Beam Global (BEEM) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Envision Solar International full-year 2019 financial results and corporate update conference call. (Operators Instructions) Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of this call will be available approximately one hour after the end of the call through June 30, 2020.

I would now like to turn the call over to Scott Gordon, President of CORE IR, the company's Investor Relations firm. Please go ahead.

Thank you, operator, and good afternoon, everyone. Thank you for participating in today's conference call. Joining me from Envision's leadership team are Desmond Wheatley, President, CEO, and Chairman; and Katherine McDermott, Chief Financial Officer.

During this call, management will be making forward-looking statements, including statements that address Envision's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Envision's most recent filed periodic reports on Form 10-K and Form 10-Q and other periodic reports filed with the SEC.

The content of this call contains time-sensitive information that is accurate only as of today, March 30, 2020. And except as required by law, Envision disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

It is now my pleasure to turn the call over to Desmond Wheatley. Desmond?

Well, thank you, Scott, and good afternoon to everyone on the call. And let me start by thanking you for your support and interest in Envision Solar and for joining this call during these most unusual times. I'll be sharing my thoughts and observations about 2019 and our future prospects in a minute. But first, I'm going to ask our CFO, Kathy McDermott, to take you through financial results for the year. Katherine?

Thanks, Desmond. Hi, everyone, and thanks for joining us today.

For the year ended December 31, 2019, our revenues were $5,111,545 compared to $6,162,402 for the year ended December 31, 2018, a reduction of 17%. Unfortunately, our fourth-quarter revenues were not as strong as we expected. Shipments on our New York City contract decreased by $832,000 in fiscal 2019 compared to 2018, contributing to the decrease. We had several municipalities in the fourth quarter that were pushed into Q1 due to the timing of budget approvals or scheduling delays. We also have two large Solar Tree projects and a DC fast-charging project that we were hoping to deliver in Q4, but were pushed into 2020.

While the fourth-quarter revenues were disappointing, we're optimistic about our revenues for 2020. Through the course of the year, our pipeline of opportunities has grown. We hired a Vice President of Sales and Marketing beginning January 1, 2020, and we're investing in sales and marketing resources and programs to raise awareness of the benefits and value of our product. We also launched two new products with more on the way. As Desmond will discuss in more detail, there's a lot we're doing to drive future growth.

For the year ended December 31, 2019, we had gross loss of $153,774 compared to gross loss of $192,100 for the same period in 2018, a decrease of 20%. The gross loss for the year ended December 31, 2019 improved despite a 17% decrease in revenues, compared to the year ended December 31, 2018. Gross profit improved on the products we delivered primarily because our EV ARC unit has been in production for several years, and we made cost improvements and realized labor efficiencies in our production.

During fiscal 2019, we designed, developed, and shipped two new products: the EV ARC 2020, and the EV ARC DC fast-charging units. During the production of these initial units, we incurred labor variances for startup inefficiencies and a higher level of scrap than normal, which is expected to improve over time as we gain more experience and improve the process.

We also incurred higher warranty costs in fiscal 2019 due to having more units in the field and the addition of a full-time field technician to support our customer service levels and improve response times. As our revenues continued to grow, we expect to see an improvement in our gross profit to better utilization of our manufacturing facility and by realizing better absorption of our fixed overhead costs.

We're continually looking for ways to improve the product design or production process to reduce our manufacturing costs while maintaining high-quality products. As unit sales continue to increase, we'll be able to negotiate better volume pricing from our suppliers and benefit from labor efficiency in our production flow. Based on these objectives, management believes that gross profits can be realized and maintained.

Total operating expenses were $3,117,793 for the year ended December 31, 2019, compared to $2,337,446 for the same period in 2018, a 33% increase. The increase in expense is primarily due to an increase of $248,478 of R&D expenses, including in-house labor and contract engineering related to the development of the EV ARC 2020 and the DC fast-charging unit and the Solar Tree product.

$126,500 increase was for severance and recruiting costs related to the change in the CFO position; $99,965 for investor relations and public relations costs; $81,917 for NASDAQ and filing fees due to the registration; $80,000 of consulting fees for a former director for business development; $70,000 for bonus accrual; $55,774 for non-cash compensation expense for the vesting of direct-to-restricted shares, offset by lower stock option expense; and other increases of $17,713.

Our other expense decreased from expense of $1,069,234 in fiscal 2018 to $659,255 in fiscal 2019, primarily due to lower interest expense as a result of paying off the company's debt following the public offering. Net losses of $3,933,922 or a loss of $0.88 per share for the year ended December 31, 2019, compared to a net loss of $3,598,780 or a loss of $1.24 per share for the same period in 2018, a 9% increase.

At December 31, 2019, we had cash of $3,849,456 compared to cash of $244,024 at December 31, 2018. Working capital increased from a deficit of $2,759,580 at December 31, 2018 to positive working capital of $5,142,719 at December 31, 2019, an increase of $7.9 million. We've historically met our cash needs through a combination of proceeds from private placements of our securities and from loans and during the quarter ended June 30, 2019 through a public offering. Our balance sheet is strong and debt-free.

And with that, I'll turn it back over to Desmond.

Thank you, Kathy. 2019 was perhaps the most eventful year in Envision Solar's history so far. And yet I have no doubt that it will seem insignificant to us as we look back on it from the future we are creating. It was a year in which we completed a public offering and moved to NASDAQ, the year which we cleaned up our balance sheet and paid off all the debt that we've been carrying and paying for for a decade. It was a year in which we added high-quality institutional funds to our broadening investor base, all of whom are still with us.

We added a new very well-qualified CFO, Kathy, who you just met, and recruited for the first time a Vice President of Sales and Marketing who joined us officially on January 2 of this year. We delivered our unique and patented products to Florida, Washington, California, Virginia, Massachusetts, New York, North Carolina, Nevada, New Jersey, Georgia, and Arizona. By August of 2019, our products were being used by nine of the top 100 fleets in all of the Americas, most of them in the top 50, and then around 100 municipalities across the United States.

We continued to power fleet vehicles in Northern California during the fire-related grid interruptions because our products are uniquely immune to blackouts. We provided EV charging to the US Navy. And for the first time in history, we provided fueling facilities in a highway rest area, the first off-grid, zero-construction, solar-powered DC fast-charging infrastructure deployment that we're aware of anywhere in the world and certainly in the United States.

Our products were purchased by federal, state, county, and city governments, top-secret federal facilities, national laboratories, corporations, Department of Transportation, courts, and the Department of Defense.

It was a year of giant leaps for our products too. We're fundamentally a technology innovation company building and improving a strong intellectual property portfolio. For the first time in over five years, we executed a major overhaul of our flagship patented product resulting in the creation of EV ARC 2020, a tremendous improvement over the already exciting and unique EV ARC Standard that preceded it.

With the new S-curved column, we're able to make more parking space available in the locations we serve. The tracking solar array can now be deployed at any angle above the parking space so that we can fit seamlessly into parallel, perpendicular, and even herringbone-angled parking spaces. Our engineered traction and ballast pad is now cambered, allowing for more efficient use of materials, improving aesthetics, and ensuring that water does not accumulate on its surface.

Moving all the equipment off the base pad and up into the canopy makes the product flood-proof to over 9 feet. You can imagine the opportunities that that innovation creates for us: a flood-proof emergency power and EV charging solution. The Gulf Coast, Florida Panhandle, East Coast, New York City, and anywhere else that's becoming increasingly at risk to rising sea levels and other flood threats are all looking for ways to survive the inevitable interruptions that will come with flooding.

EV ARC 2020 gives them a fueling solution and a source of emergency power that's sustainable, reliable, green, and will continue to provide service during and after the most severe conditions. It's [created] to survive 120-mile-per-hour winds, but we know through field experience that our EV ARC products have survived Category 5, 185-mile-an-hour winds in the Caribbean.

It's a clearly indispensable disaster preparedness asset. And especially during the current trying times, these unique qualities are received in heightening interest, especially amongst our government prospects.

Perhaps as important as all these technical factors, the EV ARC 2020, which is already being deployed in cities across the US, is far better looking, at least in my opinion, than anything we've ever produced in the past.

Not content with the total product overhaul, we also developed two brand new products and patented a third. The EV ARC 2020 DC fast-charging solution is another first of its kind. Comprising four EV ARC 2020s, which are interconnected and a stand-alone DC fast charger, all of which were deployed without construction or site interruption, we're able to provide the first off-grid, zero-construction, solar-powered DC fast-charging solution in the world. Caltrans is our first customer, but I'm sure there'll be many others.

Our engineering and fabrication teams were also committed throughout the better part of the year to perfecting our Solar Tree DC fast-charging product for medium- and heavy-duty vehicles. The first articles are being fabricated in our factory now with deployment scheduled for full-size electric bus charging during the first half of this year.

As has happened often in the past, we found a customer who bought our innovative product before we're even ready to take it to market. That might sound like a potentially risky strategy. I can tell you, we've never failed to deliver, and we will not start now.

Continuing the growth of our IP portfolio, on December 31, 2019, the US Patent and Trademark Office issued us a patent for our EV Standard product, a curbside charging solution that I believe has fantastic potential. This product will replace an existing streetlamp with a product which has solar and light-wind generation, a column for battery storage, and a connection to the street lamp's grid circuit.

The combination of these three sources of power delivered to our batteries will deliver the only scalable and meaningful EV charging solution at the car that I'm aware of. Like our other products, the EV Standard will not require expensive or disruptive civil and electrical work. And though it will connect to the grid, it will greatly reduce the utility bills associated with EV charging, and it will continue to operate during blackouts. It will, of course, also have a high lumens and low energy light.

It's easy to imagine cities in the not-too-distant future having one of these products where every four or five standard street lamps will certainly need that much curbside charging. Let's put that in perspective: New York City, which parks even its own fleet vehicles on street, has over 300,000 street lamps. When you do the math, then you'll see why I'm so excited about the potential of this newly patented invention of ours.

We intend to have the first article ready for testing this year, and, as usual, we'll start marketing it before it's completely ready for deployment. With countries all across Europe and the rest of the world banning petrol and diesel cars, with the early starting in 2025 and the rest no later than 2040, you have to ask yourself: where are all the world's 1.2 billion cars going to charge? Certainly not at home.

Most people live in apartments or homes that don't have sufficient electrical capacity to charge their cars. Anyway, the US and global grids do not have enough capacity to support the electrification of transportation. So my answer is that a very large number of them will charge on our products, which are rapidly deployed, highly scalable, and do not rely on the utility grid for power. There simply is no other source of power, which is more reliable, sustainable, and cost-effective than solar energy; that's why we use it to power our products.

Goldman Sachs has estimated that $6 trillion will be spent on the infrastructure for an electrified transportation sector. We have the fastest deployed, most scalable, and lowest total cost of ownership solution available. We're in it to win it. And while we're on the subject of patents, I'll just briefly mention that we have no patent pending on our wireless charging solution. And of course, we continue to prosecute our applications around our UAV ARC drone recharging network product.

Now, I recognized that all these achievements, impressive as they are, and there are many more, do not amount to a hill of beans, if this company is not on a path to growth and profitability. We do not run a charity. I have many missions, but the only one that truly matters is my mission to lead Envision Solar to profitable growth with sustainable and aggressive improvement across all the relevant metrics. It's the only mission that truly matters, because without it, I cannot deliver on the others, important as they are.

Every decision that I and the rest of the management team takes is driven by the necessity of increasing volume and controlling costs so as to increase our gross margins with the goal of moving to profitability as soon as possible. I congratulate my team for all the stellar work they did in 2019 and continue to do today. But I do not congratulate myself for the year-over-year reduction in revenue.

I do not congratulate nor excuse myself, but I do endeavor to see these results in context. The fact is that while our 2019 revenues were less than 2018's, they were still by far larger than any other year in our history. 2018 revenue was 336% greater than 2017's; and 2019's revenue, though was less than 2018's, was still 262% greater than 2017. And as I have said, far bigger than any year in our history.

It's important to understand this because it demonstrates that the overall growth trend is very positive. Actually, we had sufficient backlog in 2019 to exceed our 2018 revenue number. But backlog and revenue are not the same thing. You have to deliver the products to record the revenue; we don't do that on contract. So if the delivery gets pushed for any reason, the revenue moves from the quarter in which we might have expected it, to the following quarter, and sometimes even to the quarter after that. That's exactly what happened in 2019.

But there's nothing wrong with our backlog and growing pipeline. And history teaches us that our pipeline to backlog conversion ratio is good and that whatever ends up in backlog converts to revenue, even if it sometimes happen and doesn't happen in the quarter we'd anticipated.

We did not lose any of these sales; they just moved right. A big chunk of it was because we were late in delivering the Solar Tree DCFC product, which I mentioned earlier; and another big chunk move, right, because Caltrans is not ready to accept some of our products though we're ready to deliver them. The combination of these two orders alone would have put us over the 2018 yardstick. And there were others: delivering fewer products in the period, along with inefficiencies related to the production of our new products, resulted in lower gross profits than we've reported in other periods.

Both contributions to margin erosion are removed by increases in volume. The more product we deliver, the more efficient we become. The lower the cost of the components and commodities that we integrate into our products, and the lower the contribution of our fixed overheads will be to our individual product deliveries. I stress that we do produce gross profits at a unit level, the unit economics are good; more volume will [transfer] those unit benefits to our bigger financial picture.

We got there with our previous generation of products, and I'm confident we'll do it even better with the new generation; that was part of the goal of the redesign.

Why are we late on the Solar Tree development? The fact is that the product development work we do is not trivial. The three new products we developed in 2019 were very disruptive to our operations. Adding the public offering activities in the first and second quarters created a great deal more disruption to the business.

So as you compare the 2019 revenue to 2018's results, recognize that we produced that revenue in what, as I said at the beginning of my comments, was one of the most tumultuous years in our history-- nay, the most tumultuous. So was it worth it? You bet it was. We now trade at much higher volumes on a national exchange and not in the [Quagmire] or the Bulletin Board. We cleaned up our balance sheet and paid off all our debt and a bunch of other one-time expenses.

And even today, in a time of global crisis, we have enough cash and equivalents to operate for about two years, even if we don't generate a dime of gross profit during that time. But we are generating gross profits at the unit level. We have a hyper clean balance sheet. We have no going concern warning on our filings. We're still very cost conscious, even more so during these most unusual times.

No one could accuse us of being careless with money. We make every dime work towards improving the business. We've invested in a highly qualified CFO who will help us grow. And for the first time in our history, we have a talented and experienced marketing and sales leader. Sandra Peterson brings her Silicon Valley marketing experience to our business at a crucial time.

We've always leveraged science and technology in the development of our products. Now for the first time, we're taking a scientific and technological approach to introducing our products to those who can benefit from them. We know that we have a high conversion rate when people understand the value our products deliver. Sandra and her team will ensure that a lot more prospects are introduced to them at a time when the interest in EVs is really starting to take off.

I don't own a TV -- and anyway, I follow Rugby, not the other game with all the pads and helmets -- but I did receive about 50 texts during the Super Bowl from friends and supporters telling me that many of the commercials were about EVs. That's never happened before, and it tells you a good deal about where this industry and the money is going.

Our new VP of Marketing has, for the first time in our history, engaged the Los Angeles-based public relations company, who, along with our IR company, will make sure that our story is being heard by the broadest possible audiences, audiences that can benefit from our products and also from owning our stock. Investing in the right team and increased sales and marketing is something we've not been able to do before. The public offering was worth the disruption.

Our backlog of approximately $4 million is near historical highs, and our pipeline of approximately $40 million is bigger than ever. We recently announced a contract and $2 million order from Electrify America, the Volkswagen subsidiary, which is spending $2 billion on EV charging infrastructure in the US, more than any other entity. This is our first order from them. But we do not, for one minute, believe it will be the last.

Just last week, during the most unprecedented slowdown in US history, we delivered EV ARCs to three separate states and listened to New York City present the virtues of our products to a webinar audience of fleet operators from across the US. Every week, we release news about a new order, a repeat order, or deliveries of our products to the best customers. We have no bad debt, we always get paid, and we've never lost an order. Though certainly some have moved right as we've seen in the fourth quarter of 2019.

Our new EV ARC 2020 is the best we've ever made. And with its new look and capabilities, we believe it will sell far better than our previous model. Developing it was worth the disruption. Our new DC fast-charging EV ARC 2020 that we worked so hard to get to market in 2019 sells for far more than the four EV ARC 2020 it's made up of because of increased storage and other technologies.

At the moment, DC fast-charging is very sought-after. And now we have a product that can provide it without any construction, permitting, electric work, or utility bills. Going through the hard work and challenges of making it work was worth the disruption.

Solar Tree DCFC will be the only rapidly deployed, off-grid fast-charging solution for medium- and heavy-duty vehicles at a time when the adoption of electric buses is higher from a percentage point of view than that of sedans, and at a time when electric semi-trucks from Tesla, Mack, [DAP], and Mercedes are in the headlines. Perfecting the Solar Tree DCFC was worth the disruption.

Two weeks ago, we were in Las Vegas, partnered with Volvo, showing off our ability to charge their new evolution of fully electric construction equipment. In Europe, it's becoming increasingly difficult to operate diesel fuel construction equipment because of regulatory restrictions on emissions and noise pollution. That's why Volvo and all the others are developing electric construction equipment.

We partnered with Volvo, and they invited us to exhibit with them at CONEXPO, the largest construction equipment show in the world, because Volvo recognizes that the greatest barrier to entry to the electrification of construction equipment is the availability of electricity with which to charge that equipment at a construction site, particularly at the stage when one's moving dirt.

Bundling an electric excavator with an EV ARC, which can be delivered to a construction site in minutes, where it then delivers all the fuel that equipment needs before moving easily to the next construction site, is a killer app. They know it, and so did all the construction companies who are members of the press who came to see it. We were described the one trade publication that covers the industry as easily the most interesting and innovative thing at the show this year, as a quote.

And you know what? I've heard that before in other shows, many times in fact. So it was worth the disruption and the blood, sweat, and tears to develop all these products, even [through] our 2019 results because it put us further and more firmly on a track to be the great growth engine that I'm convinced we will be.

Nothing that we do is easy, but everything we do is worth it. The media side of our business is a typical example of this. I've spent several years working to create this business model, which will allow us to deliver large networks of solar-powered EV charging products across major US cities, free to the taxpayer and free to the EV driver. Driving on sunshine guilt-free, environmental-impact-free, and, the best free of all, fleet-free.

A couple of years ago, we partnered with OUTFRONT Media to make this vision a reality. Envision deploys the network and OUTFRONT finds corporate sponsors to pay for it, just like a stadium sponsorship deal or like Citibank in New York. What more visible and excellent way could a corporate brand announce their commitment to sustainability than by making it possible to drive on sunshine for free? And what city will not jump at the chance to accept the network of free solar-powered EV chargers that create no disruption and allow their citizens to no longer pour their hard-earned dollars out of a polluting tailpipe.

Now, it turns out that second question is not quite as obvious as it seems. Last year, the city of San Diego released an RFP for immediate-funded network of solar-powered EV charging stations. We were the only respondent. Since that time, OUTFRONT and we have been negotiating the terms of San Diego, which will allow them to accept the free driving-on-sunshine network in a manner that we believe is beneficial to both parties.

Not been as easy as we might have expected, but I do believe that we're making good progress. We're down to the last few items of contention, and the city has told us that they will have comments back to us on our last round sometime in the next few days. Something this good has to happen, I'm sure of it, but, as is often the case, I can't pinpoint exactly when. I'm also pretty confident, and so is OUTFRONT, that this will not be a one-city deal. How could it be?

So like everything else we do, it takes longer, and it's often harder than we thought it would be, but we always get it done. We don't walk away; we don't come up with some new strategy to cover up our tactical failures. We stick to the grind, we do the hard work, and we deliver the results. We still have no direct product competition, and we're getting better and better at what we do. With every new innovation and every new product we develop and patent, we broaden the gap between us and anyone who tries to catch up, and we create an ever-taller barrier and deeper moat for the competition. And the end of the day, that and our profits will translate into the real value of this company.

Now, we're living through a period of unprecedented uncertainty. Four weeks ago, my children were in school; four weeks ago, I could get a cup of coffee at Starbucks; four weeks ago, unemployment was at historical lows; four weeks ago, our stock was trading at just under $13. Just over a week ago, Governor Newsom issued a stay-at-home order for the entire state of California, except for exempted organizations that provide vital services or products. We're one of those organizations.

We're still operating. Our courageous team of factory workers, and all the others who work to make this company what it is, have not missed a minute of work. Our delivery experts are, as I noted earlier, delivering our products all over the US, including tragically hard-hit New York City. This is not because we're [fumbing] our noses at the restrictions -- far from it. It's because our products genuinely deliver vital fueling and emergency power functions to police departments, health care workers, transportation, and other key agencies need to ensure that they can deliver the vital services we all rely upon.

Just last week, we announced that we would prioritize any health care or other COVID response orders above our other orders. We're confident that we can do that with the blessing of our customers whose needs are less urgent. I have been in discussions with our city and other customers about the potential of fleeting their existing EV ARC units from locations where they're currently providing EV charging into hospital parking lots or other locations like parks in the event that there's an overflow of patients and life-saving power is required on those lots.

God knows we hope it doesn't come to that. But if it does, we'll do everything we can to help, including prioritizing orders, as I've said, and also sending delivery experts to those cities to aid in the relocation of the units, if need be.

We designed EV ARC products to offer reliable, clean, and free fuel during times of peace and prosperity. But we included the capability to provide emergency power to those who require it most in times of urgent need.

We had no crystal ball, we could never have prophesized COVID-19, but, alas, one does not need a crystal ball to forecast disaster. Our electric grid is vulnerable to weather events, to terrorist, to the various state actors, into fires, and goodness knows what else. In a time when we're more relying on electricity than ever in our history, the grid suffers more blackouts than ever before. A rapidly deployed, highly scalable, and highly distributed source of fuel and electricity is needed more than ever. And that's what we uniquely supply.

It seems likely that it will be an increase in government infrastructure spending, perhaps to unprecedented peacetime levels as 2020 advances. This will be one of the most important tools that a government can use to reinvigorate the economy. They'll be looking for shovel-ready projects that can get agreement on both sides of the aisle. Deployments of our products are about shovel-ready as you can get; no shovel required in fact. Emergency power in fleet and other fueling products that are made in America and can be deployed rapidly and at scale, which seem like a strong contender.

We already have some state- and city-wide open contracts, which allow our customers to buy without going through lengthy processes. We will work to repeat those orders in other states and also to make sure that our products are on the GSA schedule so that federal agencies can point and click to buy. I don't know how many silver linings will come out of the dark clouds of COVID. But I do know that our products are well positioned to deliver real value and change at a time when governments will be looking for highly visible and sustainable initiatives in which to invest.

Trading on the NASDAQ has changed the way we are viewed by customers, vendors, partners, and the industry in general. It's helped us win quality customers like Electrify America, and it's allowed us to consider other non-organic growth -- ways to grow our business. There will be many opportunities in what Goldman has called a $6 trillion build-out. We'll consider and work towards any strategic opportunity that increases shareholder value and strengthens our offering and place in the industry.

Having the most rapidly deployed and highly scalable fueling solution in the industry puts us in the unique position of being a port of call for all the other mobility and electrification fleets. Whether it's two wheels, four wheels, 18 wheels, or six rotors, whether it's driven by a human or autonomously, whether it's owned or shared, all these mobility solutions will have one thing in common: they need to connect to a source of electricity.

We supply that source in the most scalable and sustainable manner available. We will see it all and we will not shy away from taking advantage of our unique position, both as a provider of unique products and as a public company that has the ability to grow our business and drive shareholder value through nonorganic means.

So as I consider our future and the massive growth in the electrification of transportation, driven by both governments and consumers, and when I consider the dramatic needs for a reliable off-grid electricity that will sadly, but inevitably confront us, I feel nothing but confidence and excitement for this company.

And when I look at our 2019 results in the context I described to you, I know that they in no way describe fundamental weaknesses with our company or our business model. On the contrary, we are executing, and I believe that we have a fantastic future ahead of us; I'm dedicated to it.

And that concludes my comments. I offer all of you my thanks for your time and support and my hopes and wishes that you and those around you stay safe and healthy.

And we are now ready to take questions. Operator?

(Operator Instructions) Tate Sullivan, Maxim Group.

Thank you and good afternoon. Thanks for taking my question. Desmond, thanks for all your comments. On the emergency power products comments, is it a relocation of deployed EV ARC units? Are you designing a new product, would you call it, with just the power source as opposed to having the charging equipment on it?

No, it's not a new product. The EV ARC was always designed to deliver emergency power to customers who want to pay for the additional accessory of the emergency power panel that's built into it. So the great majority of our government customers buy EV ARCs with the emergency power panel integrated into the product for an additional cost.

That said, the response to the COVID disaster can be twofold. In the first place, it could be taking existing EV ARC products that cities already own and fleeting them to locations where, as I mentioned in my comments, there's a requirement for power, either a parking lot of a hospital or could be in a local park where they're setting up a field hospital or wherever else. Those cities that own our product have the ability to do that because, of course, the EV ARC is uniquely transportable.

And if you take New York, as an example, they own their own transportation trailer as well, which we designed and manufacture. So they're able to move them around to wherever the needs are greatest. That's one -- the first area of response.

The second area of response is that we know that some of our customers are feeling a very urgent need for this type of infrastructure. And so what we've offered to them is that in the event that their orders are genuinely related to responding to this disaster or crisis, that we would push them to the front of the queue in order that they get their orders in time to be meaningful for them. And we're asking for the forbearance of some of our other customers whose requirements are less urgent.

Thank you. And also related to (multiple speakers) environment -- yes?

Sorry, I'd just say. And of course, we're making sure that we're able to ramp up as well. It's not one or the other.

And also related to COVID-19, was there any -- are you seeing lower products -- lower prices for your supplies, panels, batteries, everything else? Or any disruptions where you can comment on your supply chains, please?

Yes. So at the moment, we are actively pulling our vendors of everything from steel to electronics, to solar panels, batteries, everything else. And at the moment, I can report that we are not anticipating any supply chain disruptions. We did get a little nervous bit when the battery -- or the factory rather that makes the cells that we integrate into our battery solution was closed down in China for a while. However, they have reopened, and we understand that we should not anticipate any supply chain disruptions.

On the other side of the business, as I mentioned in my comments, we are still delivering product to our customers. And in fact, we did have a couple of customers who said to us, hey, we're just going to hold off on taking delivery of these products right now because we've got so much else going on. And plus, we're trying to reduce interactions with humans.

And we were able to point out to them that, actually, this is a great opportunity for them to have a win where there's zero interaction involved. We have a zero-touch deployment. We shop generally in the middle of the night. We drop the product off. We have introduced a new sanitization process that the delivery expert invokes. It goes -- wipes down any surfaces that might have consumer interface on them with disinfectant. And then he fills out a form, which is left in the delivery package with our customer showing them that the thing has been delivered cleanly.

So while we do see people working from home and of course, other people, they -- some of our customers have other priorities than EV charging at the moment, we are doing everything that we can to help them understand that this is a win that they can get without any interactions. Unlike the grid tied installations, they don't need to have teams of construction workers and consultants and people pouring all over their property. They can -- we just drop this thing off, they never see us. And yes, they got the win of the infrastructure and the disaster preparedness.

Well, thank you, Desmond. I'll hop back in the queue. Thank you.

Thank you.

(Operator Instructions) [Daniel Finnegan, Hosthelp Incorporated].

Desmond, can you please inform us whether Envision has received any interest from any municipality or city in the continental United States on the street lamp charging unit?

And the second part of the question would be, can you provide any update whatsoever on Envision's efforts in Europe and China? Thank you, Desmond.

Yes, thank you for the question. So on the EV Standard, the EV Standard is, like all of our products, frankly, a response to the requests that we were getting from customers. And so our EV ARC product, for example, is fantastic, very easy to deploy, dropped off in a single parking space. But it's better suited to parking lot environments than it is to curbside. Although we are in the rights of way in some places where the units are dropped off on the street and providing curbside charging.

I know this because many cities that we talked to said, we need a curbside charging solution, but it's very difficult to get power to the curb. We want you to come up with something that's like the EV ARC and that it doesn't have any construction or electrical engineering requirement, that's easy and rapidly deployed, and that will reduce the reliance on the grid and work when the power goes out. And so, as I said, like all of our other products, it was invented and engineered in response to requirements.

So the answer to your question simply is, yes, we've had lots of interest. We're not ready to take it to market yet, although we hope to be by the end of this year. And so I don't want to characterize that interest as anything looking like a purchase order or anything like that, but we wouldn't have done it had we not had the interest.

To your second question about China and Europe, I would characterize China as probably my single largest professional failure since I've been at this company. I worked for several years to try and get a good deal for this company in China. It's really easy to get a deal done in China. It's very hard to get a good deal done in China. And I'm only interested in that kind.

I spent four years working on it. The last two years, I spent working with a major Chinese state-owned enterprise. And in January of 2019, I inked a contract with them, and I can tell you it was a good contract with very good results for Envision Solar, very -- took us two years to get there. They then had to send that to Beijing to get what they told me was a rubber stamp from Beijing. They were unsuccessful in getting that rubber stamp, and I received a single-line letter from them saying, we're not going to proceed.

I do not know why, but I'm told by the experts, the Chinese -- US Chinese experts that I deal with, the consultants I deal with, that it was almost certainly related to the trade spat between our government and theirs. And so that was very disappointing for us.

The deal was, by the way, to manufacture and sell the products in China and then also to manufacture subassemblies and components that we could integrate into our products here for faster growth. And we had 50% equity in the deal, which is almost unheard of; Qualcomm only got 45%, I think. So it was a very well-structured deal, and I'm very sorry that we didn't move forward with it. However, we will go back to that table when things calm down.

Where Europe is concerned, we do have a very small presence in Europe, as I'm sure you're aware, and we intend to grow that. In fact, I was supposed to be in Europe in a month from now; of course, my plans have changed where that's concerned. But we do believe that there's a great market there, with most European countries banning internal combustion engine vehicles in the next couple of decades, starting with Norway in 2025, the UK in 2035, and so on.

I also believe that the EV Standard product that we have patented right now will be a very important product over there, because, as you know, most European cities, also like East Coast Europe -- United States cities, do not have large surface laws and there will be a huge requirement for on-street curbside parking. And so we thoroughly believe that the EV Standard will have a great place in that market. Not ignoring either of them, but putting our finite resources towards the -- where we can get the most bang for the buck, which currently is in the US.

Tate Sullivan, Maxim Group.

Thank you. Can you remind me of your federal clients that you have delivered EV ARCs to? I know that's maybe a long list, but I recall reasonably it's with the US Navy. But have you done business with other federal agencies? Can you give us some examples of that, please?

Yes. Definitely. As you've already said -- you've already cited the US Navy. Of course, we have a couple of different deployments for them. We are also -- the Department of Energy. We're in several of the national laboratories around the country where they do a lot of the top-secret work. We're in another top-secret facility in Nevada, which -- I can tell you we're in a top-secret facility, but I can't tell you more about it than that. And then maybe a couple of others.

Tate, apologies, I don't have a list in front of me, but I could certainly get -- furnish that to you. I do think, though, that there's going to be a great opportunity for growth there, because, as I said during my comments, I think it's likely that part of the stimulus rather than just recovery, but the stimulus that will come this year. I believe there will be a considerable amount of infrastructure spending.

And as I've said, it's hard to find shovel-ready projects; we're definitely that. We are a made-in-America product, and we tick all the right boxes in terms of being popular on both sides of the aisle.

Thanks. And last one from me about the pipeline. I think -- I apologize if I missed it -- it increased from 30 to 40, I think. But what gave you that confidence, or what indications did you receive? Was it the federal that we just talked about? Why did that increase?

Yes. So first of all, in order to be in our pipeline, this has to describe customers who know what the product is, know how much it costs, have a need, have budget; these are not simply people who have expressed a passing interest or think that we have a cool idea or something like that. Our pipeline, as you know, is much more art than science, except for the factors that I've just described. We don't allow our salespeople to introduce into the pipeline anything other than what we consider to be serious and very viable opportunities.

What we're not good is, as I've demonstrated in this call and we've demonstrated with our results, is always being clear on exactly when that pipeline will convert to backlog, and, even once it's backlog, when it will convert to revenue. Although we're getting much better at that, we still get surprises. I mean -- and it really is.

Just to give you an example of what happens, we get an order from an agency. The agency tells us they expect us to deliver at such and such a date. And in fact, they're quite often really aggressive about that, telling us we mustn't be late and that nothing can get in the way and all sorts of other things like this. And then just as we're getting ready to deliver, they tell us, you know what, [you can have that] in a month. And sometimes that month is the next quarter, and that has significant impacts on our quarterly results, and by which I can tell you they're not concerned at all.

However, as I've said before, as we convert more of that pipeline to backlog, and as we convert more backlog to revenue, what happens is the status line of our business becomes bigger and we get more of the onesie-twosie orders. And the lumpiness that comes about as a result of these specific orders gets buried in the bigger line.

I think I'm seeing that, I think we've witnessed that. You can see that looking at our press releases over the last year. And I'm confident that we're going to see a lot more of that. And while we'll never be immune to lumpiness, because we do tend to get these big orders, they will become less obvious and less impactful to our business. That's not just good, by the way, for quarter results; it's also really good for the way we run the factory and the way we buy commodities and everything else because it allows us to run at a more steady state.

Jerkiness is expensive and it's inefficient, but we're increasingly moving out of that. And I feel good about where that's going. Not to say we won't still have choppiness, especially not when you've got things like COVID chopped at you, but we're managing it and we anticipated it and we firmly believe we'll grow out of it.

That's awesome. Thank you, that was my last one. Have a good rest of the day.

Thank you, Tate.

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

I just want to, again, thank all of you for your time. And sincerely hope that we see an end to the tragic and rather horrible situation that we're in globally at the moment. In the meantime, we're going to keep working as hard as we can to increase the value of this company and also to do our best to help everybody through the crisis as it happens at the moment. So be safe and be healthy. And thank you very much.

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