What changed in this filing

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Item 1A. Risk Factors

2024-03-14 compared with 2023-03-17 · 81 added, 48 removed, 357 unchanged (27% of the section changed)

An investment in our securities involves a high degree of risk.

You should carefully consider all of the risks described below, together with the other information contained in this Annual Report on Form 10-K, including our financial statements and related notes, before making a decision to invest in our securities.

You should carefully consider all of the risks described below, together with the other information contained in this Annual Report, including our financial statements and related notes, before making a decision to invest in our securities.

If any of the following events occur, our business, financial condition and operating results may be materially adversely affected.

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Some of the factors that could materially and adversely affect our business, financial condition, results of operations and cash flows include, but are not limited to, the following:

● Unfavorable global economic or political conditions, including the ongoing conflict between Russia and Ukraine may adversely affect our business, financial condition, results from operations, or the businesses of our suppliers, vendors and logistics partners;

• Unfavorable global economic or political conditions, including the ongoing conflicts between Russia and Ukraine, and Israel and Hamas, may adversely affect our business, financial condition, results from operations, or the businesses of our suppliers, vendors and logistics partners;

• our inability to predict or anticipate the duration or adapt to the long-term economic and business consequences of a global pandemic linked to the COVID-19 pandemic or any future pandemics;

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Risks Related to Our Business, Operations and Financial Condition

Unfavorable global economic or political conditions, including the ongoing conflict between Russia and Ukraine may adversely affect our business, financial condition, or results of operations .

We have not complied with certain covenants, minimum liquidity and borrowing base requirements under the Credit Agreement and this could cause us to be unable to continue to operate as a going concern.

As mentioned before, we have been unable to comply with certain covenants under our Credit Agreement with the Lender.

Although, to date, we have been successful in obtaining forbearance agreements with respect to these matters and avoid defaults under the agreement, there can be no assurance that the lender will not declare an event of default and acceleration all of our obligations under the Credit Agreement in the event we are unable to get into full compliance with these covenants in the future.

We are considering various alternatives to potentially refinancing such indebtedness.

We believe that our ability to do so will require an improvement of our 2023 financial performance in 2024.

In addition, t here is no assurance that we will refinance the indebtedness, so if so, the terms will be favorable to us.

Additionally, we have disclosed this in our periodic reports filed with the SEC that there is substantial doubt about our ability to continue as a going concern.

We have a substantial amount of indebtedness bearing interest at a variable rate, which may adversely affect our cash flow and our ability to operate our business.

We have a significant amount of indebtedness.

As of December 31, 2023, we have approximately $43 million of indebtedness outstanding, all of which is secured.

Our substantial amount of indebtedness could have important consequences.

For example, it could:

• increase our vulnerability to adverse economic, industry or competitive developments;

• result in an event of default if we fail to satisfy our obligations with respect to our Credit Agreement or which event of default could result in all of our debt becoming immediately due and payable and could permit our lenders to foreclose on our assets securing such debt;

• require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use cash flow to fund our operations, capital expenditures and future business opportunities;

• limit our ability to service our indebtedness;

• limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, or general corporate purpose;

The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations or prospects.

In addition, borrowings under the Credit Agreement bear interest at variable rates.

If these rates were to increase significantly, the risk related to our substantial indebtedness would intensify.

While we may enter into agreements limiting our exposure to higher interest rates, any such agreements may not offer complete protection for this risk.

Unfavorable global economic or political conditions, including the ongoing conflict between Russia and Ukraine, and Israel and Hamas may adversely affect our business, financial condition, or results of operations .

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.

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In addition, U.S.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the military conflict between Russia and Ukraine.

On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops began.

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We continue to monitor the reactions of our investors, employees, customers and other stakeholders and, as of the date of this report, have neither experienced any material adverse financial impacts nor suffered from the loss of key customers or employees.

Further, in October 2023, a military conflict commenced between Israel and Hamas.

It is not possible to predict the broader or longer-term consequences of these conflicts, which could include further sanctions, embargoes, regional instability, energy shortages, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions,

currency exchange rates and financial markets.

Such geopolitical instability and uncertainty could have a negative impact on our ability to sell to, ship products to, collect payments from, and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions, and logistics restrictions including closures of air space, and could increase the costs, risks and adverse impacts from these new challenges.

We may also be the subject of increased cyber-attacks.

While currently the countries involved in these conflicts do not constitute a portion of our business, a significant escalation or expansion of economic disruption or the conflicts' current scope could have a material adverse effect on our results of operations.

In addition, the risk of cybersecurity incidents has increased in connection with the ongoing war, driven by justifications such as retaliation for the sanctions imposed in conjunction with the war, or in response to certain companies’ continued operations in Russia.

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We insure ourselves against many types of risks;

however, while this insurance may mitigate certain of the risks associated with general market disruptions, including the risk related to the banking system and the ongoing war in Ukraine, our level of insurance

may not cover all losses we could incur.

The potential effects of these conditions could have a material adverse effect on our business, results of operations and financial condition.

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While conditions surrounding the COVID-19 pandemic seem to have stabilized, there is nonetheless a risk related to modification of the traditional classroom setting, similar to what occurred during 2020 to 2021 when many classrooms were all virtual, that may result in reduced demand for our classroom solutions, including reduced demand for our interactive displays due to extended or indefinite distance and digital learning.

There is also a risk of reduced borrowing with our factoring and purchase order financing facilities, as well as risk of inability to raise additional capital.

There is also a risk of reduced borrowing with our factoring and purchase order financing facilities, as well as the risk of inability to raise additional capital.

We generate a substantial portion of our revenue from the sale of our display products, and any significant reduction in sales of these products would materially harm our business.

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Our ability to successfully develop new technologies will depend in large measure on our ability to maintain a technically skilled research and development staff and to adapt to technological changes and advances in the industry.

The success of new product introductions depends on a number of factors, including timely and successful product development, market acceptance, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of components in appropriate quantities and costs to meet anticipated demand, the risk that new products may have quality or other defects and our ability to manage distribution and production

issues related to new product introductions.

If we are unsuccessful in selling the new products that we develop and introduce, or any future products that we may develop, we may carry obsolete inventory and have reduced available working capital for the development of other new technologies and products.

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The majority of our revenue has been derived from sales to the education market.

Our business strategy contemplates expanding our sales in both the education market, as well as to the business and government training sectors.

Our business strategy contemplates expanding our sales in both the education market, as well as the business and government training sectors.

However, to date, there has not been widespread adoption of interactive displays and collaboration solutions in the business and government market, and these solutions may fail to achieve wide acceptance in this market.

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Although we are endeavoring to enter into written agreements with certain of our suppliers, we cannot assure that our efforts will be successful.

Furthermore, due to the impacts of the COVID-19 pandemic the company may experience material adverse impacts on its supply chain.

Furthermore, the Company may experience materially adverse impacts on its supply chain in the event of sanctions or shipping embargoes caused by any conflict, war, or pandemics.

We rely on highly skilled personnel, and, if we are unable to attract, retain or motivate qualified personnel, we may not be able to operate our business effectively.

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These parties are often large, established companies.

Negotiating and performing under these arrangements involves significant time and expense, and we may not have sufficient resources to devote to our strategic alliances, particularly those

with companies that have significantly greater financial and other resources than we do.

Negotiating and performing under these arrangements involves significant time and expense, and we may not have sufficient resources to devote to our strategic alliances, particularly those with companies that have significantly greater financial and other resources than we do.

The anticipated benefits of these arrangements may never materialize and performing under these arrangements may adversely affect our results of operations.

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In addition, our resellers and most of our distributors are not contractually required to sell our products exclusively and may offer competing interactive display products, and therefore we depend on our ability to establish and develop new relationships and to build on existing relationships with resellers and distributors.

We cannot assure that our resellers and distributors will act in a manner that will promote the success of our products.

We cannot ensure that our resellers and distributors will act in a manner that will promote the success of our products.

Factors that are largely within the control of those resellers and distributors but are important to the success of our products include:

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While we obtain assurances from those parties that they have systems and processes in place to protect such data, and where applicable, that they will take steps to assure the protections of such data by third parties, nonetheless those partners may also be subject to data intrusion or otherwise compromise the protection of such data.

Any compromise of the confidential data of our customers, consumers, suppliers, partners, employees or ourselves, or failure to prevent or mitigate the loss of or damage to this data through breach of our information technology systems or other means could substantially disrupt our operations, harm our customers, consumers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and result in a loss of business that could be material.

Any compromise of the confidential data of our customers, consumers, suppliers, partners, employees or ourselves, or failure to prevent or mitigate the loss of or damage to

this data through breach of our information technology systems or other means could substantially disrupt our operations, harm our customers, consumers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and result in a loss of business that could be material.

A failure to keep pace with developments in technology could impair our operations or competitive position.

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This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action.

The Company maintains cybersecurity insurance in the event of an information security or cyber incident;

however, the coverage may not be sufficient to cover all financial losses.

Risks Related to our Industry and Regulations

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Our customers include primary and secondary schools, colleges, universities, other education providers and, to a lesser extent, government agencies, each of which depends heavily on government funding.

The effects and duration of the COVID-19 pandemic, which has resulted in worldwide disruptions in supply chains and economic recession, are as yet unknown.

We anticipate that the COVID-19 pandemic and resulting economic recession could cause a substantial disruption in, decrease or stagnation of, spending and budget priorities for government funding of schools, colleges, universities and other education providers and government agencies.

The COVID-19 pandemic and resulting economic recession could cause a substantial disruption in, decrease or stagnation of, spending and budget priorities for government funding of schools, colleges, universities and other education providers and government agencies.

The economy had only recently experienced a similar disruption from the worldwide recession of 2008 and subsequent sovereign debt and global financial crisis, which resulted in substantial declines in the revenues and fiscal capacity of many national, federal, state, provincial and local governments.

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Moreover, local laws and customs in many countries differ significantly and compliance with the laws of multiple jurisdictions can be complex, difficult and costly.

We cannot assure that risks inherent in our foreign operations will not have a material adverse effect on our business.

We cannot ensure that risks inherent in our foreign operations will not have a material adverse effect on our business.

We must comply with the Foreign Corrupt Practices Act.

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companies from engaging in bribery of or other prohibited payments to foreign officials for the purpose of obtaining or retaining business and requires that we maintain adequate financial records and internal controls to prevent such prohibited payments.

Our international operations are managed by the Sahara team who are required to comply with the UK Bribery Act 2010 which goes further than current US legislation where the Bribery Act is not limited to foreign officials but also includes customers and includes all form of inducement and incentives;

Our international operations are managed by the Sahara team who are required to comply with the U.K.

Bribery Act 2010 which goes further than current U.S.

legislation where the Bribery Act is not limited to foreign officials but also includes customers and includes all form of inducement and incentives;

the same standard is expected of all our Sahara employees of other European countries where similar legislation is in force under EU-Law Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur in countries where we do business.

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Although we believe our tax estimates are reasonable, we cannot assure you that the final determination of any tax audits and litigation will not be materially different from that which is reflected in our historical income tax provisions and accruals.

Should additional taxes be assessed against us as a result of an audit or litigation, there could be a material adverse effect on our current and future results and financial condition.

Should additional taxes be assessed

against us as a result of an audit or litigation, there could be a material adverse effect on our current and future results and financial condition.

Certain of our subsidiaries provide products to and may from time to time undertake certain significant transactions with us and our other subsidiaries in different jurisdictions.

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Our reporting currency is the U.S.

Sahara Holdings Ltd.

consolidates results using the British pound (with principal functional currencies in British pound, Euro and U.S.

Sahara consolidates results using the British pound (with principal functional currencies in British pound, Euro and U.S.

dollar) and Boxlight Latin America uses the Mexican Peso as functional currency to report revenue and expenses.

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dollars in consolidation.

If there is a change in foreign currency exchange rates, the translation of any of the group companies financial statements into U.S.

If there is a change in foreign currency exchange rates, the translation of any of the group companie's financial statements into U.S.

dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income.

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The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates and uncertainty about economic stability.

Any such volatility and disruptions may have adverse consequences on us or the third parties upon who we rely.

Any such volatility and disruptions may have adverse consequences on us or the third parties upon whom we rely.

Risks Related to Our Intellectual Property and Technology

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Correcting such errors and failures in our products could require significant expenditure of capital by us.

In addition, we are rapidly developing and introducing new products, and new products may have higher rates of errors and defects than

our established products.

In addition, we are rapidly developing and introducing new products, and new products may have higher rates of errors and defects than our established products.

The Boxlight Group has historically provided product warranties between one and five years, and the failure of our products to operate as described could give rise to warranty claims.

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Also, third parties may make infringement claims against us that relate to technology developed and owned by one of our suppliers for which our suppliers may or may not indemnify us.

Even if we are indemnified against such costs, the indemnifying party may be unable to uphold its contractual obligations and determining the extent such of such obligations could require additional litigation.

Even if we are indemnified against such costs, the indemnifying party may be unable to uphold its contractual obligations and determining the extent of such obligations could require additional litigation.

Claims of intellectual property infringement against us or our suppliers might require us to redesign our products, enter into costly settlements or license agreements, pay costly damage awards or face a temporary or permanent injunction prohibiting us from marketing or selling our products or services.

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Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing demands and preferences of customers in a timely manner.

If we are unable to introduce new products or technologies in a timely manner or our new products or technologies are not accepted by our customers, our competitors may introduce more attractive products which

would adversely impact our competitive position.

Failure to respond in a timely manner to changing consumer preferences could lead to, among other things, lower revenues and excess inventory positions of outdated products.

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Because our Class A common stock is listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing.

At present, we are in the second 180-day compliance period provided by Nasdaq relating to our failure to maintain the $1.00 minimum bid price requirement (the “Minimum Bid Price”).

This second 180-day compliance period expires on July 3, 2023.

In order to regain compliance, we must regain the $1.00 Minimum Bid Price and trade at $1.00 or higher for 10 consecutive days.

If we do not organically regain the Minimum Bid Price within that period, we will need to seek stockholder approval to conduct a reverse stock split.

At present, we are in the initial period of 180-day compliance period provided by Nasdaq relating to our failure to maintain the $1.00 minimum bid price requirement.

On February 29, 2024, we received a letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq notifying us that based upon the closing bid price for the last 30 consecutive business days, we no longer meet the Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).

We have been provided an initial period of 180 calendar days, or until August 26, 2024, to regain compliance with the Bid Price Rule.

If we are not in compliance with the Bid Price Rule by August 26, 2024, we may be afforded a second 180 calendar day period to regain compliance.

We will continue to actively monitor the closing bid price of our Class A common stock and will evaluate available options, including, without limitation, seeking to effect a reverse stock split, in order to resolve the deficiency and regain compliance with the Bid Price Rule.

If we fail to regain compliance, or otherwise violate or fail to meet any Nasdaq listing requirements, our Class A common stock may be delisted.

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In the event our stock is delisted from Nasdaq, whether by choice or otherwise, the delisting of our Class A common stock could significantly impair our ability to raise capital and stockholder value.

Future sales of our Class A common stock could adversely affect our share price, and any additional capital raised by us through the sale of equity or convertible debt securities may dilute your ownership in BOXL and may adversely affect the market price of our Class A common stock.

We believe that our existing working capital, expected cash flow from operations and other available cash resources will enable us to meet our working capital requirements for at least the next 12 months.

However, the development and marketing of new products and the expansion of distribution channels require a significant commitment of resources.

Future sales of our Class A common stock could adversely affect our share price, and any additional capital raised by us through the sale of equity or convertible debt securities may dilute your ownership in our securities and may adversely affect the market price of our Class A common stock.

The development and marketing of new products and the expansion of distribution channels require a significant commitment of resources.

From time to time, we may seek additional equity or debt financing to finance working capital requirements, continue our expansion, develop new products or make acquisitions or other investments.

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As of March 8, 2024, our Class A common stock closed at $0.92 per share.

In addition, our financial performance, government regulatory action, tax laws and market conditions in general, including the ongoing COVID-19 pandemic and its resulting impact on the economy at large, could have a significant impact on the future market price of our Class A common stock.

In addition, our financial performance, government regulatory action, tax laws and market conditions in general, including the ongoing COVID-19 pandemic and conflicts between Ukraine and Russia, and Israel and Hamas, and their resulting impact on the economy at large, could have a significant impact on the future market price of our Class A common stock.

Some of the factors that could negatively affect our share price or result in fluctuations in the price of our common stock include:

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• new laws and governmental regulations, or other regulatory developments, applicable to our industry;

● changes in general conditions in the United States and global economies or financial markets, including both social and economic conditions resulting from the ongoing COVID-19 pandemic, war, incidents of terrorism or responses to such events;

• changes in general conditions in the United States and global economies or financial markets, including both social and economic conditions resulting from the ongoing COVID-19 pandemic and, conflicts between Ukraine and Russia, and Israel and Hamas, war, incidents of terrorism or responses to such events;

• changes in government spending levels on education;

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• the volume of trading in our Class A common stock;

● the realization of any risks described in this section under the caption “Risk Factors”

• the realization of any risks described in this Item 1A under the caption “Risk Factors”.

Furthermore, the stock market has recently experienced extreme volatility that, in some cases, has been unrelated or disproportionate to the operating performance of particular companies.

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Each share of Class A common stock entitles the holder to one vote on all matters to be voted upon by stockholders, and the Class B common stock has no vote, except as required by law.

In addition, our board of directors (“Board”) has the authority to issue additional shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions of those shares without any further vote or action by the stockholders.

In addition, the Board has the authority to issue additional shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions of those shares without any further vote or action by the stockholders.

The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The ability of our Board to issue additional shares of preferred stock could make it more difficult for a third-party to acquire a majority of our voting stock.

Other provisions of our Bylaws also may have the effect of discouraging,

delaying or preventing a merger, tender offer or proxy contest, which could have an adverse effect on the market price of our Class A common stock.

Other provisions of our Bylaws also may have the effect of discouraging, delaying or preventing a merger, tender offer or proxy contest, which could have an adverse effect on the market price of our Class A common stock.

In addition, certain provisions of Nevada law applicable to our company could also delay or make more difficult a merger, tender offer or proxy contest involving our company, including Sections 78.411 through 78.444 of the Nevada Revised Statutes, which prohibit a Nevada corporation from engaging in any business combination with any “interested stockholder” (as defined in the statute) for a period of two years unless certain conditions are met.

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We may be exposed to risks relating to evaluations of controls required by Sarbanes-Oxley Act of 2002.

Pursuant to Sarbanes-Oxley Act of 2002, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting.

Pursuant to Sarbanes-Oxley Act of 2002, our management is required to report on the effectiveness of our internal control over financial reporting.

Although we prepare our financial statements in accordance with accounting principles generally accepted in the United States, our internal accounting controls may not meet all standards applicable to companies with publicly traded securities.

If we fail to implement any required improvements to our disclosure controls and procedures, we may be obligated to report control deficiencies and our independent registered public accounting firm may not be able to certify the effectiveness of our internal controls over financial reporting.

If we fail to implement any required improvements to our disclosure controls and procedures, we may be obligated to report control deficiencies.

In either case, we could become subject to regulatory sanction or investigation.

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If we fail to maintain adequate internal controls, our financial statements may not accurately reflect our financial condition.

Any material misstatements could require a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, leading to a decline in the market value of our securities.

UNRESOLVED STAFF COMMENTS

Any material misstatements could require a restatement of our consolidated financial statements, cause us to fail to meet our reporting

obligations or cause investors to lose confidence in our reported financial information, leading to a decline in the market value of our securities.

Unstable market and economic conditions and potential disruptions in the credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity requirements and our ability to meet long-term commitments, which could adversely affect our results of operations, cash flows and financial condition.

If internally generated funds are not available from operations, we may be required to rely on the banking and credit markets to meet our financial commitments and short-term liquidity needs.

Our access to funds under our revolving credit facility or pursuant to arrangements with other financial institutions is dependent on the financial institution’s ability to meet funding commitments.

Financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience high volumes of borrowing requests from other borrowers within a short period of time.

In addition, the global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate changes and uncertainty about economic stability.

More recently, the closures of Silicon Valley Bank, Signature Bank and First Republic Bank and their placement into receivership with the Federal Deposit Insurance Corporation (FDIC) created bank-specific and broader financial institution liquidity risk and concerns.

Future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty.

There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur.

Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions.

If the equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly and more dilutive.

Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans.

In addition, there is a risk that one or more of our current service providers, financial institutions, manufacturers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and on budget.

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

What changed 10-K

Item 1A. Risk Factors