Beam Global (BEEM) 2020 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Envision Solar International first quarter 2020 financial results and corporate update conference call. (Operator Instructions)

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, sir.

Thank you, Andrew. Good afternoon, everyone, and thank you for participating in today's conference call. Joining me from Envision's leadership team are Desmond Wheatley, President, CEO and Chairman; and Kathy 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 recently filed periodic reports on 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, May 14, 2020. Except as required by law Envision disclaims any obligation to publicly update or revise any information to reflect events or circumstances, that could occur after this call. It is now my pleasure to turn the call over to Desmond Wheatley. Desmond?

Well, thank you very much, Scott, and good afternoon to everybody on this call. Let me start by thanking you for your support and interest in Envision Solar, and for joining this call during these strangest of days. I'm going to be sharing my thoughts and observations about the first quarter of 2020 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 quarter. Kathy?

Thank you, Desmond, and welcome, everyone, to our call. I'll now discuss the financial results for the first fiscal quarter of 2020. For the three months ended March 31, 2020, revenues were $1,317,052 compared to $1,189,595 for the three months ended March 31, 2019, an 11% increase.

Revenues in the three months ended March 31, 2020, included a variety of customers, including municipalities across four states, two colleges, and a large commercial business, which shows an expansion in the breadth of our customers. This compares to revenues for the three months ended March 31, 2019, which resulted from the delivery of 18 units to one customer, the City of New York.

As of March 31, 2020, our contracted backlog was approximately $3.6 million. This includes an order from Electrify America for $2 million, which was received during the quarter ended March 31, 2020, for 30 EV ARC charging stations to be deployed in rural areas of California. We had three large projects that were originally expected to be delivered in the quarter ended December 31, 2019, that were delayed until 2020. These projects are expected to deliver during the quarter ended June 30, 2020, in the current quarter. Our shipments will continue to fluctuate each quarter due to the varying size of orders and timing of deliveries.

For the three months ended March 31, 2020, we had gross loss of $39,641 compared to gross loss of $53,102 for the period ended March 31, 2019, a 25% decrease. Our gross loss is caused by several factors which will generally improve as our revenues increase. First, we've priced our units to be competitive and to gain market share in EV charging market.

Our fixed manufacturing cost per unit is high, but will improve as we increase our revenue and spread the cost over more units. We also expect that a higher volume of production, we will improve our labor efficiency and we can negotiate better volume pricing from our suppliers.

Total operating expenses were $902,000 for the three months ended March 31, 2020, compared to $522,667 for the same period in 2019, an increase of $379,333. This increase of -- in operating expenses was almost entirely offset by a reduction of interest expense of $365,434 in Q1 2020, compared to Q1 2019 that resulted from the elimination of debt in 2019.

The increase in operating expense was primarily attributable to an investment in our sales and marketing resources to build company and product awareness with the intent to increase revenues. Operating expenses increased by $154,679 for marketing, sales, and investor relations consultants and trade shows, and $79,995 for increased sales personnel and commissions. In addition, operating expenses increased by $71,964 for non-cash compensation expense for stock options, investing of director of restricted shares, $49,176 for increased salaries and the addition of medical benefits, which were not available in the prior year, and $23,519 of other expenses.

Our net loss of $942,521 for the three months ended March 31, 2020, was comparable to a net loss of $949,631 for the same period in 2019. As mentioned, the decrease in interest expense that resulted from the elimination of debt was invested in operating expenses primarily for sales and marketing activities targeted to increase our revenues. As of March 31, 2020, we had cash of $2,432,300 compared to cash of $3,849,456 at December 31, 2019.

The cash usage in the quarter resulted primarily from the net loss, net of non-cash expenses, as well as increases in inventory and prepayments for inventory based on Q2 requirements. Our working capital decreased by $567,104 from $5,142,719, at December 31, 2019, to $4,575,615 at March 31, 2020. And with that, I'll turn the call back over to Desmond.

Thank you, Kathy. During the first quarter of 2020, Envision continued to deliver real results in three core areas, core areas that I've emphasized over the last year, and particularly during and after the public offering, we completed a year ago last month. Those three areas are: growth in revenues, through increasing our footprint and number of customers as well as from single large contracts; increased emphasis and investment in sales and particularly marketing; and increasing and honing our intellectual property leadership in the spaces of off-grid EV charging and energy security.

In January, we announced a new patent for our EV Standard streetlight replacement product, which combines light wind, patented solar tracking, ARC technology energy storage, and an existing streetlamps grid circuit to create what we believe will be the only product in the world which can provide a meaningful EV charge at the curb using existing street lighting infrastructure.

Curbside charging is the holy grail of charging for any vertical city like New York, Austin, Chicago or San Francisco, and just about everywhere in Europe and Asia, where they don't have large flat open lots. We also made solid advances in improving the fabrication processes for our new EV ARC 2020 product, which was officially announced in the quarter and shipped to several new customers.

EV ARC 2020 provides several significant benefits over our previous already very advanced EV ARC model. It's now flood proof to 9.5 feet, offers an expanded parking space, can be interconnected to provide DC fast charging, and it is, in my opinion at least, far better looking.

At the same time, our team has been refining our patented Solar Tree product, which will be deployed this year to provide DC fast charging for full size buses in California. It's our biggest and most ambitious ARC technology product yet. Both the EV ARC and Solar Tree DC fast charging products generate much more revenue and lower volumes than the standard EV ARC because they have a lot more technology jammed into them.

And EV ARC DC fast charging product is made up of four EV ARCs that generates eight times the revenue. This is a good example of why we concentrate on creating technology solutions for industries that historically been served by construction and electrical low margin labor. The more tech we cram into our products, the more barriers to entry there are for the competition, the more revenue we can get, and the higher the margins we can demand.

In other intellectual property news, we announced a new patent pending on a wireless charging EV ARC product. Wireless EV charging works very well, I've use it myself and I believe that in the not too distant future, we will see the EV manufacturers start to integrate wireless into their cars. That's really the only thing holding it up at the moment. BMW and a couple of others have already done so at small scale integrations. I cannot foresee a future where consumers select plugging their vehicles in rather than simply parking them and walking away, which is what wireless charging allows.

The vehicle refuels without any human interaction at all across a gap between a transmitter and a receiver in the vehicle. Our products are ideally suited to offer wireless charging, because unlike everyone else who's investing in grid-type chargers and who will have to go back out to their sites and get new permits and do new construction and electrical work to install wireless transmitters in the street, we'll be able to integrate the transmitters directly into our base plates. This will work in retrofit and, of course, in new deployments.

If you believe that wireless will win, and I, as a consumer, certainly do, you can see that this is another major differentiator for us. That's why we're pursuing the patent. In fact, in March, we demonstrated wireless charging at CONEXPO. We were there in partnership with Volvo, who's rolling out a whole line of electric construction equipment. In Europe and other places, it's getting harder and harder to operate diesel-powered construction equipment because of emissions controls, noise pollution, and regulations surrounding the transport and storage of liquid fuels on a jobsite. Electric construction equipment is cheaper to operate too. So there will be a big shift in that direction in the coming years, both because of regulations and economics.

The one thing that generally isn't available on a construction site when you're moving dirt is electricity. Utility connections come later. But the electric construction equipment needs somewhere to charge. Volvo partnered with us because our products can be delivered to a construction site, keep their recruitment charged during the project, and then be moved to a new site for the next project. No fuels, no grid, no emissions and no risks. And best of all, no cost for the energy.

Even the gruffest old construction curmudgeons I talk to warmed to the idea of electric when they understood it was going to save them time, risk and money. The EV ARC is the perfect bundled product with electric construction equipment, and if it has wireless charging, so much better. That market alone is worth hundreds of millions of dollars. And like an EV charging, I'm not aware of any product that compete with ours.

Finally, on patents and IP. We continue to work towards securing a patent for our currently patent pending UAV ARC, the drone recharging product. We've had some interactions with the USPTO, which we view as normal, and we continue to be confident that we will win that patent which will defend our IP in what we believe will be another very large market opportunity.

Q1 was a significant period where sales and marketing investment and activities are concerned. In January, Sandra Peterson joined us. Sandra is the first experienced executive level marketing person we've ever had at Envision. She came down from Silicon Valley where she's worked for notable player such as Apple. It's been an education having her on board. She brings professionalism to an area which we have previously not focused on.

The immediate impacts of her joining, have been an overhaul of our sales and marketing collateral. Customers now receive information from us, which is not only correct and up to date, but also delivered in crisp, professional-looking documents that display the same level of excellence as our products do.

Our sales outreaches are now logical and programmatic, targeting customers at the right times in their budgets and buying journeys. For example, Sandra has the sales team calling flood-prone environments in advance of flood season to educate on the EV ARC 2020 flood-proof capabilities. She has been calling jurisdictions that are in high fire risk zones to get EVR ARC in front of them before the local utilities start turning the power off as part of their public safety power shutoffs.

But most excitingly, Sandra has built from the ground up our rebranding program. I genuinely cannot wait to see the fruits of this effort. I'm proud to announce that as of Q3 of this year, we will no longer be known as Envision Solar. We're renaming the company Beam Global, but it will simply go by Beam from that time forward. Envision Solar is the name I inherited when I took this company over, and it's been on my target list ever since.

Until now, I haven't had someone who has the skill to take on such a move and to execute on it flawlessly. We spent the last several years explaining that we're not a low margin solar installer to Wall Street. And our sales people have had to struggle with the same challenge on every outgoing call they've made. It's been really unhelpful.

Beam, on the other hand, is fresh, crisp and full of connotations which fit what we're doing today and what we intend to be in the future: a beam of energy, a sunbeam, beaming from one place to another. And then there's the stability that a structural beam provides. Weeks of introspection and consideration of our company, its attributes, our culture, and our character went into this choice in a very defined and scientific method, which Sandra has learned through multiple rebrandings in her career.

The more I think of the name, the more I like it, and the more I see it representing our future as a technology company at the nexus of clean energy and transportation. I believe we're going places and the name Beam will take us there. There's a very involved process in renaming and rebranding a company and doing it well. I'm happy to have Sandra at the helm. I'll have to wait for the new website, the new collateral, the videos, and this one, I'm really looking forward to, having our new logo and name on the side of our trucks and building. But it will get done.

All of these efforts have one aim, to increase revenues and to increase market awareness of the value that our products bring because that will increase revenues. Like any manufacturing company, increasing revenues is the surest path to increase gross profits and overall profitability as a result. The more we sell, the more efficient we become. The better the deals we get on the components and materials we integrate into our products and the lower the overhead contributions to each sale become.

In the first quarter of this year, we brought in more revenue than in any other first quarter in our history, except for Q1 of 2018, which was driven by a single large purchase order from the City of New York. Revenues in Q1 of this year were up on prior quarter and up on the same period prior year. But the real story on the revenue is not how much it was up, but where it came from.

First, it's important to point out that while I previously reported that we had three large revenue deliveries move out of the fourth quarter of 2019 and into 2020, none of these were recognized in the first quarter of this year. They've all skipped another quarter. We have not and we will not lose any of them, but they moved further right than we initially expected and are still in the bank as it were. So the Q1 revenue was not helped out by deliveries that we had slated for 2019.

Q1 of 2020 was also the most diverse revenue quarter in our history from a customer point of view. We have had higher revenue quarters, but they've always been driven by one or two large orders. Q1 revenues this year, all came from small onesie, twosie deals, and that's very important to me. I often talk about the lumpy nature of our revenues and the fact that I expect that to continue for a while. We get a big order from New York; we have to deliver it in 90 days; we do that and then things drop off till the next big order.

Now, I fully expect those big orders to keep coming. And that was confirmed in the first quarter by our first order from Volkswagen subsidiary, Electrify America. More on that in a moment, but what's interesting, and I'm happy to say that we plan for this and foresaw it is that we're seeing an increase in what I refer to as white noise POs.

White noise POs don't get a lot of attention, because they're not on their own very exciting. A unit here at Arizona, two units there to Wisconsin, one unit here the Bronx. We don't get a lot of attention or excitement about these orders but we should, because the trend is that those sorts of orders are accelerating, and also because our history shows that they often lead to repeat business.

I'm most interested in them, because as the white noise POs increase, the revenue line associated with them grows. We're not there yet but I believe that we're heading to a time when the white noise POs provide enough revenues to swallow the large orders in our business, and therefore remove much of the lumpiness from our revenue recognition.

White noise POs are also important because as they move around, which our orders often do, they will not be a big impact on our quarterly results. At the moment, if we have a big order move from 1Q to the next or even across two quarters, as has happened with our big Q4 deliveries, it can have a huge impact on our quarterly and even annual results, even though it's very little meaningful impact on our long term prospects.

As an example, one of the larger orders that moved out of Q4 was for Caltrans. Now Caltrans has moved orders on us before, but no one noticed because they were smaller orders. We can't impact when Caltrans takes delivery of our products; that's up to them. We closed the deal; we got the PO; we produced the products; and we'll deliver them and get the revenues when Caltrans is ready for them.

White noise POs can move without anyone noticing. Nothing else drops in and fills their spot till they come through. And so far, all our orders always do come through. We've never lost an order or had a product returned and we've never had a customer say they wish they hadn't bought our products.

The white noise purchase orders and revenues in the first quarter came from the City of Los Angeles; The California Department of Fish and Game -- that was a repeat order; the City of Long Beach, another repeat order; Tehama County; Madison, Wisconsin; Glendale, Arizona; the City of Charlotte, North Carolina; Orange County, North Carolina; Rice University; The City of Richmond, British Columbia; the City of Richmond, California; yes, two Richmonds; the Fresno County Rural Transit Authority; the California Office of the Inspector General; Bronx Community College, New York; and Pfizer, the large pharmaceutical firm.

So don't forget that California and many other parts of the country were in total lockdowns after the first half of March. We continued to deliver because we're exempted from the stay-at-home orders because of the vital transportation and energy products we produce and also, crucially, because our customers could accept product from us because, uniquely for an infrastructure product, we can be deployed in minutes without any customer interaction, our zero-touch deployment protocol.

On the not white noise POs front, we received our first order from Volkswagen subsidiary, Electrify America. They're deploying more EV charging than anyone else in the US with a $2 billion budget that must be spent. Our first PO is for 30 units.

It's the first $2 million in revenue from Electrify America, but I think it's very unlikely that it will be the last. This PO amounts to about 0.1% of their budget. And what they're going to find with us is that we're the easiest, fastest and most scalable solution available to them. We will deploy 30 units in less time than it takes them to go through the process of deploying a single grid-tied option in most jurisdictions.

So we're still going to get the big orders, and we're still going to deliver on them. But I believe that the kind of white noise POs, which we received and executed on in Q1 will play an increasing and important role in our revenue mix. Flattening some of the lumpiness out of our revenue mix will also help us to operate more efficiently, which will in turn reduce our cost of sales and increase our per unit gross profit contributions.

Even today, we generate gross profits at the unit level, but not always enough to overcome the fixed costs associated with manufacturing like rent, insurances and labor. More volume and less choppiness will enable us to overcome the overheads and also actually reduce our costs at the unit level. It's also important to note that while we're still producing a few of our EV ARC standard models, most of the production is now on EV ARC 2020, which is still a new product for us.

The team is not yet as efficient as they became on EV ARC standards, and we are daily identifying little engineering and fabrication tweaks, which will make us more efficient and reduce the cost to produce the product. We went through the same process with EV ARC standard, and it's worth going through again with EV ARC 2020, because the product is so superior and because we all believe that even though it's costing us more to produce at this early stage of its evolution, it will actually cost less in the longer term. So we'll end up with a superior product which generates better gross margins.

Even during COVID, we're seeing continued investment in electric vehicles. In fact, there are several studies which show that consumer interest in EVs has grown significantly since the occurrence of the COVID pandemic. The New York Times yesterday reported that while the rest of the auto industry has been badly impacted by the crisis, sales of electric cars have been surprisingly resilient.

In Europe in March, conventional car sales fell by more than a half, but EV registrations surged 23%. People are enjoying the clean air brought about by the lack of traffic, and perhaps also feeling more vulnerable and wanting to do something to protect the environment. In any event, I believe that there will be enough consumer interest to maintain a requirement for solid growth in EV charging infrastructure, which will, in turn, create the opportunities for us to sell more products and increase our gross profits.

Government goals across the globe are strengthening, not weakening, where the electrification of transportation is concerned. And we continue to see more nations announcing future bans of internal combustion engine vehicles and more emphasis on the deployment of EV charging infrastructure. And this is taking place in the next decade or so.

We're also concentrating efforts on qualifying for the General Services Administration, or GSA, contract. Being on this contract, will be like being on the New York contract or the California one, except for the Fed, it will be for the federal government. We've hired a consultant to help with this process, because we believe that there may be significant opportunities to sell to the federal government as they grow their EV fleets. We've sold to them before, but it was harder than it will be when we have the GSA contract in place.

We also believe that there may be significant infrastructure spending, which will come about as a result of the COVID response stimulus, anywhere from $1 trillion to $3 trillion in infrastructure spending has been suggested by both sides of the US government.

I'm very encouraged to see the introduction by the House Committee on Energy and Commerce leadership of H.R. 5545, otherwise known as the No Exhaust Bill Act of 2020. This bill would authorize $2 billion per year from fiscal year 2021 through 2030, for grants to state and local governments and private entities for electric vehicle charging infrastructure. This means that the very entities who are already our largest customers would actually have more money to spend on our products, not less as we might otherwise have feared as a result of COVID.

Interestingly, and crucially, the language does not specify grid-tying EV chargers, as similar proposals often have in the past. Our new consultant in DC will continue working to ensure that the upcoming COVID response stimulus bill includes such language and authorizing an appropriate funding for EV charging infrastructure as part of an expected infrastructure investment package.

I think this is a good indication of two things. First, our increased spending on sales and marketing, which includes these sorts of consultants, is bearing fruit and potentially on a grand scale. Secondly, and importantly, it demonstrates that the federal government and those who control the purse strings recognize the importance of EV charging infrastructure that is not reliant on the electric grid to function.

The government will be looking for shovel-ready opportunities to put stimulus dollars to work. We are the ultimate in shovel-ready projects. There is no shovel. Our technology allows us to deploy networks of chargers faster than any other solution out there, and we're a made-in-America product. Note that the White House in the last couple of weeks has emphasized the vulnerability we face as Americans because our utility grid is susceptible to foreign bad actors.

The President and others are calling for US-made products which can strengthen our power infrastructure. Our products are American and immune to any sort of grid failure. They've already been used to continue charging vital fleet vehicles during blackouts and emergency power panels we integrate are powering emergency COVID centers, even as I speak to you now.

No other EV charging infrastructure company can compete with these multiple layers of value we deliver. We're going to go after the stimulus dollars, both directly at a federal level and also at the state, local and municipal levels, as and when the dollars reach those entities. We've continued to operate during the COVID stay-at-home orders because we're exempt from these orders because of the vital nature of our products.

We've seen our EV ARC product being used to provide power to emergency COVID facilities in California. And I believe that the combination of our rapid and scalable deployability and the fact that we provide a disaster preparedness solution that's never been more recognized by our customers than it is now, will place us in a good situation to capture stimulus spending. And I've asked Sandra to continue to direct our sales team and marketing efforts towards that end.

You can see the increase in investment in sales and marketing when you look at our financials. The combined operating costs and interest lines are more or less flat for Q1 and the same period last year. But the good news is that in 2020, we do not have any interest expense because we paid down all our debt. Instead of spending that money servicing debt, we invested it in increased sales and marketing expenditures. I committed to doing that when we did our public offering last year, and I believe that we're seeing the fruits of those efforts now.

Beyond internal adds like Sandra Peterson and a new salesperson, we've added several other sales and marketing resources. A PR firm in Malibu, California is now working to get our story out to the public domain. We know that when people hear about our products, they get excited. You'll see an increase in the amount of press we've received, articles, podcasts, and even TV news. These have been largely driven by our PR firm.

We've also invested in the engagement of an IR firm to help us with investor relations. Other increased spending in sales and marketing stems from the addition of the consultants I previously mentioned, and from increased sales commissions because we're selling more. And we've hired another consultant to help us with our negotiations with the City of San Diego to finalize an agreement, which will enable us to move forward with our media-funded network in partnership with OUTFRONT Media. We've made more progress in the month or so since we engaged that consultant than we did in the year prior to their being involved.

I continue to be confident that we'll arrive at an understanding with San Diego that works for us that is -- and that this most important business unit will be able to proceed first in San Diego and then across the country. We will always be very careful in how we invest money. Those of you who have been here will know that we operate in spartan offices without any gloss or fancy coffee machines or beanbags. We don't spend our money on anything that does not improve our product, our ability to produce our product or our ability to sell our product.

I'm confident that our investments in sales and marketing are prudent, and that they will lead to increased sales. Otherwise, I wouldn't approve them. We will constantly monitor these investments and the impact they're having, particularly during COVID, and we'll make adjustments as necessary.

COVID is obviously creating a lot of uncertainty across the broader markets and the economy. At the moment, we're delivering products, and we're not seeing any material impacts to our ability to continue to perform throughout the remainder of this year. We have had some prospects slow their purchases of our products. But at the same time, we're seeing new opportunities open up as a result of the value that we deliver.

We don't want to exploit this pandemic and the misery it's causing, but we do want to make sure that we deliver as much product as possible to those that need it because it's so clearly a benefit during these very trying times, as well as during peace and prosperity.

I'll wrap up by talking a bit about our cash position. Obviously, cash is the lifeblood of any business and as an operator and an investor, I want to know that a company has sufficient cash on hand to continue operating into the reasonable future. Looking at our cash position on the balance sheet, can be misleading when trying to discern whether or not we have enough cash to do that.

When we're actively producing and delivering products as we are now, the majority of the cash we spend goes on materials and components, which we integrate into our products. We don't manufacture products, unless we have a purchase order in hand or such a high degree of certainty that we're getting one as to make it almost the same. The cash that we spend in this way ends up in inventory or AR, or when we deliver the product and get paid for it comes back to us with a gross profit contribution at the unit level.

Because of that cycle, you'll sometimes see significant reductions in cash in a given period that are not related to burn. It just means that we've bought components and materials and are somewhere in the process of turning them into products, delivering those products, billing for them and getting paid. With that in mind, the truest indication of our health from a cash point of view is to add our cash, our inventory and our AR net of AP. Remember that we've never had an order cancel, and we've never had a product returned and we always get paid though we do sometimes have to wait 45 days or even longer for that to happen.

We are not raising money at the moment, and we do not need to. At the same time, I've always said that if there is a strategic opportunity to raise more capital in a manner that increases shareholder value in the long term, I'll probably do it. We will welcome the exercise of our warrants when our share price returns to its pre-COVID levels as we expect it will. This non-dilutive means to bring more capital in is an excellent tool in our growth toolbox. We'll also put an S-3 shelf in place, again, not because we need to raise capital now, but because it's the prudent thing for us to do.

There are many catalysts in the industry that we positioned ourselves to take advantage of that might cause appreciation in our stock. We should be ready to take advantage of that sort of eventuality should it present itself. Equally, some other growth opportunity, like a large order or an acquisition that requires capital, might come along. If we need more capital, we'll raise it, but we don't need it now. The key point is that we're in a much better shape than the cash line on the balance sheet might indicate.

In summary, the takeaways from Q1 are as follows. We had the second highest revenue for a quarter -- Q1 in our history. We sold to the most diverse set of customers in any quarter in our history. We continued to deliver product even during the COVID shutdown. We're positioning ourselves to take advantage of what will likely be the biggest infrastructure spending stimulus in history. We swapped interest payments for increased sales and marketing.

We continued to grow and strengthen our intellectual property portfolio, and we managed cash in a manner that will allow us to continue to execute on our plan. That concludes my comments. I offer all of you my thanks for your time and support and my hopes and wishes that those around you stay safe and healthy. We're now ready to take questions. Operator?

(Operator Instructions) Tate Sullivan, Maxim Group.

Hi, thank you. Thank you, Desmond, for all the comments. And just my first one on your wireless charging patent progress. Can you just give some context on your previous experience with getting the patents through and approved and how long that might take, and any impacts from COVID on that process or just a little more detail on that timeline if you can please?

Yes. Thank you, Tate. Like everything else, it takes longer than I want it to. However, it doesn't take us any longer than it takes anybody else. There is a process; we've had an excellent batting average, I think is the American baseball term for this, where patents are concerned. In fact, we have won every patent but one that we've gone after. We are very disciplined in our approach to going after patents.

We only prosecute patents that, A, create a significant barrier to entry for a competition, and B, we believe we can monetize. And I'm happy to report that all but one of the patents that we've won are in products which we've sold and are making money. The one that we have not yet sold is our EV Standard product patent, and that we intend to have -- be able to take to market later this year. But otherwise, all the others are out there.

So we have no indication as of the moment that COVID is slowing down the USPTO. And we have had communications with them about the wireless charging product, and also about the UAV, the drone charging product through our patent attorney. And so I see that continuing forward. So far it's not taking longer than any of the others that we've gone after. But as I said at the beginning in my comments, I'll never be happy with the speed that anything moves forward at.

And you mentioned, you can integrate when that opportunity -- that patent does come through and you can integrate transmitters into your existing base plate. Can existing EVs integrate a similar type of technology into the cars? Or does it have to be a part of new cars? Or how can it work in the next five to 10 years going to that type of car?

So far it's a bit of both. So to date, none of the major OEMs have started integrating wireless receivers into the bottom of their vehicles. I mean this is just typical of the auto manufacturing community, right. They're not exactly rapid to move forward with brilliant new stuff. However, there are aftermarket solutions which you can integrate into existing vehicles.

And as I said in my comments, we've seen notable companies like BMW sending out 5 Series BMWs with wireless receivers in the bottom of their vehicles. So they're clearly getting on board with this. I think Volvo has done it too. And again, as I said, just as a consumer, the idea that -- people spend a couple of thousand dollars getting pearl paint work on their car; the idea that they wouldn't add a wireless receiver for wireless charging and never have to plug their car in again to fuel it, that's just anathema to me.

So I'm certain it will happen. We will be in an incredible position when it does because, again, as I said in my comments, we won't have to do any difficult work to integrate the transmitters either into our existing customers' base plates or into our future products whereas everyone else will have to get new building permits, new electrical permits and go out and do a bunch of street work and everything. That's actually a terrifying prospect, I think, if you're in the grid-tied business. But it's not terrifying for us; it's going to be a major differentiator for us.

Thank you. And then just following up on your name announcement, Beam Global. Is that official as of today? Are you known as Beam Global now and when might your ticker change as well to just a little background info, please?

Yeah, so to be clear, the legal name will be Beam Global, but we will just go by Beam. And the answer is it's in our proxy now. It will require a shareholder vote, which will happen on June 17. We have done the legal background checks and everything like that on it so we feel confident that we'll be able to move forward if it pleases our shareholders. And we have already an anticipation of it pleasing our shareholders, which we're certainly hoping it does.

We've already started a good deal of the laying the groundwork from a design, logo and general rebrand. It's a long process and I don't want to wait till June 17 to get the shareholder approval before we start the clock ticking on that, partly because I'm so enamored with the name and so is everyone else that I put it in front of that I just think it's extraordinarily unlikely that anyone who understands what we actually do would prefer us to stay with this name, which kind of consigns us to being viewed as a sort of rooftop solar installer. That's not something that's good for the company, whereas this new name will be crisp.

And beyond that, I've got great visions for what this company is going to become in the future, and we need to have a name that allows us to grow into that. And so that's the process, we get the shareholder vote June 17; we'll do a bunch of legwork as much of it as we can in advance of that. But without investing in expensive stuff like new websites and everything like that. So that's why I said Q3 is the likely launch date for that. And of course, as soon as we get the shareholder vote, we'll go to NASDAQ and try and get a ticker that best fits the name and what we do.

Great, okay. Thank you, Desmond.

Thank you, Tate.

(Operator Instructions) [Joseph Miranda], Individual Investor.

Yes. Good afternoon, Desmond. Thank you for sharing with us your insights. I do have a question about the name though, the new name change. I just did a quick Google search. And you want to differentiate from Envision Solar from being a rooftop installer. But here, there's going to be a confluence of people looking at Beam Global as a premium spirit. There's already a name for a company that's making $3.1 billion with that name.

Yes, Joseph. Nice to hear from you, you're sounding well. So, Joseph, we're aware of this, as Jim Beam is the company that you're talking about. Obviously, we're aware of that. And part of the result of there being 7 billion, heading towards 8 billion people on the planet is that, it is more or less impossible to find any name at all for a business, which is not already being used by somebody else. What's important for us is that we find a name which -- while it may be used by companies making alcohol, and there's a marketing company as well. And a couple of -- I mean, probably thousands of other Beams across the globe.

What's important to us is that we choose a name which fits what we're doing and what we will do and where there's no likelihood that an investor or a customer might confuse us with one or the other Beams. And so where Jim Beam is concerned, for example, we were not concerned that somebody might think, well, I want a solar powered EV charger. I'll just go to jimbeam.com and then get confused when they see a bottle of something that's not even Scottish whiskey. And so that's -- that was the way we've approached this.

Believe me, we looked at 100 different names. I have to say I didn't like any of them as much as Beam. But we looked at 100 different names, and we did searches on probably 20 of them. And you simply cannot find a name that hasn't been used over and over and over again, any word in the dictionary is the name of a business. But we chose one that we thought, as I said, is very good in terms of reflecting what we are today and where we're going more importantly. That was the one of the crucial things was to make sure that we didn't come up with a name -- solar powered EV charger company -- because there's so much more that we will do at the nexus of clean energy and transportation in the future.

And we wanted to make sure that we had a name which allowed us to do that. So I take your point, but unfortunately, the reality is, there's no such thing as originality. All we can do is choose the name which best takes us into the future.

Okay, thank you. One of the question if I may. Has -- have any hospitals or medical centers shown any interest after you announced prioritization of such orders?

Yes. I can't go into too much more detail than that, but the answer is yes. It's -- as you -- you might not be surprised to hear, hospitals are not trivial environments to get into. There are lots of regulations and all sorts of other stuff going on. I think what's really interesting about this is it's not just the hospitals as hosts for these units. But what's also interesting is that our existing customers who have units are interested or have expressed an interest in doing a couple of different things.

It's just like what happened in Oakland, moving existing units to locations where they can help during the crisis because let's face it, many of them are underutilized at the moment. They've been deployed in environments where people are no longer going to work during the stay-at-home order. And that makes these EV ARC units underutilized. Uniquely in the industry, our customers were able to pick these units up and take them somewhere where they can be used, either providing electric vehicle charging at a new location, which is happening in the COVID test centers, or also providing this emergency source of power to power the entire COVID test center.

There is hardly anything more gratifying that I've ever experienced than seeing those healthcare workers so relieved that they would not have to operate a test -- a COVID test center with a diesel generator, which is what they'd been using to that point. They were always afraid of it, afraid to start it, afraid it would run out of fuel. They didn't like breathing the fumes, they didn't like the sound. And we've given them a silent, clean -- or rather the City of Oakland has repurposed one of our equipment or piece of equipment in that particular location, several of them in fact, but in that particular location to provide them with silent, very reliable source of energy. They're thrilled to bits.

But there are others, there are other jurisdictions that are looking at either increasing the number of EV ARCs they have, and sharing them in putting a working group together in Southern California to share them with facilities that might need them. And I think the really important thing that's come out of this is, this has been a wake-up call for our many existing customers, and also for prospects that we've been talking to. We've been selling this concept of an emergency source of power and an emergency source of EV charging for many years now.

And except in a few cases like in New York and places where there have been blackouts, and they have continued to fuel their vital fleet vehicles using our products. And also in Northern California during the during PG&E's power shut off, because of the fires and all that sort of stuff. And that's happened a lot. But across the board, and across the board in 100 municipalities that we're deployed in today, we've got lots of customers that have forgotten about their EV ARCs. They use them every day, but they don't give them a second thought. And that's kind of what we want. That's how infrastructure should be; it should be so easy and so non-intrusive that you forget about it.

But now they're realizing, Jesus, we could move this thing and we can use it to power infrastructure in locations where there is no grid connection and no chance of us getting it there. Certainly not in time for the crisis. And beyond that, we can use this thing for power when the grid fails as it certainly will. And as I say, the White House, I think a little bit too late, but the White House has finally come to the same conclusion that we've been talking about for a decade now, which is the grid is probably the greatest vulnerability facing the country. And so it's been a big deal for us. And I think it's going to have a significant impact on our future growth.

I'm very proud of that. And as I said in my comments, I don't intend to exploit this. But we're not exploiting it. We're -- all of our team is here working during the shutdown; everyone else is staying at home. Not our team, everyone's here working, and we're out delivering these products to customers. And I'm bloody proud of it. And it's going to be good for our future.

[Michael Murali], Individual Investor.

Thank you. I would like to know who your competitors are, and what percentage of orders do you lose to your competitors and why?

So I'll give you a somewhat coy response first. In the sales office here, I had a sign put up that says, your only competition is ignorance. And I'll tell you why I did that. It's a little bit coy but it's a reality. From a product point of view, there is no product competition. Nobody else makes a transportable, solar-powered, electric vehicle charging station that can be deployed in a single parking space without disrupting parking and all the other benefits that come from the product.

And the reason I can feel confident about that is not because I have the time or resources to search the globe for a competing product. But some of our biggest customers do. We have multiyear contracts in place with the State of California, New York City, State of Massachusetts, and several other contracts where they did global RFIs, requests for information, and RFQs, and then let -- competitively let contracts and in every instance, we were the only company that they found.

We were the only company that responded to the RFP, the request for proposals, which was also true in San Diego last year on the media network. We were the only company that responded because we're the only company that has what we have. But that does not mean that we don't compete with anybody.

As I said in my comments, we have developed a technology solution, which displaces the 100-year old model, which everybody else uses when they're trying to get something electrical to work. What the first thing you do is connect it to the electric grid, right? We've all been inured to that. So for 100 years, that's been the habit. And so our prospects, when they think about integrating electric vehicle charging, the first thing that comes to mind, well, better get an electrical contractor and an engineer, and I better start looking into permitting on electrical stuff.

The first thing that comes to their mind is definitely not us. And that's one of the uphill jobs for us. That's why we have the PR firm. That's why we're investing more in sales and marketing and everything else, because ignorance of our product and its capabilities is the number one barrier to entry for us. In general, when people see our products and experience them, and see them work and use them, as I said in my comments, we have never had a product returned. And we don't have a single customer that tells us they wish they didn't have them.

Most of them give us repeat orders or are threatening to give us repeat orders. So who we're competing with, Michael, is a whole ecosystem of general contractors, electrical contractors, zoning specialists, engineers, utilities, and all the other people that are required to dig up your parking lot and deliver the grid power to the location where you want to charge your vehicle.

And in the early days, that's going to be a struggle for us because it's what people are used to and changing behavior is difficult. But increasingly, and again, this goes back to the white noise orders that we're getting. Increasingly, we're seeing that people are becoming much more accepting of our technology. They used to say to me all the time, that's a nice concept, and I used to hate hearing that. It's not a concept; it's a working -- hardworking piece of equipment that's out all over the country doing its job. I don't hear that anymore. I don't hear this is a nice concept. Now I hear, we've heard that you're using these things in the winter in New York, can we have some.

So there's plenty of competition out there but the good news for us is that we're competing with a highly fragmented set of industries, electrical and general contracting. And in most instances, our customers, once they understand that they don't need to go through an 18- or 24-month process with those types of people that, in fact, they can have an installation that can be done in as little as four minutes without permitting or any else; they can move it later; it will work when there's a blackout or brownout, the competition fades away pretty quickly.

And then just final comment on that. Important for you to understand that, although our products have a fairly high sticker price, the total cost of ownership, once you have all the avoided cost of construction, and all the permitting and everything else like that, and once you have a lifetime, or 20 years anyway, of free electricity without utility charges, kilowatt hour charges or demand charges, our product is already today, the cheapest, lowest total cost of ownership solution out there, except in some extraordinary circumstances.

Adam Cote, Drummond Woodsum.

Thank you. My name is Adam Cote, I'm a renewable energy attorney in Maine. Happy to be a shareholder after doing a lot of due diligence in what it is you do, and hoping to be a very long-term shareholder. I'm really excited about what you're doing and excited to see you grow. My concern and I guess this is for you, Desmond, you're talking a lot about the stimulus funds and other opportunities for funding for projects going forward. That can come from the federal government, as you know, but the states and particularly municipalities are required to balance their budgets. And they're all projecting massive budget shortfalls next year as a result -- at least next year as a result of COVID-19. To what extent have you taken that into consideration? And to what extent do you think that may affect your opportunities for sales going forward into the next several quarters? Thank you.

Adam, thank you for the question, and thanks also for being a shareholder, particularly after having done a lot of due diligence, and you're an expert in this space as well and that's my favorite kind of shareholder, honestly, because you get what we're doing and yet you understand the space. So your question is, there's a lot of aspects to it. And certainly we're looking at all of them. And it's a tricky one to answer because I don't have a crystal ball. But what I am -- so let me give you a couple of answers to that.

Looking at the bills that are on the table at the moment, yes, some of them have a balance book requirement, but there's also a lot of money which is being put forward in the shape of loans and other types of funding to help with that. And my core feeling on this is that, any way you look at it, we have used up most of the monetary tools that are available to us to help us get out of the recession or depression or whatever the hell this is going to end up being. And that really the only recourse left will be stimulus spending, and it's going to be infrastructure spending. And that's one of the things that's sort of interesting to note about that is that infrastructure spending was one of the few things that both sides of the aisle could agree on.

They might not exactly agree on where infrastructure spending goes, but certainly the infrastructure spending was required long before COVID kicked into gear. So I am confident, again without a crystal ball, that there will be significant amount of money spent on infrastructure, stimulus dollars spent on infrastructure. And I'm further confident that a big chunk of that will go to energy and transportation.

Now it's possible that people on the far right will not be very comfortable with electric vehicle infrastructure but our products, again made in America, providing disaster preparedness, and strengthening the grid from these other threats. I think we've got enough values which are attractive to both sides of the aisle, even at the extremes.

We get the tree huggers like us because we're charging electric vehicles with renewable energy. And then you've got the sort of diehard, log this planet, we'll get to the rest of them later on the right, who are looking at us as a disaster preparedness asset and a made-in-America product. And don't forget our factory is staffed by combat veterans and disabled workers and many others. We do all the right things. The meritocracy, that we seek out merit in places that I think others ignore.

So one way or another, the money will either through the federal spend and that's again why we're concentrating on GSA and why we have that consultant in Washington DC now, or through trickling through state, local and municipal coffers. I believe a great deal of it will get spent on transportation and energy infrastructure. And our job is to make sure that we're there, if not at the front of the line, bloody close to it, explaining the value of our products.

So while there are no guarantees in the world, and none of us know how this whole COVID thing is going to end up. What I can guarantee is I can guarantee that we are using the best of our intellect and the best of our abilities and the best of the resources that are available to us to make sure that if these opportunities come up, and when they come up, we can be there to make sure that we're delivering value to people that have money in their hands.

[Joel Chiteya, Arkea Capital Management].

Hi, Desmond. Nice call. Got a couple of questions for you. Some come from ignorance. I've been a shareholder for about six months. And one of my business partners paid a visit to your facility down there in San Diego. And he agrees with you that you run a very lean operation, which he was very impressed with. But I've got a couple of questions. And one he mentioned in terms of, of manufacturing distribution, is it true that your manufacturing is done at one site in San Diego? And he also mentioned when it came time to make a delivery that you had a truck that actually made the delivery? Is that right?

Yeah. So you've actually -- thank you; you've given me an opportunity to something -- to talk about something which is also very important to us. Yes, it is true that we do all of our manufacturing in a facility in San -- just north of San Diego, 50,000-square-foot facility. In that facility, we're currently operating one shift, five days a week. And that gives us a capacity of about 260 units per year or around $16 million to $17 million in revenue. We should cash flow at somewhere around $11 million in annualized revenue.

So they'll get that just in one shift, five days a week, in this one facility gets us past cash flow. However, you should also know that we have -- we've already done the analysis, moving to three shifts, seven days a week, and investing in some fairly lightweight automation, so robotic welding, for example, is a very obvious example of this. Robotic welders are far less expensive than they were when I started out in business, Christ knows how long ago. So some additional investment, I mean, and I'm talking about small amount of investment, we can actually get [done] over 2,000 units a year out of this existing facility.

As you know, that our fixed overheads, the rents and those sorts of things, don't increase when we do that. That would get us to between $130 million and $150 million in revenue annually, depending on the mix of products that we sell. Some of our products are more expensive than others. I mean how much energy storage they have and that sort of thing is what changes that. So we've got a fantastic opportunity to scale up, even with our existing facility.

But your colleague is absolutely right. Even if we get to the point where we produce 2,000 units a year in this facility, let's just put that in perspective for a second. Governor Brown, before he left, put an executive order in place in California, mandating the deployment of 250,000 publicly available EV chargers in the State of California by 2025.

Now the entire industry, ourselves and everybody else included, deployed about 20,000 in the last decade, so we're going to go from 20,000 in a decade to 50,000 a year for the next five years. So 2,000 a year out of this factory, we won't even put a dent in Governor Brown's requirement for the next five years. And by the way -- which is 50,000 a year. And by the way, everyone in the industry accepts that even if we were successful in 250,000 deployed in California, that wouldn't be enough, nowhere near enough, and that's just California.

Our product uniquely works anywhere it can see the sky. And so California, United States, Europe, Asia, anywhere, we have global aspirations. And we're already deployed, although in a very small way, internationally. This just proves the product does work wherever it goes. And so the opportunity to scale up here is very significant. And I firmly believe that we'll need to open five or six or seven or eight or nine or 10 of these types of facilities across the country so that we're not manufacturing products in San Diego and delivering them to New York City.

One of the magnificent things about this place is it's a bloody huge country, and you don't want to be making something that's heavy and cumbersome and transporting it from the bottom left hand to the top right hand; I get that. But it's prudent for us right now to grow the business in the existing facility that we have, and then scale it up from there. Good news is, we've done it here. It's not intellectually taxing to do it elsewhere. It's just blood and sweat and tears, and we're good at that, that's we're -- that's in our -- ingrained in our -- in the stuff that makes us up.

To your question about transporting the products, your colleague will have seen the ARC mobility trailer that we have here, and the unit that we use to transport local products. I can tell you that just today, another truck left here with two EV ARCs on it, not being -- not where our ARC mobility trailer is not using -- not being used at all. And so we use a combination of different means to transport these things. The new product is, again, another patent that we have is on the transporter ARC, and that's the capability of an EV ARC to fold up and fit inside a 20-foot shipping container.

And as you know, once you can go in a container, you can go anywhere in the world by rail, by truck, by sea. And the product's deliberately made like that. So that actually the great majority of product that leaves here doesn't use our ARC Mobility trailer. And then beyond that, you can call this cheating, if you like. But some of the customers that have a lot of our EV ARC products, we also sold them the trailer, the same trailer that your colleague saw, except the newer versions of it now. We've got newer generations which are sort of more intelligent.

And what ends up happening is, for example, if we ship to New York, we ship a bunch of units to New York, they go by common carrier, but then they're unloaded in a centralized location in New York. And then we use New York's trailer, the one we sold to them, to do the final yard delivery for them from there. So he saw one unit, but just remember that there's multimodal transportation capabilities. And the majority of the product leaves here not on our trailer, but on others.

With that said, we definitely intend to add more of our trailers. I love it when we transport them with our trailers. We control the whole process and that's really cool. And dare I say it without scaring everybody on the call, but we will make our delivery process more and more intelligent down the road. I'm a believer in autonomy. And I see a future just to get back to Beam, being a company which is going to be at the nexus of clean transportation or clean energy and transportation. I can see a future where we have autonomous deliveries of these things. Now it's very far down the road and don't get nervous. I'm not investing in that at the moment.

But you have to understand that the world is going to need tens or hundreds of millions of these charging points. And we will need to come up with ways of deploying them as though we're fighting a war. And that's not just going to be trundling them down the road on a few trucks here and there.

Okay, that's good to hear. I just could imagine one of -- that one truck driving across Kansas on its way to New York to install one of those, and that wouldn't make much sense. So when you mentioned in the call acquisitions or some M&A and you don't need capital. I wrote a question down is what acquisitions would be accretive, but probably the ones that would be accretive would be in other facilities like you mentioned, four or five, six around the country, once you get critical mass to grow the company that way. Is that fair?

Actually, so there's a couple of things to tell you about that. I don't think that we would buy our way into other facilities across the country. I think we would invest our way in. But that does also open up another interesting point to make. We do not intend to continue to do the soup to nuts manufacturing of our products. Right now our engineering teams are identifying components and subassemblies of our products which we can have manufactured by others.

And so what -- obviously, there are lots of other factories, which are far better set up and at scale with much better cost controls than we will endeavor to have here, who could churn out subassemblies and components of our products which would then be delivered to us by the container load. And our team will go from manufacturing to assembly. And my vision for this is that they're literally pulling out a component which now takes a team of people half a day to put together, they'll be pulling that out of a cardboard box, swinging it in, locking two cam locks, and it will plug in and that'll be the end of it. And they'll end up doing 50 a day instead of a team of people doing one every half a day or something like that.

So it's not impossible that you might see us moving into something to that kind of space. But actually the types of acquisitions that we would look at would be acquisitions that somehow defend our supply chain. So remember, we are consumers of electronic components; we're consumers of battery cells; we're consumers of battery management systems and lots of other things like that. There's a lot of great work being done in that space. And so if we could make an acquisition that would defend our supply chains, that would increase our gross profit because we wouldn't be giving the margin to others, and that would give us greater flexibility in tailoring the solutions towards our products instead of shoehorning them in, which we sometimes have to do, you might see us doing something like that.

Beyond that as I mentioned, we don't intend to continue being only a solar-powered, electric vehicle charging company. We intend to operate at the nexus of clean energy and transportation. There are lots of other very interesting things going on in that space. In fact, I don't know of anything more interesting right now. And as long as it's something which strategically fits and makes us stronger, adds shareholder value and all the other things.

In other words, I'm not just going to buy a company because it's accretive. I'm not going to go out and buy a dog food company because they're profitable. This has to be something that fits with our strategy and with our plan, because God knows, we're going to have our hands full. This is a gigantic new opportunity in a new space. And I want to make sure that we're bringing stuff in that helps us grow in that space and doesn't just dilute our focus.

[Howard Corburke, Corburke Enterprises]

Hi, Desmond. Great job.

Hi, Howard. Thank you.

Okay. I had a few questions. Let me just throw them all out here. And I'm not an accountant, so forgive me for that. But I was wondering, you said you're going to go after San Diego and then the rest of the country. I was wondering if there's a reason. It sounds like you're almost waiting for San Diego instead of just going out towards the rest of the company. And then with regards to cash, you said you don't have a cash need now. Can you remind us all when you will have a cash need, if at all, in the future? I mean you're talking about a month, quarter, year or two?

And then if I heard you correctly, it almost seemed as though, as your cash is going down, it's a good thing as ironic as that sounds, because it sounds like you're building the inventory for orders that you've already gotten, are building, and just haven't delivered. And then you can't book them as revenues until you actually drop them off. And that being said, do you have some sort of terms as to how far back a customer that gives you a purchase order and you make the products for can actually push the orders back before they must take delivery to protect you, to protect the company from the cash drawdown? That's it.

Yeah. Thanks, Howard. Okay. Let me take them in the order that you gave them to me. San Diego, as you correctly pointed out, it seems like we're waiting to get San Diego done and frankly in many ways we are. This has been driven more by OUTFRONT Media than by us, and so I'll tell you why. San Diego is well known for having the most onerous and stringent signage ordinance of any major city in the United States of America. They went to the Supreme Court to prevent outdoor media companies from putting up outdoor advertising, billboards, screens and all that sort of stuff.

So anything of that ilk that you see in San Diego today is grandfathered in before that Supreme Court decision. OUTFRONT's feeling is that, if we can demonstrate that we can pull this off here, San Diego, that will give us a blueprint which will essentially give the roadmap to any other city in the nation. No other city in the nation is going to look at this and say well all right, you did have San Diego, but we're worried that we might be a bit tougher on signage than San Diego. And so it's one of those things where you kind of have to break the toughest log in the log jam and then when you do, their feeling -- and again, they're the experts in this and I'm just parroting what they told me. Their feeling is that this will go very quickly into other cities.

And why wouldn't it? Which other city would say no to a free deployment of solar-powered, electric vehicle charging stations, which is offered free to their constituencies. Don't forget the driver will drive on sunshine for free. The whole thing is paid for with the media dollars. Who else would say no to that. And then the other interesting angle on that is that OUTFRONT also tells me that it's very unlikely that any corporate sponsor who would support a deployment in San Diego would want to do just one city, would likely be a regional, if not a national player.

So that's why I'm so excited about this. And I've got years into this. I'm very, I mean it's been a very frustrating process for me. It's been very hard work. It's gone on for a long time. And people say, well, why would you keep doing this? Why is it worth putting the time and effort into it, because the payoff is so big when we get to the other side of this. The highest gross profit recurring revenue business I've ever been involved in. And so it's worth putting the time and energy in.

But you are right; San Diego is kind of the thing. Now, at some point, if San Diego doesn't play, would we just go to one of the other cities? Yes, we will. But we believe that we are making very good progress with San Diego, especially with the addition of this new consultant. And we don't believe that this would be the time to break the effort. And time will tell of course, municipalities are notoriously difficult to work; local government, everything else, it's not -- they're not driven by some of the same decision processes that we are in the private sector. You just have to accept that. The good news is that once we get through it, it'll be just the most fantastic thing. That's why I keep doing it.

So your second question was on cash. And what I pointed out during -- when I was talking to you was that the cash line on our balance sheet is not as -- it's not the only metric to be looking at. It needs to be combined with inventory and AR net of AP. And what you'll see there is, if you look at that and you add up those numbers, and then you look at our operating capital reduction over the last quarter or so is that that would give us a good solid run rate here for certainly the foreseeable -- the important foreseeable future.

A lot of things can happen and I recognize that a lot of things can happen but at the moment, you're right in the second part of the statement that you made, which is that we have a lot of inventory on hand right now. And we are going to be converting a good deal of that into cash. And so cash will go down when we buy components, put them into inventory, and then it goes back up when we get the money back in from those things.

And I would say that on the balance at the moment, partly because those Q4 orders were pushed out of Q4 and into this quarter now, the bridge to cross the first quarter and into the second quarter, we've been sitting on a lot of revenue, which is cash out of our pockets that's wrapped up in those orders.

And additionally on our shop floor right now, there's a lot of product which is being turned into product, a lot of components, a lot of materials which is being turned into products, which will also be converted into cash. So that's why I said I'm not worried about cash right now. We're not raising money right now. But again if the right opportunities come along to do the right things, then of course, we will.

And then the last thing you asked me was whether or not we have, and I'm doing this from memory, but I didn't write it down. I should have, foolish of me, but I think you asked me whether or not we have any kind of a process in place that says to a customer like Caltrans, for example, if you order a product and we anticipate delivering it to you on such and such a date, if you're late, what does that mean? How does that impact us? And the answer is no, not at this stage in our evolution as a business. We don't believe that the benefits that we could get from that would be worth alienating these types of customers.

It's very hard to win a customer like Caltrans. It's very hard to win a customer like New York City, very hard to win a customer like Pfizer or Johnson & Johnson or some of the other big corporate customers we have. Very hard to get in. And when you're kind of young like we are and you've a new product and they're learning about us and everything else, we don't believe that being sticklers to the rules is a good way to grow our business. Our number one objective right now is to grow revenue, grow our footprint and capture market share.

For example, sometimes people pay us late and we could chase them down for 2% because they've gone past 30 days or past 45 days or whatever else like that. The truth is we would be arguing for that forever. And all we would do is create a great deal of bad blood and it would cost us a lot more than the value of the 2% as we always get paid. We always have been paid. So we are -- we spend less time, energy, and resource trying to enforce rules than we do in trying to open new markets and get new customers and keep the existing customers that we have really happy.

That will probably change, right, as the balance of power changes and as we get -- become more powerful and we've got more clout and everything else, we will of course institute rules and programs and processes, and we'll be much more ruthless with people. But at the moment, the number one job on hand is to make sure that we grow the business, grow the revenues and grow the customer base.

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

Well, thank you very much. And I can say to all of you, I think we have gone a little over time. I'm very appreciative of the time and energy that you've put into this. I'm very appreciative of the support that you've given this company over the years. As I said, there are no guarantees in life. But I do guarantee that everybody here is working as hard as they can to make a great success of this. And I believe that that success will come to us.

In the meantime, I hope that all of you stay healthy. Look after yourselves and goodness knows, let's get through this dreadful crisis off to the broad sunlit uplands that I'm sure are on the other side of it. Thank you.

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