What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 197 added, 355 removed, 543 unchanged (50% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Loss

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

For the three months ended March 31, 2024 and 2023

(in thousands, except per share amounts)

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Revenues, net $ 37,093 $ 41,189

4 unchanged sentences

Research and development 1,171 597

Impairment of goodwill 13,226 — 13,226 —

Total operating expense 16,420 15,328

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

Loss from operations ( 3,605 ) ( 180 )

Other (expense) income:

1 unchanged sentence

Other expense, net ( 199 ) ( 22 )

Gain on settlement of liabilities, net — — — 856

Change in fair value of derivative liabilities 192 ( 224 )

Total other expense ( 2,614 ) ( 2,693 )

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

Loss before income taxes $ ( 6,219 ) $ ( 2,873 )

Income tax expense ( 870 ) ( 51 )

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

Net loss $ ( 7,089 ) $ ( 2,924 )

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

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

Net loss attributable to common stockholders $ ( 7,406 ) $ ( 3,241 )

Comprehensive loss:

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

Net loss $ ( 7,089 ) $ ( 2,924 )

Other comprehensive loss:

1 unchanged sentence

Total comprehensive loss $ ( 7,900 ) $ ( 2,366 )

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

Net loss per common share – basic and diluted, as adjusted $ ( 0.76 ) $ ( 0.35 )

Weighted average number of common shares outstanding – basic and diluted, as adjusted 9,714 9,366

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Balance Sheets

As of September 30, 2023 and December 31, 2022

As of March 31, 2024 and December 31, 2023

(in thousands, except share and per share amounts)

September 30,

2024 December 31,

(Unaudited) (as adjusted)

Current assets:

Cash and cash equivalents $ 11,812 $ 17,253

Accounts receivable – trade, net of allowances 40,421 31,009

Accounts receivable – trade, net of allowances for credit losses of 357 and 421

26,519 29,523

Inventories, net of reserves 39,155 44,131

4 unchanged sentences

Intangible assets, net of accumulated amortization 43,815 45,964

Goodwill 11,969 25,092

Other assets 880 906

28 unchanged sentences

Accumulated deficit ( 111,364 ) ( 104,275 )

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

Accumulated other comprehensive income 490 1,301

Total stockholders’ equity 9,083 16,751

3 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended September 30, 2023

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

Shares issued for:

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

Stock compensation — — — — 671 — — 671

Foreign currency translation — — — — — ( 2,854 ) — ( 2,854 )

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

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

For the three months ended March 31, 2024

(in thousands, except share amounts)

3 unchanged sentences

Comprehensive

Loss Accumulated

Income (loss) Accumulated

Deficit Total

1 unchanged sentence

Balance as of December 31, 2023 167,972 $ — 9,704,496 $ 1 $ 119,724 $ 1,301 $ ( 104,275 ) $ 16,751

Cumulative effect of change in accounting principle, net of tax — — — — — — ( 76 ) ( 76 )

Balance as of December 31, 2022 - as adjusted 167,972 — 9,339,587 1 117,849 ( 914 ) ( 65,119 ) 51,817

Shares issued for:

Stock options exercised — — 12,500 — 13 — — 13

Vesting of restricted share units — — 73,229 — — — — —

Reverse stock split fractional adjustment — — 33,414 — — — — —

Stock compensation — — — — 549 — — 549

2 unchanged sentences

Net loss — — — — — — ( 7,089 ) ( 7,089 )

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 three months ended September 30, 2022, as adjusted

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

Shares issued for:

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

Foreign currency translation — — — — — ( 5,040 ) — ( 5,040 )

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

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

Balance as of March 31, 2024 167,972 $ — 9,777,725 $ 1 $ 119,956 $ 490 $ ( 111,364 ) $ 9,083

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

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

For the three months ended March 31, 2023, as adjusted

(in thousands, except share amounts)

7 unchanged sentences

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

Cumulative effect of change in accounting principle, net of tax — — — — — — ( 76 ) ( 76 )

Balance as of December 31, 2022 - as adjusted 167,972 $ — 9,339,587 $ 1 $ 117,849 $ ( 914 ) $ ( 65,119 ) $ 51,817

Shares issued for:

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 — — — — —

Vesting of restricted share units — — 45,246 — — — — —

Stock compensation — — — — 627 — — 627

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

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

Foreign currency translation — — — — — 558 — 558

1 unchanged sentence

Net loss — — — — — — ( 2,924 ) ( 2,924 )

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

Balance as of March 31, 2023 167,972 $ — 9,384,833 $ 1 $ 118,159 $ ( 356 ) $ ( 68,043 ) $ 49,761

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2023 and 2022

For the three months ended March 31, 2024 and 2023

(in thousands)

Nine Months Ended

September 30,

2023 September 30,

Three Months Ended

2024 March 31,

Cash flows from operating activities:

Net loss $ ( 7,089 ) $ ( 2,924 )

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

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

Amortization of debt premium, discount and issuance cost 592 456

Bad debt expense ( 197 ) 9

Gain on settlement of liabilities — ( 856 )

Provision for credit losses 129 ( 10 )

Changes in deferred tax assets and liabilities ( 323 ) ( 121 )

4 unchanged sentences

Depreciation and amortization 2,069 2,263

Impairment of goodwill 13,226 —

Change in right of use assets and lease liabilities 1 160

2 unchanged sentences

Inventories 4,735 13,571

Prepaid expenses and other assets ( 602 ) ( 41 )

Prepaid expenses and other current assets ( 1,086 ) 122

Other assets 22 ( 229 )

2 unchanged sentences

Deferred revenues 105 ( 171 )

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

Net cash used in operating activities $ ( 1,942 ) $ ( 1,903 )

Cash flows from investing activities:

Asset acquisition — ( 100 )

Purchases of furniture and fixtures, net ( 394 ) ( 81 )

1 unchanged sentence

Cash flows from financing activities:

Proceeds from short-term debt 3,000 —

Proceeds from long-term debt — 2,500

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

Principal payments on long term debt ( 2,307 ) ( 670 )

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

Payments of fixed dividends to Series B Preferred stockholders ( 317 ) ( 317 )

Proceeds from the exercise of options and warrants 13 70

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

Net cash used in financing activities $ ( 2,624 ) $ ( 987 )

Effect of foreign currency exchange rates ( 481 ) ( 346 )

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

Net decrease in cash and cash equivalents ( 5,441 ) ( 3,317 )

Cash and cash equivalents, beginning of the period 17,253 14,591

5 unchanged sentences

Addition of operating lease liabilities $ 52 $ 26

Shares issued for asset acquisition $ — $ 150

See accompanying notes to unaudited condensed consolidated financial statements.

4 unchanged sentences

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.

Boxlight’s solutions include interactive displays, audio and other accessory products, software, and professional services.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Boxlight and its wholly owned subsidiaries (collectively, the “Company”).

The accompanying unaudited condensed consolidated financial statements include the accounts of Boxlight and its direct and indirect wholly owned subsidiaries (collectively, the “Company”).

All significant intercompany balances and transactions have been eliminated in consolidation.

6 unchanged sentences

The December 31, 2023 balance sheet included herein was derived from the Company’s audited consolidated financial statements, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

Effective January 1, 2023, the Company’s internal reporting structure used by the chief operating decision maker (or CODM) changed resulting in changes to the Company’s segment reporting to align such reporting with the geographic markets in which the Company operates, as further discussed below and in Note 16 - Segments.

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

ESTIMATES AND ASSUMPTIONS

8 unchanged sentences

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.

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

All of the agreements include existing conversion language in the event of a stock split and thus did not result in modification accounting or additional incremental expense as a result of this transaction.

agreements include existing conversion language in the event of a stock split and thus did not result in modification accounting or additional incremental expense as a result of this transaction.

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 September 30, 2023.

There are presently no shares of Class B common stock outstanding, and none were outstanding as of March 31, 2024.

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.

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

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

On March 14, 2024 the Company entered into a fifth agreement (the 'Fifth Amendment') with the Collateral Agent and Lender which waived any Event of Default that may have arisen directly as a result of the financial covenant default at December 31, 2023 and in the interim two-month period ended February 29, 2024.

The Fifth Amendment also restated the Senior Leverage Ratio and Minimum Liquidity requirements.

Under the Amended agreement, the Senior Leverage Ratio requirement at March 31, 2024 was amended from 2.00 to 6.00 , at June 30, 2024 will remain at 2.00 and thereafter will remain at 1.75 .

The Company was in compliance with all financial covenants at March 31, 2024.

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.

1 unchanged sentence

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.

The Company is actively working to refinance its debt with new lenders.

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.

The Company has a good working relationship with its current banking partner.

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

To the extent not 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.

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.

2 unchanged sentences

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.

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 Company has determined that the estimated fair value of debt approximates its carrying value, excluding premiums, discounts, and issuance costs.

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.

Derivative liabilities are recorded at fair value on a recurring basis.

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

There were no transfers into or our of Level 3 measurements in 2024 and 2023.

The following table sets forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in thousands):

Description Markets for

2 unchanged sentences

(Level 3) Carrying

September 30,

Derivative liabilities - warrant instruments — — $ 13 $ 13

6 unchanged sentences

(in thousands)

Balance, June 30, 2023 $ 512

Change in fair value of derivative liabilities ( 90 )

Balance, September 30, 2023 $ 422

(in thousands)

Balance, December 31, 2023 $ 205

Change in fair value of derivative liabilities ( 192 )

Balance, September 30, 2023 $ 422

(in thousands)

Balance, June 30, 2022 $ 1,414

Change in fair value of derivative liabilities 113

Balance, September 30, 2022 $ 1,527

Balance, March 31, 2024 $ 13

(in thousands)

1 unchanged sentence

Change in fair value of derivative liabilities 224

Balance, September 30, 2022 $ 1,527

INCOME (LOSS) PER COMMON SHARE

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

Balance, March 31, 2023 $ 696

LOSS PER COMMON SHARE

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

For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting, and warrants to purchase common stock were considered to be common stock equivalents.

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

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

The dilutive effect of options to purchase common stock, restricted stock units subject to vesting and other share-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period.

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 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.

For the three months ended March 31, 2024, 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, 0.2 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.

For t he three month ended March 31, 2023 , potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 0.8 million shares from options to purchase shares of common stock and 0.3 million of unvested restricted stock units 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.

16 unchanged sentences

For software product sales, control is transferred when the customer receives the related interactive hardware since the customer’s connection to the interactive hardware activates the software license at which time the software is made available to the customer.

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

For the Company’s software maintenance,

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

The Company excludes all taxes assessed by a governmental agency that are both imposed on and concurrent with the specific revenue-producing transaction from revenue (for example, sales and use taxes).

In essence, the Company is reporting these amounts collected on behalf of the applicable government agency on a net basis as though they are acting as an agent.

The taxes collected and not yet remitted to the governmental agency are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Significant Judgments

4 unchanged sentences

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

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

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

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.

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

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

13 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 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.

The Company had no material contract assets as of March 31, 2024 or December 31, 2023.

During the three months ended March 31, 2024 and March 31, 2023, respectively, the Company recognized $ 2.3 million and $ 2.1 million of revenue that was included in the deferred revenue balance as of December 31, 2023 and December 31, 2022, respectively.

Variable Consideration

4 unchanged sentences

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

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

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

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

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

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

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

There was no material revenue recognized in the three months ended March 31, 2024 related to changes in estimated variable consideration that existed at December 31, 2023.

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 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.

As of March 31, 2024 and December 31, 2023, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $ 25.0 million.

The Company expects to recognize revenue on 35.5 % of the remaining performance obligations during the next 12 months, 28.8 % in the following 12 months, 20.5 % in the 12 months ended March 31, 2026, 11.4 % in the 12 months ended March 31, 2027, with the remaining 3.8 % 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

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:

Professional services 45 1,359 872 2,192

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

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

(in thousands)

Product revenue $ 34,435 $ 38,681

Service revenue 2,658 2,508

Total revenues, net $ 37,093 $ 41,189

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.

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

Total deferred commissions, net of accumulated amortization, as of March 31, 2024 and December 31, 2023 was $ 0.6 million.

The Company has not historically incurred any material fulfillment cost that meet the criteria for capitalization.

SEGMENT REPORTING

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Our CODM is our Chief Executive Officer.

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

The Company previously managed the Company as one operating segment.

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

The Company’s operations are organized, managed and classified into three reportable segments – EMEA, North and Central America (the “Americas”) and all other geographic regions (“Rest of World”).

Our EMEA segment consists of the operations of Sahara Holding Limited and its subsidiaries (the “Sahara Entities”).

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

RECENTLY ADOPTED ACCOUNTING STANDARDS

In June 2016, the FASB issued ASU No.

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

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

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

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

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

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

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

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

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

ACCOUNTING STANDARDS PENDING ADOPTION

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280.

The enhanced disclosure requirements include:

title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances.

This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024.

This change will apply retrospectively to all periods presented.

The Company is currently evaluating the impact of this ASU on its financial statements.

The adoption of this ASU is not expected to result in significant changes to the Company's current segment disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid.

This change is effective for annual periods beginning after December 15, 2024.

This change will apply on a prospective basis to annual financial statements for periods beginning after the effective date.

However, retrospective application in all prior periods presented is permitted.

The Company is currently evaluating the impact of this ASU on its financial statements.

NOTE 2 – ACCOUNTS RECEIVABLE - TRADE

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

Accounts receivable consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

Accounts receivable – trade $ 29,827 $ 33,089

Allowance for doubtful accounts ( 315 ) ( 414 )

Allowance for credit losses ( 357 ) ( 421 )

Allowance for sales returns and volume rebates ( 2,951 ) ( 3,145 )

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NOTE 3 – INVENTORIES

Inventories are stated at the lower of cost or net realizable value and include spare parts and finished goods.

Inventories are primarily determined using specific identification and the first-in, first-out (“FIFO”) cost methods.

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

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

Inventories consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

Finished goods $ 40,711 $ 45,461

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Reserve for inventory obsolescence ( 2,627 ) ( 2,551 )

Advanced shipping costs 940 1,384

Inventories, net $ 39,155 $ 44,131

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

Prepaid expenses and other current assets consisted of the following at March 31, 2024 and December 31, 2023 (in thousands):

Prepayments to vendors $ 2,805 $ 3,176

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Prepaid expenses and other current assets $ 8,999 $ 9,471

NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

Prepaid expenses and other current assets as of March 31, 2024 and December 31, 2023 are net of reserves of $ 1.4 million related to vendor receivables.

NOTE 5 – INTANGIBLE ASSETS

Intangible Assets

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

Intangible assets consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

Useful lives 2024 2023

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Intangible assets, net of accumulated amortization $ 43,815 $ 45,964

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 $ 22.4 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.

As of June 30, 2023, the Company 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, the Company used a combination of the income and market approaches to estimate the fair value.

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

The assumptions used are based on what the Company believes 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, the Company estimated the fair value based on market multiples of revenue or earnings before interest, income taxes, depreciation, and amortization for benchmark companies.

If the fair value exceeds carrying value, then no further testing is required.

However, if the fair value were to be less than carrying value, the Company would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the goodwill exceeded its implied value.

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.

For the three months ended March 31, 2024 and 2023, the Company recorded amortization expense of $ 1.9 million and $ 2.1 million, respectively.

Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately ($ 0.5 ) million as of March 31, 2024 and ($ 0.1 ) million as of December 31, 2023.

NOTE 6 – LEASES

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

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

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

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

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

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.

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

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

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

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

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

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

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

As of March 31, 2024, the Company had no leases classified as finance leases.

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

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.

Operating lease expense was $ 630 thousand and $ 564 thousand for the three months ended March 31, 2024 and 2023, respectively.

Variable and short-term lease cost was $ 528 thousand for the three months ended March 31, 2024.

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

Cash paid for amounts included in the measurement of lease liabilities was $ 466 thousand and $ 621 thousand for the three months ended March 31, 2024 and 2023, respectively.

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

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Thereafter 6,708

Less imputed interest ( 1,112 )

Total $ 8,676

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

Total lease liabilities 13,890

Imputed interest ( 4,923 )

Present value of lease liabilities $ 8,967

The following is supplemental lease information as of March 31, 2024 and December 31, 2023:

Weighted-average remaining lease term (years) 10.0 9.9

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NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

Accounts payable and accrued expenses consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

Accounts payable $ 18,754 $ 27,448

Accrued expense and other 5,892 5,847

Accounts payable and other liabilities $ 35,988 $ 36,566

Accrued expenses and other 5,808 5,106

Other 123 345

Accounts payable and accrued expenses $ 24,685 $ 32,899

NOTE 8 – DEBT

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

The following is a summary of the Company’s debt as of March 31, 2024 and December 31, 2023 (in thousands):

Debt – Third Parties

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Whitehawk Finance LLC

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”).

In order to finance the acquisition of FrontRow Calypso LLC (“FrontRow”), which closed on December 31, 2021, and to refinance the Company's then existing note payable, 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 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.

The Initial Loan and Delayed Draw are collectively referred to as the “Term Loans.” The Term Loans are secured by substantially all of the assets of the Company.

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.

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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 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.

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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.

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

On March 14, 2024, the Company entered into a fifth amendment (the "Fifth Amendment') with the Collateral Agent and Lender 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).

The Fifth Amendment also added additional financial reporting obligations and potentially may include certain foreign subsidiaries of Boxlight Inc.

as additional guarantors under the Credit Agreement.

During the three months ended March 31, 2024, the Company repaid principal of $ 2.3 million and interest of $ 1.8 million to Whitehawk.

Covenant Compliance and Liquidity Considerations

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.

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.

The waiver did not amend the maturity date of the Credit Agreement.

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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.

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

The non-compliance was cured by a waiver applied in accordance with the Fifth Amendment to the Credit Agreement dated March 14, 2024 which waived any Event of Default that may have arisen directly as a result of the financial covenant default at December 31, 2023 and in the interim two-month period ended February 29, 2024.

The Fifth Amendment also amended and restated the Senior Leverage Ratio and Minimum Liquidity requirements.

Under the Fifth Amendment, the Senior Leverage Ratio requirement at March 31, 2024 was amended from 2.00 to 6.00 , at June 30, 2024 will remain at 2.00 and thereafter will remain at 1.75 .

The Company was in compliance with all financial covenants as of March 31, 2024.

In February 2024, the Company paid $ 1.7 million, inclusive of a $ 0.1 million pre-payment penalty, to Whitehawk to maintain compliance with the borrowing base covenant calculation as of January 31, 2024.

After the payment the Company was in compliance with the borrowing base covenant.

Issuance Cost and Warrants

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The Whitehawk warrants were repriced to $ 8.80 and shares increased to 464,385 .

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 our lender on May 5, 2022, extending the payoff date until May 2025.

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

NOTE 9 – DERIVATIVE LIABILITIES

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Conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future.

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 September 30, 2023 and December 31, 2022.

September 30, 2023

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 March 31, 2024 and December 31, 2023.

March 31, 2024

Common stock issuable upon exercise of warrants 464,385

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Three Months Ended

September 30, Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

United States $ ( 6,109 ) $ ( 3,515 )

Foreign ( 110 ) 642

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 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.

Income taxes have been provided in accordance with ASC-740-270, based upon the tax laws and rates of the countries in which operations are conducted.

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 in which the carryforward applies.

Total pretax book loss $ ( 6,219 ) $ ( 2,873 )

The Company recorded income tax expense of $ 0.9 million and $ 51 thousand for the three months ended March 31, 2024 and 2023, respectively.

The effective tax rate was ( 14.0 )% and ( 1.8 )% for the three months ended March 31, 2024 and 2023.

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

The increase in income tax expense year-over-year is primarily due to higher U.S.

taxes related to interest expense and increased net operating loss ("NOL") limitations for the three months ended March 31, 2024 as compared to the prior year.

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

Income taxes have been provided based upon the tax laws and rates of the countries in which operations are conducted and income is earned.

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 its 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.

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

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net operating loss carryforwards.

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

Additionally, because U.S.

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

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

This includes the deferred tax liability recorded during 2021 for the acquisition of Interactive Concepts.

Based on its long history of cumulative losses in those jurisdictions, it believes it is appropriate to maintain a full valuation allowance on its net deferred tax asset at March 31, 2024 and December 31, 2023.

The Company has determined that it likely underwent IRC Sec 382 ownership changes in prior years.

The Company is in the process of evaluating the Section 382 impact to determine what portion of its NOLs will be utilizable in the future.

It is expected that the ownership change caused a limitation on the net operating losses generated before 2020.

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

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

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Statutes of limitations vary in other immaterial jurisdictions.

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

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

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

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

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This amount includes $ 24 thousand of income tax and $ 65 thousand of penalties and interest.

The Company has not identified any other material uncertain tax positions during the nine months ended September 30, 2023.

The Company has not identified any other material uncertain tax positions during the three months ended March 31, 2024.

The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%.

Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax rate by January 1, 2025.

We are currently evaluating the potential impact of the rules on our consolidated financial statements and related disclosures.

NOTE 11 – EQUITY

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

and (4) 48,280,000 shares of “blank check” preferred stock to be designated by the Company’s board of directors.

and (4) Remaining shares of “blank check” preferred stock to be designated by the Company’s board of directors.

Each authorized series of preferred stock is described below.

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

All of the Series A preferred stock was convertible into 49,801 shares of Class A common stock, at the discretion of the Series A stockholder.

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 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.

As of March 31, 2024, 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

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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 September 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 March 31, 2024, 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.

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

As of September 30, 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

Securities Purchase Agreement

On July 22, 2022, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited institutional investor (the “Investor”) pursuant to which the Company agreed to issue and sell, in a registered direct offering directly to the Investor, (i) 875,000 shares of the Company’s Class A common stock, par value of $ 0.0001 per share, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase 44,118 shares of common stock at an exercise price of $ 0.0008 per share, which Pre-Funded Warrants were issued in lieu of shares of common stock to ensure that the Investor did not exceed certain beneficial ownership limitations, and (iii) warrants to purchase an aggregate of 919,118 shares of common stock at an exercise price of $ 5.44 per share (the “Warrants,” and collectively with the Pre-Funded Warrants and the Shares, the “Securities”).

The Securities were sold at a price of $ 5.44 per share for total gross proceeds to the Company of $ 5.0 million (the “Offering”), before deducting estimated offering expenses, and excluding the exercise of any Warrants or Pre-Funded Warrants.

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

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

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

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

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

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

The Company evaluated whether the Warrants, Pre-Funded Warrants and/or Shares were within the scope of ASC 480 which discusses the accounting for instruments with characteristics of both liabilities and equity.

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

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

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

Credit Facility

In conjunction with its receipt of the Whitehawk loan, the Company issued to Whitehawk 66,022 shares of Class A common stock, which were registered pursuant to the Company’s existing shelf registration statement and were delivered to Whitehawk in January 2022.

As of March 31, 2024 and December 31, 2023, the Company had 9,777,725 and 9,704,496 shares of Class A common stock issued and outstanding, respectively.

No Class B shares were outstanding as of March 31, 2024 or December 31, 2023.

The Company had equity warrants outstanding of 921,462 and 921,306 as of March 31, 2024 and December 31, 2023, respectively.

Repurchase Plan

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

As of March 31, 2024, the Company has not utilized the Repurchase Program.

NOTE 12 – STOCK COMPENSATION

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(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 September 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 March 2022, 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 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.

During the year ended December 31, 2023, the Company cancelled 384,340 shares of previously issued awards such that the Company is under the authorized number of share awards.

Stock Options

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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 nine months ended September 30, 2023:

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 as they occur.

The following is a summary of the option activities during the three months ended March 31, 2024:

Number of Units

Outstanding, December 31, 2023 348,259

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 nine months ended September 30, 2023:

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

exercise price of $ 2.48 to $ 3.20 ;

risk free interest rate, 4.19 % to 4.22 %;

expected term, 3 years to 4 years;

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

Forfeited ( 4,138 )

Outstanding, March 31, 2024 344,121

Exercisable, March 31, 2024 303,160

Restricted Stock Units

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

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

The following is a summary of the RSU activities during the three months ended March 31, 2024:

Number of Units

Outstanding, December 31, 2023 408,451

Granted 498,398

Vested ( 73,229 )

Forfeited ( 170,202 )

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.

Outstanding, March 31, 2024 165,020

Stock Compensation Expense

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

For the three months ended March 31, 2024 and 2023, the Company recorded the following stock compensation in general and administrative expense (in thousands):

Three Months Ended

Stock options $ 104 $ 169

Restricted stock units 444 471

Warrants 1 1 2 2

Total stock compensation expense $ 549 $ 641

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

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

For the 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.

The agreement, unless cancelled, will automatically renew on December 31, 2024.

For the three months ended March 31, 2024 and 2023, the Company paid $ 79 thousand and $ 12 thousand under the agreement, respectively.

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

The Management Agreement is separate and apart from Mr.

Pope’s employment agreement with the Company.

The Management Agreement will become effective as of the first day of the same month that Mr.

Pope’s employment with the Company terminates.

Thereafter, and for a term of 13 months, Mr.

The Management Agreement is effective as of the first day of the same month that Mr.

Pope's employment with the Company terminates, and for a period of 13 months, in which Mr.

Pope will provide consulting services to the Company including sourcing and analyzing strategic acquisitions, assisting with financing activities, and other services.

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

On January 4, 2024, Mr.

Pope's employment with the Company terminated at which time his Management Agreement became effective.

For the three months ended March 31, 2024, the Company paid $ 109 thousand under the agreement.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

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

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

As of March 31, 2024, the total amount of such open inventory purchase orders was $ 25.8 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 nine months ended September 30, 2023 and 2022.

There was no particular customer that accounted for greater than 10% of the Company's consolidated revenues for the three months ended March 31, 2024.

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

Details are as follows:

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total revenues

for the nine months ended

September 30,

for the three months ended

2024 Accounts

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the customer as of

September 30,

(in thousands) Total revenues

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total revenues

for the nine months ended

September 30,

for the three months ended

2023 Accounts

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the customer as of

September 30,

(in thousands)

1 — % $ — 14.1 % $ 3,362

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.

For the three months ended March 31, 2024, the Company’s purchases were concentrated primarily with one vendor .

For the three months ended March 31, 2023, the Company's purchases were not concentrated with any particular vendor.

Details are as follows:

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total cost of

the nine months ended

September 30,

the three months ended

2024 Accounts payable

to the vendor

September 30,

(in thousands) Total purchases

from the vendors

from the vendor

as a percentage

of total cost of

the nine months ended

September 30,

the three months ended

2023 Accounts payable

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the vendors as of

September 30,

(in thousands)

1 47.6 % $ 12,166 — % $ —

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.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Americas $ 17,530 $ 21,066

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Eliminations and Adjustments (1)

69 ( 130 ) 26 ( 170 )

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

Total Loss from Operations $ ( 3,605 ) $ ( 180 )

(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,

2024 December 31,

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NOTE 17 – SUBSEQUENT EVENTS

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.

On April 19, 2024, the Company entered into the sixth amendment with the Collateral Agent and Lender (the "Sixth Amendment").

The Sixth Amendment provided the Company with an additional $ 2.0 million working capital bridge loan on April 19, 2024 and agreed to provide the Company with an additional $ 3.0 million working capital bridge loan in June 2024, provided, that the Company is then in compliance with certain financial covenants (as defined in the Credit Agreement), including its Senior Leverage Ratio.

The Company is required to pay a fee equal to 6.00 % of the aggregate amount of borrowings under the Sixth Amendment.

Both working capital bridge loans are due and payable in full on November 29, 2024.

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