Boxlight Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the financial statements and the related notes thereto included elsewhere herein. The MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this report. The actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. Historical results may not be indicative of future performance. The Company’s forward-looking statements reflect its current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. 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 March 31st. 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 continue to operate as a going concern; • 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; • our history of operating losses; • our ability to raise additional capital; 33 Table of Contents • 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; • changes in the spending policies or budget priorities for government funding of schools, colleges, universities, other education providers or government agencies; • 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 epidemics, pandemics, or other health crises; • 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; • 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; 34 Table of Contents • 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; • our possible or assumed future results of operations; • our ability to attract and retain customers; • our ability to sell additional products and services to customers; • our cash needs and financing plans; • our potential growth opportunities; • expected technological advances by us or by third parties and our ability to leverage them; • the effects of future regulation; • our ability to protect or monetize our intellectual property; • 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. 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. Overview 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. We currently design, produce and distribute interactive displays, collaboration software, supporting accessories and professional services. We also distribute science, technology, engineering, and math (or “STEM”) products, including a robotics and coding system, 3D printing solution and portable science lab. The Company’s products are integrated into its software suite that provides tools for presentation creation and delivery, assessment, and collaboration. Our operations are organized, managed, and classified into three reportable segments – Europe, Middle East, and Africa (“EMEA”), North and Central America (“Americas”), and all other geographic regions (“Rest of World”). Our EMEA segment consists of the operations of Sahara Holding Limited and its subsidiaries. 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”) . 35 Table of Contents 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. Generally, our displays produce higher net operating revenues but lower gross profit margins than our accessory solutions and professional services. To date, we have generated substantially all of the Company’s revenue from the sale of hardware (primarily consisting of interactive displays and audio products) and software to the educational market in the United States and Europe. We have also implemented a comprehensive plan to reach and maintain profitability both from our core business operations. Highlights of the plan include: • Integrating products of the acquired companies and cross training sales representatives to increase their offerings and productivity; • Hiring new sales representatives with significant industry experience in their respective territories, and • Expanding our reseller partner network both in key territories and in new markets, thereby increasing our penetration and reach. Components of our Results of Operations and Financial Condition Revenues are comprised of hardware products, software services, and professional development revenues less sales discounts. • Product revenue. Product revenue is derived from the sale of our hardware (interactive displays), 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 service revenue. We receive revenue from providing professional development services through third parties and our network of distributors. Cost of revenues Our cost of revenues is comprised of the following: • costs to purchase components and finished goods directly; • third-party logistics costs; • inbound and outbound freight costs, and customs and duties charges; • costs associated with the repair of products under warranty; • write-downs of inventory carrying value to adjust for excess and obsolete inventory and periodic physical inventory counts; and • cost of professionals to deliver professional development training related to the use of our products. We outsource some of our warehouse operations and order fulfillment and purchase products from related and third parties. Our product costs will vary directly with volume and the costs of underlying product components as well as the prices we are able to negotiate with our contract manufacturers. Shipping costs fluctuate with volume as well as with the method of shipping chosen in order to meet customer demand. As a global company with suppliers centered in Asia and customers located worldwide, we have used, and may in the future use, air shipping to deliver our products directly to our customers. Air shipping is more costly than sea or ground shipping or other delivery options. We primarily use air shipping to meet the demand for our products during peak seasons and new product launches. 36 Table of Contents Gross profit and gross profit margin Gross profit and gross profit margin have been, and may in the future be, influenced by several factors including: competitive pricing within the industry, product, channel and geographical revenue mix; changes in product costs related to the release of projector models; 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. To the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on future average selling prices and unit costs. Gross profit and gross profit margin may fluctuate over time based on the factors described above. Operating expenses We classify our operating expenses into three categories: general and administrative, depreciation and amortization, and research and development. 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, depreciation and amortization 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 property and equipment and amortization of capitalized intangible assets over their estimated useful lives. Research and development. Research and development expense consists primarily of personnel related costs, prototype and sample costs, design costs and global product certifications mostly for wireless certifications. Other (expense) income, net 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 We are subject to income taxes in the jurisdictions in which we do business, including the United States, Canada United Kingdom, Mexico, Sweden, Finland, Holland, Australia, Denmark and Germany. The United Kingdom, Mexico, Sweden, Finland, Holland, Germany, Australia, Canada, and Denmark have a statutory tax rate different from that of the United States. Additionally, certain jurisdictions of the Company’s international earnings are also taxable in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the absorption of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws. We regularly assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S. Internal Revenue Service, or IRS, and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary. Any such adjustments could have a significant impact on our results of operations. Operating Results – Boxlight Corporation For the three-month periods ended March 31, 2026 and 2025 Revenues. 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 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. 37 Table of Contents Gross Profit. 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 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 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 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 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. 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 To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding operations, we supplement our condensed consolidated financial statements which are prepared in accordance with GAAP with EBITDA and Adjusted EBITDA, both non-GAAP financial measures of earnings. 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, 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. These adjustments, and the non-GAAP financial measure that is derived from them, provide supplemental information to analyze our operations between periods and over time. Investors should consider the Company’s non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. 38 Table of Contents The following table contains reconciliations of net losses to EBITDA and adjusted EBITDA for the periods presented: (in thousands) Three Months Ended March 31, 2026 Three Months Ended March 31, 2025 Net Loss $ (6,525) $ (3,243) Depreciation and amortization 2,556 2,463 Interest expense 1,274 2,487 Income tax (benefit) (385) (150) EBITDA $ (3,080) $ 1,557 Stock compensation expense 163 169 Change in fair value of derivative liabilities 32 9 Change in fair value of common warrants — (1,936) Loss on warrant issuance — 578 Purchase accounting impact of fair valuing deferred revenue — 119 Severance charges 51 57 Adjusted EBITDA $ (2,834) $ 553 39 Table of Contents PART I. FINANCIAL INFORMATION Discussion of Effect of Seasonality on Financial Condition Certain accounts in our financial statements are subject to seasonal fluctuations. As our business and revenues grow, we expect these seasonal trends to be reduced. The bulk of our products are shipped to our educational customers prior to the beginning of the school year, usually in July, August or September. To prepare for each school year, we generally build up inventories during the second quarter of the year. As a result, inventories tend to be at their highest levels at that point in time. In the first quarter of the year, inventories tend to decline significantly as products are delivered to customers. Thereafter, during the first quarter, we do not generally need to restock inventories at the same inventory levels. Accounts receivable balances tend to be at the highest levels in the third quarter, at which point we record the highest level of sales. Liquidity and Capital Resources 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 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. Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases. We lease all of our office facilities. We expect to make future payments on existing leases from cash generated from operations. We have limited credit available from our major vendors and are required to prepay a percentage of our inventory purchases, which further constrains our cash liquidity. In addition, our industry is seasonal with many sales to educational customers occurring during the second and third quarters when schools make budget appropriations and classes are not in session limiting disruptions related to product installation. This seasonality makes our needs for cash vary significantly from quarter to quarter. 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. 40 Table of Contents 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; and 41 Table of Contents • 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 42 Table of Contents 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, 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. Astor & Co. (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. J.J. Astor is beneficially owned, directly or indirectly, by a private investment fund managed by Mr. Pope. 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. Financing See Note 8 – Debt for a discussion of our existing debt financing arrangements. Off Balance Sheet Arrangements We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations or liquidity and capital resources. 43 Table of Contents Critical Accounting Policies and Estimates Our condensed consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. 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. 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. Our significant accounting policies are discussed in the notes to the unaudited condensed consolidated financial statements and in Note 1 in the Company’s 2024 Annual Report, which was filed with the SEC on March 28, 2025. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain : 1. Revenue Recognition 2. Inventory Reserve 3. Goodwill and Intangible Assets 4. Share-based Compensation 5. Derivative Warrant Liabilities 6. Income Taxes Recent Accounting Pronouncements For information on accounting pronouncements that have impacted or are expected to materially impact our consolidated financial condition, results of operations or cash flows, see Note 1 to our unaudited condensed consolidated financial statements. Item 3. Quantitative and Qualitative Disclosure About Market Risk As a “smaller reporting company,” this item is not required.