Boxlight Corp

Previous wording

The Company’s sales of interactive devices, including panels, whiteboards and other interactive devices generally include hardware maintenance services, a license to software, and the provision of related software maintenance. In most cases, interactive devices are sold with hardware maintenance services.

Current wording

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.

Previous wording

Our 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 newer models; component, contract manufacturing and supplier pricing, foreign currency exchange and most recently, increased shipping costs due to the pandemic and global unrest. 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 our future average selling prices and unit costs. Gross profit and gross profit margin may fluctuate over time based on the factors described above.

Current wording

Our 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 newer models; component, contract manufacturing and supplier pricing, competitive industry pricing, foreign currency exchange and shipping costs. 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 our future average selling prices and unit costs. Gross profit and gross profit margin may fluctuate over time based on the factors described above.

Previous wording

General and administrative. General and administrative expense consists of personnel related costs, which include salaries, 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.

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

Cost of Revenues. Cost of revenues for the year ended December 31, 2023 was $113.4 million as compared to $156.9 million for the year ended December 31, 2022, resulting in a 27.7% decrease. The decrease in cost of revenues was primarily due to more favorable material and shipping cost and the decrease in revenues.

Current wording

Cost of Revenues. Cost of revenues for the year ended December 31, 2024 was $89.0 million as compared to $113.4 million for the year ended December 31, 2023, resulting in a 21.6% decrease. The decrease in cost of revenues was attributable to the decrease in units sold.

Previous wording

Gross Profit. Gross profit for the year ended December 31, 2023 was $63.3 million as compared to $64.9 million for the year ended December 31, 2022. Gross profit margin improved to 35.8% for the year ended December 31, 2023 compared to 29.2% for the year ended December 31, 2022 due to audio products comprising a greater percentage of total sales, which carry higher margins, and decreases in manufacturing and shipping cost.

Current wording

Gross Profit. Gross profit for the year ended December 31, 2024 was $46.9 million as compared to $63.3 million for the year ended December 31, 2023. Gross profit margin declined to 34.5% for the year ended December 31, 2024 compared to 35.8% for the year ended December 31, 2023, primarily related recent increases in pricing pressure within the industry as well as a difference in product mix compared to the prior year.

Previous wording

Research and Development Expense. Research and development expense was$3.2 million or 1.8% of revenue for the year ended December 31,2023 as compared to$2.5 million or 1.1% of revenue for the year ended December 31,2022. Research and development expense primarily consists of costs associated with development of proprietary technology. The increase in research and development expense was primarily driven by an increase in contract services related to software development.

Current wording

Research and Development Expense. Research and development expense was$4.1 million or 3.0% of revenue for the year ended December 31,2024 as compared to$3.2 million or 1.8% of revenue for the year ended December 31,2023. Research and development expense primarily consists of costs associated with development of proprietary technology. The increase was attributable to the allocation of certain general and administrative expenses to new and ongoing research and development projects.

Previous wording

Impairment of Goodwill. Impairment of goodwill for the year ended December 31,2023 was$25.2 million and related to both the Americas and EMEA reporting segments. There was no impairment of goodwill for the year ended December 31,2022.

Current wording

Impairment of Goodwill. Impairment of goodwill for the year ended December 31,2023 was $25.2 millionand related to both the Americas and EMEA reporting segments. There was no impairment of goodwill for the year ended December 31, 2024.

Previous wording

Net Loss. Net loss attributable to common shareholders was $40.4 million and $5.0 million for the years ended December 31, 2023 and 2022, respectively, after deducting fixed dividends to Series B preferred shareholders of $1.3 million in each year.

Current wording

Net Loss. Net loss attributable to common shareholders was $29.6 million and $40.4 million for the years ended December 31, 2024 and 2023, respectively, after deducting fixed dividends to Series B preferred shareholders of $1.3 million in each year.

Previous wording

EBITDA represents net loss before income tax expense, interest expense, net, and depreciation and amortization expense. Adjusted EBITDA represents EBITDA, adjusted for stock compensation expense and changes in fair value of derivative liabilities, purchase accounting impact for fair valuing inventory and deferred revenue, net gain on settlement of debt, and impairment of goodwill. Our management uses EBITDA and Adjusted EBITDA as financial measures to evaluate the profitability and efficiency of our business model. We use these non-GAAP financial measures 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. We find this especially useful when reviewing results of operations, which include large non-cash amortizations of intangibles assets from acquisitions. Investors should consider our non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

Current wording

EBITDA represents net loss before income tax expense, interest expense, net, and depreciation and amortization expense. Adjusted EBITDA represents EBITDA, adjusted for stock compensation expense and changes in fair value of derivative liabilities, purchase accounting impact for fair valuing inventory and deferred revenue, impairment of goodwill, and severance charges. Our management uses EBITDA and Adjusted EBITDA as financial measures to evaluate the profitability and efficiency of our business model. We use these non-GAAP financial measures 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. We find this especially useful when reviewing results of operations, which include large non-cash amortizations of intangibles assets from acquisitions. Investors should consider our non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of$17.3 million, a working capital balance of $54.1 million, and a current ratio of 2.17. At December 31, 2022, we had $14.6 million of cash and cash equivalents, a working capital balance of $62.8 million, and a current ratio of 2.29.

Current wording

As of December 31, 2024, we had cash and cash equivalents of$8.0 million, a working capital balance of $1.3 million, and a current ratio of 1.02. At December 31, 2023, we had $17.3 million of cash and cash equivalents, a working capital balance of $54.1 million, and a current ratio of 2.10.

Previous wording

For the years ended December 31, 2023 and 2022, we had net cash provided by operating activities of $11.6 million and $1.2 million, respectively. Cash provided by operating activities increased year over year as a result of a change in working capital management. We had net cash used in investing activities of $1.3 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively. Cash used in investing activities is primarily related to purchases of property and equipment. For the years ended December 31, 2023 and 2022, we had net cash used in financing activities of $8.0 million and $5.1 million, respectively. Cash used for financing activities for the year ended December 31, 2023 is primarily related to principal payments on debt of $6.8 million, and $1.3 million in payments of fixed dividends to our Series B preferred shareholders, and stock option exercise proceeds of $13 thousand. Cash used by financing activities for the year ended December 31, 2022 was primarily related to principal payments on debt, and payments of fixed dividends to our Series B preferred shareholders, partially offset by net proceeds of issuance of common stock, and proceeds from long-term debt and stock option exercises.

Current wording

For the years ended December 31, 2024 and 2023, we had net cash used in operating activities of $0.4 million and net cash provided by $11.6 million, respectively. Cash used in operating activities increased year over year as a result of a change in working capital management. We had net cash used in investing activities of $0.5 million and $1.3 million for the years ended December 31, 2024 and 2023, respectively. Cash used in investing activities is primarily related to purchases of property and equipment. For the years ended December 31, 2024 and 2023, we had net cash used in financing activities of $7.1 million and $8.0 million, respectively. Cash used in financing activities for the year ended December 31, 2024 is primarily related to principal payments on debt of $9.9 million, and $1.3 million in payments of fixed dividends to our Series B preferred shareholders, partially offset by proceeds from short-term debt. Cash used in financing activities for the year ended December 31, 2023 was primarily related to principal payments on debt, and payments of fixed dividends to our Series B preferred shareholders, partially offset by proceeds from short-term debt and stock option exercises.

Previous wording

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 Israel and Hamas 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.

Current wording

Given the uncertainty surrounding global supply chains, global markets, and general global uncertainty as a result of new U.S. tariff policy, trade wars, and the ongoing conflicts between Russia and Ukraine and Israel and Hamas, the availability of debt and equity capital has been reduced and the cost of capital has increased. 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, there can be no guarantee we will be able to access capital when needed or be able to manage through the current challenges in the equity and debt finance markets by managing payment terms with our customers and vendors.

Previous wording

The Company was not in compliance with its financial covenant related to the Senior Leverage Ratio under the Credit Agreement at December 31, 2023. Although on March 14, 2024, the Loan Parties entered into the Fifth Amendment with the Collateral Agent and the Lender mainly for the purpose of (1) amending and restating the Senior Leverage Ratio and Minimum Liquidity (as defined in the Fifth Amendment), and (2) waiving any Event of Default that may have arisen directly as a result of the Financial Covenant Default (as defined in the Fifth Amendment), there can be no assurance that the Lender will not declare an event of default and acceleration of all of our obligations under the Credit Agreement in the event we are unable to get into full compliance with these covenants in the future. Following the Fifth Amendment to the Credit Agreement, the Senior Leverage ratio increased to 6.00 at March 31, 2024, remained at 2.00 at June 30, 2024 and 1.75 thereafter. Because of the significant decreases in the required Senior Leverage Ratio within the next twelve months, the Company’s current forecast projects the Company may not be able to maintain compliance with this ratio. These conditions raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the financial statements are issued.

Current wording

The Company was also not in compliance with its Senior Leverage Ratio financial covenant under the Credit Agreement at September 30, 2024. Subsequent to the end of the third quarter of 2024, we were also not in compliance with our borrowing base covenant under the Credit Agreement for month ended October 31, 2024. On November 14, 2024, we obtained a waiver for the Credit Agreement from the Collateral Agent and Lender (the “November 2024 Waiver”) to waive any events of default that may have arisen directly as a result of (i) the Financial Covenant Default (as defined in the November 2024 Waiver) at September 30, 2024 and (ii) the Borrowing Base Default (as defined in the November 2024 Waiver) for the month ended October 31, 2024. In conjunction with obtaining the waiver, the Company paid down approximately $1.1 million under the Credit Agreement, inclusive of $60 thousand of prepayment penalties. There can be no assurance that the Lender will not declare an event of default and acceleration of all of our obligations under the Credit Agreement in the event we are unable to maintain full compliance with these covenants in the future.

Previous wording

In view of this matter, continuation as a going concern is dependent upon the Company’s ability to continue to achieve positive cash flow from operations, obtain waivers or other relief under the Credit Agreement for any future non- compliance with the Senior Leverage Ratio, or refinance its Credit Agreement with a different lender on a basis with more favorable terms. The Company is actively working to refinance its debt with new lenders on terms more favorable to the Company. While the Company is confident in its ability to refinance its existing debt, it does not have written or executed agreements as of the issuance of this Form 10-K. The Company’s ability to refinance its existing debt is based upon credit markets and economic forces that are outside of its control. We believe we have a good working capital relationship with our current lender. However, there can be no assurance that the Company will be successful in refinancing its debt, or on terms acceptable to the Company.

Current wording

In view of this matter, continuation as a going concern is dependent upon our ability to continue to achieve positive cash flow from operations, obtain waivers or other relief under the Credit Agreement for any future non-compliance with the Senior Leverage Ratio, the borrowing base covenant, or any other financial covenants, or refinance our Credit Agreement with a different lender on a basis with more favorable terms. As part of our ongoing efforts to strengthen our financial position, the Company has initiated plans to recapitalize its balance sheet and refinance our current Credit Agreement. This initiative is part of our broader strategy to improve financial flexibility, reduce our cost of capital, and position the Company for sustainable growth in the long term. We are actively working to refinance our debt with new lenders. While we have currently engaged financial advisors and are actively working to refinance our existing debt, we do not have written or executed agreements as of the issuance of this Form 10-K. Our ability to refinance our existing debt is based upon credit markets and economic forces that are outside of our control. We have a good working relationship with our current banking partner, however, there can be no assurance that we will be successful in refinancing our debt, or on terms acceptable to us.

Previous wording

Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. No material impairments of intangible assets have been identified during any of the periods presented. Intangible assets are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist using an undiscounted cash-flow approach.

Current wording

Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. Intangible assets are assessed for impairment if indicators of potential impairment exist using an undiscounted cash-flow approach.