.7 million for September 30, 2024 and December 31, 2023, respectively, and prepaid multi-year maintenance plans for previously sold products which account for $0.9 million and $0.5 million for September 30, 2024 and December 31, 2023, respectively, and pertain to services to be provided through 2031.

Management has evaluated events that have occurred subsequent to the date of these condensed consolidated financial statements and has determined that no such reportable subsequent events exist through date of filing. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.