Q2 2022 Beam Global Earnings Call

Good afternoon, and welcome to the beam Global second quarter, 2022 financial results and corporate update conference call.

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Note. This event is being recorded.

I would now like to turn the conference over to Kathy Mcdermott C. F. O. Please go ahead.

Thank you.

Good afternoon, and thank you for participating in <unk> conference call for the second quarter of 2022 and.

We appreciate your time today to join US for this call joining me it doesn't really president CEO and chairman of the board.

That's not what you're providing an update on the recent activities that team followed by a question and answer session.

But first I'd like to communicate to you that during this call management will be making forward looking statements, including statements that address beams expectations or future performance or operational results.

Looking statements involve risks and other factors that may cause actual results to differ materially from those statements.

More information about those risks please refer to the risk factors described in <unk>. Most recently filed Form 10-K, and other periodic reports filed with the SEC.

The content of this call contains time sensitive information that is accurate only as of today August 12, 2022, except by required except as required by law being disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.

Next I'd like to provide an overview of our financial results for the second quarter ended June 30th 2022.

For the second quarter of 2022, we reported record Q2 revenues of $3 7 million, a 75% increase over 2.19 reported second quarter 2021.

We also reported record first half revenues of $7 5 million, a 114% increase over $3 5 million reported in the first half of 2021.

During the first half.

I've got 4 million increases in revenue $1 8 million was for our newly acquired battery storage business.

1.8 million was for increased shipments in federal state and local governments and the balance consisted primarily of shipments to enterprise customers for fleet vehicles or workplace charging.

Gross loss in the quarter ended June 30th 2022 was point 3 million flat with the same period in 2021.

But the first half of 2022, we reported a gross loss of <unk>.

It's nothing compared to point 4 million for the first half of 2021.

The gross loss improved by four percentage points in the second quarter and year to date compared to the prior year as a result of the increased production volume.

I'll think unfavorable fixed overhead absorption and improved labor efficiency and utilization do.

These savings were partially offset by higher material costs for steel and other component you just supply chain shortages and other inflationary pressures.

Operating expenses were $2 5 million for Q2, 2022 compared to $1 4 million for Q2 2021.

For the first half of 2022, we reported $4 5 million for operating expenses compared to $2 5 million for the first half of 2021.

Decreased as a percentage of revenue of 11 percentage points.

The increases were primarily due to the addition of our new battery storage business.

And increased legal and accounting services, partially due to the acquisition.

The net loss was $2 3 million or 28 cents per share, but the second quarter of 2022 compared to $1 6 million or <unk> 10 per share for the second quarter of 2021.

The net loss for the first half was $5 1 million or 52 cents per share compared to $2 9 million or 33 cents per share for the first half of 2021.

At June 30 of 2022, we had cash of $13 8 million compared to $21 9 million at December 31 2021.

Cash decrease was primarily from operating activities and the cash payment for working capital for the purchase of all cell technology.

Included in the operating clash cash usage year to date, we increased inventory purchases and increased prepayment to vendors for inventory to reduce the rest of the potential shortages of cells required for battery manufacturing as well as an increase in work in process inventory of EDI, arguing it do.

These increases are not expected to be ongoing quarterly cash requirement.

Our working capital decreased from $24 6 million at December 31, 2021 to $19 4 million at June 32022.

And with that I'm going to turn the call over to Jasmine to give you an update on the business.

Doesn't it.

Yeah.

Well, thank you Cathy.

Thank you everybody else for joining us today for this call.

I'm going to just start out by.

Reminding all of you are suddenly introducing those who joined.

Joining us for one of these calls before that we are in the flight path for the Marine Corps Air station in my remarks, but it's only about miles the crow flies from that air base from time to time, we will get fly all birch during this call and it's a very large one that I was wondering if when and if it does happen just expect me to stop talking and I'll wait for them to fly over time.

15 seconds, and then I'll I'll start right back up where I left off don't don't worry if you hear a very loud noise. That's oh that's it.

Well, we've had another very fruitful quarter, that's being global setting new records in revenue sales growth and pipeline goes well.

We've also increased our efficiencies reduced our cost per unit produced and improved gross profitability on that call stability in both the second quarter and the first half of this year.

We've made significant advances in the integration of our recently acquired battery company in Chicago and I'm Happy to report that in addition to the other good work. We're doing there we're now starting to produce our own proprietary battery systems and installing them in the latest Ive Yorks, which are currently being shipped to our customers at a greater rate than any time in our history.

The level of attention that being global is now receiving state governmental levels and also importantly in Washington D. C is higher than it's ever been.

That's being matched by a significant increase in attention from the media.

I recently met with congressmen and ranking officials from the department of energy and transportation.

Years ago, I might have had a hard time getting a junior staff to take my call.

Essentially the advances that both we and the understanding of what we do and why we do it you have made.

I'm also personally been interviewed by publications like the Wall Street Journal C. N N, Inc magazine, Politico or any other trade and industry publications.

We have previously been globus products might've been viewed as interesting niche solutions for a small minority of EV charging requirements. The attributes which are embedded in our value proposition such as rapid and highly scalable deployment a secure source of energy during grid oxo juice, a low total cost of ownership and divorced style and flexible means to increase elect.

Cool by state.

Supported by the Giants and centralized grid are now being viewed as essential by regulators policymakers and importantly, purchasers both governmental and corporate.

The EV industry is really taking off and the general global perception of energy and it seems stability along with climate change exacerbated by the war in Ukraine, and the heat waves as far as being experienced all across Europe Asia, and the United States tragic as they are are increasing awareness and acceptance of products, which clearly reduces the risk from both energy and secured.

On climate change.

Being global is rapidly deployed and renewable energized portfolio of products a poster children. So the new era of increased emphasis on clean reliable secure and domestically produced energy.

And as a means to actually provide the massive amounts of publicly available at vehicle charging that will be required over the next couple of decades.

Now, let's take a look at some numbers.

In Q2, Scott said, we generated more revenue than in any second quarter.

And actually the second highest revenue of any quarter in our history.

75% increase over Q2 of 2021.

That continued to trend we sat in the first quarter of this year, resulting in first half revenues, which are I'm getting 14% greater than the first half prior year and actually greater than any full year's revenue in our history, except for last year.

So at the midpoint of the year with six months left to go we'd already generated over 80% of 'twenty, one 2021 full year revenue.

Not year was 144% of our previous record year.

Perhaps you can start to detect a pattern here.

I believe that we will see an increase in momentum during the remainder of this year. So naturally I'm feeling enthusiastic about our future both short and long term.

We're operating in a period of unprecedented inflation and supply chain challenges and yet in the second quarter and indeed throughout the first half of 'twenty to 'twenty, two we improved our gross profitability by over 4%.

Improvements of net profitability were over 14% during the first song.

No remember that during that period, we closed the acquisition of our Chicago based battery company and commenced the integration of the two entities.

Integrating our new acquisition is never easy it's inevitably leads to increases in overhead costs, albeit often one time increases.

That's certainly been our experience in this at this time and yeah, we've actually reduced our net loss as a percentage of revenue while undertaking this challenge.

So looking at gross profitability and that profitability you can see that we were able to improve both even in the face of the extraordinary activity of the integrating an acquisition and during a period the most severe inflation and supply chain challenges certainly in the last 40 years.

I have consistently committed to improving our gross margins and our bottom line as volumes increase.

The beam team has consistently made a reality.

Once that I've made on their behalf.

Our use of cash during Q2 was much higher than in previous quarters, but let's be absolutely clear about what this means and what actually happened.

The increase in the use of the cash was not the result of excessive and propagate your increases in overhead spending far from it.

Reading our filings you'll notice that of the $7 4 million of cash we used in Q2 $3 6 million was spent on inventory work in process products largely partially completed Ive, you ask which were already sold and.

And importantly, the strategic allocation of cash to secure voice will battery cells, which are essential to our EV charging product production and to our broader battery manufacturing business.

Anybody who reached the newspaper will know that supply chain constraints, where battery cells are concerned for real.

We used cash to defend against risks associated with these supply chain constraints and we put ourselves in a position of security for the foreseeable future even in the face of the significant increase in demand for our products, which we're experiencing.

It's important to point out that using cash in this way it is.

The same is burning it on overheads, because any cash we use in this manner will be returned to us as cash when we take revenue on the products reduce as a result of work in progress inventory and the prepayments that we've made to vital suppliers.

Well this is not a condition, which I anticipate will endure.

While there is a supply demand imbalance today I'm confident that that imbalance will be corrected in the future.

In any event our use of cash in the second quarter was composed of many non typical events and actual cash burn not related to cost of goods sold was fairly consistent with our history.

We remain highly frugal with I would say almost unrivalled discipline, where overhead spending is concerned.

If you visited my office could happily attached to that.

A quick glance at our working capital position should remove any doubt about the veracity of my comments on this matter and demonstrate that we still need not be concerned about running out of money.

But if you want more detail or color on this matter don't hesitate to raise it during the Q&A session or if you prefer get in touch with us after the call I or coffee would be happy to discuss the merits of it.

The <unk> team has worked very hard to mitigate the impacts of the various supply chain challenges, which have confronted us during the last 12 months in particular.

It's been hard work and required their professionalism and commitment to ensuring the challenging as it is we do not allow it to prevent us from shipping product and generating revenue.

Well, we I had many eyebrow raising moments none have been more acute than those we've experienced with the battery supply chain.

Any of you who listened to my explanations of the wisdom of making our battery company acquisition, well know that one of the significant factors, which drove me to execute or not excellent transaction with my determination to insulate us from the battery supply chain constraints I anticipated.

Hindsight is more than validated my premonition.

We've struggled this year to acquire sufficient battery packs from our prior supplier to meet the ever increasing demand for our products.

While we manage through the shortfall our Chicago based battery team has been working with urgency to engineer and manufacture a new a superior product for our ETR.

<unk>.

This is a process, which is much more complex than many may imagine.

Creating a safe.

And cost of back test battery pack system is not the same as pumping a few double ease into a flashlight.

Complex and difficult and it requires a highly experienced team like the one that came with our acquisition.

This of course is a significant differentiator for us.

While there are increasing numbers of traditional electric vehicle charging infrastructure companies, who are attempting to integrate battery storage with their grid tied installations. We are the only company that I'm aware of has its own proprietary energy storage solutions.

Yeah.

The first of our new battery packs are now being shipped from Chicago facility and they're being installed in the later C V arcs, which were shipping to customers.

The transition was not seamless there've been periods during which we've had otherwise completed E. B auction what are you seeing as our San Diego facility for battery packs.

Let's go some way to explaining the larger than normal work in progress inventory, which would I don't have it.

The good news is that we're solving these problems and we fully anticipate that our Chicago team will catch up and keep pace with the increasing velocity, which we're having to produce E V O X systems.

We've not lost any orders as a result of these delays, but the revenue did move right.

This increased pace of DVR production is impressive.

Our existing team has more or less double the number of systems. They are able to produce just six months ago.

A strong indication of how much more efficient we can become as a revenue per employee has increased by six third by 34% over Q2 of 2021 and it's almost double what it was in Q2 of 'twenty 'twenty.

Said another way, while we're dramatically increasing our output where do so doing so without dramatically increasing the head count and of course, we're getting even more leverage from our fixed overhead costs.

Another area, where we've seen skyrocketing inflation is in the cost of transportation cost to deliver our products and also to receive the components and raw materials that go into them.

While we cannot impact the cost of incoming transportation, except by increasing our volumes of course, which we're doing we've been able to positively impact the way, we transport our product to our customers.

Now the beautiful video, which shows our latest advanced and delivery technology.

Single operates are transporting not one, but two review, Oxford customer site and deploying them before returning to the factory.

Remember that we can integrate as many as six charters onto a single leave yard and then consider beam global's impact on an industry that requires teams of contractors electrical workers consultants engineers and permitting specialists to spend weeks or months deploying a grid tied charter.

This new video shows a single beam employee to point to me the art systems, which are capable of counting as many as 12 Chargers and a couple of hours with no on site activity or disruption for our customers.

Look for that video soon on our website, it's really fantastic.

Our production and revenues are up because of course sales are up and this is probably the most exciting part of the beam story at the moment.

The second quarter, we had over $10 million in contracted backlog.

This is a significant increase over the highest backlog that we've reported or indeed hot anytime in our history.

It's greater than any full year's revenue we've ever reported.

At the same time, our sales pipeline has also increased to a new record of over 120 minutes.

We keep getting more and more conservative about what we consider as active pipeline and yet the number continues to increase dramatically.

The combination of increasing revenue backlog and pipeline has never been Bachelor.

The investments we've made in adding salespeople increased marketing efforts in particular and government relations.

Due to the school, but in my mind more importantly positioned us for what I believe will be dramatic and accelerating growth for the foreseeable future.

Just looking at anticipated federal spending on electric vehicle charging infrastructure in clean energy and remembering that we have a GSA contract in place under blanket purchase authority. The federal agencies can use to acquire products might give a reasonable person calls to suspect that being global will see significant growth in that area alone.

But the fact is the federal spending commitments, while they're dramatically increase this year, particularly now that they are a has passed the Senate.

The only one contributing factor to our future growth.

We're seeing increased spending across the board, both governmental and corporate levels.

There may be a recession coming.

And not to be bad news for lots of companies, but it might have the opposite effect for us.

Very little if any of the pipeline revenue that we will be impacted by a recession might even supported it.

At the same time availability of labor will increase in commodities raw materials, and contributing parts will be reduced demand, which should make them easier for us to secure what possibly reducing their costs as well.

It feels good to have a business that should not be impacted by a recession.

We could end up being one of the few bright spots in an otherwise pretty dim 'twenty two 'twenty three.

Your commitment to binding to sale of internal combustion engine vehicles in 'twenty or do you feel like there's been a wake up call to the entire industry.

Automotive Oems will not be able to produce internal combustion engine vehicles for North America on electric vehicles for Europe now in this day and age.

There are about $1 4 billion cars on the world's largest today moving to 2 billion by 'twenty two.

The United States, there are about 300 million of them.

You need one publicly available charging plug for every five electric vehicles on the road simple.

Simple arithmetic shows that the United States will need something in the order of 60 million plugs in the coming decades.

Well, let's say, we have the luxury of four decades to deploy all these flux, which still need to install about 1 million a year every year for 40 years.

Being global has the most rapidly deployed scalable made in America infrastructure solution available to date, and we power and equality behind a charger.

That will certainly be a mixture of solutions required to provide all the charging infrastructure and energy required, but with our unique attributes I do not anticipate any decrease in the velocity of our growth for a long time to come.

I think we're gonna be very very busy.

Our sales are not just coming from EV charging solutions. This is another area of growth, which is exciting and it has to be battery systems.

Recently, we sold our delivered batteries to companies that produce or operate drones medical devices, EV Chargers industrial real boss personal watercraft electric aircraft and material handling equipment.

These organizations and uses are as diverse and broad is the requirement for safe energy dance and long live battery solutions.

While our battery company acquisition is important to our EV charging infrastructure pulled up business. It's also opening up a whole new universe of strategic revenue opportunities in the energy storage ecosystem.

These opportunities are supportive of our renewable energized charging business, because just about anybody who integrates batteries into their product needs to have a clever way of charging them.

But they also provide another what I believe will be significant growth for being global.

We continue to pursue the sponsorship opportunity about which Ive said so much in the past.

I was hoping you one update which I believe will help me to understand why continue to invest time and effort in this initiative.

On Monday of this week.

I welcome the team from one of the world's largest companies to our facility in San Diego.

They toured the factory and we discussed the opportunity.

This is the third visit by different teams with Representatives from this one very large company.

The basis of our discussions from day, one has been the sponsor driving on Sunshine network.

I cannot guarantee that we will secure a sponsor broad driving on Sunday Sunshine network, but I can report that we continue to be actively engaged with very large organizations, whose primary interest in us is driven by their interest in this initiative.

Until I see she used to be the case I will continue to drive the opportunity forward with the help of our partner the superlative Brook.

Still believe that it offers an excellent future source of highly profitable recurring revenue.

But as I've said before as I tried to have an opportunity to driving on Sunshine network is for US It has never been essential to our growth prosperity.

And continuing growth in our core business demonstrates that box.

As I've also said silver.

I Hope you are as an excellent and attainable opportunity.

Finally, I want to brief you on our continued international expansion plans.

In September all travel to Europe , and the Middle East for a series of meetings, which are intended to create fertile ground for expansion into both markets.

Successfully pulling this all will take time and work and I will not do it unless I'm convinced that we're positioned for success.

Nevertheless, Europe is the largest EV market in the world and arguably even more receptive to product solutions, which have the attributes we still uniquely possess.

We continue to secure patents in that market.

The combination of extreme weather events equally extreme vulnerability to traditional sources of energy that's had a significant impact on European receptivity to rapidly deploying infrastructure support to support electrification of transportation and reduce the reliance on traditional utility grid electricity.

Being global products salt for both opportunities.

The middle East, it's far less advanced where the adoption of electric vehicles is concerned. However, there is increasing interest in that part of the world for clean and sustainable solutions and Theres lots of cash to fund them.

With the right partners in place, who have relationships and credibility where infrastructure is concerned I believe that we can create some significant growth opportunities in that market.

Furthermore, it will provide a gateway to the rest of Africa, where large sums of capital are expected to be invested by the rest of the world and the transition to sustainable energy and transportation.

It's early days, yet where international expansion is a concern for us, but I want you to know that it's an extremely important area of focus for me and I intend to prosecute it with vigor.

We will of course provide updates through press releases filings and calls like this if and when we made material progress.

So.

To sum up.

Record revenues record sales record backlog record pipeline and.

An improvement in our gross and net profitability during exceptionally challenging times.

I've, often said that there's never been a better time to be being global and that's because we continue to break records provide growth and improve our execution. So simply truth. It really never has it been a Bachelor of science being global except the time that's coming.

Thank you all for your time and attention.

I return the call to the operator to coffee and take your questions.

Operator.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If you were using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Our first question is from Christopher Souther with B Riley. Please go ahead.

But I guess, you're taking my question here Hum.

Maybe just on the backlog the pipeline could.

Could you maybe a breakdown.

That between traditional products and the storage side, and then maybe within traditional being the mix between government and commercial customers trying to get a sense of where we are in some of the commercial customers coming back after COVID-19 slowdowns and how the backlog and pipeline are starting to bottom out here.

Yeah, so on the breakdown of backlog.

It's highly transient of course and I've I've mentioned this on previous calls before I actually think that backlogs are less useful metrics and pipeline and revenue because of course as we execute on backlog and convert to revenue it might never even show up in the reporting periods.

Highly finds it at the moment, it's probably 50 50.

Charging products to its energy storage products.

And you know we are seeing a significant return and increased two corporate backlog.

And our mix during Covid as you just pointed out we certainly saw a very significant reduction in non government revenue.

Revenue in backlog and I have to point out that even during that period, we never did reduce our revenues at all even though having lost more or less all of our.

Enterprise corporate spending them.

At the moment, we're seeing that that roaring back, but at the same time look it's we're heading towards the end of the third quarter.

Federal government spending a lot of the contracts are signed and closed out before September 30th or I would have to be done by September its aren't yet so I wouldn't be at all surprised to see a significant shift in favor of the charging products during that period and Ah Ah.

Hum.

It can increase I'm a I'm, obviously, that's what we're planning for but that's what the way it black break starting at the moment.

Okay, maybe the pipeline as well just a you know given that you know as well.

More meaningful here yeah, yeah the pipeline.

Yes.

Sorry, Chris I didn't mean to ignore that part of your question if I have to be honest agriculture.

The pipeline is actually more much more heavily weighted to the charging products.

So that's the stuff that you've been used to seeing beam selling them and you know.

That speaks a little bit to some of the comments I just made.

As I've said before in previous calls we are increasingly looking at very much larger orders, but very much larger product volumes associated with those orders and although we weight them heavily.

Nevertheless, there they are extremely impactful and it's.

It doesn't take more than one or two of those too dramatic a life altering impact on this company and of course, that's what we're working to two effect.

Got it no that's good to hear.

And then on the Vogtle construction equipment, but it seems like your partner could be very well suited. There can you just talk about the timing when do you think that could start to be meaningful maybe initial thoughts on how you size that specific opportunity or end market. You know understanding it's very early days here.

Yeah, so lots of precisely why I didn't mention it during my my comments I'm very very enthusiastic about that Volvo partnership with several aspects of Baidu, which I really like the first one obviously to have a company like bold will include us in their catalog and in their financing so that customers can bundle their products on hours under that one finite blanket that's a that's a.

I mean, there's there are many layers of value surrounding that it's a significant validation of what they think of our product and the future of the business. It's also a strong recognition of the fact that electric construction equipment without rapidly deployed E. B charging infrastructure that doesn't rely on the grid because remember butchy you when youre doing a construction site there.

And the electricity there most of the time, especially when you're moving dirt, which is what most of these machines are designed to do so so it's up strong recognition and validation of the idea of having a I.

Transportable and renewable energize product that generates and stores all of its own energy and those types of environments and can then be moved to the next construction site is a it's a very important part of our our value proposition. So all of those things are good why don't I don't mention it in my comments, because it's still a small market in the United States, but I'll tell you where it isn't a small market Europe .

Increasingly in Europe .

Green particulate pollution, the sort that you get from diesel and noise pollution, the sort that you get from diesel pollution diesel engines, it's becoming increasingly difficult to operate diesel equipment are in Europe , and I think that we're going to see an awful lot of growth and the deployment of that type of infrastructure, there and as I already mentioned in my comments I think that the European market will be the Morris.

After two our products than the U S market because you know they are more sort of green renewable energized minded, but beyond that because it's actually much much harder to do infrastructure in Europe , because the streets are older. There's a lot more antiquated stop around and everything else and then certainly in the western part of the United States. So part of what I'll be doing one of them in Europe asides from looking.

For.

Our advanced in my conversations with partners to expand over there we'll be looking at those sorts of opportunities and I think that's where it's going to we'll probably do more there and we really like states in the early days. However, I believe it is inevitable, but it will take over here and it's a multibillion dollar industry and we intend to take a good piece of it.

Got it.

I'll hop in the queue appreciate it.

Thank you.

The next question is from Tate Sullivan with Maxim Group. Please go ahead hi.

Hi, Hi, Good day. Thank you I am not I mean again at the backlog and an impressive number but I mean, the backing into the implied orders in the quarter I think get it also implied it's close to 10 did you have some customers that didn't allow you to disclose larger orders or was it just a wide variety of smaller orders within two.

So this is kind of an interesting question and it reflects a shift in the way that we are.

Reporting what we do in the past when we were getting fewer orders and they were smaller we tended to report all of them. However, that's changing that we are we're getting I mean, if I put a press release out every time I've got purchase alright be putting out press release everyday practically and in fact I.

The numbers for the second quarter bear that we saw.

Certainly at a purchase order every couple of days in the second quarter and so what we what we're trying to do now is do less of that because we don't want the broader market or the investment community want anybody to think that we are excited by a one or two you know order anymore.

Look we love every order that we get but we what we're trying to do now is reduce the number of press releases, we put out and maybe bundle suffered anything else. So you didn't see a lot of stuff because of that but rest assured that I and even by the way if we have a large and meaningful customer the drone.

Press release that we put out it's a perfect example of US we'd love to have named them, but they asked us not to.

And that's going to happen you know there are many customers, particularly the really large ones, the very well known and popular ones whose.

Whose brand is so valuable to them they don't even want us.

In our press releases, they quite often brag about what they're doing with us, but we are not allowed to so it's a combination of all those factors, but rest assured when when anything really big heads, we will still identify those with with press releases, but yes, youre going to see more of that youre going to see more revenue growth more order growth more backlog growth without an asset.

Certainly being able to add up all the press releases to get to it.

And then on the revenue composition into acute Kathy you mentioned in the press release 1.4 million from energy storage, but I heard you in your prepared remarks, you also broke it down between government customers in commercial can you give those numbers again please.

So that was part of that part.

Part of the increase in revenues 1.8 of that was the energy business that we didn't have in the prior year. So that was all in club and then we had $1 eight an increase and that federal state and local government area.

Hum.

The $4 million.

Enjoy it you have to go out.

Well I think what the astute and you're all astute listeners are going to figure out here is that the the the the.

And I mentioned it in my comments that we have an.

And it seems quite significant accumulated with work in progress group holds.

Essentially partially well all but complete E. B R systems that work because we had that.

That lack of smoothness in the transition from prior battery vendor, who were unable to keep up with our demand and the new engineered packages that were bringing over here.

Those would otherwise have gone to customers. So said another way we might have a much better quarter. If it wasn't for that imbalance now the good news is they haven't gone anywhere and we are now stopping batteries into them and shipping them out to customers and so as I said in my comments that revenue didn't go away. It just moved right.

And yeah, it will inevitably have future quarters.

Okay and last from me doesn't sorry, you went over some of the vertical for all cell I heard medical devices material handling drones.

What are some of the others that you mentioned as well too and it sounds like drone is just one of the many areas that you can go go and sell to tell you I'm not going to keep taking your questions have you keep referring to them as all cell, we're going through a lot of trouble and works to rebrand them as beam has been.

[laughter] beam Chicago, you can go out please okay.

Yeah, No. It's just it's fantastic I'm thrilled to death with it I mean, you know that.

As I said aircraft drones, wherein submersibles, we're in robots were in material handling.

In electric vehicles. It just it's just it's a fantastic a broad selection and if you think of it is not surprising I don't think we've even begun to scratched the tip of the iceberg on this new generation of small battery powered devices that people are going to expect to have around there in their lives.

Robot deliveries of groceries.

Something is going to bring your Budweiser from the French deal when you're sitting on the sofa.

They were gonna see more and more of this sort of roomba vacuum cleaner type thing if you like and then yes, I wont personal watercraft drones and all the other things like drones, obviously very interesting to us, particularly in light of the fact that we have are you a V arc.

Unmanned aerial vehicle reached recharging product, which is patented.

It's very broad and that's what I like about it and I was very clear with the Chicago team when we acquired them.

While it's important to me that they that they provide us with the best possible and.

Least expensive and most scalable battery storage solution for the products that we were already making it being that could not be at the expense of broadening revenues from the other aspects of their business because I want the revenue and the margin, but also because I'm going to I want the opportunity to get into all of those other businesses in a meaningful way. So it's I'm really thrilled to bits with it.

I think he doesn't thinking Kathy.

Thank you too.

The next question is from Amit Dayal with H C. W. Please go ahead.

Oh.

Good good Desmond. Thank you for taking my questions with respect to the battery business.

Okay.

Hey, Matt.

Sure.

And where do you could you mentioned do you need to spend more sort of R&D dollars.

Well I think that can actually you know what makes it different types of applications.

Yeah, not so much R&D dollars mm the many of the applications that we fulfill them. This is part of our of our differentiator frankly are highly specific to the product I mean, clearly it's quite a lot different to make the battery solution for a drone than it is for our electric surf board by the way that's one of the incredibly diverse products that we.

We put our batteries into nowadays.

It's different from a medical device and <unk> and all of those are different from stationary application like ours. So in each instance, there's a degree of of.

Bespoke nature to the battery pack, if you like and that that'll open requires little engineering and very often we bill for that where they put a specific customer that comes in however, that's not my ambition I'm not interested in that side of the business and what we are getting much much bachelorette and whats an area of major focus for us is figuring out how we can.

Mass produce solutions, which are versatile enough to solve a whole variety of different won't look to the customer like bespoke problems. So it's sort of like Lego if you like a different number of blocks and maybe different shaped blocks, but all the same underlying technology are going to fulfill a whole variety of different.

<unk> opportunities and I got to tell you I think that's going to be a very very interesting business moving forward because as I said I believe that we're going to we're only at the very beginning of this there sort of revolution of all these different types of pieces of equipment and devices that run on these batteries and this thing is they aren't necessarily going to have different fee.

Some factors I mean, you cannot make a drone the same shape as you make you know what.

A robot, that's delivering groceries and Milton teams and real estate and weight. The energy density and all those other things are absolutely a premium to all of these companies. So they can't just lumping wherever all battery packs lying around and hope it works for them and then of course safety.

The other big thing that we bring to this to our thermal management technology.

The Goldilocks zone, we keep batteries and a nice eight middle temperature and that does several things for us it makes them less likely to experience thermal runaway our fire explosion in common bonds, but also keeping them in the goldilocks rule. It means we can make them more energy dense and extend their life, which is another way of making sure thing make them cheaper. So there's a great deal wrapped up in.

This and it's.

I really hope that the way, we're gonna be able to add a great deal of margin and compete with very large very well funded organizations in our space is that we will be able to exceed the safety aspects, but at the same time provide are they the.

They're kind of bespoke requirements for many of these other applications, which I as I said I believe we're just at the very beginning of their growth curves.

Understood. Thank you for that and then you know with respect to this idea of legislation I mean, you're already doing well with the governments.

Segment.

How much more benefit do you hope to sort of be able to extract you know based on the provisions in this legislation.

Well look I, there's another 360 odd billion dollars being spent on clean energy and electric vehicle charging infrastructure. There. There's there's the extension of the ITC in fact returned to the 30% of the ITC and an extension for another decade with it.

That you know that's obviously been a sunsetting of our products are eligible for its never decision factor in and the purchases of our products.

But it Nevertheless is a nice shot in the arm yet you know if you've got $300000 back on a million dollar spend on our products no one's going to say no to that so and then you know there there are other manufacturing I think its 48 season, there the manufacturing incentives et cetera, all of those will benefit us, but I think youre right to point out that really what this is all about is identifying that.

The federal government is very serious about electrification, we know that for a fact, because we are in the process of talking to very large federal entities and Ah.

About their requirements, which are significant and material and in fact, it's a matter of public record I'm not going to speak to it right now and I'm not even going to direct you to it right now, but if you dig you will find the Rfps and I encourage you to read the specifications of them. So it's a it's a it's a it's not just Iraq it's H.

It's a whole host of different things all happening at the federal level right. Now we think that we're just at the beginning of it and.

We have very good reason to believe that.

And do you think the legislation could help on your efforts to lock a sponsored deal.

Well certainly the extension of the ITC because of course, that's a major source of.

One thing for that deal, but there are other aspects of it as well there's been much I do made about the fact that the the IRA legislation restricts the number of electric vehicles, which are compliant with the 7500 dollar tax credit, but I'll tell you what people were completely missing the bus on this it's certainly true.

Expensive vehicles for rich people might be at risk, but what's really interesting actually its not that what's really interesting is the lift on the top of the 200000 vehicles. So that was much more alarming because when you're talking about very widespread.

Deployment, it's not gonna be rich people and inexpensive vehicles that was.

That was always the early adopter niche the truth of the matter is that the I V.

American consumer is going to be getting into vehicles like the Chevy bolt I, you know 35020, $9000 or wherever they are and those price. The vehicle caps were much more impactful. So what we're going to see as a result of this if they raised those cats is limitless number so people can buy those vehicles and get about $7500 as opposed to one.

200000 per company not per vehicle and that will dramatically in my view increase the adoption of electric vehicles and accelerated adoption of electric vehicles and the one thing that we've learned about just driving on sponge Sunshine sponsorship deal is I was way too early with it besides as everybody likes it but they didn't really think it was important.

Because they didn't really think the E vs, where that much of a deal or anything else like that that part of what we have observed in part of who we're talking to now tells US the same thing which is that this E. B charging infrastructure thing is becoming a far bigger deal for everyone and part a big part of that's driven by adoption of E. V. So I would say just not one aspect alone Oh.

<unk> more people doing these vehicles are not rich people in elite cars or that's not it was interesting.

No. That's that's $20 million of the 300 million cars on the United States. Once I want another $280 million and that's what that will help with and yes that will definitely support our efforts were driving on Sunshine is concerned I was one of the I T C.

Okay. That's all I have different thank you.

Thank you Donna.

The next question is from Noel Parks with 12, He brothers investment research. Please go ahead.

No no no.

Hi, good afternoon.

Okay.

I'm listening.

A couple of things I am.

Actually you did touch a minute ago on the fact that all the news recently has it been about the and of course reduction Act and I'm sorry. If you discussed this already but can you talk some more about maybe where things stand or where what the status is that you see from the infrastructure built.

Last year it just rulemaking.

Process, and it's sort of kind of where you think youre going to or when you're going to think you're really going to see benefits from that.

Yeah. So the infrastructure build outs you are being quite distinct from IRA that's just come out right now.

But with the.

7.2, I think it was $1 billion.

For electric vehicle charging infrastructure.

Obviously, we believe that's going to be very important to us. There are two buckets of that 5 billion and that's going to go into the Navy funding that national electric vehicle infrastructure funding them.

I encourage you to take a look at the federal Highway administration's guidance document that describes how those funds should be spent it's available online just Google well, yeah. If you take a look at that document where you're going to find in that document is that there was only one image anywhere in the document.

Images on the front cover of that document that image is of our products.

So some for some reason the first administration and department of Energy and Department transportation when they were putting the documents together to tell people how do they should spend the $5 billion selected an image of our products as the front cover of.

Of that magazine, though if I was in sales I'd say, that's a buying cycle.

Yeah. So that's that's a 5 billion of it and we can certainly fulfill are they.

That the requirements of some of that in ways that other people come we don't agree with all of the rulemaking, we don't agree with all the standards of the regulations and I can tell you that I firmly believe that there will be lots of exceptions made lots of exemptions made nothing because they will have to be and that's because.

One of the requirements that there should be 600 kilowatts of charging every 50 miles done at Dundee, United States' highways and nobody and nobody imagined for one second that that type of power is available.

In almost any of these locations. We of course can provide that 150 kilowatt hour the under 50 kilowatt charging in those locations without bringing the grid there and so that's one of the great strengths that will bring to it.

To bear on that the other two plus billion dollars and that funding is more flexible and I believe a great deal of it will go to level two charging a lot of it will go to disadvantaged communities a lot of it will go to Brian broadly dispersed infrastructure and in every instance, those will be places, where it's harder to get the grid deployed and far in order to just scale up or anything else and of course, we are ideally.

Suited for those sorts of deployment and have a demonstrated history of deploying in those types of environments. So look as I said in my comments, we're going to need a shitload of infrastructure here in the next couple of decades unimaginable, a much one and a half million charges a year, if we take for decades to do it the entire industry has deployed 120000 charters in the last decade publicly available.

Talking about it's going to take a mixture of many many things to solve for this we I believe are going to get a very very big piece of that pie, where from our point of view you know I mean, it's a it's a six trillion dollars buildout or whatever in the long run according to Goldman Sachs, but from our point of view to get to get thousands of units deployed.

And so I was in thousands and thousands of them deployed it won't have a tie.

Tiniest bit of impact on the overall demand but of course, it would be very very very meaningful for us.

Sure absolutely and strategically you you know I was struck to see that there was another deal of.

Public battery.

A battery company.

Acquired by a and easy OEM in Australia.

Yes, right exactly.

I was just curious.

Do you.

Your own M&A in that in that space.

Is there is there sort of like Oh.

We drive of our continued vertical integration transactions that you foresee kind of near term next year or two or or is it more of a case, where they are like specific windows of opportunity when color Mike.

Mike.

You know be reasonable in terms of bid ask spread and you can make it happen. What do you think it will just be a state of these or do you think they're kind of just really situational specific.

No. It's both things I am aggressively acquisitive.

I want to control more of what we're doing I want us to find my supply chain I want to bring margin in house and beyond that we worked very very hard to make other people stop work and unique.

Weights in fact, we were always educating the vendors of various components that we buy off the shelf as to what their shifts can do they didn't even know they can do it themselves and in some instances had that stopped adding to their manuals. Our engineers have figured that out so I want to control more of that I want to be I don't forget we're not going to stop with E. V. Archs. We've got E V standard coming we'd go are you a b are coming we've got many.

Other products in the pipeline and between our ears, and so we want to control as much of this as we can so that we can maximize margins defense supply chain and also make sure that the things that we're integrating or actually right for our products. So you'll see me continuing to look for opportunities wherever possible for more vertical integration, but at the same time. The second thing that you said is also.

True.

Only going to do that when I can buy it right and and also is a great example of this I've been trying to buy or sell for a long time and believe me. It didn't just start happening last year I wanted them for a long time and it wasn't until we could you know.

Whole series of externalities.

In a position, where we were able to affect that transaction not least of which was the fact that beams growth opportunities. So material is so significant that the funds don't forget they were over the wall I can disclose stuff to them and I can't disclose the other people and the fund the owned all sell at that time realized that they were going to make a hell.

There are a lot more money owning 10% of beam then they would own than they would ever make owning 100% of ours. So I don't we're talking about it but that didn't hurt the transaction.

Gotcha.

And.

When you're thinking about.

What the lead time for that transaction.

Just curious what is it sort of your traditional M&A social issues that were that was the thing that extended its how much was it you.

You know Jeff.

Financing concerns you said.

Remember it was an old paper deal. It was all of it was an all IP video so.

There was certainly a very tough negotiation on price. There's no question about that very tall Kay.

There was only that but also the truth of the matter is when I said I'd been often for years I took a run at them a couple of years earlier and it didn't work.

I'm I'm I'm I have a discipline about I've done a bit of M&A in my time and I have a good discipline about not falling in love with deals and walking away from them, if I don't get why once.

I wont fair deal and I can tell you that the seller in this case, we feel very much that this was a fair deal that they've already done very well out of it and they're going to do a whole lot backdrop to that that's how I want it but I'm not my primary concern has always been with my existing shareholders and the existing company I'm not going to sell them down the road to enrich somebody else.

That's really important to me, but in fact, when we came back together to attempt to get this done in the second time. It didn't take a long time. It was it was spirited there there was no doubt about that there was a few tables something sections in it and some raised voices, but at the end of the day, we got it done pretty quickly because we were we were able to fairly early on.

Discover that we were better off on the same team then we werent in opposing teams and that's.

That's one of the great things about doing all paper deal you give somebody cash that's your road bursaries.

Through the transaction at closing and after the transaction.

When you give somebody paper they quickly become your greatest supports are right.

That's a great thing I love being in that position with a seller. There there are no valued shareholders and being global I like them personally there theyre very well known and have great experience in the industry and I'm looking forward to making them a lot of money and staying engaged with them for a long time, but anytime anybody will tell you they've been involved in any type of M&A transaction with.

Or indeed, any large deal with you with me they probably think I'm a bit of an <expletive> frankly, because I have a tendency to stick to my guns and I am a firm grasp of what I believe is fair and I wont venture away from it.

Oh, absolutely I understand fair enough. So thanks very much for for that background. That's all for me.

My pleasure, Thanks, you too.

The next question is from Joseph Miranda a private Investor. Please go ahead.

Oh, yes.

Hello Testament, thank you for taking my questions.

You don't break out either on the press release or the 10-Q segment segmented information so it's.

Just a more general question, which segment do you foresee as becoming profitable first in San Diego are being Chicago.

Okay. So really important meet you pointed out the reason, we don't break out because we do not operate them as separate segment, they're fully integrated into our company and that I mean from an accounting point of view that's important to point out and it's also philosophically it very important to point out that it's not us and them. It's just us.

So there they're the simple fact of the matter is they will be crucial to beam San Diego's profitability because of course batteries are about 30% of our bill of materials and so anything that we can do to reduce costs. There is going to have a very very significant impact on our profitability and quickly and they will also do some deals which.

Are very profitable the gross profitability will be very high on certain deals that they do and it would be lower in other deals that they do work with I think what you'll find is that San Diego you know if we're gonna segment it like that by the way they cant even do that in the future because I'm going to bring battery manufacturing over here and I intend to expand our charging products manufacturing into the Midwest as well as demand.

Dictates, but just to keep her that using that normally flat sure at the moment I think what you'll see is a greater consistency in the product offerings in San Diego, because you know, we make a smaller number of products and they all have very very fixed prices.

Sometimes minor minor discounts for large volume purchases for the feds or stay in California, or something like that whereas with a battery products, there's going to be much more variability in the in the in the margin sachse, there and some of that will do will be to do with the hope of spokes. There has to be what kind of volumes. We're looking at and also what the cells and raw material contributions after them, which are very varied.

But I'm not going to tell you, which ones can be more profitable than the other because of the fact that matters. We are all going to be profitable and we're going to do it together.

Okay. That's that's good news.

Secondly, any update on the rollout of the <unk> standard.

Yeah.

Hi.

[laughter].

Yeah.

So they'd be standard Unfortunately is falling victim to our success in the rest of the business right. Now we are very very busy engineering very very busy and we're seeing a very significant I mean, obviously you can see just from the backlog in the particularly the pipeline number.

We're we're we're sort of readying ourselves for what we believe is going to be a significant onslaughts at.

Here in the remainder of this year and into 'twenty two 'twenty three so I've got to be pragmatic about this at the same time I love that product and I view it as a very important to our future and so I can tell you what we're doing right I was recruiting we're recruiting engineers, because we need to we need to not just engineer recruiting just wherever we can lay our hands on but where we are we are definitely recruiting and.

Generics because I need to commit that team to that development of the <unk> standard products. So that we can we can get it.

Because I love it I do believe it will be a very significant seller for us.

Alright that sounds that sounds great and one final question in terms of you've been controlling and trying to get our costs under control in this very tough environment, bringing everything in house have you been successful at bringing painting final painting of the ARX in house.

It's a bloody good question, it's definitely an area, where we give up a lot of margin and indeed, we we we it adds risk to our business because we rely on others to do it and you're you're absolutely right to identify as something that's very much in our in our crosshairs at the moment, we have not done it yet, but I intend to have the space.

And it's actually not as expensive as you might think to do that nowadays all the booths and everything like that come to your pre fabricated pre permitted and everything else.

We just got it's just another one of the things that's on the list for our operations team to do and by the way one of the great.

Tensions that you have running a growing business like this is on the one hand, you're just you're a pump out as much product as you can because it because the growth is significant not only going to get more so on the other hand, you've got to have the discipline to get people to stop what they're doing and take the steps necessary to move us to the next level and that's always attention I can tell you.

My operations manager was in here right now.

He he's he's he's running 100 miles an hour.

It's just keeping up with producing product and delivering it. Yes. This is one of his responsibilities and so.

I know that he feels that he's under types of sometimes but we will get it done and it is a very important area of another.

Another one of those vertical integration things that we will bring in house for sure.

Well Desmond. Thank you very much that's a great news of all round keep it going thank you.

Joseph Thanks for being on board.

The next question is from James Mcculloch, a private Investor. Please go ahead.

Hello, James Yeah, Hi, Desman, you commented during your prepared remarks on some of the supply chain challenges and.

And use of cash to pre purchase sells for beam Chicago.

Our first question was.

On the battery cells are they sourced locally and do you and how long do you feel confident that you've got a source of supply in terms of a year or six months.

And eat contracts to.

Handle any future growth at least for the next couple of years.

Yeah. So.

To answer your first question if only.

They're they're there simply isn't any domestic battery cell supply chain no no.

The meaningful way and certainly not within any kind of.

Scales of economies that you you could you could work with them, that's a shame and I've been very vocal in D C and in and to the press frankly about the fact that we need to start onshoring a lot more of their stuff for all sorts of different reasons, which we don't have time to get into today, but it's going to take a while to do it and I hope that we can all.

Be growing up enough and have the courage of leadership at governmental level and all other levels to get that done as quickly as possible because some of the places where these where they where the raw materials and components are our bra and I don't want it happening anywhere except here frankly, and we can do it just to be clear we have plenty of lithium the U S is the fourth largest.

Cobalt.

Reserves in the World and we don't need to be sending children died holes in the Congo to get that stuff.

And then and then the western friendly democracies I've everything else that we need as well so I don't I shouldn't get off track on that but as yet that's not happening I hope it will the other thing that I think youre going to see happening just while we're on that subject, which can be very impactful is the tremendous maturation of the recycling industry you can recycle about 98% of lithium iron battery we are.

Already engaging in discussions for second life use of a battery so eat batteries come out of D vs and into our products, which will which should dramatically reduce our costs as well as of course.

Fantastically, improving that that whole cycle as well, but at any rate note. They are coming from overseas and we have committed a lot of capital to defending our position.

And and.

You know for the next 12 months and also in Portland doing that is normally when you're defending your position with committed resources, but also we're putting our money where our most.

Where our money money, where I'm ozarks with the with those overseas vendor, it's mostly Korea by the way to be clear and Ah that that cements our position and in fact on the 22nd of this month I'll be in Chicago.

I visited irregularly not surprisingly and I'll be meeting with a very very senior executives from our Korean a box.

Box of companies and continue that thought.

The strengthening of the relationship and everything else, but money ultimately is what makes it work and we've done that now the good news with that is it looks terrifying when you look at the spend during the quarter Oh, My God, how could they possibly have spent $7 $4 million look money's, just like like copper or battery cells or paint or steel or anything else that would go into our products when we sell our products.

We get the money back.

I'm confident that we will get most if not all of that back within the next 12 months and a whole bunch of other money that's not involved with that so it's not it's.

It's not a matter for concern it's exactly the right thing to do and it's the way we should be using our balance sheet.

I would concur I might even bought more so I just what I didn't know it was.

I was not aware of any domestically source cells and I didn't know if you'd pull a rabbit out of your house. So I appreciate the clarity on the sourcing and it's nice to hear from Korea anyway. So.

The second question was on the European market opportunity it sounds like you've kind of pushed that opportunity for it in your.

On your prioritization for future growth. If you could just maybe comment on just a little bit on maybe a timing what are you looking at as far as timing and if you're if you've got any approach are tending towards whether it's greenfield JV or a licensing deal.

Yeah, So I'm.

I'm going there in September and I'm not these are not cold calls.

To give you an indication of how the conversations are I wouldn't be I wouldn't put my my my bottom in an airplane seat if I didn't feel that I had a degree of advancement in the discussions with the people, who I'm going to go and beat to make it worthwhile, making the trip.

By the way I'm also meeting with customer prospects, while I'm over there and some of them are really cool. So it's it's a it's a it is important to me. It's a very very important market and I you know things are moving quickly in this industry.

They they they there's the war in Ukraine, and the and the heat waves and everything got definitely heightened European sensitivity about all this stuff in.

In there there are quite different than the Americans and the way they operate over there you know if they decide that they're going to spend government money on something they just do it.

NIMBY ism and stuff like that place that's much smaller role so I want to make sure that we strike, while the Orange Hall I'm not.

Not not licensing I, just don't like that model.

I Wanna control much more of a not I think I missed.

Unlikeliest Greenfield I think what you should be considered you should be thinking about us finding a a worthy and incredible.

Incredible partner in that part of the World and then creating.

Some sort of interesting and which we have equals.

Equal share of equity that's the that's the that's the way I'm going after at the moment.

These things always have a way of evolving and it doesn't happen overnight, particularly if you're if you're a strict about what you'll put up with than I am.

But I believe that we'll get a lot of value out of it.

If we pull it off and if it was just me I'd say when we call it off.

Okay. Good.

Had a little experience and Oh, my own company, and we actually JV with a company that was struggling.

Struggling and a huge investment and a built up fairly large manufacturing facility in law in Belgium, which is a JV was a turned out the way to go. So it was so good.

One thing I, probably would be one thing I want to make clear to you and to everybody else, who is listening I part of the other reason that the that it might take a little bit longer to get this done just because I want to continue down that path of not using cash or capital to get these things done we've got tremendous amount of IP, we bring a lot of value to the table and I think that.

I'll be trying I'll be working very hard to make sure that the other site brings the capital to the table not us.

So that's that opens up the third question. When did you mention when you mentioned IP could you just Desmond comment a little bit about the strength of your patent portfolio.

And is it a do you have process protection is it product protection protection and do you feel that you've got strong enough patent protection to on any particular products.

That could successfully defended in the event of.

An onslaught from saying much bigger.

To finance the company.

One of the things I learned a few years ago when in a meeting in New York City with some bankers and a bunch of attorneys and I know that sounds like the beginning of a bad joke, but in fact, there was a reality.

One of them one of the attorneys there was an IP attorney he had moved to our patent portfolio at the time, which has only been strengthened since then and he told me that he would write me a check to take on a defense. If we were if somebody big and powerful came after us. He was he was so confident in the strength of the patents that we have written who have them in the U S.

We have them in Europe , and we have them and <unk> to some extent in Asia as well of course, we could dramatically increase that patent portfolio with the acquisition of of Oh.

The battery company in Chicago.

We've got lots of life left on the times are important to us and we continue to get more and more of them and what I'll say to you about this is where parents are concerned as I have a really really strong discipline around that I I do not invest in patents to pump up my own ego. The litmus test that we use is it will it will it create a significant barrier to Ed.

Entry to call it competition and is it something that we can monetize within the next 12 to 18 months and if the answer is no to either of those questions I don't spend money on it but it's not a cheap as you know.

So all the patents that we've ever gone after.

In products that we have today that are either making money for US right. Now revenue that is I have to be clear I'm, saying that because of course, we're pretty profit.

Or are there theyre, just recently onto them and we haven't started producing them, yet and thats our discipline.

Okay.

And then the last question was on the growth opportunity I believe you mentioned it about 7 million sales for the six months. This year is that correct.

So where we're at $7 5 million for the first six months of the year, which again after last year, which was a record year of revenue for us is greater than any previous year in our history and that was for the first six months got it. So I. So the question was I would I would.

Thanks.

There is at least a 1 billion sales opportunity available almost now or at least in the next couple of years.

And I know you've sounded very proud on your on your conference calls on cost containment and the ability to grow while maintaining expenses, either whether it's cost of goods sold or overhead.

It sounds like that the market opportunity, especially with the new legislation that's been passed so enormous.

So are there any considerations to even if it's a temporary basis to shore up our whether its sales or engineering.

Or are all of our areas to support a fairly significant increase in sales should occur.

So I would agree with you on your on your your.

Ideas about the billion and.

Product sales I actually don't even consider that to be a very big number where we're concerned I think that's gonna be an awful lot more than that.

And so to the second part of your question without a doubt we're recruiting I mean, though where we are careful about money and we're careful to try to add resources when they're needed or is it just a little ahead of when they're needed but at the same time, yes, we are recruiting because I do believe that there's a wave coming.

Okay. Thanks very much.

Okay.

The next question is from Frank Heart with high capital funding. Please go ahead.

Hello, Frank how are you.

Hello, Desmond I've been so very very happy to hear this call.

I thought when you and I met.

That you were a master and.

You have continued to demonstrate that with what you've done with the company.

I can't you correct, how does the company does not end up as one of the behemoths in this industry.

And I'm not even sure what the definition of this industry is because you're in so many different areas.

Anyway. Thank you.

And it was nothing to do with the questions a couple of questions one.

What do you see as your two biggest bottlenecks right now.

Mhm yeah.

So human beings and and potential supply chain stuff I mean, it really the supply chain stuff I know everyone's talking about it but believe me. It has been we've had to work bloody hard to keep up with us and we've had to do some pretty clever maneuvering as well I mean, you couldn't use Frank I think you know me well enough to know what I'm like where money is concerned to fight the unprepared to part with money.

The body cells in advance or prepay vendors, just a strong indication to you about how much of a risk I view, our supply chain problems in the future. Nevertheless, well I don't think it's going to get a whole lot worse, but I think we're gonna start to see things improve and we have managed through this we definitely had a slowing down of.

Of deployments in the second quarter of the court could have been better had we not had this that that imbalance.

Artery supply at that time, but we're solving not yet as I say, we didn't lose anything out of it but who knows what's coming around the corner next and that's gonna be thing. So the next thing of course as human beings.

We without a doubt.

Question. The previous question same thing, we need to hire the best and the brightest what I can tell you about that is good news as two things first of all labor is actually a fairly small percentage of our of our cost model and so the good news when that's where that's concerned as you can actually afford to pay a little bit more than the next person without really having a major impact on you.

Cost model, because unlike lots of businesses, where labor, 60% materials of four 8% in our instance, actual hands on labor on the products really 5%. The rest of it's born and so that allows us some latitude there and then the second thing we've got going for US is I think and thank you for making those initial comments, but basically it's related to your initial comments, which is it.

This is a fantastic company doing fantastic things in a brand new and very exciting industry, an increasing number of people are starting to understand that and get their head around it and of course, they want to come work for us. So we will get over it but but it's all going to require a lot of work and a lot of effort.

Indeed, Oh, one other thing on that subject.

So you you mentioned the people you need more people, who have the confidence to move.

Move the business in your agenda forward and.

Clearly you should be able to attract the right ones.

Hum.

The next part of my question is actually about money.

I remember at one point some time ago I suggested to you that even though you had convinced me that you had enough money to get through.

When anybody looked at your balance sheet, they wouldn't think that.

And I suggested to you that you might Wanna taken some more money so that no one would even think that.

Cause you're behind the eight ball when somebody even raises the question even if it's only in their own mind and doesn't say it to you.

So I'm wondering two things number one.

Would it make sense for you to do some sort of non dilutive financing I know many companies have done. These you know kind of a preferred issues and so on that have no dilution at all it's just a.

Effectively.

A dividend rate or an interest rate on the capital.

And at the rate that you're growing.

And I wouldn't think that that should be a big.

Cost item in terms of your profitability and yet.

If you did a 10 or $25 million non dilutive deal like that.

It would just blow away any bodies questions about capital.

Yeah. So first with the second question with respect the money is.

Have you thought about or have you set up a a finance company our captive Finance company you know like General Motors, our credit Corp, or Chrysler Credit Corp.

Hum.

Because I I understand two things on that one.

Your systems are relatively expensive to purchase compared to some other systems of course, the total cost of ownership is a lot lower but that's got to be off putting to some people with respect to the initial purpose.

And I'm wondering if two things and that two sub things on that one with respect to government stuff, where some governments only have an annual budget and don't have the money to spend on the capital, but could you lease it to them over five years or rent it to them here.

By year end, if they don't want to you.

You know extend it for the next year you have the ability to just charge them the restock.

Restocking thing so to speak and redeploy the equipment.

Yes, right exactly.

Let me.

But let me let me know.

I'm conscious of other People's time on the on the lineup.

Let me, let me just yes sure.

So that so as far as are.

The amount of cash we have on our balance sheet is concerned you're right I mean look I I do have a what.

I do have the Scottish tendency to be very very careful and tight with money.

You can look at the financing as I've done in our history.

I've never done anything toxic I most of the money that the companies would be not market, sometimes even a little premium sometimes a little discount but nothing ever.

All puts them from that point of view and the results of that is that today, we have the by far the lowest of any company of our size or dimension and anyone in the industry I'm I'm I'm, an $8 million in the flow 11 million fully diluted $10 million outstanding right now and I don't think.

Shareholder.

Yes, well good so we'll be very careful with that and know that at the end of the day. The twin entire game is about earnings per share. We will have a lot less S to divide into that E and as a result, we're going to we're going to really give our shareholders a great right for their for their money because they're just far fewer.

Shares than anybody else. Nevertheless, the other thing about that is it does give me.

A lot of dry powder, whether this is concerned and so let me just tell you. This while I don't like raising money and I don't like giving up equity in every dollar matters to me and every share matters to me at the same time I'm gonna be very pragmatic about this and there are several instances and I've been clear about this in the past while they don't need to raise money there were several instances where I might.

And one of them for example would be an acquisition, we're raising some capital made sense to do that but the other one which in many ways just sort of more fun to talk about it is if the stock picks up its had significantly wood I would I threw some more millions onto the balance sheet, you're done right I would under those circumstances and let me give you one circumstance where.

That could happen at the moment, we've got about 21% short interest in our stock something like 12 base to cover with a miniscule float and I I'm very confident that we are off to great things now when you shop somebody's talked there's only one way of getting out there and that's by buying it right and we're being shorted not for any fundamental reason I'm not going to deliberately to the short term I'm not going to be.

Bankrupt I'm not going to do a destructive dilutive financing I'm not going to fail in fact were going completely opposite direction and so if we get into a situation, where there's a short squeeze or the stock runs up for any reason frankly, I I would be very happy to strengthen our balance sheet, taking the money out of those short term pockets without a doubt so no.

What I'm, saying never and I, it's just that I want to make sure that like everything else I do it's done at the right time in the right way and then just quickly on your other question about financing for their customers. Yes, we've definitely looked at that you're right to point that one of the major areas to point out that many of our customers our government customers and as a result cannot take advantage of the various tax incentives like ITC that I mentioned.

Which is 30% is a credits.

The deduction and so we can put financing together.

To which we could roll that ITC and other tax equity for Coproduction and offer really a very inexpensive solution. So yes, that's definitely on our drawing board as well and then there's some other more interesting things to like batteries as a service no that was on the battery company and there's nothing to stop US, let's say selling in E V R, but without the cost of the batteries in it which is a significant contributor.

And then charging people a monthly fee for the batteries, we maintain title and therefore risk because we understand them better we'd arbitrage fear in that case. So yes. There are lots of very interesting things that we can do and I want you to rest assured that we're not ignoring any of those we just need to we need to plow on.

Put them into effect, but don't think I won't raise money if if if we need to we don't need to but if we did I would but most mostly if there's somebody that I can do it in a in a way that's a as you said not dilutive.

And and there's really much in the favor of the current shareholder in growing the company I'll do it.

I'll go to take the last question I think I'm, just glad to hear you're Oh got it on your radar well. Thank you Brian . Thank you very much.

The next day as long as the excuse me the better.

Yes. Please do I think there's one more the next question is from Alan Ginsberg, a private investor. Please go ahead.

Hello, Alan Yeah, Hi, how are you.

With the expansion of your business being so robust as we hear from this call.

And other people asking you about hiring various technical people do you think you have the depth of management.

And are you going to be hiring more management and also second part.

Our capacity in your manufacturing operation do you think you're going to have to expand that as well.

Yeah. So let me answer the second question first the really good news, where that's concerned in this 53000 square foot facility that I'm operating in to date. My My my one of my operations managers just came to me and told me that they that they were up to two units a day with the current head count, but we can get to six units.

Sure.

We can get to six units a shift with our with the current head count we kind of course went to two shifts in three shifts. We're currently operating five days a week. We can go to seven days a week and just put that in perspective for you.

So about $105 million of shift so if we if we were to go to three shifts we could probably bump of about $300 million a year out of this facility and very profitably because of course, the rent doesn't go out when we do that.

This is all about this this is all about this leveraging these fixed overheads that we have been talking about this for years and low volumes, it's very expensive to do this but as volumes go up lots of things get less expensive materials, and particularly fixed overhead. So we got lots of room for expansion here, but at the same time as I've already mentioned on the call intend to expand into Europe , I'm not going to do that from here.

So I'll use other people's money and know our equity or money to make that expansion and I'll use our IP to make that happen if I am able to pull that off and then I also mentioned that we want I want to bring battery manufacturing I want to expand our battery manufacturing capability not just in Chicago, but bring that here to San Diego because.

The stable through a lots of money at me to do that and of course, it makes a lot of sense to make batteries, where I'm, making the charging products, but equally I want to expand my charging products business into the Midwest because at the moment I'm, making products in San Diego and shipping them to New York City and their Abbvie and they are big and that doesn't make sense to do that and so to get to somewhere like Chicago or somewhere else in the Midwest are too.

Fixed line, there as well that would double our capacity that we've got the $600 million another $300 million in Europe , you can see over a 1 billion pretty bloody quickly we haven't done anything at all its associated the demand.

So can you speak to the depth of management I mean, you can't be as five places at once and.

The senior management are you going to make that more robust as we go along.

Yes, without a doubt Cathy and I were just having this discussion the other day because it looks like my travels well keep me out of the country for about a month in September between the middle East and in Europe and we.

Yes, we are looking for people and the other thing is listen I'm I'm pretty robust Guy I've got a lot of energy unhealthy.

I'm doing but I cannot have this company in a position where something nasty happened to me that it would be hard in anyway. So I want to make sure that that that we have good succession in place and that we have the depth of management to build out the teams and we are currently recruiting for a high level people and a big reason that we're doing that is because from a cost structure point of view.

There were some <expletive> comment made in some stock magazine last week about how our operating expenses were up and they are off but they're they're not anywhere near as much as our revenues are up and so what we're trying to do is balance this right as we get in these opportunities and as we get this we scale the business up I still think there's a lot of opportunity to increase revenue per head.

No there is and so as we scale these things up and bringing the opportunities then we'll bring into head count because I wont be able to keep reporting to you that we are reducing our operating cost as a percent of revenue and reducing our direct costs as a percentage of revenue because that's where profitability comes from.

Okay. Thank you very much and good luck.

So we make our own luck.

This concludes our question and answer session I would like to turn the conference back over to Desmond Wheatley for any closing remarks.

Well I think we've gone a bit overtime here, so I don't want to hold anybody any longer just to say thank you very much.

As always I'm sure.

Thrilled about what's going on and I. You know you hear that from me every time I do these calls and I've got good reason to be we keep growing this thing and growing it dramatically and we're in the right place at the right time, and we have the right products. So thank you for being involved and I can always speak to you in a quarter.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.