What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2022-11-09 · 239 added, 405 removed, 443 unchanged (59% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three and nine months ended September 30, 2022 and 2021

(in thousands, except share and per share amounts)

For the three months ended March 31, 2023 and 2022

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

Revenues, net

1 unchanged sentence

Operating expense:

General and administrative expenses

General and administrative

Research and development

Total operating expense

Income from operations

Loss from operations

Other income (expense):

Interest expense, net

Other income (expense), net

Gain (loss) on settlement of liabilities, net

Changes in fair value of derivative liabilities

Other expense, net

Gain on settlement of liabilities, net

Change in fair value of derivative liabilities

Total other expense

Income (loss) before income taxes

Income tax expense

Net income (loss)

Loss before income taxes

Income tax (expense) benefit

Fixed dividends - Series B Preferred

Deemed contribution -Series B Preferred

Net income (loss) attributable to common stockholders

Net loss attributable to common stockholders

Comprehensive loss:

Net income (loss)

Other comprehensive loss:

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Total comprehensive loss

Net income (loss) per common share – basic

Net income (loss) per common share – diluted

Weighted average number of common shares outstanding – basic

Weighted average number of common shares outstanding – diluted

Net loss per common share – basic and diluted

Weighted average number of common shares outstanding – basic and diluted

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Balance Sheets

As of September 30, 2022 and December 31, 2021

As of March 31, 2023 and December 31, 2022

(in thousands, except share and per share amounts)

September 30,

Current assets:

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Operating lease liabilities, non-current

Other long-term liabilities

Total liabilities

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Accumulated deficit

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders’ equity

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 30, 2022

For the three months ended March 31, 2023

(in thousands, except share amounts)

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(Loss) Income

Balance as of June 30, 2022

Shares issued for:

Shares issued for acquisition

Issuance of warrants and prefunded warrants

Warrants exercised

Issuance of stock, net

Vesting of restricted share units

Stock compensation

Foreign currency translation

Fixed dividends Preferred Series B

Balance as of September 30, 2022

Balance as of December 31, 2022

Cumulative effect of change in accounting principle, net of tax

Balance as of December 31, 2022 - as adjusted

Shares issued for:

Stock options exercised

Shares issued for acquisition

Issuance of warrants and prefunded warrants

Debt issuance costs

Vesting of restricted share units

Stock compensation

Issuance of stock

Warrants exercised

Foreign currency translation

Fixed dividends Preferred Series B

Balance as of September 30, 2022

Balance as of March 31, 2023

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 2021

For the three months ended March 31, 2022

(in thousands, except share amounts)

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Comprehensive

Balance as of June 30, 2021

Shares issued for:

Conversion of restricted shares

Conversion of debt obligations

Stock options exercised

Warrants exercised

Stock compensation

Fixed dividends Preferred Series B

Foreign currency translation

Balance as of September 30, 2021

Balance as of December 31, 2021

Shares issued for:

Conversion of accounts payable liabilities

Conversion of debt obligations

Stock options exercised

Debt issuance costs

Conversion of restricted shares

Stock compensation

Stock options exercised

Warrants exercised

Shares issued for acquisition

Fixed dividends Preferred Series B

Deemed contribution from Series B preferred

Foreign currency translation

Balance as of September 30, 2021

Fixed dividends Preferred Series B

Balance as of March 31, 2022

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2022 and 2021

Nine Months Ended

September 30,

For the three months ended March 31, 2023 and 2022

(in thousands)

Three Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of debt discount and issuance cost

Bad debt expense (recovery)

(Gain) loss on settlement of liabilities

Change in debt issuance costs

Bad debt expense

Gain on settlement of liabilities

Changes in deferred tax assets and liabilities

2 unchanged sentences

Change in fair value of derivative liability

Shares issued for interest payment on notes payable

Stock compensation expense

Depreciation and amortization

Non-cash lease expense

Change in right of use assets and lease liabilities

Changes in operating assets and liabilities:

Accounts receivable – trade

Prepaid expenses and other assets

Prepaid expenses and other current assets

Accounts payable and accrued expenses

1 unchanged sentence

Deferred revenues

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

Business acquisitions (net of cash acquired)

Asset acquisition

Purchases of property and equipment, net

Purchases of furniture and fixtures, net

Net cash used in investing activities

Cash flows from financing activities:

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

Debt issuance costs

Payments of fixed dividends to Series B Preferred stockholders

Net cash provided by financing activities

Proceeds from the exercise of options and warrants

Net cash used in financing activities

Effect of foreign currency exchange rates

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of the period

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Non-cash investing and financing transactions:

Shares issued to settle accounts payable

Exercise of warrants

Deemed contribution - Series B Preferred

Deferred consideration for acquisition

Shares issued to convert notes payable and accrued interest

Shares issued for asset acquisition

Addition of right of use assets

See accompanying notes to unaudited condensed consolidated financial statements.

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Boxlight Corporation, a Nevada Corporation (“Boxlight”), designs, produces and distributes interactive technology solutions to the education, corporate and government markets under its Clevertouch and Mimio brands.

The Company’s solutions include interactive displays, collaboration software, supporting accessories and professional services.

Boxlight’s solutions include interactive displays, collaboration software, supporting accessories, and professional services.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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The December 31, 2022 balance sheet included herein was derived from the audited consolidated financial statements, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

Effective January 1, 2023, the Company’s internal reporting structure used by the Chief Operating Decision Maker changed that resulted in changes to the Company’s segment reporting to align with the geographic markets in which it operates, as further discussed below and in Note 16 - Segments.

Corresponding prior period amounts have been restated to conform to current period classification.

ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Note 1 in the Notes to the Consolidated Financial Statements for 2021 contained in the Annual Report on Form 10-K, filed with the SEC on April 13, 2022, describes the significant accounting policies that the Company used in preparing its dated condensed financial statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

Note 1 in the Notes to the Consolidated Financial Statements for 2022 contained in the Annual Report on Form 10-K, filed with the SEC on March 17, 2023, describes the significant accounting policies that the Company used in preparing its condensed consolidated financial statements.

On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to revenue, reserves, and allowances.

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The Company’s financial instruments primarily include cash, accounts receivable, derivative liabilities, accounts payable and debt.

Due to the short-term nature of cash, accounts receivables and accounts payable, the carrying amounts of these assets and liabilities approximate their fair value.

Due to the short-term nature of cash, accounts receivable and accounts payable, the carrying amounts of these assets and liabilities approximate their fair value.

Debt approximates fair value due to either the short-term nature, variable rate, or recent execution of the debt agreement.

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Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants.

A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted

prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

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The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The following table sets forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 (in thousands):

September 30,

The following table sets forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):

Derivative liabilities - warrant instruments

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(in thousands)

Balance, June 30, 2022

Change in fair value of derivative liabilities

Balance, September 30, 2022

(in thousands)

Balance, December 31, 2022

Change in fair value of derivative liabilities

Balance, September 30, 2022

(in thousands)

Balance, June 30, 2021

Exercise of warrants

Change in fair value of derivative liabilities

Balance, September 30, 2021

Balance, March 31, 2023

(in thousands)

Balance, December 31, 2021

Exercise of warrants

Change in fair value of derivative liabilities

Balance, September 30, 2021

Balance, March 31, 2022

INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

For purposes of this calculation, options to purchase

common stock, restricted stock units subject to vesting, and warrants to purchase common stock were considered to be common stock equivalents.

Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period giving effect to all potentially dilutive securities to the extent they are dilutive.

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The dilutive effect of convertible securities is calculated using the “if-converted method.” 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.

For the three months ended September 30, 2022 and September 30, 2021, where the Company had income, approximately 17.7 million and 1.89 million of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

For the nine months ended September 30, 2022 potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 7.2 million shares from options to purchase common shares and unvested restricted shares as well as 10.8 million shares issuable upon exercise of warrants.

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

For the nine months ended September 30, 2021 potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 6.7 million shares from options to purchase common shares and unvested restricted shares as well as 265,000 shares issuable upon exercise of warrants.

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

For the three months ended March 31, 2023, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 6.4 million shares from options to purchase common shares, 2.6 million of unvested restricted shares and 11.1 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.

For the three months ended March 31, 2022, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 3.8 million shares from options to purchase common shares, 3.9 million of unvested restricted shares and 3.4 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

The Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers.

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.

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 the products or services, have been transferred to its customers.

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

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In most cases, interactive devices are sold with hardware maintenance services with terms of approximately 30 - 60 months.

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

Software maintenance includes technical support, product updates performed 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 .

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For the Company’s software maintenance, hardware maintenance and subscription services, revenue is recognized ratably over time as the services are provided since time is the best output measure of how those services are transferred to the customer.

Customer Financing Arrangements

Through a third-party leasing partner, we provide financing programs that are designed to offer customers a variety of options to purchase interactive technology solutions whereby customers enter into purchase agreements with the Company along with a separate financing or leasing contract with a third-party lender, who advances the proceeds from the sale to us upon contract execution and shipment of goods.

In such situations, the sales to the customer are final and the Company bears no risk of loss regarding subsequent payments.

Significant Judgments

For contracts with multiple performance obligations, each of which represent promises within a contract that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”).

The Company’s products and services included in its contracts with multiple performance obligations generally are not sold separately and there are no observable prices available to determine the SSP for those products and services.

Company’s products and services included in its contracts with multiple performance obligations generally are not sold separately and there are no observable prices available to determine the SSP for those products and services.

Since observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis.

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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 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.

However, the Company does have 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 terms.

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 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.

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The upfront invoicing terms are designed 1) to provide customers with a predictable way to purchase products and services where the payment is due in the same timeframe as when the products, which constitute the predominant portion of the contractual value, are transferred, and 2) to ensure that the customer continues to use the related services;

so that the customer will receive the optimal benefit from the products during the course of such product’s lifetime.

so that the customer can receive the optimal benefit from the products during the course of such product’s lifetime.

Additionally, the Company has elected the practical expedient to exclude any financing component from consideration for contracts where, at contract inception, the period between the transfer of services and the timing of the related payment is not expected to exceed one year.

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That unconditional right to consideration is reflected in accounts receivable in the accompanying condensed consolidated balance sheets in accordance with Topic 606.

Contract liabilities are reflected in deferred revenue in the accompanying consolidated balance sheets and reflect amounts allocated to performance obligations that have not yet been transferred to the customer related to software maintenance, hardware maintenance, and subscription services.

The Company has no material contract assets as of September 30, 2022, or December 31, 2021.

During the three months ended September 30, 2022, and September 30, 2021, the Company recognized $ 2.2 million and $ 2.5 million of revenue that was included in the deferred revenue balance as of December 31, 2021, and December 31, 2020, respectively.

During the nine months ended September 30, 2022, and September 30, 2021, the Company recognized $ 5.8 million and $ 4.4 million of revenue that was included in the deferred revenue balance as of December 31, 2021 and December 31, 2020, respectively.

Contract liabilities are reflected in deferred revenue in the accompanying condensed consolidated balance sheets and reflect amounts allocated to performance obligations that have not yet been transferred to the customer related to software maintenance, hardware maintenance, and subscription services.

The Company had no material contract assets as of March 31, 2023 or December 31, 2022.

During the three months ended March 31, 2023 and March 31, 2022, the Company recognized $ 2.1 million and $ 1.9 million of revenue that was included in the deferred revenue balance as of December 31, 2022 and December 31, 2021, respectively.

Variable Consideration

The Company’s otherwise fixed consideration in its customer contracts may vary when refunds or credits are provided for sales returns, stock rotation rights, price protection provisions, or in connection with certain other rebate provisions.

The Company’s otherwise fixed consideration may vary when refunds or credits are provided for sales returns, stock rotation rights, price protection provisions, or in connection with certain other rebate provisions.

The Company generally does not allow product returns other than under assurance warranties or hardware maintenance contracts.

However, the Company, on a case-by-case basis, will grant exceptions, mostly for “buyer’s remorse” where the distributor or reseller’s end customer either did not understand what they were ordering or otherwise determined that the product did not meet their needs.

An allowance for sales returns is estimated based on an analysis of historical trends.

An allowance for sales returns is estimated based on an

analysis of historical trends.

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 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.

These estimates are generally made using the expected value method based on historical experience and are measured at each

reporting date.

There was no material revenue recognized in the three and nine months ended September 30, 2022 related to changes in estimated variable consideration that existed at June 30, 2022 or December 31, 2021.

These estimates are generally made using the expected value method based on historical experience and are measured at each reporting date.

There was no material revenue recognized in the three months ended March 31, 2023 related to changes in estimated variable consideration that existed at December 31, 2022.

Remaining Performance Obligations

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Remaining performance obligations represent the portion of the transaction price in a contract allocated to products and services not yet transferred to the customer.

As of September 30, 2022 and December 31, 2021, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $ 23.2 million and $ 21.5 million, respectively.

The Company expects to recognize revenue on 33 % of the remaining performance obligations during the next twelve months , 26 % in the following twelve months , 22 % in the twelve months ended September 30, 2025, 14 % in the twelve months ended September 30, 2026, with the remaining 5 % recognized thereafter .

As of March 31, 2023 and December 31, 2022, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $ 24.1 million and $ 23.9 million, respectively.

The Company expects to recognize revenue on 34 % of the remaining performance obligations during the next twelve months , 28 % in the following twelve months , 21 % in 2025 , 13 % in 2026 , with the remaining 4 % 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 contracts).

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The Company disaggregates revenue based upon the nature of its products and services and the timing and in the manner which it is transferred to the customer.

Although all products are transferred to the customer at a point in time, hardware and some software is pre-installed on the interactive device are transferred at the point of shipment, while some software is transferred to the customer at the time the hardware is received by the customer or when software product keys are delivered electronically to the customer.

Although all products are transferred to the customer at a point in time, hardware and some software which comes pre-installed on an interactive device is transferred at the point of shipment, while some software is transferred to the customer at the time the hardware is received by the customer or when software product keys are delivered electronically to the customer.

All service revenue is transferred over time to the customer;

however, professional services are generally transferred to the customer within a year from the contract date as measured based upon hours or time incurred while software maintenance, hardware maintenance, and subscription services are generally transferred over five years from the contract execution date as measured based upon the passage of time.

however, professional services are generally transferred to the customer within a year from the contract date as measured based upon hours or time incurred while software maintenance, hardware maintenance, and subscription services are generally transferred over three to five years from the contract execution date as measured based upon the passage of time.

Three Months Ended

Nine Months Ended

September 30,

(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 condensed consolidated balance sheets.

Total deferred commissions, net of accumulated amortization, was $ 274 thousand at September 30, 2022.

Total deferred commissions, net of accumulated amortization, on March 31, 2023 and December 31, 2022 was less than $ 300,000 .

Bill and Hold Arrangements

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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 September 30, 2022, $ 5.3 million of revenue was recognized for goods that will be delivered to a customer during the fourth quarter.

(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 is a fixed schedule for delivery, and (5) the seller cannot use the product or direct the product to another customer.

As of March 31, 2023, $ 2.0 million of revenue was previously recognized for goods that are expected to be delivered to a customer during the second quarter.

SEGMENT REPORTING

ASC 280, Segment Reporting , establishes standards for reporting information about operating segments.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

Our chief operating decision maker (CODMs) is our Chief Executive Officer.

Effective January 1, 2023, the Company changed its segment reporting to align with the geographic markets in which it operates, as further discussed in Note 16 - Segments .

The Company previously managed the Company as one operating segment.

Following the integration of recent acquisitions which further expanded the Company’s operations into Europe, Middle East and Africa (“EMEA”) and other international markets, the Company’s operations are now organized, managed and classified into three reportable segments – EMEA, North and Central America (the “Americas”) and all other geographic regions (“Rest of World”).

Our EMEA segment consists of the operations of Sahara Holding Limited.

and its subsidiaries (the “Sahara Entities”).

Our Americas segment consists primarily of Boxlight, Inc.

and its subsidiaries and the Rest of World segment consists primarily of Boxlight Australia , PTY LTD ("

Boxlight Australia ”) .

Each of our operating segments are primarily engaged in the sale of education technology products and services in the education market but which are also sold into the health, government and corporate sectors and derive a majority of their revenues from the sale of flat-panel displays, audio and other hardware accessory products, software solutions and professional services.

Generally, our displays produce higher net operating revenues but lower gross profit margins than our accessory solutions and professional services.

The Americas operating segment includes salaries and overhead for corporate functions that are not allocated to the Company’s individual reporting segments.

Transfers between segments are generally valued at market and are eliminated in consolidation.

RECENTLY ADOPTED ACCOUNTING STANDARDS

Accounting Standards Update ("ASU") No.

2016-02 "Leases” (Topic 842), as amended, 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 we 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 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 Condensed Consolidated Statement of Operations and Comprehensive Loss or Condensed Consolidated Statement of Cash Flows.

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

ACCOUNTING STANDARDS PENDING ADOPTION

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The new guidance replaces the incurred loss methodology with the current expected credit loss (CECL) methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including trade accounts receivable.

It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842.

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

The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

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

There were various other accounting standards and interpretations issued recently, some of which although applicable, are not expected to a have a material impact on the Company’s financial position, operations, or cash flows.

SUBSEQUENT EVENTS

We reviewed all material events through the date on which these condensed consolidated financial statements were issued for subsequent event disclosure consideration as described in Note 17.

NOTE 2 – RECENT BUSINESS ACQUISITIONS

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.

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.

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 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.

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.

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, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” and therefore, the acquired contract liabilities of FrontRow have been recognized and measured in accordance with Topic 606 as follows.

(in thousands)

Assets acquired:

Accounts receivable

Prepaid expenses

Property and equipment

Total assets acquired

Accounts payable and accrued expenses

Deferred revenue

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:

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

Non-compete agreements

Interactive Concepts

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.

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

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:

(in thousands)

Assets acquired:

Accounts receivable

Property and equipment

Total assets acquired

Accounts payable and accrued expenses

Deferred tax liability

Total liabilities assumed

Net tangible assets acquired

Identifiable intangible assets:

Customer relationships

Total intangible assets subject to amortization

Total net assets acquired

Consideration paid:

Deferred cash consideration

Common shares issued

Total consideration paid

Measurement of Credit Losses on Financial Instruments,” which introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (“CECL”).

The new guidance applies to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures.

The new guidance also applies to debt securities and other financial assets measured at fair value through other comprehensive income.

Estimated credit losses under CECL consider relevant information about past events, current conditions and reasonable and supporting forecasts that affect the collectability of financial assets.

The new guidance was effective January 1, 2023 and was applied using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of January 1, 2023.

Prior period comparative information has not been recast and continues to be reported under the accounting guidance in effect for those periods.

The Company recognized a

cumulative-effect adjustment to reduce retained earnings by $ 76 thousand, net of taxes.

The change in the allowance for credit losses was not significant during the three months ended March 31, 2023.

ACCOUNTING STANDARDS PENDING ADOPTION

There were various other accounting standards and interpretations issued recently, some of which although applicable, are not expected to have a material impact on the Company’s financial position, operations, or cash flows.

NOTE 2 – ACCOUNTS RECEIVABLE - TRADE

Accounts receivable consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

Accounts receivable consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):

Accounts receivable – trade

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Cost includes direct cost from the Current Manufacturer (“CM”) or Original Equipment Manufacturer (“OEM”), plus material overhead related to the purchase, inbound freight and import duty costs.

Inventories consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

Inventories consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):

Finished goods

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NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

Prepaid expenses and other current assets consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):

Prepayments to vendors

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NOTE 5 – INTANGIBLE ASSETS

Intangible assets consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

Intangible assets consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):

INTANGIBLE ASSETS

Customer relationships

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Intangible assets, net of accumulated amortization

For the three months ended September 30, 2022 and 2021, the Company recorded amortization expense of $ 2.1 million and $ 1.8 million, respectively.

For the nine months ended September 30, 2022 and 2021, the Company recorded amortization expense of $ 6.5 million and $ 5.2 million, respectively.

Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately $ 6.3 million reduction as of September 30, 2022 and $ 3.0 million increase as of December 31, 2021.

For the three months ended March 31, 2023 and 2022, the Company recorded amortization expense of $ 2.1 million and $ 2.2 million, respectively.

Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately $ 1.4 million reduction as of March 31, 2023 and $ 3.1 million reduction as of December 31, 2022.

NOTE 6 – LEASES

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

The Company has entered into various operating leases for certain offices, support locations and vehicles with terms extending through February 2028.

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.

The exercise of lease renewal options is at the Company’s sole discretion.

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

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

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

In connection with

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

In connection with the adoption of ASC 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 September 30, 2022, the Company had no leases classified as finance leases.

The Company is not a lessor in any lease arrangement.

Operating lease expense was $ 439 thousand for the three months ended September 30, 2022 and $ 1.5 million for the nine months ended September 30, 2022.

Variable lease costs and short-term lease cost were not material for the three and nine months ended September 30, 2022.

Cash paid for amounts included in the measurement of lease liabilities was $ 267 thousand for the three months ended September 30, 2022 and $ 1.4 million for the nine months ended September 30, 2022.

During the three months ended September 30, 2022, the Company obtained new operating lease right-of-use assets totaling $ 143 thousand and for the nine months ended September 30, 2022, the Company obtained $ 2.0 million in operating right-of-use assets.

At March 31, 2023, the Company had no leases classified as finance leases.

The Company is currently not a lessor in any lease arrangement.

Our corporate headquarters is located at 2750 Premiere Parkway, Duluth, GA, 30097 in an office space of approximately 12,000 square feet, for which we pay approximately $ 23,000 per month as rent pursuant to a rental agreement.

Our corporate headquarters house our administrative offices.

The Company leases warehouse space in Lawrenceville, Georgia, for approximately $ 13,000 per month.

We also maintain offices in Scottsdale, Arizona and Utica, New York in the U.S., and in Dartford, London, Leeds and Livingston and Belfast in the United Kingdom.

for sales, marketing, technical support and service staff.

In addition, we also maintain sales, marketing and technical support offices in Apeldoorn, Netherlands, Anzegem, Belgium, Helsinki, Finland, Oskarshamn Kalmar, Sweden, and Düsseldorf, Germany

Operating lease expense was $ 564 thousand and $ 469 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively.

Variable lease costs and short-term lease cost were not material for the three months ended March 31, 2023 and March 31, 2022.

Cash paid for amounts included in the measurement of lease liabilities was $ 621 thousand and $ 423 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively.

Future maturities of the Company's operating lease liabilities are summarized as follows (in thousands):

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Less imputed interest

Supplemental lease information

The following is supplemental lease information at March 31, 2023:

Weighted-average remaining lease term (years)

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NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expense consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

Accounts payable and accrued expense consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):

Accounts payable

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NOTE 8 – DEBT

The following is a summary of the Company’s debt as of September 30, 2022 and December 31, 2021 (in thousands):

The following is a summary of the Company’s debt as of March 31, 2023 and December 31, 2022 (in thousands):

Debt – Third Parties

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Whitehawk Finance LLC

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.

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”).

In order to finance the acquisition of FrontRow Calypso LLC (“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 (“WhiteHawk”).

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.

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

On 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.

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.

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.

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.

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.

During the three-month period ending March 31, 2023, the Company repaid principal of $ 656 thousand and interest of $ 2.0 million to Whitehawk.

As of March 31, 2023, the Company was in compliance with all financial covenants under the Credit Facility.

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

6 unchanged sentences

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

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.

During the three-month period ending September 30, 2022, the Company repaid principal of $ 656 thousand and interest of $ 2.0 million to Whitehawk.

During the nine-month period ending September 30, 2022, the Company repaid principal of $ 1.9 million and interest of $ 5.6 million to Whitehawk.

Lind Global Marco Fund and Lind Global Asset Management

During the nine months ended September 30, 2021, the Company repaid principal of $ 9.9 million and interest of $ 511 thousand, to Lind Global by issuing a total of 5.7 million shares of Class A common stock with an aggregate value of $ 13.8 million to Lind Global and recognized a loss extinguishment of debt of approximately $ 3.4 million.

Paycheck Protection Program Loan

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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 September 30, 2022 was $ 140 thousand.

Everest Display, Inc.

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

During the nine months ended September 30, 2021, the Company recognized a $ 357 thousand gain.

Accounts Receivable Financing – Sallyport Commercial Finance

On September 30, 2020, Boxlight Inc.

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

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

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

In addition, the Company 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 .

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

Other terms of the Accounts Receivable Agreement remain unchanged.

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 a fee of $ 20,000 , representing one percent of the increased Maximum Facility Limit Amount.

Other terms of the Accounts Receivable Agreement remain unchanged.

As of March 31, 2023, the amount remaining on the loan was $ 113 thousand.

NOTE 9 – DERIVATIVE LIABILITIES

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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 (loss) for the period.

The Company used a Monte Carlo Simulation model to determine the fair value of the derivative liabilities at September 30, 2022 and December 31, 2021.

September 30, 2022

The Company used a Monte Carlo Simulation model to determine the fair value of the derivative liabilities as of March 31, 2023 and December 31, 2022.

March 31, 2023

Common stock issuable upon exercise of warrants

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

(2) The historical trading volatility 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.

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Pretax (loss) income resulting from domestic and foreign operations is as follows (in thousands):

September 30,

United States

Total pretax book income

Nine Months Ended

September 30,

Three Months Ended

United States

Total pretax book loss

The Company recorded income tax expense of $ 520 thousand and $ 1.4 million for the three months ended September 30, 2022 and September 30, 2021, respectively and income tax expense of $ 475 thousand of $ 3.9 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

The year-to-date effective tax rate is 38 % due to there being no material tax expense/benefit for the legacy Boxlight entities, due to their valuation allowance position, while the Sahara entities are fully taxable.

The decrease in tax expense year-over-year is largely due to foreign pretax book loss for the nine months ended September 30, 2022 as compared to foreign pretax income for the nine months ended September 30, 2021, as well as the impact of a significant tax rate change in the UK on the Company’s deferred tax liability that was recorded in the three months ended September 30, 2021.

The Company recorded income tax expense of $ 51 thousand and income tax benefit of $ 86 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively.

The year-to-date effective tax rate is ( 1.8 )% due to there being no tax expense/benefit for the legacy Boxlight entities, but the Sahara entities are fully taxable.

The increase in tax expense year-over-year is largely due to foreign pretax book income for the three months ended March 31, 2023 as compared to foreign pretax loss for the three months ended March 31, 2022.

The Company operates in the United States, United Kingdom, and other jurisdictions.

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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 September 30, 2022 and December 31, 2021.

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 March 31, 2023 and December 31, 2022.

The Sahara entities have recorded a net deferred tax liability, which is primarily driven by the net deferred tax liability on the intangibles for which it does not have tax basis.

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Statutes of limitations vary in other immaterial jurisdictions.

On August 16, 2022, the president signed the Inflation Reduction Act ( IRA ) into law.

The IRA enacted a 15% corporate minimum tax effective in 2024, a 1% tax on share repurchases after December 31, 2022, and created and extended certain tax-related energy incentives.

We currently do not expect the tax-related provisions of the IRA to have a material effect on our financial results.

During the second quarter of 2021, the Company became aware of a potential state tax exposure for failure to file minimum tax returns in a state for several years.

1 unchanged sentence

This amount includes $ 24 thousand of income tax and $ 58 thousand of penalties and interest.

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

The Company has not identified any other material uncertain tax positions during the three months ended March 31, 2023.

NOTE 11 – EQUITY

2 unchanged sentences

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

2) 1,200,000 shares of voting Series B preferred stock, with a par value of $ 0.0001 per share;

2) 1,586,620 shares of

voting Series B preferred stock, with a par value of $ 0.0001 per share;

3) 1,320,850 shares of voting Series C preferred stock, with a par value of $ 0.0001 per share;

5 unchanged sentences

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

As of September 30, 2022, a total of 167,972 shares of Series A preferred stock remained outstanding.

As of March 31, 2023, a total of 167,972 shares of Series A preferred stock remained outstanding which can be converted into 267,684 shares of Class A common stock, at the discretion of the Series A stockholder.

Series B Preferred Stock and 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.

On September 25, 2020, in connection with the acquisition of Sahara Holding Limited ("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 $ 94.9 million consideration paid for the purchase of Sahara.

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.

As the redemption features in the Series B preferred stock and Series C preferred stock are not solely within the control of the Company, the Company has classified the Series B preferred stock and Series C preferred stock as mezzanine or temporary equity in the Company’s condensed consolidated balance sheet.

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.

Such stockholders hold 96 % of the Series C preferred stock.

Upon redemption, the Series C shares held by such stockholders would convert into approximately 7.6 million shares of Class A Common Stock at the stated conversion price of $ 1.66 per share.

On June 14, 2021, the Company entered into an amendment to the Redemption Agreement (the “Amended Redemption Agreement”) for purposes of extending the completion date to on or before December 31, 2021.

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 470-50 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 thousand deemed contribution was credited to additional-paid-in-capital.

With the Redemption Agreement, the Series B Preferred Stock includes a beneficial conversion feature.

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”, which includes a key provision eliminating the beneficial conversion feature guidance in ASC Subtopic 470-20, “Debt with Conversion and Other Options.

As of March 31, 2023, a total of 1,586,620 and 1,320,850 shares of Series B and C preferred stock remained outstanding, respectively.

The Company’s common stock consists of 1) 150,000,000 shares of Class A voting common stock and 2) 50,000,000 shares of Class B non-voting common stock.

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Upon any public or private sale or disposition by any holder of Class B common stock, such shares of Class B common stock would automatically convert into shares of Class A common stock.

As of September 30, 2022 and December 31, 2021, the Company had 74,123,492 and 63,821,901 shares of Class A common stock issued and outstanding , respectively.

No Class B shares were outstanding at September 30, 2022 or December 31, 2021.

As of March 31, 2023 and December 31, 2022, the Company had 75,078,661 and 74,716,696 shares of Class A common stock issued and outstanding , respectively.

No Class B shares were outstanding at March 31, 2023 or December 31, 2022.

Issuance of common stock

Securities Purchase Agreement

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”).

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 of the Company’s Class A common stock, par value $ 0.0001 per share, 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.

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$ 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.

The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Investors and customary indemnification rights and obligations of the parties.

Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on the issuance and sale of its Common Stock or Common Stock Equivalents (as defined in the Purchase

Agreement) during the 60-day period following the closing of the Offering, which was on July 26, 2022.

Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on the issuance and sale of its common stock or common stock equivalents (as defined in the Purchase Agreement) during the 60-day period following the closing of the Offering, which was on July 26, 2022.

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

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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

During the three months ended September 30, 2021, the Company repaid principal of $ 3.1 million and interest of $ 138 thousand by issuing 1.8 million shares Class A common stock to Lind and recognized a $ 0.7 million loss.

During the nine months ended September 30, 2021, the Company repaid principal of $ 9.9 million and interest of $ 511 thousand by issuing 5.7 million shares Class A common stock with an aggregate value of $ 13.8 million to Lind and recognized a $ 3.4 million loss.

Accounts Payable and Other Liabilities Conversion

During the nine months ended September 30, 2021, the Company converted $ 2.0 million of EDI accounts payable in exchange for 793 thousand shares of Class A common stock with an aggregate value of $ 1.6 million and recognized a $ 357 thousand gain.

Conversion of restricted stock units

During the three and nine months ended September 30, 2022, respectively, 332,065 and 1,995,871 restricted stock units vested and were converted into Class A common stock.

During the three and nine months ended September 30, 2021, 217,000 and 760,060 restricted stock units vested and were converted into Class A common stock.

Exercise of stock options

During the three months ended September 30, 2022, no options to purchase stock were exercised and during the nine months ended September 30, 2022, options to purchase a total of 193,841 shares of Class A common stock were exercised.

During the three months ended September 30, 2021, 162,000 options were exercised and during the nine months ended September 30, 2021, options to purchase a total of 481,834 shares of Class A common stock were exercised.

The following is a summary of the equity warrant activities during the nine months ended September 30, 2022.

Exercise Price

Term (in years)

Outstanding, December 31, 2021

Outstanding, September 30, 2022

Exercisable, September 30, 2022

The Company used the following inputs to value warrants issued during the nine months ending September 30, 2022 using the Black Scholes option valuation method:

market value on measurement date, $ 0.59 ;

exercise price $ 0.68 ;

risk free interest rate, 2.86 %;

expected term, 6 years;

expected volatility, 132 % and expected dividend yield of 0 %.

Exercise of warrants

During the three and nine months ended September 30, 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 three and nine months ended September 30, 2021, 75,000 and 95,749 warrants were exercised, , respectively with an exercise price of $ 0.42 .

Repurchase Plan

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.

The Company had equity warrants outstanding of 7,366,690 and 7,365,440 at March 31, 2023 and December 31, 2022, respectively.

NOTE 12 – STOCK COMPENSATION

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

As of September 30, 2022, 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 were 2,725,400 shares.

The Company has issued grants under two equity incentive plans, both of which have been approved by the Company’s shareholders:

(i) the 2014 Equity Incentive Plan, as amended (the “2014 Plan”), pursuant to which a total of 6,390,438 shares of the Company’s Class A common stock have been approved for issuance, and (ii) the 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which a total of 5,000,000 shares of the Company’s Class A common stock have been approved for issuance.

Upon approval of the 2021 Plan in June 2021, any shares remaining available for issuance under the 2014 Plan were cancelled, and all future grants were issued under the 2021 Plan.

The 2021 Plan allows for issuance of shares of our Class A common stock, whether through restricted stock, restricted stock units, options, stock appreciation rights or otherwise, to the Company’s officers, directors, employees and consultants.

As of March 31, 2023, the Company has issued 6,199,231 shares under the 2021 Plan, such that the Company is over the authorized share number.

The Company intends to increase the number of shares available for issuance under the 2021 Plan in May 2023.

The fair value of any shares issued in excess of the approved shares under the 2021 Plan was less than $ 15 thousand and have been recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets at March 31, 2023.

Stock Options

Under the Company’s stock option program, pursuant to the Equity Incentive Plans, an employee receives an award that provides the opportunity in the future to purchase the Company’s shares at the market price of the stock on the date the award is granted (the strike price).

Under the Company’s stock option program, pursuant to the 2014 Plan and 2021 Plan, an employee receives an award that provides the opportunity in the future to purchase the Company’s shares at the market price of the stock on the date the award is granted (the strike price).

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.

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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.

The following is a summary of the option activities during the nine months ended September 30, 2022:

Exercise Price

Term (in years)

The following is a summary of the option activities during the three months ended March 31, 2023:

Outstanding, December 31, 2022

Outstanding, September 30, 2022

Exercisable, September 30, 2022

Outstanding, March 31, 2023

Exercisable, March 31, 2023

On January 1, 2023, the company granted 2,041,098 options which vest ratably over three years .

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

The Company used the following inputs to value warrants issued during the nine months ending September 30, 2022 using the Black Scholes option valuation method:

The Company used the following inputs to value options issued during the three months ended March 31, 2023:

market value on measurement date, $ 0.21 to $ 0.28 ;

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risk free interest rate, 4.19 % to 4.22 %;

expected term, 3 to 4 years;

expected term, 3 years to 4 years;

expected volatility, ranged from 111.45 to 111.74 and expected dividend yield of 0 %.

As of September 30, 2022 and December 31, 2021, the stock options had an intrinsic value of approximately $ 150 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 $ 314,000 .

On June 13, 2022, the Boxlight board of directors granted Greg Wiggins, our 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.

Restricted Stock Units

Under the Company’s Equity Incentive Plans the Company may grant restricted stock units (“RSUs”) to certain employees and non-employee directors.

Under the Company’s 2014 Plan and 2021 Plan, the Company may grant restricted stock units (“RSUs”) to certain employees and non-employee directors.

Upon granting the RSUs, the Company recognizes a fixed compensation expense equal to the fair market value of the underlying shares of RSUs granted on a straight-line basis over the requisite services period for the RSUs.

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The RSUs 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 RSU activities during the nine months ended September 30, 2022.

Grant Date Fair

The following is a summary of the RSU activities during the three months ended March 31, 2023:

Number of Units

Outstanding, December 31, 2022

( 1,179,754 )

Outstanding, September 30, 2022

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 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 $ 180,000 , and vesting over three years and 494,069 options to purchase Class A Common Stock, which are valued using the Black-Scholes Model with the Company’s customary inputs.

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.

During the first quarter ended March 31, 2022, Jens Holstebro, a former FrontRow employee, received 39,683 in restricted shares of Class A common stock, valued at $ 50,000 , as a bonus, which restricted stock vested immediately.

Outstanding, March 31, 2023

On January 1, 2023, the Company granted 578,778 RSU’s to our Chief Executive Officer, in accordance with his employment agreement.

The RSU’s vest ratably over a three-year period.

Stock Compensation Expense

For the three and nine months ended September 30, 2022 and 2021, the Company recorded the following stock compensation in general and administrative expense (in thousands):

Three months ended September 30,

Nine months ended September 30,

For the three months ended March 31, 2023 and 2022, the Company recorded the following stock compensation in general and administrative expense (in thousands):

Stock options

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Total stock compensation expense

As of September 30, 2022, there was approximately $ 4.7 million of unrecognized compensation expense related to unvested options, restricted stock units, and warrants, which expense will be amortized over the remaining vesting period of such awards.

Of that total, approximately $ 608 thousand is estimated to be recorded as compensation expense in the remaining three months of 2022.

NOTE 13 – RELATED PARTY TRANSACTIONS

Management Agreement

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 thousand 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.

For the three months ended March 31, 2023, the Company paid $ 12 thousand under the agreement.

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

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NOTE 14 – COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases seven office building facilities located in Lawrenceville, Georgia and Duluth, Georgia;

Scottsdale, Arizona;

Miami, Florida and Utica, New York in the U.S., and two office building facilities in Dartford and Kent in the U.K.

for sales, marketing, technical support, and service staff.

During the second quarter of 2022, FrontRow entered into a building lease in Australia and assumed a lease from FrontRow’s former owner in Denmark.

All such leased facilities are under non-cancelable lease agreements with terms ending from 2023 to 2027.

Contingencies

The Company assesses its exposure related to legal matters and other items that arise in the regular course of its business.

If the Company determines that it is probable a loss has been incurred, the amount of the loss, or an amount within the range of loss, that

can be reasonably estimated is recorded.

The Company has not identified any legal matters that could have a material adverse effect on our consolidated results of operations, financial position, or cash flows.

Purchase Commitments

The Company is legally obligated to fulfill certain purchase commitments made to vendors that supply materials used in the Company’s products.

As of September 30, 2022, the total amount of such open inventory purchase orders was $ 33.8 million.

As of March 31, 2023, the total amount of such open inventory purchase orders was $ 22.1 million.

NOTE 15 – CUSTOMER AND SUPPLIER CONCENTRATION

There was one customer that accounts for greater than 10% of the Company’s consolidated revenues for the nine months ended September 30, 2022.

There were two customers that accounted for greater than 10% of the Company’s consolidated revenues for the nine months ended September 30, 2021.

There was one customer that accounted for greater than 10% of the Company’s consolidated revenues for the three months ended March 31, 2023 and 2022.

Details are as follows:

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Total revenues

from the customer

from the customers

from the customer

receivable from

as a percentage of

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as a percentage of

the customer as

receivable from

total revenues

this customer as of

the customers as of

total revenues

for the nine months ended

September 30,

for the nine months ended

September 30,

the customers as of

for the three months ended

(in thousands)

For the nine months ended September 30, 2022 and 2021, the Company’s purchases were concentrated primarily with two vendors.

For the three months ended March 31, 2023, the Company’s purchases did not exceed 10% with any particular vendor.

For the three months ended March 31, 2022, the Company’s purchases were concentrated primarily with one vendor.

Details are as follows:

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Total purchases

from the vendor

Accounts payable

from the vendors

as a percentage of

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as a percentage

(prepayment) to

Accounts payable

total cost of

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of total cost of

the vendor as of

the nine months ended

September 30,

the nine months ended

September 30,

(prepayment) to

the vendors as of

the three months ended

the year ended

(in thousands)

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The Company believes there are other suppliers that could be substituted should the above cited supplier become unavailable or non-competitive.

NOTE 16 - SEGMENTS

Information about our Company’s operations by operating segment is shown in the following tables (in thousands):

Three Months Ended

Rest of World

Eliminations and Adjustments (1)

Total Revenue, net

Income (Loss) from Operations

Rest of World

Eliminations and Adjustments (1)

Total Loss from Operations

(1) Eliminations and adjustments represent net sales between the Americas, EMEA and Rest of World segments.

Sales between these segments are generally valued at market.

Identifiable Assets

Rest of World

Total Identifiable Assets

NOTE 17 – SUBSEQUENT EVENTS

On November 4, 2022, the Company made a $ 4.25 million payment on its Credit Agreement with Whitehawk.

The payment will be credited by WhiteHawk toward the repayment of the $ 8.5 million term loan due on February 28, 2023.There were no pre-payment penalties or premiums included with this payment.

On April 24, 2023, the Company entered into a third amendment (the “Third Amendment”) to the Credit Agreement, with Whitehawk Capital Partners, LP, as collateral agent, and Whitehawk Finance LLC as the Lender.

The Third Amendment serves to amend the Credit Agreement, originally entered into on December 31, 2021, as amended on April 4, 2022 and June 21, 2022, between the Company and all of its direct and indirect subsidiaries, the Collateral Agent and the Lender pursuant to which the Company received an initial $ 58.5 million term loan on December 31, 2021.

The Third Amendment was entered into for purposes of the Lender funding an additional $ 3.0 million delayed draw term loan (the “Additional Draw”).

The Additional Draw was funded on April 24, 2023, must be repaid on or prior to September 29, 2023, is not subject to any prepayment penalties, and adjusts certain terms to the Credit Agreement, including adjusting the Test Period End dates and corresponding Senior Leverage Ratios (as defined in the Credit Amendment) and revising the minimum liquidity requirements that the Company must maintain compliance with pertaining to certain Borrowing Base Requirements, among other adjustments.

The completion of the additional draw eliminates further delayed draws under the term loan agreement.

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-Q

Item 1. Financial Statements