What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-17 compared with 2022-04-13 · 130 added, 144 removed, 187 unchanged (59% of the section changed)

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Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

We are an educational technology company that is seeking to become a world leading innovator and integrator of interactive products and software for schools, as well as for business and government learning spaces.

We currently design, produce and distribute interactive projectors and distribute interactive technologies, including flat panels, projectors, whiteboards and peripherals to the education market.

We also distribute science, technology, engineering and math (or “STEM”) products, including a portable science lab.

All our products are integrated into our classroom software suite that provides tools for whole class learning, assessment and collaboration.

To date, we have generated substantially all revenue in the U.S.

from the sale of interactive displays and related software to the educational market.

In the region encompassing Europe, the Middle East and Africa (collectively, “EMEA”), approximately 92% of our revenues relate to the education sector and the remainder comes from health, government and corporate, including the banking and financials services sector.

We have also implemented a comprehensive plan to reach profitability both from our core business operations and as a result of making strategic business acquisitions.

We have already started to implement this strategy as set forth below.

Highlights of our plan include:

● Integrating products of the acquired companies and cross training our sales reps to increase their offerings.

The combination of products and cross training has already resulted in increased sales.

The synergy we have found between the products of Boxlight and Mimio are adding opportunities to resellers for both companies to increase their sales.

● Hiring new sales representatives with significant education technology sales experience in their respective territories and our current pipeline has reached a record high level.

● Seeking to increase demand in the US market for technology sales and have the products and infrastructure in place to handle our expected growth.

We are a technology company that develops, sells and services interactive solutions predominantly for the global education market, but also for the corporate and government sectors.

We are seeking to become a worldwide leading innovator and integrator of interactive products and software solutions and improve collaboration and effective communication in meeting environments.

We currently design, produce and distribute interactive technologies including our interactive and non-interactive flat panel displays, LED video walls, media players, classroom audio and campus communication, cameras and other peripherals for the education market and non-interactive solutions including flat panels, LED video walls and digital signage.

We also distribute science, technology, engineering and math (or “STEM”) products, including our 3D printing and robotics solutions, and our portable science lab.

All products are

integrated into our classroom software suite that provides tools for whole class learning, assessment and collaboration.

In addition, we offer professional training services related to our technology to our U.S.

educational customers.

To date, we have generated the majority of our revenue in the U.S.

and internationally from the sale of interactive displays and related software to the educational market.

We have sold our solutions into over 70 countries and into over 1.5 million classrooms and meeting spaces.

We sell our products and software through more than 1,000 global reseller partners.

We believe we offer the most comprehensive and integrated line of interactive display solutions, audio products, peripherals and accessories, software and professional development for schools and enterprises on the market today.

The majority of our products are backed by nearly 30 years of research and development.

Advances in technology and new options for the introduction of technology into the classroom have forced school districts to look for solutions that allow teachers and students to bring their own devices into the classroom, provide school districts with information technology departments with the means to access data with or without internet access, handle higher demand for video, as well as control cloud and data storage challenges.

Our design teams are able to quickly customize systems and configurations to serve the needs of clients so that existing hardware and software platforms can communicate with one another.

Our goal is to become a single source solution to satisfy the needs of educators around the globe and provide a holistic approach to the modern classroom.

Recent Acquisitions

On December 31, 2021, the Company acquired FrontRow Calypso LLC, a California company and a leader in classroom and campus communication solutions for the education market.

While purchase accounting was applied to the acquired assets and assumed liabilities of FrontRow, the fiscal 2021 revenues and the results of operations of FrontRow are not included in consolidated results as a result of the acquisitions date.

While purchase accounting was applied to the acquired assets and assumed liabilities of FrontRow, the fiscal 2021 revenues and the results of operations of FrontRow are not included in our consolidated financial statements for the year ended December 31, 2021 as a result of the year-end acquisition date.

On March 23, 2021, the Company acquired Interactive Concepts BV, a company incorporated and registered in Belgium and a distributor of interactive technologies (“Interactive”).

The company has been Boxlight’s key distributor in Belgium and Luxembourg.

On September 24, 2020, the Company acquired Sahara Holdings, Ltd., a leader in distributed and manufactured AV solutions.

Headquartered in the United Kingdom, Sahara is a leader in distributed AV products and a manufacturer of multi-award-winning touchscreens and digital signage products, including the globally renowned Clevertouch and Sedao brands.

On April 17, 2020, the Company acquired MyStemKits and STEM Education Holdings, Pty, an Australian corporation (“STEM”), the largest online collection of K-12 STEM curriculum for 3D printing.

Prior to the acquisition, the company had been Boxlight’s key distributor in Belgium and Luxembourg.

Our Acquisition Strategy and Challenges

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The process to undertake a potential acquisition is time-consuming and costly.

We expect to expend significant resources to undertake business, financial and legal due diligence on our potential acquisition targets, and there is no guarantee that we will complete any acquisition that we pursue.

Prior to completing any acquisition, we expect to expend significant resources to undertake business, financial and legal due diligence on our potential acquisition targets, as a result, and there is no guarantee that we will complete any acquisition that we pursue.

We believe we can achieve significant cost-savings by merging the operations of the companies we acquire and after their acquisition leverage the opportunity to reduce costs through the following methods:

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As a result, we believe that an analysis of the historical costs and expenses of our Target Sellers (a company that is the subject of an attempted acquisition) prior to their acquisition will not provide guidance as to the anticipated results after acquisition.

We anticipate that we will be able to achieve significant reductions in our costs of revenue and selling, general and administrative expenses from the levels currently incurred by the Target Sellers operating independently, thereby increasing our EBITDA and cash flows.

We anticipate that we will be able to achieve significant reductions in our costs of revenue and selling and, general and administrative expenses from the levels currently incurred by the Target Sellers operating independently, thereby increasing our EBITDA and cash flows.

Components of our Results of Operations and Financial Condition

The Company’s sales of interactive devices, including panels, projectors and other interactive devices generally include hardware maintenance services, a license to software, and the provision of related software maintenance.

The Company’s sales of interactive devices, including panels, whiteboards and other interactive devices generally include hardware maintenance services, a license to software, and the provision of related software maintenance.

In most cases, interactive devices are sold with hardware maintenance services.

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Air shipping is more costly than sea or ground shipping or other delivery options and it is rarely used as a result.

The Company did not experience material delays in shipping during 2021 that materially negatively impacted our revenues, however has faced specific supply chain challenges with component shortage and increased cost of global shipping and margins.

The Company did not experience material delays in shipping during 2022 or 2021 that materially negatively impacted our revenues, however, we have faced specific supply chain challenges related to certain component shortages and increased cost of global shipping and margins.

Gross profit and gross profit margin

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product, channel and geographical revenue mix;

changes in product costs related to the release of projector models;

changes in product costs related to the release of newer models;

component, contract manufacturing and supplier pricing, foreign currency exchange and most recently, increased shipping costs due to the pandemic and global unrest.

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For the years ended December 31, 2022 and 2021

The consolidated financials only include the revenues and results of operations for Sahara from the date of acquisition in September 2020.

Total revenues for the year ended December 31, 2022 were $221.8 million as compared to $185.2 million for the year ended December 31, 2021, resulting in a 19.8% increase.

The increase in revenues was primarily a result of the acquisition of Sahara in September 2020 and increased demand for our solutions in both the U.S.

and Europe, the Middle East, and Africa (together “EMEA”).

Sahara made up approximately 68% of revenue in 2021 and 45% in 2020, when it was consolidated for three months.

Boxlight revenue alone doubled from 2020 to 2021.

The increase in revenues was primarily a result of our acquisition of FrontRow in December 2021 and increased demand for our solutions in both the U.S.

and EMEA markets.

Excluding FrontRow revenues, revenues increased $11.0 million or 5.9%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

Cost of Revenues.

Cost of revenues for the year ended December 31, 2022 was $156.9 million as compared to $138.7 million for the year ended December 31, 2021, resulting in an 13.2% increase.

Cost of revenues consists primarily of product cost, freight expenses, customs expense and inventory adjustments.

The increase in cost of revenues was associated with the acquisitions and growth of the business as outlined above and was also due to additional increases in global freight/shipping which the company has experienced (as have many others) as a result of supply chain issues arising as a result of the COVID-19 pandemic.

During 2021 the cost increase was approximately four times normal costs as compared to pre-pandemic levels.

The increase in cost of revenues was primarily due to the growth in revenues associated with the acquisition of FrontRow in December 2021.

Excluding cost of revenues associated with FrontRow, cost of revenues for Boxlight increased by $5.1 million or 3.7%, to $143.8 million.

The increase in cost of revenues, excluding FrontRow, was primarily due to the growth in revenues across all markets partially offset by lower manufacturing and freight and shipping costs.

Gross Profit .

Gross profit for the year ended December 31, 2022 was $64.9 million as compared to $46.5 million for the year ended December 31, 2021.

Gross profit margin increased from 18% to 25% despite the effects of increased freight and shipping expenses discussed above and product cost increases (which have been partially offset by increased sales prices).

Gross profit margin, adjusted for the net effect of acquisition-related purchase accounting, was 26.8% as compared to 27.1%, as adjusted, for the twelve months ended December 31, 2020.

Additional pressure on margin has been seen on the cost of manufacturing as a result of component shortages which have had an adverse impact of approximately 3.9% in the twelve months to December 31, 2021.The prior year included certain purchase accounting adjustments stemming from the Sahara acquisition and affecting recognized revenues.

Boxlight’s gross profit margin for 2021 ,excluding Sahara, was 17%.

Gross profit margin increased from 25.1% for the year ended December 31, 2021 to 29.2% for the year ended December 31, 2022 due to decreased manufacturing and freight and shipping expenses over the prior year following the height of the COVID-19 pandemic and higher margins associated with sales from FrontRow products.

General and Administrative Expense.

General and administrative expense for the year ended December 31, 2022 was $59.3 million and 26.8% of revenue as compared to $47.3 million and 25.6% of revenue for the year ended December 31, 2021.

The increase resulted from additional personnel costs associated with the acquisition.

The increase primarily resulted from additional costs associated with the FrontRow acquisition.

Excluding FrontRow, general and administrative expense for the year ended December 31, 2022 was $50.7 million and 25.8% of revenue.

Research and Development Expense.

Research and development expense was $1.8 million and 1% of revenue for the year ended December 31, 2021 as compared to $1.4 million and 3% of revenue for the year ended December 31, 2020.

Research and development expense primarily consists of costs associated with development of proprietary technology.

Research and development expense was $2.5 million or 1.1% of revenue for the year ended December 31, 2022 as compared to $1.8 million or 1.0% of revenue for the year ended December 31, 2021.

development expense primarily consists of costs associated with development of proprietary technology.

The increase in research and development expense was primarily driven by an increase in contract services related to software development.

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Other expense for the year ended December 31, 2022 was $6.7 million as compared to $7.9 million for the year ended December 31, 2021.

Other expense increased $3.6 million, primarily due to losses incurred on the settlement of Lind and Sallyport debt obligations with the new Whitehawk debt facility.

Net losses were $13.8 million and $16.2 million for the years ended December 31, 2021 and 2020, respectively.

The decrease in the net loss was primarily due to higher sales volume, higher gross profit margin and the acquisition of Sahara.

Other expense decreased by $1.2 million, primarily due to a change in fair value of derivative liabilities due to a decrease in the Company’s stock price.

The decrease was partially offset by an increase in interest expense.

The net loss attributable to common shareholders was $5.0 million and $14.7 million for the year ended December 31, 2022 and 2021, respectively, after deducting fixed dividends to Series B preferred shareholders of $1.3 million in each year and the fair value revaluation deemed contribution of $367 thousand following the redemption amendment with the Series B shareholders in the second quarter of 2021.

To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding operations, we supplement our consolidated financial statements presented on a basis consistent with U.S.

generally accepted accounting principles (“GAAP”) with EBITDA and Adjusted EBITDA, both non-GAAP financial measures of earnings.

EBITDA represents net income (loss) before income tax expense, interest income, interest expense, depreciation and amortization.

Adjusted EBITDA represents EBITDA, plus stock compensation expense and non-recurring expenses and minus changes in fair value of derivative liabilities.

EBITDA represents net income (loss) before income tax expense, interest expense, net, and depreciation and amortization expense.

Adjusted EBITDA represents EBITDA, adjusted for stock compensation expense and non-recurring expenses changes and changes in fair value of derivative liabilities, purchase accounting impact for fair valuing inventory and deferred revenue, and net (gain) loss on settlement of debt.

Our management uses EBITDA and Adjusted EBITDA as financial measures to evaluate the profitability and efficiency of our business model.

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The following table contains reconciliations of net losses to EBITDA and adjusted EBITDA for the periods presented.

Reconciliation of net loss for the year ended

December 31, 2021 and 2020 to EBITDA

Reconciliation of net loss for the years ended

December 31, 2022 and 2021 to EBITDA and Adjusted EBITDA

(in thousands)

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Purchase accounting impact of fair valuing deferred revenue

Net loss on settlement of Lind debt in stock

Net loss on settlement of debt close out

Net (gain) loss on settlement of debt

Adjusted EBITDA

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The bulk of our products are shipped to our educational customers prior to the beginning of the school year, usually in July, August or September.

To prepare for the upcoming school year, we generally build up inventories during the second

quarter of the year.

To prepare for the upcoming school year, we generally build up inventories during the second quarter of the year.

Therefore, inventories tend to be at the highest levels at that point in time.

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Accounts receivable balances tend to be at the highest levels in the third quarter, in which we record the highest level of sales.

We have been very proactive, and will continue to be proactive, in obtaining contracts during the fourth and first quarters that will help offset the seasonality of our business.

We have been very proactive, and will continue to be proactive, in obtaining contracts during the fourth and first quarters or each year in order to help offset the seasonality of our business.

Liquidity and Capital Resources

As of December 31, 2022, we had cash and cash equivalents of $14.6 million, a working capital position of $62.8 million, and a current ratio of 2.29.

This financial position represents a significant improvement from a year ago at December 31, 2020 when we had a working capital position of $21.0 million and $13.5 million of cash and cash equivalents.

For the years ended December 31, 2021 and 2020, we had net cash used in operating activities of $2.3 million and $4.7 million, respectively.

We had net cash used in investing activities of $34.0 million and $45.3 million, respectively.

In addition, we had net cash provided by financing activities of $41.1 million and $65.6 million during the years ended December 31, 2021 and 2020, respectively.

In addition to the cash flows generated by our ongoing operating activities we financed our operations during 2021 and 2020 with a $20.0 million tranche of debt funded by our primary lender, and from a pre-existing accounts receivable financing arrangement with another lender who purchases 85% of the eligible accounts receivable of the Company, up to $6.0 million, with the right of recourse.

This financial position represents an improvement from a year ago at December 31, 2021 when we had a working capital position of $53.8 million and $17.9 million of cash and cash equivalents.

For the year ended December 31, 2022, we had net cash provided by operating activities of $1.2 million.

For the year ended December 31, 2021, we had net cash used in operating activities of $2.3 million.

The change in cash from operating activities primarily relates to increases in operating income in 2022 compared to 2021.

For the year ended December 31, 2022 and 2021, we had net cash used in investing activities of $1.2 million and $34.0 million, respectively.

The decrease in cash used in investing activities primarily relates to the purchase of FrontRow that occurred in 2021, partially offset by an increase in purchases of Property and Equipment.

In addition, for the year ended December 31, 2022, we had net cash used in financing activities of $5.1 million.

For the year ended December 31, 2021, we had net cash provided by financing activities of $41.1 million.

The decrease in cash from financing activities primarily relates to a decrease in net proceeds and principal repayments of debt of $54.5 million and a decrease in debt issuance costs of $3.3 million, partially offset by an increase in proceeds from common stock of $4.3 million.

In addition to the cash flows generated by our ongoing operating activities we financed our operations during 2022 with our current Credit Facility with WhiteHawk and in 2021 with a $20.0 million tranche of debt funded by our previous lender, and from a pre-existing accounts receivable financing arrangement with another lender who purchases 85% of the eligible accounts receivable of the Company, up to $6.0 million, with the right of recourse.

We closed these credit lines in December 2021 and replaced them with our Credit Facility with WhiteHawk.

Our accounts receivable and our ability to borrow against accounts receivable provides an additional source of liquidity as cash payments are collected from customers in the normal course of business.

Our accounts receivable and our ability to borrow against accounts receivable provides an additional source of liquidity as cash payments are collected from customers in the ordinary course of business.

Our accounts receivable balance fluctuates throughout the year based on the seasonality of the business.

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We expect to make future payments on existing leases from cash generated from operations.

We have limited credit available from our major vendors and are required to prepay for the majority of our inventory purchases, which further constrains our cash liquidity.

The Company had an accumulated deficit of $61.3 million as of December 31, 2021 and net cash used in operations of $2.3 million for the year ended December 31, 2021.

We have limited credit available from our major vendors and are required to prepay a percentage of our inventory purchases, which further constrains our cash liquidity.

The Company had an accumulated deficit of $65.0 million as of December 31, 2022 and net cash provided by operations of $1.2 million for the year ended December 31, 2022.

Recent Financing

To finance the acquisition of FrontRow, the Company and substantially all its direct and indirect subsidiaries, including Boxlight, Sahara and FrontRow as guarantors, entered into a maximum $68.5 million term loan credit facility, dated December 31, 2021 and as amended April 4, 2022 (the “Amended Credit Agreement”), with Whitehawk Finance LLC, as lender (the “Lender”), and White Hawk Capital Partners, LP, as collateral agent.

Under the terms of the Credit Agreement, the Company received an initial term loan of $58.5 million on December 31, 2021 (the “Initial Loan”) and was provided with a subsequent delayed draw facility of up to $10 million that may be provided for additional working capital purposes under certain conditions (the “Delayed Draw”).

The Initial Loan and Delayed Draw are collectively referred to as the “Term Loans.” The proceeds of the Initial Loan were used to finance the Company’s acquisition of FrontRow, pay off all indebtedness owed to our existing lenders, Sallyport Commercial Finance, LLC and Lind Global Asset Management, LLC, pay related fees and transaction costs, and provide working capital.

WhiteHawk Finance LLC

To finance the acquisition of FrontRow, the Company and substantially all of its direct and indirect subsidiaries, including Boxlight and FrontRow as guarantors, entered into a maximum $68.5 million term loan credit facility, dated December 31, 2021 (the “Credit Agreement”), with WhiteHawk Finance LLC, as lender (the “Lender”), and WhiteHawk Capital Partners, LP, as collateral agent.

The Company received an initial term loan of $58.5 million on December 31, 2021 (the “Initial Loan”) and was provided with a subsequent delayed draw facility of up to $10 million that may be provided for additional working capital purposes under certain conditions (the “Delayed Draw”).

The Initial Loan and Delayed Draw are collectively referred to as the “Term Loans.” The proceeds of the Initial Loan were used to finance the Company’s acquisition of FrontRow, pay off all indebtedness owed to the Company’s then existing lenders, Sallyport Commercial Finance, LLC and Lind Global Asset Management, LLC, pay related fees and transaction costs, and provide working capital.

Of the Initial Loan, $8.5 million was subject to repayment on February 28, 2022, with quarterly principal payments of $625,000 and interest payments commencing March 31, 2022 and the $40.0 million remaining balance plus any Delayed Draw loans becoming due and payable in full on December 31, 2025.

The Term Loans will bear interest at the LIBOR rate plus 10.75%;

provided that after June 30, 2022, if the Company’s Senior Leverage Ratio (as defined in the Credit Agreement) is less than 2.25, the interest rate would be reduced to LIBOR plus 10.25%.

The Term Loans bear interest at the LIBOR rate plus 10.75%;

provided that after March 31, 2022, if the Company’s Senior Leverage Ratio (as defined in the Credit Agreement) is less than 2.25, the interest rate would be reduced to LIBOR plus 10.25%.

Such terms are subject to the Company maintaining a borrowing base in terms compliant with the Credit Agreement.

On March 29, 2022, the Company received a Notice of Events of Default and Reservation of Rights (the “Notice”) from the Collateral Agent, alleging, among other things, defaults as a result of (i) failure to repay $8.5 million of the facility by February 28,

2022, (ii) non-compliance with the borrowing base resulting in the Company being in an over advance position under the Credit Agreement, and (iii) failure to timely provide certain reports and documents.

As a result of the Notice, all accrued and unpaid interest owed under the Term Loan, became subject to a post-default interest rate equal to the highest interest rate allowed for under the Credit Agreement plus 2.50% until such time as the Events of Default are either waived or cured.

Following the Company’s receipt of the Notice and pursuant to amendment to the Credit Agreement, dated April 4, 2022, the Collateral Agent and Lender agreed to extend the terms of repayment of the $8.5 million originally due on February 28, 2022 until February 28, 2023 and waive and/or otherwise extend compliance with certain other terms of the Credit Agreement in order to allow the Loan Parties adequate time to comply with such terms.

The principal elements of the amendment included (a) an extension of time for the Loan Parties to repay $8.5 million of the principal amount of the term loan from February 28, 2022 to February 28, 2023, and (b) forbearance on $3,500,000 of over advances to grant the Loan Parties until May 16, 2022 to allow the Company to come into compliance with the borrowing base requirements set forth in the Credit Agreement.

In such connection, the Loan Parties intend to obtain credit insurance on certain key customers whose principal offices are located in the European Union and Australia as their accounts owed to the Loan Parties were deemed ineligible for inclusion in the borrowing base calculation primarily due to the perceived inability of the Collateral Agent to enforce security interests on such accounts.

In addition, the Lender and Collateral Agent agreed to (i) reduce, through June 30, 2022, the minimum cash reserve requirement for the Loan Parties, (ii) reduce the interest rate by 50 basis points (to Libor plus + 9.75%) after delivery of the Loan Parties’ June 30, 2023 financial statements, subject to the Loan Parties maintaining 1.75 EBITDA coverage ratio, and (iii) waive all prior Events of Default under the Credit Agreement.

In conjunction with the amendment to the Credit Agreement, the parties entered into an amended and restated fee letter (the “Fee Letter”) pursuant to which the parties agreed to prepayment premiums of (i) 5% for payments made on or before December 31, 2022, (ii) 4% for payments made between January 1, 2023 and December 31, 2023, and (iii) 2% for payments made between January 1, 2024 and December 31, 2025 a.

In conjunction with its receipt of the Initial Loan, the Company issued to the Lender (i) 528,169 shares of Class A common stock (the “Shares”), which Shares were registered pursuant to its existing shelf registration statement and were delivered to the Lender in January 2022, (ii) a warrant to purchase 2,043,291 shares of Class A common stock (subject to increase to the extent of 3% of any Series B and Series C convertible preferred stock converted into Class A common stock), exercisable at $2.00 per share (the “Warrant”), which Warrant was subject to repricing on March 31, 2022 based on the arithmetic volume weighted average prices for the 30 trading days prior to September 30, 2022, in the event the Company’s stock is then trading below $2.00 per share, (iii) a 3% fee of $1,800,000, and (iv) a $500,000 original issue discount.

In addition, the Company agreed to register for resale the shares issuable upon exercise of the Warrant.

The Company also incurred agency fees, legal fees and other costs in connection with the execution of the Credit Agreement totaling approximately $1.7 million.

Under the terms of the warrant issued to WhiteHawk on December 31, 2021, the exercise price of the warrants would reprice if the stock price on March 31, 2022 was less than the original exercise price, at which time the number of warrants would also be increased proportionately, so that after such adjustment the aggregate exercise price payable for the increased number of warrant shares would be the same as the aggregate exercise price previously in effect.

The warrants repriced on March 31, 2022 to $1.19 per share and the shares increased to 3,434,103.

On July 22, 2022, the Company entered into a Securities Purchase Agreement with an accredited institutional investor.

According to the terms of the WhiteHawk agreement, this purchase agreement triggered a reduction of the exercise price of the warrants and a revaluation of the derivative liability.

The warrants were repriced to $1.10 and warrant shares increased to 3,715,075.

On March 29, 2022, the Company received a notice from the collateral agent, alleging, among other things, defaults as a result of (i) failure to repay $8.5 million of the facility by February 28, 2022, (ii) non-compliance with the borrowing base resulting in the Company being in an over advance position under the Credit Agreement, and (iii) failure to timely provide certain reports and documents.

As a result, all accrued and unpaid interest owed under the Term Loan, became subject to a post-default interest rate equal to the highest interest rate allowed for under the Credit Agreement plus 2.50% until such time as the events of default were either waived or cured.

In February 2022, WhiteHawk and the Company agreed in principle to an extension of the February 2022 Payment.

Pursuant to amendment to the Credit Agreement, dated April 4, 2022, the Collateral Agent and Lender agreed to extend the terms of repayment of the $8.5 million originally due on February 28, 2022 until February 28, 2023 and waive and/or otherwise extend compliance with certain other terms of the Credit Agreement in order to allow the Loan Parties adequate time to comply with such terms.

In July 2022, the Company and WhiteHawk agreed that the notice had inadvertently included the default with respect to the failure to repay $8.5 million of the facility.

As a result, notwithstanding the notice, both WhiteHawk and the Company have agreed that the Company was not in default in making the February 2022 Payment to WhiteHawk.

The principal elements of the April amendment included (a) an extension of time to repay $8.5 million of the principal amount of the term loan from February 28, 2022 to February 28, 2023, and (b) forbearance on $3,500,000 in over advances until May 16, 2022 to allow the Company to come into compliance with the borrowing base requirements set forth in the Credit Agreement.

In such connection, the Loan Parties have obtained credit insurance on certain key customers whose principal offices are located in the European Union and Australia as, without the credit insurance, their accounts owed to the Loan Parties had been deemed ineligible for inclusion in the borrowing base calculation primarily due to the perceived inability of the Collateral Agent to enforce security interests on such accounts.

In addition, the Lender and Collateral Agent agreed to (i) reduce, through September 30, 2022, the minimum cash reserve requirement for the Loan Parties, (ii) reduce the interest rate by 50 basis points (to LIBOR plus 9.75%) after delivery of the Loan Parties’ September 30, 2023 financial statements, subject to the Loan Parties maintaining 1.75 EBITDA coverage ratio, and (iii) waive all prior Events of Default under the Credit Agreement.

Furthermore, the parties agreed that no prepayment premiums would be payable with respect to the first $5.0 million paid under the Term Loan, any payments made in relation to the $8.5 million due on or before February 28, 2023, any required amortization payments under the Credit Agreement and any mandatory prepayments by way of ECF or casualty events.

The foregoing descriptions of the Amendment to the Credit Agreement, the Notice and the Fee Letter do not purport to describe all of the terms of such agreements.

The full details of the Amendment to the Credit Agreement are filed as an Exhibit to the 8-K filed by the Company on April 4, 2022.

On July 20, 2021, Boxlight and Sallyport amended the Accounts Receivable Agreement (the “ARC Amendment”) entered into on September 21, 2020 and described below for purposes of increasing the Maximum Facility Limit Amount to $13,000,000, as well as increasing the minimum monthly sales from $1,250,000 to $3,000,000.

On June 21, 2022, the Company and substantially all of its direct and indirect subsidiaries (together with the Company, the “Loan Parties”), entered into a second amendment (the “Second Amendment”) to the four-year term loan credit facility, originally entered into December 31, 2021 and as amended on April 4, 2022 (the “Credit Agreement”), with the Collateral Agent and Lender.

The Second Amendment to the Credit Agreement was entered into for purposes of the Lender funding a $2.5 million delayed draw term loan and adjusting certain terms to the Credit Agreement, including adjusting the Applicable Margin (as defined in the Second

Amendment) to 13.25% for LIBOR Rate Loans and 12.25% for Reference Rate Loans, increasing the definition of change of control from 33% voting power to 40% voting power, requiring the Company to engage a financial advisor, and allowing additional time, until July 15, 2022, for the Company to come into compliance with certain borrowing base requirements set forth in the Second Amendment to the Credit Agreement, among other adjustments.

Lind Global Marco Fund and Lind Global Asset Management

On February 4, 2020, the Company and Lind Global Macro Fund, LP (“LGMF”) entered into a securities purchase agreement pursuant to which the Company received $750,000 in exchange for the issuance to Lind of (1) an $825,000 convertible promissory note, payable at an 8% interest rate, compounded monthly, (2) certain shares of restricted Class A common stock valued at $60,000, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended February 4, 2020, and (3) a commitment fee of $26,250.

The Note was to mature over 24 months, with repayment commencing on August 4, 2020, after which time the Company made monthly payments of $45,833 plus interest by issuing shares of Class A common stock.

The commitment fee in the amount of $26,025 was paid to LGMF, along with legal fees in the amount of $15,000.

The Company paid LGMF $60,000 for closing fees by issuing 44,557 shares of Class A common stock.

During the year ended December 31, 2021, the Company paid principal of $1.1 million and interest of $32,000 by issuing a total of 671,000 shares Class A common stock with an aggregate value of $1.5 million to Lind Global and recognized a loss extinguishment of debt of approximately $430,000.

On December 31, 2021, the LGMF convertible note was paid in full.

On September 21, 2020, the Company and Lind Global Asset Management, LLC (“Lind Global”) entered into a securities purchase agreement (the “Lind SPA”) pursuant to which the Company received $20.0 million in exchange for the issuance to Lind Global of (1) a $22.0 million convertible promissory note, payable at a 4% interest rate, compounded monthly, (2) 310,399 shares of restricted Class A common stock valued at $900,000, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended September 21, 2020, and (3) a commitment fee of $400,000.

The convertible note was to mature over 24 months, with repayment commencing on November 22, 2020, after which time the Company became obligated to make monthly payments of $1.0 million, plus interest.

Interest accrued during the first two months of the note, after which time the interest payments, including accrued interest was paid monthly in either conversion shares.

The commitment fee in the amount of $40,000 was paid to Lind Global, along with legal fees in the amount of $20,000 The Company paid Lind Global a total of $500,000 in closing fees consisting of commitment and legal fees, by issuing 310,399 shares of Class A common stock.

The shares of Class A common stock issuable to Lind under the convertible note were registered pursuant to our effective shelf registration statement on Form S-3.

During the year ended December 31, 2021, as payment for the Lind Global convertible notes, the Company repaid principal of $12.0 million and interest of $584,000 to Lind Global by issuing a total of 7.2 million shares Class A common stock with an aggregate value of $15.9 million to Lind and recognized a $3.3 million loss.

Paycheck Protection Program Loan

On May 22, 2020, the Company received loan proceeds of $1.1 million under the Paycheck Protection Program.

During 2021, the Company applied for forgiveness in the amount of $836 thousand.

On March 2, 2022, we received a decision letter from the lender that the forgiveness application had been approved, leaving a remaining balance of $173 thousand to be paid.

The Company received a payment schedule from its lender on May 5, 2022, extending the payoff date until May 2025.

The amount remaining on the loan at December 31, 2022 was $127 thousand.

Everest Display, Inc.

On January 26, 2021, the Company entered into an agreement with EDI and EDI’s subsidiary, AMAGIC, settling $1,983,436 in accounts payable owed by the Company to EDI for 793,375 shares of Class A common stock.

During the year ended December 31, 2021, the Company recognized a $357 thousand gain.

Accounts Receivable Financing – Sallyport Commercial Finance

On September 30, 2020, Boxlight Inc.

and EOS EDU LLC entered into an asset-based lending agreement with Sallyport Commercial Finance, LLC (“Sallyport”).

Sallyport agreed to purchase 90% of the eligible accounts receivable of the Company during the Term with a right of recourse back to the Company if the receivables are not collectible.

Advances against this agreement accrue

interest at the rate of 3.50% in excess of the highest prime rate publicly announced from time to time with a floor of 3.25%.

In addition, the Company was required to pay a daily audit fee of $950 per day.

On July 20, 2021, Boxlight and Sallyport amended the Accounts Receivable Agreement (the “ARC Amendment”) for purposes of increasing the Maximum Facility Limit Amount (as defined in the ARC Amendment) to $13,000,000, as well as increasing the minimum monthly sales from $1,250,000 to $3,000,000.

In exchange for entry into the ARC Amendment, Boxlight agreed to a fee of $50,000, representing one percent of the increased Maximum Facility Limit Amount.

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In exchange for entry into the Second ARC Amendment, Boxlight agreed to a fee of $20,000, representing one percent of the increased Maximum Facility Limit Amount.

Other terms of the Accounts Receivable Agreement remained unchanged.

On August 23, 2021, the Company and Sallyport, as first lien creditor, and Lind Global Macro Fund, LP (“LGMF”) and Lind Global Asset Management, LLC (“Lind Global”), together as second lien creditors, entered into the fourth amended and restated intercreditor agreement (the “Fourth A&R Intercreditor Agreement”) for the sole purpose of increasing the permitted first lien cap thereunder from $6 million to $20 million.

On December 31, 2021, the Company obtained funds from its new Credit Agreement with Whitehawk to pay off the remaining $8.4 million in principal.

As a result of paying off Sallyport, the Company recorded a loss on settlement of debt of $812,000.

Everest Display (EDI)

On January 26, 2021, we entered into an agreement with Everest Display Inc., a Taiwan corporation (“EDI”), and EDI’s subsidiary, AMAGIC Holographics Inc., a California corporation (“AMAGIC”), pursuant to which $1,983,436 in accounts payable owed by us to EDI was settled in exchange for our issuance of 793,375 shares (the “2021 Shares”) of its Class A common stock to AMAGIC at a $2.50 per share purchase price, which resulted in a loss of $356,000.

The 2021 Shares were issued to AMAGIC pursuant to an exemption from registration provided by Rule 506 of Regulation D under Section 4(a)(2) of the Securities Act.

As approved by the Company’s board of directors on June 22, 2020, the Company entered into an agreement with EDI and EDI’s subsidiary, AMAGIC, effective June 11, 2020, pursuant to which EDI forgave $1,000,000 in accounts payable owed by the Company to EDI in exchange for the Company’s issuance of 869,565 shares (the “Shares”) of its Class A common stock to AMAGIC which was calculated at a $1.15 per share purchase price.

The Shares were issued to AMAGIC pursuant to an exemption from registration provided by Rule 506 of Regulation D under Section 4(a)(2) of the Securities Act of 1933, as amended.

Lind Global Macro Fund, LP

On February 4, 2020, the Company and Lind entered into a securities purchase agreement pursuant to which the Company received $750,000 in exchange for the issuance to Lind of (1) an $825,000 convertible promissory note, payable at an 8% interest rate, compounded monthly, (2) certain shares of restricted Class A common stock valued at $60,000, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended February 4, 2020, and (3) a commitment fee of $26,250.

The Note was to mature over 24 months, with repayment that commenced on August 4, 2020, after which time the Company made monthly payments of $45,833 plus interest by issuing shares of Class A common stock.

The commitment fee in the amount of $26,250 was paid to Lind, along with legal fees in the amount of $15,000.

The Company paid Lind $60,000 for closing fees by issuing 44,557 shares of Class A common stock.

During the year ended December 31, 2021, the Company paid principal of $1.1 million and interest of $32,000 to Lind Global by issuing a total of $671,000 shares of Class A common stock with an aggregate value of $1.5 million to Lind Global and recognized a loss extinguishment of approximately $430,000.

The Note was paid off on December 21, 2021.

Lind Global Asset Management

On September 21, 2020, the Company and Lind Global Asset Management, LLC (“Lind Global”) entered into a securities purchase agreement (the “Lind SPA”) pursuant to which the Company received $20.0 million in exchange for the issuance to Lind of (1) a $22.0 million convertible promissory note, payable at a 4% interest rate, compounded monthly, (2) 310,399 shares of restricted Class A common stock valued at $900,000, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended September 21, 2020, and (3) a commitment fee of $400,000.

The Note was to mature over 24 months, with repayment commencing on November 22, 2020, after which time the Company became obligated to make monthly payments of $1.0 million, plus interest.

Interest accrued during the first two months of the note, after which time the interest payments, including accrued interest was paid monthly in either conversion shares.

The commitment fee in the amount of $40,000 was paid to Lind Global, along with legal fees in the amount of $20,000.

The Company paid Lind a total of $500,000 in closing fees consisting of commitment and legal fees, by issuing 310,399 shares of Class A common stock.

The shares of Class A common stock issuable to Lind under the Note are registered pursuant to our effective shelf registration statement on Form S-3.

All of the Lind Debt was paid off with the proceeds from the term loan credit facility entered into with Whitehawk on December 31, 2021.

Aggregate principal due of $8 million was paid off of proceeds of term loan and a settlement loss of $374,000 was recognized which included a write off of the related deferred financing costs.

During the twelve months ended December 31, 2021, as payment for the Lind Global convertible notes, the Company repaid principal of $12.0 million and interest of $584,000 to Lind Global by issuing a total of 7.2 million shares Class A common stock with an aggregate value of $15.9 million to Lind and recognized a $3.3 million loss.

In conjunction with our entry into the Lind Global SPA agreement and the issuance of the Convertible Note, on September 21, 2020, the Company and Lind Global Macro Fund, LP, an affiliate of Lind Global(“Lind”), entered into a third amended and restated security agreement (the “Third A&R Security Agreement”) for purposes of amending and restating a prior security agreement, dated as of February 4, 2020, between the Company and Lind in order to incorporate the Lind Global SPA and the Convertible Note therein.

In addition, on September 21, 2020, the Company, Sallyport Commercial Finance, LLC (“Sallyport”), as first lien creditor, and Lind and Lind Global, as second lien creditors, entered into a third amended and restated intercreditor agreement (the “Third A&R Intercreditor Agreement”) for purposes of amending and restating the second amended and restated intercreditor agreement, dated as of February 4, 2020, between the Company, Sallyport and Lind, in order to (i) incorporate Lind Global as a second lien creditor and (ii) reaffirm and confirm the relative priority of each creditor’s respective security interests in the Company’s assets, among other matters.

In addition, on February 4, 2020, we and Lind entered into a second amended and restated security agreement for purposes of amending and restating a prior security agreement, dated as of December 13, 2019.

Also, Sallyport Commercial Finance, LLC, as first lien creditor, and Lind, as second lien creditor, entered into a second amended and restated intercreditor agreement for purposes of

amending and restating the intercreditor agreement between the parties, dated as of December 13, 2019, in order to reaffirm and confirm the relative priority of each creditor’s respective security interests in our assets,

On July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group, LLC, a Delaware limited liability company (“Maxim”), pursuant to which Maxim, as representative of the underwriters, agreed to underwrite the public offering (the “Offering”) of up to 15,000,000 shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”), at a public offering price of $2.00 per share, in addition to an overallotment option (the “Overallotment Option”) of 2,250,000 shares of Common Stock.

The Offering closed on July 31, 2020, with the sale of all 17,250,000 shares of the Company’s Common Stock, including the Overallotment Option, for gross proceeds of $34,500,000.

Maxim acted as sole book-running manager, National Securities Corporation acted as a co-manager for the Offering, and A.G.P./Alliance Global Partners (“A.G.P.”) acted as financial advisor.

As compensation for underwriting the Offering, the underwriters received an underwriting discount of 7%, equaling approximately $2,415,000, in addition to $60,000 in expenses.

A.G.P.’s compensation was paid out of the underwriting discount.

The Offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (SEC File No.

333-239939) (the “Registration Statement”) and the related base prospectus included therein, as supplemented by the prospectus supplement dated July 28, 2020 (the “Preliminary Prospectus”) and the final prospectus supplement, filed July 29, 2020 (the “Final Prospectus” and collectively with the Preliminary Prospectus, the “Prospectus”).

On June 8, 2020, the Company entered into an underwriting agreement (the “June Underwriting Agreement”) with Maxim pursuant to which Maxim agreed to underwrite the public offering (the “June Offering”) of 13,333,333 shares (the “Shares”) of the Company’s Class A common stock at a public offering price of $0.75 per share.

National acted as co-manager of the June Offering.

The June Offering closed on June 11, 2020, with the Company’s sale of the Shares for gross proceeds of $10,000,000.

In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 2,000,000 shares of Class A common stock at the public offering price less discounts and commissions (the “June Over-Allotment Option”).

The June Over-Allotment Option was exercised in full on June 24, 2020, for additional proceeds of $1,500,000, through the sale of an additional 1,999,667 shares of Class A common stock.

Maxim acted as sole-bookrunner and National acted as co-manager for the Offering.

Gross proceeds, before underwriting discounts and commissions and estimated offering expenses, totaled $11.5 million.

As compensation for underwriting the Offering, Maxim and National together received an underwriting discount of 7% of the Offering and the Over-Allotment Option and were reimbursed for up to $85,000 in underwriting expenses.

The June Offering was conducted pursuant to the Company’s registration statement on Form S-1 (File No.

333-238634) previously filed with and subsequently declared effective by the SEC.

On February 4, 2020, we and Lind Global Marco Fund, LP (the “Investor” or “Lind”) entered into a purchase agreement (the “2020 SPA”) pursuant to which we received $750,000 in exchange for the issuance to Lind of (1) an $825,000 convertible promissory note, payable at an 8% interest rate, compounded monthly (the “2020 Note”), (2) certain shares of restricted Company Class A common stock valued at $60,000, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended February 4, 2020, and (3) a commitment fee of $26,250.

The Note matures over 24 months, with repayment to commence August 4, 2020, after which time the Company will be obligated to make monthly payments of $45,833 (the “Monthly Payments”), plus interest.

Interest payments owed under the 2020 Note (the “Interest Payments”) accrue beginning on the one-month anniversary of the issuance of the Note, however such Interest Payments accrued during the first six months of the Note, after which time the Interest Payments, including such accrued Interest Payments, shall be payable on a monthly basis in either conversion shares or in cash.

We may make the Monthly Payments and any Interest Payments in shares of the Company’s Class A common stock so long as such shares are either registered for resale under the Securities Act of 1933, as amended, or may be sold without restriction pursuant to Rule 144 thereunder.

As such, the Monthly Payments may be subject to reduction in any month by any amounts converted into the Company’s Class A common stock.

In connection with this transaction the Company and Lind amended and restated the $4,400,000 note and the $1,375,000 note referred to below that we issued to Lind in March and December 2019, respectively, to provide that we would not make any payments under the Lind notes in the form of Class A Common Stock if such payments could cause the Company to violate any rules of the Nasdaq Capital Market.

Other terms of the Accounts Receivable Agreement remain unchanged.

Following the Company’s entry into the Credit Facility with WhiteHawk, on December 31, 2021, all indebtedness to Sallyport was satisfied in full.

Off Balance Sheet Arrangements

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However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in in detail Note 1 to the enclosed consolidated financial statements, and briefly summarized below.

Our significant accounting policies are discussed in detail in Note 1 to the accompanying consolidated financial statements, and briefly summarized below.

We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain :

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Share-based Compensation

Derivative Warrant Liabilities

REVENUE RECOGNITION

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Control is generally transferred when the Company has a present right to payment and the significant risks and rewards of ownership of products or services are transferred to its customers.

Product revenue is derived from the sale of projectors, interactive panels, audio and communication equipment and related software and accessories to distributors, resellers, and end users.

Product revenue is derived from the sale of interactive panels, audio and communication equipment and related software and accessories to distributors, resellers, and end

Service revenue is derived from hardware maintenance services, product installation, training, software maintenance, and subscription services.

The Company’s sales of interactive devices, including panels, projectors, audio and communication equipment and other interactive devices generally include hardware maintenance services, a license to software, and the provision of related software maintenance.

The Company’s sales of interactive devices, including panels, whiteboards, audio and communication equipment and other interactive devices generally include hardware maintenance services, a license to software, and the provision of related software maintenance.

Interactive devices are generally sold with hardware maintenance services with terms ranging from 36-60 months.

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SHARE-BASED COMPENSATION

The Company estimates the fair value of each stock compensation award at the grant date by using the Black-Scholes option pricing model.

The Company estimates the fair value of each stock option compensation award at the grant date by using the Black-Scholes option pricing model;

the fair value of each restricted stock unit awarded is the market price of the underlying shares at the date of grant.

The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award.

Accordingly, stock compensation expense is recognized based on

the estimated fair value of the awards which is amortized as compensation expense on a straight-line basis over the vesting period.

Accordingly, stock compensation expense is recognized based on the estimated fair value of the awards which is amortized as compensation expense on a straight-line basis over the vesting period.

Total expense related to the award is reduced by the fair value of the options that are forfeited by the employees that leave the Company prior to vesting.

DERIVATIVE WARRANT LIABILITIES

The Company classifies common stock purchase warrants as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement).

The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions as either an asset or a liability.

The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.

The Company determined that certain warrants to purchase common stock do not satisfy the criteria for classification as equity instruments due to the existence of certain net cash and non-fixed settlement provisions that are not within the sole control of the Company.

Such warrants are measured at fair value at each reporting date, and the changes in fair value are included in determining net income for the period.

The Company follows the asset and liability method of accounting for income taxes pursuant to the pertinent guidance issued by the FASB.

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Such valuation allowances are recorded for the portion of the deferred tax assets that are not expected to be realized based on the levels of historical taxable income and projections for future taxable income over the periods in which the temporary differences will be deductible.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

Accordingly, certain specified reporting and other regulatory requirements for public companies are reduced for businesses that meet the qualifications for emerging growth companies.

These provisions include:

(1) an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002;

(2) an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

(3) an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements;

(4) reduced disclosure about our executive compensation arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis