What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2025-11-14 · 125 added, 138 removed, 188 unchanged (58% of the section changed)

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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 September 30th.

The terms “quarter” and “year to date” refer to our quarter ending March 31st.

FORWARD LOOKING STATEMENTS

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• our ability to continue to operate as a going concern;

• our substantial indebtedness which matures December 31, 2025;

• our ability to comply with certain covenants, minimum liquidity, and borrowing base requirements under our existing credit agreement, or in the alternative, to continue to obtain forbearances or waivers from the lender thereunder with respect to defaults thereunder, including existing defaults;

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• our ability to raise additional capital;

• our ability to maintain compliance with the Nasdaq Capital Market continued listing requirements and maintain a listing of our Class A common stock on Nasdaq Capital Market;

• our ability to maintain compliance with the Nasdaq Capital Market continued listing requirements and maintain a listing of our Class A common stock on the Nasdaq Capital Market;

• our substantial indebtedness, which matures April 1, 2027;

• changes in the sales of our display products;

• market adoption of our new Symphony product line;

• changes in U.S.

administrative policy, including the imposition of or increases in tariffs, changes to existing trade agreements and any resulting changes in international trade relations, such as trade wars;

• unfavorable global economic or political conditions, including fluctuations in interest rates, inflation, declining consumer sentiment and market uncertainty, and the ongoing conflicts between Russia and Ukraine, and Israel and Hamas;

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

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• 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 markets;

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

• changes in market saturation for our products;

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• our reliance on highly skilled personnel;

• governance and management risks related to turnover in our executive ranks and board of directors;

• 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 epidemics, pandemics, or other health crises;

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• our ability to protect or monetize our intellectual property;

(“SEC”), including those risks discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which discussion is incorporated herein by this reference.

• 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, 2025, which discussion is incorporated herein by this reference.

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

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General and administrative.

General and administrative expense consists of personnel related costs, which include salaries and stock-based compensation, as well as the costs of professional services, such as accounting and legal, facilities, information technology, and other administrative expenses.

General and administrative expense may fluctuate as a percentage of revenue, notably in the second and third quarters of our fiscal year when we have historically experienced our highest levels of revenue.

Depreciation and amortization.

Depreciation and amortization expense consists of depreciation of our property and equipment and amortization of our intangible assets.

Depreciation and amortization expense consists of depreciation of property and equipment and amortization of capitalized intangible assets over their estimated useful lives.

Research and development.

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Other (expense) income, net

Other (expense) income, net primarily consists of interest expense associated with our debt financing arrangements, certain impacts of changes in foreign exchange rates, and the effects of changes in the fair value of derivative liabilities and changes in the fair value of warrants.

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

Income tax expense

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Operating Results – Boxlight Corporation

For the three-month periods ended September 30, 2025 and 2024

Total revenues for the three months ended September 30, 2025 were $29.3 million as compared to $36.3 million for the three months ended September 30, 2024, resulting in a 19.2% 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 as well as competitive industry pricing .

On a sequential quarter basis, total revenues decreased 4.9% from the three months ended September 30, 2025.

Cost of Revenues.

Cost of revenues for the three months ended September 30, 2025 were $20.8 million as compared to $24.0 million for the three months ended September 30, 2024, resulting in a 13.5% decrease .

The decrease in cost of revenues was attributable to the decrease in units sold, offset by an increase of $1.6 million in tariffs.

Gross Profit.

Gross profit for the three months ended September 30, 2025 was $8.5 million as compared to $12.3 million for the three months ended September 30, 2024, a decrease of 30.3% .

Gross profit margin was 29.1% for the three months ended September 30, 2025 and 33.8% for the three months ended September 30, 2024.

The decrease in gross profit margin is primarily related to changes in the product mix, increases in pricing pressure within the industry, and the impact of tariffs on the cost of our products compared to the prior year quarter.

General and Administrative Expenses.

General and administrative expenses for the three months ended September 30, 2025 were $8.7 million, representing 29.8% of revenue as compared to $10.0 million representing 27.6% of revenue for the three months ended September 30, 2024.

The decrease in general and administrative expenses for the period ended September 30, 2025 was primarily due to a decrease of $1.1 million in employee-related expenses, a decrease of $0.3 million in stock compensation, and a decrease of $0.1 million in travel expense, offset by an increase in professional fees of $0.2 million.

Depreciation and Amortization Expenses.

Depreciation and amortization expenses for the three months ended September 30, 2025 were $2.6 million, representing 9.0% of revenue as compared to $2.1 million representing 5.7% of revenue for the three months ended September 30, 2024.

The increase in depreciation and amortization expenses for the period ended September 30, 2025 was due to acceleration of amortization of intangible assets that will continue through the third quarter of 2026.

Research and Development Expenses.

Research and development expenses for the three months ended September 30, 2025 and 2024 were $1.1 million and $1.0 million , respectively and represented 3.8% and 2.8% of revenue, respectively.

Other Expense.

Other expense, net for the three months ended September 30, 2025 was $2.5 million as compared to $2.2 million for the three months ended September 30, 2024 , representing an increase of $0.3 million .

Other expense consists primarily of interest expense on our term loan, foreign currency translation, and the change in fair value of common warrants and derivative liabilities compared to the prior year quarter, and the increase in the current period relates primarily to the increase in interest expense and the change in fair value of common warrants.

Net loss was approximately $6.2 million and $3.1 million for the three months ended September 30, 2025 and 2024, respectively, and was a result of the changes noted above.

For the nine-month periods ended September 30, 2025 and 2024

Total revenues for the nine months ended September 30, 2025 were $82.6 million as compared to $111.9 million for the nine months ended September 30, 2024, resulting in a 26.2% 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 as well as competitive industry pricing .

For the three-month periods ended March 31, 2026 and 2025

Total revenues for the three months ended March 31, 2026 were $22.4 million as compared to $22.4 million for the three months ended March 31, 2025, resulting in a 0.1% increase.

The increase in revenues was driven by higher sales of interactive flat panel displays.

Cost of Revenues.

Cost of revenues for the nine months ended September 30, 2025 were $55.2 million as compared to $72.3 million for the nine months ended September 30, 2024, resulting in a 23.6% decrease.

The decrease in cost of revenues was attributable to the decrease in units sold, offset by an additional $1.3 million in tariffs.

Cost of revenues for the three months ended March 31, 2026 were $15.5 million as compared to $14.4 million for the three months ended March 31, 2025, resulting in a 7.8% increase.

The increase in cost of revenues was attributable to the increase in units sold and a $1.5 million increase in customs expense.

Gross Profit.

Gross profit for the nine months ended September 30, 2025 was $27.4 million as compared to $39.6 million for the nine months ended September 30, 2024, a decrease of 30.9%.

Gross profit margin was 33.1% for the nine months ended September 30, 2025 and 35.4% for the nine months ended September 30, 2024.

The decrease in gross profit margin is primarily related to the difference in product mix, increases in pricing pressure within the interactive flat panel display market , and the impact of tariffs incurred during a portion of the current period compared to the prior year period.

Gross profit for the three months ended March 31, 2026 was $6.9 million as compared to $8.0 million for the three months ended March 31, 2025, a decrease of 13.7%.

Gross profit margin was 30.9% for the three months ended March 31, 2026 and 35.9% for the three months ended March 31, 2025.

The decrease in gross profit margin was primarily related to increases in pricing pressure within the industry compared to the prior year quarter and an increase in customs expense.

General and Administrative Expenses.

General and administrative expenses for the nine months ended September 30, 2025 were $27.3 million, representing 33.0% of revenue as compared to $33.5 million representing 29.9% of revenue for the nine months ended September 30, 2024.

The decrease in general and administrative expenses for the period ended September 30, 2025 was due to ongoing initiatives to reduce operating expenses across all cost groups, with the largest declines in employee-related expenses of $5.0 million and the second largest declines in sales and marketing expense of $1.2 million.

General and administrative expenses for the three months ended March 31, 2026 were $8.4 million, representing 37.2% of revenue as compared to $7.6 million representing 33.8% of revenue for the three months ended March 31, 2025.

The increase in general and administrative expenses for the period ended March 31, 2026 was due to increases in professional fees of $0.5 million and other expenses of $0.5 million, offset by $0.3 million decrease in contract and consulting expenses.

Depreciation and Amortization Expenses.

Depreciation and amortization expenses for the nine months ended September 30, 2025 were $7.7 million, representing 9.3% of revenue as compared to $6.2 million representing 5.5% of revenue for the nine months ended September 30, 2024.

Depreciation and amortization expenses for the three months ended March 31, 2026 were $2.6 million , representing 11.4% o f revenue as compared to $2.5 million re presenting 11.0% of revenue for the three months ended March 31, 2025 .

Research and Development Expenses.

Research and development expenses for the nine months ended September 30, 2025 and 2024 were $3.2 million in both periods and represented 3.8% and 2.8% of revenue, respectively.

Research and development expenses for the three months ended March 31, 2026 and 2025 were $0.9 million and $0.9 million, respectively and represented 4.2% and 4.1% of revenue, respectively.

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

The increase was 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 nine months ended September 30, 2025 was $3.5 million as compared to $7.6 million for the nine months ended September 30, 2024 , representing a decrease of $4.1 million.

Other expense consists primarily of interest expense on our term loan, foreign currency translation, and the c hange in fair value of common warrants compared to the prior year.

The decrease in the current period was due to an increase in other income and positive changes in the fair value of common warrants.

Net loss was approximately $14.1 million and $11.6 million for the nine months ended September 30, 2025 and 2024, respectively, and was a result of the changes noted above.

Other expense, net for the three months ended March 31, 2026 was $2.0 million as compared to $0.5 million for the three months ended March 31, 2025 , representing an increase of $1.5 million.

The increase in other expense was primarily driven by the change in fair value of common warrants in the prior year quarter, offset by the decrease in interest expense on our term loan in the three months ended March 31, 2026.

Net loss was approximately $6.5 million and $3.2 million for the three months ended March 31, 2026 and 2025, respectively, and was a result of the changes noted above.

Use of Non-GAAP financial measures

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

Adjusted EBITDA represents EBITDA, plus stock compensation expense, the change in fair value of derivative liabilities, purchase accounting impact of fair valuing inventory and deferred revenue, loss on warrant issuance,

change in fair value of warrants and severance charges.

Management uses EBITDA and Adjusted EBITDA as financial measures to evaluate the profitability and efficiency of the Company’s business model, and to assess the strength of the underlying operations of our business.

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(in thousands) Three Months Ended

September 30, 2025 Three Months Ended

September 30, 2024 Nine Months Ended

September 30, 2025 Nine Months Ended

September 30, 2024

March 31, 2026 Three Months Ended

March 31, 2025

Net Loss $ (6,525) $ (3,243)

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Interest expense 1,274 2,487

Income tax (benefit) expense (261) (12) (137) 767

Income tax (benefit) (385) (150)

EBITDA $ (3,080) $ 1,557

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Change in fair value of derivative liabilities 32 9

Purchase accounting impact of fair valuing inventory — — — 225

Loss on warrant issuance — — 578 —

Change in fair value of common warrants

291 — (1,394) —

Loss on warrant issuance — 578

Purchase accounting impact of fair valuing deferred revenue — 119

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Adjusted EBITDA $ (2,834) $ 553

FINANCIAL INFORMATION

Discussion of Effect of Seasonality on Financial Condition

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Liquidity and Capital Resources

As of September 30, 2025, we had cash and cash equivalents of $11.8 million, a working capital balance of $1.5 million, and a current ratio of 1.02.

As of September 30, 2024, we had $10.5 million of cash and cash equivalents, a working capital balance of $45.8 million, and a current ratio of 2.10.

In addition, the Company had indebtedness of $36.7 million maturing on December 31, 2025.

For the nine months ended September 30, 2025 and 2024, we had net cash used in operating activities of $1.8 million and $2.1 million, respectively.

Cash used in operating activities primarily relates to net loss for the nine months ended September 30, 2025 as well as changes in working capital management.

We had net cash used in investing activities of $158 thousand and $279 thousand for the nine months ended September 30, 2025 and 2024, respectively.

As of March 31, 2026, we had cash and cash equivalents of $6.9 million, a working capital balance of $25.3 million, and a current ratio of 1.63.

As of March 31, 2025, we had $8.1 million of cash and cash equivalents, a working capital balance of $1.6 million, and a current ratio of 1.02.

For the three months ended March 31, 2026 and 2025, we had net cash used in operating activities of $5.0 million and $4.7 million, respectively.

Cash used in operating activities primarily relates to net loss for the three months ended March 31, 2026 as well as changes in working capital management.

We had net cash used in investing activities of $42 thousand and $127 thousand for the three months ended March 31, 2026 and 2025, respectively.

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

For the nine months ended September 30, 2025 and 2024, we had net cash provided by and used in financing activities of $5.7 million and $4.4 million, respectively.

Cash provided by financing activities in 2025 is related to proceeds from short-term debt of $2.5 million and proceeds from issuance of common stock and the exercise of warrants of $8.3 million, partially offset by principal payments of debt of

$5.1 million.

Cash used in financing activities in the 2024 period related to principal payments on debt of $7.4 million and payments of preferred dividends of $1.0 million, partially offset by $4.0 million proceeds from short-term debt.

For the three months ended March 31, 2026 and 2025, we had net cash provided by financing activities of $3.1 million and $4.6 million, respectively.

Cash provided by financing activities in the three months ended March 31, 2026 is related to proceeds from the At-the-Market offering program of $3.7 million.

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

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

On April 19, 2024, the Company entered into a sixth amendment to the Credit Agreement with the Collateral Agent and Lender (the “Sixth Amendment”).

The Sixth Amendment provided the Company with an additional $2 million working capital bridge loan in April 2024, and an additional $3 million working capital bridge loan in June 2024, of which $2 million was advanced to the Company.

The Company was required to pay a fee equal to 6% of the aggregate amount of borrowings under the Sixth Amendment (i.e.

$4.0 million).

Both working capital bridge loans, including the related fee were paid in full by November 2024, and were not subject to prepayment penalties.

Given the uncertainty surrounding global supply chains, global markets, and general global uncertainty as a result of new U.S.

tariff policy, trade wars, and the ongoing conflicts between Russia and Ukraine and Israel and Hamas, the availability of debt and equity capital has been reduced and the cost of capital has increased.

As of March 31, 2026, the Company had approximately $32.2 million of indebtedness outstanding under its Credit Agreement with Whitehawk Capital Partners, LP, as Collateral Agent, and Whitehawk Finance LLC, as Lender.

During the fiscal year ended December 31, 2025, the Company entered into the Eighth, Ninth, Tenth, and Eleventh Amendments to the Credit Agreement (collectively, the “2025 Amendments”) to address prior instances of non-compliance with certain financial covenants and to restructure key terms of the facility.

In particular, the Company had not maintained compliance with the Senior Leverage Ratio and borrowing base covenants at various measurement dates during 2025.

The Lender waived each of these events of default in connection with the respective amendments.

Most significantly, on December 18, 2025, the Company entered into the Eleventh Amendment.

The Eleventh Amendment extended the final maturity date of the loans from December 31, 2025, to April 1, 2027, suspended mandatory quarterly amortization payments through June 30, 2026, and replaced the Senior Leverage Ratio financial covenant with a Minimum Consolidated Adjusted EBITDA covenant commencing with the quarter ending March 31, 2026.

The Company is also required to maintain qualified cash of at least $1.5 million The Company is also required to meet Borrowing Base covenants with allowed over advances of for the month ending December 31, 2025, $4,000,000;

for the month ending January 31, 2026, $4,500,000;

for the month ending February 28, 2026, $5,500,000 and (from and after the month ending March 31, 2026 (and each Fiscal Month thereafter), $4,000,000 (the “Permitted Over Advance”).

The Eleventh Amendment includes revised mandatory prepayment provisions requiring 50% (or 100% if in default) of net cash proceeds from equity offerings and certain debt to be applied to loan prepayments, with up to $5.0 million allocable for working capital and general corporate purposes.

Pursuant to the March 2026 Forbearance Agreement, the Lenders waived the underlying borrowing base defaults for January and February 2026.

Pursuant to the May 2026 Forbearance Agreement, the Lenders granted a limited waiver of the borrowing base and Minimum Consolidated Adjusted EBITDA defaults for the periods ended March 31, 2026 and April 30, 2026.

As such, the debt outstanding from Boxlight to Whitehawk is classified as Long-Term debt in the financial periods ended March 31, 2026 and December 31, 2025.

Capital Raise

In September 2025, the Company completed a registered direct offering of 222,222 shares of Class A common stock at $18.00 per share, generating approximately $4.0 million in gross proceeds.

Net proceeds were used for working capital and debt reduction pursuant to the Company’s agreement with its senior lender.

This offering was conducted through the Company’s effective shelf registration statement on Form S-3.

In December 2025 and until exhaustion of the “at the market” equity offering program (“ATM Program”) in January 2026 the Company has shown the ability to raise capital to fund operations.

Past success is not indicative of future results and the Company has evaluated the going concern consideration as such.

Tariff Environment

On February 20, 2026, the Supreme Court of the United States ruled that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the imposition of tariffs, effectively invalidating IEEPA-based tariffs that had been in effect since February 2025.

The Company’s diversified supply chain and global revenue base have historically provided a degree of insulation from direct tariff impacts.

The elimination of these tariffs is expected to reduce input cost pressures and improve the purchasing environment for the Company’s education and government customers, and may result in refund recoveries for IEEPA tariffs previously paid by the Company or its suppliers during the applicable period.

The tariff environment is in a state of flux and the Company is actively pursuing refund recovery activities per the guidelines provided by the Court of International Trade and the US Customs and Border Protection,

Going Concern Assessment

The Company has evaluated conditions and events, in the aggregate, that may raise doubt about its ability to continue as a going concern within one year after the date these financial statements are issued, in accordance with ASC 205-40.

The Company acknowledges that it has a history of operating losses, has incurred recurring negative cash flows from operations, and has required multiple amendments and waivers under its Credit Agreement due to non-compliance with financial covenants in prior periods.

The Company acknowledges it is a reasonable concern that compliance will be maintained at all future measurement dates.

Management believes that the following factors provide potential upside to help alleviate cash restrictions over the next year:

• The extension of the Credit Agreement maturity to April 1, 2027, pursuant to the Eleventh Amendment, eliminates the near-term risk of debt maturity acceleration and provides the Company with an extended runway within which to execute its operational and any recapitalization, if necessary, plans;

• The replacement of the Senior Leverage Ratio covenant with the Minimum Consolidated Adjusted EBITDA covenant establishes a financial compliance framework that management believes is more achievable based on the Company’s current and projected operating performance;

• The suspension of mandatory quarterly amortization payments through June 30, 2026, provides near-term cash flow relief;

• The September 2025 capital raise of approximately $4.0 million in gross proceeds demonstrated continued access to the equity capital markets and provided additional liquidity;

• The invalidation of IEEPA tariffs by the Supreme Court in February 2026 reduces supply chain cost pressures seen during 2025 and provides for a non-insignificant, cash injection into the Company in 2026;

• Management’s continued focus on operational efficiency, expense reduction, and revenue diversification into the corporate and government markets as well expansion as with a new product offering coming to market in 2026.

Notwithstanding the foregoing, there is substantial doubt as to the Company’s ability to continue as a going concern as the Company is dependent upon its ability to maintain compliance with the financial covenants under the Credit Agreement as amended, achieve positive cash flow from operations, and, if necessary, access additional financing.

There can be no assurance that the Company will be successful in maintaining compliance with its financial covenants, achieving profitability, or raising additional capital on acceptable terms or at all.

The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

To address our near-term liquidity needs, we are pursuing an equity line of credit (the “ELOC”) providing for a maximum aggregate commitment of up to $15 million over a period of up to 24 months.

Under the ELOC, we would have the right, at our sole discretion, to sell shares of our Class A common stock to one or more institutional investors at a price equal to up to a 5% discount to the then-current VWAP, with no obligation to draw the full commitment.

We intend to use the proceeds for general working capital purposes and to support the commercialization of our Symphony product line, expected to be available in the second half of 2026.

Completion of the ELOC is subject to stockholder approval at our 2026 Annual Meeting of Stockholders scheduled for June 2, 2026 of (i) an increase in authorized Class A common stock from 4,166,667 to 55,000,000 shares and (ii) the issuance of shares pursuant to Nasdaq Marketplace Listing Rule 5635(d).

If both proposals are approved, we expect to execute the ELOC and file a registration statement on Form S-1 on or before July 31, 2026.

There can be no assurance that we will obtain the required stockholder approvals, execute the ELOC on the terms described or at all.

If we are unable to obtain sufficient funding, we may need to reduce or cease operations or pursue other strategic options.

Preferred Stock and Capital Structure Considerations

On February 20, 2025, we filed with the Secretary of State of the State of Nevada (i) an Amendment to the Certificate of Designation of our Series B Preferred Stock (the “Series B Amendment”) and (ii) an Amendment to the Certificate of Designation of our Series C Preferred Stock (the “Series C Amendment” and, together with the Series B Amendment, the “Amendments”).

Each Amendment was approved by the holders of a majority of the outstanding shares of Series B Preferred Stock or Series C Preferred Stock, as applicable, in accordance with the applicable Certificate of Designation.

Pursuant to the Amendments, neither the Series B Preferred Stock nor the Series C Preferred Stock shall be convertible into Class A Common Stock until the earlier of (1) the effectiveness of an amendment to the articles of incorporation of the Company increasing the number of shares of authorized Class A Common Stock to at least 25,000,000 shares (subject to adjustments as set forth therein) and (2) August 19, 2025.

On October 1, 2025, the Company converted all outstanding Series C preferred stock into common stock and amended the Series B preferred stock to eliminate redemption and conversion features, reducing potential future cash obligations.

At-the-Market Offering (“ATM Program”)

During the year ended December 31, 2025, the Company raised approximately $0.66 million of net proceeds through sales of its Class A Common Stock under its “at the market” offering program (“ATM Program”).

In January 2026, the Company sold the remaining shares available under the “at the market offering” program (“ATM Program”).

In total, the Company sold 2,449,653 shares of Class A Common Stock under the program for aggregate proceeds of approximately $4.6 million, after deducting sales agent commissions of $0.14 million but before offering expenses, thereby fully exhausting the capacity of the program.The proceeds were used for working capital and general operating purposes.

See Note 11 – Stockholders’ Equity to the consolidated financial statements for additional information regarding the Company’s ATM program.

Given the uncertainty surrounding global supply chains, global markets, and general global uncertainty as a result of the fluid U.S.

tariff policy, trade wars, and the ongoing and widespread conflicts across multiple regions, the availability of debt and equity capital has been reduced and the cost of capital has increased.

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

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

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

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

our existing stockholders.

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

Cash and cash equivalents, along with anticipated cash flows from operations and recent financing arrangements with our lenders, are expected to provide sufficient liquidity for working capital needs and debt service requirements.

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

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

On March 14, 2024, we entered into the Fifth Amendment with the Collateral Agent and the Lender to (1) amend and restate the Senior Leverage Ratio and Minimum Liquidity (as defined in the Fifth Amendment), and (2) waive any event of default that may rise directly as a result of the Financial Covenant Default (as defined in the Fifth Amendment) at December 31, 2023.

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 it remained at 2.00, and thereafter it remained at 1.75.

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

On August 12, 2024, we entered into the Seventh Amendment with the Collateral Agent and the Lender to (1) reduce the intellectual property sublimit under the borrowing base from $15.0 million to $11.2 million, and (2) waive the event of default that may have arisen directly as a result of the Financial Covenant Default (as defined in the Seventh Amendment) at June 30, 2024.

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

Subsequent to the end of the third quarter of 2024, we were also not in compliance with our borrowing base covenant under the Credit Agreement for month ended October 31, 2024.

On November 14, 2024, we obtained a waiver for the Credit Agreement from the Collateral Agent and Lender (the “November 2024 Waiver”) to waive any events of default that may have arisen directly as a result of (i) the Financial Covenant Default (as defined in the November 2024 Waiver) at September 30, 2024 and (ii) the Borrowing Base Default (as defined in the November 2024 Waiver) for the month ended October 31, 2024.

In conjunction with obtaining the waiver, the Company paid down approximately $1.1 million under the Credit Agreement, inclusive of $60 thousand of prepayment penalties.

The Company was also not in compliance with its financial covenant related to the Senior Leverage Ratio under the Credit Agreement at December 31, 2024.

In addition, the Company was also not in compliance with its borrowing base covenant under the Credit Agreement at December 31, 2024, January 31, 2024 and February 28, 2025.

On March 24, 2025, the Company entered into an eighth amendment to the Credit Agreement with the Collateral Agent and Lender (the “Eighth Amendment”) to (i) provide the Company with an additional $2.5 million working capital bridge loan and (ii) waive any events of default that may have arisen as a result of the Company’s failure to (A) maintain the required ratio of indebtedness to adjusted EBITDA (defined more specifically as the “Senior Leverage Ratio” in the Credit Agreement) for the periods ended December 31, 2024 and March 31, 2025 and (B) maintain a value of specified assets in excess of certain borrowings (defined more specifically as a “Borrowing Base” in the Credit Agreement) for the months ended December 31, 2024, January 31, 2025 and February 28, 2025.

In addition, no payments were required to be made by the Company to pay down the borrowing base defaults for December 2024, January 2025 and February 2025.

The Company was required to pay a fee equal to 6% of the working capital bridge loan under the Eighth Amendment.

The bridge loan, including the related fee, was due and was paid in full on August 29, 2025, and is not subject to prepayment penalties.

There can be no assurance that the Lender will not declare an event of default and acceleration of all of our obligations under the Credit Agreement in the event we are unable to maintain full compliance with these covenants in the future.

In conjunction with obtaining the waiver pursuant to the Eighth Amendment, the Company was also required to comply with additional covenants, including meeting target completion milestones related to the Company’s recapitalization process, most notably achieving an expected completion of the recapitalization and/or repayment of its term loan by June 16, 2025 (the "Recapitalization Requirement").

In addition, the Company is required to provide budgets to the lender with variance analysis in excess of specified thresholds resulting in an event of default at the discretion of the lender.

The amendment also prohibits the Company from paying dividends or distributions to its preferred stockholders and reduces the value assigned to its intellectual property under its borrowing base calculation.

The Company also was not in compliance with its financial covenant related to the borrowing base under the Credit Agreement at March 31, 2025.

However, the non-compliance was cured by the payment of approximately $1.3 million under the Credit Agreement in April and May 2025.

The Company was not in compliance with its financial covenant related to the Senior Leverage Ratio under the Credit Agreement at September 30, 2025.

In addition, the Company was not in compliance with its borrowing base covenant under the Credit Agreement at April 30, 2025, May 31, 2025, June 30, 2025, July 31, 2025, and August 31, 2025.

Further, the Company had not complied with the Recapitalization Requirement.

On August 13, 2025, the Company entered into a forbearance agreement and ninth amendment and waiver to the Credit Agreement with the Collateral Agent and Lender (the “Ninth Amendment”) to waive any events of default that may have arisen directly as a result of (1) the Financial Covenant Event of Default (as defined in the Ninth Amendment) for the period ended June 30, 2025, (2) the Borrowing Base defaults described in the Ninth Amendment for the months ended April 30, 2024, May 31, 2025, June 30, 2025, and July 31, 2025, and (3) the failure to comply with the Recapitalization Requirement.

In connection with the Ninth Amendment, the Company agreed to increase its quarterly principal payment due on September 30, 2025 from the scheduled $0.7 million to $1.0 million and to change interest payments from being due quarterly to being due monthly beginning in August 2025.

As of October 31, 2025, the Company was in default of certain financial and non‑financial covenants under its credit facility with Whitehawk.

Moreover, the Company’s loan from Whitehawk matures on December 31, 2025, and the Company does not anticipate it will have the resources to pay the loan at that time.

The Company is actively engaged in discussions with Whitehawk to obtain an additional waiver and to amend the terms of the credit facility to address the existing defaults and provide additional flexibility under the loan agreement, including with respect to the upcoming maturity.

While there can be no assurance that a waiver or amendment will be obtained, management believes that ongoing negotiations with the lender will be successful.

On November 10, 2025, the Company made a principal payment of $1,000,000 on its outstanding loan balance.

The Company continues to comply with all other payment obligations under the facility.

Management continues to evaluate the potential impact of the existing covenant default on the Company’s liquidity and financial condition.

If the Company is unable to obtain a waiver or otherwise cure the default, the lender could exercise its rights and remedies under the loan agreement, which may include acceleration of the outstanding debt.

Because of the significant decreases in the required Senior Leverage Ratio that have occurred within the past twenty one months, our current forecast projects that we may not be able to maintain compliance with this ratio.

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

In view of this matter, continuation as a going concern is dependent upon our 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, the borrowing base covenant, or any other financial covenants, or refinance our Credit Agreement with a different lender on a basis with more favorable terms.

As part of our ongoing efforts to strengthen our financial position, the Company has initiated plans to recapitalize its balance sheet and refinance our current Credit Agreement.

This initiative is part of our broader strategy to improve financial flexibility, reduce our cost of capital, and position the Company for sustainable growth in the long term.

We are actively working to refinance our debt with new lenders.

While we have currently engaged financial advisors and are actively working to refinance our existing debt, we do not have written or executed agreements as of the issuance of this Form 10-Q.

Our ability to refinance our existing debt is based upon credit markets and economic forces that are outside of our control.

We have a good working relationship with our current lending partner, however, there can be no assurance that we will be successful in refinancing our debt, or on terms acceptable to us.

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

On April 7, 2025, the Company received a letter (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that it did not satisfy certain continued listing requirements for the Nasdaq Capital Market.

The Company submitted a compliance plan within 45 days of the date of the notification with available options to resolve the deficiency and regain compliance.

The Company’s compliance plan was accepted on June 20, 2025, and the Company was granted until October 6, 2025, to evidence compliance.

On October 3, 2025, the Company announced that it believed that it had met the listing requirements.

On October 8, 2025, Nasdaq informed the Company that it had determined that the Company complies with Nasdaq Listing Rules relating to minimum stockholders' equity, independent director, and audit committee requirements with which it previously did not comply.

Nasdaq further noted that it will continue to monitor the Company's compliance with the minimum stockholders' equity and, if at the time of its next periodic report the Company does not comply, the Company may be subject to delisting.

Following a private placement offering in February 2025, which included the sale of warrants (the “2025 Common Warrants”) to purchase up to an aggregate of 1,323,000 shares of Class A Common Stock, our number of authorized but unissued shares of Class A common stock remaining under our articles of incorporation would not be sufficient to issue shares should all of the 2025 Common Warrants be exercised.

On August 8, 2025, at the Company's annual meeting of shareholders, the Company’s shareholders approved an amendment to the Company's articles of incorporation to increase the number of authorized shares of Class A common stock from 3,750,000 to 25,000,000.

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

Inventory Financing Agreement

On November 3, 2025, we entered into an amended and restated inventory finance agreement with J.J.

(the “Inventory Purchaser”), pursuant to which the Inventory Purchaser may, from time to time, finance up to $9.0 million of our finished goods inventory purchases from our contract manufacturers.

Under this arrangement, we are required to pay a deposit equal to 20% of the purchase price of the applicable inventory, and the Inventory Purchaser funds the remaining balance directly to the supplier and takes title to the inventory.

We have determined that this arrangement results in the recognition of the financed inventory and a corresponding financing obligation on our consolidated balance sheets, as the risks and rewards of ownership are substantially retained by us during the financing period.

Accordingly, financed inventory is included within inventories, net of reserves, and the related payment obligations are presented as related party accounts payable on our consolidated balance sheets.

For each inventory purchase financed under the agreement, we are obligated to pay the Inventory Purchaser an amount equal to the funded purchase amount plus a contractual premium within 90 days of the funding date.

The agreement also requires us to pay monthly monitoring fees and provides for additional fees based on unused financing availability.

In the event we fail to satisfy our payment obligations when due, the Inventory Purchaser may accelerate amounts owed, impose default interest and penalties, and sell the inventory collateral.

We would remain liable for any deficiency resulting from such sale.

The agreement further provides the Inventory Purchaser with the right, at its election, to convert certain outstanding payment obligations into shares of our Class A common stock, subject to ownership limitations and other contractual restrictions.

On April 1, 2026, the Company amended its inventory financing arrangement with J.J.

Astor & Co., an entity affiliated with Michael Pope, the Company’s Chairman of the Board, pursuant to which $556,200 of outstanding inventory financing obligations was converted into 600,000 shares of Class A common stock at a conversion price of $0.927 per share.

The amendment also increased the aggregate Maximum Inventory Purchase Amount available under the agreement from $9.0 million to $10.0 million.

Further, the parties agreed that, if the aggregate proceeds from the sale of the Conversion Shares are less than $556,200, the Company shall pay the shortfall in cash within five trading days.

Michael Pope, Chairman of the Company’s Board of Directors, and its former president and chief executive officer, is the chief executive officer of J.J.

Astor is beneficially owned, directly or indirectly, by a private investment fund managed by Mr.

As of March 31, 2026, the aggregate outstanding obligation under this arrangement was $3.1 million, recorded as related party accounts payable on our consolidated balance sheet.

This arrangement represents a form of short-term inventory financing and exposes us to material liquidity, cash flow, and operational risks.

Additional information regarding this inventory financing arrangement is included in Note 14 - Commitments and Contingencies to our consolidated financial statements.

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

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We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared.

On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and

in accordance with GAAP.

On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

2 unchanged sentences

Revenue Recognition

Intangible Assets

Stock-based Compensation Expense

Inventory Reserve

Goodwill and Intangible Assets

Share-based Compensation

Derivative Warrant Liabilities

Recent Accounting Pronouncements

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis