Good afternoon, and welcome to the Beam Global second quarter 2022 financial results and corporate update conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Katherine McDermott, CFO. Please go ahead.
Thank you. Good afternoon, and thank you for participating in Beam Global's conference call for the second quarter of 2022. We appreciate your time today to join us for this call. Joining me is Desmond Wheatley, President, CEO, and Chairman of the Board. Desmond will be providing an update on the recent activities at Beam, followed by a question-and-answer session. First, I'd like to communicate to you that during this call, management will be making forward-looking statements, including statements that will address Beam'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 those risks, please refer to the risk factors described in Beam's most recently filed Form 10-K and other periodic reports filed with the SEC.
The content of this call contains time-sensitive information that is accurate only as of today, August 12th, 2022 . Except as required by law, Beam disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. Next, I'd like to provide an overview of our financial results for Beam's second quarter ended June 30th, 2022 . For the second quarter of 2022 , we reported record Q2 revenues of $3.7 million, a 75% increase over $2.1 million reported for the second quarter of 2021 . We also reported record first half revenues of $7.5 million, 114% increase over $3.5 million reported in the first half of 2021 .
During the first half of the $4 million increase in revenue, $1.8 million was for our newly acquired battery storage business. $1.8 million was for increased shipments to federal, state, and local governments, and the balance consisted primarily of shipments to enterprise customers for fleet vehicles or workplace charging. Gross loss in the quarter ended June 30th, 2022 was $0.3 million, flat with the same period in 2021. For the first half of 2022, we reported a gross loss of $0.6 million compared to $0.4 million for the first half of 2021.
The gross loss improved by 4 percentage points in the second quarter and year- to- date compared to the prior year as a result of the increased production volume, resulting in favorable fixed overhead absorption and improved labor efficiencies and utilization. These savings were partially offset by higher material costs for steel and other components due to supply chain shortages and other inflationary pressures. Operating expenses were $2.5 million for Q2 2022, compared to $1.4 million for Q2 2021. For the first half of 2022, we reported $4.5 million for operating expenses, compared to $2.5 million for the first half of 2021, a decrease as a percentage of revenue of 11 percentage points.
The increases were primarily due to the addition of our new battery storage business and increased legal and accounting services, partially due to the acquisition. The net loss was $2.3 million or $0.28 per share for the second quarter of 2022, compared to $1.6 million or $0.18 per share for the second quarter of 2021. The net loss for the first half was $5.1 million or $0.52 per share, compared to $2.9 million or $0.33 per share for the first half of 2021. At June 30th, 2022, we had cash of $13.8 million, compared to $21.9 million at December 31st, 2021.
The cash decrease was primarily from operating activities and the cash payment for working capital for the purchase of AllCell Technologies. Included in the operating cash usage for year- to- date, we increased inventory purchases and increased prepayments to vendors for inventory to reduce the risk of potential shortages of cells required for battery manufacturing, as well as an increase in work in process inventory of EV ARC units. These increases are not expected to be ongoing quarterly cash requirements. Our working capital decreased from $24.6 million at December 31st, 2021, to $19.4 million at June 30th, 2022. With that, I'm going to turn the call over to Desmond to give you an update on the business. Desmond?
Well, thank you, Kathy. Thank you everybody else for joining us today for this call. I'm gonna just start out by reminding all of you, or certainly introducing those of you who've not joined us for one of these calls before, that we are in the flight path for the Marine Corps Air Station at Miramar. In fact, we're only about a mile as the crow flies from that airbase. From time to time, we will get flyovers during this call, and it's very loud when that happens. When and if it does happen, just expect me to stop talking and I'll wait for them to fly over for 10 or 15 seconds, and then I'll start right back up where I left off.
Don't worry if you hear a very loud noise. That's all it is. Well, we've had another very fruitful quarter at Beam Global, setting new records in revenue, sales growth, and pipeline growth.
We've also increased our efficiencies, reduced our cost per unit produced, and improved gross profitability and net profitability in both the second quarter and the first half of this year. We've made significant advances in the integration of our recently acquired battery company in Chicago, and I'm happy to report that in addition to the other good work we're doing there, we're now starting to produce our own proprietary battery systems and installing them in the latest EV ARCs, which are currently being shipped to our customers at a greater rate than any time in our history. The level of attention that Beam Global is now receiving at state governmental levels, and also importantly in Washington, D.C., is higher than it's ever been. That's being matched by a significant increase in attention from the media.
I've recently met with congressmen and ranking officials from the Department of Energy and Transportation. Two years ago, I might have had a hard time getting a junior staffer to take my call. Such are the advances that both we and the understanding of what we do and why we do it have made. I've also personally been interviewed by publications like The Wall Street Journal, CNN, Inc. Magazine, Politico, and many other trade and industry publications.
Where previously Beam Global's products might have been viewed as interesting and niche solutions for a small minority of EV charging requirements, the attributes which are embedded in our value proposition, such as rapid and highly scalable deployment, a secure source of energy during grid outages, a low total cost of ownership, and a versatile and flexible means to increase electrical capacity, not afforded by the giant and centralized grid, are now being viewed as essential by regulators, policymakers, and importantly, purchasers, both governmental and corporate.
The EV industry is really taking off, and the general global perception of energy and its instability, along with climate change, exacerbated by the war in Ukraine and the heat waves and fires being experienced all across Europe, Asia, and the United States, tragic as they are increasing awareness and acceptance of products which clearly reduce the risk from both energy insecurity and climate change. Beam Global's rapidly deployed and renewably energized portfolio of products are poster children for the new era of increased emphasis on clean, reliable, secure, and domestically produced energy, and as a means to actually provide the massive amounts of publicly available electric vehicle charging that will be required over the next couple of decades. Now, let's take a look at some numbers.
In Q2, as Kathy said, we generated more revenue than in any second quarter, and actually the second highest revenue of any quarter in our history, a 75% increase over Q2 of 2021. That continued a trend we set in the first quarter of this year, resulting in first half revenues which are 114% greater than that first half prior year, and actually greater than any full year's revenue in our history, except for last year. At the midpoint of the year, with six months left to go, we'd already generated over 80% of 2021's full year revenue. That year was a 144% of our previous record year. Perhaps you can start to detect a pattern here. I believe that we'll see an increase in momentum during the remainder of this year.
Naturally, I'm feeling enthusiastic about our future, both short and long term. We're operating in a period of unprecedented inflation and supply chain challenges. Yet, in the second quarter, and indeed throughout the first half of 2022, we improved our gross profitability by over 4%. Improvements of net profitability were over 14% during the first half. Now, remember that during that period, we closed the acquisition of our Chicago-based battery company and commenced the integration of the two entities. Integrating a new acquisition is never easy. It inevitably leads to increases in overhead costs, albeit often one-time increases. That's certainly been our experience in this time. Yet, we've actually reduced our net loss as a percentage of revenue while undertaking this challenge.
Looking at gross profitability and net profitability, you can see that we were able to improve both, even in the face of the extraordinary activity of integrating an acquisition and during a period of the most severe inflation and supply chain challenges, certainly in the last 40 years. I have consistently committed to improving our gross margins and our bottom line as volumes increase. The Beam team has consistently made a reality out of the commitments that I've made on their behalf. Our use of cash during Q2 was much higher than in previous quarters, but let's be absolutely clear about what this means and what actually happened. The increase in the use of cash was not the result of excessive and propagated increases in overhead spending. Far from it.
Reading our filings, you will notice that of the $7.4 million of cash we used in Q2, $3.6 million was spent on inventory, work in process products, largely partially completed EV ARCs, which were already sold, and importantly, the strategic allocation of cash to secure vital battery cells, which are essential to our EV charging product production and to our broader battery manufacturing business. Anybody who reads the newspaper will know that supply chain constraints where battery cells are concerned are real. We used cash to defend against risks associated with these supply chain constraints, and we put ourselves in a position of security for the foreseeable future, even in the face of the significant increase in demand for our products, which we're experiencing.
It's important to point out that using cash in this way, it's not the same as burning it on overhead because any cash we use in this manner will be returned to us as cash when we take revenue on the products produced as a result of work in progress, inventory, and the prepayments that we've made to vital suppliers. Now, this is not a condition which I anticipate will endure. While there is a supply-demand imbalance today, I'm confident that that imbalance will be corrected in the future. In any event, our use of cash in the second quarter was composed of many non-typical events. An actual cash burn, not related to cost of goods sold, was fairly consistent with our history. We remain highly frugal with, I would say, almost unrivaled discipline where overhead spending is concerned.
Any of you who visited my office could happily attest to that. A quick glance at our working capital position should remove any doubt about the veracity of my comments on this matter and demonstrate that we still need not be concerned about running out of money. If you want more detail or color on this matter, don't hesitate to raise it during the Q&A session, or if you prefer, get in touch with us after the call. I or Kathy would be happy to discuss the merits with you. The Beam team has worked very hard to mitigate the impacts of the various supply chain challenges which have confronted us during the last 12 months in particular. It's been hard work and required their professionalism and commitment to ensuring that challenging as it is, we do not allow it to prevent us from shipping product and generating revenue.
While we've had many eyebrow-raising moments, none have been more acute than those we've experienced with the battery supply chain. Any of you who listened to my explanations of the wisdom of making our battery company acquisition will know that one of the significant factors which drove me to execute on that excellent transaction was my determination to insulate us from the battery supply chain constraints I anticipated. Hindsight has more than validated my premonition. We've struggled this year to acquire sufficient battery packs from our prior supplier to meet the ever-increasing demand for our products. While we manage through this shortfall, our Chicago-based battery team has been working with urgency to engineer and manufacture a new and superior pack for our EV ARC products. This is a process which is much more complex than many may imagine.
Creating a safe, efficient, and cost-effective battery pack system is not the same as popping a few double As into a flashlight. It's complex and difficult, and it requires a highly experienced team like the one that came with our acquisition. This, of course, is a significant differentiator for us. While there are increasing numbers of traditional electric vehicle charging infrastructure companies who are attempting to integrate battery storage with their grid-tied installations, we're the only company that I'm aware of that has its own proprietary energy storage solutions. The first of our new battery packs have now been shipped from Chicago facility, and they're being installed in the latest EV ARCs, which are shipping to customers. The transition was not seamless, and there have been periods during which we've had otherwise completed EV ARCs waiting at our San Diego facility for battery packs.
This goes some way to explaining the larger than normal work in progress inventory which we've had on hand. The good news is that we're solving these problems, and we fully anticipate that our Chicago team will catch up and keep pace with the increasing velocity at which we're having to produce EV ARC systems. We have not lost any orders as a result of these delays, but the revenue did move right. This increased pace of EV ARC production is impressive. Our existing team has more or less doubled the number of systems they were able to produce just six months ago. A strong indication of how much more efficient we've become is that our revenue per employee has increased by 34% over Q2 of 2021, and it's almost double what it was in Q2 of 2020.
Said another way, while we're dramatically increasing our output, we're doing so without dramatically increasing the headcount. Of course, we're getting even more leverage from our fixed overhead costs. Another area where we've seen skyrocketing inflation is in the cost of transportation, both to deliver our products and also to receive the components and raw materials that go into them. While we cannot impact the cost of incoming transportation, except by increasing our volumes, of course, which we're doing, we've been able to positively impact the way we transport our products to our customers. We now have a beautiful video which shows our latest advance in delivery technology. A single operator transporting not one, but two EV ARCs to a customer site and deploying them before returning to the factory.
Remember that we can integrate as many as six chargers onto a single EV ARC, and then consider Beam Global's impact on an industry that requires teams of contractors, electrical workers, consultants, engineers, and permitting specialists to spend weeks or months deploying a grid-tied charger. This new video shows a single Beam employee deploying two EV ARC systems, which are capable of carrying as many as 12 chargers in a couple of hours with no on-site activity or disruption for our customers. Look for that video soon on our website. It's really fantastic. Our production and revenues are up because, of course, sales are up, and this is probably the most exciting part of the Beam story at the moment. At the end of the second quarter, we had over $10 million in contracted backlog.
This is a significant increase over the highest backlog that we've reported or indeed had at any time in our history. It's greater than any full year's revenue we've ever reported. At the same time, our sales pipeline has also increased to a new record of over $120 million. We keep getting more and more conservative about what we consider as active pipeline, and yet the number continues to increase dramatically. The combination of increasing revenue, backlog, and pipeline has never been better. The investments we've made in adding salespeople, increased marketing efforts, and particularly in government relations, has contributed to this growth. In my mind, more importantly, positioned us for what I believe will be dramatic and accelerating growth for the foreseeable future.
Just looking at anticipated federal spending on electric vehicle charging infrastructure and clean energy, and remembering that we have a GSA contract in place and a blanket purchase authority that federal agencies can use to acquire our products, might give a reasonable person cause to suspect that Beam Global will see significant growth in that area alone. The fact is that federal spending commitments, while they dramatically increased this year, particularly now that the IRA has passed the Senate, are only one contributing factor to our future growth. We're seeing increased spending across the board at both governmental and corporate levels. There may be a recession coming, and that will be bad news for lots of companies, but it might have the opposite effect for us. Very little, if any, of the pipeline revenue that we have will be impacted by a recession, might even support it.
At the same time, availability of labor will increase and commodities, raw materials, and contributing parts will be in reduced demand, which should make them easier for us to secure while possibly reducing their costs as well. Feels good to have a business that should not be impacted by a recession. We could end up being one of the few bright spots in an otherwise pretty dim 2023. Europe's commitment to banning the sale of internal combustion engine vehicles in 2035 has been a wake-up call to the entire industry. Automotive OEMs will not be able to produce internal combustion engine vehicles for North America and electric vehicles for Europe. Not in this day and age. There are about 1.4 billion cars on the world's roads today, moving to 2 billion by 2030. In the United States, there are about 300 million of them.
You need one publicly available charging plug for every five electric vehicles on the road. Simple arithmetic shows that the United States will need something in the order of 60 million plugs in the coming decades. Let's say we have the luxury of four decades to deploy all these plugs. We still need to install about 1.5 million a year every year for 40 years. Beam Global has the most rapidly deployed, scalable, made in America infrastructure solution available today, and we power any quality brand of charger. There will certainly be a mixture of solutions required to provide all the charging infrastructure and energy required. With our unique attributes, I do not anticipate any decrease in the velocity of our growth for a long time to come. In fact, I think we're gonna be very, very busy.
Our sales are not just coming from EV charging solutions. If there's another area of growth which is as exciting, it'd have to be battery systems. Recently, we've sold or delivered batteries to companies that produce or operate drones, medical devices, EV chargers, industrial robots, personal watercraft, electric aircraft, and material handling equipment. These organizations and uses are as diverse and broad as the requirement for safe, energy-dense, and long-lived battery solutions. While our battery company acquisition is important to our EV charging infrastructure product business, it's also opening up a whole new universe of strategic revenue opportunities in the energy storage ecosystem. These opportunities are supportive of our renewably energized charging business because just about anybody who integrates batteries into their product needs to have a clever way of charging them. They also provide another area of what I believe will be significant growth for Beam Global.
We continue to pursue the sponsorship opportunity, about which I've said so much in the past. I offer you one update, which I believe will help you to understand why I continue to invest time and effort in this initiative. On Monday of this week, I welcomed a team from one of the world's largest companies to our facility in San Diego. They toured the factory, and we discussed the opportunity. This is the third visit by different teams of representatives from this one very large company. The basis of our discussions from day one has been the sponsored Driving on Sunshine Network. Now, I cannot guarantee that we'll secure a sponsor for our Driving on Sunshine Network, but I can report that we continue to be actively engaged with very large organizations whose primary interest in us is driven by their interest in this initiative.
Until that ceases to be the case, I will continue to drive the opportunity forward with the help of our partner, the Superlative Group. I still believe that it offers an excellent future source of highly profitable recurring revenue. As I've said before, as attractive an opportunity as the Driving on Sunshine Network is for us, it has never been essential to our growth or prosperity. The significant and continuing growth in our core business demonstrates that fact. However, as I've also said, I still view it as an excellent and attainable opportunity. Finally, I want to brief you on our continued international expansion plans. In September, I'll travel to Europe and the Middle East for a series of meetings which are intended to create fertile ground for expansion into both markets.
Successfully pulling this off will take time and work, and I will not do it unless I'm convinced of a position for success. Nevertheless, Europe is the largest EV market in the world and arguably even more receptive to product solutions which have the attributes we so uniquely possess. We continue to secure patents in that market. The combination of extreme weather events and equally extreme vulnerability to traditional sources of energy has had a significant impact on European receptivity to rapidly deploying infrastructure support to support electrification of transportation and reduce the reliance on traditional utility grid electricity. Beam Global's products solve for both opportunities. The Middle East is far less advanced where the adoption of electric vehicles is concerned. However, there is increasing interest in that part of the world for clean and sustainable solutions, and there's lots of cash to fund them.
With the right partners in place who have relationships and credibility where infrastructure is concerned, I believe that we can create some significant growth opportunities in that market. Furthermore, it will provide a gateway to the rest of Africa, where large sums of capital are expected to be invested by the rest of the world in the transition to sustainable energy and transportation. It's early days yet where international expansion is concerned for us, but I want you to know that it's an extremely important area of focus for me, and I intend to prosecute it with vigor. We will, of course, provide updates through press releases, filings, and calls like this if and when we make material progress. To sum up, record revenues, record sales, record backlog, record pipeline, and an improvement in our gross and net profitability during exceptionally challenging times.
I've often said that there's never been a better time to be Beam Global, and that's because we continue to break records, provide growth, and improve our execution. It's simply true, there really never has been a better time to be Beam Global, except the time that's coming. Thank you all for your time and attention. I'll now return the call to the operator and to Kathy and take your questions. Operator?
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Christopher Souther with B. Riley. Please go ahead.
Thanks for taking my question here. Maybe just on the backlog and pipeline, could you maybe break down that between, you know, traditional Beam products and the storage side and then maybe, you know, within traditional Beam, the mix between government and some of the commercial customers? Trying to get a sense of where we are in some of the commercial customers coming back after COVID slowdowns and how the backlog and pipeline are starting to broaden out here. Thanks.
Yeah. On the breakdown of backlog, it's highly transient, of course, and I've mentioned this on previous calls before. I actually think that backlogs are less useful metric than pipeline and revenue, because of course, as we execute on backlog and convert it to revenue, it might never even show up in the reporting periods. It's highly transient. At the moment, it's probably 50/50, charging products to energy storage products. You know, we are seeing a significant return and increase to corporate backlog in our mix. You know, during COVID, as you just pointed out, we certainly saw a very significant reduction in non-government revenue and backlog.
I have to point out that even during that period, we never did reduce our revenues at all, even having lost more or less all of our enterprise or corporate spending. At the moment we're seeing that roaring back. At the same time, we're heading towards the end of the third quarter. Federal government spending, a lot of the contracts are signed and closed out before September 30th or have to be done by September 30th. I wouldn't be at all surprised to see a significant shift in favor of the charging products during that period and you know, a significant increase. Obviously that's what we're planning for. That's the way it breaks down at the moment.
Okay. Look, maybe the pipeline as well, just to, you know, given that, you know, it's more meaningful here.
Yeah. Yeah. The pipeline. Yes. Sorry, Chris, I didn't mean to ignore that part of your question. If I have to be honest, I took off there. The pipeline is actually much more heavily weighted to the charging products side. So the stuff that you've been used to seeing Beam selling. You know, that speaks a little bit to some of the comments that I've just made. As I've said before in previous calls, we are increasingly looking at very much larger orders with very much larger product volumes associated with those orders. Although we weight them heavily, nevertheless, they're extremely impactful.
It's, you know, it doesn't take more than one or two of those to have a dramatic, life-altering impact on this company. Of course, that's what we're working to affect.
Got it. No, that's good to hear. Then, on the Volvo Construction Equipment deal, it seems like your products could be very well suited there. Can you just talk about the timing where you think that could start to be meaningful and maybe, you know, initial thoughts on how you size that specific opportunity or end market? You know, understanding it's very early days here.
Yeah. That's precisely why I didn't mention it during my comments. I'm very, very enthusiastic about that Volvo partnership. There's several aspects about it which I really like. The first one, obviously to have a company like Volvo include us in their catalog and in their financing so that customers can bundle their products and ours under that one finance blanket. I mean, there are many layers of value surrounding that. It's a significant validation of what they think of our product and the future of the business. It's also a strong recognition of the fact that electric construction equipment without rapidly deployed EV charging infrastructure that doesn't rely on the grid. 'Cause remember, folks, when you're doing a construction site, there isn't electricity there most of the time.
Especially when you're moving dirt, which is what most of these machines are designed to do. It's a strong recognition and validation of the idea that having a transportable and renewably energized product that generates and stores all of its own energy in those types of environments and can then be moved to the next construction site is a very important part of our value proposition. All of those things are good. Why did I not mention it in my comments? It's still a small market in the United States, but I'll tell you where it isn't a small market, Europe.
Increasingly in Europe, between particulates pollution, the sort that you get from diesel, and noise pollution, the sort that you get from diesel pollution, diesel engines, it's becoming increasingly difficult to operate diesel equipment in Europe. I think that we're gonna see an awful lot of growth in the deployment of that type of infrastructure there. As I already mentioned in my comments, I think that the European market will be even more receptive to our products than the US market because, you know, they are more sort of green, renewably energized-minded. Beyond that, because it's actually much harder to do infrastructure in Europe because the streets are older, there's a lot more antiquated stuff around and everything else than certainly in the western part of the United States.
Part of what I'll be doing when I'm in Europe, aside from looking for or advancing my conversations with partners to expand over there, will be looking at those sorts of opportunities. I think that's where we'll probably do more there than we will in the United States in the early days. However, I believe it's inevitable that it will take over here, and it's a multi-billion-dollar industry, and we intend to take a good piece of it.
Got it. No, that's great to hear. I'll hop in the queue. Appreciate it.
Thank you.
The next question is from Tate Sullivan with Maxim Group. Please go ahead.
Hi, Tate.
Hi. Hi, good day. Thank you. I mean, again, on the backlog, an impressive number, but I mean, the backing into the implied orders in the quarter, I think it also implies it's close to 10. Did you have some customers that didn't allow you to disclose larger orders, or was it just a wide variety of smaller orders within 2Q?
Yeah. This is kind of an interesting question, and it reflects a shift in the way that we are reporting what we do. In the past, when we were getting fewer orders and they were smaller, we tended to report all of them. However, that's changing now. We're getting. I mean, if I put a press release out every time I get a purchase order, I'd be putting out a press release every day, practically. In fact, I think the numbers for the second quarter bear that out. We certainly had a purchase order every couple of days in the second quarter.
What we're trying to do now is do less of that because we don't want the broader market or the investment community or anybody to think that we're excited by a one or two unit order anymore. Look, we love every order that we get, but what we're trying to do now is reduce the number of press releases we put out and maybe bundle stuff and everything else. You didn't see a lot of stuff because of that. Rest assured. And even by the way, if we have a large and meaningful customer, the drone press release that we put out is a perfect example of this. We'd love to have named them, but they asked us not to. And that's going to happen.
You know, the many customers, particularly the really large ones, the very well-known and popular ones, that whose brand is so valuable to them, they don't even want us, you know, putting it in our press releases. They quite often brag about what they're doing with us, but we're not allowed to. It's a combination of all those factors. Rest assured, when anything really big hits, we will still identify those with press releases. Yes, you're gonna see more of this. You're gonna see more revenue growth, more order growth, more backlog growth, without necessarily being able to add up all the press releases to get to it.
Yes, thank you. On the revenue composition in 2Q, Kathy, you mentioned in the press release $1.4 million from energy storage. I heard in your prepared remarks you also broke it down between government customers and commercial. Can you give those numbers again, please?
That was part of the increase in revenues. $1.8 million of that was the energy business that we didn't have in the prior year, so that was all growth. We had $1.8 million was an increase in the federal, state, and local government area. Of the $4 million, that's the majority of the growth.
What I think the astute, and you're all astute listeners are gonna figure out here is that, the. I mentioned it in my comments, that we have a quite significant accumulated WIP, work in progress, group of, essentially partially complete, well, all but complete EV ARC systems that, because we had that lack of smoothness in the transition from prior battery vendor who were unable to keep up with our demand and the new engineered packs that we're bringing over here, those would otherwise have gone to customers. Said another way, we might have had a much better quarter if it wasn't for that imbalance.
Now, the good news is they haven't gone anywhere, and we are now stuffing batteries into them and shipping them out to customers. As I said in my comments, that revenue didn't go away. It just moved right, and it will inevitably hit future quarters.
Last from me, Desmond Wheatley. Sorry, you went over some of the verticals for AllCell. I heard medical devices, material handling, drones. What are some of the others that you mentioned as well too? It sounds like drone is just one of the many areas that you can go and sell to.
Tate, I'm not gonna keep taking your questions if you keep referring to them as AllCell. We're going through a lot of trouble and work to rebrand them as Beam.
Excuse me. Okay.
Beam Chicago, you can call it, please.
Okay.
Yeah, no, it's fantastic. I'm thrilled to death with it. I mean, you know, that we're, as I said, aircraft, drones, we're in submersibles, we're in robots, we're in material handling, we're in electric vehicles. It's a fantastic broad selection. If you think of it's not surprising. I don't think we've even begun to scratch the tip of the iceberg on this new generation of small battery-powered devices that people are gonna expect to have around in their lives. You know, robot deliveries of groceries. Something's gonna bring your Budweiser from the fridge to you when you're sitting on the sofa. We're gonna see more and more of this sort of Roomba vacuum cleaner type thing, if you like.
Yes, personal watercraft, drones, and all the other things like that. Drones obviously very interesting to us, particularly in light of the fact that we have our UAV ARC, unmanned aerial vehicle recharging product, which is patented. It's very broad, and that's what I like about it. I was very clear with the Chicago team when we acquired them, that while it's important to me that they provide us with the best possible, and least expensive and most scalable battery storage solution for the products that we were already making at Beam, that could not be at the expense of broadening revenues from the other aspects of their business.
Because I want the revenue and the margin, but also because I want the opportunity to get into all of those other businesses in a meaningful way. I'm really thrilled to bits with it.
Thank you, Desmond. Thank you, Kathy.
Thank you, sir.
The next question is from Amit Dayal with HCW. Please go ahead.
Hi, Amit. How are you?
Hi, guys. Good, Desmond. Thank you for taking my questions. With respect to the battery business, Desmond, great[Inaudible]
Yeah, not so much are indeed dollars. They manage the application that we fulfil and this is part of our differentiation frankly or highly specific to the product. And clearly its quiet a difference to make a battery solution for a drone than is for an electric surf board. That is one of the incredible device product that we put batteries [ ]. It's different from medical device and all of those are different from station application like ours .......[ ]
Understood. Thank you for that. You know, with respect to this IRA legislation, I mean, you're already doing well with the government, you know, segment. How much more benefit do you hope to sort of be able to extract, you know, based on the provisions in this legislation?
Look, there's another $360-odd billion being spent on clean energy and electric vehicle charging infrastructure. There's the extension of the ITC, in fact, return to the 30% of the ITC and an extension for another decade with it. You know, that's obviously been sunsetting. Our products are eligible for it. It's never a decision factor in the purchase of our products, but it nevertheless is a nice shot in the arm. You know, you get $300,000 back on $1 million spent on our products. No one's gonna say no to that. You know, there are other manufacturing, I think it's 48C in the manufacturing incentives, et cetera. All of those will benefit us.
I think you're right to point out that really what this is all about is identifying the fact that the federal government is very serious about electrification. We know that for a fact because we are in the process of talking to very large federal entities and about their requirements, which are significant and material. In fact, it's a matter of public record. I'm not gonna speak to it right now, and I'm not even gonna direct you to it right now. If you dig, you will find the RFPs, and I encourage you to read the specifications in them. It's not just IRA. It's a whole host of different things all happening at the federal level right now.
We think that we're just at the beginning of it, and we have very good reason to believe that.
Do you think the legislation could help on your efforts to lock a sponsor deal?
Certainly the extension of the ITC because, of course, that's a major source of funding for that deal. There are other aspects of it as well. There's been much ado made about the fact that the IRA legislation restricts the number of electric vehicles which are compliant with the $7,500 tax credit. I'll tell you what, people are completely missing the bus on this. It's certainly true that expensive vehicles for rich people might be at risk. What's really interesting actually is not that. What's really interesting is the lift on the cap of the 200,000 vehicles. That was much more alarming because when you're talking about very widespread deployment, it's not gonna be rich people in expensive vehicles. That was always the early adopter niche.
The truth of the matter is that the average American consumer's gonna be getting into vehicles like the Chevy Bolt, you know, $35,000, $29,000 or wherever they are. Those prices, the vehicle caps were much more impactful. What we're gonna see as a result of this, if they raise those caps, is that limitless numbers of people can buy those vehicles and get that $7,500 as opposed to only $200,000 per company, not per vehicle. That will dramatically, in my view, increase the adoption of electric vehicles and accelerate the adoption of electric vehicles. The one thing that we've learned about this Driving on Sunshine sponsorship deal is I was way too early with it.
The fact is everybody liked it, but they didn't really think it was important because they didn't really think the EVs were that much of a deal or anything else like that. That part of what we've observed and part of who we're talking to now tells us the same thing, which is that this EV charging infrastructure thing is becoming a far bigger deal for everyone. Part, a big part of that's driven by adoption of EVs. I would say just that one aspect alone, encouraging more people to own these vehicles and not rich people in elite cars. That's not who's interesting. I, that's, you know, that's 20 million of the 300 million cars on United States roads. I want the other 280 million, and that's what that will help with.
Yes, that will definitely support our efforts where Driving on Sunshine's concerned, as will the ITC.
Okay. That's all I have, Desmond. Thank you.
Thank you, Amit.
The next question is from Noel Parks with Tuohy Brothers Investment Research. Please go ahead.
Hello, Noel.
Hi, good afternoon.
I'm listening, Noel.
Oh, great. A couple things. I actually, you did touch just a minute ago on the fact that all the news recently has been about the Inflation Reduction Act. Sorry if you discussed this already, but can you talk some more about maybe where things stand or what the status is that you see from the infrastructure bill from last year. Just the rulemaking process and sort of kinda where you think you're gonna or when you think you're really gonna see benefits from that.
Yeah. The infrastructure bill last year has been quite distinct from IRA that's just come out right now. With the $7.2 billion, I think it was, for electric vehicle charging infrastructure. Obviously, we believe that's gonna be very important to us. There are two buckets of that. $5 billion of that's gonna go into the NEVI funding, the National Electric Vehicle Infrastructure funding. I encourage you to take a look at the Federal Highway Administration's guidance document that describes how those funds should be spent. It's available online.
Right.
Just Google. Yeah. If you take a look at that document, what you're gonna find in that document is that there is only one image anywhere in the document. That image is on the front cover of that document, and that image is of our products.
Uh-huh.
For some reason, the Federal Highway Administration and Department of Energy, and Department of Transportation, when they were putting the document together to tell people how they should spend the $5 billion, selected an image of our products as the front cover of that magazine. Now, if I was in sales, I'd say that's a buying sign.
Yeah.
That's $5 billion of it, and we can certainly fulfill the requirements of some of that in ways that other people can't. We don't agree with all the rulemaking. We don't agree with all the standards or the regulations. I can tell you that I firmly believe that there will be lots of exceptions made and lots of exemptions made in that because there will have to be.
Okay.
That's because one of the requirements is that there should be 600 kW of charging every 50 miles down the United States highways. Nobody imagines for one second that that type of power is available in almost any of these locations. We, of course, can provide that 150 kW or the 150 kW charging in those locations without bringing the grid there. That's one of the great strengths that we'll bring to bear on that. The other $2+ billion in that funding is more flexible, and I believe a great deal of it will go to level two charging. A lot of it will go to disadvantaged communities. A lot of it will go to broadly dispersed infrastructure.
In every instance, those will be places where it's harder to get the grid deployed and far, and harder to scale up or anything else. Of course, we are ideally suited for those sorts of deployments and have a demonstrated history of deploying in those types of environments. Look, as I said in my comments, we're gonna need a shitload of infrastructure here in the next couple of decades, an unimaginable amount. 1.5 million chargers a year if we take four decades to do it. The entire industry's deployed 120,000 chargers in the last decade, publicly available I'm talking about. It's gonna take a mixture of many, many things to solve for this. We, I believe, are going to get a very, very big piece of that pie where from our point of view.
You know, I mean, it's a $6 trillion build-out or whatever in the long run, according to Goldman Sachs. From our point of view, to get thousands of units deployed, and thousands of them deployed, won't have the tiniest bit of impact on the overall demand, but of course it'll be very meaningful for us.
Sure. Absolutely. Strategically, you know, I was struck to see that there was another deal of a public battery company acquired by an EV OEM then just earlier this week.
By Nikola. Yeah.
Right. Exactly.
Mm-hmm.
I was just curious, do you, with your own, M&A in that space, is there sort of like, a likely drive of continued vertical integration transactions that you foresee kind of near term, next year or two. Or is it more a case where there are like specific windows of opportunity when a seller might, you know, be reasonable in terms of bid-ask spread, and you can make it happen? Do you think we'll just see a spate of these, or do you think they're kind of just really situation specific?
No, it's both things. I am aggressively acquisitive. I want to control more of what we're doing. I want to defend my supply chain. I want to bring margin in-house. Beyond that, we work very, very hard to make other people's stuff work in unique ways. In fact, we are always educating the vendors of various components that we buy off the shelf as to what their shit can do, that they didn't even know they could do it themselves. In some instances had that stuff added to their manuals. Our engineers have figured it out. I want to control more of that. I want to be. Don't forget, we're not gonna stop with EV ARCs. We've got EV Standard coming. We've got our UAV ARC coming.
We've got many other products in the pipeline and between our ears. We wanna control as much of this as we can so that we can maximize margins, defend supply chain, and also make sure that the things that we're integrating are actually right for our products. You'll see me continuing to look for opportunities wherever possible for more vertical integration. At the same time, the second thing that you said is also true. I'm only gonna do that when I can buy it right. AllCell's a great example of this. I've been trying to buy AllCell for a long time. Believe me, it didn't just start happening last year. I wanted them for a long time.
It wasn't until we could, you know, a whole series of externalities put us in a position, where we were able to effect that transaction, not least of which was the fact that Beam's growth opportunity is so material and so significant that the funds, don't forget, they were over the wall. I could disclose stuff to them that I can't disclose to other people. The fund that owned AllCell at that time realized that they were gonna make a hell of a lot more money owning 10% of Beam, than they would ever make owning 100% of AllCell. I don't wanna put words in their mouth, but that didn't hurt the transaction.
Gotcha. When you're thinking about what the lead time for that transaction, I'm just curious, was it sort of your traditional M&A usual issues that were the thing that extended it so much? Was it, you know, just, you know, financing concerns? You said the
No, it was not that. Remember, it was an all-paper deal. It was an all-paper deal. Look, there was certainly a very tough negotiation on price. There's no question about that. Very tough.
Okay.
There was certainly that. Also, the truth of the matter is, when I said I've been after them for years, I took a run at them, a couple of years earlier and it didn't work. I have a discipline about. I've done a bit of M&A in my time, and I have a good discipline about not falling in love with deals and walking away from them if I don't get what I want. I want fair deals, and I can tell you that the seller in this case would feel very much that this was a fair deal, that they've already done very well out of it, and they're gonna do a whole lot better out of it. That's how I want it. I'm not.
Look, my primary concern has always been with my existing shareholders and my existing company. I'm not gonna sell them down the road to enrich somebody else. That's really important to me. In fact, when we came back together to attempt to get this done the second time, it didn't take a long time. It was spirited. There was no doubt about that. There was a few table thumping sessions and some raised voices. At the end of the day, we got it done pretty quickly, because we were able to fairly early on discover that we were better off on the same team than we were in opposing teams. That's one of the great things about doing an all-paper deal.
You know, you give somebody cash, that's your adversary through the transaction, at closing and after the transaction. When you give somebody paper, they quickly become your greatest supporter, right? That's a great thing. I love being in that position with a seller. They're very well known and have great experience in the industry, and I'm looking forward to making them a lot of money and staying engaged with them for a long time. Anytime anybody will tell you, if they've been involved in any type of M&A transaction with me, or indeed any large deal with me, they probably think I'm a bit of an asshole, frankly.
Because I have a tendency to stick to my guns and I have a firm grasp of what I believe is fair, and I won't venture away from it.
Absolutely. Understand. Fair enough. Thanks very much for that background. That's all for me.
My pleasure. Thanks to you.
The next question is from Joseph Miranda, a private investor. Please go ahead.
Hello, Joseph.
Yes. Hello, Desmond. Thank you for taking my questions. You don't break out either on the press release or the 10-Q segment, segmented information. Just a more general question, which segment do you foresee as becoming profitable first, Beam San Diego or Beam Chicago?
Okay, really important for me to point out, the reason we don't break it out is because we do not operate them as a separate segment. They're fully integrated into our company. That, I mean, from an accounting point of view, that's important to point out, and it's also philosophically very important to point out. It's not us and them, it's just us. The simple fact of the matter is they will be crucial to Beam San Diego's profitability because, of course, batteries are about 30% of our bill of materials, and so anything that we can do to reduce costs there is gonna have a very, very significant impact on our profitability, and quickly. They will also do some deals which are very profitable.
The gross profitability will be very high on certain deals that they do, and it'll be lower on other deals that they do. I think what you'll find is that the San Diego, you know, if we're gonna segment it like that, and by the way, we can't even do that in the future because I'm going to bring battery manufacturing over here, and I intend to expand our charging products manufacturing into the Midwest as well as demand dictates. Just to keep to that, using that nomenclature at the moment, I think what you'll see is a greater consistency in the product offerings in San Diego because, you know, we make a smaller number of products and they all have very fixed prices.
Sometimes minor discounts for large volume purchases for the feds or State of California or something like that. Whereas with the battery products, there's gonna be much more variability in the margin sets there. Some of that will be to do with how bespoke they have to be, what kind of volumes we're looking at, and also what the sales and raw material contributions are to them, which are very varied. I'm not gonna tell you which one's gonna be more profitable than the other because the fact of the matter is we are all going to be profitable, and we're gonna do it together.
Okay. That's good news. Secondly, any update on the rollout of the EV Standard?
Yeah. What, so the EV Standard unfortunately is falling victim to our success in the rest of the business right now. We're very, very busy. Engineering's very, very busy. We're seeing a very significant increase. I mean, obviously you can see just from the backlog and particularly the pipeline number, we're sort of readying ourselves for what we believe is gonna be a significant onslaught here in the remainder of this year and into 2023. I've got to be pragmatic about this. At the same time, I love that product, and I view it as very important to our future. I can tell you what we're doing right now is recruiting. We're recruiting engineers.
Okay.
Because we need to bring on not just engineers. We're recruiting just about everybody we can lay our hands on. We are definitely recruiting engineers because I need to commit a team to that development of the EV Standard product so that we can get it out because I love it. I do believe it will be a very significant seller for us.
Well, that sounds great. One final question. In terms of you've been controlling and trying to get costs under control in this very tough environment, bringing everything in-house, have you at all been successful at bringing painting, final painting of the EV ARCs in-house?
That's a bloody good question. It's definitely an area where we give up a lot of margin. Indeed, it adds risk to our business because we're reliant on others to do it. You're absolutely right to identify as something that's very much in our crosshairs at the moment. We have not done it yet, but I intend to. I have the space, and it's actually not as expensive as you might think to do that nowadays. All the booths and everything like that come to you prefabricated, pre-permitted and everything else. It's just another one of the things that's on the list for our operations team to do.
By the way, one of the great tensions that you have running a growing business like this is on the one hand, you just pump out as much product as you can because the growth is significant and only gonna get more so. On the other hand, you've got to have the discipline to get people to stop what they're doing and take the steps necessary to, you know, move us to the next level. That's always a tension. You know, I can tell you if my operations manager was in here right now, he's running at 100 miles an hour, is just keeping up with producing product and delivering it, and yet this is one of his responsibilities. I know that he feels that he's under tension sometimes.
We'll get it done, and it is a very important area of another one of those vertical integration things that we will bring in-house for sure.
Well, Desmond, thank you very much. That's great news all around. Keep it going. Thank you.
Thanks, Joseph. Thanks for being on board.
The next question is from James McCullough, a private investor. Please go ahead.
Hello, James.
Yeah. Hi, Desmond. You commented during your prepared remarks on some of the supply chain challenges and use of cash to pre-purchase cells for Beam Chicago. First question was on the battery cells. Are they sourced locally? How long do you feel confident that you've got a source of supply in terms of a year, six months? Any contracts to handle any future growth, at least the next couple of years?
Yeah. To answer your first question, if only. There simply isn't any domestic battery cell supply chain, not in any meaningful way, and certainly not within any kind of you know economies of scale you could work with. That's a shame, and I've been very vocal in D.C. and to the press, frankly, about the fact that we need to start onshoring a lot more of this stuff for all sorts of different reasons, which we don't have time to get into today. It's gonna take a while to do it. I hope that we can all be grown up enough and have the courage of leadership at governmental level and all other levels to get that done as quickly as possible.
Okay.
I've been to some of the places where the raw materials and components are brought out, and I don't want it happening anywhere except here, frankly. We can do it. Just to be clear, we have plenty of lithium. The U.S. has the fourth largest cobalt reserves in the world. We don't need to be sending children down holes in Congo to get that stuff. The Western-friendly democracies have everything else that we need as well. I shouldn't get off track on that, but as yet, that's not happening. I hope it will.
The other thing that I think you're gonna see happening just while we're on that subject, which is gonna be very impactful, is the tremendous maturation of the recycling industry. You can recycle about 98% of a lithium-ion battery. We are already engaging in discussions for second life use of batteries. Batteries come out of EVs and into our products, which should dramatically reduce our costs as well as, of course, fantastically improving that whole cycle as well. At any rate, no. They're coming from overseas.
We have committed a lot of capital to defending our position in you know for the next sort of 12 months. Also in part in doing that is not only are you defending your position with committed resources, but also we're putting our money where our mouths are with those overseas vendors, mostly Korea, by the way, to be clear. That cements our position. In fact, next on the 22nd of this month, I'll be in Chicago. I visit there regularly, not surprisingly. I'll be meeting with a very senior executive from a Korean battery company to continue that strengthening of the relationship and everything else.
Money ultimately is what makes it work, and we've done that. Now, the good news with that is it looks terrifying when you look at the spend during the quarter. Oh my God, how could they possibly have spent $7.4 million? Look, money is just like copper or battery cells or paint or steel or anything else that would go into our products. We, when we sell our products, we get the money back. And I'm confident that we will get all of that back within the next 12 months and a whole bunch of other money that's not involved with that. So it's not, like, it's not a matter for concern. It's exactly the right thing to do, and it's the way we should be using our balance sheet.
I would concur. I might have even bought more. What I didn't know was, I was not aware of any domestically sourced cells, and I didn't know if you'd pulled a rabbit out of your hat. Appreciate the clarity on the sourcing, and it's nice to hear it's from Korea anyway. The second question was on the European market opportunity. Sounds like you've kinda pushed that opportunity forward in your prioritization for future growth. If you could just maybe comment just a little bit on timing, what are you looking at as far as timing, and if you've got any approach you're tending towards, whether it's greenfield, JV, or a licensing deal.
I'm going there in September. These are not cold calls, just to give you an indication of how advanced the conversations are. I wouldn't put my bottom in an airplane seat if I didn't feel that I had a degree of advancement in the discussions with the people who I'm gonna go and meet to make it work while I'm making the trip. By the way, I'm also meeting with customer prospects while I'm over there, and some of them are really cool. It is important to me. It's a very important market. I, you know, things are moving quickly in this industry.
The war in Ukraine and the heat waves and everything have definitely heightened European sensitivity about all this stuff. They're quite different than the Americans in the way they operate over there. You know, if they decide that they're gonna spend government money on something, they just do it. You know, NIMBYism and stuff like that plays a much smaller role. I wanna make sure that we strike while that iron's hot. Not licensing. I just don't like that model. I wanna control much more of it than that. I think it's unlikely it's greenfield.
I think what you should be thinking about is us finding a worthy and credible partner in that part of the world and then creating some sort of entity in which we have you know equal share of equity. That's the way I'm going after it at the moment. It you know these things always have a way of evolving and it doesn't happen overnight, particularly not if you're strict about what you'll put with, and I am. I believe that we'll get a lot of value out of it if we pull it off. If it was just me, I'd say when we pull it off.
Okay, good. Now I had a little experience with my own company, and we actually JV'd with a company that was struggling, made a huge investment and built a fairly large manufacturing facility in Leuven, Belgium, which as a JV turned out the way to go. It's good to hear.
By the way, one thing I want to make clear to you and to everybody else who's listening, a part of the other reason that it might take a little bit longer to get this done is because I want to continue down the path of not using cash or our capital to get these things done. We've got a tremendous amount of IP. We bring a lot of value to the table, and I think, I'll be trying, I'll be working very hard to make sure that the other side brings the capital to the table, not us.
That opens up the third question when you mentioned IP. Could you just, Desmond, comment a little bit about the strength of your patent portfolio? Do you have process protection? Is it product protection? Do you feel that you've got strong enough patent protection on any particular products that could successfully be defended in the event of an onslaught from, say, a much bigger, better financed company?
One of the things I learned a few years ago in a meeting in New York City with some bankers and a bunch of attorneys, and I know that sounds like the beginning of a bad joke, but in fact it was a reality. One of them, one of the attorneys there was an IP attorney. He had looked at our patent portfolio at the time, which has only been strengthened since then. He told me that he would write me a check to take on a defense if somebody big and powerful came after us. He was so confident in the strength of the patents that we have written.
We have them in the U.S., we have them in Europe, and we have them to some extent in Asia as well. Of course, we've dramatically increased that patent portfolio with the acquisition of the battery company in Chicago. We've got lots of life left on the patents that are important to us, and we continue to get more and more of them. What I'll say to you about this is where patents are concerned is I have a really strong discipline around that. I do not invest in patents to pump up my own ego. The litmus test that we use is will it create a significant barrier to entry for the competition?
Is it something that we can monetize within the next sort of 12 months-18 months? If the answer is no to either of those questions, I don't spend money on it, 'cause it's not cheap, as you know. All the patents that we've ever gone after are in products that we have today that are either making money for us right now, revenue that is. I have to be clear in saying that because of course we're pre-profit. But or they're just recently patented and we haven't started producing them yet. That's our discipline.
Okay. The last question was on the growth opportunity. I believe you mentioned it about $7 million in sales for the six months this year. Is that correct?
We're at $7.5 million for the first six months of the year.
Okay.
Which again, April last year, which was a record year of revenue for us, is greater than any previous year in our history. That was for the first six months.
Got it. The question was, I would think there is at least a $1 billion sales opportunity available almost now or at least in the next couple of years. I know you've sounded very proud on your conference calls on cost containment and the ability to grow while maintaining expenses, either whether it's cost of goods sold or overhead. It sounds like the market opportunity, especially with the new legislation that's been passed, is so enormous. Are there any considerations to, even if it's on temporary basis, to shore up whether it's in the sales or engineering or other areas to support a fairly significant increase in sales should occur?
I'll agree with you on your ideas about the $1 billion in product sales. I actually don't even consider that to be a very big number where we're concerned. I think that's gonna be an awful lot more than that. To the second part of your question, without a doubt, we're recruiting. I mean, we are careful about money, and we're careful to try to add resources when they're needed or just a little ahead of when they're needed. At the same time, yes, we are recruiting. I do believe that there's a wave coming.
Okay, Desmond, thank you very much.
Thank you.
The next question is from Frank Hart with High Capital Funding. Please go ahead.
Hello, Frank. How are you?
Hello, Desmond. I've been so very, very happy to hear this call. I thought when you and I met, that you were a master. You have continued to demonstrate that with what you've done with the company.
Thank you, Frank.
I can't see how this company does not end up as one of the behemoths in this industry. I'm not even sure what the definition of this industry is because you're in so many different areas. Anyway.
Thank you.
That has nothing to do with the questions. Couple of questions. One, what do you see as your two biggest bottlenecks right now?
Yeah. Human beings and potential supply chain stuff. I mean, it really, the supply chain stuff. I know everyone's talking about it, but believe me, it has been. We've had to work bloody hard to keep up with this, and we've had to do some pretty clever maneuvering as well. I mean, you can, Frank, you, I think you know me well enough to know what I'm like where money's concerned. The fact that I'm prepared to part with money to buy cells in advance or prepay vendors is a strong indication to you about, you know, how much of a risk I view supply chain problems in the future. Nevertheless, I don't think it's gonna get a whole lot worse. In fact, I think we're gonna start to see things improve, and we have managed through this.
We definitely had a slowing down of deployments in the second quarter. The quarter could have been better had we not had that imbalance of battery supply at that time. We're solving that.
Yep.
As I say, we didn't lose anything out of it. Who knows what's coming around the corner next, and that's gonna be the thing. The next thing, of course, is human beings. We, without a doubt, to the previous question, same thing, we need to hire the best and the brightest. What I can tell you about that is good news is two things. First of all, labor is actually a fairly small percentage of our cost model. The good news when that's where that's concerned is you can actually afford to pay a little bit more than the next person without really having a big, major impact on your cost model.
Because unlike lots of businesses where labor is 60% and materials are 40%, in our instance, actual hands-on labor on the product is only 5%, and the rest of it's BOM. That allows us some latitude there. Then the second thing we've got going for us is and thank you for making those initial comments, but basically, it's related to your initial comments, which is that this is a fantastic company doing fantastic things in a brand new and very exciting industry. An increasing number of people are starting to understand that and get their head around it. Of course, they wanna come and work for us. We'll get over it, but it's all gonna require a lot of work and a lot of effort.
Indeed. One other thing on that subject. You mentioned people. You need more people who have the competence to move the business and your agenda forward. Clearly, you should be able to attract the right ones. The next part of my question is actually about money. I remember at one point some time ago, I suggested to you that even though you had convinced me that you had enough money to get through, when anybody looked at your balance sheet, they wouldn't think that. I suggested to you that you might wanna take in some more money so that no one would even think that, 'cause you're behind the eight ball when somebody even raises the question, even if it's only in their own mind and doesn't say it to you.
Yeah.
I'm wondering two things. Number one, would it make sense for you to do some sort of non-dilutive financing? I know many companies have done these, you know, kind of preferred issues and so on that have no dilution at all. It's just effectively you know a dividend rate or an interest rate on the capital, and at the rate that you're going, I wouldn't think that that should be a big cost item in terms of your profitability. Yet, if you did a $10 million or $25 million non-dilutive deal like that, it would just blow away anybody's questions about capital.
Yeah.
The second question with respect to money is, have you thought about or have you set up a finance company, a captive finance company, you know, like General Motors Credit Corp or Chrysler Credit Corp? Because I understand two things on that. One, your systems are relatively expensive to purchase compared to some other systems. Of course, the total cost of ownership is a lot lower, but that's got to be off-putting to some people with respect to the initial purpose.
Yeah.
I'm wondering if two things in that, two sub things in that. One, with respect to government stuff, where some governments only have an annual budget and don't have the money to spend on the capital, but could you lease it to them over five years or rent it to them year by year? If they don't wanna, you know, extend it for the next year, you have the ability to just charge them the restocking.
Yeah
Fee, so to speak, and redeploy the equipment.
Yes. Right. Got it.
And second-
Let me answer those questions. I'm conscious of other people's time on the line.
Sure.
Let me just.
Yeah, sure. Go ahead. Thanks.
Go after those. As far as the amount of cash we have on our balance sheet is concerned, you're right. I mean, look, I do have the Scottish tendency to be very careful and tight with money. You know, I do have the Scottish tendency to be very careful and tight with money. You can look at the financings I've done in our history. I've never done anything toxic. Most of the money that I've raised for the company has been at market, sometimes even a little premium, sometimes a little discount, but nothing ever off-putting from that point of view.
The result of that is that today, we have by far the lowest float of any company of our size or dimension anywhere in the industry. I'm 8 million in the float, 11 million fully diluted, 10 million outstanding right now. I don't think you'll find any.
That's why I'm still a shareholder.
Thank you. Yes. Well, good. We're very careful with that. Now that's at the end of the day, this entire game is about earnings per share. We will have a lot less S to divide into that E. As a result, we're gonna really give our shareholders a great ride for their money because they're just far fewer shares out than anybody else. Nevertheless, the other thing about that is it does give me a lot of dry powder where this is concerned. Let me just tell you this. While I don't like raising money and I don't like giving up equity, and every dollar matters to me and every share matters to me, at the same time, I'm gonna be very pragmatic about this.
There are several instances, and I've been clear about this in the past. While I don't need to raise money, there are several instances where I might. One of them, for example, would be an acquisition where raising some capital made sense to do that. The other one, which in many ways is sort of more fun to talk about, is if the stock picks up its head significantly, would I throw some more millions onto the balance sheet? You're damn right I would under those circumstances. Let me give you one circumstance where that could happen. At the moment, we've got about 21% short interest in our stock, something like 12 days to cover with a minuscule float. I'm very confident that we're off to great things.
Now, when you short somebody's stock, there's only one way of getting out of it, and that's by buying it, right? We're being shorted not for any fundamental reason. I'm not gonna deliver to the shorters. I'm not gonna bankrupt. I'm not gonna do a destructive dilutive financing. I'm not gonna fail. In fact, we're going completely opposite direction. So if we get into a situation where there's a short squeeze or the stock runs up for any reason, frankly, I would be very happy to strengthen our balance sheet, taking the money out of those shorters' pockets, without a doubt. So it's not that I'm saying never. I want to make sure that, like everything else I do, it's done at the right time and the right way.
Just quickly, on your other question about financing for the customers, yes, we've definitely looked at that. You're right to point that out. One of the major areas to point out is that many of our customers are government customers, and as a result, cannot take advantage of the various tax incentives like ITC that I mentioned, which is 30%. It's a credit, not a deduction. We can put financing together into which we could roll that ITC and other tax equity for CapEx reduction and offer really a very inexpensive solution. Yes, that's definitely on our drawing board as well. There are some other more interesting things too, like batteries as a service.
Now that we own the battery company, there's nothing to stop us, let's say, selling an EV ARC, but without the cost of the batteries in it, which is a significant contributor, and then charging people a monthly fee for the batteries. We retain title and therefore risk because we understand them better. We'd arbitrage fear in that case. Yes, there are lots of very interesting things that we can do, and I want you to rest assured that we're not ignoring any of those. We just need to plow on and, you know, put them into effect. Don't think I won't raise money if we need to. We don't need to, but if we did, I would.
Mostly if there's some way that I can do it in a way that's, as you said, not dilutive, and is really much in the favor of the current shareholder in growing the company, I'll do it. I gotta take the next question. I think.
Yes. Well, I'm just glad to hear you've got it on your radar. Well done.
Thank you, Frank. Thank you very much.
The next question is.
I think there's one more.
Excuse me, Desmond Wheatley?
Yes, please do. I think there's one more.
Next question is from Alan Ginsberg, a private investor. Please go ahead.
Hello, Alan. Yeah, hi. How are you, Desmond? With the expansion of your business being so robust, as we hear from this call, and other people asking you about hiring various technical people, do you think you have the depth of management? Are you gonna be hiring more management? Also second part, the capacity in your manufacturing operation, do you think you're gonna have to expand that as well? Yeah. Let me answer the second question first.
The really good news where that's concerned, in this 53,000 sq ft facility that I'm operating in today, one of my operations managers just came to me and told me that they were up to 2 units a day with the current headcount, but we can get to 6 units a shift, that is. We can get to 6 units a shift with the current headcount. We can of course go to two shifts and three shifts. We're currently operating five days a week. We can go to seven days a week. Just put that in perspective for you, that equates to about $105 million a shift.
If we were to go to three shifts, we could probably pump around $300 million a year out of this facility and very profitably, because of course the rent doesn't go up when we do that.
Right.
This is all about leveraging these fixed overheads that we have. I've been talking about this for years in low volumes. It's very expensive to do this, but as volumes go up, lots of things get less expensive, materials and particularly fixed overheads. We got loads of room for expansion here. At the same time, as I've already mentioned on the call, I intend to expand into Europe. I'm not gonna do that from here. I'll use other people's money and not our equity or money to make that expansion happen. I'll use our IP to make that happen if I'm able to pull that off. I also mentioned that I want to bring battery manufacturing.
I want to expand our battery manufacturing capability, not just in Chicago, but bring that here to San Diego because the state will throw lots of money at me to do that. Of course it makes a lot of sense to make batteries where I'm making the charging products. Equally, I want to expand my charging products business into the Midwest, because at the moment I'm making products in San Diego and shipping them to New York City, and they're heavy and they're big, and that doesn't make sense to do that. To get to somewhere like Chicago or somewhere else in the Midwest, to expand there as well, that would double our capacity. That would get us to $600 million, another $300 million in Europe. You can see over $1 billion pretty bloody quickly.
We haven't done anything at all to satiate the demand.
Can you speak to the depth of management? I mean, you can't-
Yes.
be in five places at once. The senior management, are you gonna make that more robust as we go along?
Yes, without a doubt. Kathy and I were just having this discussion the other day because it looks like my travels will keep me out of the country for about a month in September.
Right.
between the Middle East and Europe. Yes, we are looking for people. Another thing is, listen, I'm a pretty robust guy. I've got a lot of energy. I'm healthy, and I love what I'm doing. But I cannot have this company in a position where something nasty happened to me that it would be hurt in any way. So I wanna make sure that we have good succession in place and that we have the depth of management to build out the teams. We are currently recruiting for high level people. The big reason that we're doing that is because from a cost structure point of view.
There was some asshole comment made in some stock magazine last week about how our operating expenses were up, and they are up, but they're not up anywhere near as much as our revenues are up. What we're trying to do is balance this, right? As we get in these opportunities and as we get this, we scale the business up, I still think there's a lot of opportunity to increase revenue per head. In fact, I know there is. As we scale these things up and bring in the opportunities, then we'll bring in the headcount, because I wanna be able to keep reporting to you that we are reducing operating costs as a percent of revenue and reducing direct costs as a percent of revenue, because that's where profitability comes from.
Okay. Thank you very much and good luck.
Thanks, Alan. We make our own luck.
This concludes our question- and- answer session. I would like to turn the conference back over to Desmond Wheatley for any closing remarks.
I think we've gone a bit over time here, so I don't wanna hold anybody any longer just to say thank you very much. As always, I'm thrilled about what's going on and you know, you hear that from me every time I do these calls and I've got good reason to be. We keep growing this thing and growing it dramatically and we're in the right place at the right time and we have the right products. So thank you for being involved and I can't wait to speak to you in a quarter.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.