What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-03-14 compared with 2023-03-17 · 104 added, 132 removed, 185 unchanged (56% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere herein.

The Management’s Discussion and Analysis (“MD&A”) contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.

The following Management’s Discussion and Analysis ("MD&A") should be read in conjunction with our financial statements and the related notes thereto included elsewhere herein MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.

Any statements that are not statements of historical fact are forward-looking statements.

When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements.

These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this form.

Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.

6 unchanged sentences

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

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

All products are

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

We also distribute STEM products, including our 3D printing and robotics solutions, and our portable science lab.

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

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

7 unchanged sentences

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

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

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

communicate with one another.

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

Recent Acquisitions

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

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

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

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

Our Acquisition Strategy and Challenges

26 unchanged sentences

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

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

The Company did not experience material delays in shipping during 2023 or 2022 that materially negatively impacted our revenues.

Gross profit and gross profit margin

15 unchanged sentences

Other income (expense), net

Other income (expense), net primarily consists of interest expense associated with our debt financing arrangements, gains (losses) on the settlements of debt and trade payable obligations exchanged for common shares, and the effects of changes in the fair value of derivative liabilities.

Other income (expense), net primarily consists of interest expense associated with our debt financing arrangements, gains (losses) on the settlements of debt, and the effects of changes in the fair value of derivative liabilities.

Income tax expense

We are subject to income taxes in the United States, United Kingdom, Mexico, Sweden, Finland, Holland and Germany where we do business.

The United Kingdom, Mexico, Sweden, Finland, Holland and Germany have a statutory tax rate different from that in the United States.

We are subject to income taxes in the United States, Canada, United Kingdom, Mexico, Sweden, Finland, Holland, Australia, Denmark and Germany where we do business.

The United Kingdom, Mexico, Sweden, Finland, Holland and Germany, Australia, Canada and Denmark have a statutory tax rate different from that in the United States.

Additionally, certain of our international earnings are also taxable in the United States.

7 unchanged sentences

For the years ended December 31, 2023 and 2022

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

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

Total revenues for the year ended December 31, 2023 were $176.7 million as compared to $221.8 million for the year ended December 31, 2022, resulting in a 20.3% decrease.

The decrease in revenues was primarily a result of softening world-wide demand for our products and solutions in both the U.S.

and EMEA markets.

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

Cost of Revenues.

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

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

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

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

Cost of revenues for the year ended December 31, 2023 was $113.4 million as compared to $156.9 million for the year ended December 31, 2022, resulting in a 27.7% decrease.

The decrease in cost of revenues was primarily due to more favorable material and shipping cost and the decrease in revenues.

Gross Profit .

Gross profit for the year ended December 31, 2023 was $63.3 million as compared to $64.9 million for the year ended December 31, 2022.

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

Gross profit margin improved to 35.8% for the year ended December 31, 2023 compared to 29.2% for the year ended December 31, 2022 due to audio products comprising a greater percentage of total sales, which carry higher margins, and decreases in manufacturing and shipping cost.

General and Administrative Expense.

General and administrative expense for the year ended December 31, 2023 was $61.3 million and 34.7% of revenue as compared to $59.3 million and 26.8% of revenue for the year ended December 31, 2022 .

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

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

The increase primarily relates to an increase in personnel related expenses to support the growth of the business in certain markets.

Research and Development Expense.

Research and development expense was $3.2 million or 1.8% of revenue for the year ended December 31, 2023 as compared to $2.5 million or 1.1% of revenue for the year ended December 31, 2022 .

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

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

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

Other income (expense), net.

Impairment of Goodwill.

Impairment of goodwill for the year ended December 31, 2023 was $25.2 million and related to both the Americas and EMEA reporting segments.

There was no impairment of goodwill for the year ended December 31, 2022.

Other Expense, net.

Other expense for the year ended December 31, 2023 was $11.0 million as compared to $6.7 million for the year ended December 31, 2022.

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

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

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

Other expense increased by $4.2 million, due to a $2.3 million decrease in fair value of derivative liabilities, $0.9 million increase in interest expense, and $0.9 million decrease from the settlement of liabilities in the prior year that did not recur in the current year.

Net loss attributable to common shareholders was $40.4 million and $5.0 million for the years ended December 31, 2023 and 2022, respectively, after deducting fixed dividends to Series B preferred shareholders of $1.3 million in each year.

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

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

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

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

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

Adjusted EBITDA represents EBITDA, adjusted for stock compensation expense and changes in fair value of derivative liabilities, purchase accounting impact for fair valuing inventory and deferred revenue, net gain on settlement of debt, and impairment of goodwill.

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

7 unchanged sentences

(in thousands) 2023 2022

Net loss $ (39,156) $ (3,743)

Depreciation and amortization 8,859 9,129

1 unchanged sentence

Income tax expense 1,866 49

EBITDA $ (17,591) $ 15,358

Stock compensation expense 3,131 3,313

2 unchanged sentences

Purchase accounting impact of fair valuing deferred revenue 1,649 2,229

Net (gain) loss on settlement of debt

Net gain on settlement of debt — (856)

Impairment of Goodwill 25,195 —

Adjusted EBITDA $ 12,565 $ 18,949

7 unchanged sentences

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

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

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

Liquidity and Capital Resources

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases and other operating leases.

We lease all our office facilities.

As of December 31, 2023, we had cash and cash equivalents o f $17.3 million , a working capital balance of $54.1 million, and a current ratio of 2.17.

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

For the years ended December 31, 2023 and 2022, we had net cash provided by operating activities of $11.6 million and $1.2 million, respectively.

Cash provided by operating activities increased year over year as a result of a change in working capital management.

We had net cash used in investing activities of $1.3 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively.

Cash used in investing activities is primarily related to purchases of property and equipment.

For the years ended December 31, 2023 and 2022, we had net cash used in financing activities of $8.0 million and $5.1 million, respectively.

Cash used for financing activities for the year ended December 31, 2023 is primarily related to principal payments on debt of $6.8 million, and $1.3 million in payments of fixed dividends to our Series B preferred shareholders, and stock option exercise proceeds of $13 thousand.

Cash used by financing activities for the year ended December 31, 2022 was primarily related to principal payments on debt, and payments of fixed dividends to our Series B preferred shareholders, partially offset by net proceeds of issuance of common stock, and proceeds from long-term debt and stock option exercises.

Our liquidity needs are funded by operating cash flow and available cash.

Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases.

We lease all of our office facilities.

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

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

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

In addition, our industry is seasonal with many sales to educational customers occurring during the second and third quarters when schools make budget appropriations and classes are not in session

limiting disruptions related to product installation.

This seasonality makes our needs for cash vary significantly from quarter to quarter.

In addition to the cash flows generated by our ongoing operating activities we financed our operations during 2023 and 2022 with our Credit Facility with Whitehawk.

Prior to April 24, 2023, we maintained a delayed draw term loan of which we had $7.5 million available.

On April 24, 2023, we borrowed $3.0 million on our delayed draw term loan that was used for working capital purposes.

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

The $3.0 million was repaid during the third quarter of 2023.

To the extent not previously converted into the Company’s Class A common stock, the outstanding shares of our Series B preferred stock became redeemable at the option of the holders at any time or from time to time commencing on January 1, 2024 upon, 30 days’ prior written notice to the Company, for a redemption price, payable in cash, equal to the sum of (a) ($10.00) multiplied by the number of shares of Series B preferred stock being redeemed (the “Redeemed Shares”), plus (b) all accrued and unpaid dividends, if any, on such Redeemed Shares.

We may be required to seek alternative financing arrangements or restructure the terms of the agreement with the Series B preferred shareholders on terms that are not favorable to us if cash and cash equivalents are not sufficient to fully redeem the Series B preferred shares.

We are currently evaluating alternatives to refinance or restructure the Series B preferred shares including extending the maturity of the Series B preferred shares beyond the current optional conversion date.

Given the uncertainty surrounding global supply chains, global markets, and general global uncertainty as a result of the ongoing conflict between Russia and Ukraine and Israel and Hamas and the continuing COVID-19 pandemic, the availability of debt and equity capital has been reduced and the cost of capital has increased.

Furthermore, recent adverse developments affecting the financial services industry including events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions may lead to market-wide liquidity problems.

This in turn could result in a reduction in our ability to access funding sources and credit arrangements in amounts adequate to finance our current and future business operations.

Increasing our capital through equity issuance at this time could cause significant dilution to our existing stockholders.

However, while there can be no guarantee we will be able to access capital when needed, we are confident that the Company will be able to manage through the current challenges in the equity and debt finance markets by managing payment terms with our customers and vendors.

Cash and cash equivalents, along with anticipated cash flows from operations, may not provide sufficient liquidity for our working capital needs, debt service requirements or to maintain minimum liquidity requirements under our Credit Agreement, and we may need to raise capital to meet current working capital requirements including maintaining sufficient inventory levels to meet future sales demand.

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.

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

The non-compliance was cured by the Company paying $4.3 million, inclusive of $0.3 million in prepayment penalties and interest in November 2023 in order to bring the Company into compliance with the Senior Leverage Ratio at September 30, 2023.

The Company was not in compliance with its financial covenant related to the Senior Leverage Ratio under the Credit Agreement at December 31, 2023.

Although on March 14, 2024, the Loan Parties entered into the Fifth Amendment with the Collateral Agent and the Lender mainly for the purpose of (1) amending and restating the Senior Leverage Ratio and Minimum Liquidity (as defined in the Fifth Amendment), and (2) waiving any Event of Default that may have arisen directly as a result of the Financial Covenant Default (as defined in the Fifth Amendment), there can be no assurance that the Lender will not declare an event of default and acceleration of 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.

Following the Fifth Amendment to the Credit Agreement, the Senior Leverage ratio increased to 6.00 at March 31, 2024, remained at 2.00 at June 30, 2024 and 1.75 thereafter.

Because of the significant decreases in the required Senior Leverage Ratio within 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 a basis with 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-K.

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

We believe we have a good working capital relationship with our current lender.

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

Recent Financing

WhiteHawk Finance LLC

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lind Global Marco Fund and Lind Global Asset Management

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

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

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

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

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

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

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

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

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

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

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

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

Paycheck Protection Program Loan

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

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

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

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

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

Everest Display, Inc.

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

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

Accounts Receivable Financing – Sallyport Commercial Finance

On September 30, 2020, Boxlight Inc.

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

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

Advances against this agreement accrue

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

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

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

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

Other terms of the Accounts Receivable Agreement remained unchanged.

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

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

Other terms of the Accounts Receivable Agreement remain unchanged.

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

See Note 9 to the consolidated financial statements.

Off Balance Sheet Arrangements

9 unchanged sentences

Revenue Recognition

Business Acquisitions

Goodwill and Intangible assets

4 unchanged sentences

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

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

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

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

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

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

Interactive devices are generally sold with hardware maintenance services with terms

ranging from 36-60 months.

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

10 unchanged sentences

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

BUSINESS ACQUISITIONS

The Company’s business acquisitions are accounted for as a business combination, in accordance with Topic 350 “ Business Combinations ,” which requires, among other things, that assets acquired, and liabilities assumed be recognized at their estimated fair values as of the acquisition date on the consolidated balance sheet.

Transaction costs are expensed as incurred.

Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill.

Income taxes, where applicable, are recognized and measured in accordance with Topic 740, Accounting for Income Taxes.

For transactions occurring on or after January 1, 2021, contract liabilities acquired in a business combination are recognized and measured in accordance with Topic 606.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgement and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, and discount rates.

GOODWILL AND INTANGIBLE ASSETS

18 unchanged sentences

Intangible assets are amortized using the straight-line method over their estimated period of benefit.

We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.

We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised

estimates of useful lives or that indicate that impairment exists.

No material impairments of intangible assets have been identified during any of the periods presented.

Intangible assets are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach.

Intangible assets are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist using an undiscounted cash-flow approach.

The Company's annual impairment testing date normally occurs as of October 1, which facilitates the overall coordination and timing of our annual financial statement close cycle and the preparation of our annual report.

During the year ended December 31, 2023, due to triggering events, the Company performed Goodwill testing as of June 30, September 30, and December 31, 2023.

As of June 30, 2023, we determined that a triggering event had occurred as a result of our market capitalization that suggested one or more of the reporting units may have fallen below the carrying amounts.

In addition, changes in our reporting segments resulted in a change in the composition of our reporting units.

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

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

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

In analyzing goodwill for potential impairment in the quantitative impairment test, we used a combination of the income and market approaches to estimate the fair value.

Under the income approach, we calculated the fair value based on estimated future discounted cash flows.

The assumptions used are based on what we believe a hypothetical marketplace participant would use in estimating fair value and include the discount rate, projected average revenue growth and projected long-term growth rates in the determination of terminal values.

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

Based on the results of our interim test as of June 30, 2023, we concluded that the estimated fair value of each reporting unit exceeded the respective carrying value and, as such, we concluded that the goodwill assigned to each reporting unit, as of June 30, 2023, was not impaired.

As of 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 event 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.

As of December 31, 2023, the Company performed goodwill impairment testing as a result of another triggering event identified.

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

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

For the year ended December 31, 2023, the Company recorded goodwill impairment charges of $22.4 million and $2.8 million in the Americas and EMEA reporting units, respectively, which also represents total accumulated goodwill impairment charges for each reporting unit.

SHARE-BASED COMPENSATION

3 unchanged sentences

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

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

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

DERIVATIVE WARRANT LIABILITIES

1 unchanged sentence

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

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

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

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

7 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis