What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-17 compared with 2022-04-13 · 444 added, 488 removed, 713 unchanged (57% of the section changed)

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Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and 2020

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Boxlight Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We have audited the accompanying consolidated balance sheets of Boxlight Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes and financial statement schedule II (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Dixon Hughes Goodman LLP

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter – Fair Value of Derivative Liabilities

As described in Notes 1 and 10, the Company has issued warrants to purchase common stock which feature net cash settlement provisions or do not have fixed settlement provisions because their conversion and exercise prices may be lowered under certain conditions.

The warrants are derivative liabilities and are remeasured at fair value at each reporting date using a Monte Carlo simulation technique.

Changes in fair value are included in operations each period.

December 31, 2022, the Company estimated the fair value to be $472 thousand and recognized a $2.6 million change in fair value in operations for the year ended December 31, 2022.

We identified the fair value of the liability-classified warrants as a critical audit matter.

The principal considerations for that determination were the unobservable inputs used in the Company’s valuation technique are highly subjectivity and involves higher measurement uncertainty.

This required a high degree of auditor effort, including specialized skills and knowledge, and significant auditor judgment in evaluating the fair value of the warrants.

The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of management’s process for determining the unobservable inputs for the fair value measurement.

● Utilizing a valuation specialist, we evaluated the significant assumptions and methods utilized in developing the fair value, including:

o We evaluated the reasonableness of the Company’s measurement technique and significant assumptions and inputs.

o We verified developed an independent calculation of the risk-free rate and volatility and compared our rates to those used by management.

o We performed independent simulations using a Monte Carlo technique to determine the fair value of the warrants and test the accuracy of management’s valuation technique and application.

Critical Audit Matter – Equity-Classified Warrants

As described in Note 12, the Company issued certain warrants and prefunded warrants in connection with a securities purchase agreement to issue and sell 7.0 million shares of the Company’s common stock.

The Company evaluated whether the warrants and pre-funded warrants were in the scope of ASC Topic 480 Distinguishing Liabilities from Equity, which discusses the accounting for instruments with characteristics of both liabilities and equity.

The guidance in Topic 480, and the resulting liability classification, is applicable to instruments when certain criteria are met.

Based on its analysis, the Company concluded that the warrants, and pre-funded warrants did not meet any of the criteria to be subject to liability classification and are therefore classified as equity.

We identified the classification of the warrants as a critical audit matter.

The principal considerations for that determination included the complexity and effort required in identifying all relevant features of and obligations under the instruments for evaluation against the criteria for classification.

This required a high degree of auditor effort, including specialized skills and knowledge, and significant auditor judgment in evaluating the features of and obligations under the warrants and the determination of whether such features meet the criteria for liability-classification.

The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of management’s process for identifying and evaluating the critical terms of the warrant agreements in determining the classification.

● With the assistance of professionals in our firm that have specialized skills and knowledge in accounting for debt and equity instruments:

o We evaluated management’s analysis and conclusions regarding the relevant provisions and features of the warrants in light of relevant guidance and the criteria for classification.

o We read the securities purchase agreement and underlying warrant agreements comprising the offering to identify the relevant features and settlement provisions for our evaluation.

o We independently evaluated the relevant features and settlement provisions of the warrants under relevant guidance considering the criteria for liability-classification.

Critical Audit Matter – Goodwill Impairment Assessment

As described in Note 1, in analyzing goodwill for potential impairment in the quantitative impairment test, the Company uses a combination of the income and market approaches to estimate the fair value.

Under the income approach, the Company calculates the fair value based on discounted estimated future cash flows.

Under the market approach, the Company estimates the fair value based on the market multiples of revenue or earnings before interest, income taxes, depreciation, and amortization for benchmark companies.

We identified the quantitative impairment test of goodwill as a critical audit matter.

The principal considerations for that determination included the judgement involved in assessing management’s impairment test of goodwill due to the measurement uncertainty involved in determining the fair value of equity for the reporting units.

In particular, the fair value estimates are sensitive to changes in assumptions such as discount rates, expected future cash flows, long-term growth rates, and comparable company earnings multiples.

The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of management’s process for assessing goodwill impairment and performing the qualitative goodwill impairment test, including management’s process for developing assumptions used in the income and market approaches to estimate the fair value of reporting units.

● We evaluated management’s revenue growth rates, margins, and cash flows to current industry and economic trends, while also considering the current and future business, customer base, and product mix.

● We assessed management’s process for estimating revenue growth and margins by comparing past projections to actual performance.

● With the assistance of our valuation professionals with specialized skills and knowledge, we evaluated the models, valuation methodology, and significant assumptions used in the income and market approaches to estimate the fair values.

● We tested management’s reconciliation of the fair value of equity of the reporting units to the market capitalization of the Company.

/s/ FORVIS, LLP (Formerly, Dixon Hughes Goodman LLP)

We have served as the Company’s auditor since 2018.

Atlanta, Georgia

April 13, 2022

March 16, 2023

Boxlight Corporation

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As of December 31, 2022 and 2021

($ in thousands)

(in thousands except share and per share amounts)

Current assets:

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Property and equipment, net of accumulated depreciation

Operating lease right of use asset

Intangible assets, net of accumulated amortization

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Accounts payable and accrued expenses

Accounts payable and accrued expenses – related parties

Short-term debt

Earn-out payable- related party

Deferred revenues – short-term

Operating lease liabilities, current

Deferred revenues, current

Derivative liabilities

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Total current liabilities

Deferred revenues - long-term

Deferred revenues, non-current

Long-term debt

Deferred tax liabilities, net

Operating lease liabilities, non-current

Other long-term liabilities

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Mezzanine equity:

Preferred Series B

Preferred Series C

Preferred Series B, 1,586,620 shares issued and outstanding

Preferred Series C, 1,320,850 shares issued and outstanding

Total mezzanine equity

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Common stock, $ 0.0001 par value, 200,000,000 shares authorized;

63,821,901 and 53,343,518 Class A shares issued and outstanding , respectively

74,716,696 and 63,821,901 Class A shares issued and outstanding at December 31, 2022 and 2021, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income

Accumulated other comprehensive (loss) income

Total stockholders’ equity

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Total operating expense

Loss from operations

Income (loss) from operations

Other income (expense):

Interest expense, net

Other income (expense), net

Loss on settlement of liabilities, net

Changes in fair value of derivative liabilities

Total other income (expense)

Other expense, net

Gain (loss) on settlement of liabilities, net

Change in fair value of derivative liabilities

Total other expense

Loss before income taxes

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Other comprehensive loss:

Foreign currency translation (loss) gain

Foreign currency translation adjustment

Total comprehensive loss

Net loss per common share – basic and diluted

Net loss attributable to common stockholders

Net loss per common share – basic and diluted

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Boxlight Corporation

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended December 31, 2022 and 2021

($ in thousands)

(in thousands except share amounts)

Accumulated Other

Preferred Stock

Subscriptions

Comprehensive

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Conversion of liabilities

Closing fees related to public offering

Public offering

Other share-based payments

Conversion of restricted shares

Stock options exercised

Debt issuance costs

Vesting of restricted stock units

Warrant redemption, net

Stock compensation

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Fixed dividends for preferred shareholders

Deemed contribution for preferred shareholders

Balance, December 31, 2021

Shares issued for:

Conversion of liabilities

Other share-based payments

Stock options exercised

Debt issuance costs

Conversion of restricted shares

Vesting of restricted stock units

Securities purchase agreement

Warrant redemption, net

Issuance of warrants and prefunded warrants

Stock compensation

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Fixed dividends for preferred shareholders

Deemed contribution for preferred shareholders

Balance, December 31, 2022

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For the Years Ended December 31, 2022 and 2021

($ in thousand)

(in thousands)

Cash flows from operating activities:

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Amortization of debt discount and issuance cost

Bad debt (recovery) expense

Loss on settlement of liabilities

Bad debt expense

(Gain) loss on settlement of liabilities

Changes in deferred tax assets and liabilities

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Stock compensation expense

Other share-based payments

Depreciation and amortization

Change in right of use assets and lease liabilities

Changes in operating assets and liabilities:

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Other short-term liabilities

Warranty liability

Accounts payable and accrued expenses - related parties

Deferred revenues

Other liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Business acquisitions (net of cash acquired)

Asset acquisition

Cash paid to settle earnout obligations

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Cash flows from financing activities:

Proceeds from short-term debt

Principal payments on short-term debt

Net proceeds from issuance of common stock and warrants, net of issuance costs

Proceeds from issuances of short-term debt

Proceeds from exercise of options and warrants

Principal payments on debt

Discount on notes payable

Proceeds from convertible debt

Proceeds from long term debt

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Proceeds from issuance of common stock

Proceeds from the Paycheck Protection Plan Program loan

Net cash provided by financing activities

Other Share based payments

Net cash (used in) provided by financing activities

Effect of foreign currency exchange rates

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of the period

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Non-cash investing and financing transactions:

Preferred shares issued as consideration for acquisition of Sahara

Note payable issued as consideration for acquisition of MyStemkits

Shares issued to settle accounts payable

Shares issued to convert notes payable – Lind Global

Shares issued for closing fees related to outstanding notes payable – Lind Global

Exercise of warrants

Shares issued for acquisition

Shares issued for asset acquisition

Deemed contribution from Series B Preferred Stock

See Accompanying Notes to Financial Statements.

Of Boxlight Corporation

Notes to Consolidated Financial Statements

Boxlight Corporation

NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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Boxlight Corporation (the “Company”) was incorporated in the State of Nevada on September 18, 2014 with its headquarters in Atlanta, Georgia for the purpose of becoming a technology company that sells interactive educational products.

The Company designs, produces and distributes interactive technology solutions to the education market.

The Company designs, produces and distributes interactive technology solutions predominantly to the education market.

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.

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 the assets, and assumed certain liabilities of MyStemKits and STEM Education Holdings, Pty, an Australian corporation (“STEM”), the largest online collection of K-12 STEM curriculum for 3D printing.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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Actual amounts could differ from those estimates.

Significant estimates include estimates of allowances for bad debts, and inventory obsolescence;

Significant estimates include estimates of reserves for inventory obsolescence;

the recoverability of deferred tax assets;

the fair value and the recoverability of warrants;

the initial fair value of preferred stock, intangible assets and goodwill;

stock compensation, fair values of assets acquired and estimates for contingent liabilities.

the fair value of warrants;

the initial fair value of preferred stock, the fair value and recoverability of intangible assets and goodwill;

the fair value of stock compensation;

the fair values of assets acquired;

the relative stand-alone selling prices of goods and services;

and variable consideration.

COMPREHENSIVE INCOME

Comprehensive income (loss) reflects the change in equity during the year and is comprised of all components of net income (loss) and foreign currency translation adjustments.

Comprehensive income (loss) reflects the change in equity during the year except those resulting from investments by and distributions to stockholders, and is comprised of all components of net income (loss) and foreign currency translation adjustments.

FOREIGN CURRENCIES

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The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of equity (deficit).

Foreign exchange gains and losses arise from transactions denominated in

currencies other than the functional currency.

Foreign exchange gains and losses arise from transactions denominated in currencies other than the functional currency.

Gains and losses on those foreign currency transactions are included in determining net income (loss) for the period in which the exchange rates change.

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These investments are carried at cost, which approximates fair value.

The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits of $ 250,000 for banks located in the U.S.

The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits of $ 250,000 for banks

located in the U.S.

The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.

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For transactions occurring on or after January 1, 2021, contract liabilities acquired in a business combination are recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers (“Topic 606”).

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgement and estimates, including the selection of valuation methodologies, estimates of future

revenue, costs and cash flows, and discount rates.

Transaction costs are expensed as incurred.

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No goodwill impairments have been identified and recognized during any of the periods presented.

We test goodwill annually for impairment during the fourth quarter.

During the year ended December 31, 2022, we began performing the annual impairment test as of October 1, compared to December 31 in previous years.

This facilitates the overall coordination and timing of our annual financial statement close cycle and the preparation of our annual report.

The change to the testing date did not represent a material change to our method of applying the accounting principle in light of requirements to monitor goodwill throughout the reporting period.

Since the acquisition of FrontRow Calypso LLC occurred December 31, 2021, the Company believes that the carrying amount does not exceed the fair value for the reporting unit.

Goodwill arising from the FrontRow Calypso LLC acquisition was not included in the goodwill impairment testing for 2021 but will included in the impairment testing in 2022.

Goodwill arising from the FrontRow Calypso LLC acquisition was not included in the goodwill impairment testing for 2022.

INTANGIBLE ASSETS

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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

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.

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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.

See Note 10 “Derivative Liabilities” for more information.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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Derivative liabilities - warrant instruments

Earn-out payable – related party

The following tables reconcile opening and closing balances of contingent consideration for which fair value is based on level 3 inputs.

See Note 10 for discussion of the valuation techniques and inputs and reconciliation of the opening and closing balances of the fair value of warrants.

The following tables reconcile opening and closing balances of contingent consideration for which fair value is based on level 3 inputs (in thousands).

Balance, December 31, 2020

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Balance, December 31, 2022

Note 10 describes the valuation techniques and inputs and reconciles opening and closing balances of the fair value of warrants, which are also based on level 3 inputs.

NET INCOME (LOSS) PER COMMON SHARE

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Diluted net income (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents.

In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

For the year ended December 31, 2021, approximately 8.7 million of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

The dilutive effect of convertible instruments is determined using the if-converted method, presuming share settlement.

Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted calculation for the entire period being presented.

In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

For the year ended December 31, 2022, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 3.9 million shares from options to purchase common shares and 2.4 million of unvested restricted shares, 10.8 million shares issuable upon exercise of warrants.

Additionally, potentially dilutive securities of 17.8 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive.

For the year ended December 31, 2021, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 4.1 million shares from options to purchase common shares, unvested restricted shares of 2.0 million and 2.1 million shares issuable upon exercise of warrants.

Additionally, potentially dilutive securities of 17.8 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive.

REVENUE RECOGNITION

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Control is generally transferred when the Company has a present right to payment and the title 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 users.

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

Nature of Products and Services and Related Contractual Provisions

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, 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 of approximately 36 - 60 months .

Software maintenance includes technical support, product updates on a when and if available basis, and error correction services.

At times, non-interactive projectors are also sold with hardware maintenance services with terms of approximately 60 months .

At times, non-interactive panels are also sold with hardware maintenance services with terms of approximately 60 months .

The Company also licenses software independently of its interactive devices, in which case it is bundled with software maintenance, and in some cases, subscription services that include access to on-line content, and cloud-based applications.

The Company’s software subscription services provide access to content and software applications on an as needed basis over the Internet, but do not provide the right to take delivery of the software applications.

The Company’s software subscription services provide

access to content and software applications on an as needed basis over the Internet, but do not provide the right to take delivery of the software applications.

The Company’s product sales, including those with software and related services, generally include a single payment up front for the products and services, and revenue is recorded net of estimated sales returns and rebates based on the Company’s expectations and historical experience.

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Because observable prices are generally not available for the Company’s performance obligations that are sold in bundled arrangements, the Company does not apply the residual approach to determining SSP.

However, the Company does have certain performance obligations for which pricing is highly variable or uncertain, and contracts with those performance obligations generally contain multiple performance obligations with highly variable or uncertain pricing.

For these contracts the Company allocates the transaction price to those performance obligations using an alternative method of allocation that is consistent with the allocation objective and the guidance on determining SSPs in Topic 606 considering, when applicable, the estimated cost to provide the performance obligation, market pricing for competing product or service offerings, residual values based on the estimated SSP for certain goods, product-specific business objectives, incremental values for bundled transactions that include a service relative to similar transactions that exclude the service, and competitor pricing and margins.

A separate price has not been established by the Company for its hardware maintenance services and software maintenance services.

In addition, hardware maintenance services, software solutions, and the related maintenance services are never sold separately and are proprietary in nature, and the related selling price of these products and services is highly variable or uncertain.

Therefore, the SSP of these products and services is estimated using the alternative method described above, which includes residual value techniques.

The Company has applied the portfolio approach to its allocation of the transaction price for certain portfolios of contracts that are executed in the same manner, contain the same performance obligations, and are priced in a consistent manner.

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The timing of invoicing to customers often differs from the timing of revenue recognition and these timing differences can result in receivables, contract assets, or contract liabilities (deferred revenue) on the Company’s consolidated balance sheets.

Fees for the Company’s product and most service contracts are fixed, except as adjusted for rebate programs when applicable, and are generally due within 30 - 60 days of contract execution.

the Company’s product and most service contracts are fixed, except as adjusted for rebate programs when applicable, and are generally due within 30 - 60 days of contract execution.

Fees for installation, training, and professional development services are fixed and generally become due as the services are performed.

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The Company has no material contract assets on December 31, 2022 or 2021.

During the years ended December 31, 2021 and 2020, the Company recognized $ 5.6 million and $ 2.0 million, respectively of revenue that was included in the deferred revenue balance as of December 31, 2020 and December 31, 2019, respectively, as adjusted for Topic 606, at the beginning of the period.

During the years ended December 31, 2022 and 2021, the Company recognized $ 7.5 million and $ 5.6 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2021 and December 31, 2020, respectively.

Variable Consideration

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In very limited situations, a customer may return previous purchases held in inventory for a specified period of time in exchange for credits toward additional purchases.

The Company provides rebates to certain customers based on the achievement of certain sales targets.

The provision for rebates is estimated based on customers’ contracted rebate programs and our historical experience of rebates paid.

The Company includes variable consideration in its transaction price when there is a basis to reasonably estimate the amount of the fee and it is probable there will not be a significant reversal.

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As of December 31, 2022 and 2021, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $ 23.9 million and $ 21.5 million, respectively.

The Company expects to recognize revenue on approximately 35 % of the remaining performance obligations in 2022 , 47 % in 2023 and 2024 , with the remainder recognized thereafter.

The Company expects to recognize revenue on approximately 33 % of the remaining performance obligations in 2023 , 27 % in 2024 , 21% in 2025 , 13 % in 2026 , with the remainder recognized thereafter.

In accordance with Topic 606, the Company has elected not to disclose the value of remaining performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (for example, a time-and-materials professional services contract).

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(in thousands)

Product revenues:

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Commission costs that are deferred are classified as current or non-current assets based on the timing of when the Company expects to recognize the expense and are included in prepaid and other assets and other assets, respectively, in the accompanying consolidated balance sheets.

Total deferred commissions at December 31, 2021 and 2020 and the related amortization for 2021 were less than $ 241,000 .

Total deferred commissions at December 31, 2022 and 2021 and the related amortization for 2022 and 2021 were less than $ 300,000 .

The Company has not historically incurred any material fulfilment costs that meet the criteria for capitalization.

Bill and Hold Arrangements

From time to time the Company enters custodial bill and hold arrangements with customers.

Each arrangement is reviewed, and revenue is recognized only when the following criteria have been met:

(1) the reason for the bill-and-hold arrangement is substantive (2) the product is identified as the customer’s asset (3) the product is ready for delivery to the customer (4) there must be a fixed schedule for delivery (5) the seller cannot use the product or direct the product to another customer.

At December 31, 2022, $ 3.2 million of revenue was recognized for goods that will be delivered to a customer during the first quarter of 2023.

WARRANTY RESERVE

For customers that do not purchase hardware maintenance services, the Company generally provides warranty coverage on projectors and accessories, batteries and computers.

For customers that do not purchase hardware maintenance services, the Company generally provides warranty coverage on panels and accessories, batteries and computers.

This warranty coverage ranges from 2 - 5 years , and the Company establishes a liability for estimated product warranty costs, included in other short-term liabilities in the consolidated balance sheets, at the time the related product revenue is recognized.

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STOCK-BASED COMPENSATION

The Company estimates the fair value of each stock-based 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 for each restricted stock unit award 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 on a straight-line basis over the vesting period during which an employee is required to provide service in exchange for the award.

Total expense is reduced by the fair value of the options that are forfeited prior to vesting when the forfeiture occurs.

Total expense is reduced by the previously recognized compensation expense for options that are forfeited prior to vesting when the forfeiture occurs.

The Company has entered into various operating leases for certain office, support locations and vehicles with terms extending through February 2027.

Generally, these leases have initial lease terms of five years or less.

Prior to the adoption of Accounting Standards Update ("ASU") No.

2016-02 "Leases” (Topic 842) on January 1, 2022, the Company recorded the difference between the rent paid and the straight-line rent expense as a deferred rent liability within accrued expenses and other current liabilities and other liabilities.

Subsequent to the adoption of Topic 842, operating lease assets and liabilities are reflected within operating lease assets, operating lease liabilities, current, and operating lease liabilities, non-current, on the consolidated balance sheets.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Many of the leases have one or more lease renewal options.

The exercise of lease renewal options is at our sole discretion.

The Company does not consider exercise of any lease renewal options reasonably certain.

Certain of our lease agreements contain early termination options.

No renewal options or early termination options have been included in the calculation of the operating right-of-use assets or operating lease liabilities.

Certain of our lease agreements provide for periodic adjustments to rental payments for inflation.

As the majority of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.

The incremental borrowing rate is based on the term of the lease.

In connection with the adoption of Topic 842, the Company used incremental borrowing rates on January 1, 2022 for operating leases that commenced prior to that date.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

For these short-term leases, lease expense is recognized on a straight-line basis over the lease term.

SUBSEQUENT EVENTS

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Recently Adopted Accounting Pronouncements

We early adopted (as of January 1, 2021) ASU No.

The Company adopted Topic 842, as amended, which requires that lessees and lessors recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements.

The Company elected the modified retrospective approach which it applied on January 1, 2022, and therefore have not restated comparative periods.

The Company elected certain relief options offered in ASU 2016-02 including the package of practical expedients, and the option not to recognize right-of-use assets and lease liabilities that arise from short-term leases (i.e., leases with terms of twelve months or less).

The Company also elected the practical expedient to not separate lease and non-lease components, which allows it to account for lease and non-lease components as a single component.

Finally, the Company elected not to apply the hindsight practical expedient to determine the lease term for existing leases.

The Company’s operating leases relate primarily to office space.

As a result of the adoption of ASU 2016-02, the Company recognized an operating lease right-of-use ("ROU") asset of $ 3.8 million and a current operating lease liability of approximately $ 1.6 million and a long-term operating lease liability of approximately $ 2.3 million as of January 1, 2022, with no impact on the Company’s Consolidated Statement of Operations and Comprehensive Loss or Consolidated Statement of Cash Flows.

The ROU asset and operating lease liabilities are recorded as separate line items in the Consolidated Balance Sheet.

The Company adopted ASU 2021-06, “ Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses ” to amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses.

Among other changes, the final rule modifies the significance tests and improves the disclosure requirements for (1) acquired or to be acquired businesses, (2) real estate operations, and (3) pro forma financial information.

In addition, the final rule includes amendments to financial disclosures specific to smaller reporting companies (SRCs).

There is no immediate impact on the Company’s financial statements due to the adoption of this standard.

The Company early adopted (as of January 1, 2021) ASU No.

2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The new guidance simplifies the accounting for certain convertible instruments and for contracts in an entity’s own equity.

Key provisions include the elimination of the “cash conversion” guidance and the “beneficial conversion feature” guidance in ASC 470-20 as well as a simplification of the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification by removing certain conditions in ASC 815-40-25.

Key provisions include the elimination of the “cash conversion” guidance and the “beneficial conversion feature” guidance in ASC Subtopic 470-20, (Debt with Conversion and Other Options) , as well as a simplification of the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification by removing certain conditions in ASC Subtopic 815-40-25.

Since the beneficial conversion feature is eliminated by this guidance, it will not be recorded for our Series B preferred stock.

The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share for convertible instruments by using the if-converted method.

The amendments in ASU 2020-06 further revise the guidance in ASC Topic 260, “ Earnings Per Share, ” to require entities to calculate diluted earnings per share for convertible instruments by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

We early adopted (as of January 1, 2021) ASU No.

2021-08, “ Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ”, (“ASU 2021-08”), which amends the guidance in ASC 805 to require that “an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, rather than at fair value”.

At the acquisition date, an acquirer would account for the related revenue contracts in accordance with Topic 606 as if it had

originated the contracts.

For the years ended December 31, 2022 and 2021, the Company has calculated diluted earnings per share using the if-converted method.

The Company early adopted (as of January 1, 2021) ASU No.

2021-08, “ Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, ” (“ASU 2021-08”), which amends the guidance in ASC Topic 805, “ Business Combinations ,” to require that “an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, rather than at fair value.” At the acquisition date, an acquirer would account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts.

We adopted ASU No.

The Company applied the guidance in this ASU to the FrontRow acquisition that was completed on December 31, 2021.

The Company adopted ASU No.

2019-12, “Income Taxes” (ASU 740):

“Simplifying the Accounting for Income Taxes”.

The new guidance eliminates the need for an organization to analyze whether the following apply in a given period:

(1) the exception to the incremental approach for intraperiod tax allocation;

“Simplifying the Accounting for Income Taxes.” The new guidance eliminates the need for an organization to analyze whether the following apply in a given period:

(1) the exception to the

incremental approach for intraperiod tax allocation;

(2) the exceptions to accounting for basis differences when there are ownership changes in foreign investments;

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The standard became effective for the Company on January 1, 2021 and did not have a material impact on the financial statements.

The new guidance modifies the requirements for the timing of adoption of enacted change in tax law.

Recent Accounting Pronouncements not yet Adopted

In August 2021, The FASB issued ASU 2021-06, “ Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses ” to amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses.

In addition, the final rule includes amendments to financial disclosures specific to smaller reporting companies (SRCs).

The Company is currently evaluating the impact that this standard update will have on its financial statements.

In February 2016, the FASB issued ASC 842 “Leases” that creates new accounting and reporting guidelines for leasing arrangements.

The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases.

Under the previous guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily depended on its classification as a finance or operating lease.

The new guidance also requires disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.

For Emerging Growth Companies, the new standard is not effective until annual reporting periods beginning after December 15, 2021, including interim periods in 2022.

Earlier application is permitted.

The Company is currently evaluating the impact of this new pronouncement on its financial statements and will adopt the new standard in 2022.

In June 2016, the FASB issued ASU No.

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This new guidance changes the impairment model for most financial assets and certain other instruments.

Since the Company is a Small Emerging Growth Company, the ASU is not effective until fiscal years beginning after December 15, 2022, and interim periods within that fiscal year.

The Company is currently evaluating the impact that this standard will have, if any, on its financial statements.

The ASU is not effective until fiscal years beginning after December 15, 2022, and interim periods within that fiscal year.

The Company’s trade receivable terms are short term in duration and historically losses on accounts receivable have not been significant;

write-offs were approximately $ 243,000 for the year ended December 31, 2022.

Accordingly, the Company does not expect the adoption to have a material impact on the Company’s financial statements.

There were various other accounting standards and interpretations issued recently, some of which may be applicable to the Company but none of which are expected to a have a material impact on our financial position, operations, or cash flows.

NOTE 2 – RECENT BUSINESS ACQUISITIONS

NOTE 2 –BUSINESS ACQUISITIONS

The acquisitions described below were accounted for as business combinations which require, among other things, that assets acquired, and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

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FrontRow Calypso LLC.

On December 31, 2021, the Company, and its wholly owned subsidiary, Boxlight, Inc, consummated the acquisition of 100 % of the membership interests of FrontRow Calypso LLC, a Delaware limited liability company (“FrontRow”).

FrontRow was acquired in exchange for payment of $ 34.7 million to Phonic Ear Inc.

and Calypso Systems LLC, the equity holders of FrontRow (the “Equityholders”).

The acquisition occurred pursuant to the terms of a membership interest purchase agreement, dated October 29, 2021 (the “Purchase Agreement”), between the Company, Boxlight, FrontRow and the Equityholders, which Purchase Agreement was filed as Exhibit 10.1 to our Current Report on Form 8-K dated October 29, 2021.

On December 31, 2021, the Company, and its wholly owned subsidiary, Boxlight, Inc, acquired 100 % of the membership interests of FrontRow Calypso LLC, a Delaware limited liability company (“FrontRow”) in exchange for payment of $ 34.7 million to Phonic Ear Inc.

and Calypso Systems LLC, the equity holders of FrontRow.

Based in Petaluma, California, FrontRow makes technology that improves communication in learning environments, including developing network-based solutions for intercom, paging, bells, mass notification, classroom sound, lesson sharing, AV control and management.

FrontRow also has offices in Toronto, Copenhagen, Brisbane, Hamilton (UK) and Shenzhen.

In order 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 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”).

To finance the acquisition of FrontRow, the Company entered into a term loan credit facility, with WhiteHawk Finance LLC, as lender and WhiteHawk Capital Partners, LP, as collateral agent.

See Note 9 “Debt.”

The assets acquired and liabilities assumed were recorded at their estimated fair values at the acquisition date.

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The excess consideration over the net fair values of the assets acquired and liabilities assumed was recognized as goodwill.

The fair value or net realizable value of inventories at the date of acquisition was determined using a “top-down” approach based upon the estimated sales value, less a reasonable profit margin and less the estimated costs to dispose of the inventory, including selling costs and other disposal costs such as freight.

Accordingly, the carrying amount of inventories at the acquisition date was increased to its estimated fair value based on these assumptions which will result in an increase in cost of revenues subsequent to the acquisition date in 2022.

selling costs and other disposal costs such as freight.

The fair value of accounts receivable acquired in connection with the acquisition approximated the contractual amount due from customers at that date.

The Company has early adopted ASU 2021-08, and therefore, the acquired contract liabilities of FrontRow have been recognized and measured in accordance with Topic 606.

The acquired contract liabilities of FrontRow have been recognized and measured in accordance with Topic 606.

The following table summarizes the estimated acquisition date fair values of the net assets acquired and liabilities assumed, and the estimate of the fair value of consideration paid:

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Acquisition related costs are included in general and administrative expenses in the Consolidated Statement of Operations and Comprehensive Loss.

The results of operations of FrontRow will be included in the Consolidated Statement of Operations and Comprehensive Loss beginning at the acquisition date.

There was no impact to the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2021 since the acquisition was consummated on December 31, 2021.

The results of operations of FrontRow are included in the Consolidated Statement of Operations and Comprehensive Loss beginning at the acquisition date.

There was no impact to the Consolidated Statement of Operations and

Comprehensive Loss for the year ended December 31, 2021 since the acquisition was consummated on December 31, 2021.

For the year ended December 31, 2022, revenue and net income from FrontRow were $ 24.8 million and $ 0.8 million, respectively.

Pro Forma Financials

The following unaudited pro forma information reflects our consolidated results of operations as if the acquisition of FrontRow had taken place on January 1, 2021.

The unaudited pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the acquisition actually occurred at the beginning of these periods nor is it necessarily indicative of future results.

The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated costs savings from synergies or other operational improvements.

The nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination are included in the pro forma revenue and net earnings reflected below.

Year ended December 31,

(in thousands)

Revenues, net

Net loss attributable common shareholders

Interactive Concepts

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Total consideration paid

Sahara Presentation Systems PLC

On September 24, 2020, the Company acquired 100 % of the outstanding shares of Sahara Holdings Limited, a private limited company operating under the laws of the UK and all of its subsidiaries, including Sahara Presentation Systems PLC (collectively, “Sahara”).

Sahara is a distributor of audio and video software and equipment including the Clevertouch branded product line of interactive touch screens.

This strategic acquisition expanded the Company’s geographic footprint, industry verticals served, and enhanced the Company’s technology and product offerings.

As consideration for the purchase of Sahara, the Company transferred GBP 74.0 million (approximately USD $ 94.9 million) in form of GBP 52.0 million (approximately USD $ 66.7 million) in cash and GBP 22.0 million (approximately USD $ 28.2 million) in our Series B convertible preferred stock and our Series C convertible preferred stock.The convertible preferred stock was comprised of 1,586,620 shares of Series B convertible redeemable preferred stock (the “Series B Preferred Stock”) and 1,320,850 shares of Series C convertible redeemable preferred stock (the “Series C Preferred Stock”).

The fair value of the preferred shares issued was $ 16.5 million

and $ 12.4 million for the Series B Preferred Stock and Series C Preferred Stock, respectively.

See further discussion of the features of the preferred shares in Note 12.

The consideration transferred to the selling shareholders along with the assets acquired and liabilities assumed were recorded at their estimated fair values at the acquisition date.

Determining the fair value of assets acquired and liabilities assumed, and the issued shares of Series B Preferred Stock and Series C Preferred Stock requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, and selection of comparable companies.

The Company engaged the assistance of an independent third-party valuation specialist to determine certain fair value measurements related to acquired assets, and the Series B Preferred Stock, and the Series C Preferred Stock.

The excess consideration over the net fair values of the assets acquired and liabilities assumed was recognized as goodwill.

The fair value of the deferred revenue at the date of acquisition was determined based on the estimated direct and incremental costs to fulfill the remaining performance obligations associated with the deferred revenue, plus a reasonable profit margin.

Accordingly, the carrying amount of deferred revenue at the acquisition date was reduced to its estimated fair value based on the assumptions above which has resulted in and will result in a reduction in revenue that otherwise would have been recognized in periods subsequent to the acquisition date.

Accordingly, the carrying amount of inventories at the acquisition date was increased to its estimated fair value based on these assumptions which resulted in an increase in cost of revenues subsequent to the acquisition date in 2020.

The following table summarizes the estimated fair values of the net assets acquired and liabilities assumed, and the estimate of the fair value of consideration paid:

(in thousands)

Assets acquired:

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Total assets acquired

Accounts payable and accrued expenses

Deferred revenue

Deferred tax liability

Other liabilities

Total liabilities assumed

Net tangible assets acquired

Identifiable intangible assets:

Customer relationships

Total intangible assets subject to amortization

Total net assets acquired

Consideration paid:

Preferred shares issued

Total consideration paid

The following table presents the useful lives over which the acquired intangible assets will be amortized on a straight-line basis, which approximates the pattern by which the related economic benefits of the assets are consumed:

Weighted Average

Customer relationships

Goodwill is primarily attributable to synergies expected from the acquisition and the assembled workforce.

The Company incurred a total of $ 0.2 million in acquisition-related costs and expensed all such costs incurred during the period in which the service was received.

Acquisition related costs are included in general and administrative expenses in the Consolidated Statement of Operations and Comprehensive Loss.

The results of operations of Sahara since the acquisition are included in the Consolidated Statement of Operations and Comprehensive Loss for the twelve months ended December 31, 2021.

Pro Forma Financials

The following unaudited pro forma information reflects our consolidated results of operations as if the acquisition of Sahara had taken place on January 1, 2019 and the acquisition of FrontRow had taken place on January 1, 2020.

The nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination are included in the pro forma revenue and net earnings reflected below.

Year ended December 31,

(in thousands)

Revenues, net

Net loss attributable common shareholders

MyStemKits and STEM Education Holdings, Pty

On April 17, 2020, the Company acquired the assets, and assumed certain liabilities of MyStemKits and STEM Education Holdings, Pty, an Australian corporation (“STEM”) which is the sole shareholder of MyStemKits, for consideration of $ 450,000 , after working capital adjustments of $ 150,000 .

Consideration included $ 100,000 paid in cash at closing with the balance payable in the form of a $ 350,000 purchase note payable in four equal installments of $ 87,500 (the “Installment Payments”) on July 31, 2020, October 31, 2020, January 31, 2021 and April 30, 2021.

Acknowledging the ongoing COVID-19 pandemic, on April 17, 2020, the Company and STEM entered into a letter agreement pursuant to which the parties agreed that potential adjustments may be made to the installment payments due on July 31, 2020 and October 31, 2020 in the event the actual gross revenue of MyStemKits is materially below budget.

Accordingly, and as agreed between Boxlight and the STEM sellers the note payable was adjusted to $ 175,000 and was paid off in September of 2021.

The following table summarizes the fair values of the net assets acquired and the fair value of consideration paid:

(in thousands)

Assets acquired:

Total assets acquired

Total liabilities assumed

Net assets acquired

Identifiable intangible assets:

Customer relationships

Total identifiable intangible assets subject to amortization

Consideration paid:

Total consideration paid

NOTE 3 – ACCOUNTS RECEIVABLE - TRADE

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Accounts receivable - trade, net of allowances

Writeoffs of accounts receivable in 2021 was $ 524,700 .

The Company did not write off any accounts receivables in 2020.

Write-offs of accounts receivable was approximately $ 243,000 and $ 525,000 for the years ended December 31, 2022 and 2021, respectively.

NOTE 4 – INVENTORIES

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Inventories, net

The Company wrote off inventories of $ 624,000 and $ 31,000 for the years ended December 31, 2021 and 2020, respectively.

The Company wrote off inventories of approximately $ 1.2 million and $ 0.6 million for the years ended December 31, 2022 and 2021, respectively.

NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

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Prepaid licenses and other

Unbilled revenue

Prepaid expenses and other current assets

Prepaid expenses and other current assets as of December 31, 2022 are net of reserves related to vendor receivables of $ 0.8 million.

There were no reserves related to vendor receivables as of December 31, 2021.

NOTE 6 – PROPERTY AND EQUIPMENT

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Other equipment

Construction in process

Construction in progress

Property and equipment, at cost

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Intangible assets and goodwill consisted of the following at December 31, 2022 and 2021 (in thousands):

INTANGIBLE ASSETS

Customer relationships

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Intangible assets, net of accumulated amortization

Goodwill from acquisition of Mimio

Goodwill from acquisition of Sahara

Goodwill from acquisition of Interactive Concepts

Goodwill from acquisition of FrontRow

Goodwill from acquisition of STEM

Goodwill from acquisition of Boxlight

Goodwill from acquisition of EOS

Goodwill from acquisition of Qwizdom

Beginning Balance

Goodwill acquired during the period

Change due to foreign currency translation

Ending Balance

As of December 31, 2022, the company had $ 25.1 million of goodwill, of which none was allocated to a reporting unit with a negative carrying amount.

The company’s goodwill has an indefinite useful life and is tested for impairment annually.

For the years ended December 31, 2022 and 2021, the Company recorded amortization expense of $ 8.6 million and $ 7.0 million, respectively.

As of December 31, 2021, we had $ 26.0 million of goodwill, of which $ 8.0 million was allocated to a reporting unit with a negative carrying amount.

Expected future amortization expense for intangible assets as of December 31, 2021 is as follows:

(in thousands)

Changes to gross carrying amount of recognized intangible assets and goodwill due to translation adjustments were approximately ($ 3.1 ) million and $ 3.2 million as of December 31, 2022 and 2021, respectively.

Expected future amortization expense for intangible assets as of December 31, 2022 is as follows (in thousands):

NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payble consisted of the following at December 31, 2021 and 2020 (in thousands):

Accounts payable consisted of the following at December 31, 2022 and 2021 (in thousands):

Accounts payable

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Debt – Third Parties

Note payable – Lind Global

Paycheck Protection Program

Accounts receivable financing – Sallyport Commercial

Note payable - Whitehawk

Note payable – STEM Education Holdings

Discount and issuance cost

Discount and issuance costs

Current portion of debt

Long-term debt

Total debt (net of discount)

Total debt (net of discount and issuance costs)

Debt - Third Parties:

WhiteHawk Finance LLC

In order to finance the acquisition of FrontRow, the Company and substantially all 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 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.

In order 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.

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.

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 our 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 may be subject to repricing on March 31, 2022 based on the arithmetic volume weighted average prices for the 30 trading days prior to March 31, 2022, in the event our 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 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 the Company’s 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 being 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.

Lind Global Macro Fund, LP

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 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 $ 26,025 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 .

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 $ 400,000 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 Note are registered pursuant to our effective shelf registration statement on Form S-3.

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 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

During the twelve months ended December 31, 2021, the Company repaid principal of $ 12.0 million and interest of $ 548,000 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 Global and recognized a loss extinguishment of det of approximately $ 3.3 million.

Further, on December 31, 2021, the Company paid the remaining principal balance of $ 8.0 million in connection with the execution of the Whitehawk Credit Agreement discussed above and recognized an additional loss on extinguishment of debt of $ 1.2 million.

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.

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 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.

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.

As of December 31, 2022 and 2021, the Company was in compliance with all covenants and borrowing base requirements.

During the year ended December 31, 2022, the Company paid the $ 8.5 million due on February 28, 2023.

During the year ended December 31, 2022, the Company repaid total principal of $ 10.4 million (inclusive of the $ 8.5 million) and interest of $ 8.3 million to WhiteHawk.

Lind Global Marco Fund and Lind Global Asset Management

During the year ended December 31, 2021, the Company repaid principal of $ 12.0 million and interest of $ 584 thousand, to Lind Global by issuing a total of 7.2 million shares of Class A common stock with an aggregate value of $ 15.9 million to Lind Global and recognized a loss on extinguishment of debt of approximately $ 3.3 million.

Any outstanding debt owed to Lind Global was repaid in full on December 31, 2021 following the Company’s receipt of the Initial Loan from WhiteHawk.

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, the Company 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 our 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 June 22, 2020, the Company entered into an agreement with Everest Display, Inc., (“EDI”), and subsidiary, AMAGIC Holographics, Inc.

(“AMAGIC”), pursuant to which $ 1,000,000 in accounts payable owed by the Company to EDI in exchange for the Company’s issuance of 869,565 shares of its Class A common stock, par value $ 0.0001 per share, to AMAGIC at a $ 1.15 per share purchase price.

On January 26, 2021, the Company entered into an agreement with EDI and EDI’s subsidiary, AMAGIC, pursuant to which $ 1,983,436 in accounts payable owed by the Company to EDI was settled in exchange for the Company’s issuance of 793,375 shares of its Class A common stock to AMAGIC at a $ 2.50 per share purchase price.

In each instance, 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.

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 on the settlement of the accounts payable.

Accounts Receivable Financing – Sallyport Commercial Finance

On August 15, 2017, our subsidiaries, Boxlight Inc., and Genesis entered into a 12-month term account sale and purchase agreement with Sallyport Commercial Finance, LLC (“Sallyport”).

Sallyport agreed to purchase 85 % of the eligible accounts receivable with a right of recourse back to the Company if the receivables were not collectible.

This agreement required a minimum monthly sales volume of $ 1,250,000 with a maximum facility limit of $ 6,000,000 .

Advances against this agreement accrued interest at the rate of 4 % in excess of the highest prime rate publicly announced from time to time with a floor of 4.25 %.

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

The Company granted Sallyport a security interest in all of Boxlight Inc.

and Genesis’ assets.

This agreement was terminated and replaced with an asset-based lending agreement effective September 30, 2020.

On September 30, 2020, Boxlight Inc., and EOS EDU LLC.

entered into a 12-month term asset-based lending agreement with Sallyport.

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

This agreement requires a minimum monthly sales volume of $ 1.25 million with a maximum facility limit of $ 8 million.

Advances against this agreement accrued 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.

The Company granted Sallyport a security interest in all of the assets of Boxlight Inc.

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 is 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 to $ 13,000,000 , as well as increasing the minimum monthly sales from $ 1,250,000 to $ 3,000,000 .

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On August 6, 2021, Boxlight and Sallyport entered into an additional amendment of the Accounts Receivable Agreement (the “Second ARC Amendment”), which further increased the Maximum Facility Limit Amount to $ 15,000,000 .

In exchange for entry into the Second ARC Amendment, Boxlight agreed to pay a fee of $ 20,000 , representing one percent of the increased maximum facility limit amount.

Other terms of the Agreement remained unchanged.

On August 23, 2021, the Company and Sallyport, as first lien creditor and LGMF and 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 $ 6,000,000 million to $ 20,000,000 million.

On December 31, 2021, the Company obtained funds from its new credit areement with Whitehawk to pay off the remaining $ 8,400,000 owed to Sallyport.

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

Paycheck Protection Program Loan

On May 22, 2020, the Company received loan proceeds of $ 1.09 million under the Federal Paycheck Protection Program (“PPP”) established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

The loans and accrued interest received under the PPP are forgivable to the extent borrowers use the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains their payroll levels during a designated eight-week period.

The amount of loan forgiveness is reduced if the borrower terminates employees or reduces salaries during the eight-week period.

During 2021 the Company applied for forgiveness in the amount of $ 835,500 .

On March 2, 2022 we received a decision letter from our lender that our forgiveness application had been approved, leaving a remaining balance of $ 173,100 to be paid.

The remaining balance is expected to be paid by the Company in May 2022.

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 remain unchanged.

Any outstanding debt owed to Sallyport was repaid in full on December 31, 2021 following the Company’s receipt of the Initial Loan from WhiteHawk.

Debt - Related Parties:

Note Payable - STEM Education Holdings, Pty

As discussed in Note 2 “Recent Business Acquisitions,” purchase consideration for the acquisition of STEM included a note payable in the of $ 350,000 .

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 Purchase consideration for the acquisition of STEM included a note payable in the of $ 350,000 .

The note was payable in four equal installments of $ 87,500 on July 31, 2020, October 31, 2020, January 31, 2021 and April 30, 2021.

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Accordingly, and as agreed between Boxlight and the STEM sellers the note payable was adjusted to $ 175,000 and was paid off in September 2021.

Note Payable – Steve Barker

On March 12, 2019, the Company purchased the MRI net assets for 200,000 shares of the Company’s Class A common stock and a $ 70,000 note payable.

As of December 31, 2019, outstanding principal under this agreement was $ 18,000 .

The note was paid in full on March 31, 2020.

Long Term Note Payable- Qwizdom Shareholders

On June 22, 2018, the Company issued a note to Darin and Silvia Beamish, the previous 100 % shareholders of Qwizdom, in the amount of $ 656,000 bearing an 8 % interest rate.

The note was issued as a part of the purchase price pursuant to a stock purchase agreement.

The principal and accrued interest of the note is due and payable in 12 equal quarterly payments.

The first quarterly payment was due September 2018 and subsequent quarterly payments are due through June 2021.

This note was paid in full on May 3, 2021.

Note Payable – James Mark Elliott

On January 16, 2015, the Company issued a note to James Mark Elliott, the Company’s former Chief Commercial Officer and a current Director of the Company, in the amount of $ 50,000 .

The note was paid in full on July 17, 2020.

Line of Credit - Logical Choice Corporation-Delaware

On May 21, 2014, the Company entered into a line of credit agreement (the “LCC Line of Credit”) with Logical Choice Corporation-Delaware (“LCC-Delaware”), the former sole member of Genesis.

The LCC Line of Credit allowed the Company to borrow up to $ 500,000 for working capital and business expansion.

The funds when borrowed accrued interest at 10 % per annum.

Interest accrued on any advanced funds was due monthly and the outstanding principal and any accrued interest were due in full on May 21, 2015.

In May 2016, the maturity date was extended to May 21, 2018.

The note was paid in full on June 26, 2020.

Debt Maturity

Principal repayments to be made during the next five years on the Company’s outstanding debt facilities at December 31, 2021 (excluding amounts forgiven in 2022 related to the PPP loan) are as follows:

(in thousands):

Principal repayments to be made during the next five years on the Company’s outstanding debt facilities at December 31, 2022 are as follows (in thousands):

NOTE 10 – DERIVATIVE LIABILITIES

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The Company concluded that the warrants should be accounted for as derivative liabilities.

The Company used a third party to determine the fair value of the derivative liabilities at December 31, 2021 and they used a Monte Carlo Simulation model to determine the fair value.

In determining the fair value of the derivative liabilities on December 31, 2020, the Company used the Black-Scholes option pricing model.

The Company used a third party to determine the fair value of the derivative liabilities at December 31, 2022 and 2021, and they used a Monte Carlo Simulation model to determine the fair value.

Key assumptions used are as follows:

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(1) The risk-free interest rate was determined using the applicable Treasury Bill as of the measurement date.

(2) The historical trading volatility for 2020 was determined by calculating the volatility of the Company’s common stock.

For 2021 the information was obtained from the third party model.

(2) The historical trading volatility for 2022 and 2021 was based on historical fluctuations in stock price for Boxlight and certain peer companies.

(3) The Company does not expect to pay a dividend in the foreseeable future.

The following table shows the change in the Company’s derivative liabilities for the years ended December 31, 2021 and 2020 (in thousands):

The following table shows the change in the Company’s derivative liabilities for the years ended December 31, 2022 and 2021:

(in thousands)

Balance, December 31, 2021

Change in fair value of warrants

Exercise of warrants

Issuance of warrants

Change in fair value of derivative liabilities

Balance, December 31, 2022

(in thousands)

Balance, December 31, 2020

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Issuance of warrants

Change in fair value of warrants

Change in fair value of derivative liabilities

Balance, December 31, 2021

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Total pretax book loss

The components of income tax (benefit) expense at December 31, 2021 and December 31, 2020, are as follows (in thousands):

The components of income tax expense at December 31, 2022 and December 31, 2021, are as follows (in thousands):

Total Current

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The reconciliation of the provision for income taxes at the United States Federal statutory rate compared to the Company’s income tax expense (benefit) as reported is as follows (in thousands)

Income (Loss) before income taxes

Loss before income taxes

Income tax benefit computed at the statutory rate

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GILTI Inclusion

Stock compensation

Non-deductible expenses

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Change in valuation allowance

Income tax expense

Tax effects of temporary differences at December 31, 2022 and December 31, 2021 are as follows (in thousands):

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Allowance for bad debts

R&D amortization

Accrued expenses

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Stock compensation

Net lease asset

Interest expense limitation

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Additionally, because U.S.

tax laws limit the time during which the net operating losses generated prior to 2018 may be applied against future taxes, if the Company fails to generate U.S.

taxable income prior to the expiration dates, the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes.

tax laws limit the time during which the net operating losses generated prior to 2018 may be applied against future taxes, if the Company fails to generate U.S.taxable income prior to the expiration dates the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes.

The Company has evaluated both positive and negative evidence as to the ability of its legacy entities in each jurisdiction to generate future taxable income.

Based on its long history of cumulative losses in those jurisdictions, it believes it is appropriate to maintain a full valuation allowance on its net deferred tax asset at December 31, 2021 and 2020.

Based on its long history of cumulative losses in those jurisdictions, it believes it is appropriate to maintain a full valuation allowance on the net deferred tax asset of its legacy Boxlight entities at December 31, 2022 and 2021.

The change in its valuation allowance during 2022 is approximately $ 0.6 million.

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The Company does not qualify for any consolidated filing positions in any of these countries, so there is no ability to net the deferred tax liabilities of the Sahara companies against the deferred tax assets of the legacy Boxlight companies.

Therefore, the net deferred tax liability of $ 8.4 million at December 31, 2021 is entirely based on the Sahara acquired entities.

Therefore, the net deferred tax liability of $ 4.7 million at December 31, 2022 is primarily based on the Sahara acquired entities.

The tax years from 2009 to 2022 remain open to examination in the U.S.

federal jurisdiction.

The tax years from 2020 to 2021 remain open to examination in the U.K.

Statues of limitations vary in other immaterial jurisdictions.

federal jurisdictions to which the Company is subject.

The Company has not identified any uncertain tax positions at this time.

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Additionally, the CARES Act provides for various payroll incentives, including Payroll Protection Program (“PPP”) loans, refundable employee retention tax credits, and the deferral of the employer-paid portion of social security payroll taxes.

The Company received a $ 1.1 M loan under the PPP, of which over $ 0.8 M was forgiven in March 2022 under the requirements of the program.

The Company received a $ 1.1 million loan under the PPP, of which over $ 0.8 million was forgiven in March 2022 under the requirements of the program.

The remaining amount owed will be paid back in May 2022.

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This has been reflected in the Company’s tax provision.

Effective January 1, 2022, for U.S.

tax purposes research and development costs, including software development costs, are required to be capitalized and will be deductible over five years for costs incurred domestically and over fifteen years for costs incurred in a foreign country.

Additionally, the first year of amortization requires that amortization begin with the midpoint of the taxable year.

As of December 31, 2022, the Company has recorded a deferred tax asset of $ 0.4 million related to capitalized research and development costs.

NOTE 12 – EQUITY

Preferred Shares

The Company’s articles of incorporation, as amended on September 18, 2020, provide that the Company is authorized to issue 50,000,000 shares of preferred stock consisting of:

The Company’s articles of incorporation, as amended on December 15, 2016, provide that the Company is authorized to issue 50,000,000 shares of preferred stock consisting of:

1) 250,000 shares of non-voting Series A preferred stock, with a par value of $ 0.0001 per share;

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At the time of the Company’s initial public offering, 250,000 shares of the Company’s non-voting convertible Series A preferred stock were issued to Vert Capital for the acquisition of Genesis.

All of the Series A preferred stock was convertible into

398,406 shares of Class A common stock.

All of the Series A preferred stock was convertible into 398,406 shares of Class A common stock.

On August 5, 2019, 82,028 of these preferred shares were converted into 130,721 shares of Class A common stock.

Series B Preferred Stock and Series C Preferred Stock

As stated in Note 2, on September 25, 2020, in connection with the acquisition of Sahara, the Company issued 1,586,620 shares of Series B Preferred Stock and 1,320,850 shares of Series C Preferred Stock.

On September 25, 2020, in connection with the acquisition of Sahara, the Company issued 1,586,620 shares of Series B Preferred Stock and 1,320,850 shares of Series C Preferred Stock.

The Series B Preferred Stock has a stated and liquidation value of $ 10.00 per share and pays a dividend out of the earnings and profits of the Company at the rate of 8 % per annum, payable quarterly.

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The Series C Preferred Stock is also subject to redemption on the same terms commencing January 1, 2026.

The aggregate estimated fair value of the Series B and C Preferred Stock of $ 28.5 million was included as part of the total consideration paid for the purchase of Sahara.

On March 24, 2021, the Company entered into a share redemption and conversion agreement with certain holders of Series B and Series C preferred stock (the “Redemption Agreement”) which allows the Company to redeem and repurchase each such stockholder’s shares of Series B preferred stock on or before June 30, 2021 for the stated or liquidation value of approximately £ 11.5 million (or approximately $ 15.9 million) plus accrued dividends from January 1, 2021 to the date of purchase.

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In addition, the Amended Redemption Agreement changed the definition of “Redemption Payments” such that the redemption payment schedule would begin on or before May 31, 2021, for the quarter then ended and continue quarterly until the date of completion.

Regarding these amendments, the Company applied the accounting guidance from ASC Subtopic 470-50, “Debt Modifications and Extinguishments” , pertaining to determining whether an amendment to an equity-classified preferred share is an extinguishment or modification, and concluded that the Amended Redemption Agreement on June 14, 2021, as it effected the Series B Preferred Stock, resulted in an extinguishment of the original equity instruments subject to redemption agreement.

Regarding these amendments, the Company applied the accounting guidance from ASC Subtopic 470-50, “ Debt Modifications and Extinguishments ,” pertaining to determining whether an amendment to an equity-classified preferred share is an extinguishment or

modification, and concluded that the Amended Redemption Agreement on June 14, 2021, as it effected the Series B Preferred Stock, resulted in an extinguishment of the original equity instruments subject to redemption agreement.

Accordingly, the Series B Preferred Stock subject to the Amended Redemption Agreement was recorded at its fair value as of June 14, 2021, and a $ 367,000 deemed contribution was credited to additional-paid-in-capital.

With the Redemption Agreement, the Series B Preferred Stock includes a beneficial conversion feature, but in accordance with ASC 470-20, since it is dependent upon contingencies that are not solely in the control of the holder, the beneficial conversion feature was not recognized for accounting purposes.

With the Redemption Agreement, the Series B Preferred Stock includes a beneficial conversion feature, but in accordance with ASC Subtopic 470-20, since it is dependent upon contingencies that are not solely in the control of the holder, the beneficial conversion feature was not recognized for accounting purposes.

Since we early adopted (as of January 1, 2021) ASU No.

2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which includes a key provision eliminating the beneficial conversion feature guidance in ASC Subtopic 470-20, “Debt with Conversion and Other Options”, we will not record the beneficial conversion feature.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which includes a key provision eliminating the beneficial conversion feature guidance in ASC Subtopic 470-20, we have not recorded the beneficial conversion feature.

The Series B Preferred Stock has been recorded at its estimated fair value on the date of issuance of approximately $ 16.1 million, which includes the conversion and redemption features as they have not been bifurcated from the host instruments.

The Series C Preferred Stock has been recorded at its estimated fair value on the date of issuance of approximately $ 12.4 million, which includes the redemption features as they have not been bifurcated from the host instrument.

As disclosed in in Note 2, the aggregate estimated fair value of the Series B and C Preferred Stock of $ 28.5 million is included as part of the total $ 94.9 million consideration paid for the purchase of Sahara.

As the redemption features in the Series B Preferred Stock and Series C Preferred Stock are not solely with the control of the Company, the Company has classified the Series B Preferred Stock and Series C Preferred Stock in temporary equity on the Company’s consolidated balance sheet.

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Issuance of common stock

Public Offering

On June 11, 2020, the Company issued 13,333,333 shares of the Company’s Class A common stock at a public offering price of $ 0.75 per share.

In addition, on June 24, 2020 the Company issued an additional 1,999,667 shares of Class A common stock to the underwriter at $ 0.75 per share.

Gross proceeds from the issuances were $ 11.5 million.

Net proceeds were $ 10.6 million after deducting underwriting discounts and offering expenses of $ 906,000 .

On July 31, 2020, the Company issued 17,250,000 shares of the Company’s Class A common stock at a public offering price of $ 2.00 per share.

Gross proceeds from the issuances were $ 34,500,000 , including the underwriting overallotment.

Net proceeds were $ 32.0 million after deducting underwriting discounts and offering expenses of $ 2.5 million.

Securities Purchase Agreement

On July 22, 2022, the Company, entered into a Securities Purchase Agreement with an accredited institutional investor pursuant to which the Company agreed to issue and sell, in a registered direct offering directly to the Investor, 7.0 million shares of the Company’s Class A common stock, par value $ 0.0001 per share (“Common Stock”), pre-funded warrants (the “Pre-Funded Warrants”) to purchase 352,940 shares of Common Stock at an exercise price of $ 0.0001 per share, which Pre-Funded Warrants were issued in lieu of shares of Common Stock to ensure that the Investor did not exceed certain beneficial ownership limitations, and warrants to purchase an aggregate of 7,352,940 shares of Common Stock at an exercise price of $ 0.68 per share (the “Warrants”, and collectively with the Pre-Funded Warrants and the Shares, the “Securities”).

The Securities were sold at a price of $ 0.68 per share for total gross proceeds to the Company of $ 5.0 million, before deducting estimated offering expenses, and excluding the exercise of any Warrants or Pre-Funded Warrants.

The Pre-Funded Warrants were exercisable immediately and the Warrants will be exercisable six months after the date of issuance and will expire five and a half years from the date of issuance.

As such, the net proceeds to the Company from the offering, after deducting placement agent’s fees and estimated expenses payable by the Company and excluding the exercise of any Warrants or Pre-Funded Warrants was $ 4.6 million of which the proceeds net of issuance costs were allocated based on the relative fair values of the instruments, warrants and prefunded warrants;

$ 2.4 million was allocated to common stock, $ 2.2 million was allocated to warrants and $ 118 thousand was allocated to the pre-funded warrants.

On August 9, 2022, the Investor exercised the prefunded warrants.

The Company evaluated whether the Warrants, Pre-Funded Warrants and/or Shares were in the scope of ASC Topic 480 “ Distinguishing Liabilities from Equity, ” which discusses the accounting for instruments with characteristics of both liabilities and equity.

The guidance in Topic 480, and the resulting liability classification, is applicable to such instruments when certain criteria are met.

Based on its analysis, the Company concluded that the Warrants, Pre-Funded Warrants and Shares did not meet any of the criteria to be subject to liability classification under Topic 480 and are therefore classified as equity.

Credit Facility

In conjunction with its receipt of the WhiteHawk loan, the Company issued to WhiteHawk 528,169 shares of Class A common stock, which were registered pursuant to the Company’s existing shelf registration statement and were delivered to the WhiteHawk in January 2022.

Debt Conversion

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These conversion transactions resulted in a $ 3.8 million loss on the settlement of debt obligations.

During the year ended December 31, 2020, the Company issued 6.2 million shares of Class A common stock in lieu of $ 4.9 million in principal and interest payments due in relation to notes payable to Lind Global.

In addition, the Company issued 310,000 shares of Class A common stock in lieu of payment of the closing fees of the convertible debt with an aggregate amount of to Lind Global.

These conversion transactions resulted in a $ 3.1 million loss on the settlement of debt obligations.

Accounts Payable and Other Liabilities Conversion

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to convert $ 2.0 million in accounts payable owed, resulting in a gain of $ 356,700 from settlement of liabilities.

During the year ended December 31, 2020, the Company entered into an agreement with a related party, Everest Display, Inc., to convert $ 3.0 million in accounts payable owed in exchange for 2.2 million shares of Class A common stock with an aggregate value of $ 1.3 million resulting in the Company recording a $ 1.7 million gain from settlement of liabilities.

During the year ended December 31, 2020, the Company issued 7,111 shares of Class A common stock in lieu of payment for services with an aggregate amount of $ 8,000 .

On March 20, 2021, the Company granted an aggregate of 875,245 shares of restricted common stock to Michael Pope, the Company’s CEO and Chairman, pursuant to his employment agreement.

These shares were issued pursuant to the 2014 Equity Incentive Plan, vest ratably over one year , are issued monthly as they vest, and had an aggregated fair value of approximately $ 2.5 million on the grant date.

On March 31, 2020, the Company issued 186,484 shares of restricted Class A common shares to Michael Pope as part of his stock compensation as the Chief Executive Officer, with such shares vesting over a one-year period.

Conversion of Restricted Stock Units

During the year ended December 31, 2022 and 2021, respectively, 2,489,075 and 916,682 restricted stock units vested and were converted into Class A common stock.

Exercise of Stock Options

There were 296,841 options to purchase common stock that were exercised during the year ended December 31, 2022.

There were 492,460 options to purchase common stock exercised during the year ended December 31, 2021.

Exercise of Warrants

During the year ended December 31, 2022, pre-funded warrants to purchase 352,940 shares of Common Stock at an exercise price of $ 0.001 per share were exercised.

During the year ended December 31, 2021, 295,000 warrants were exercised with an exercise price of $ 0.42 .

On March 23, 2021, the Company acquired 100 % of the outstanding shares of Interactive Concepts BV, a company incorporated and registered in Belgium and a distributor of interactive technologies (“Interactive”), for total consideration of approximately $ 3.3 million in cash, common stock and deferred consideration.

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The company issued 142,882 shares of Class A Common Stock, in conjunction with the purchase of Interactive.

On April 17, 2020, the Company sold 142,857 shares of Class A Common Stock to Stemify Limited, an Australian entity (“Stemify”), at a $ 0.70 purchase price per share or a total of $ 100,000 , in conjunction with the Company’s closing on an asset purchase agreement with Stemify.

The shares were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act.

Exercise of stock options

There were 492,460 options to purchase common stock that were exercised during the twelve months ended December 31, 2021.

There were 3,751 options to purchase common stock were exercised during the twelve months ended December 31, 2020.

NOTE 13 – STOCK COMPENSATION

Grants made under the Equity Incentive Plans must be approved by the Company’s board of directors.

The total number of underlying shares of the Company’s Class A common stock available for grant to directors, officers, key employees and consultants of the Company or a subsidiary of the Company under the Company’s 2021 Equity Incentive Plan and 2014 Equity Inventive Plan, as amended (together “Equity Incentive Plans”), in the aggregate were 5,000,000 and 725,381 shares, respectively.

The 2021 Equity Incentive Plan was approved by the Company’s Board on April 12, 2021 and approved by the shareholders at the Company’s 2021 Annual Shareholders Meeting held on June 25, 2021.

On April 15, 2020, the Company’s 2014 Equity Incentive Plan was amended, whereby the board of directors approved increasing the shares available for issuance under the 2014 Equity Incentive Plan by 3,700,000 shares.

The Company obtained shareholder approval of the aforementioned action at the Company’s 2020 annual meeting of stockholders, which was held on September 4, 2020.

The number of underlying shares available, under the 2014 Equity Incentive Plan, as amended, was 6,390,438 .

Stock Options

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The options become exercisable over a range of immediately vested to four-year vesting periods and expire five years from the grant date, unless stated differently in the option agreements, if they are not exercised.

Stock options have no financial statement effect on the date they are granted but rather are reflected over time through compensation expense.

We record compensation expense 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, total

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

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

Following is a summary of the option activities during the years ended December 31, 2022 and 2021:

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Outstanding, December 31, 2021

( 1,063,142 )

Outstanding, December 31, 2022

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

As of December 31, 2021, and 2020, the options had an intrinsic value of approximately $ 1.9 million and $ 2.7 million, respectively.

The Company used the following inputs to value warrants issued during the year ending December 31, 2022 using the Black Scholes option valuation method:

market value on measurement date of $ 0.00 to $ 0.91 ;

exercise price of $ 0.13 to $ 5.01 ;

risk free interest rate of 1.45 % to 2.87 %;

expected term, 3 to 4 years;

expected volatility, ranging from 49 % to 148 % and expected dividend yield of 0 %.

As of December 31, 2022 and December 31, 2021, the stock options had an intrinsic value of approximately $ 18 thousand and $ 1.9 million, respectively.

On May 3, 2022, the Boxlight board of directors adopted a resolution, in exchange for a three-year non-compete agreement, to grant Mark Elliott, a member of the board and former CEO of the Company, an extension for one year , of previously granted stock options to purchase a total of 577,675 shares of Class A common stock, par value $ 0.001 per share, which had expired on January 12, 2022.

The stock price on the remeasurement date was $ 1.04 and the incremental compensation recognized was approximately $ 314 thousand.

On June 13, 2022, the Boxlight board of directors granted Greg Wiggins, Chief Financial Officer, stock options for 150,000 shares of the Company’s Class A common stock will vest in equal quarterly installments over a four-year term commencing on July 5, 2022.

On February 14, 2022, with an effective date of January 1, 2022, the Company entered into a letter agreement with Michael Pope, the Chairman and Chief Executive Officer, extending Mr.

Pope’s term of employment with the Company.

Under the terms of the agreement, Mr.

Pope received a grant 494,069 options to purchase Class A Common Stock, which are valued at approximately $ 420 thousand.

There were no issuances of stock options in 2021.

The issuances in 2020 are as follows:

On January 2, 2020, the Company granted 100,000 stock options each, for a total of 300,000 options to purchase common stock, to its President, Chairman and Chief Executive Officer, its Chief Commercial Officer and its Chief Operating Officer;

such options have an exercise price of $ 1.15 per share, and vest monthly over one-year period.

The expiration date of these options is five years from the grant date.

These options had an aggregated fair value of approximately $ 264,000 on the grant date that was calculated using the Black-Scholes option-pricing model.

On January 13, 2020, the Company granted 50,000 stock options to Mark Elliott as part of his new employment agreement as the Company’s Chief Commercial Officer with an exercise price of $ 1.20 per share, which options vest monthly over one-year period.

The expiration date of these options is five years from the grant date.

These options had an aggregated fair value of approximately $ 67,000 on the grant date that was calculated using the Black-Scholes option-pricing model.

On April 15, 2020, the Company granted an aggregate of 2,550,000 stock options in total to its employees with an exercise price of $ 0.70 per share vesting monthly over four years .

The expiration date of these options is five years from the grant date.

These options had an aggregated fair value of approximately $ 1.5 million on the grant date.

On April 20, 2020, the Company granted an aggregate of 20,000 stock options in total to a new employee with an exercise price of $ 0.67 per share vesting quarterly over four years .

The expiration date of these options is five years from the grant date.

These options had an aggregated fair value of approximately $ 11,000 on the grant date.

On September 17, 2020, the Company granted an aggregate of 16,000 stock options in total to an employee with an exercise price of $ 1.46 per share vesting annually over four years .

The expiration date of these options is ten years from the grant date.

These options had an aggregated fair value of approximately $ 20,000 on the grant date.

On November 23, 2020, the Company granted an aggregate of 10,000 stock options in total to an employee with an exercise price of $ 1.45 per share vesting annually over four years .

The expiration date of these options is ten years from the grant date.

These options had an aggregated fair value of approximately $ 13,000 on the grant date.

On December 11, 2020, the Company granted an aggregate of 10,000 stock options in total to an employee with an exercise price of $ 1.95 per share vesting annually over four years .

The expiration date of these options is ten years from the grant date.

These options had an aggregated fair value of approximately $ 14,000 on the grant date.

Variables used in the Black-Scholes option-pricing model for options granted during the twelve months ended December 31, 2020 include:

(1) discount rate of 0.23 % – 1.61 %, (2) expected life, using simplified method, of 3 - 4 years , (3) expected volatility of 136 - 148 %, and (4) zero expected dividends.

Restricted Stock Units

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The restricted stock units vest over a range of immediately vested to four-year vesting periods in accordance with the terms of the applicable RSU grant agreement.

The following is a summary of the restricted stock activities during the years ended December 31, 2021.

The following is a summary of the restricted stock activities during the years ended December 31, 2022 and 2021.

Grant Date Fair

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Outstanding, December 31, 2021

( 1,583,525 )

Outstanding, December 31, 2022

On January 25, 2022, the Company granted an aggregate of 40,000 RSUs to new employees.

The RSUs vest over four years and the aggregate fair value of the shares was approximately $ 44 thousand.

On February 14, 2022, with an effective date of January 1, 2022, the Company entered into a letter agreement with Michael Pope, the Chairman and Chief Executive Officer, extending Mr.

Pope’s term of employment with the Company.

Under the terms of the agreement, Mr.

Pope received a grant of 163,637 RSU’s, valued at approximately $ 180 thousand, and vesting over three years .

On February 24, 2022, following approval by the Company’s board of directors, the Company’s senior management issued a total of 1,771,950 RSUs under the terms of Amendment No.

2 to the Boxlight Corporation 2014 Stock Incentive Plan, vesting over four years , as long-term incentive awards to its employees in the U.S.

The aggregate fair value of the shares was $ 2.1 million.

On March 21, 2022, the Company granted an aggregate of 348,840 RSUs to its board members.

These RSUs vest ratably over one year and had an aggregated fair value of approximately $ 450 thousand on the grant date.

On May 26, 2022, the company granted 73,565 RSUs to a company owned and controlled by Karel Callens named OLORI.

Callens performs certain sales and marketing functions in our EMEA markets.

These RSUs vested and were issued directly to OLORI, and such common stock issuable upon vesting of the RSUs will be reserved for issuance directly out of the authorized shares of Class A common stock and not out of the Company’s equity incentive plan.

On February 24, 2021, the Company granted an aggregate of 130,547 RSUs to its board members.

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On March 20, 2020, the Company granted an aggregate of 186,484 shares of restricted common stock to Michael Pope, CEO pursuant to his employment agreement.

These shares vest ratably over one year and had an aggregated fair value of approximately $ 76,000 on the grant date.

On June 30, 2020, the Company granted an aggregate of 108,696 RSUs to new board members.

These RSUs vest over one year and had an aggregated fair value of approximately $ 100,000 on the grant date.

On September 18, 2020, the Company granted an aggregate of 34,483 RSUs to a new employee.

These RSUs vest over four years and had an aggregated fair value of approximately $ 50,000 on the grant date.

On September 25, 2020, the Company granted an aggregate of 2,725,400 RSUs to its new employees retained in relation to the Sahara acquisition.

These RSUs vest over four years and had an aggregated fair value of approximately $ 4.5 million on the grant date.

On October 1, 2020, the Company granted an aggregate of 20,000 RSUs to a new employee.

These RSUs vest over four years and had an aggregated fair value of approximately $ 37,000 on the grant date.

On October 19, 2020, the Company granted an aggregate of 18,634 RSUs to a new employee.

These RSUs vest over four years and had an aggregated fair value of approximately $ 30,000 on the grant date.

Following is a summary of the warrant activities during the years ended December 31, 2021 and 2020:

The following is a summary of the warrant activities during the years ended December 31, 2022 and 2021:

Exercise Price

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2022 Warrants

On July 22, 2022, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited institutional investor (the “Investor”) pursuant to which the Company agreed to issue and sell, in a registered direct offering directly to the Investor, 7.0 million shares (the “Shares”) of the Company’s Class A common stock, par value $ 0.0001 per share (“Common Stock”), pre-funded warrants (the “Pre-Funded Warrants”) to purchase 352,940 shares of Common Stock at an exercise price of $ 0.0001 per share, which Pre-Funded Warrants were issued in lieu of shares of Common Stock to ensure that the Investor did not exceed certain beneficial ownership limitations, and warrants to purchase an aggregate of 7,352,940 shares of Common Stock at an exercise price of $ 0.68 per share (the “Warrants”, and collectively with the Pre-Funded Warrants and the Shares, the “Securities”).

The Securities were sold at a price of $ 0.68 per share for total gross proceeds to the Company of $ 5.0 million (the “Offering”), before deducting estimated offering expenses, and excluding the exercise of any Warrants or Pre-Funded Warrants.

The Pre-Funded Warrants were exercisable immediately and the Warrants will be exercisable six months after the date of issuance and will expire five and a half years from the date of issuance.

As such, the net proceeds to the Company from the Offering, after deducting placement agent’s fees and estimated expenses payable by the Company and excluding the exercise of any Warrants or Pre-Funded Warrants was $ 4.6 million of which the proceeds net of issuance costs were allocated based on the relative fair values of the instruments, warrants and prefunded warrants;

$ 2.4 million was allocated to common stock, $ 2.2 million was allocated to warrants and $ 118 thousand was allocated to the pre-funded warrants.

The net proceeds received by the Company will be used for working capital purposes.

2021 Warrants

On December 31, 2021, the Company granted WhiteHawk, Inc., 2,043,291 warrants, in conjunction with the issuance of a loan credit facility to the Company.

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The warrants had an aggregated fair market value of approximately $ 3.1 million on the grant date.

2020 Warrants

On April 20, 2020, the Company granted 20,000 warrants to Ryan Legudi, the managing director of Stemify, as part of his compensation with an exercise price of $ 0.70 per share, which warrants vest quarterly over four-year period.

The expiration of these warrants is five years from the grant date.

The warrants had an aggregated fair market value of approximately $ 11,000 on the grant date.

Stock compensation expense

For the year ended December 31, 2021 and 2020, the Company recorded the following stock compensation in general and administrative expense (in thousands):

For the years ended December 31, 2022 and 2021, the Company recorded the following stock compensation expense which is included in general and administrative expense in the Company’s consolidated statement of operations and comprehensive loss (in thousands):

Stock options

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NOTE 14 – OTHER RELATED PARTY TRANSACTIONS

Management Agreement

Management Agreements

On November 1, 2022, the Company entered into a consulting agreement with Mark Elliott, former CEO of Boxlight and a current member of the board of directors.

The agreement is for Mr.

Elliott to provide sales, marketing, management and related consulting services to assist the Company in sourcing and entering into agreements with one or more customers to provide products and services for specified school districts.

The Company will pay Mr.

Elliott a fixed payment of $ 4,000 per month and commissions equal to 15 % of gross profit derived by the Company based on total purchase order revenue.

The agreement, unless renewed or extended will expire on December 31, 2023.

On January 31, 2018, the Company entered into a management agreement (the “Management Agreement”) with an entity owned and controlled by our CEO and Chairman, Michael Pope.

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Pope may defer payment until the end of each year and receive payment in the form of shares of Class A common stock of the Company.

Sales and Purchases – EDI

Everest Display Inc., an affiliate of the one of the Company’s shareholders, Amagic Holographics, Inc., a subsidiary of K Laser Technology Inc.

(“K Laser”), is a supplier of products to the Company.

For the years ended December 31, 2021 and 2020, the Company had purchases of $ 26,000 and $ 339,000 respectively, from EDI.

For the years ended December 31, 2021 and 2020, the Company had sales of $ 0 and $ 36,000 , respectively, to EDI.

As of December 31, 2021, and 2020, the Company had accounts payable to EDI of approximately of $ 65,000 and $ 2.0 million respectively, to EDI.

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases four office spaces under non-cancelable lease agreements.

The leases provide that the Company pay only a monthly rental and is not responsible for taxes, insurance or maintenance expenses related to the property.

The Company has entered into various operating leases for certain office, support locations and vehicles with terms extending through December 2027.

Generally, these leases have initial lease terms of five years or less.

Many of the leases have one or more lease renewal options.

The exercise of lease renewal options is at its sole discretion.

The Company does not consider exercise of any lease renewal options reasonably certain.

Certain of the Company’s lease agreements contain early termination options.

No renewal options

or early termination options have been included in the calculation of the operating right-of-use assets or operating lease liabilities.

Certain of the Company’s lease agreements provide for periodic adjustments to rental payments for inflation.

As the majority of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.

The incremental borrowing rate is based on the term of the lease.

In connection with the adoption of Topic 842, the Company used incremental borrowing rates on January 1, 2022 for operating leases that commenced prior to that date.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

For these short-term leases, lease expense is recognized on a straight-line basis over the lease term.

At December 31, 2022, the Company had no leases classified as finance leases.

The Company is not a lessor in any lease arrangement.

Operating lease expense was $ 2.1 million and $ 2.3 million for the year ended December 31, 2022 and 2021, respectively.

Variable lease costs and short-term lease cost were not material for the year ended December 31, 2022.

Cash paid for amounts included in the measurement of lease liabilities was $ 2.4 million for the year ended December 31, 2022.

During the year ended December 31, 2022, the Company obtained new operating lease right-of-use assets totaling $ 1.8 million.

Future minimum lease payments of the Company’s operating leases with a term over one year subsequent to December 31, 2022 are as follows:

Year ending December 31,

Amount (in thousands)

Minimum Lease Payments

(in thousands)

Less imputed interest

The weighted-average remaining lease term is 3.2 years and the weighted-average discount rate is 15.5 %.

On January 19, 2022, the Company signed a lease agreement for 64 months for approximately 12,000 feet of space for its new corporate headquarters in Duluth, Georgia.

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The lease will replace the space previously rented by the Company.

If the annual amounts for these leases were added to the table above, the minimum lease payments would increase by approximately $ 2.7 million.

For the year ended December 31, 2021, if the annual amounts for these leases were added to the table above, the minimum lease payments would increase by approximately $ 2.7 million.

Purchase Commitments

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At December 31, 2022 the total amount of such open inventory purchase orders was $ 56.2 million.

Legal Proceedings

From time to time, the Company is involved in routine litigation and legal proceedings in the ordinary course of its business, such as, employment matters and contractual disputes.

Currently, there is no pending litigation or proceedings that the Company’s management believes will have a material effect, either individually or in the aggregate, on its business or financial condition.

NOTE 16 – CUSTOMER AND SUPPLIER CONCENTRATION

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Total revenues

Total revenues from the

Total revenues

from the customers

from the customer

as a percentage of

receivable from

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receivable from

as a percentage

the customer as

total revenues

this customer as of

of total revenues

the customers as of

total revenues

the customers as of

for the year ended

ended December

The loss of the significant customer or the failure to attract new customers could have a material adverse effect on our business, results of operations and financial condition.

for the year ended

(in thousands)

The loss of the significant customers or the failure to attract new customers could have a material adverse effect on our business, results of operations and financial condition.

The Company’s purchases were concentrated among a few vendors for the years ended December 31, 2022 and 2021:

1 unchanged sentence

Total purchases

from the vendor

Accounts payable

from the vendor

Accounts payable

from the vendors

as a percentage of

(prepayment) to

Accounts payable

as a percentage

(prepayment) to

Accounts payable

total cost of

(prepayment) to

of total cost of

(prepayment) to

the vendors as of

the year ended

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NOTE 17 – SUBSEQUENT EVENTS

On January 19, 2022, the Company signed a lease agreement for 64 months for approximately 12,000 feet of space for its new corporate headquarters in Duluth, Georgia.

The Company will occupy the building on approximately May 15, 2022 and will pay rent of approximately $ 23,000 per month.

The lease will replace the space previously rented by the Company for its headquarters in Lawrenceville, Georgia.

On February 24, 2022 the Company signed a lease for new warehouse space in Lawrenceville, GA, which it will occupy sometime in March of 2022.

On February 4, 2022, the Company signed a lease agreement for 60 months for 24,000 feet of warehouse space in Lawrenceville, Georgia to begin March 1, 2022, for approximately $ 13,000 per month.

The lease will replace the space previously rented by the Company.

On February 24, 2022, following approval by the Company’s board of directors, the Company’s senior management issued a total of 1,771,950 RSU’s under the terms of Amendment No.

2 to the Boxlight Corporation 2014 Stock Incentive Plan, as long-term incentive awards to its employees in the U.S.

The aggregate fair value of the shares was $ 2.1 million.

On February 14, 2022, with an effective date of January 1, 2022, the Company entered into a letter agreement (”the Agreement”) with Michael Pope, our Chairman and Chief Executive Officer, extending Mr.

Pope’s term of employment with the Company.

Under the terms of the Agreement, Mr.

Pope will receive based compensation of $ 400,000 per year, eligibility for an annual performance bonus of between $ 350,000 to $ 525,000 depending on the achievement of certain performance goals established by the board of directors,

along with a grant of 163,637 RSU’s, valued at approximately $ 180,000 , and $ 420,000 in the form of options to purchase Class A Common Stock, both of which are valued using the Black-Scholes Model with the Company’s customary inputs.

Pope will also continue to be eligible to participate in customary fringe benefit plans and programs, as may be generally available to senior executives of the Company from time to time.

The Agreement continues through December 31, 2024 and may be renewed or extended by mutual agreement of the Company and Mr.

The Agreement supersedes in its entirety the terms of the prior employment agreements between Mr.

Pope and the Company dated November 30, 2017 and March 20, 2020.

In February 2022, as a result of the Russia-Ukraine conflict, economic sanctions were imposed on Russian individuals and entities, including financial institutions, by countries around the world, including the U.S.

and the European Union.

The conflict may weaken the global post-pandemic recovery.

The increase in cost of revenues from supply-chain bottlenecks and global freight and shipping cost, initially arising from the effects of the COVID-19 pandemic, may be exacerbated by the wider effect of the war in Ukraine and increasing inflationary pressures

On March 8, 2022, the Small Business Administration (“SBA”) informed us by letter that a large part of our Payroll Protection Plan loan had been forgiven.

Out of the total loan of $ 1,008,575 , the SBA forgave $ 835,460 .

We will pay off the remaining amount in 2022.

On March 29, 2022, the Company received a Notice of Events of Default and Reservation of Rights (the “Notice”) from the Collateral Agent.

The Notice alleged, 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.

On March 31, 2022, based on the arithmetic volume weighted average prices of the Company’s Class A common stock for the 30 trading days prior to March 31, 2022, the exercise price of the Whitehawk Warrant was reduced from $ 2.00 to $ 1.19 per share.

On April 4, 2022, the Company, the Lender and the Collateral Agent amended the Credit Agreement.

On February 14, 2023, the board of directors of Boxlight Corporation approved the Company’s establishment of a share repurchase program (the “Repurchase Program”) authorizing the Company to purchase up to $ 15.0 million of the Company’s Class A common stock.

Pursuant to the Repurchase Program, the Company may, from time to time, repurchase its Class A common stock in the open market, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.

The timing and total amount of any repurchases made under the Repurchase Program will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.

The authorization expires on January 26, 2027, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of Class A common stock.

As previously disclosed, we received a deficiency letter from the Listing Qualifications Department (the "Staff") of the Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that, for the preceding 30 consecutive business days, the closing bid price for the Company's Class A common stock (the "Common Stock") was trading below the minimum $ 1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Requirement").

In accordance with Nasdaq Rules, the Company was provided with an initial period of 180 calendar days, or until January 2, 2023 (the ("Initial Grace Period"), to regain compliance with the Bid Price Requirement.

Because the Initial Grace Period was coming to an end and the Company had not yet regained compliance, in December 2022, the Company submitted a request to Nasdaq to obtain an additional 180 -day grace period (the "Additional Grace Period") to regain compliance with the Bid Price Requirement.

On January 3, 2023, the Company received formal approval from Nasdaq granting it an additional 180 days , or until July 3, 2023 (the “Compliance Date”), to regain compliance with the Bid Price Requirement.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On June 1, 2022, the Company was notified by Dixon Hughes Goodman LLP ("DHG"), the Company's independent registered public accounting firm, that DHG was merging with BKD, LLP ("BKD"), and that following their merger, their combined entities would operate under the name FORVIS, LLP (“FORVIS”).

The audit committee of the Company’s board of directors approved the engagement of FORVIS, the successor in the merger of DHG and BKD, as the Company’s independent registered public accounting firm, effective June 1, 2022.

DHG’s audit report on the consolidated financial statements of the Company for the year ended December 31, 2021 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company’s two most recent fiscal years ended December 31, 2021 and 2020 and through June 2, 2022, the Company has not had any “disagreements” (as such term is defined in Item 304 of Regulation S-K) with DHG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of DHG, would have caused DHG to make reference to the subject matter of the disagreement in its reports on the Company’s consolidated financial statements for such periods.

During the Company’s two most recent fiscal years and through June 2, 2022, there were no “reportable events” (as such term is defined in Item 304 of Regulation S-K).

On June 2, 2022, the Company provided FORVIS, as successor to DHG, with a copy of the Current Report on Form 8-K filed on June 2, 2022 (the “Form 8-K”) and has requested that FORVIS furnish it with a letter addressed to the U.S.

Securities and Exchange Commission stating whether or not FORVIS agrees with the Company’s statements in the Form 8-K .

A copy of the letter dated June 2, 2022 furnished by FORVIS in response to that request was filed as Exhibit 16.1 to the Form 8-K filed with the SEC on June 2, 2022.

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 8. Financial Statements and Supplementary Data