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 clean-technology innovation company headquartered in San Diego, California with factories in the U.S. in San Diego, California and Broadview, Illinois and in Europe in Belgrade and Kraljevo, Serbia. We develop, design, engineer, manufacture, and sell high-quality, renewably energized infrastructure products for electric vehicle (“EV”) charging, infrastructure for Smart Cities (the interconnected physical and digital elements within a city that utilize technology to enhance efficiency, sustainability, and quality of life for residents), energy security and disaster preparedness and highly energy-dense battery solutions in safe, compact and unique form-factors. Additionally, we manufacture steel structures with electronic integration such as street lighting, cell towers and energy infrastructure products as well as power electronics including invertors, charge controllers, power supplies and LED lighting. Beam’s energy storage products provide high energy density in 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 ended March 31, 2025 and 2024, and our financial position as of March 31, 2025, 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, 2024. The December 31, 2024 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, 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

Recent pronouncement not yet adopted

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 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 deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through March 31, 2025. As of March 31, 2025, approximately $1.5 million of the Company’s cash deposits were greater than the federally insured limits.

Major Customers

For the three months ended March 31, 2025, one customer accounted for 12% of total revenues and for the three months ended March 31, 2024, two customers accounted for 30% and 18% of total revenues, each with no other single customer accounting for more than 10% of revenues. At March 31, 2025, accounts receivable from one customer accounted for 15% of total accounts receivable and at March 31, 2024, accounts receivable from three customers accounted for 22%,18% and 14% 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 March 31, 2025 and 2024, the Company’s concentration of sales to federal customers represented 14% and 58% of revenues, respectively and the concentration of sales to state and local governments represented 33% and 26% of revenues, respectively.

Foreign Operations

The following summarizes key financial metrics associated with the Company’s continuing operations:

Impairment of Goodwill

The Company operates as one operating segment and reporting unit and therefore evaluates goodwill for impairment as one singular reporting unit annually during the fourth quarter or more often when an event occurs, or circumstances indicate the carrying value may not be recoverable. The determination of the fair value of the reporting unit requires us to make significant estimates and assumptions. Due to the inherent uncertainty involved in making these estimates, actual future results could differ. Changes in assumptions regarding future results or other underlying assumptions could have a significant impact on the fair value of the reporting unit.

During the three months ending March 31, 2025, the Company continued to experience a decline in its stock price resulting in the total market value of its common stock outstanding (“market capitalization”) being less than the carrying value of the reporting unit. Management believes this decline in market value is due to a variety of factors, as further described below. Considering the circumstances and indicators of potential impairment described above, management performed an interim quantitative goodwill impairment test as of March 31, 2025. Management first considered whether any impairment was present for the Company’s long-lived assets, concluding that no such impairments were present. The Company does not have any indefinite lived assets other than goodwill.

The Company concluded that the sustained stock price decline in the Company’s common stock and its market capitalizations as of March 31, 2025 is a triggering event which requires us to perform a quantitative goodwill impairment test. We determine the value of goodwill largely based on our stock price. The results of the Company’s test for impairment of goodwill as of March 31, 2025, utilizing recent trends in stock price over a reasonable period, indicated that the fair value of goodwill fell below its book value. Based on the results of the goodwill impairment procedures, the Company recorded a $10.8 million goodwill impairment for the single reporting unit during the three months ended March 31, 2025.

Accounts Receivable

The Company does business and extends credit based on an evaluation of each customer’s financial condition, generally without requiring collateral. 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. Exposure to losses on receivables is expected to vary by customer due to the financial condition of each customer. The Company estimates future credit losses based on the age of customer receivable balances, collection history and forecasted economic trends. The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. A summary of the allowance for credit losses for the three months ended March 31, 2025 and December 31, 2024:

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 March 31, 2025. The Company had Level 3 liabilities as of March 31, 2025. There were no transfers between levels during the reporting period.

Significant Accounting Policies

During the three months ended March 31, 2025, 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, 2024.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock consists of the incremental shares of common stock issuable upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.

The following shares were not included in the computation of 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 $15.5 million (which includes $12.5 million of non-cash expenses) and $3.0 million (which includes $1.1 million of non-cash expenses) and net cash used in operating activities of $1.8 million and $3.0 million for the three months ended March 31, 2025 and 2024, respectively.

At March 31, 2025, the Company had a cash balance of $2.5 million and working capital of $10.8 million. Based on the Company’s current operating plan and the available working capital that it believes can be converted to cash (specifically the accounts receivable balance of approximately $7.1 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.

On April 11, 2025, the Company entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc., pursuant to which the Company has the right, but not the obligation, to sell up to $8 million in shares of its common stock, subject to certain terms and conditions.

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, our gross profit improves 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.

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 “Telcom Agreement”) with the owners (the “Telcom 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 Telcom 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 Telcom Sellers a purchase price equal to EUR 815,298 which was paid to the Telcom 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 Telcom 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 “Telcom Earnout Consideration”). The Telcom Earnout Consideration that the Telcom Sellers are eligible to receive for 2024 was equal to the amount the net revenue of Telcom (“Telcom Net Revenue”) exceeded EUR 850,000 for 2024 up to the Earnout Cap. The Company issued 27,836 shares of stock valued at $0.1 million as payment for the 2024 Telcom Earnout Consideration. The Telcom Earnout Consideration was less than the Earnout Cap, and the Telcom 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 Telcom Earnout Consideration for 2024 and 2025, in the aggregate, exceed the Earnout Cap. The Telcom 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 Telcom Sellers receive from Beam or will Beam issue to the Telcom 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 Telcom 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 Telcom 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 three months ended March 31, 2025 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 Company believed it to be probable that the maximum amount of Telcom Earnout Consideration would be earned and therefore accrued the full amount in the opening balance sheet. The estimated fair values were assigned to identifiable assets acquired and liabilities.

Pro Forma Unaudited Financial Information

The following unaudited pro forma financial information summarizes the combined results of operations of Beam Global and Telcom as if the company had been acquired as of the beginning of the three months ended March 31, 2024 (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 three months ended March 31, 2024. 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 three months ended March 31, 2024 includes revenues of $0.2 million and income from operations of $8 thousand from the acquired Telcom business.

Prepaid expenses and other current assets are summarized as follows (in thousands):

Inventories are stated at the lower of cost and net realizable value. Costs are determined using the first in-first out (FIFO) method. As of March 31, 2025 and 2024, inventory consists of the following (in thousands):

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

Depreciation expense during the three months ended March 31, 2025 and 2024 was $0.7 million for both years. For the three months ended March 31, 2025 and 2024, depreciation expense recognized in Operating expenses was $0.1 million in both years and $0.6 million and $0.1 million in Cost of Goods Sold, respectively.

The following table presents the Company's goodwill asset:

Intangible assets, net, as of March 31, 2025 and 2024 consists of the following (in thousands):

Amortization expense for each of the three months ended March 31, 2025, and 2024 was $0.2 million. Amortization expense for intangible assets held as of December 31, 2024, will be $1.0 million for each of the years 2025 – 2028. Amortization expense recognized in Operating expenses for the three months ended March 31, 2025 and 2024 was $0.1 million and $0.2 million in Cost of Goods Sold, respectively.

The major components of accrued expenses and long-term liabilities are summarized as follows (in thousands):

Acquired long-term liability of $3.4 million consists of a restructuring debt settlement from the acquisition of Amiga. Approximately $0.5 million is current and included in other accrued expenses and the rest is categorized in long-term liability. The debt restructuring was entered into in 2021 for a nine-year term with five years and 9 months remaining at March 31, 2025. Payments are interest free, not secured, and due quarterly as a percentage of the remaining balance due. $23 thousand consists of non-current liabilities related to the acquisition of Telcom. Approximately $32 thousand is current and included in other accrued expenses and the rest is categorized in long-term liability.

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 $43 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:

The Company may from time to time become party to actions, claims, suits, investigations or proceedings arising from the ordinary course of our business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims and other matters. Any litigation could divert management time and attention from the Company, could involve significant amounts of legal fees and other fees and expenses, or could result in an adverse outcome having a material adverse effect on our financial condition, cash flows or results of operations. Actions, claims, suits, investigations and proceedings are inherently uncertain, and their results cannot be predicted with certainty. We are not currently involved in any legal proceedings that we believe are, individually or in the aggregate, material to our business, results of operations or financial condition. However, regardless of the outcome, litigation can have an adverse impact on us because of associated cost and diversion of management time. As of March 31, 2025, 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 three months ended March 31, 2025 or 2024 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. As of March 31, 2025, 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.

At Market Issuance Sales Agreement

On April 11, 2025, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley”), pursuant to which the Company has the right, but not the obligation, to sell shares of their common stock having an aggregate offering price of up to $8 million, subject to certain terms and conditions.

Stock Options

Stock options may be granted to new and existing employees and other eligible participants under the Company’s equity incentive plan. New employee option grants generally have a term of ten years and vest ratably over four years.

Option activity for the three months ended March 31, 2025 is as follows:

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock based on our historical volatility. The Company uses the simplified method to estimate the expected term. The expected term of stock options granted to employees is equal to the contractual term of the option award. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate.

There wereno option grants in the three months ended March 31, 2025.

The Company’s stock option compensation expense was $0.1 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively, and there was $1.3 million of total unrecognized compensation costs related to outstanding stock options at March 31, 2025 which will be recognized over 3.5 years. There wereno options issued or exercised in the three months ended March 31, 2025. The number of stock options vested and unvested as of March 31, 2025 were 395,531 and 255,373, respectively. Stock-based compensation expense is generally included in selling, general and administrative expenses in the consolidated statement of operations.

Restricted Stock Units

In November 2022, the Board approved a stock grant under the Company’s 2021 Equity Incentive Plan, consisting of (i) a one-time grant of 142,500 restricted stock units (“RSUs”) and (ii) a target number of 142,500 performance restricted stock units (“PRSUs”) to further incentivize and align the CEO’s interest with the Company. For the RSUs, 50% vested upon the grant date, 25% vested on February 1, 2024 and 25% vested on February 1, 2025. The number of shares issuable under the PSUs were determined based on the achievement of performance metrics specific to the Company that were measured at the end of fiscal year 2024. The fair value of both the RSUs and PSUs were based on the stock price of $13.05 per share on the date of grant. The PSUs were reviewed to determine estimated performance over the term and then a factor was applied ranging from 0% to 150% of the grant date fair value. As of December 31, 2024, based on the specific performance metrics set by the Company, the target number of shares underlying the PSUs was increased by 44,531 shares of common stock for a total of 187,031 shares granted under the PSU. There have been no further grants as of the three months ended March 31, 2025.

A summary of activity of the RSUs for the three months ended March 31, 2025 is as follows:

Stock compensation expense related to restricted stock units was $35 thousand during the three months ended March 31, 2025. Stock compensation expense related to performance stock units was $0.2 million during the three months ended March 31, 2025. There areno further unrecognized stock compensation expenses remaining to be recognized at this time.

Restricted Stock Awards

The Company issues restricted stock awards to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four 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 three months ended March 31, 2025:

Stock compensation expense related to restricted stock awards was $0.1 million for the three months ended March 31, 2025 and $6 thousand for the three months ended March 31, 2024. Fair values of restricted stock vested during each of the three months ended March 31, 2025 and 2024 were $0.1 million and $2 thousand, respectively.

As of March 31, 2025, there were unvested shares of common stock representing $0.3 million of unrecognized restricted stock grant expense which will be recognized over 9 months.

Warrants

During the three months ended March 31, 2025, the Company had exercisable warrants to purchase up to 200,000 shares of the Company’s common stock at a price per share equal to $17.00 issued to a consultant for investor relations services to be provided over a five-year period starting in March 2023. The warrants are 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%, 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 warrant was recorded to prepaid expenses and other current assets to be recognized over the service period. During the three months ended March 31, 2025, $0.1 million was recorded as expense and at March 31, 2025, $1.0 million of cost has not been recognized and will be recognized over the next 3 years. These warrants are not cashless and expire on March 31, 2028.

A summary of activity of warrants outstanding for the three months ended March 31, 2025 is as follows:

The warrant outstanding as of March 31, 2025 expires in March 2028. The intrinsic value of the shares of common stock underlying the warrants at March 31, 2025 was $0.00.

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

The following table disaggregates gross revenue from our clients by significant geographic area for the three months ended March 31, 2025 and 2024:

During the three months ended March 31, 2025 and 2024,14% and 58% of revenues were derived from federal customers, while 33% and 26% were from state and local governments, respectively. In addition,25% of revenues in the three months ended March 31, 2025 were sales made outside of the United States compared to 11% in the prior year.

At March 31, 2025 and 2024, deferred revenue was $1.9 million and $1.5 million, respectively. These amounts consisted mainly of customer deposits in the amount of $0.7 million and $0.9 million for March 31, 2025 and 2024, respectively, and prepaid multi-year maintenance plans for previously sold products which account for $1.2 million and $0.6 million for March 31, 2025 and 2024, respectively, and pertain to services to be provided through 2035. Revenue recognized during the three months ended March 31, 2025 and 2024 which pertained to revenue deferred in prior years was $48 thousand and $27 thousand respectively.

The balance of contract assets is driven by the difference in timing of when revenue is recognized from performance obligations satisfied in the current reporting period and when amounts are invoiced to the customer. The balance of contract liabilities is driven by the difference in timing between when cash is received pursuant to a contract and when the Company’s performance obligations under the contract are satisfied.

The following table provides the activity for the contract liabilities recognized (in thousands):

The Company has a single reportable segment focused around providing clean-technology innovation focused on providing high-quality, renewably energized products. The Company’s chief operating decision-maker (the “CODM”), who is the Chief Executive Officer, assesses performance for the reportable segment and decides how to allocate resources using net income (loss) as the primary measure of profitability. The CODM is not regularly provided with specific segment expenses, but focuses on revenue, gross profit, and net income. Expense information, including cost of sales, can be easily computed from the provided information. These segment (and consolidated) measures of profitability are shown in the statements of operations. The measure of segment assets are reported on the balance sheets as total assets.

The continuing impacts of rising interest rates, inflation, changes in foreign currency exchange rates and geopolitical developments, such as the imposition of tariffs and shifts in international alliances, have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by the Company’s clients and as a result, the Company, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time. Additionally, recent changes to U.S. policy implemented by the U.S. Congress, and the Executive Branch and the responses of other nations to such actions have impacted and may in the future impact, among other things, the U.S. and global economy, international alliances and trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. As a result of the current uncertainty regarding economic activity, the Company is unable to predict the size and duration of the impact of its revenue and its results of operations, if any, of actions taken to date and those that may occur in the future. The extent of the potential impact of these macroeconomic factors on the Company’s operational and financial performance will depend on a variety of factors, including the extent of geopolitical disruption and its impact on the Company’s clients, partners, industry and employees, all of which are uncertain at this time and cannot be accurately predicted. The Company continues to monitor the effects of these macroeconomic factors and intends to take steps deemed appropriate to limit the impact on its business.

There can be no assurance that precautionary measures, whether adopted by the Company or imposed by others, will be effective, and such measures could negatively affect its sales, marketing, and client service efforts, delay and lengthen its sales cycles, decrease its employees’, clients’, or partners’ productivity, or create operational or other challenges, any of which could harm its business and results of operations.

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.