What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 336 added, 190 removed, 562 unchanged (48% of the section changed)

1 unchanged sentence

Boxlight Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss )

For the three and six months ended June 30, 2023 and 2022

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three and nine months ended September 30, 2023 and 2022

(in thousands, except per share amounts)

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Revenues, net $ 49,667 $ 68,736 $ 137,909 $ 178,967

Cost of revenues 31,653 47,716 86,919 128,497

Gross profit 18,014 21,020 50,990 50,470

Operating expense:

1 unchanged sentence

Research and development 979 604 2,101 1,865

Impairment of goodwill 13,226 — 13,226 —

Total operating expense 29,613 14,556 60,693 46,579

Income (loss) from operations

Other income (expense):

(Loss) income from operations ( 11,599 ) 6,464 ( 9,703 ) 3,891

Other (expense) income:

Interest expense, net ( 2,987 ) ( 2,598 ) ( 8,222 ) ( 7,330 )

3 unchanged sentences

Total other expense ( 3,078 ) ( 2,839 ) ( 8,403 ) ( 5,141 )

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

(Loss) income before income taxes $ ( 14,677 ) $ 3,625 $ ( 18,106 ) $ ( 1,250 )

Income tax expense ( 3,073 ) ( 520 ) ( 3,379 ) ( 475 )

Net (loss) income $ ( 17,750 ) $ 3,105 $ ( 21,485 ) $ ( 1,725 )

Fixed dividends - Series B Preferred ( 317 ) ( 317 ) ( 952 ) ( 952 )

Net loss attributable to common stockholders

Comprehensive income (loss):

Net income (loss)

Other comprehensive income (loss):

Net (loss) income attributable to common stockholders $ ( 18,067 ) $ 2,788 $ ( 22,437 ) $ ( 2,677 )

Comprehensive loss:

Net (loss) income $ ( 17,750 ) $ 3,105 $ ( 21,485 ) $ ( 1,725 )

Other comprehensive loss:

Foreign currency translation adjustment ( 2,854 ) ( 5,040 ) ( 574 ) ( 11,449 )

Total comprehensive income (loss)

Net loss per common share – basic and diluted, as adjusted

Weighted average number of common shares outstanding – basic and diluted, as adjusted

Total comprehensive loss $ ( 20,604 ) $ ( 1,935 ) $ ( 22,059 ) $ ( 13,174 )

Net (loss) income per common share – basic, as adjusted $ ( 1.90 ) $ 0.31 $ ( 2.39 ) $ ( 0.32 )

Net (loss) income per common share - diluted, as adjusted $ ( 1.90 ) $ 0.28 $ ( 2.39 ) $ ( 0.32 )

Weighted average number of common shares outstanding – basic, as adjusted 9,484 8,943 9,399 8,432

Weighted average number of common shares outstanding – diluted, as adjusted 9,484 11,197 9,399 8,432

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Balance Sheets

As of June 30, 2023 and December 31, 2022

As of September 30, 2023 and December 31, 2022

(in thousands, except share and per share amounts)

(as adjusted)

September 30,

2023 December 31,

(Unaudited) (as adjusted)

Current assets:

7 unchanged sentences

Intangible assets, net of accumulated amortization 46,547 52,579

Goodwill 11,969 25,092

Other assets 851 397

Total assets $ 180,372 $ 195,395

LIABILITIES AND STOCKHOLDERS’ EQUITY

15 unchanged sentences

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

16,146 16,146

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

12,363 12,363

Total mezzanine equity 28,509 28,509

6 unchanged sentences

Accumulated deficit ( 86,604 ) ( 65,043 )

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss ( 1,488 ) ( 914 )

Total stockholders’ equity 30,642 51,893

3 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and six months ended June 30, 2023, as adjusted

For the three months ended September 30, 2023

(in thousands, except share amounts)

Preferred Stock

Comprehensive

(Loss) Income

Balance as of March 31, 2023

Preferred Stock Class A

Common Stock Additional

Capital Accumulated

Comprehensive Income

(Loss) Accumulated

Deficit Total

Shares Amount Shares Amount

Balance as of June 30, 2023 167,972 $ — 9,465,494 $ 1 $ 118,379 $ 1,366 $ ( 68,854 ) $ 50,892

Shares issued for:

Stock options exercised

Vesting of restricted share units — — 139,866 — — — — —

Reverse stock split fractional adjustment

Stock compensation — — — — 671 — — 671

1 unchanged sentence

Fixed dividends Preferred Series B — — — — ( 317 ) — — ( 317 )

Balance as of June 30, 2023

Net loss — — — — — — ( 17,750 ) ( 17,750 )

Balance as of September 30, 2023 167,972 $ — 9,605,360 $ 1 $ 118,733 $ ( 1,488 ) $ ( 86,604 ) $ 30,642

See accompanying notes to unaudited condensed consolidated financial statements.

Boxlight Corporation

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the nine months ended September 30, 2023

(in thousands, except share amounts)

Preferred Stock Class A

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Shares Amount Shares Amount

Balance as of December 31, 2022 167,972 $ — 9,339,587 $ 1 $ 117,849 $ ( 914 ) $ ( 65,043 ) $ 51,893

8 unchanged sentences

Fixed dividends Preferred Series B — — — — ( 952 ) — — ( 952 )

Balance as of June 30, 2023

Net loss — — — — — — ( 21,485 ) ( 21,485 )

Balance as of September 30, 2023 167,972 $ — 9,605,360 $ 1 $ 118,733 $ ( 1,488 ) $ ( 86,604 ) $ 30,642

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and six months ended June 30, 2022, as adjusted

For the three months ended September 30, 2022, as adjusted

(in thousands, except share amounts)

Preferred Stock

Preferred Stock Class A

Common Stock Additional

Capital Accumulated

Comprehensive

Balance as of March 31, 2022

Loss Accumulated

Deficit Total

Shares Amount Shares Amount

Balance as of June 30, 2022 167,972 $ — 8,275,965 $ 1 $ 112,358 $ ( 2,681 ) $ ( 66,130 ) $ 43,548

Shares issued for:

Stock options exercised

Conversion of restricted shares

Shares issued for acquisition — — 28,847 — 150 — — 150

Issuance of warrants and prefunded warrants — — — — 2,348 — 2,348

Warrants Exercised — — 44,118 — — — — —

Issuance of Stock, net — — 875,000 — 2,352 — — 2,352

Vesting of restricted shares units — — 41,507 — 11 — — 11

Stock compensation — — — — 603 — — 603

1 unchanged sentence

Fixed dividends Preferred Series B — — — — ( 317 ) — — ( 317 )

Balance as of June 30, 2022

Net income — — — — — — 3,105 3,105

Balance as of September 30, 2022 167,972 $ — 9,265,437 $ 1 $ 117,505 $ ( 7,721 ) $ ( 63,025 ) $ 46,760

See accompanying notes to unaudited condensed consolidated financial statements.

Boxlight Corporation

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the nine months ended September 30, 2022, as adjusted

(in thousands, except share amounts)

Preferred Stock Class A

Common Stock Additional

Capital Accumulated

Comprehensive Income

(Loss) Accumulated

Deficit Total

Shares Amount Shares Amount

Balance as of December 31, 2021 167,972 $ — 7,977,738 $ — $ 110,873 $ 3,728 $ ( 61,300 ) $ 53,301

1 unchanged sentence

Stock options exercised — — 24,231 — 69 — — 69

Shares issued for acquisition — — 28,847 — 150 — — 150

Issuance of warrants and prefunded warrants — — — — 2,348 — — 2,348

Debt issuance costs — — 66,021 — — — — —

Conversion of restricted shares

Vesting of restricted share units — — 249,482 — — — — —

Stock compensation — — — — 2,665 — — 2,665

Issuance of stock — — 875,000 1 2,352 — — 2,353

Warrants exercised — — 44,118 — — — — —

Foreign currency translation — — — — — ( 11,449 ) — ( 11,449 )

Fixed dividends Preferred Series B — — — — ( 952 ) — — ( 952 )

Balance as of June 30, 2022

Net loss — — — — — — ( 1,725 ) ( 1,725 )

Balance as of September 30, 2022 167,972 $ — 9,265,437 $ 1 $ 117,505 $ ( 7,721 ) $ ( 63,025 ) $ 46,760

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2023 and 2022

For the nine months ended September 30, 2023 and 2022

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

2023 September 30,

Cash flows from operating activities:

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

Amortization of debt discount and issuance cost

Net loss $ ( 21,485 ) $ ( 1,725 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Amortization of debt premium, discount and issuance cost 1,800 1,645

Bad debt expense ( 197 ) 9

6 unchanged sentences

Depreciation and amortization 6,893 6,818

Impairment of goodwill 13,226 —

Change in right of use assets and lease liabilities 249 ( 20 )

1 unchanged sentence

Accounts receivable – trade ( 10,344 ) ( 26,240 )

Inventories 13,788 ( 4,722 )

Prepaid expenses and other assets ( 602 ) ( 41 )

Other assets ( 450 ) ( 332 )

Accounts payable and accrued expenses ( 972 ) 21,592

1 unchanged sentence

Deferred revenues ( 322 ) 4,570

Net cash provided by (used in) operating activities

Net cash provided by operating activities $ 8,242 $ 500

Cash flows from investing activities:

Asset acquisition — ( 100 )

Purchases of furniture and fixtures, net ( 226 ) ( 960 )

3 unchanged sentences

Proceeds from long-term debt — 2,500

Principal payments on debt

Principal payments on short term debt ( 3,000 ) —

Principal payments on long term debt ( 2,048 ) ( 1,878 )

Net proceeds from issuance of common stock and warrants, net of issuance costs — 4,700

Payments of fixed dividends to Series B Preferred stockholders ( 952 ) ( 952 )

Proceeds from the exercise of options and warrants 13 70

Net cash provided by financing activities

Net cash (used in) provided by financing activities $ ( 2,987 ) $ 4,440

Effect of foreign currency exchange rates ( 1,206 ) 134

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents 3,823 4,014

Cash and cash equivalents, beginning of the period 14,591 17,938

4 unchanged sentences

Non-cash investing and financing transactions:

Addition of right of use assets

Addition of operating lease liabilities $ 5,369 $ —

Shares issued for asset acquisition $ — $ 150

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

NATURE OF OPERATIONS

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.

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

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

18 unchanged sentences

REVERSE STOCK SPLIT

On June 14, 2023, the Company effected a reverse stock split of the Company’s Class A common stock whereby each eight shares of the Company’s authorized and outstanding Class A common stock was replaced with one share of common stock.

The par value of the common stock was not adjusted.

Following the reverse split, the authorized shares for Class A common stock was adjusted to 18,750,000 , the authorized shares for Class B common stock remained at 50,000,000 shares, and preferred shares remained unchanged at 50,000,000 .

All Class A common share and per share amounts for all periods presented in the condensed consolidated financial statements and the notes to the consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock

split, including reclassifying an amount equal to the reduction in aggregate par value of Class A common stock to additional paid-in capital on the condensed consolidated balance sheets of approximately $ 6 thousand.

Following the reverse split, the authorized shares for Class A common stock was adjusted to 18,750,000 , the authorized shares for Class B common stock remained at 50,000,000 shares, and the authorized share of preferred stock remained unchanged at 50,000,000 shares.

All Class A common share and per share amounts for all periods presented in the condensed consolidated financial statements and the

notes to the consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in aggregate par value of Class A common stock to additional paid-in capital on the condensed consolidated balance sheets of approximately $ 6 thousand.

The quantity of Class A common stock equivalents and the conversion and exercise ratios were adjusted for the effect of the reverse stock split for warrants, stock-based compensation arrangements, and the conversion features on preferred shares.

1 unchanged sentence

The Company issued 33,414 shares of Class A common stock to adjust fractional shares following the reverse stock split to the nearest whole share.

There are presently no shares of Class B common stock outstanding and none were outstanding as of June 30, 2023.

There are presently no shares of Class B common stock outstanding and none were outstanding as of September 30, 2023.

GOING CONCERN

The Company’s financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business.

At September 30, 2023 the Company was not in compliance with its Senior Leverage Ratio financial covenant under the credit agreement, originally dated December 31, 2021, as amended (the "Credit Agreement"), between the Company, its direct and indirect subsidiaries, and Whitehawk Finance LLC, as lender, and White Hawk Capital Partners, LP, as collateral agent.

(The terms of the Credit Agreement and the amendments thereto are described in more detail in Note 8 below).

The Company's non-compliance with the Credit Agreement was cured by the Company paying $ 4.3 million, inclusive of $ 0.3 million in prepayment penalties and accrued interest, in November 2023 which would have resulted in the Company being in compliance with the Senior Leverage Ratio at September 30, 2023.

The Senior Leverage Ratio, as stated in the Third Amendment to the Credit Agreement, decreases to 2.50 at December 31, 2023, 2.00 at March 31, 2024 and June 30, 2024 and 1.75 thereafter.

Because of the significant decreases in the required Senior Leverage Ratio that will occur over the next twelve months, the Company’s current forecast projects the Company may not be able to maintain compliance with this ratio.

These conditions raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the financial statements are issued.

In view of this matter, continuation as a going concern is dependent upon the Company’s ability to continue to achieve positive cash flow from operations, obtain waivers or other relief under the Credit Agreement for any future non-compliance with the Senior Leverage Ratio, or refinance its Credit Agreement with a different lender on more favorable terms.

The Company is actively working to refinance its debt with new lenders on terms more favorable to the Company.

While the Company is confident in its ability to refinance its existing debt, it does not have written or executed agreements as of the issuance of this Form 10-Q.

The Company’s ability to refinance its existing debt is based upon credit markets and economic forces that are outside of its control.

The Company has a good working relationship with its current banking partner, and has seen a positive trend in the credit markets as of late.

However, there can be no assurance that the Company will be successful in refinancing its debt, or on terms acceptable to the Company.

These financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern.

FAIR VALUE OF FINANCIAL INSTRUMENTS

1 unchanged sentence

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.

The amount of consideration received is deemed to approximate the fair value of long-term debt net of any debt discount and issuance cost.

The Company has determined that the estimated fair value of debt is approximately $ 49 million when the carrying value, excluding discounts, premiums and issuance costs, is approximately $ 47.9 million.

The fair value of debt was estimated using market rates the Company believes would be available for similar types of financial instruments and represents a Level 2 measurement.

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.

7 unchanged sentences

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 June 30, 2023 and December 31, 2022 (in thousands):

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, 2023 and December 31, 2022 (in thousands):

Description Markets for

(Level 1) Other

(Level 2) Significant

(Level 3) Carrying

September 30,

Derivative liabilities - warrant instruments — — $ 422 $ 422

Description Markets for

(Level 1) Other

(Level 2) Significant

(Level 3) Carrying

Derivative liabilities - warrant instruments — — $ 472 $ 472

1 unchanged sentence

(in thousands)

Balance, March 31, 2023

Change in fair value of derivative liabilities

Balance, June 30, 2023 $ 512

Change in fair value of derivative liabilities ( 90 )

Balance, September 30, 2023 $ 422

(in thousands)

1 unchanged sentence

Change in fair value of derivative liabilities ( 50 )

Balance, June 30, 2023

Balance, September 30, 2023 $ 422

(in thousands)

Balance, March 31, 2022

Change in fair value of derivative liabilities

Balance, June 30, 2022 $ 1,414

Change in fair value of derivative liabilities 113

Balance, September 30, 2022 $ 1,527

(in thousands)

1 unchanged sentence

Change in fair value of derivative liabilities ( 1,537 )

Balance, June 30, 2022

Balance, September 30, 2022 $ 1,527

INCOME (LOSS) PER COMMON SHARE

4 unchanged sentences

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 and six months ended June 30, 2023, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 0.4 million shares from options to purchase common shares, 0.2 million of unvested restricted shares and 1.4 million shares issuable upon exercise of warrants.

Additionally, potentially dilutive securities of 2.2 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive.

For the three and six months ended June 30, 2022, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 0.5 million shares from options to purchase common shares, 0.4 million of unvested restricted shares and 0.4 million shares issuable upon exercise of warrants.

Additionally, potentially dilutive securities of 2.2 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive.

For the three and nine months ended September 30, 2023, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 0.3 million shares issuable upon exercise of options to purchase common stock, 0.5 million of unvested shares of restricted stock and 1.4 million shares issuable upon exercise of warrants.

Additionally, potentially dilutive securities of 2.2 million shares issuable 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, 2022, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 0.9 million shares from options to purchase shares of common stock and unvested shares of restricted stock as well as 1.4 million shares of common stock issuable upon exercise of warrants.

Additionally, potentially dilutive securities of 2.2 million from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive.

REVENUE RECOGNITION

25 unchanged sentences

A separate price has not been established by the Company for performance obligations generally included in its contracts.

In addition, the Company’s contracts generally include performance obligations that are never sold separately, are proprietary in nature, and the related selling price of these products and services is highly variable or uncertain.

In addition, the Company’s contracts generally include performance obligations that are never sold separately, are proprietary in nature, and the related selling price of

these products and services is highly variable or uncertain.

Therefore, the SSP of these products and services is estimated using the alternative method described above.

14 unchanged sentences

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 June 30, 2023 or December 31, 2022.

During the three months ended June 30, 2023 and June 30, 2022, respectively, the Company recognized $ 2.0 million and $ 1.8 million of revenue that was included in the deferred revenue as of December 31, 2022 and December 31, 2021, respectively.

During the six months ended June 30, 2023 and June 30, 2022, the Company recognized $ 4.1 million and $ 3.7 million of revenue that was included in the deferred revenue balance as of December 31, 2022 and December 31, 2021, respectively.

The Company had no material contract assets as of September 30, 2023 or December 31, 2022.

During the three months ended September 30, 2023 and September 30, 2022, respectively, the Company recognized $ 1.9 million and $ 2.2 million of revenue that was included in the deferred revenue balance as of December 31, 2022 and December 31, 2021, respectively.

During the nine months ended September 30, 2023 and September 30, 2022, the Company recognized $ 6.0 million and $ 5.8 million of revenue that was included in the deferred revenue balance as of December 31, 2022 and December 31, 2021, respectively.

Variable Consideration

6 unchanged sentences

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 six months ended June 30, 2023 related to changes in estimated variable consideration that existed at December 31, 2022.

There was no material revenue recognized in the three and nine months ended September 30, 2023 related to changes in estimated variable consideration that existed at December 31, 2022.

Remaining Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting within the contract.

The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer.

The transaction price is allocated to each distinct performance obligation and

recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer.

The Company identifies performance obligations at contract inception so that it can monitor and account for the obligations over the life of the contract.

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 June 30, 2023 and December 31, 2022, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $ 23.9 million.

The Company expects to recognize revenue on 34.4 % of the

remaining performance obligations during the next twelve months , 28.1 % in the following twelve months , 21.2 % in the twelve months ended June 30, 2026, 12.6 % in the twelve months ended June 30, 2027, with the remaining 3.7 % recognized thereafter .

As of September 30, 2023 and December 31, 2022, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $ 23.7 million and $ 23.9 million, respectively.

The Company expects to recognize revenue on 34.3 % of the remaining performance obligations during the next 12 months, 28.2 % in the following 12 months, 21.3 % in the 12 months ended September 30, 2026, 12.5 % in the 12 months ended September 30, 2027, with the remaining 3.7 % 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).

6 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

September 30, Nine Months Ended

September 30,

(in thousands) (in thousands)

2023 2022 2023 2022

Product revenues:

Hardware $ 46,650 $ 64,601 $ 128,781 $ 167,967

Software 733 906 1,818 3,959

Service revenues:

1 unchanged sentence

Maintenance and subscription services 2,239 1,870 6,438 4,849

$ 49,667 $ 68,736 $ 137,909 $ 178,967

Contract Costs

6 unchanged sentences

Certain sales commissions incurred by the Company are determined to be incremental costs to obtain the related contracts, which are deferred and amortized ratably over the estimated economic benefit period.

For these sales commissions that are incremental costs to obtain where the period of amortization would be recognized over a period that is one year or less, the Company has elected the practical expedient to expense those costs as incurred.

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, at June 30, 2023 and December 31, 2022 was $ 0.5 million.

Bill and Hold Arrangements

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

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

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

As of June 30, 2023, $ 0.1 million of revenue was previously recognized for goods that are expected to be delivered to a customer during the third quarter.

For these sales commissions that are incremental costs to obtain where the period of amortization would be recognized over a period that

is one year or less, the Company has elected the practical expedient to expense those costs as incurred.

Total deferred commissions, net of accumulated amortization, at September 30, 2023 and December 31, 2022 was $ 0.5 million.

SEGMENT REPORTING

7 unchanged sentences

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 ”) .

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.

12 unchanged sentences

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 and six months ended June 30, 2023.

The change in the allowance for credit losses was not significant during the three and nine months ended September 30, 2023.

ACCOUNTING STANDARDS PENDING ADOPTION

1 unchanged sentence

NOTE 2 – ACCOUNTS RECEIVABLE - TRADE

Accounts receivable consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

Accounts receivable consisted of the following at September 30, 2023 and December 31, 2022 (in thousands):

Accounts receivable – trade $ 43,773 $ 33,198

6 unchanged sentences

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 June 30, 2023 and December 31, 2022 (in thousands):

Inventories consisted of the following at September 30, 2023 and December 31, 2022 (in thousands):

Finished goods $ 43,680 $ 56,583

Spare parts 1,329 775

Reserve for inventory obsolescence ( 1,807 ) ( 531 )

2 unchanged sentences

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

Prepaid expenses and other current assets consisted of the following at September 30, 2023 and December 31, 2022 (in thousands):

Prepayments to vendors $ 4,352 $ 4,131

3 unchanged sentences

Intangible Assets

Intangible assets consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

Intangible assets consisted of the following at September 30, 2023 and December 31, 2022 (in thousands):

Useful lives 2023 2022

INTANGIBLE ASSETS

Customer relationships

Patents 4 - 10 years

Customer relationships 8 - 15 years

51,031 52,736

Technology 3 - 5 years

Domain 7 years 14 14

Non-compete 8 - 15 years

Tradenames 2 - 10 years

12,528 12,769

Intangible assets, at cost 72,950 75,035

1 unchanged sentence

Intangible assets, net of accumulated amortization $ 46,547 $ 52,579

For the three months ended June 30, 2023 and 2022, the Company recorded amortization expense of $ 2.2 million.

For the six months ended June 30, 2023 and 2022, the Company recorded amortization expense of $ 4.3 million and $ 4.4 million, respectively.

Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately $ 0.3 million reduction as of June 30, 2023 and $ 3.1 million reduction as of December 31, 2022.

The Company determined that a triggering event had occurred as a result of the Company’s market capitalization that suggested one or more of the reporting units may have fallen below the carrying amounts.

For the three months ended September 30, 2023 and 2022, the Company recorded amortization expense of $ 2.1 million.

For the nine months ended September 30, 2023 and 2022, the Company recorded amortization expense of $ 6.4 million and $ 6.5 million, respectively.

Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately $ 2.1 million reduction as of September 30, 2023 and $ 3.1 million reduction as of December 31, 2022.

During the quarter ended September 30, 2023, as a result of the triggering events disclosed below, the Company performed an interim impairment test on its finite-lived intangible assets using undiscounted cash flows.

There was no impairment recorded on finite-lived intangible assets during the nine months ended September 30, 2023.

During the quarter ended June 30, 2023, the Company determined that a triggering event had occurred as a result of the Company’s market capitalization that suggested one or more of the reporting units may have fallen below the carrying amounts.

In addition, the Company’s change in reporting segments resulted in a change in the composition of the Company’s reporting units.

As a result of these changes, the Company determined it has two reporting units for purposes of testing based upon entities that comprise the Americas and EMEA reporting segments.

For purposes of impairment testing, the Company allocated goodwill to the reporting units based upon a relative fair value allocation approach and has assigned approximately $ 22.5 million and $ 2.9 million of goodwill to the America and EMEA reporting units, respectively.

For purposes of impairment testing, the Company allocated goodwill to the reporting units based upon a relative fair value allocation approach and has assigned approximately $ 22.4 million and $ 2.8 million of goodwill to the Americas and EMEA reporting units, respectively.

However, the allocation used for purposes of segment information disclosures in Note 16 differs from these values used for impairment testing as the information used by the Chief Operating Decision Maker does not assign goodwill in the same manner.

7 unchanged sentences

Based on the results of the quantitative interim impairment test, the Company concluded that the reporting unit's goodwill was not impaired as of June 30, 2023.

During the quarter ended September 30, 2023, due to further declines in the Company’s market capitalization and a reduction in cash-flows resulting from continued softening in the industry leading to a reduction in sales from interactive flat-panel displays, the Company determined that a triggering event had occurred.

As of September 30, 2023, the Company performed an interim goodwill impairment test as a result of the triggering events identified.

The Company’s methodology for estimating fair value was consistent with the income and market approaches used as of June 30, 2023.

Certain estimates and assumptions, including the Company’s operating forecast for 2023 and future periods, were revised based on current industry and Company trends.

For the three and nine months ended September 30, 2023, the Company recorded goodwill impairment charges of $ 10.4 million and $ 2.8 million to the Americas and EMEA reporting units, respectively, which also represents total accumulated goodwill impairment charges for each reporting unit.

NOTE 6 – LEASES

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

The Company has entered into various operating leases for certain offices, support locations and vehicles with terms extending through July 2038.

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

1 unchanged sentence

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.

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

In addition, certain of the Company’s lease agreements contain early termination options.

5 unchanged sentences

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

At June 30, 2023, the Company had no leases classified as finance leases.

At September 30, 2023, the Company had no leases classified as finance leases.

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

Operating lease expense was $ 536 thousand and $ 579 thousand for the three months ended June 30, 2023 and June 30, 2022, respectively and $ 1.1 million and $ 1.0 million for the six months ended June 30, 2023 and June 30, 2022, respectively.

Variable lease costs and short-term lease cost were not material for the three and six months ended June 30, 2023 and June 30, 2022.

Cash paid for amounts included in the measurement of lease liabilities was $ 619 thousand and $ 684 thousand for the three months ended June 30, 2023 and June 30, 2022, respectively and $ 1.2 million and $ 1.1 million for the six months ended June 30, 2023 and June 30, 2022.

Operating lease expense was $ 712 thousand and $ 439 thousand for the three months ended September 30, 2023 and September 30, 2022, respectively and $ 1.8 million and $ 1.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Variable lease costs and short-term lease cost were not material for the three and nine months ended September 30, 2023 and September 30, 2022.

Cash paid for amounts included in the measurement of lease liabilities was $ 660 thousand and $ 267 thousand for the three months ended September 30, 2023 and September 30, 2022, respectively and $ 1.9 million and $ 1.4 million for the nine months ended September 30, 2023 and September 30, 2022.

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

Fiscal year ended,

Thereafter 4,371

Less imputed interest ( 1,112 )

The following is supplemental lease information at June 30, 2023:

Total $ 8,676

The following is supplemental lease information at September 30, 2023:

Weighted-average remaining lease term (years) 9.9

1 unchanged sentence

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expense consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

Accounts payable and accrued expense consisted of the following at September 30, 2023 and December 31, 2022 (in thousands):

Accounts payable $ 30,096 $ 30,719

2 unchanged sentences

NOTE 8 – DEBT

The following is a summary of the Company’s debt as of June 30, 2023 and December 31, 2022 (in thousands):

The following is a summary of the Company’s debt as of September 30, 2023 and December 31, 2022 (in thousands):

Debt – Third Parties

1 unchanged sentence

Note payable - Whitehawk 47,900 49,906

Discount and issuance costs

Total debt 47,985 50,033

Premium, discount and issuance costs 3,608 5,410

Current portion of debt 1,022 845

Long-term debt $ 43,355 $ 43,778

Total debt (net of discount and issuance costs)

Total debt (net of premium, discount and issuance costs) $ 44,377 $ 44,623

Debt - Third Parties:

1 unchanged sentence

In order to finance the acquisition of FrontRow Calypso LLC (“FrontRow”), which closed on December 31, 2021, 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” or the “Collateral Agent”).

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

The 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 available for additional working capital purposes under certain conditions (the “Delayed Draw”).

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

6 unchanged sentences

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 $ 3.5 million 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 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 such connection, the Company and substantially all of its direct and indirect subsidiaries (together with the Company, the "Loan Parties") obtained credit insurance on certain key customers whose principal offices are located in the European Union and Australia as, without the credit insurance, the accounts of these key customers had been deemed ineligible for inclusion in the borrowing base

calculation primarily due to the perceived inability of the Collateral Agent to enforce security interests on such accounts.

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

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

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.

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 six months ended June 30, 2023, the Company repaid principal of $ 1.4 million and interest of $ 4.0 million to Whitehawk.

On April 24, 2023, the Company entered into a third amendment (the “Third Amendment”) to the Credit Agreement, with Collateral Agent and the Lender.

On June 21, 2022, the Loan Parties entered into a second amendment (the “Second Amendment”) to 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.

On April 24, 2023, the Company entered into a third amendment (the “Third Amendment”) to the Credit Agreement, with the Collateral Agent and the Lender.

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

1 unchanged sentence

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

As discussed in Note 17, on July 20, 2023, the Company paid the $ 3.0 million due under the terms of the Third Amendment.

On July 20, 2023, the Company paid the $ 3.0 million due under the terms of the Third Amendment.

There were no prepayment penalties or premiums included with this payment.

During the nine months ended September 30, 2023, the Company repaid principal of $ 5.0 million and interest of $ 6.4 million to Whitehawk.

On June 26, 2023, the Company entered into a fourth amendment (the “Fourth Amendment”) with the Collateral Agent and the Lender for the sole purpose of replacing LIBOR-based rates with a SOFR-based rate.

Following the Fourth Amendment, the Company’s interest rate is calculated as the Daily Simple SOFR, subject to a floor of 1 %, plus the SOFR Term Adjustment and Applicable Margin, as defined in the Credit Agreement, as amended.

At such time, no other changes were made to the Credit Agreement.

The Fourth Amendment made no other changes to the Credit Agreement.

Covenant Compliance and Liquidity Considerations

The Company's Credit Agreement requires compliance with certain monthly covenants, which include provisions regarding over advance limitations based upon a borrowing base.

The Company's Credit Agreement, as amended to date, requires compliance with certain monthly covenants, which include provisions regarding over advance limitations based upon a borrowing base.

In the second quarter of 2023, as part of obtaining an appropriate waiver, the Company agreed to engage a financial advisor and to use commercial reasonable efforts to refinance the Credit Agreement with an alternative lender and repay the Credit Facility by September 30, 2023, or as soon thereafter as practical.

1 unchanged sentence

Upon repayment, the Company will be subject to a prepayment premium that is higher than the prepayment premium included in the original Credit Agreement, as defined in the waiver.

At period end, considering the waivers obtained, the Company was in compliance with all such financial covenants of the Credit Agreement, as amended.

The Company has either implemented or initiated appropriate plans regarding refinancing procedures that are within management’s control to comply with the waiver requirements.

The financial statements do not include any adjustments that might result from the outcome of the Company’s ability to refinance and repay the credit facility by September 30, 2023.

The financial statements do not include any adjustments that might result from the outcome of the Company’s ability to refinance and repay the credit facility.

The Company was not in compliance with its financial covenant related to the Senior Leverage Ratio under the Credit Agreement at September 30, 2023.

The Company cured the non-compliance by paying $ 4.3 million inclusive of $ 0.3 million in prepayment penalties and accrued interest in November 2023 which would have resulted in the Company being in compliance with the Senior Leverage Ratio at September 30, 2023.

Issuance Cost and Warrants

12 unchanged sentences

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

As of June 30, 2023, the amount remaining on the loan was less than $ 100 thousand.

As of September 30, 2023, the amount remaining on the loan was less than $ 100 thousand.

NOTE 9 – DERIVATIVE LIABILITIES

2 unchanged sentences

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 as of June 30, 2023 and December 31, 2022.

June 30, 2023

The Company used a Monte Carlo Simulation model to determine the fair value of the derivative liabilities as of September 30, 2023 and December 31, 2022.

September 30, 2023

Common stock issuable upon exercise of warrants 464,385

2 unchanged sentences

Risk free interest rate (1) 4.66 %

Expected life in years

Expected life in years 3.25 years

Expected volatility (2) 106.0 %

5 unchanged sentences

Risk free interest rate (1) 4.02 %

Expected life in years

Expected life in years 4 years

Expected volatility (2) 83.6 %

6 unchanged sentences

Three Months Ended

Six Months Ended

September 30, Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

United States $ ( 8,041 ) $ 3,320 $ ( 11,761 ) $ ( 589 )

Total pretax book income

The Company recorded income tax expense of $ 255 thousand and $ 41 thousand for the three months ended June 30, 2023 and 2022, respectively, and income tax expense of $ 306 thousand and income tax benefit of $ 45 thousand for the six months ended June 30, 2023 and 2022, respectively.

The year-to-date effective tax rate is 8.9 % while the June 30, 2022 year-to-date effective rate

was ( 0.9 )%.

Foreign ( 6,636 ) 305 ( 6,345 ) ( 661 )

Total pretax book (loss) income $ ( 14,677 ) $ 3,625 $ ( 18,106 ) $ ( 1,250 )

The Company recorded income tax expense of $ 3.1 million and $ 520 thousand for the three months ended September 30, 2023 and 2022, respectively, and income tax expense of $ 3.4 million and $ 475 thousand for the nine months ended September 30, 2023 and 2022, respectively.

The year-to-date effective tax rate is 18.7 % while the September 30, 2022 year-to-date effective rate was 38.0 %.

The negative effective tax rate for 2023 is due to the Company paying income taxes in various jurisdictions while incurring a worldwide net loss.

The increase in tax expense year-over-year is largely due to the decrease in the estimated annual effective tax rate of the US legacy Boxlight entities for the three months ended June 30, 2023 as compared to the estimated annual effective tax rate of the US legacy Boxlight entities for the three months ended June 30, 2022.

The increase in tax expense year-over-year is largely due to the increase in the estimated annual effective tax rate of the US legacy Boxlight entities for the three months ended September 30, 2023 as compared to the estimated annual effective tax rate of the US legacy Boxlight entities for the three months ended September 30, 2022.

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

1 unchanged sentence

The legacy Boxlight entities are in a net deferred tax asset position in the United States, the United Kingdom and other jurisdictions, primarily driven by net operating losses.

The recoverability of these deferred tax assets depends on the Company’s ability to generate taxable income in the jurisdiction to which the carryforward applies.

The recoverability of these deferred tax assets depends on the Company’s ability to generate taxable income in the jurisdiction in which the carryforward applies.

It also depends on specific tax provisions in each jurisdiction that could impact utilization.

1 unchanged sentence

net operating loss carryforwards.

The company is in process of analyzing whether an ownership change has occurred in recent years.

Additionally, because U.S.

2 unchanged sentences

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 as of June 30, 2023 and December 31, 2022.

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 as of September 30, 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 the Sahara entities do not have tax basis.

9 unchanged sentences

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.

The Company has recorded an exposure item of $ 82 thousand for its best estimate of the amount for which it will settle the exposure.

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 during the nine months ended September 30, 2023.

NOTE 11 – EQUITY

11 unchanged sentences

On August 5, 2019, a total of 82,028 shares of Series A preferred stock were converted into a total of 16,341 shares of Class A common stock.

As of June 30, 2023, a total of 167,972 shares of Series A preferred stock remained outstanding which can be converted into 33,461 shares of Class A common stock, at the discretion of the Series A stockholder.

As of September 30, 2023, a total of 167,972 shares of Series A preferred stock remained outstanding which can be converted into 33,461 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 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.

6 unchanged sentences

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.

As of June 30, 2023, a total of 1,586,620 and 1,320,850 shares of Series B and C preferred stock remained outstanding, respectively.

As of September 30, 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 authorized common stock consists of 1) 18,750,000 shares of Class A voting common stock and 2) 50,000,000 shares of Class B non-voting common stock.

1 unchanged sentence

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 June 30, 2023 and December 31, 2022, the Company had 9,465,494 and 9,339,587 shares of Class A common stock issued and outstanding , respectively.

No Class B shares were outstanding at June 30, 2023 or December 31, 2022.

As of September 30, 2023 and December 31, 2022, the Company had 9,605,360 and 9,339,587 shares of Class A common stock issued and outstanding, respectively.

No Class B shares were outstanding at September 30, 2023 or December 31, 2022.

Issuance of Common Stock

11 unchanged sentences

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

The Company had equity warrants outstanding of 920,993 and 920,680 at June 30, 2023 and December 31, 2022, respectively.

The Company had equity warrants outstanding of 921,150 and 920,680 at September 30, 2023 and December 31, 2022, respectively.

Credit Facility

5 unchanged sentences

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

As of June 30, 2023, the Company has not utilized the Repurchase Program.

As of September 30, 2023, the Company has not utilized the Repurchase Program.

NOTE 12 – STOCK COMPENSATION

1 unchanged sentence

(i) the 2014 Equity Incentive Plan, as amended (the “2014 Plan”), pursuant to which a total of 798,805 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 625,000 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.

Upon approval of the 2021 Plan in September 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.

Prior to the second quarter of 2023, the Company had issued 774,904 shares under the 2021 Plan such that the Company was over the authorized share number.

During the three months ended June 30, 2023, the Company cancelled 384,340 shares of previously issued awards such that the Company is under the authorized number of share awards.

The fair value of shares previously issued in excess of the approved shares under the 2021 Plan of approximately $ 13 thousand was reclassed from liability to equity as of June 30, 2023.

During the nine months ended September 30, 2023, the Company cancelled 384,340 shares of previously issued awards such that the Company is under the authorized number of share awards.

The fair value of shares previously issued in excess of the approved shares under the 2021 Plan of approximately $ 13 thousand was reclassed from liability to equity during the second quarter.

Stock Options

1 unchanged sentence

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

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

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

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

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

The following is a summary of the option activities during the six months ended June 30, 2023:

The following is a summary of the option activities during the nine months ended September 30, 2023:

Outstanding, December 31, 2022 489,485

Outstanding, June 30, 2023

Exercisable, June 30, 2023

During the six months ended June 30, 2023, the Company granted 364,299 options of which 322,040 were subsequently cancelled and 42,259 vested during the period.

Granted 364,299

Exercised ( 12,500 )

Cancelled ( 491,336 )

Outstanding, September 30, 2023 349,948

Exercisable, September 30, 2023 275,150

During the first quarter of 2023, the Company granted 364,299 options of which 322,040 were subsequently cancelled and 42,259 vested during the period.

During the third quarter of 2023, 59,116 out of the money options were cancelled, with such shares being returned to the 2021 Plan and becoming available for re-issuance in new grants.

The Company estimated 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 options issued during the six months ended June 30, 2023:

The Company used the following inputs to value options issued during the nine months ended September 30, 2023:

market value on measurement date, $ 1.68 to $ 2.24 ;

8 unchanged sentences

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 six months ended June 30, 2023:

The following is a summary of the RSU activities during the nine months ended September 30, 2023:

Number of Units

Outstanding, December 31, 2022 303,879

Outstanding, June 30, 2023

During the six months ended June 30, 2023, the Company granted 72,348 RSUs of which 62,300 were subsequently cancelled and 10,048 vested during the period.

Granted 498,398

Vested ( 219,859 )

Forfeited ( 72,297 )

Outstanding, September 30, 2023 510,121

During the first quarter of 2023, the Company granted 72,348 RSUs of which 62,300 were subsequently cancelled and 10,048 vested during the first six months of the year.

During the third quarter of 2023, the Company granted 426,049 RSUs to its board of directors and key executive officers.

Stock Compensation Expense

For the three and six months ended June 30, 2023 and 2022, the Company recorded the following stock compensation in general and administrative expense (in thousands):

Three months ended June 30,

Six months ended June 30,

For the three and nine months ended September 30, 2023 and 2022, the Company recorded the following stock compensation in general and administrative expense (in thousands):

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Stock options $ 125 $ 128 $ 446 $ 683

Restricted stock units 545 474 1,375 1,980

Warrants 1 1 2 2

Total stock compensation expense $ 671 $ 603 $ 1,823 $ 2,665

7 unchanged sentences

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

For the six months ended June 30, 2023, the Company paid $ 36 thousand under the agreement.

For the nine months ended September 30, 2023, the Company paid $ 92 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 our Chief Executive Officer and Chairman, Michael Pope.

16 unchanged sentences

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

As of June 30, 2023, the total amount of such open inventory purchase orders was $ 30.6 million.

As of September 30, 2023, the total amount of such open inventory purchase orders was $ 28.4 million.

NOTE 15 – CUSTOMER AND SUPPLIER CONCENTRATION

There was one customer that accounted for greater than 10% of the Company’s consolidated revenues for the six months ended June 30, 2023 and 2022.

There was one customer that accounted for greater than 10% of the Company’s consolidated revenues for the nine months ended September 30, 2023 and 2022.

Details are as follows:

Total revenues

from the customer

Customer Total revenues

from the customer

as a percentage of

receivable from

as a percentage of

receivable from

total revenues

for the nine months ended

September 30,

2023 Accounts

receivable from

the customer as of

September 30,

(in thousands) Total revenues

from the customer

as a percentage of

total revenues

for the nine months ended

September 30,

2022 Accounts

receivable from

the customer as of

for the six months ended

(in thousands)

September 30,

(in thousands)

For the six months ended June 30, 2023, the Company’s purchases were concentrated primarily with one vendor .

For the six months ended June 30, 2022, the Company’s purchases were concentrated primarily with two vendors.

1 12.8 % $ 5,417 14.1 % $ 8,532

For the nine months ended September 30, 2023, the Company’s purchases were concentrated primarily with one vendor .

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

Details are as follows:

Total purchases

from the vendors

Vendor Total purchases

from the vendor

as a percentage of

total cost of

the nine months ended

September 30,

2023 Accounts payable

to the vendor

September 30,

(in thousands) Total purchases

from the vendors

as a percentage

Accounts payable

total cost of

(prepayment) to

of total cost of

the nine months ended

September 30,

2022 Accounts payable

(prepayment) to

the vendors as of

the six months ended

(in thousands)

September 30,

(in thousands)

1 45.1 % $ 22,715 44.0 % $ 8,275

2 — % $ — 20.0 % $ ( 10,482 )

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

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Americas $ 25,717 $ 31,780 $ 76,851 $ 79,537

EMEA 24,330 37,537 68,249 100,143

Rest of World 799 168 2,443 359

Eliminations and Adjustments (1)

( 1,179 ) ( 749 ) ( 9,634 ) ( 1,072 )

Total Revenue, net $ 49,667 $ 68,736 $ 137,909 $ 178,967

Income (Loss) from Operations

(Loss) Income from Operations

Americas ( 5,124 ) 3,861 ( 2,330 ) 1,772

EMEA ( 6,945 ) 2,721 ( 8,205 ) 2,264

Rest of World 401 12 806 25

Eliminations and Adjustments (1)

Total Income (Loss) from Operations

69 ( 130 ) 26 ( 170 )

Total (Loss) Income from Operations $ ( 11,599 ) $ 6,464 $ ( 9,703 ) $ 3,891

(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.

September 30,

2023 December 31,

Identifiable Assets

Americas $ 93,644 $ 88,451

EMEA 84,135 104,978

Rest of World 2,593 1,966

1 unchanged sentence

NOTE 17 – SUBSEQUENT EVENTS

On July 20, 2023, the Company paid $ 3.0 million on its Credit Agreement with Whitehawk.

The payment was for amounts borrowed under the Third Amendment to the Credit Agreement that were required to be repaid by September 29, 2023.

There were no pre-payment penalties or premiums included with this payment.

On November 3, 2023, the Company paid $ 4.3 million inclusive of $ 0.3 million in prepayment penalties and accrued interest on its Credit Agreement.

The Company made the payment in order to cure it's non-compliance with the Senior Leverage Ratio financial covenant under the Credit Agreement as of September 30, 2023.

In conjunction with the $ 4.3 million payment, the Company obtained a waiver from its lender stating that the Company was in compliance with all covenants under the Credit Agreement as of September 30, 2023.

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