エドガーで原本を確認する
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023
OR
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☐ |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to ______________
Commission file number 001-37564
BOXLIGHT CORPORATION
(Exact name of registrant as specified in its charter)
Nevada |
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46-4116523 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification Number) |
2750 Premiere Parkway, Suite 900
Duluth, Georgia 30097
(Address of principal executive offices) (Zip Code)
(678) 367-0809
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
||
Common Stock |
BOXL |
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☒ |
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Smaller reporting company |
☒ |
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Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The number of shares outstanding of the registrant’s common stock on August 8, 2023 was 9,466,349.
BOXLIGHT CORPORATION
TABLE OF CONTENTS
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Page No. |
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3 |
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3 |
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Unaudited Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 |
4 |
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5 |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
27 |
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34 |
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35 |
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35 |
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35 |
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36 |
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36 |
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36 |
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36 |
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37 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Boxlight Corporation
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three and six months ended June 30, 2023 and 2022
(Unaudited)
(in thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues, net |
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$ |
47,052 |
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$ |
59,628 |
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$ |
88,242 |
|
$ |
110,231 |
Cost of revenues |
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29,224 |
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42,794 |
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55,266 |
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80,781 |
Gross profit |
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17,828 |
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16,834 |
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32,976 |
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29,450 |
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Operating expense: |
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General and administrative |
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15,227 |
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15,304 |
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29,958 |
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30,762 |
Research and development |
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525 |
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|
649 |
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1,122 |
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1,261 |
Total operating expense |
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15,752 |
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15,953 |
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31,080 |
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32,023 |
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Income (loss) from operations |
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2,076 |
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881 |
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1,896 |
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(2,573) |
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Other income (expense): |
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Interest expense, net |
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(2,788) |
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(2,417) |
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(5,235) |
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(4,733) |
Other expense, net |
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(28) |
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(60) |
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(50) |
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(74) |
Gain on settlement of liabilities, net |
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— |
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3 |
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— |
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|
856 |
Change in fair value of derivative liabilities |
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184 |
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1,660 |
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(40) |
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1,650 |
Total other expense |
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(2,632) |
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(814) |
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(5,325) |
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(2,301) |
Income (loss) before income taxes |
|
$ |
(556) |
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$ |
67 |
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$ |
(3,429) |
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$ |
(4,874) |
Income tax (expense) benefit |
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(255) |
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(41) |
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(306) |
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45 |
Net income (loss) |
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$ |
(811) |
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$ |
26 |
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$ |
(3,735) |
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$ |
(4,829) |
Fixed dividends - Series B Preferred |
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(317) |
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(317) |
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(635) |
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(635) |
Net loss attributable to common stockholders |
|
$ |
(1,128) |
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$ |
(291) |
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$ |
(4,370) |
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$ |
(5,464) |
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Comprehensive income (loss): |
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Net income (loss) |
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$ |
(811) |
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$ |
26 |
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$ |
(3,735) |
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$ |
(4,829) |
Other comprehensive income (loss): |
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Foreign currency translation adjustment |
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1,722 |
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(4,637) |
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2,280 |
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(6,409) |
Total comprehensive income (loss) |
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$ |
911 |
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$ |
(4,611) |
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$ |
(1,455) |
|
$ |
(11,238) |
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Net loss per common share – basic and diluted, as adjusted |
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$ |
(0.12) |
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$ |
(0.04) |
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$ |
(0.47) |
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$ |
(0.67) |
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Weighted average number of common shares outstanding – basic and diluted, as adjusted |
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9,385 |
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8,228 |
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9,359 |
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8,176 |
See accompanying notes to unaudited condensed consolidated financial statements.
3
Boxlight Corporation
Condensed Consolidated Balance Sheets
As of June 30, 2023 and December 31, 2022
(in thousands, except share and per share amounts)
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June 30, |
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December 31, |
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2023 |
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2022 |
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(Unaudited) |
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(as adjusted) |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
15,588 |
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$ |
14,591 |
Accounts receivable – trade, net of allowances |
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37,635 |
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31,009 |
Inventories, net of reserves |
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37,809 |
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58,211 |
Prepaid expenses and other current assets |
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10,014 |
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7,433 |
Total current assets |
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101,046 |
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111,244 |
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Property and equipment, net of accumulated depreciation |
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1,545 |
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1,733 |
Operating lease right of use asset |
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3,556 |
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4,350 |
Intangible assets, net of accumulated amortization |
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49,869 |
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52,579 |
Goodwill |
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25,470 |
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25,092 |
Other assets |
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827 |
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|
397 |
Total assets |
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$ |
182,313 |
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$ |
195,395 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
21,108 |
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$ |
36,566 |
Short-term debt |
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3,807 |
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|
845 |
Operating lease liabilities, current |
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1,699 |
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1,898 |
Deferred revenues, current |
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8,248 |
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8,308 |
Derivative liabilities |
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512 |
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|
472 |
Other short-term liabilities |
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|
878 |
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|
386 |
Total current liabilities |
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36,252 |
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48,475 |
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Deferred revenues, non-current |
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15,682 |
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15,603 |
Long-term debt |
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43,369 |
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43,778 |
Deferred tax liabilities, net |
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5,571 |
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|
4,680 |
Operating lease liabilities, non-current |
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2,038 |
|
|
2,457 |
Total liabilities |
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102,912 |
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114,993 |
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Commitments and contingencies (Note 14) |
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Mezzanine equity: |
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Preferred Series B, 1,586,620 shares issued and outstanding |
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16,146 |
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16,146 |
Preferred Series C, 1,320,850 shares issued and outstanding |
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12,363 |
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12,363 |
Total mezzanine equity |
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28,509 |
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28,509 |
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Stockholders’ equity: |
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Preferred stock, $0.0001 par value, 50,000,000 shares authorized; 167,972 and 167,972 shares issued and outstanding, respectively |
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— |
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— |
Common stock, $0.0001 par value, 68,750,000 shares authorized; 9,465,494 and 9,339,587 Class A shares issued and outstanding, respectively |
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1 |
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1 |
Additional paid-in capital |
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118,379 |
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117,849 |
Accumulated deficit |
|
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(68,854) |
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|
(65,043) |
Accumulated other comprehensive income (loss) |
|
|
1,366 |
|
|
(914) |
Total stockholders’ equity |
|
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50,892 |
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51,893 |
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Total liabilities and stockholders’ equity |
|
$ |
182,313 |
|
$ |
195,395 |
See accompanying notes to unaudited condensed consolidated financial statements.
4
Boxlight Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three and six months ended June 30, 2023, as adjusted
(Unaudited)
(in thousands, except share amounts)
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Accumulated |
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Series A |
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Class A |
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Additional |
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Other |
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Preferred Stock |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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(Loss) Income |
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Deficit |
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Total |
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Balance as of March 31, 2023 |
|
167,972 |
|
$ |
— |
|
9,384,833 |
|
$ |
1 |
|
$ |
118,159 |
|
$ |
(356) |
|
$ |
(68,043) |
|
$ |
49,761 |
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Shares issued for: |
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Stock options exercised |
|
— |
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— |
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12,500 |
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— |
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13 |
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— |
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— |
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13 |
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Vesting of restricted share units |
|
— |
|
|
— |
|
34,747 |
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|
— |
|
|
— |
|
|
— |
|
|
— |
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— |
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|
|
|
|
|
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|
|
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Reverse stock split fractional adjustment |
|
— |
|
|
— |
|
33,414 |
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|
— |
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|
— |
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— |
|
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— |
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— |
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Stock compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
524 |
|
|
— |
|
|
— |
|
|
524 |
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Foreign currency translation |
|
— |
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|
— |
|
— |
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|
— |
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|
— |
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|
1,722 |
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|
— |
|
|
1,722 |
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Fixed dividends Preferred Series B |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(317) |
|
|
— |
|
|
— |
|
|
(317) |
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Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(811) |
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|
(811) |
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|
|
|
|
|
|
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|
|
|
|
|
|
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|
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Balance as of June 30, 2023 |
|
167,972 |
|
$ |
— |
|
9,465,494 |
|
$ |
1 |
|
$ |
118,379 |
|
$ |
1,366 |
|
$ |
(68,854) |
|
$ |
50,892 |
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Balance as of December 31, 2022 |
|
167,972 |
|
$ |
— |
|
9,339,587 |
|
$ |
1 |
|
$ |
117,849 |
|
$ |
(914) |
|
$ |
(65,043) |
|
$ |
51,893 |
|
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|
|
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Cumulative effect of change in accounting principle, net of tax |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(76) |
|
|
(76) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2022 - as adjusted |
|
167,972 |
|
|
— |
|
9,339,587 |
|
|
1 |
|
|
117,849 |
|
|
(914) |
|
|
(65,119) |
|
|
51,817 |
|
|
|
|
|
|
|
|
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Shares issued for: |
|
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|
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|
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|
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|
|
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|
|
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|
|
|
|
|
|
Stock options exercised |
|
— |
|
|
— |
|
12,500 |
|
|
— |
|
|
13 |
|
|
— |
|
|
— |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted share units |
|
— |
|
|
— |
|
79,993 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse stock split fractional adjustment |
|
— |
|
|
— |
|
33,414 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
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Stock compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
1,152 |
|
|
— |
|
|
— |
|
|
1,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
2,280 |
|
|
— |
|
|
2,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed dividends Preferred Series B |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(635) |
|
|
— |
|
|
— |
|
|
(635) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,735) |
|
|
(3,735) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2023 |
|
167,972 |
|
$ |
— |
|
9,465,494 |
|
$ |
1 |
|
$ |
118,379 |
|
$ |
1,366 |
|
$ |
(68,854) |
|
$ |
50,892 |
See accompanying notes to unaudited condensed consolidated financial statements.
5
Boxlight Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three and six months ended June 30, 2022, as adjusted
(Unaudited)
(in thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Series A |
|
Class A |
|
Additional |
|
Other |
|
|
|
|
|
|
||||||||
|
|
Preferred Stock |
|
Common Stock |
|
Paid-in |
|
Comprehensive |
|
Accumulated |
|
|
|
|||||||||
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Income |
|
Deficit |
|
Total |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2022 |
|
167,972 |
|
$ |
— |
|
8,190,305 |
|
$ |
1 |
|
$ |
111,721 |
|
$ |
1,956 |
|
$ |
(66,156) |
|
$ |
47,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised |
|
— |
|
|
— |
|
17,574 |
|
|
— |
|
|
25 |
|
|
— |
|
|
— |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of restricted shares |
|
— |
|
|
— |
|
68,086 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
929 |
|
|
— |
|
|
— |
|
|
929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(4,637) |
|
|
— |
|
|
(4,637) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed dividends Preferred Series B |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(317) |
|
|
— |
|
|
— |
|
|
(317) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
26 |
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2022 |
|
167,972 |
|
$ |
— |
|
8,275,965 |
|
$ |
1 |
|
$ |
112,358 |
|
$ |
(2,681) |
|
$ |
(66,130) |
|
$ |
43,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021 |
|
167,972 |
|
$ |
— |
|
7,977,738 |
|
$ |
— |
|
$ |
110,873 |
|
$ |
3,728 |
|
$ |
(61,300) |
|
$ |
53,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised |
|
— |
|
|
— |
|
24,605 |
|
|
— |
|
|
58 |
|
|
— |
|
|
— |
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs |
|
— |
|
|
— |
|
66,021 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of restricted shares |
|
— |
|
|
— |
|
207,601 |
|
|
1 |
|
|
— |
|
|
— |
|
|
(1) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
2,062 |
|
|
— |
|
|
— |
|
|
2,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(6,409) |
|
|
— |
|
|
(6,409) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed dividends Preferred Series B |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(635) |
|
|
— |
|
|
— |
|
|
(635) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,829) |
|
|
(4,829) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2022 |
|
167,972 |
|
$ |
— |
|
8,275,965 |
|
$ |
1 |
|
$ |
112,358 |
|
$ |
(2,681) |
|
$ |
(66,130) |
|
$ |
43,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
6
Boxlight Corporation
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2023 and 2022
(Unaudited)
(in thousands)
|
|
Six Months Ended |
|
||||
|
|
June 30, |
|
June 30, |
|
||
|
|
2023 |
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,735) |
|
$ |
(4,829) |
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
Amortization of debt discount and issuance cost |
|
|
931 |
|
|
1,097 |
|
Bad debt expense |
|
|
(126) |
|
|
8 |
|
Gain on settlement of liabilities |
|
|
— |
|
|
(856) |
|
Changes in deferred tax assets and liabilities |
|
|
906 |
|
|
(719) |
|
Change in allowance for sales returns and volume rebates |
|
|
1,062 |
|
|
191 |
|
Change in inventory reserve |
|
|
1,222 |
|
|
749 |
|
Change in fair value of derivative liabilities |
|
|
40 |
|
|
(1,650) |
|
Stock compensation expense |
|
|
1,152 |
|
|
2,062 |
|
Depreciation and amortization |
|
|
4,561 |
|
|
4,587 |
|
Change in right of use assets and lease liabilities |
|
|
172 |
|
|
(98) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable – trade |
|
|
(6,953) |
|
|
(13,839) |
|
Inventories |
|
|
20,076 |
|
|
2,010 |
|
Prepaid expenses and other assets |
|
|
(2,842) |
|
|
(1,149) |
|
Accounts payable and accrued expenses |
|
|
(16,202) |
|
|
2,969 |
|
Other liabilities |
|
|
459 |
|
|
9 |
|
Deferred revenues |
|
|
(713) |
|
|
2,582 |
|
Net cash provided by (used in) operating activities |
|
$ |
10 |
|
$ |
(6,876) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchases of furniture and fixtures, net |
|
|
(100) |
|
|
(659) |
|
Net cash used in investing activities |
|
$ |
(100) |
|
$ |
(659) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from short-term debt |
|
|
3,000 |
|
|
— |
|
Proceeds from long-term debt |
|
|
— |
|
|
2,500 |
|
Principal payments on debt |
|
|
(1,378) |
|
|
(1,305) |
|
Payments of fixed dividends to Series B Preferred stockholders |
|
|
(635) |
|
|
(631) |
|
Proceeds from the exercise of options and warrants |
|
|
13 |
|
|
57 |
|
Net cash provided by financing activities |
|
$ |
1,000 |
|
$ |
621 |
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rates |
|
|
87 |
|
|
596 |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
997 |
|
|
(6,318) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the period |
|
|
14,591 |
|
|
17,938 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the period |
|
$ |
15,588 |
|
$ |
11,620 |
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
892 |
|
$ |
215 |
|
Cash paid for interest |
|
$ |
4,050 |
|
$ |
3,731 |
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions: |
|
|
|
|
|
|
|
Addition of right of use assets |
|
$ |
43 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
7
Boxlight Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Boxlight Corporation, a Nevada Corporation (“Boxlight”), designs, produces and distributes interactive technology solutions to the education, corporate and government markets under its Clevertouch and Mimio brands. Boxlight’s solutions include interactive displays, collaboration software, supporting accessories, and professional services.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited condensed consolidated financial statements include the accounts of Boxlight and its wholly owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim unaudited condensed consolidated financial information and interim financial reporting guidelines and rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete condensed consolidated financial statements. The unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2022 and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”). Certain information and note disclosures normally included in consolidated financial statements have been condensed. The December 31, 2022 balance sheet included herein was derived from the Company’s audited consolidated financial statements, but does not include all disclosures, including notes, required by GAAP for complete financial statements.
Effective January 1, 2023, the Company’s internal reporting structure used by the chief operating decision maker (or CODM) changed resulting in changes to the Company’s segment reporting to align such reporting with the geographic markets in which the Company operates, as further discussed below and in Note 16 - Segments. Corresponding prior period amounts have been restated to conform to current period classification.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Note 1 in the Notes to the consolidated financial statements for 2022 contained in the 2022 Annual Report filed with the SEC on March 17, 2023, describes the significant accounting policies that the Company used in preparing its condensed consolidated financial statements. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to revenue, reserves, and allowances. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates under different assumptions or conditions.
REVERSE STOCK SPLIT
On June 14, 2023, the Company effected a reverse stock split of the Company’s Class A common stock whereby each eight shares of the Company’s authorized and outstanding Class A common stock was replaced with one share of common stock. The par value of the common stock was not adjusted. Following the reverse split, the authorized shares for Class A common stock was adjusted to 18,750,000, the authorized shares for Class B common stock remained at 50,000,000 shares, and preferred shares remained unchanged at 50,000,000. All Class A common share and per share amounts for all periods presented in the condensed consolidated financial statements and the notes to the consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in aggregate par value of Class A common stock to additional paid-in capital on the condensed consolidated balance sheets of approximately $6 thousand.
8
The quantity of Class A common stock equivalents and the conversion and exercise ratios were adjusted for the effect of the reverse stock split for warrants, stock-based compensation arrangements, and the conversion features on preferred shares. All of the agreements include existing conversion language in the event of a stock split and thus did not result in modification accounting or additional incremental expense as a result of this transaction. The Company issued 33,414 shares of Class A common stock to adjust fractional shares following the reverse stock split to the nearest whole share. There are presently no shares of Class B common stock outstanding and none were outstanding as of June 30, 2023.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments primarily include cash, accounts receivable, derivative liabilities, accounts payable and debt. Due to the short-term nature of cash, accounts receivable and accounts payable, the carrying amounts of these assets and liabilities approximate their fair value. Debt approximates fair value due to either the short-term nature, variable rate, or recent execution of the debt agreement. The amount of consideration received is deemed to approximate the fair value of long-term debt net of any debt discount and issuance cost.
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
| ● | Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
| ● | Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. |
| ● | Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
The following table sets forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets for |
|
Other |
|
Significant |
|
Carrying |
||||
|
|
Identical |
|
Observable |
|
Unobservable |
|
Value as of |
||||
|
|
Assets |
|
Inputs |
|
Inputs |
|
June 30, |
||||
Description |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
2023 |
||||
Derivative liabilities - warrant instruments |
|
|
— |
|
|
— |
|
$ |
512 |
|
$ |
512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets for |
|
Other |
|
Significant |
|
Carrying |
||||
|
|
Identical |
|
Observable |
|
Unobservable |
|
Value as of |
||||
|
|
Assets |
|
Inputs |
|
Inputs |
|
December 31, |
||||
Description |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
2022 |
||||
Derivative liabilities - warrant instruments |
|
|
— |
|
|
— |
|
$ |
472 |
|
$ |
472 |
9
The following tables reconcile the beginning and ending balances of the warrant instruments within Level 3 of the fair value hierarchy:
|
|
|
|
|
|
(in thousands) |
|
Balance, March 31, 2023 |
|
$ |
696 |
Change in fair value of derivative liabilities |
|
|
(184) |
Balance, June 30, 2023 |
|
$ |
512 |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Balance, December 31, 2022 |
|
$ |
472 |
Change in fair value of derivative liabilities |
|
|
40 |
Balance, June 30, 2023 |
|
$ |
512 |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Balance, March 31, 2022 |
|
$ |
3,074 |
Change in fair value of derivative liabilities |
|
|
(1,660) |
Balance, June 30, 2022 |
|
$ |
1,414 |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Balance, December 31, 2021 |
|
$ |
3,064 |
Change in fair value of derivative liabilities |
|
|
(1,650) |
Balance, June 30, 2022 |
|
$ |
1,414 |
INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting, and warrants to purchase common stock were considered to be common stock equivalents. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period giving effect to all potentially dilutive securities to the extent they are dilutive. The dilutive effect of options to purchase common stock, restricted stock units subject to vesting and other share-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted calculation for the entire period being presented.
For the three and six months ended June 30, 2023, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 0.4 million shares from options to purchase common shares, 0.2 million of unvested restricted shares and 1.4 million shares issuable upon exercise of warrants. Additionally, potentially dilutive securities of 2.2 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive. For the three and six months ended June 30, 2022, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 0.5 million shares from options to purchase common shares, 0.4 million of unvested restricted shares and 0.4 million shares issuable upon exercise of warrants. Additionally, potentially dilutive securities of 2.2 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive.
10
REVENUE RECOGNITION
The Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present right to payment and the title, and the significant risks and rewards of ownership of the products or services, have been transferred to its customers. Product revenue is derived from the sale of interactive devices and related software and accessories to distributors, resellers and end users. Service revenue is derived from hardware maintenance services, product installation, training, software maintenance and subscription services.
Nature of Products and Services and Related Contractual Provisions
The Company’s sales of interactive devices, including panels, whiteboards, and other interactive devices generally include hardware maintenance services, a license to use software, and the provision of related software maintenance. In most cases, interactive devices are sold with hardware maintenance services with terms of approximately 30-60 months. Software maintenance includes technical support, product updates performed on a when and if available basis, and error correction services. At times, non-interactive projectors are also sold with hardware maintenance services with terms of approximately 60 months. The Company also licenses software independently of its interactive devices, in which case it is bundled with software maintenance, and in some cases, subscription services that include access to on-line content and cloud-based applications. The Company’s software subscription services provide access to content and software applications on an as needed basis over the Internet, but do not provide the right to take delivery of the software applications.
The Company’s product sales, including those with software and related services, generally include a single payment up front for the products and services, and revenue is recorded net of estimated sales returns and rebates based on the Company’s expectations and historical experience. For most of the Company’s product sales, control transfers and, therefore, revenue is recognized when products are shipped at the point of origin. When the Company transfers control of its products to the customer prior to the related shipping and handling activities, the Company has adopted a policy of accounting for shipping and handling activities as a fulfillment cost rather than a performance obligation. For many of the Company’s software product sales, control is transferred when shipped at the point of origin since the software is installed on the interactive hardware device in advance of shipping. For software product sales, control is transferred when the customer receives the related interactive hardware since the customer’s connection to the interactive hardware activates the software license at which time the software is made available to the customer. For the Company’s software maintenance, hardware maintenance and subscription services, revenue is recognized ratably over time as the services are provided since time is the best output measure of how those services are transferred to the customer.
Significant Judgments
For contracts with multiple performance obligations, each of which represent promises within a contract that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). The Company’s products and services included in its contracts with multiple performance obligations generally are not sold separately and there are no observable prices available to determine the SSP for those products and services. Since observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, when applicable, the estimated cost to provide the performance obligation, market trends in the pricing for similar offerings, product-specific business objectives, and competitor or other relevant market pricing and margins. Because observable prices are generally not available for the Company’s performance obligations that are sold in bundled arrangements, the Company does not apply the residual approach to determining SSP. However, the Company does have performance obligations for which pricing is highly variable or uncertain, and contracts with those performance obligations generally contain multiple performance obligations with highly variable or uncertain pricing terms. For these contracts the Company allocates the transaction price to those performance obligations using an alternative method of allocation that is consistent with the allocation objective and the guidance on determining SSPs considering, when applicable, the estimated cost to provide the performance obligation, market pricing for competing product or service offerings, residual values based on the estimated SSP for certain goods, product-specific business objectives, incremental values for bundled transactions that include a service relative to similar transactions that exclude the service, and competitor pricing and margins. A separate price has not been established by the Company for performance obligations generally included in its contracts. In addition, the Company’s contracts generally include performance obligations that are never sold separately, are proprietary in nature, and the related selling price of these products and services is highly variable or uncertain. Therefore, the SSP of these products and services is estimated using the alternative method described above.
11
The Company has applied the portfolio approach to its allocation of the transaction price for certain portfolios of contracts that are executed in the same manner, contain the same performance obligations, and are priced in a consistent manner. The Company believes that the application of the portfolio approach produces the same result as if they were applied at the contract level.
Contract Balances
The timing of invoicing to customers often differs from the timing of revenue recognition and these timing differences can result in receivables, contract assets, or contract liabilities (deferred revenue) on the Company’s consolidated balance sheets. Fees for the Company’s product and most service contracts are fixed, except as adjusted for rebate programs when applicable, and are generally due within 30-60 days of contract execution. Fees for installation, training and professional development services are fixed and generally become due as the services are performed. The Company has an established history of collecting under the terms of its contracts without providing refunds or concessions to its customers. The Company’s contractual payment terms do not vary when products are bundled with services that are provided over multiple years. In these contracts where services are expected to be transferred on an ongoing basis for several years after the related payment, the Company has determined that the contracts generally do not include a significant financing component. The upfront invoicing terms are designed (1) to provide customers with a predictable way to purchase products and services where the payment is due in the same timeframe as when the products, which constitute the predominant portion of the contractual value, are transferred, and (2) to ensure that the customer continues to use the related services; so that the customer can receive the optimal benefit from the products during the course of such product’s lifetime. Additionally, the Company has elected the practical expedient to exclude any financing component from consideration for contracts where, at contract inception, the period between the transfer of services and the timing of the related payment is not expected to exceed one year.
The Company has an unconditional right to consideration for all products and services transferred to the customer. That unconditional right to consideration is reflected in accounts receivable in the accompanying condensed consolidated balance sheets in accordance with Topic 606. Contract liabilities are reflected in deferred revenue in the accompanying condensed consolidated balance sheets and reflect amounts allocated to performance obligations that have not yet been transferred to the customer related to software maintenance, hardware maintenance, and subscription services. The Company had no material contract assets as of June 30, 2023 or December 31, 2022. During the three months ended June 30, 2023 and June 30, 2022, respectively, the Company recognized $2.0 million and $1.8 million of revenue that was included in the deferred revenue as of December 31, 2022 and December 31, 2021, respectively. During the six months ended June 30, 2023 and June 30, 2022, the Company recognized $4.1 million and $3.7 million of revenue that was included in the deferred revenue balance as of December 31, 2022 and December 31, 2021, respectively.
Variable Consideration
The Company’s otherwise fixed consideration may vary when refunds or credits are provided for sales returns, stock rotation rights, price protection provisions, or in connection with certain other rebate provisions. The Company generally does not allow product returns other than under assurance warranties or hardware maintenance contracts. However, the Company, on a case-by-case basis, will grant exceptions, mostly for “buyer’s remorse” where the distributor or reseller’s end customer either did not understand what they were ordering or otherwise determined that the product did not meet their needs. An allowance for sales returns is estimated based on an analysis of historical trends. In very limited situations, a customer may return previous purchases held in inventory for a specified period of time in exchange for credits toward additional purchases. The Company includes variable consideration in its transaction price when there is a basis to reasonably estimate the amount of the fee and it is probable there will not be a significant reversal. These estimates are generally made using the expected value method based on historical experience and are measured at each reporting date. There was no material revenue recognized in the three and six months ended June 30, 2023 related to changes in estimated variable consideration that existed at December 31, 2022.
Remaining Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting within the contract. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies performance obligations at contract inception so that it can monitor and account for the obligations over the life of the contract. Remaining performance obligations represent the portion of the transaction price in a contract allocated to products and services not yet transferred to the customer. As of June 30, 2023 and December 31, 2022, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $23.9 million. The Company expects to recognize revenue on 34.4% of the remaining performance obligations during the next twelve months, 28.1% in the following twelve months, 21.2% in the twelve months ended June 30, 2026, 12.6% in the twelve months ended June 30, 2027, with the remaining 3.7% recognized thereafter.
12
In accordance with Topic 606, the Company has elected not to disclose the value of remaining performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (for example, a time-and-materials professional services contracts). In addition, the Company has elected not to disclose the value of remaining performance obligations for contracts with performance obligations that are expected, at contract inception, to be satisfied over a period that does not exceed one year.
Disaggregated Revenue
The Company disaggregates revenue based upon the nature of its products and services and the timing and in the manner which it is transferred to the customer. Although all products are transferred to the customer at a point in time, hardware and some software which comes pre-installed on an interactive device is transferred at the point of shipment, while some software is transferred to the customer at the time the hardware is received by the customer or when software product keys are delivered electronically to the customer. All service revenue is transferred over time to the customer; however, professional services are generally transferred to the customer within a year from the contract date as measured based upon hours or time incurred while software maintenance, hardware maintenance, and subscription services are generally transferred over three to five years from the contract execution date as measured based upon the passage of time.
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
(in thousands) |
|
(in thousands) |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Product revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware |
|
$ |
43,781 |
|
$ |
56,569 |
|
$ |
81,999 |
|
$ |
103,863 |
|
Software |
|
|
621 |
|
|
1,038 |
|
|
1,085 |
|
|
2,556 |
|
Service revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services |
|
|
445 |
|
|
479 |
|
|
827 |
|
|
833 |
|
Maintenance and subscription services |
|
|
2,205 |
|
|
1,542 |
|
|
4,331 |
|
|
2,979 |
|
|
|
$ |
47,052 |
|
$ |
59,628 |
|
$ |
88,242 |
|
$ |
110,231 |
|
Contract Costs
The Company capitalizes incremental costs to obtain a contract with a customer if the Company expects to recover those costs. The incremental costs to obtain a contract are those that the Company incurs to obtain a contract with a customer that it would not have otherwise incurred if the contract were not obtained (e.g., a sales commission). The Company capitalizes the costs incurred to fulfill a contract only if those costs meet all the following criteria:
| ● | The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify; |
| ● | The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and |
| ● | The costs are expected to be recovered. |
Certain sales commissions incurred by the Company are determined to be incremental costs to obtain the related contracts, which are deferred and amortized ratably over the estimated economic benefit period. For these sales commissions that are incremental costs to obtain where the period of amortization would be recognized over a period that is one year or less, the Company has elected the practical expedient to expense those costs as incurred. Commission costs that are deferred are classified as current or non-current assets based on the timing of when the Company expects to recognize the expense and are included in prepaid and other assets and other assets, respectively, in the accompanying condensed consolidated balance sheets.
13
Total deferred commissions, net of accumulated amortization, at June 30, 2023 and December 31, 2022 was $0.5 million.
Bill and Hold Arrangements
From time to time the Company enters custodial bill and hold arrangements with customers. Each arrangement is reviewed, and revenue is recognized only when the following criteria have been met: (1) the reason for the bill-and-hold arrangement is substantive, (2) the product is identified as the customer’s asset, (3) the product is ready for delivery to the customer, (4) there is a fixed schedule for delivery, and (5) the seller cannot use the product or direct the product to another customer. As of June 30, 2023, $0.1 million of revenue was previously recognized for goods that are expected to be delivered to a customer during the third quarter.
SEGMENT REPORTING
ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer.
Effective January 1, 2023, the Company changed its segment reporting to align with the geographic markets in which it operates, as further discussed in Note 16 - Segments. The Company previously managed the Company as one operating segment. Following the integration of recent acquisitions which further expanded the Company’s operations into Europe, Middle East and Africa (“EMEA”) and other international markets, the Company’s operations are now organized, managed and classified into three reportable segments – EMEA, North and Central America (the “Americas”) and all other geographic regions (“Rest of World”). Our EMEA segment consists of the operations of Sahara Holding Limited and its subsidiaries (the “Sahara Entities”). Our Americas segment consists primarily of Boxlight, Inc. and its subsidiaries and the Rest of World segment consists primarily of Boxlight Australia, PTY LTD ("Boxlight Australia”).
Each of our operating segments are primarily engaged in the sale of education technology products and services in the education market but which are also sold into the health, government and corporate sectors and derive a majority of their revenues from the sale of flat-panel displays, audio and other hardware accessory products, software solutions and professional services. Generally, our displays produce higher net operating revenues but lower gross profit margins than our accessory solutions and professional services. The Americas operating segment includes salaries and overhead for corporate functions that are not allocated to the Company’s individual reporting segments. Transfers between segments are generally valued at market and are eliminated in consolidation.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (“CECL”). The new guidance applies to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new guidance also applies to debt securities and other financial assets measured at fair value through other comprehensive income. Estimated credit losses under CECL consider relevant information about past events, current conditions and reasonable and supporting forecasts that affect the collectability of financial assets. The new guidance was effective January 1, 2023 and was applied using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of January 1, 2023. Prior period comparative information has not been recast and continues to be reported under the accounting guidance in effect for those periods. The Company recognized a cumulative-effect adjustment to reduce retained earnings by $76 thousand, net of taxes. The change in the allowance for credit losses was not significant during the three and six months ended June 30, 2023.
ACCOUNTING STANDARDS PENDING ADOPTION
There were various other accounting standards and interpretations issued recently, some of which although applicable, are not expected to have a material impact on the Company’s financial position, operations, or cash flows.
14
NOTE 2 – ACCOUNTS RECEIVABLE - TRADE
Accounts receivable consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):
|
|
2023 |
|
2022 |
||
|
|
|
|
|
|
|
Accounts receivable – trade |
|
$ |
40,758 |
|
$ |
33,198 |
Allowance for doubtful accounts |
|
|
(286) |
|
|
(414) |
Allowance for sales returns and volume rebates |
|
|
(2,837) |
|
|
(1,775) |
Accounts receivable - trade, net of allowances |
|
$ |
37,635 |
|
$ |
31,009 |
NOTE 3 – INVENTORIES
Inventories are stated at the lower of cost or net realizable value and include spare parts and finished goods. Inventories are primarily determined using specific identification and the first-in, first-out (“FIFO”) cost methods. Cost includes direct cost from the Current Manufacturer (“CM”) or Original Equipment Manufacturer (“OEM”), plus material overhead related to the purchase, inbound freight and import duty costs.
Inventories consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):
|
|
|
|
|
|
|
|
|
2023 |
|
2022 |
||
|
|
|
|
|
|
|
Finished goods |
|
$ |
37,961 |
|
$ |
56,583 |
Spare parts |
|
|
1,211 |
|
|
775 |
Reserve for inventory obsolescence |
|
|
(1,776) |
|
|
(531) |
Advanced shipping costs |
|
|
413 |
|
|
1,384 |
Inventories, net |
|
$ |
37,809 |
|
$ |
58,211 |
NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):
|
|
2023 |
|
2022 |
||
|
|
|
|
|
|
|
Prepayments to vendors |
|
$ |
3,718 |
|
$ |
4,131 |
Prepaid licenses and other |
|
|
6,296 |
|
|
3,302 |
Prepaid expenses and other current assets |
|
$ |
10,014 |
|
$ |
7,433 |
15
NOTE 5 – INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
Intangible assets consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful lives |
|
2023 |
|
2022 |
||
INTANGIBLE ASSETS |
|
|
|
|
|
|
|
|
Patents |
|
4-10 years |
|
$ |
182 |
|
$ |
182 |
Customer relationships |
|
8-15 years |
|
|
52,484 |
|
|
52,736 |
Technology |
|
3-5 years |
|
|
8,926 |
|
|
8,943 |
Domain |
|
7 years |
|
|
14 |
|
|
14 |
Non-compete |
|
8-15 years |
|
|
391 |
|
|
391 |
Tradenames |
|
2-10 years |
|
|
12,726 |
|
|
12,769 |
Intangible assets, at cost |
|
|
|
|
74,723 |
|
|
75,035 |
Accumulated amortization |
|
|
|
|
(24,854) |
|
|
(22,456) |
Intangible assets, net of accumulated amortization |
|
|
|
$ |
49,869 |
|
$ |
52,579 |
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2023 and 2022, the Company recorded amortization expense of $2.2 million. For the six months ended June 30, 2023 and 2022, the Company recorded amortization expense of $4.3 million and $4.4 million, respectively. Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately $0.3 million reduction as of June 30, 2023 and $3.1 million reduction as of December 31, 2022.
Goodwill
The Company determined that a triggering event had occurred as a result of the Company’s market capitalization that suggested one or more of the reporting units may have fallen below the carrying amounts. In addition, the Company’s change in reporting segments resulted in a change in the composition of the Company’s reporting units. As a result of these changes, the Company determined it has two reporting units for purposes of testing based upon entities that comprise the Americas and EMEA reporting segments. For purposes of impairment testing, the Company allocated goodwill to the reporting units based upon a relative fair value allocation approach and has assigned approximately $22.5 million and $2.9 million of goodwill to the America and EMEA reporting units, respectively. However, the allocation used for purposes of segment information disclosures in Note 16 differs from these values used for impairment testing as the information used by the Chief Operating Decision Maker does not assign goodwill in the same manner.
As of June 30, 2023, the Company performed an interim goodwill impairment test as a result of the triggering events identified. In analyzing goodwill for potential impairment in the quantitative impairment test, the Company used a combination of the income and market approaches to estimate the fair value. Under the income approach, the Company calculated the fair value based on estimated future discounted cash flows. The assumptions used are based on what the Company believes a hypothetical marketplace participant would use in estimating fair value and include the discount rate, projected average revenue growth and projected long-term growth rates in the determination of terminal values. Under the market approach, the Company estimated the fair value based on market multiples of revenue or earnings before interest, income taxes, depreciation, and amortization for benchmark companies. If the fair value exceeds carrying value, then no further testing is required. However, if the fair value were to be less than carrying value, the Company would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the goodwill exceeded its implied value.
Based on the results of the quantitative interim impairment test, the Company concluded that the reporting unit’s goodwill was not impaired as of June 30, 2023.
NOTE 6 – LEASES
The Company has entered into various operating leases for certain offices, support locations and vehicles with terms extending through February 2028. Generally, these leases have initial lease terms of five years or less. Many of the leases have one or more lease renewal options. The exercise of lease renewal options is at the Company’s sole discretion. The Company does not consider the exercise of any lease renewal options reasonably certain.
16
In addition, certain of the Company’s lease agreements contain early termination options. No renewal options or early termination options have been included in the calculation of the operating right-of-use assets or operating lease liabilities. Certain of the Company’s lease agreements provide for periodic adjustments to rental payments for inflation. As the majority of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments. The incremental borrowing rate is based on the term of the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For these short-term leases, lease expense is recognized on a straight-line basis over the lease term. At June 30, 2023, the Company had no leases classified as finance leases. The Company is currently not a lessor in any lease arrangement.
Operating lease expense was $536 thousand and $579 thousand for the three months ended June 30, 2023 and June 30, 2022, respectively and $1.1 million and $1.0 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Variable lease costs and short-term lease cost were not material for the three and six months ended June 30, 2023 and June 30, 2022. Cash paid for amounts included in the measurement of lease liabilities was $619 thousand and $684 thousand for the three months ended June 30, 2023 and June 30, 2022, respectively and $1.2 million and $1.1 million for the six months ended June 30, 2023 and June 30, 2022.
Future maturities of the Company's operating lease liabilities are summarized as follows (in thousands):
Fiscal year ended,
2023 |
|
$ |
1,056 |
2024 |
|
|
1,358 |
2025 |
|
|
1,118 |
2026 |
|
|
751 |
2027 |
|
|
246 |
Thereafter |
|
|
6 |
|
|
|
4,535 |
Less imputed interest |
|
|
(798) |
Total |
|
$ |
3,737 |
The following is supplemental lease information at June 30, 2023:
Weighted-average remaining lease term (years) |
|
2.9 |
|
Weighted-average discount rate |
|
15.5 |
% |
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expense consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):
|
|
2023 |
|
2022 |
||
Accounts payable |
|
$ |
15,144 |
|
$ |
30,719 |
Accrued expense and other |
|
|
5,964 |
|
|
5,847 |
Accounts payable and other liabilities |
|
$ |
21,108 |
|
$ |
36,566 |
17
NOTE 8 – DEBT
The following is a summary of the Company’s debt as of June 30, 2023 and December 31, 2022 (in thousands):
|
|
|
|
|
|
|
|
|
2023 |
|
2022 |
||
Debt – Third Parties |
|
|
|
|
|
|
Paycheck Protection Program |
|
$ |
99 |
|
$ |
127 |
Note payable - Whitehawk |
|
|
51,556 |
|
|
49,906 |
Total debt |
|
|
51,655 |
|
|
50,033 |
Less: Discount and issuance costs |
|
|
4,479 |
|
|
5,410 |
Current portion of debt |
|
|
3,807 |
|
|
845 |
Long-term debt |
|
$ |
43,369 |
|
$ |
43,778 |
Total debt (net of discount and issuance costs) |
|
$ |
47,176 |
|
$ |
44,623 |
Debt - Third Parties:
Whitehawk Finance LLC
In order to finance the acquisition of FrontRow Calypso LLC (“FrontRow”), which closed on December 31, 2021, the Company and substantially all of its direct and indirect subsidiaries, including Boxlight and FrontRow as guarantors, entered into a maximum $68.5 million term loan credit facility, dated December 31, 2021 (the “Credit Agreement”), with Whitehawk Finance LLC, as lender (the “Lender”), and White Hawk Capital Partners, LP, as collateral agent (“Whitehawk” or the “Collateral Agent”). The Company received an initial term loan of $58.5 million on December 31, 2021 (the “Initial Loan”) and was provided with a subsequent delayed draw facility of up to $10 million that may be provided for additional working capital purposes under certain conditions (the “Delayed Draw”). The Initial Loan and Delayed Draw are collectively referred to as the “Term Loans.” The proceeds of the Initial Loan were used to finance the Company’s acquisition of FrontRow, pay off all indebtedness owed to the Company’s then existing lenders, Sallyport Commercial Finance, LLC and Lind Global Asset Management, LLC, pay related fees and transaction costs, and provide working capital. Of the Initial Loan, $8.5 million was subject to repayment on February 28, 2022, with quarterly principal payments of $625,000 and interest payments commencing March 31, 2022 and the $40.0 million remaining balance plus any Delayed Draw loans becoming due and payable in full on December 31, 2025. The Term Loans bear interest at the LIBOR rate plus 10.75%; provided that after March 31, 2022, if the Company’s Senior Leverage Ratio (as defined in the Credit Agreement) is less than 2.25, the interest rate would be reduced to LIBOR plus 10.25%. Such terms are subject to the Company maintaining a borrowing base in compliance with the Credit Agreement. In the event of non-compliance with the borrowing base, the Company would be subject to an increased interest rate as stated in the Credit Agreement.
On April 4, 2022, the Collateral Agent and Lender agreed to extend the terms of repayment of the $8.5 million originally due on February 28, 2022 until February 28, 2023. The principal elements of the April amendment included (a) an extension of time to repay $8.5 million of the principal amount of the term loan from February 28, 2022 to February 28, 2023, and (b) forbearance on $3.5 million in over advances until May 16, 2022 to allow the Company to come into compliance with the borrowing base requirements set forth in the Credit Agreement. In such connection, the Loan Parties obtained credit insurance on certain key customers whose principal offices are located in the European Union and Australia as, without the credit insurance, their accounts owed to the Loan Parties had been deemed ineligible for inclusion in the borrowing base calculation primarily due to the perceived inability of the Collateral Agent to enforce security interests on such accounts. In addition, the Lender and Collateral Agent agreed to (i) reduce, through September 30, 2022, the minimum cash reserve requirement for the Loan Parties, (ii) reduce the interest rate by 50 basis points (to Libor plus+ 9.75%) after delivery of the Loan Parties’ September 30, 2023 financial statements, subject to the Loan Parties maintaining 1.75 EBITDA coverage ratio, and (iii) waive all prior Events of Default under the Credit Agreement. Furthermore, the parties agreed that no prepayment premiums would be payable with respect to the first $5.0 million paid under the Term Loan, any payments made in relation to the $8.5 million due on or before February 28, 2023, any required amortization payments under the Credit Agreement and any mandatory prepayments by way of ECF or casualty events.
On June 21, 2022, the Company and substantially all of its direct and indirect subsidiaries (together with the Company, the “Loan Parties”), entered into a second amendment (the “Second Amendment”) to the four year term loan credit facility, originally entered into December 31, 2021 and as amended on April 4, 2022 (the “Credit Agreement”), with the Collateral Agent and Lender. The Second Amendment to the Credit Agreement was entered into for purposes of the Lender funding a $2.5 million delayed draw term loan and adjusting certain terms to the Credit Agreement, including adjusting the Applicable Margin (as defined in the Second Amendment) to 13.25% for LIBOR Rate Loans and 12.25% for Reference Rate Loans, increasing the definition of change of control from 33% voting power to 40% voting power, requiring the Company to engage a financial advisor, and allowing additional time, until July 15, 2022, for the Company to come into compliance with certain borrowing base requirements set forth in the Second Amendment to the Credit Agreement, among other adjustments.
18
During the six months ended June 30, 2023, the Company repaid principal of $1.4 million and interest of $4.0 million to Whitehawk.
On April 24, 2023, the Company entered into a third amendment (the “Third Amendment”) to the Credit Agreement, with Collateral Agent and the Lender. The Third Amendment was entered into for purposes of the Lender funding an additional $3.0 million delayed draw term loan (the “Additional Draw”). The Additional Draw was funded on April 24, 2023, must be repaid on or prior to September 29, 2023, is not subject to any prepayment penalties, and adjusts certain terms to the Credit Agreement, including adjusting the test period End dates and corresponding Senior Leverage Ratios (as defined in the Credit Amendment) and revising the minimum liquidity requirements that the Company must maintain compliance with pertaining to certain Borrowing Base Requirements, among other adjustments. The completion of the additional draw eliminates further delayed draws under the term loan agreement. As discussed in Note 17, on July 20, 2023, the Company paid the $3.0 million due under the terms of the Third Amendment.
On June 26, 2023, the Company entered into a fourth amendment (the “Fourth Amendment”) with the Collateral Agent and the Lender for the sole purpose of replacing LIBOR-based rates with a SOFR-based rate. Following the Fourth Amendment, the Company’s interest rate is calculated as the Daily Simple SOFR, subject to a floor of 1%, plus the SOFR Term Adjustment and Applicable Margin, as defined in the Credit Agreement, as amended. At such time, no other changes were made to the Credit Agreement.
Covenant Compliance and Liquidity Considerations
The Company's Credit Agreement requires compliance with certain monthly covenants, which include provisions regarding over advance limitations based upon a borrowing base. In the second quarter of 2023, as part of obtaining an appropriate waiver, the Company agreed to engage a financial advisor and to use commercial reasonable efforts to refinance the Credit Agreement with an alternative lender and repay the Credit Facility by September 30, 2023, or as soon thereafter as practical. The waiver did not amend the maturity date of the Credit Agreement. Upon repayment, the Company will be subject to a prepayment premium that is higher than the prepayment premium included in the original Credit Agreement, as defined in the waiver. At period end, considering the waivers obtained, the Company was in compliance with all such financial covenants of the Credit Agreement, as amended.
The Company has either implemented or initiated appropriate plans regarding refinancing procedures that are within management’s control to comply with the waiver requirements. The financial statements do not include any adjustments that might result from the outcome of the Company’s ability to refinance and repay the credit facility by September 30, 2023.
Issuance Cost and Warrants
In conjunction with its receipt of the Initial Loan, the Company issued to the Lender (i) 66,022 shares of Class A common stock (the “Shares”), which Shares were registered pursuant to its existing shelf registration statement and were delivered to the Lender in January 2022, (ii) a warrant to purchase 255,411 shares of Class A common stock (subject to increase to the extent that 3% of any Series B and Series C convertible preferred stock converted into Class A common stock), exercisable at $16.00 per share (the “Warrant”), which Warrant was subject to repricing on March 31, 2022 based on the arithmetic volume weighted average prices for the 30 trading days prior to September 30, 2022, in the event the Company’s stock is then trading below $16.00 per share, (iii) a 3% fee of $1,800,000, and (iv) a $500,000 original issue discount. In addition, the Company agreed to register for resale the shares issuable upon exercise of the Warrant. The Company also incurred agency fees, legal fees, and other costs in connection with the execution of the Credit Agreement totaling approximately $1.7 million. Under the terms of the warrant issued to Whitehawk on December 31, 2021, the exercise price of the warrants would reprice if the stock price on March 31, 2022 was less than the original exercise price, at which time the number of warrants would also be increased proportionately, so that after such adjustment the aggregate exercise price payable for the increased number of warrant shares would be the same as the aggregate exercise price previously in effect. The warrants repriced on March 31, 2022 to $9.52 per share and the shares increased to 429,263.
On July 22, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited institutional investor. According to the terms of the Credit Agreement, as amended, the Purchase Agreement triggered a reduction of the exercise price of the warrants and a revaluation of the derivative liability. The Whitehawk warrants were repriced to $8.80 and shares increased to 464,385.
19
Paycheck Protection Program Loan
On May 22, 2020, the Company received loan proceeds of $1.1 million under the Paycheck Protection Program. During 2021, the Company applied for forgiveness in the amount of $836 thousand. On March 2, 2022, we received a decision letter from the lender that the forgiveness application had been approved, leaving a remaining balance of $173 thousand to be paid. The Company received a payment schedule from our lender on May 5, 2022, extending the payoff date until May 2025. As of June 30, 2023, the amount remaining on the loan was less than $100 thousand.
NOTE 9 – DERIVATIVE LIABILITIES
The Company determined that certain warrants to purchase common stock do not satisfy the criteria for classification as equity instruments due to the existence of certain net cash and non-fixed settlement provisions that are not within the sole control of the Company. Conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future. Such warrants are measured at fair value at each reporting date, and the changes in fair value are included in determining net income (loss) for the period. The Company used a Monte Carlo Simulation model to determine the fair value of the derivative liabilities as of June 30, 2023 and December 31, 2022.
|
|
|
|
|
|
|
June 30, 2023 |
|
|
Common stock issuable upon exercise of warrants |
|
|
464,385 |
|
Market value of common stock on measurement date |
|
$ |
2.22 |
|
Exercise price |
|
$ |
8.80 |
|
Risk free interest rate (1) |
|
|
4.31 |
% |
Expected life in years |
|
|
3.5 years |
|
Expected volatility (2) |
|
|
104.0 |
% |
Expected dividend yields (3) |
|
|
— |
% |
|
|
|
|
|
|
|
December 31, 2022 |
|
|
Common stock issuable upon exercise of warrants |
|
|
464,385 |
|
Market value of common stock on measurement date |
|
$ |
2.48 |
|
Exercise price |
|
$ |
8.80 |
|
Risk free interest rate (1) |
|
|
4.02 |
% |
Expected life in years |
|
|
4 years |
|
Expected volatility (2) |
|
|
83.6 |
% |
Expected dividend yields (3) |
|
|
— |
% |
| (1) | The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date. |
| (2) | The historical trading volatility was based on historical fluctuations in stock price for Boxlight and certain peer companies. |
| (3) | The Company does not expect to pay a dividend in the foreseeable future. |
NOTE 10 – INCOME TAXES
Pretax (loss) income resulting from domestic and foreign operations is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
Six Months Ended |
|
Six Months Ended |
|
||||
|
|
June 30 |
|
June 30, |
|
June 30, |
|
June 30, |
|
||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
United States |
|
$ |
(205) |
|
$ |
510 |
|
$ |
(3,720) |
|
$ |
(3,908) |
|
Foreign |
|
|
(351) |
|
|
(443) |
|
|
291 |
|
|
(966) |
|
Total pretax book income |
|
$ |
(556) |
|
$ |
67 |
|
$ |
(3,429) |
|
$ |
(4,874) |
|
The Company recorded income tax expense of $255 thousand and $41 thousand for the three months ended June 30, 2023 and 2022, respectively, and income tax expense of $306 thousand and income tax benefit of $45 thousand for the six months ended June 30, 2023 and 2022, respectively. The year-to-date effective tax rate is 8.9% while the June 30, 2022 year-to-date effective rate was (0.9)%.
20
The negative effective tax rate for 2023 is due to the Company paying income taxes in various jurisdictions while incurring a worldwide net loss.
The increase in tax expense year-over-year is largely due to the decrease in the estimated annual effective tax rate of the US legacy Boxlight entities for the three months ended June 30, 2023 as compared to the estimated annual effective tax rate of the US legacy Boxlight entities for the three months ended June 30, 2022.
The Company operates in the United States, United Kingdom and various other jurisdictions. Income taxes have been provided in accordance with ASC-740-270, based upon the tax laws and rates of the countries in which operations are conducted.
The legacy Boxlight entities are in a net deferred tax asset position in the United States, the United Kingdom and other jurisdictions, primarily driven by net operating losses. The recoverability of these deferred tax assets depends on the Company’s ability to generate taxable income in the jurisdiction to which the carryforward applies. It also depends on specific tax provisions in each jurisdiction that could impact utilization. For example, in the United States, a change in ownership, as defined by federal income tax regulations, could significantly limit the Company’s ability to utilize its U.S. net operating loss carryforwards. Additionally, because U.S. tax laws limit the time during which the net operating losses generated prior to 2018 may be applied against future taxes, if the Company fails to generate U.S. taxable income prior to the expiration dates, the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes. The Company has evaluated both positive and negative evidence as to the ability of its legacy entities in each jurisdiction to generate future taxable income. Based on its long history of cumulative losses in those jurisdictions, it believes it is appropriate to maintain a full valuation allowance on its net deferred tax asset as of June 30, 2023 and December 31, 2022.
The Sahara entities have recorded a net deferred tax liability, which is primarily driven by the net deferred tax liability on the intangibles for which the Sahara entities do not have tax basis. This includes the deferred tax liability recorded during 2021 for the acquisition of Interactive Concepts. The Company does not qualify for any consolidated filing positions in any of these countries, so there is no ability to net the deferred tax liabilities of the Sahara companies against the deferred tax assets of the legacy Boxlight companies.
The tax years from 2009 to 2023 remain open to examination in the U.S. federal jurisdiction and in most U.S. state jurisdictions. The tax years from 2020 to 2023 remain open to examination in the U.K. Statutes of limitations vary in other immaterial jurisdictions.
On August 16, 2022, the president signed the Inflation Reduction Act (IRA) into law. The IRA enacted a 15% corporate minimum tax effective in 2024, a 1% tax on share repurchases after December 31, 2022, and created and extended certain tax-related energy incentives. We currently do not expect the tax-related provisions of the IRA to have a material effect on our financial results.
NOTE 11 – EQUITY
Preferred Shares
The Company’s articles of incorporation, as amended, provide that the Company is authorized to issue 50,000,000 shares of preferred stock, with such preferred stock consisting of: (1) 250,000 shares of non-voting Series A preferred stock, with a par value of $0.0001 per share; (2) 1,586,620 shares of voting Series B preferred stock, with a par value of $0.0001 per share; (3) 1,320,850 shares of voting Series C preferred stock, with a par value of $0.0001 per share; and (4) 48,280,000 shares of “blank check” preferred stock to be designated by the Company’s board of directors. Each authorized series of preferred stock is described below.
Issuance of Preferred Shares
Series A Preferred Stock
At the time of the Company’s initial public offering, the Company issued 250,000 shares of the Company’s non-voting convertible Series A preferred stock to Vert Capital for the acquisition of Genesis. All of the Series A preferred stock was convertible into 49,801 shares of Class A common stock, at the discretion of the Series A stockholder. On August 5, 2019, a total of 82,028 shares of Series A preferred stock were converted into a total of 16,341 shares of Class A common stock. As of June 30, 2023, a total of 167,972 shares of Series A preferred stock remained outstanding which can be converted into 33,461 shares of Class A common stock, at the discretion of the Series A stockholder.
21
Series B Preferred Stock and Series C Preferred Stock
On September 25, 2020, in connection with the acquisition of Sahara Holding Limited ("Sahara”), the Company issued 1,586,620 shares of Series B preferred stock and 1,320,850 shares of Series C preferred stock. The Series B preferred stock has a stated and liquidation value of $10.00 per share and pays a dividend out of the earnings and profits of the Company at the rate of 8% per annum, payable quarterly. The Series B preferred stock is convertible into the Company’s Class A common stock at a conversion price of $13.28 per share which was the closing price of the Company’s Class A common stock on the Nasdaq Stock Market on September 25, 2020 (the “Conversion Price”). Such conversion may occur either (i) at the option of the holder at any time after January 1, 2024, or (ii) automatically upon the Company’s Class A common stock trading at 200% of the Conversion Price for 20 consecutive trading days (based on a volume weighted average price). The Series C preferred stock has a stated and liquidation value of $10.00 per share and is convertible into the Company’s Class A common stock at the Conversion Price either (i) at the option of the holder at any time after January 1, 2026, or (ii) automatically upon the Company’s Class A common stock trading at 200% of the Conversion Price for 20 consecutive trading days (based on a volume weighted average price).
To the extent not previously converted into the Company’s Class A common stock, the outstanding shares of Series B preferred stock shall be redeemable at the option of the holders at any time or from time to time commencing on January 1, 2024 upon, 30 days prior written notice to the holders, for a redemption price, payable in cash, equal to the sum of (a) ($10.00) multiplied by the number of shares of Series B preferred stock being redeemed (the “Redeemed Shares”), plus (b) all accrued and unpaid dividends, if any, on such Redeemed Shares. The Series C preferred stock is also subject to redemption on the same terms commencing January 1, 2026. The aggregate estimated fair value of the Series B and C preferred stock of $28.5 million was included as part of the total consideration paid for the purchase of Sahara.
As the redemption features in the Series B preferred stock and Series C preferred stock are not solely within the control of the Company, the Company has classified the Series B preferred stock and Series C preferred stock as mezzanine or temporary equity in the Company’s condensed consolidated balance sheet. As of June 30, 2023, a total of 1,586,620 and 1,320,850 shares of Series B and C preferred stock remained outstanding, respectively.
Common Stock
The Company’s authorized common stock consists of 1) 18,750,000 shares of Class A voting common stock and 2) 50,000,000 shares of Class B non-voting common stock. Class A and Class B common stock have the same rights except that Class A common stock is entitled to one vote per share while Class B common stock has no voting rights. Upon any public or private sale or disposition by any holder of Class B common stock, such shares of Class B common stock would automatically convert into shares of Class A common stock. As of June 30, 2023 and December 31, 2022, the Company had 9,465,494 and 9,339,587 shares of Class A common stock issued and outstanding, respectively. No Class B shares were outstanding at June 30, 2023 or December 31, 2022.
Issuance of Common Stock
Securities Purchase Agreement |
On July 22, 2022, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited institutional investor (the “Investor”) pursuant to which the Company agreed to issue and sell, in a registered direct offering directly to the Investor, (i) 875,000 shares of the Company’s Class A common stock, par value of $0.0001 per share, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase 44,118 shares of common stock at an exercise price of $0.0008 per share, which Pre-Funded Warrants were issued in lieu of shares of common stock to ensure that the Investor did not exceed certain beneficial ownership limitations, and (iii) warrants to purchase an aggregate of 919,118 shares of common stock at an exercise price of $5.44 per share (the “Warrants,” and collectively with the Pre-Funded Warrants and the Shares, the “Securities”). The Securities were sold at a price of $5.44 per share for total gross proceeds to the Company of $5.0 million (the “Offering”), before deducting estimated offering expenses, and excluding the exercise of any Warrants or Pre-Funded Warrants. The Pre-Funded Warrants were exercisable immediately and the Warrants were exercisable six months after the date of issuance and will expire five and a half years from the date of issuance. As such, the net proceeds to the Company from the Offering, after deducting placement agent’s fees and estimated expenses payable by the Company and excluding the exercise of any Warrants or Pre-Funded Warrants, was $4.6 million of which the proceeds net of issuance costs were allocated based on the relative fair values of the instruments, warrants and prefunded warrants; with $2.4 million allocated to common stock, $2.2 million allocated to warrants and $118 thousand allocated to the pre-funded warrants.
22
The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Investors and customary indemnification rights and obligations of the parties. Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on the issuance and sale of its common stock or common stock equivalents (as defined in the Purchase Agreement) during the 60-day period following the closing of the Offering, which was on July 26, 2022. On August 9, 2022, the Investor exercised the prefunded warrants.
The Company evaluated whether the Warrants, Pre-Funded Warrants and/or Shares were within the scope of ASC 480 which discusses the accounting for instruments with characteristics of both liabilities and equity. The guidance in ASC 480, and the resulting liability classification, is applicable to such instruments when certain criteria are met. Based on its analysis, the Company concluded that the Warrants, Pre-Funded Warrants and Shares did not meet any of the criteria to be subject to liability classification under ASC 480 and are therefore classified as equity.
Warrants
The Company had equity warrants outstanding of 920,993 and 920,680 at June 30, 2023 and December 31, 2022, respectively.
Credit Facility
In conjunction with its receipt of the Whitehawk loan, the Company issued to Whitehawk 66,022 shares of Class A common stock, which were registered pursuant to the Company’s existing shelf registration statement and were delivered to Whitehawk in January 2022.
Repurchase Plan
On February 14, 2023, the Board of Directors of Boxlight Corporation approved the Company’s establishment of a share repurchase program (the “Repurchase Program”) authorizing the Company to purchase up to $15.0 million of the Company’s Class A common stock. Pursuant to the Repurchase Program, the Company may, from time to time, repurchase its Class A common stock in the open market, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in accordance with applicable securities laws and other restrictions. The timing and total amount of any repurchases made under the Repurchase Program will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The authorization expires on January 26, 2027, may be suspended or discontinued at any time, and does not obligate the Company to acquire any amount of Class A common stock. As of June 30, 2023, the Company has not utilized the Repurchase Program.
NOTE 12 – STOCK COMPENSATION
The Company has issued grants under two equity incentive plans, both of which have been approved by the Company’s shareholders: (i) the 2014 Equity Incentive Plan, as amended (the “2014 Plan”), pursuant to which a total of 798,805 shares of the Company’s Class A common stock have been approved for issuance, and (ii) the 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which a total of 625,000 shares of the Company’s Class A common stock have been approved for issuance. Upon approval of the 2021 Plan in June 2021, any shares remaining available for issuance under the 2014 Plan were cancelled, and all future grants were issued under the 2021 Plan. The 2021 Plan allows for issuance of shares of our Class A common stock, whether through restricted stock, restricted stock units, options, stock appreciation rights or otherwise, to the Company’s officers, directors, employees and consultants. Prior to the second quarter of 2023, the Company had issued 774,904 shares under the 2021 Plan such that the Company was over the authorized share number. During the three months ended June 30, 2023, the Company cancelled 384,340 shares of previously issued awards such that the Company is under the authorized number of share awards. The fair value of shares previously issued in excess of the approved shares under the 2021 Plan of approximately $13 thousand was reclassed from liability to equity as of June 30, 2023.
Stock Options
Under the Company’s stock option program, pursuant to the 2014 Plan and 2021 Plan, employees may be eligible to receive awards that provides the opportunity in the future to purchase the Company’s shares at the market price of the stock on the date the award is granted (the strike price). Following the issuance, such options become exercisable over a range of immediately vested to four-year vesting periods and expire five years from the grant date, unless stated differently in the option agreements, if they are not exercised. Stock options have no financial statement effect on the date they are granted but rather are reflected over time through compensation expense.
23
We record compensation expense based on the estimated fair value of the awards which is amortized as compensation expense on a straight-line basis over the vesting period. Accordingly, total expense related to the award is reduced by the fair value of options that are forfeited by employees that leave the Company prior to vesting.
The following is a summary of the option activities during the six months ended June 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
Units |
|
Outstanding, December 31, 2022 |
|
489,485 |
|
Granted |
|
364,299 |
|
Exercised |
|
(12,500) |
|
Cancelled |
|
(432,220) |
|
Outstanding, June 30, 2023 |
|
409,064 |
|
Exercisable, June 30, 2023 |
|
305,982 |
|
During the six months ended June 30, 2023, the Company granted 364,299 options of which 322,040 were subsequently cancelled and 42,259 vested during the period. The Company estimated the fair value of each stock option award on the date of grant using a Black-Scholes option pricing model. The Company used the following inputs to value options issued during the six months ended June 30, 2023: market value on measurement date, $1.68 to $2.24; exercise price of $2.48 to $3.20; risk free interest rate, 4.19% to 4.22%; expected term, 3 years to 4 years; expected volatility, ranged from 111.45% to 111.74% and expected dividend yield of 0%.
Restricted Stock Units
Under the Company’s 2014 Plan and 2021 Plan, the Company may grant restricted stock units (“RSUs”) to certain employees and non-employee directors. Upon granting the RSUs, the Company recognizes a fixed compensation expense equal to the fair market value of the underlying shares of RSUs granted on a straight-line basis over the requisite services period for the RSUs. Compensation expense related to the RSUs is reduced by the fair value of units that are forfeited by employees that leave the Company prior to vesting. The RSUs vest over a range of immediately vested to four-year vesting periods in accordance with the terms of the applicable RSU grant agreement.
The following is a summary of the RSU activities during the six months ended June 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
Number of Units |
Outstanding, December 31, 2022 |
|
303,879 |
Granted |
|
72,348 |
Vested |
|
(79,993) |
Forfeited |
|
(72,044) |
Outstanding, June 30, 2023 |
|
224,190 |
During the six months ended June 30, 2023, the Company granted 72,348 RSUs of which 62,300 were subsequently cancelled and 10,048 vested during the period.
24
Stock Compensation Expense
For the three and six months ended June 30, 2023 and 2022, the Company recorded the following stock compensation in general and administrative expense (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
Stock options |
|
$ |
152 |
|
$ |
440 |
|
$ |
321 |
|
$ |
555 |
Restricted stock units |
|
|
359 |
|
|
489 |
|
|
830 |
|
|
1,506 |
Warrants |
|
|
— |
|
|
— |
|
|
1 |
|
|
1 |
Total stock compensation expense |
|
$ |
511 |
|
$ |
929 |
|
$ |
1,152 |
|
$ |
2,062 |
NOTE 13 – RELATED PARTY TRANSACTIONS
Management Agreement
On November 1, 2022, the Company entered into a consulting agreement with Mark Elliott, former CEO of Boxlight and a current member of the Board of Directors. Under the terms of the agreement, Mr. Elliott is to provide sales, marketing, management and related consulting services to assist the Company in sourcing and entering into agreements with one or more customers to provide products and services for specified school districts. The Company will pay Mr. Elliott a fixed payment of $4 thousand per month and commissions equal to 15% of gross profit derived by the Company based on total purchase order revenue. The agreement, unless renewed or extended, will expire on December 31, 2023. For the six months ended June 30, 2023, the Company paid $36 thousand under the agreement.
On January 31, 2018, the Company entered into a management agreement (the “Management Agreement”) with an entity owned and controlled by our Chief Executive Officer and Chairman, Michael Pope. The Management Agreement is separate and apart from Mr. Pope’s employment agreement with the Company. The Management Agreement will become effective as of the first day of the same month that Mr. Pope’s employment with the Company terminates. Thereafter, and for a term of 13 months, Mr. Pope will provide consulting services to the Company including sourcing and analyzing strategic acquisitions, assisting with financing activities, and other services. As consideration for the services provided, the Company will pay Mr. Pope a management fee equal to 0.375% of the consolidated net revenues of the Company, payable in monthly installments, not to exceed $250,000 in any calendar year. At his option, Mr. Pope may defer payment until the end of each year and/or receive payment in the form of shares of Class A common stock of the Company.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Contingencies
The Company assesses its exposure related to legal matters and other items that arise in the regular course of its business. If the Company determines that it is probable a loss has been incurred, the amount of the loss, or an amount within the range of loss, that can be reasonably estimated is recorded. The Company has not identified any legal matters that could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Purchase Commitments
The Company is legally obligated to fulfill certain purchase commitments made to vendors that supply materials used in the Company’s products. As of June 30, 2023, the total amount of such open inventory purchase orders was $30.6 million.
25
NOTE 15 – CUSTOMER AND SUPPLIER CONCENTRATION
There was one customer that accounted for greater than 10% of the Company’s consolidated revenues for the six months ended June 30, 2023 and 2022. Details are as follows:
|
|
Total revenues |
|
|
|
|
Total revenues |
|
|
|
|
|
from the customer |
|
Accounts |
|
from the customer |
|
Accounts |
||
|
|
as a percentage of |
|
receivable from |
|
as a percentage of |
|
receivable from |
||
|
|
total revenues |
|
the customer as of |
|
total revenues |
|
the customer as of |
||
|
|
for the six months ended |
|
June 30, |
|
for the six months ended |
|
June 30, |
||
|
|
June 30, |
|
2023 |
|
June 30, |
|
2022 |
||
Customer |
|
2023 |
|
(in thousands) |
|
2022 |
|
(in thousands) |
||
1 |
|
14.6 |
% |
$ |
4,071 |
|
11.7 |
% |
$ |
4,923 |
For the six months ended June 30, 2023, the Company’s purchases were concentrated primarily with one vendor. For the six months ended June 30, 2022, the Company’s purchases were concentrated primarily with two vendors. Details are as follows:
|
|
Total purchases |
|
|
|
|
Total purchases |
|
|
|
|
|
from the vendors |
|
|
|
|
from the vendors |
|
|
|
|
|
as a percentage of |
|
|
Accounts payable |
|
as a percentage |
|
|
Accounts payable |
|
|
total cost of |
|
|
(prepayment) to |
|
of total cost of |
|
|
(prepayment) to |
|
|
revenues for |
|
|
the vendors as of |
|
revenues for |
|
|
the vendors as of |
|
|
the six months ended |
|
|
June 30, |
|
the six months ended |
|
|
June 30, |
|
|
June 30, |
|
|
2023 |
|
June 30, |
|
|
2022 |
Vendor |
|
2023 |
|
|
(in thousands) |
|
2022 |
|
|
(in thousands) |
1 |
|
17.5 |
% |
$ |
4,812 |
|
39.5 |
% |
$ |
10,894 |
2 |
|
- |
% |
$ |
— |
|
17.6 |
% |
$ |
409 |
The Company believes there are other suppliers that could be substituted should the above cited vendor become unavailable or non-competitive.
NOTE 16 – SEGMENTS
Information about our Company’s operations by operating segment is shown in the following tables (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
||||||
|
|
June 30, |
|
|
June 30, |
||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
Revenue, net |
|
|
|
|
|
|
|
|
|
|
|
Americas |
$ |
30,067 |
|
$ |
27,681 |
|
$ |
51,134 |
|
$ |
47,757 |
EMEA |
|
19,964 |
|
|
31,911 |
|
|
43,919 |
|
|
62,606 |
Rest of World |
|
321 |
|
|
86 |
|
|
1,644 |
|
|
191 |
Eliminations and Adjustments (1) |
|
(3,300) |
|
|
(50) |
|
|
(8,455) |
|
|
(323) |
Total Revenue, net |
$ |
47,052 |
|
$ |
59,628 |
|
$ |
88,242 |
|
$ |
110,231 |
Income (Loss) from Operations |
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
2,941 |
|
|
838 |
|
|
2,794 |
|
|
(2,089) |
EMEA |
|
(859) |
|
|
35 |
|
|
(1,260) |
|
|
(457) |
Rest of World |
|
(3) |
|
|
5 |
|
|
405 |
|
|
13 |
Eliminations and Adjustments (1) |
|
(3) |
|
|
3 |
|
|
(43) |
|
|
(40) |
Total Income (Loss) from Operations |
$ |
2,076 |
|
$ |
881 |
|
$ |
1,896 |
|
$ |
(2,573) |
| (1) | Eliminations and adjustments represent net sales between the Americas, EMEA and Rest of World segments. Sales between these segments are generally valued at market. |
26
|
|
June 30, |
|
|
December 31, |
|
|
2023 |
|
|
2022 |
Identifiable Assets |
|
|
|
|
|
Americas |
$ |
91,419 |
|
$ |
88,451 |
EMEA |
|
88,086 |
|
|
104,978 |
Rest of World |
|
2,808 |
|
|
1,966 |
Total Identifiable Assets |
$ |
182,313 |
|
$ |
195,395 |
NOTE 17 – SUBSEQUENT EVENTS
On July 20, 2023, the Company paid $3.0 million on its Credit Agreement with Whitehawk. The payment was for amounts borrowed under the Third Amendment to the Credit Agreement that were required to be repaid by September 29, 2023. There were no pre-payment penalties or premiums included with this payment.
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.
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.
Effective January 1, 2023, we changed our segment reporting to align with the geographic markets in which we operate. Our operations are now 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 Boxlight, Inc. and its subsidiaries, and the Rest of World segment consists primarily of Boxlight Australia, PTY LTD (“Boxlight Australia”).
Each of our operating segments are primarily engaged in the sale of education technology products and services in the education market but which are also sold into the health, government and corporate sectors and derive a majority of their revenues from the sale of flat-panel displays, audio and other hardware accessory products, software solutions and professional services. Generally, our displays produce higher net operating revenues but lower gross profit margins than our accessory solutions and professional services.
27
To date, we have generated substantially all of the Company’s revenue from the sale of hardware (primarily consisting of interactive displays) 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 and as a result of making strategic business acquisitions. 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. |
Acquisition Strategy and Challenges
The Company has completed multiple acquisitions from 2015 through 2021 and may target additional acquisition opportunities in the future. The Company’s growth strategy includes acquiring assets and technologies of companies that have products, technologies, industry specializations or geographic coverage that extend or complement our existing business. The process to undertake a potential acquisition is time-consuming and costly. In the event we pursue additional acquisitions, we expect to expend significant resources to undertake business, financial and legal due diligence on our potential acquisition targets, and there is no guarantee that we will complete any acquisition that we pursue.
We believe we can achieve significant cost-savings by merging the operations of the companies we acquire and after their acquisition, leverage the opportunity to reduce costs through the following methods:
| ● | Staff reductions – consolidating resources, such as accounting, marketing and human resources; |
| ● | Economies of scale – improved purchasing power with a greater ability to negotiate prices with suppliers; and |
| ● | Improved market reach and industry visibility – increasing our customer base and entry into new markets. |
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 projectors), flat panels, peripherals, and accessories, along with other third-party products, directly to our customers, as well as through our network of domestic and international distributors. |
| ● | Professional development revenue. 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; |
28
| ● | 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 of our products during peak seasons and new product launches.
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: product, channel and geographical revenue mix; changes in product costs related to the release of projector models; and component, contract manufacturing and supplier pricing 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 two categories: general and administrative 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.
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 income (expense), net
Other income (expense), net primarily consists of interest expense associated with our debt financing arrangements, gains (losses) on the settlements of debt, and the effects of changes in the fair value of derivative liabilities.
Income tax (expense) benefit
We are subject to income taxes in the jurisdictions in which we do business, including the United States, United Kingdom, Mexico, Sweden, Finland, Holland and Germany. The United Kingdom, Mexico, Sweden, Finland, Holland and Germany 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.
29
Operating Results – Boxlight Corporation
For the three-month periods ended June 30, 2023 and 2022
Revenues. Total revenues for the three months ended June 30, 2023 were $47.1 million as compared to $59.6 million for the three months ended June 30, 2022, resulting in a 21.1% decrease. The decrease in revenues was primarily due to lower sales volume across all markets.
Cost of Revenues. Cost of revenues for the three months ended June 30, 2023 were $29.2 million as compared to $42.8 million for the three months ended June 30, 2022, resulting in a 31.7% decrease. The decrease in cost of revenues was attributable to the decrease in units sold, along with lower manufacturing and shipping costs in the second quarter of 2023 compared to the prior year’s second quarter.
Gross Profit. Gross profit for the three months ended June 30, 2023 was $17.8 million as compared to $16.8 million for the three months ended June 30, 2022, an increase of 5.9%. The gross profit margin was 37.9% for the three months ended June 30, 2023 and 28.2% for the three months ending June 30, 2022. The increase in gross profit is primarily related to the decrease in manufacturing and shipping costs noted above.
General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2023 were $15.2 million and 32.4% of revenue as compared to $15.3 million and 25.7% of revenue for the three months ended June 30, 2022. The decrease can be attributed primarily to a decrease in stock compensation expense.
Research and Development Expenses. Research and development expenses were $525 thousand and $649 thousand for the three months ended June 30, 2023 and 2022, respectively, and represented 1.1% of revenue for each period.
Other Income (Expense). Other expense, net for the three months ended June 30, 2023 was $2.6 million as compared to $814 thousand for the three months ended June 30, 2022, representing an increase of $1.8 million. The increase was primarily due to a $1.5 million change in the fair value of derivative liabilities and a $0.3 million increase in interest expense.
Income Tax (Expense) Benefit. Income tax expense for the three months ended June 30, 2023 was $255 thousand, as compared to $41 thousand for the three months ended June 30, 2022. The increase in tax expense year-over-year is largely due to foreign pretax book income for the three months ended June 30, 2023 as compared to foreign pretax loss for the three months ended June 30, 2022.
Net Loss. Net loss was $811 thousand for the three months ended June 30, 2023. Net income was $26 thousand for the three months ended June 30, 2022 and was a result of the changes noted above.
For the six-month periods ended June 30, 2023 and 2022
Revenues. Total revenues for the six months ended June 30, 2023 were $88.2 million as compared to $110.2 million for the six months ended June 30, 2022, resulting in a 19.9% decrease. The decrease in revenues was primarily due to lower sales volume across all markets and a decrease in foreign exchange rates during the first half of 2023 compared to the first half of 2022.
Cost of Revenues. Cost of revenues for the six months ended June 30, 2023 were $55.3 million as compared to $80.8 million for the six months ended June 30, 2022, resulting in a 31.6% decrease. The decrease in cost of revenues was attributable to the decrease in units sold, along with lower manufacturing and shipping costs in the first half of 2023 compared to the first half of the prior year.
Gross Profit. Gross profit for the six months ended June 30, 2023 was $33.0 million as compared to $29.5 million for the six months ended June 30, 2022, an increase of 12.0%. The gross profit margin was 37.4% for the six months ended June 30, 2023 and 26.7% for the six months ended June 30, 2022. The increase in gross profit is primarily related to the decrease in manufacturing and shipping costs noted above.
30
General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2023 were $30.0 million, representing 33.9% of revenue as compared to $30.8 million representing 27.9% of revenue for the six months ended June 30, 2022. The decrease in general and administrative expenses for the period ended June 30, 2023 can be attributed primarily to a decrease in stock compensation expense.
Research and Development Expenses. Research and development expenses for the six months ended June 30, 2023 were $1.1 million and $1.3 million and represented 1.3% and 1.1% of revenue for the six months ended June 30, 2023 and 2022, respectively.
Other Income (Expense). Other expense, net for the six months ended June 30, 2023 was $5.3 million as compared to $2.3 million for the six months ended June 30, 2022, representing an increase of $3.0 million. The increase was primarily due to a $1.7 million change in the fair value of derivative liabilities, $0.9 million recognized upon the settlement of certain debt obligations during the six months ended June 30, 2022, and a $0.5 million increase in interest expense.
Income Tax (Expense) Benefit. Income tax expense for the six months ended June 30, 2023 was $306 thousand, as compared to $45 thousand in income tax benefit for the six months ended June 30, 2022. The increase in tax expense year-over-year is largely due to foreign pretax book income for the six months ended June 30, 2023 as compared to foreign pretax loss for the six months ended June 30, 2022.
Net Loss. Net loss was $3.7 million and $4.8 million for the six months ended June 30, 2023 and 2022 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, and non-cash losses associated with debt settlement. 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.
31
The following table contains reconciliations of net income and losses to EBITDA and adjusted EBITDA for the periods presented:
|
|
Three Months Ended |
|
Three Months Ended |
|
Six Months Ended |
|
Six Months Ended |
|
||||
|
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Net Income (loss) |
|
$ |
(811) |
|
$ |
26 |
|
$ |
(3,735) |
|
$ |
(4,829) |
|
Depreciation and amortization |
|
|
2,298 |
|
|
2,266 |
|
|
4,561 |
|
|
4,587 |
|
Interest expense |
|
|
2,788 |
|
|
2,417 |
|
|
5,235 |
|
|
4,733 |
|
Income tax expense (benefit) |
|
|
255 |
|
|
41 |
|
|
306 |
|
|
(45) |
|
EBITDA |
|
$ |
4,530 |
|
$ |
4,750 |
|
$ |
6,367 |
|
$ |
4,446 |
|
Stock compensation expense |
|
|
511 |
|
|
929 |
|
|
1,152 |
|
|
2,062 |
|
Change in fair value of derivative liabilities |
|
|
(184) |
|
|
(1,660) |
|
|
40 |
|
|
(1,650) |
|
Purchase accounting impact of fair valuing inventory |
|
|
80 |
|
|
589 |
|
|
223 |
|
|
1,206 |
|
Purchase accounting impact of fair valuing deferred revenue |
|
|
472 |
|
|
589 |
|
|
942 |
|
|
1,238 |
|
Gain on settlement of debt |
|
|
— |
|
|
(3) |
|
|
— |
|
|
(856) |
|
Adjusted EBITDA |
|
$ |
5,409 |
|
$ |
5,194 |
|
$ |
8,724 |
|
$ |
6,446 |
|
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 June 30, 2023, we had cash and cash equivalents of $15.6 million, a working capital balance of $64.8 million, and a current ratio of 2.79. On June 30, 2022 we had $11.6 million of cash and cash equivalents, a working capital balance of $53.8 million, and a current ratio of 1.99.
For the six months ended June 30, 2023 and 2022, we had net cash provided by and used in operating activities of $10 thousand and $6.9 million, respectively. Cash provided by operating activities increased year over year as a result of higher margins on our products leading to increased operating income. We had net cash used in investing activities of $100 thousand and $659 thousand for the six months ended June 30, 2023 and 2022, respectively. Cash used in investing activities is related to purchases of property and equipment. For the six months ended June 30, 2023 and 2022, we had net cash provided by financing activities of $1.0 million and $621 thousand, respectively. Cash provided by financing activities is primarily related to a $3.0 million under the Company’s Credit Facility, partially offset by $1.4 million in principal payments on our Credit Facility and $635 thousand in payments of fixed dividends to our Series B preferred shareholders.
Our liquidity needs are funded by operating cash flow and available cash. Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases. We lease all of our office facilities. We expect to make future payments on existing leases from cash generated from operations. We have limited credit available from our major vendors and are required to prepay the majority 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.
In addition to the cash flows generated by our ongoing operating activities we financed our operations during 2023 and 2022 with our Credit Facility with Whitehawk. Prior to April 24, 2023 we maintained a delayed draw term loan of which we had $7.5 million available as of June 30, 2023.
32
On April 24, 2023, we drew $3.0 million on our delayed draw term loan that will be used for working capital purposes. The completion of the additional draw eliminates further delayed draws under the term loan agreement. The $3.0 million is required to be repaid prior to September 29, 2023. The $3.0 million was repaid during the third quarter of 2023.
To the extent not previously converted into the Company’s Class A common stock, the outstanding shares of our Series B preferred stock are redeemable at the option of the holders at any time or from time to time commencing on January 1, 2024 upon, 30 days’ prior written notice to the Company, for a redemption price, payable in cash, equal to the sum of (a) ($10.00) multiplied by the number of shares of Series B preferred stock being redeemed (the “Redeemed Shares”), plus (b) all accrued and unpaid dividends, if any, on such Redeemed Shares. We may be required to seek alternative financing arrangements or restructure the terms of the agreement with the Series B preferred shareholders on terms that are not favorable to us if cash and cash equivalents are not sufficient to fully redeem the Series B preferred shares. We are currently evaluating alternatives to refinance or restructure the Series B preferred shares including extending the maturity of the Series B preferred shares beyond the current optional conversion date.
Given the uncertainty surrounding global supply chains, global markets, and general global uncertainty as a result of the ongoing conflict between Russia and Ukraine and the continuing COVID-19 pandemic, the availability of debt and equity capital has been reduced and the cost of capital has increased. Furthermore, recent adverse developments affecting the financial services industry including events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions may lead to market-wide liquidity problems. This in turn could result in a reduction in our ability to access funding sources and credit arrangements in amounts adequate to finance our current and future business operations. Increasing our capital through equity issuance at this time could cause significant dilution to our existing stockholders. However, while there can be no guarantee we will be able to access capital when needed, we are confident that the Company will be able to manage through the current challenges in the equity and debt finance markets by managing payment terms with our customers and vendors.
Cash and cash equivalents, along with anticipated cash flows from operations, are expected to provide sufficient liquidity for working capital needs and debt service requirements.
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.
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 2022 Annual Report, which was filed with the SEC on March 17, 2023. 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. | Goodwill and Intangible assets |
As of June 30, 2023, we determined that a triggering event had occurred as a result of our market capitalization that suggested one or more of the reporting units may have fallen below the carrying amounts. In addition, changes in our reporting segments resulted in a change in the composition of our reporting units.
33
As a result of these changes, we determined the Company had two reporting units for purposes of testing based upon entities that comprise the Americas and EMEA reporting segments. For purposes of impairment testing, we allocated goodwill to the reporting units based upon a relative fair value allocation approach and assigned approximately $22.5 million and $2.9 million of goodwill to the America and EMEA reporting units, respectively.
As of June 30, 2023, we performed an interim goodwill impairment test as a result of the triggering events identified. In analyzing goodwill for potential impairment in the quantitative impairment test, we used a combination of the income and market approaches to estimate the fair value. Under the income approach, we calculated the fair value based on estimated future discounted cash flows. The assumptions used are based on what we believe a hypothetical marketplace participant would use in estimating fair value and include the discount rate, projected average revenue growth and projected long-term growth rates in the determination of terminal values. Under the market approach, we estimated the fair value based on market multiples of revenue or earnings before interest, income taxes, depreciation, and amortization for benchmark companies. Based on the results of our interim test as of June 30, 2023, we concluded that the estimated fair value of each reporting unit exceeded the respective carrying value and, as such, we concluded that the goodwill assigned to each reporting unit, as of June 30, 2023, was not impaired. However, we concluded that as of June 30, 2023, our Americas reporting unit was at risk of failing step one of the goodwill impairment test.
As of June 30, 2023, we determined that our Americas reporting unit had an estimated fair value in excess of its respective carrying value of approximately 4%. The estimated fair value of our reporting units are closely aligned with the ultimate amount of revenue and operating income that it achieves over the projected period. Our discounted cash flows, for goodwill impairment testing purposes, assumed that, through fiscal year 2028, this reporting unit would achieve a compounded annual revenue growth rate of approximately 5.0% from its forecasted 2023 revenue. Beyond fiscal 2028, we assumed a long-term revenue growth rate of 3.0% in the terminal year. As of June 30, 2023, we utilized a WACC of 14.0% for the Americas reporting unit. Given expected growth projections from industry sources, we believe these modest long-term growth rates and the WACC are appropriate to use for our future cash flow assumptions. We also believe that it is possible that our actual revenue growth rates could be significantly higher due to a number of factors, including: (i) the availability of government funding allocated to the education sector as a result of the CARES Act and other recent economic relief stimulus packages; (ii) the growth of education technology products and services outside of flat-panel sales such as audio, STEM products and professional services; and (iii) the continued growth in sales to enterprise customers. Modest changes in other key assumptions used in our June 30, 2023 impairment analysis may result in the requirement to proceed to step two of the goodwill impairment test in future periods. If this reporting unit fails step one in the future, we would be required to perform step two of the goodwill impairment test. If we perform step two, up to $22.5 million of goodwill assigned to the Americas reporting unit could be written off in the period that the impairment is triggered.
During the second half of our fiscal 2023, because our goodwill impairment analysis is sensitive to the ultimate spending decisions by our customers, we will continue to monitor key assumptions and other factors utilized in our June 30, 2023 interim goodwill impairment analysis. It is possible that, during the remainder of fiscal year 2023, business conditions (both in the U.S. and internationally) could potentially deteriorate and our current or prospective customers could materially postpone, reduce or even forgo purchases of our products and services. Any impairment charges that we may take in the future could be material to our results of operations and financial condition.
| 3. | Stock-based Compensation Expense |
| 4. | Derivative Warrant Liabilities |
| 5. | 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.
34
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report (“Evaluation Date”), pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective due to material weaknesses described in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023.
Notwithstanding the existence of these material weaknesses, we believe that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present in accordance with the GAAP, in all material respects, our financial condition, results of operations and cash flows for the periods presented in this report.
Limitations on Effectiveness of Controls.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all controls systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives.
(b) Changes in internal controls over financial reporting.
There were no changes made in the internal controls over financial reporting for the quarter ended June 30, 2023 that have materially affected our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
While we are not currently involved in any material legal proceedings, from time-to-time we are, and we anticipate that we will be, involved in legal proceedings, claims, and litigation arising in the ordinary course of our business and otherwise. The ultimate costs to resolve any such matters could have a material adverse effect on our financial statements. The Company’s management believes, based on current information, matters currently pending or threatened are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.
ITEM 1A. RISK FACTORS
For information regarding risk factors pertinent to the Company’s business please refer to Part I Item 1A of the Company’s 2022 Annual Report on Form 10-K, which was filed with the SEC on March 17, 2023 and is incorporated by reference herein. There have been no material changes from the risk factors described in our Form 10-K other than the following:
Unstable market and economic conditions and potential disruptions in the credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity requirements and our ability to meet long-term commitments, which could adversely affect our results of operations, cash flows and financial condition.
If internally generated funds are not available from operations, we may be required to rely on the banking and credit markets to meet our financial commitments and short-term liquidity needs. Our access to funds under our revolving credit facility or pursuant to arrangements with other financial institutions is dependent on the financial institution’s ability to meet funding commitments. Financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience high volumes of borrowing requests from other borrowers within a short period of time.
35
In addition, the global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate changes and uncertainty about economic stability. More recently, the closures of Silicon Valley Bank, Signature Bank and First Republic Bank and their placement into receivership with the Federal Deposit Insurance Corporation (FDIC) created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve and the FDIC jointly released a statement that depositors at Silicon Valley Bank and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, financial institutions, manufacturers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and on budget.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed or furnished with this report:
Exhibit No. |
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Description of Exhibit |
3.1 |
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3.2 |
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4.1 |
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4.2 |
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4.3 |
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4.4 |
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4.5 |
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4.6 |
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4.7 |
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4.8 |
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4.9 |
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10.1 |
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10.2 |
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10.3* |
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10.4* |
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31.1* |
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* |
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1** |
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32.2** |
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101.INS |
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Inline XBRL Instance Document |
101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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BOXLIGHT CORPORATION |
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August 9, 2023 |
By: |
/s/ Michael Pope |
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Michael Pope |
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Chief Executive Officer |
August 9, 2023 |
By: |
/s/ Greg Wiggins |
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Greg Wiggins |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
37
Exhibit 10.3
BOXLIGHT CORPORATION
2750 Premiere Parkway, Suite 900
Duluth, GA 30097
June 15, 2023
Whitehawk Capital Partners, LP
11601 Wilshire Boulevard, Suite 1250
Los Angeles, CA 90025
RE: Consent to Waiver of Borrowing Base Default, “SOFR” Amendment and amendment of Prepayment Premium
Dear Mr. Louzan,
Reference is made to:
(i) |
the Credit Agreement, originally dated December 31, 2021 ((a) as amendment by the First Amendment to Credit Agreement dated as of April 4, 2022, (b) as amendment by the Second Amendment to Credit Agreement dated as of June 21, 2022, (c) as amendment by the Third Amendment to Credit Agreement dated as of April 24, 2023 and (d) as further amended, restated, supplemented or modified, the “Credit Agreement”; all capitalized terms defined in the Credit Agreement and not otherwise defined herein have the meanings assigned to them in the Credit Agreement, as amended hereby), between Boxlight Corporation, a Nevada corporation (the “Company” or the “Borrower”) and each subsidiary of the Borrower listed as a “Guarantor” on the signature pages thereto and each other Person that executes a joinder agreement and becomes a “Guarantor” thereunder, the financial institutions party hereto as Lenders and Whitehawk Capital Partners, LP (“Whitehawk”), as collateral agent for the Lenders (in such capacity, together with its designees, successors and assigns, the “Collateral Agent”) and as administrative agent for the Lenders ((in such capacity, together with its designees, successors and assigns, the “Administrative Agent”); |
(ii) |
the Amended and Restated Fee Letter dated April 4, 2022 (as amended, restated, supplemented or modified, the “Fee Letter”), between the Borrower, the other Loan Parties, the Administrative Agent and the Collateral Agent; |
(iii) |
the Consent to Waiver of Borrowing Base Default dated as of April 17, 2023 (the “Consent”), between the Borrower, the Administrative Agent, the Collateral Agent and the Lenders; and |
(iv) |
the other Loan Documents. |
The Lenders acknowledge that the Borrowers have requested a SOFR amendment to the Credit Agreement, which will be provided by the Agents on or before June 30, 2023.
A copy of the Credit Agreement (without schedules and exhibits thereto) is annexed hereto as Exhibit A, a copy of the Fee Letter is annexed hereto as Exhibit B and a copy of the Consent is annexed hereto as Exhibit C.
The Loan Parties acknowledge and agree that:
(x) |
that for the month of April 2023, they did not comply with the Borrowing Base requirements, as defined in the Credit Agreement; |
(y) |
that the failure of the Loan Parties to comply with the April 2023 Borrowing Base requirements would constitute an immediate Event of Default under the Credit Agreement; and |
(z) |
the Loan Parties do not expect to be in compliance with the Borrowing Base requirements for the month of May 2023, which would also constitute an immediate Event of Default under the Credit Agreement. |
The Loan Parties have requested that the Lenders waive such non-compliance with the Borrowing Base requirements and the exercise of remedies under the Credit Agreement by reason of the Loan Parties’ non-compliance with the Borrowing Base requirements for the months of April and May 2023 (the “Waiver”) and the Lenders are agreeing to such Waiver based upon and subject to the following terms and conditions which the Loan Parties must comply with (each of 1 through and including 5 below, a “Waiver Condition” and collectively, the “Waiver Conditions”) (and the failure to meet any of the Waiver Conditions would effectively negate and void this Waiver without any further action or notice on part of any Agent or Lender):
1. |
The Borrower expects to achieve compliance with the Borrowing Base requirements for the month of June 2023 (and thereafter); |
2. |
The default rate of interest under the Credit Agreement shall accrue from and after April 30, 2023 until the Borrower is back in compliance with the Borrowing Base requirements and such default rate of interest shall be paid on the earlier to occur of (i) September 30, 2023, or (ii) repayment of all Obligations (including, the Prepayment Premium) under the Credit Agreement (but the non-default rate shall be continued to be paid in accordance with the terms of the Credit Agreement); |
3. |
The Borrower has engaged Oppenheimer & Company as financial advisor to secure a new lender and loan facility for the Borrower, the proceeds of which would repay the Obligations (including, the Prepayment Premium) in full; |
4. |
By not later than July 31, 2023, Oppenheimer shall have obtained one or more indicative term sheets from alternative lenders and the Borrower shall have selected such alternative lender by not later than August 31, 2023 for a loan facility for the Borrower, the proceeds of which would repay the Obligations (including, the Prepayment Premium) in full; and |
5. |
The Borrower shall use its commercially reasonable efforts to refinance and repay all Obligations (including, the Prepayment Premium) under the Credit Agreement by September 30, 2023 or as soon thereafter as is practicable, in full, at which time the Borrower shall also pay the Prepayment Premium. In such connection the Borrower shall furnish to the Agents and the Lenders copies of the financing documents with any new or alternative lender selected by the Borrower and shall keep the Agents and the Lenders fully informed as to the status and progress of such proposed refinancing. |
6. |
The definition of the term Prepayment Premium in the Fee Letter is amended and restated to read as follows: |
“Prepayment Premium” means, with respect to any repayment or prepayment of the Term Loans:
(a) during the period of time from the Effective Date up to and including December 31, 2022, an amount equal to the aggregate amount of interest that would have otherwise been payable on the amount of principal of the Term Loans repaid or prepaid on such date, from the date of repayment or prepayment (with interest calculated assuming the per annum rate of interest in effect with respect to such Term Loans on the date of repayment or prepayment (including, for the avoidance of doubt, the Post-Default Rate, if then in effect)) up to and including December 31, 2022, plus (ii) an amount equal to 5% of the principal amount of Term Loans so repaid or prepaid;
(b) during the period of time after the date that is from January 1, 2023 to September 30, 2023, an amount equal to 4% of the principal amount of Term Loans so repaid or prepaid;
(c) during the period of time after the date that is from October 1, 2023 to December 31, 2023, an amount equal to 5% of the principal amount of Term Loans so repaid or prepaid; and
(d) during the period of time after the date that is from January 1, 2024 to the date all Obligations are paid in full in cash (including the Prepayment Premium), an amount equal to 6% of the principal amount of Term Loans so repaid or prepaid.
In the event, the Borrower or any other Loan Party fails to comply with any of the Waiver Conditions (including the covenants and conditions set forth in paragraph 5 above) or if the Loan Parties are not in compliance with the Borrowing Base requirements of the Credit Agreement for the month of June 2023, then, and in any such event and anytime thereafter during the continuance of any such event, the Agents may, and shall at the request of the Required Lenders, by notice to the Borrower, (i) terminate or reduce all Commitments, whereupon all Commitments shall immediately be so terminated or reduced (ii) declare all or any portion of the Term Loans then outstanding to be accelerated and due and payable, whereupon all or such portion of the aggregate principal of all Term Loans, all accrued and unpaid interest thereon (including interest at the Default Rate), all fees and all other amounts payable under this Agreement and the other Loan Documents shall become due and payable immediately, together with the payment of the Prepayment Premium (with such term as amended by this Waiver) with respect to the Commitments so terminated and the Term Loans so repaid, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Loan Party and (iii) exercise any and all of its other rights and remedies under applicable law, hereunder and under the other Loan Documents.
All of the representations, warranties, terms, covenants and conditions of the Loan Documents shall remain in full force and effect in accordance with their respective terms. The conditional waiver set forth herein shall be limited precisely as provided for herein and, except to the extent specifically provided for herein, shall not be deemed to be waivers of, amendments of, consents to or modifications of any term or provision of the Loan Documents or any other document or instrument referred to therein or of any transaction or further or future action on the part of the Borrower or any other Loan Party requiring the consent of the Administrative Agent or any Lender. The Administrative Agent and the Lenders have not and shall not be deemed to have waived any of their respective rights and remedies against the Borrower or any other Loan Party for any existing or future Defaults or Events of Default (other than the defaults, as conditionally waived herein). This conditional waiver, except as expressly set forth herein, shall not constitute a modification of the Credit Agreement or a course of dealing with the Administrative Agent, the Collateral Agent or any Lender at variance with the Credit Agreement or any other Loan Document such as to require further notice by the Administrative Agent, the Collateral Agent or any Lender to require strict compliance with the terms of the Credit Agreement and the other Loan Documents in the future, except, in each case, as expressly set forth herein.
Each of the Loan Parties as debtor, grantor, pledgor, guarantor, assignor, or in any other similar capacity in which such Loan Party grants liens or security interests in its property or otherwise acts as an accommodation party or a guarantor, as the case may be, hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents to which it is a party (after giving effect hereto) and (ii) to the extent such Loan Party granted liens on or security interests in any of its property pursuant to any such Loan Document as security for or otherwise guaranteed any of the Obligations, ratifies and reaffirms such guarantee and grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secure all of the Obligations as amended hereby. Each of the Loan Parties hereby consents to this Waiver and conditions for this Waiver and acknowledges that each of the Loan Documents remains in full force and effect and is hereby ratified and reaffirmed. The execution of this Waiver shall not serve to effect a novation of the Obligations or, except to the extent specifically provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender or constitute a waiver of any provision of any of the Loan Documents.
In consideration of the Administrative Agent’s and each Lender’s agreements contained in this Waiver, each Loan Party hereby irrevocably releases and forever discharges the Administrative Agent, the Collateral Agent, each Lender and their respective affiliates, subsidiaries, successors, assigns, directors, officers, employees, agents, consultants and attorneys (each, a “Released Person”) of and from any and all claims, suits, actions, investigations, proceedings or demands, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which such Loan Party ever had or now has against such Released Person which relates, directly or indirectly, to any acts or omissions of any Released Person relating to the Credit Agreement or any other Loan Document on or prior to the date hereof.
Each of the following provisions of the Credit Agreement is hereby incorporated herein by this reference with the same effect as though set forth in its entirety herein, mutatis mutandis, and as if “this Agreement” in any such provision read “this Third Amendment”: Section 12.01 (Notices), Section 12.06 (Severability), Section 12.07 (Governing Law),, Section 12.10 (Jurisdiction, Service of Process and Venue), Section 12.11 (Waiver of Jury Trial), Section 12.13 (No Party Deemed Drafter), Section 12.15 (Indemnification), Section 12.16 (Governing Law Attorney), Section 12.22 (Integration), and Section 12.25 (Electronic Signatures).
This Waiver is a Loan Document and is subject to and has the benefit of all provisions in the Credit Agreement applicable to Loan Documents Please confirm Whitehawk’s consent and approval to the foregoing and by your execution of this letter you agree that no default under the Credit Agreement has occurred to date.
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BORROWER: |
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BOXLIGHT CORPORATION |
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By: |
/s/ Michael R. Pope |
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Name: Michael R. Pope |
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Title: Chief Executive Officer |
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GUARANTORS: |
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Boxlight, Inc., |
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a Washington corporation |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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EOSEDU LLC, |
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an Arizona limited liability company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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Boxlight Group Limited |
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a Northern Ireland company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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EXECUTED as a DEED by Sahara Holdings |
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Limited, acting by two directors: |
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/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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/s/ Mark Starkey |
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Name: Mark Starkey |
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Title: President |
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Sahara Presentation Systems, Inc., |
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a Delaware corporation |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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EXECUTED as a DEED by Sahara Presentation |
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Systems Ltd, acting by two directors: |
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/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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/s/ Mark Starkey |
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Name: Mark Starkey |
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Title: President |
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Clevertouch B.V., |
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a Netherlands limited liability company (besloten vennootschap met beperkte aansprakelijkheid) |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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Sahara Presentation Systems Europe BV |
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a Belgium company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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FrontRow Calypso, LLC |
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a Delaware limited liability company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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COLLATERAL AGENT AND ADMINISTRATIVE AGENT: |
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WHITEHAWK CAPITAL PARTNERS, LP, as Administrative Agent and Collateral Agent |
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By: |
/s/ Robert A. Louzan |
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Name: Robert A. Louzan |
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Title: Authorized Signatory |
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LENDERS: |
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WHITEHAWK FINANCE LLC |
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By: |
/s/ Robert A. Louzan |
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Name: Robert A. Louzan |
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Title: Authorized Signatory |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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COLLATERAL AGENT AND ADMINISTRATIVE AGENT: |
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WHITEHAWK CAPITAL PARTNERS, LP, as Administrative Agent and Collateral Agent |
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By: |
/s/ Robert A. Louzan |
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Name: Robert A. Louzan |
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Title: Authorized Signatory |
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LENDERS: |
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WHITEHAWK FINANCE LLC |
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By: |
/s/ Robert A. Louzan |
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Name: Robert A. Louzan |
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Title: Authorized Signatory |
Exhibit 10.4
FOURTH AMENDMENT TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of June 26, 2023 (this “Fourth Amendment”), is entered into by and among Boxlight Corporation, a Nevada corporation (the “Borrower”), each Subsidiary of the Borrower listed as a “Guarantor” on the signature pages hereto (each a “Guarantor” and collectively, the “Guarantors”), the financial institutions party hereto as Lenders and Whitehawk Capital Partners, LP (“Whitehawk Capital”), as the Administrative Agent.
WHEREAS, the Borrower, the Lenders, the Collateral Agent and the Administrative Agent are party to that certain Credit Agreement, dated as of December 31, 2021 ((a) as amendment by the First Amendment to Credit Agreement dated as of April 4, 2022, (b) as amendment by the Second Amendment to Credit Agreement dated as of June 21, 2022, (c) as amendment by the Third Amendment to Credit Agreement dated as of April 24, 2023 and (d) as further amended, restated, supplemented or modified, the “Credit Agreement”; all capitalized terms defined in the Credit Agreement and not otherwise defined herein have the meanings assigned to them in the Credit Agreement, as amended hereby).
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in the Credit Agreement and this Fourth Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1.
AMENDMENTS
Subject to the satisfaction of the conditions set forth in Section 2 hereof and in reliance on the representations and warranties of the Loan Parties set forth in this Fourth Amendment and in the Credit Agreement, in accordance with Section 10.01 of the Credit Agreement, the Borrower, Holdings, Administrative Agent and each of the Lenders hereby agree that the Credit Agreement is amended and modified as follows:
(a)Existing definitions:
(i)The defined term “Applicable Margin” in the Credit Agreement is amended by deleting each reference to “LIBOR Rate Loan” in their entirety and replacing such reference to “SOFR Loan”.
(ii)The defined term “Business Day” in the Credit Agreement is amended and restated to read as follows:
“Business Day” means (a) any day excluding Saturday, Sunday and any day which is a legal holiday under the Laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by Law or other governmental action to close and (b) with respect to all notices, determinations, fundings and payments in connection with Term SOFR or any SOFR Loans, the term “Business Day” shall mean any day which is a Business Day described in clause (i) and which is also a U.S. Government Securities Business Day.
(iii)The defined term “Interest Period” in the Credit Agreement is amended by deleting each reference to “LIBOR Rate Loan” in their entirety and replacing such reference to “SOFR Loan”.
(iv)The defined term “Reference Rate” in the Credit Agreement is amended by deleting each reference to “LIBOR Rate” in their entirety and replacing such reference to “Daily Simple SOFR”.
(v)The following definitions shall be deleted in their entirety from the Credit Agreement:
“LIBOR”, “LIBOR Deadline”, “LIBOR Notice”, “LIBOR Option”, “LIBOR Rate”, “LIBOR Rate Loan”, “Reserve Percentage”.
(b)New Definitions: As used herein, the following terms shall have the following meanings given to them below, and the Credit Agreement and the other Loan Documents are hereby amended to include the following in alphabetical order:
(i)“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.11.
(ii)“Base Rate Term SOFR Determination Day” as defined in the definition of “Term SOFR”.
(iii)“Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.11.
(iv)“Benchmark Replacement” means with respect to any Benchmark Transition Event, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
(a) the sum of: (i) Daily Simple SOFR, and (ii) 0.11448%; or
(b) the sum of: (i) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower giving due consideration to (A) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (B) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities and (ii) the related Benchmark Replacement Adjustment.
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If the Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for all the purposes of the Credit Documents (v)“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities at such time.
(vi)“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof); or
(b) in the case of clause (c) of the definition of “Benchmark Transition Event,” the first date on which all Available Tenors of such Benchmark (or the published component used in the calculation thereof) has been or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) have been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, if such Benchmark is a term rate, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
(vii)“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof),
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(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof); or
(c) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, if such Benchmark is a term rate, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
(viii)“Benchmark Unavailability Period” means, the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Credit Document in accordance with Section 2.11 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Credit Document in accordance with Section 2.11.
(ix)“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “U.S.
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Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 2.18(c) and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Credit Documents).
(x)“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Administrative Agent in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided that if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion.
(xi)“Floor” means 1%, per annum.
(xii)“Fourth Amendment” means the Fourth Amendment to this Agreement dated as of June [__], 2023.
(xiii)“Fourth Amendment Effective Date” has the meaning specified therefor in the Fourth Amendment.
(xiv)“Periodic Term SOFR Determination Day” as defined in the definition of “Term SOFR”.
(xv)“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
(xvi)“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
(xvii)“SOFR Borrowing” means, as to any borrowing of Loans, the SOFR Loans comprising such Borrowing.
(xviii)“SOFR Deadline” has the meaning specified therefor in Section 2.11(a).
(xix)“SOFR Loan” means a Loan that bears interest at a rate based on Term SOFR, other than pursuant to clause (iii) of the definition of “Base Rate”.
(xx)“SOFR Notice” has the meaning specified therefor in Section 2.11(a).
(xxi)“Term SOFR” means,
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for any calculation with respect to a SOFR Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day |
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(such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and
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for any calculation with respect to an Base Rate Loan on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “Base Rate Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Base Rate Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Base Rate SOFR Determination Day. |
(xxii)“Term SOFR Adjustment” means (a) for any calculation with respect to a SOFR Loan with an Interest Period of three months, 0.26161%, and (b) for any calculation with respect to a Base Rate Loan, 0.11448%.1
(xxiii)“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
(xxiv)“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
(xxv)“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
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These are the ARRC/ISDA recommended spread adjustments. |
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(c)The following new Section 1.06 is hereby added to the Credit Agreement immediately following the end of Section 1.05 of the Credit Agreement:
“Rates. The Administrative Agent does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to Base Rate, the Term SOFR Reference Rate or Term SOFR, or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, Base Rate, the Term SOFR Reference Rate, Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Administrative Agent and its affiliates or other related entities may engage in transactions that affect the calculation of Base Rate, the Term SOFR Reference Rate, Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain Base Rate, the Term SOFR Reference Rate, Term SOFR or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.”
(d)Each of Sections 2.02(a) and 4.01(a) of the Credit Agreement is hereby amended by deleting the reference to “LIBOR Rate Loan” in its entirety and replacing it with the reference to “SOFR Loan”.
(e)Section 2.04(a) of the Credit Agreement is hereby amended and restated to read as follows:
Term Loans. Subject to the terms of this Agreement, at the option of the Borrower, the Term Loan or any portion thereof shall be either a Reference Rate Loan or a SOFR Loan. Each portion of the Term Loan that is a (i) Reference Rate Loan shall bear interest on the principal amount thereof from time to time outstanding, from the date of the Term Loan until repaid, at a rate per annum equal to the sum of (x) the Reference Rate plus (ii) the Applicable Margin, and (ii) each portion of the Term Loan that is a SOFR Loan shall bear interest on the principal amount thereof from time to time outstanding, from the date of the Term Loan until repaid, at a rate per annum equal to the sum of (x) Term SOFR for the Interest Period in effect for the Term Loan (or such portion thereof) plus (y) Term SOFR Adjustment for the Interest Period in effect for the Term Loan (or such portion thereof) plus (z) the Applicable Margin.
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(f)The following new Section 2.04(e) is hereby added to the Credit Agreement immediately following the end of Section 2.04(d) of the Credit Agreement:
“Term SOFR Conforming Changes. In connection with the use or administration of Term SOFR, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Credit Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Credit Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.”
(g)Section 2.10(a) is hereby amended and restated to read as follows:
If on or prior to the first day of any Interest Period for any SOFR Loan:
(i) the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that “Term SOFR” cannot be determined pursuant to the definition thereof, or
(ii) the Required Lenders determine that for any reason in connection with any request for a SOFR Loan or a conversion thereto or a continuation thereof that Term SOFR for any requested Interest Period with respect to a proposed SOFR Loan does not adequately and fairly reflect the cost to such Lenders of making and maintaining such Loan, and the Required Lenders have provided notice of such determination to the Administrative Agent,
then in case of clause (i) or clause (b) of this Section 2.10(a), the Administrative Agent will promptly so notify the Borrower and each Lender. Upon notice thereof by the Administrative Agent to the Borrower, any obligation of the Lenders to make SOFR Loans, and any right of the Borrower to continue SOFR Loans or to convert Reference Rate Loans to SOFR Loans, shall be suspended (to the extent of the affected SOFR Loans or affected Interest Periods) until the Administrative Agent (with respect to clause (ii), at the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, (x) the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of SOFR Loans (to the extent of the affected SOFR Loans or affected Interest Periods) or, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to Reference Rate Loans in the amount specified therein and (y) any outstanding affected SOFR Loans will be deemed to have been converted into Reference Rate Loans at the end of the applicable Interest Period. Upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 2.12. Subject to Section 2.11, if the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that “Term SOFR” cannot be determined pursuant to the definition thereof on any given day, the interest rate on Reference Rate Loans shall be determined by the Administrative Agent without reference to clause (c) of the definition of “Reference Rate” until the Administrative Agent revokes such determination.
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(h)Section 2.10(b) of the Credit Agreement is hereby amended by (i) deleting the reference to “LIBOR Rate Loan” in its entirety and replacing it with the reference to “SOFR Loan”, (ii) deleting each reference to “LIBOR Rate” in its entirety and replacing it with a reference to “Term SOFR” and (iii) deleting each reference to “LIBOR Option” and replacing it with a reference to “SOFR Option”.
(i)Section 2.11(a), (b) and (c) of the Credit Agreement is hereby amended by (i) deleting the reference to “LIBOR Rate Loan” in its entirety and replacing it with the reference to “SOFR Loan”, (ii) deleting each reference to “LIBOR Rate” in its entirety and replacing it with a reference to “Term SOFR”, (iii) deleting each reference to “LIBOR Deadline” and replacing it with a reference to “SOFR Deadline, (iv) deleting each reference to “LIBOR Notice” and replacing it with a reference to “SOFR Notice” and (iii) deleting each reference to “LIBOR Option” and replacing it with a reference to “SOFR Option”.
(j)Section 2.11(d) is hereby amended and restated to read as follows:
“Notwithstanding anything to the contrary herein or in any other Loan Document, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior any setting of the then-current Benchmark, then (x) if a Benchmark Replacement is determined in accordance with clause (a) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a Benchmark Replacement is determined in accordance with clause (b) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.”
(k)Section 2.11(e) is hereby amended and restated to read as follows:
“Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.”
(l)Section 2.11(f) is hereby amended and restated to read as follows:
“Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement.
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The Administrative Agent will notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 2.11(g) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.11, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.11.”
(m)Section 2.11(g) is hereby amended and restated to read as follows.
“Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.”
(n)The following new Section 2.11(h) is hereby added to the Credit Agreement immediately following the end of Section 2.11(g) of the Credit Agreement:
“Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any pending request for a SOFR Borrowing of, conversion to or continuation of SOFR Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to Reference Rate Loans. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of Reference Rate.”
(o)Section 2.12 of the Credit Agreement is hereby amended by (i) deleting the reference to “LIBOR Rate Loan” in its entirety and replacing it with the reference to “SOFR Loan”, (ii) deleting each reference to “LIBOR Rate” in its entirety and replacing it with a reference to “Term SOFR”, (iii) deleting each reference to “LIBOR Option” and replacing it with a reference to “SOFR Option” and (iv) deleting each reference to “LIBOR Notice” and replacing it with a reference to “SOFR Notice”.
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(p)Exhibit G to the Credit Agreement is hereby amended by (i) deleting each reference to “LIBOR Notice” in its entirety and replacing it with a reference to “SOFR Notice”, (ii) deleting each reference to “LIBOR Rate Loan” in its entirety and replacing it with a reference to “SOFR Loan” and (iii) deleting each reference to “LIBOR Rate” in its entirety and replacing it with a reference to “Daily Simple SOFR”.
Notwithstanding the foregoing, all outstanding LIBOR Rate Loan (as defined in the Credit Agreement immediately prior to the Fourth Amendment Effective Date (such Credit Agreement, the “Existing Credit Agreement”)) immediately prior to the Fourth Amendment Effective Date (the “Existing LIBOR Rate Loans”) shall continue at the LIBOR Rate (as defined in the Existing Credit Agreement) plus the Applicable Margin (as defined in the Existing Credit Agreement) until the last day of the Interest Period (as defined in the Existing Credit Agreement) currently applicable to such outstanding LIBOR Rate Loans. Upon the expiration of each such Interest Period, each Existing LIBOR Rate Loan shall automatically convert to a SOFR Loan for the Interest Period specified in the Credit Agreement. Notwithstanding this Fourth Amendment above, the terms of the Existing Credit Agreement in respect of the calculation, payment and administration of the Existing LIBOR Rate Loans shall remain in effect from and after the Fourth Amendment Effective Date until the conversion of such Loans, as applicable, to SOFR Loan in accordance with this paragraph, in each case, solely for purposes of making, and the administration of, interest payments on the LIBOR Rate Loans. This paragraph shall be deemed to constitute a notice of SOFR Option pursuant to Section 2.11(a) of the Credit Agreement.
SECTION 2.
CONDITIONS TO EFFECTIVENESS
This Fourth Amendment shall become effective on the date (the “Fourth Amendment Effective Date”) on which the following conditions are satisfied, in each case, in form and substance reasonably satisfactory to the Administrative Agent:
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the Administrative Agent shall have received one or more counterparts of this Fourth Amendment executed by the Borrower, each Guarantor, the Lenders and the Administrative Agent; |
(b)no Default or Event of Default shall exist;
(c)the representations and warranties of the Borrower and the Guarantors contained in this Fourth Amendment shall be true and correct in all material respects (in each case, without duplication of any materiality qualifier contained herein or therein, as applicable) on and as of the date hereof, as though made on such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date (in each case, without duplication of any materiality qualifier contained herein or therein, as applicable); and
(d)all outstanding fees and expenses payable to the Administrative Agent, any Lender and/or any of their respective Affiliates and legal counsel for which invoices have been provided to the Administrative Borrower shall have been paid.
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SECTION 3.
LIMITATION ON SCOPE
All of the representations, warranties, terms, covenants and conditions of the Loan Documents shall remain in full force and effect in accordance with their respective terms. The amendments set forth herein shall be limited precisely as provided for herein and, except to the extent specifically provided for herein, shall not be deemed to be waivers of, amendments of, consents to or modifications of any term or provision of the Loan Documents or any other document or instrument referred to therein or of any transaction or further or future action on the part of the Borrower or any other Loan Party requiring the consent of the Administrative Agent or any Lender. The Administrative Agent and the Lenders have not and shall not be deemed to have waived any of their respective rights and remedies against the Borrower or any other Loan Party for any existing or future Defaults or Events of Default (other than the Specified Defaults, as waived herein).
SECTION 4.
REAFFIRMATION
Each of the Loan Parties as debtor, grantor, pledgor, guarantor, assignor, or in any other similar capacity in which such Loan Party grants liens or security interests in its property or otherwise acts as an accommodation party or a guarantor, as the case may be, hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents to which it is a party (after giving effect hereto) and (ii) to the extent such Loan Party granted liens on or security interests in any of its property pursuant to any such Loan Document as security for or otherwise guaranteed any of the Obligations, ratifies and reaffirms such guarantee and grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secure all of the Obligations as amended hereby. Each of the Loan Parties hereby consents to this Fourth Amendment and acknowledges that each of the Loan Documents remains in full force and effect and is hereby ratified and reaffirmed. The execution of this Fourth Amendment shall not serve to effect a novation of the Obligations or, except to the extent specifically provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender or constitute a waiver of any provision of any of the Loan Documents.
SECTION 5.
RELEASE OF CLAIMS
In consideration of the Administrative Agent’s and each Lender’s agreements contained in this Fourth Amendment, each Loan Party hereby irrevocably releases and forever discharges the Administrative Agent, the Collateral Agent, each Lender and their respective affiliates, subsidiaries, successors, assigns, directors, officers, employees, agents, consultants and attorneys (each, a “Released Person”) of and from any and all claims, suits, actions, investigations, proceedings or demands, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which such Loan Party ever had or now has against such Released Person which relates, directly or indirectly, to any acts or omissions of any Released Person relating to the Credit Agreement or any other Loan Document on or prior to the date hereof.
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SECTION 6.
MISCELLANEOUS
(a)Representations and Warranties. Each Loan Party hereby represents and warrants that:
(i) |
this Fourth Amendment has been duly authorized and executed by such Loan Party, and the Credit Agreement, as modified by this Fourth Amendment, is the legal, valid and binding obligation of the Borrower and each other Loan Party that is a party thereto, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability; |
(ii) |
the representations and warranties in the Credit Agreement and the other Loan Documents are true and correct in all material respects (in each case, without duplication of any materiality qualifier contained herein or therein, as applicable) on and as of the date hereof, as though made on such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date (in each case, without duplication of any materiality qualifier contained herein or therein, as applicable); and |
(iii) |
no Default or Event of Default has occurred and is continuing after giving effect to this Fourth Amendment. |
(b)References. All references in the Loan Documents to the “Credit Agreement” and in the Credit Agreement as modified hereby to “this Agreement,” “hereof,” “herein” or the like shall mean and refer to the Credit Agreement as modified by this Fourth Amendment (as well as by all subsequent amendments, restatements, supplements and other modifications thereof).
(c)Incorporation by Reference; Loan Document. Each of the following provisions of the Credit Agreement is hereby incorporated herein by this reference with the same effect as though set forth in its entirety herein, mutatis mutandis, and as if “this Agreement” in any such provision read “this Fourth Amendment”: Section 12.01 (Notices), Section 12.06 (Severability), Section 12.07 (Governing Law),, Section 12.10 (Jurisdiction, Service of Process and Venue), Section 12.11 (Waiver of Jury Trial), Section 12.13 (No Party Deemed Drafter), Section 12.15 (Indemnification), Section 12.16 (Governing Law Attorney), Section 12.22 (Integration), and Section 12.25 (Electronic Signatures). This Fourth Amendment is a Loan Document and is subject to and has the benefit of all provisions in the Credit Agreement applicable to Loan Documents.
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WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above.
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BORROWER: |
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BOXLIGHT CORPORATION |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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GUARANTORS: |
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Boxlight, Inc., |
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a Washington corporation |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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EOSEDU LLC, |
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an Arizona limited liability company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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Boxlight Group Limited |
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a Northern Ireland company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
[Fourth Amendment to Credit Agreement]
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EXECUTED as a DEED by Sahara Holdings |
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Limited, acting by two directors: |
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/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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/s/ Mark Starkey |
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Name: Mark Starkey |
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Title: President |
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Sahara Presentation Systems, Inc., |
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a Delaware corporation |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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EXECUTED as a DEED by Sahara Presentation |
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Systems Ltd, acting by two directors: |
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/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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/s/ Mark Starkey |
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Name: Mark Starkey |
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Title: President |
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Clevertouch B.V., |
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a Netherlands limited liability company (besloten vennootschap met beperkte aansprakelijkheid) |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
[Fourth Amendment to Credit Agreement]
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Sahara Presentation Systems Europe BV |
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a Belgium company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
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FrontRow Calypso, LLC |
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a Delaware limited liability company |
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By: |
/s/ Michael Pope |
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Name: Michael Pope |
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Title: Chief Executive Officer |
[Fourth Amendment to Credit Agreement]
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ADMINISTRATIVE AGENT AND LENDERS: |
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WHITEHAWK CAPITAL PARTNERS, LP, |
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as the Administrative Agent |
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By: |
/s/ Robert A. Louzan |
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Name: Robert A. Louzan |
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Title: Authorized Signatory |
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WHITEHAWK CAPITAL FINANCE LLC, as a Lender |
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By: |
/s/ Robert A. Louzan |
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Name: Robert A. Louzan |
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Title: Authorized Signatory |
[Fourth Amendment to Credit Agreement]
Exhibit 31.1
CERTIFICATION
I, Michael Pope, certify that:
1. I have reviewed this quarterly Report on Form 10-Q Pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended June 30, 2023, of Boxlight Corporation (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared:
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles:
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 9, 2023 |
/s/ Michael Pope |
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Michael Pope |
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Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Greg Wiggins, certify that:
1. I have reviewed this quarterly Report on Form 10-Q Pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended June 30, 2023, of Boxlight Corporation (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report,
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report:
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles:
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 9, 2023 |
/s/Greg Wiggins |
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Greg Wiggins |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Boxlight Corporation (the “Company”) on Form 10-Q pursuant to Rule 15d-2 Under the Securities Exchange Act of 1934 for the period ending June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Pope, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 9, 2023
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/s/ Michael Pope |
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Michael Pope |
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Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Boxlight Corporation (the “Company”) on Form 10-Q pursuant to Rule 15d-2 Under the Securities Exchange Act of 1934 for the period ending June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Greg Wiggins, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 9, 2023
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/s/ Greg Wiggins |
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Greg Wiggins |
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Chief Financial Officer (Principal Financial and Accounting Officer) |