What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-08 · 116 added, 34 removed, 165 unchanged (48% of the section changed)

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Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

Unless the context otherwise requires, the terms “the Company,” “we,” “us,” and “our” in this Quarterly Report refer to Boxlight Corporation and its consolidated direct and indirect subsidiaries, and the term “Boxlight” refers to Boxlight Inc., a Washington corporation and a wholly owned subsidiary of Boxlight Corporation.

The terms “quarter” and “year to date” refer to our quarter ending June 30 th .

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (including the section regarding Management’s Discussion and Analysis and Results of Operations, the "Quarterly Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.

These statements are only prediction, and are based on our management’s belief and assumptions and on information currently available to our management.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Factors that may cause actual results to differ materially from current expectations include, among other things

• our ability to comply with certain covenants, minimum liquidity and borrowing base requirements under our existing credit agreement and our ability to continue to operate as a going concern;

• our indebtedness, a substantial amount of which is bearing interest at a variable rate;

• our ability to maintain a listing of our Class A common stock on Nasdaq Capital Market;

• changes in the sales of our display products;

• seasonal fluctuations in our business;

• changes in our working capital requirements and cash flow fluctuations;

• competition in our industry;

• our ability to enhance our products and to develop, introduce and sell new technologies and products at competitive prices and in a timely manner;

• our reliance on resellers and distributors to promote and sell our products;

• the success of our strategy to increase sales in the business and government market;

• changes in market saturation for our products;

• challenges growing our sales in foreign markets;

• our dependency on third-party suppliers;

• our reliance on highly skilled personnel;

• our ability to enter into and maintain strategic alliances with third parties;

• unfavorable global economic or political conditions, including the ongoing conflict between Russia and Ukraine, and Israel and Hamas;

• war, terrorism, other acts of violence, or potential effects of future pandemics;

• a breach in security of our electronic data or our information technology systems, including any cybersecurity attack;

• our ability to keep pace with developments in technology;

• changes in the spending policies or budget priorities for government funding of schools, colleges, universities, other education providers or government agencies;

• consumer product and environmental laws;

• risks inherently related to our foreign operations;

• our compliance with the Foreign Corrupt Practices Act;

• income taxation for our worldwide operations;

• our ability to ship and transport components and final products efficiently and economically across long distances and borders;

• compliance with export control laws;

• fluctuations in foreign currencies;

• unstable market and economic conditions and potential disruptions in the credit markets;

• defects in our products and detection thereof;

• patents or other intellectual property rights necessary to protect our proprietary technology and business;

• assertions against us relating to intellectual property rights;

• our ability to anticipate consumer preferences and successfully develop attractive products;

• our ability to develop, implement and maintain an effective system of internal control over financial reporting;

• and those other risks referenced herein, including those risks referred to in Part II, Item 1A–“Risk Factors” in this Quarterly Report and those risks discussed in our other filings with the Securities and Exchange Commission (“SEC”), including those risks discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which discussion is incorporated herein by this reference.

Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits thereto completely and with the understanding that our actual future results may be materially different from what we expect.

Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

We are a technology company that is seeking to become a world-wide leading innovator and integrator of interactive products and software for schools, education, business, and government interactive spaces.

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Our EMEA segment consists of the operations of Sahara Holding Limited and its subsidiaries.

Our Americas segment consists primarily of Boxlight, Inc.

and its subsidiaries, and the Rest of World segment consists primarily of Boxlight Australia , PTY LTD (“Boxlight Australia”) .

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

professional services.

Our Americas segment consists primarily of the operations of Boxlight, Inc.

and its subsidiaries, and the Rest of World segment consists primarily of the operations of Boxlight Australia , PTY LTD (“Boxlight Australia”) .

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

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Product revenue is derived from the sale of our hardware (interactive projectors), flat panels, peripherals, and accessories, along with other third-party products, directly to our customers, as well as through our network of domestic and international distributors.

• Professional development revenue.

• Professional service revenue.

We receive revenue from providing professional development services through third parties and our network of distributors.

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changes in product costs related to the release of projector models;

and component, contract manufacturing and supplier pricing and foreign currency exchange.

and component, contract manufacturing and supplier pricing, freight, duties, and other shipping costs, and foreign currency exchange.

As we primarily procure our product components and manufacture our products in Asia, our suppliers incur many costs, including labor costs, in other currencies.

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Operating Results – Boxlight Corporation

For the three-month periods ended March 31, 2024 and 2023

Total revenues for the three months ended March 31, 2024 were $37.1 million as compared to $41.2 million for the three months ended March 31, 2023, resulting in a 9.9% decrease.

The decrease in revenues was due to lower sales volum e primarily in the U.S.

For the three-month periods ended June 30, 2024 and 2023

Total revenues for the three months ended June 30, 2024 were $38.5 million as compared to $47.1 million for the three months ended June 30, 2023, resulting in a 18.1% decrease.

The decrease in revenues was primarily due to lower sales volume across all markets primarily resulting from lower global demand for interactive flat panel displays.

Cost of Revenues.

Cost of revenues for the three months ended March 31, 2024 were $24.3 million as compared to $26.0 million for the three months ended March 31, 2023, resulting in a 6.8% decrease.

Cost of revenues for the three months ended June 30, 2024 were $24.0 million as compared to $29.2 million for the three months ended June 30, 2023, resulting in a 17.9% decrease.

The decrease in cost of revenues was attributable to the decrease in units sold.

Gross Profit.

Gross profit for the three months ended March 31, 2024 was $12.8 million as compared to $15.1 million for the three months ended March 31, 2023, a decrease of 15.4%.

Gross profit margin was 34.5% for the three months ended March 31, 2024 and 36.8% for the three months ended March 31, 2023.

Gross profit for the three months ended June 30, 2024 was $14.5 million as compared to $17.8 million for the three months ended June 30, 2023, a decrease of 18.5%.

The gross profit margin was 37.7% for the three months June 30, 2024 and 37.9% for the three months ending June 30, 2023.

The decrease in gross profit margin is primarily related to the decrease in sales volume noted above.

General and Administrative Expenses.

General and administrative expenses for the three months ended June 30, 2024 were $12.3 million, representing 32.0% of revenue as compared to $15.2 million or 32.4% of revenue for the three months ended June 30, 2023.

The decrease was due to planned initiatives to reduce operating expenses across all cost groups, with the largest declines in employee-related expenses of $0.7 million, professional fees of $0.5 million, and stock compensation expense of $0.3 million.

Research and Development Expenses.

Research and development expenses were $985 thousand and $525 thousand for the three months ended June 30, 2024 and 2023 , respectively, and representing 2.6% of revenue for the three months ended June 30, 2024, and 1.1% of revenue for the three months ended June 30, 2023.

Other Expense.

Other expense, net for the three months ended June 30, 2024 was $2.8 million as compared to $2.6 million for the three months ended June 30, 2023 , representing an increase of $0.2 million .

Other expense consists primarily of interest expense on our term loan.

Income Tax Benefit (Expense).

Income tax benefit for the three months ended June 30, 2024 was $91 thousand , as compared to income tax expense of $255 thousand for the three months ended June 30, 2023.

The decrease in tax expense year-over-year is largely due to foreign pretax book income for the three months ended June 30, 2024 as compared to foreign pretax loss for the three months ended June 30, 2023 .

Net (Loss) Income.

Net loss was $1.5 million and $0.8 million for the three months ended June 30, 2024 and June 30, 2023 and was a result of the changes noted above.

For the six-month periods ended June 30, 2024 and 2023

Total revenues for the six months ended June 30, 2024 were $75.6 million as compared to $88.2 million for the six months ended June 30, 2023, resulting in a 14.3% decrease.

The decrease in revenues was due to lower sales volum e across all markets primarily resulting from lower global demand for interactive flat panel displays.

Cost of Revenues.

Cost of revenues for the six months ended June 30, 2024 were $48.3 million as compared to $55.3 million for the six months ended June 30, 2023, resulting in a 12.7% decrease.

The decrease in cost of revenues was attributable to the decrease in units sold.

Gross Profit.

Gross profit for the six months ended June 30, 2024 was $27.3 million as compared to $33.0 million for the six months ended June 30, 2023, a decrease of 17.1%.

Gross profit margin was 36.2% for the six months ended June 30, 2024 and 37.4% for the six months ended June 30, 2023.

The decrease in gross profit margin is primarily related to a difference in product mix compared to the prior year quarter.

General and Administrative Expenses.

General and administrative expenses for the three months ended March 31, 2024 were $15.2 million, representing 41.1% of revenue as compared to $14.7 million representing 35.8% of revenue for the three months ended March 31, 2023.

The increase in general and administrative expenses for the period ended March 31, 2024 can be attributed primarily to severance charges of approximately $0.9 million related to recent headcount reductions.

General and administrative expenses for the six months ended June 30, 2024 were $27.6 million, representing 36.5% of revenue as compared to $30.0 million representing 33.9% of revenue for the six months ended June 30, 2023.

The decrease in general and administrative expenses for the period ended June 30, 2024 was due to planned initiatives to reduce operating expenses across all cost groups, with the largest declines in employee-related expenses of $0.4 million, stock compensation expense of $0.4 million, and distribution costs of $0.6 million.

Research and Development Expenses.

Research and development expenses for the three months ended March 31, 2024 and 2023 were $1.2 million and $0.6 million, respectively and represented 3.2% and 1.4% of revenue, respectively.

The increase can be attributable to new research and development projects that began during the prior year.

Research and development expenses for the six months ended June 30, 2024 and 2023 were $2.2 million and $1.1 million, respectively and represented 2.9% and 1.3% of revenue, respectively.

The increase can be attributable to the allocation of certain general and administrative expenses to new and ongoing research and development projects.

Other Expense.

Other expense, net for the three months ended March 31, 2024 was $2.6 million as compared to $2.7 million for the three months ended March 31, 2023 , representing a decrease of $0.1 million .

The decrease was due to a $0.4 million change in the fair value of derivative liabilities, offset by a $0.2 million increase in interest expense, and a $0.1 million increase in foreign currency transaction losses during the three months ended March 31, 2023.

Other expense, net for the six months ended June 30, 2024 was $5.4 million as compared to $5.3 million for the six months ended June 30, 2023 , representing a decrease of $0.1 million.

Other expense consists primarily of interest expense on our term loan.

Income Tax Expense.

Income tax expense for the three months ended March 31, 2024 was $0.9 million, as compared to a $51 thousand for the three months ended March 31, 2023.

Income tax expense for the six months ended June 30, 2024 was $779 thousand, as compared to a $306 thousand for the six months ended June 30, 2023.

The increase in tax expense is primarily due to higher U.S.

taxes related to interest expense and increased net operating loss limitations.

Net loss was $7.1 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively, and was a result of the changes noted above.

Net loss was $8.6 million and $3.7 million for the six months ended June 30, 2024 and 2023, respectively, and was a result of the changes noted above.

Use of Non-GAAP financial measures

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(in thousands) Three Months Ended

March 31, 2024 Three Months Ended

March 31, 2023

June 30, 2024 Three Months Ended

June 30, 2023 Six Months Ended

June 30, 2024 Six Months Ended

June 30, 2023

Net Loss $ (1,478) $ (811) $ (8,567) $ (3,735)

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Liquidity and Capital Resources

As of March 31, 2024, we had cash and cash equivalents of $11.8 million, a working capital balance of $46.6 million, and a current ratio of 2.17.

On March 31, 2023, we had $11.3 million of cash and cash equivalents, a working capital balance of $61.6 million, and a current ratio of 2.75.

For the three months ended March 31, 2024 and 2023, we had net cash used in operating activities of $1.9 million.

We had net cash used in investing activities of $394 thousand and $81 thousand for the three months ended March 31, 2024 and 2023, respectively.

As of June 30, 2024, we had cash and cash equivalents of $7.5 million, a working capital balance of $46.7 million, and a current ratio of 2.21.

On June 30, 2023, we had $15.6 million of cash and cash equivalents, a working capital balance of $64.8 million, and a current ratio of 2.79.

For the six months ended June 30, 2024 and 2023, we had net cash used in and provided by operating activities of $7.3 million and $10 thousand.

Cash used in operating activities primarily relates to an increase in net loss due to a decrease in sales volume.

We had net cash used in investing activities of $411 thousand and $100 thousand for the six months ended June 30, 2024 and 2023, respectively.

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

For the three months ended March 31, 2024 and 2023, we had net cash used in financing activities of $2.6 million and $1.0 million, respectively.

Cash used in financing activities is related to principal payments on debt of $2.3 million and $0.3 million in payments of fixed dividends to our Series B preferred shareholders.

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

For the six months ended June 30, 2024 and 2023, we had net cash used in financing activities of $1.4 million and cash provided by financing activities of $1.0 million, respectively.

Cash used in financing activities in 2024 is related to principal payments on debt of $3.1 million and $0.6 million in payments of fixed dividends to our Series B preferred shareholders, partially offset by $2.0 million proceeds from short-term debt.

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

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

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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 2024 and 2023 with our Credit Facility with Whitehawk.

On April 19, 2024, we took out a working capital loan with

Whitehawk for $5.0 million, with $2.0 million funded on April 19, 2024 and the remaining $3.0 million to be made available in June 2024 provided the Company is in compliance with certain covenants.

In addition to the cash flows generated by our ongoing operating activities we financed our operations during 2024 and 2023 with our credit facility pursuant to our Credit Agreement with Whitehawk.

On April 19, 2024, we entered into a working capital loan with Whitehawk for $5.0 million, with $2.0 million funded on April 19, 2024 and the remaining $3.0 million to be made available in June 2024 provided the Company was in compliance with certain covenants.

On July 2, 2024, we requested and received an additional $2 million working capital bridge loan.

We are required to pay a fee equal to 6% 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.

To the extent not previously converted into the Company’s Class A common stock, the outstanding shares of our Series B preferred stock are 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.

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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, the availability of debt and equity capital has been reduced and the cost of capital has increased.

Given the uncertainty surrounding global supply chains, global markets, and general global uncertainty as a result of the ongoing conflict between Russia, Ukraine and Israel, 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.

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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.

The Company was not in compliance with its Senior Leverage Ratio financial covenant under the Credit Agreement at June 30, 2024.

The non-compliance was cured by the Company obtaining a waiver for the leverage ratio default for the quarter ended June 30, 2024.

As part of the waiver, the lender reduced the intellectual property sublimit under the borrowing base from $15.0 million to $11.2 million.

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.

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

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

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

On February 29, 2024, we received a letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq notifying us that we no longer meet the Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).

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

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

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

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

See Note 8 – Debt for a discussion of our existing debt financing arrangements.

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Stock-based Compensation Expense

Derivative Warrant Liabilities

Recent Accounting Pronouncements

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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 2. Management’s Discussion and Analysis