UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~[X]~~

~~Quarterly Report~~

☒

QUARTERLY REPORT UNDER ~~Section~~SECTION 13 ~~or 15(~~d~~) of the Securities Exchange Act of~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~

2023

~~[ ]~~

~~Transition Report~~

☐

TRANSITION REPORT UNDER ~~Section~~SECTION 13 ~~or 15(~~d~~) of the Securities Exchange Act of~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number ~~1-9330~~001-37564

BOXLIGHT CORPORATION

(Exact name of registrant as specified in its charter)

~~Nevada~~	~~8211~~		~~46-4116523~~
Nevada		46-4116523
(State or other jurisdiction of	~~(Primary Standard Industrial~~		(I.R.S. Employer
incorporation or organization)	~~Classification Code Number)~~		Identification Number)

~~1045 Progress Circle~~2750 Premiere Parkway, Suite 900

~~Lawrenceville,~~ Duluth, Georgia ~~30043~~30097

~~Phone: (678) 367-0809~~

(Address ~~including zip code, and~~of principal executive offices)(Zip Code)

(678) 367-0809

(Registrant’s telephone number, including area ~~code,~~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 ~~registrant’s principal executive offices)~~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 ~~[X]~~☒ No ~~[ ]~~

☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ~~[X]~~☒ 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.

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 ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act. ~~[ ]~~

☐

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ~~[ ]~~☐ No ~~[X]~~

☒

The number of shares outstanding of the registrant’s common stock on ~~November 10, 2017~~August 8, 2023 was ~~5,808,346.~~9,466,349.

BOXLIGHT CORPORATION

TABLE OF CONTENTS

		~~Page No.~~
		Page No.

	PART I. Financial Information

Item 1.	Unaudited Condensed Consolidated Financial Statements	~~F-1~~ 3

	Unaudited ~~Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016~~	~~F-1~~

	~~Unaudited~~Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the ~~Three~~three months and ~~Nine Months Ended September~~six months ended June 30, ~~2017~~2023 and ~~2016~~2022	~~F-2~~ 3

	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	4

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months and six months ended June 30, 2023 and 2022	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine Months Ended September~~six months ended June 30, ~~2017~~2023 and ~~2016~~2022	~~F-3~~ 7

	Notes to Unaudited Condensed Consolidated Financial Statements ~~(unaudited)~~	~~F-4~~ 8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3 27

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	9 34

Item 4.	Controls and Procedures	9 35

	PART II. Other Information

Item 1.	Legal Proceedings	10 35

Item 1A.	Risk Factors	10 35

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	10 36

Item 3.	Defaults Upon Senior Securities	10 36

Item 4.	Mine Safety Disclosures	10 36

Item 5.	Other Information	10 36

Item 6.	Exhibits	10 36

	Signatures	11 37

Table of Contents

PART I. ~~Financial Information~~FINANCIAL INFORMATION

Item 1. Financial Statements

Boxlight Corporation

~~Consolidated Balance Sheets~~

~~As of September 30, 2017 and December 31, 2016~~

~~(Unaudited)~~

September 30, 2017 December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 783,181 $ 456,502
Accounts receivable – trade, net of allowances 5,168,641 2,943,954
Inventories, net of reserve 2,371,105 4,164,116
Prepaid expenses and other current assets 1,435,559 447,036
Total current assets 9,758,486 8,011,608

Property and equipment, net of accumulated depreciation 34,396 60,040
Intangible assets, net of accumulated amortization 6,299,748 6,833,477
Goodwill 4,181,991 4,181,991
Other assets 316 33,262
Total assets $ 20,274,937 $ 19,120,378

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses $ 4,429,767 $ 4,453,893
Accounts payable and accrued expenses – related parties 4,423,157 3,754,050
Short-term debt 2,935,001 2,791,582
Short-term debt – related parties 681,550 876,550
Convertible notes payable – related parties 1,050,000 50,000
Deferred revenues – short-term 403,870 495,603
Other short-term liabilities 250,000 251,537
Total current liabilities 14,173,345 12,673,215

Long-term convertible notes payable – related parties - 4,060,785
Deferred revenues – long-term 238,374 272,123

Total liabilities 14,411,719 17,006,123

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.0001 par value, 50,000,000 shares authorized, 1,270,000 shares issued and outstanding 127 127
Common stock, $0.0001 par value, 200,000,000 shares authorized; 5,808,346 and 4,621,687 Class A shares issued and outstanding, respectively 581 461
Additional paid-in capital 13,304,292 7,615,732
Subscriptionsreceivable (325 ) (325 )
Accumulated deficit (7,394,001 ) (5,488,822 )
Other comprehensive loss (47,456 ) (12,918 )
Total stockholders’ equity 5,863,218 2,114,255

Total liabilities and stockholders’ equity $ 20,274,937 $ 19,120,378

~~See accompanying notes to the financial statements.~~

~~F-1~~

~~Boxlight Corporation~~

Condensed Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~(Loss)

For the ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, ~~2017~~2023 and ~~2016~~2022

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenues, net	$	47,052	$	59,628	$	88,242	$	110,231
Cost of revenues		29,224		42,794		55,266		80,781
Gross profit		17,828		16,834		32,976		29,450

Operating expense:
General and administrative		15,227		15,304		29,958		30,762
Research and development		525		649		1,122		1,261
Total operating expense		15,752		15,953		31,080		32,023

Income (loss) from operations		2,076		881		1,896		(2,573)

Other income (expense):
Interest expense, net		(2,788)		(2,417)		(5,235)		(4,733)
Other expense, net		(28)		(60)		(50)		(74)
Gain on settlement of liabilities, net		—		3		—		856
Change in fair value of derivative liabilities		184		1,660		(40)		1,650
Total other expense		(2,632)		(814)		(5,325)		(2,301)
Income (loss) before income taxes	$	(556)	$	67	$	(3,429)	$	(4,874)
Income tax (expense) benefit		(255)		(41)		(306)		45
Net income (loss)	$	(811)	$	26	$	(3,735)	$	(4,829)
Fixed dividends - Series B Preferred		(317)		(317)		(635)		(635)
Net loss attributable to common stockholders	$	(1,128)	$	(291)	$	(4,370)	$	(5,464)

Comprehensive income (loss):
Net income (loss)	$	(811)	$	26	$	(3,735)	$	(4,829)
Other comprehensive income (loss):
Foreign currency translation adjustment		1,722		(4,637)		2,280		(6,409)
Total comprehensive income (loss)	$	911	$	(4,611)	$	(1,455)	$	(11,238)

Net loss per common share – basic and diluted, as adjusted	$	(0.12)	$	(0.04)	$	(0.47)	$	(0.67)

Weighted average number of common shares outstanding – basic and diluted, as adjusted		9,385		8,228		9,359		8,176

Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016* Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016*

Revenues $ 10,228,389 $ 7,877,595 $ 20,407,258 $ 15,371,130
Cost of revenues 7,327,701 5,084,340 14,595,780 9,485,596
Gross profit 2,900,688 2,793,255 5,811,478 5,885,534

Operating expense:
General and administrative expenses 2,295,101 2,049,917 7,049,288 4,701,275
Research and development 60,403 244,515 357,955 846,621
Total operating expense 2,355,504 2,294,432 7,407,243 5,547,896

Income (loss) from operations 545,184 498,823 (1,595,765 ) 337,638

Other income (expense):
Interest expense, net (186,883 ) (549,684 ) (462,581 ) (689,660 )
Other income (expense), net 111,993 (51,574 ) 153,157 9,262
Total other income (expense) (74,890 ) (601,258 ) (309,424 ) (680,398 )

Net income (loss) $ 470,294 $ (102,435 ) $ (1,905,189 ) $ (342,760 )

Comprehensive income (loss):
Net income (loss) $ 470,294 $ (102,435 ) (1,905,189 ) (342,760 )
Other comprehensive income (loss):
Foreign currency translation gain (loss) (18,012 ) (12,918 ) (34,538 ) (12,918 )
Total comprehensive income (loss) $ 452,282 $ (115,353 ) $ (1,939,727 ) $ (355,678 )

Net income (loss) per common share – basic $ 0.09 $ (0.02 ) $ (0.39 ) $ (0.08 )
Net income (loss) per common share – diluted $ 0.08 $ (0.02 ) $ (0.39 ) $ (0.08 )

Weighted average number of common shares outstanding – basic 5,379,762 4,185,637 4,910,245 4,185,637
Weighted average number of common shares outstanding – diluted 5,810,755 4,185,637 4,910,245 4,185,637

* Financial information has been retrospectively adjusted for the acquisitions of Mimio and Genesis.

See accompanying notes to ~~the~~unaudited condensed consolidated financial statements.

~~F-2~~

Table of Contents

Boxlight Corporation

Condensed Consolidated Balance Sheets

As of June 30, 2023 and December 31, 2022

(in thousands, except share and per share amounts)


	June 30,		December 31,
	2023		2022
		(Unaudited)		(as adjusted)
ASSETS
Current assets:
Cash and cash equivalents	$	15,588	$	14,591
Accounts receivable – trade, net of allowances		37,635		31,009
Inventories, net of reserves		37,809		58,211
Prepaid expenses and other current assets		10,014		7,433
Total current assets		101,046		111,244

Property and equipment, net of accumulated depreciation		1,545		1,733
Operating lease right of use asset		3,556		4,350
Intangible assets, net of accumulated amortization		49,869		52,579
Goodwill		25,470		25,092
Other assets		827		397
Total assets	$	182,313	$	195,395

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	21,108	$	36,566
Short-term debt		3,807		845
Operating lease liabilities, current		1,699		1,898
Deferred revenues, current		8,248		8,308
Derivative liabilities		512		472
Other short-term liabilities		878		386
Total current liabilities		36,252		48,475

Deferred revenues, non-current		15,682		15,603
Long-term debt		43,369		43,778
Deferred tax liabilities, net		5,571		4,680
Operating lease liabilities, non-current		2,038		2,457
Total liabilities		102,912		114,993

Commitments and contingencies (Note 14)
Mezzanine equity:
Preferred Series B, 1,586,620 shares issued and outstanding		16,146		16,146
Preferred Series C, 1,320,850 shares issued and outstanding		12,363		12,363
Total mezzanine equity		28,509		28,509

Stockholders’ equity:
Preferred stock, $0.0001 par value, 50,000,000 shares authorized; 167,972 and 167,972 shares issued and outstanding, respectively		—		—
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		1		1
Additional paid-in capital		118,379		117,849
Accumulated deficit		(68,854)		(65,043)
Accumulated other comprehensive income (loss)		1,366		(914)
Total stockholders’ equity		50,892		51,893

Total liabilities and stockholders’ equity	$	182,313	$	195,395

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Boxlight Corporation

Condensed Consolidated Statements of ~~Cash Flows~~Changes in Stockholders’ Equity

For the ~~Six Months Ended September~~three and six months ended June 30, ~~2017 and 2016~~2023, 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		(Loss) Income		Deficit		Total

Balance as of March 31, 2023	167,972	$	—	9,384,833	$	1	$	118,159	$	(356)	$	(68,043)	$	49,761

Shares issued for:

Stock options exercised	—		—	12,500		—		13		—		—		13

Vesting of restricted share units	—		—	34,747		—		—		—		—		—

Reverse stock split fractional adjustment	—		—	33,414		—		—		—		—		—

Stock compensation	—		—	—		—		524		—		—		524

Foreign currency translation	—		—	—		—		—		1,722		—		1,722

Fixed dividends Preferred Series B	—		—	—		—		(317)		—		—		(317)

Net loss	—		—	—		—		—		—		(811)		(811)

Balance as of June 30, 2023	167,972	$	—	9,465,494	$	1	$	118,379	$	1,366	$	(68,854)	$	50,892





Balance as of December 31, 2022	167,972	$	—	9,339,587	$	1	$	117,849	$	(914)	$	(65,043)	$	51,893

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

Shares issued for:

Stock options exercised	—		—	12,500		—		13		—		—		13

Vesting of restricted share units	—		—	79,993		—		—		—		—		—

Reverse stock split fractional adjustment	—		—	33,414		—		—		—		—		—

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

Nine Months Ended
September 30, 2017

Nine Months Ended
September 30, 2016*

Cash flows from operating activities:
Net loss $ (1,905,189 ) $ (342,760 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Change in inventory reserve (15,083 ) 19,033
Change in allowance for doubtful accounts 24,194 59,164
Change in allowance for sales returns 283,145 -
Depreciation and amortization 559,267 163,101
Stock compensation expense 50,046 13,531
Debt extension fees - 350,000
Amortization of debt discount - 16,830
Write-off of fixed asset 7,225 -
Changes in operating assets and liabilities:
Accounts receivable – trade (2,531,830 ) (1,197,040 )
Accounts receivable – related party - (594,454 )
Inventories 1,808,094 2,111,542
Prepaid expenses and other current assets (991,595 ) 166,753
Other assets 23,291 (626 )
Accounts payable and accrued expenses (29,574 ) (830,311 )
Accounts payable and accrued expenses – related parties 2,169,107 226,385
Deferred revenues (125,478 ) (22,501 )
Other short-term liabilities (1,689 ) 18,529
Accrued interest on long-term debt – related parties 79,342 27,178
Net cash provided by (used in) operating activities (596,727 ) 184,354

Cash flows from investing activities:
Cash acquired through acquisition of Boxlight Group - 357,573
Payments for purchase of property, equipment and other assets - (11,706 )
Net cash provided by investing activities - 345,867

Cash flows from financing activities:
Proceeds from short-term debt 4,301,268 3,408,080
Principal payments on short-term debt (4,157,849 ) (4,520,542 )
Proceeds from short-term debt – related parties - 245,000
Principal payments on short-term debt – related parties (195,000 ) -
Proceeds from convertible note payable – related parties 1,000,000 -
Principal payments on convertible note payable – related parties - (60,000 )
Proceeds from issuance of common stock - 1,000,003
Proceeds from issuance of common stock upon exercise of options 29 -
Proceeds from subscription receivable - 1,750
Distributions to the member - (780,375 )
Net cash provided by (used in) financing activities 948,448 (706,084 )

Effect of currency exchange rates (25,042 ) 9,418

Net increase (decrease) in cash and cash equivalents 326,679 (166,445 )

Cash and cash equivalents, beginning of the period 456,502 994,103

Cash and cash equivalents, end of the period $ 783,181 $ 827,658

Supplemental cash flows disclosures:
Cash paid for interest $ 300,916 $ 278,931
Cash paid for income taxes $ - $ -

Non-cash investing and financing activities:
Forgiveness of short-term debt-related parties by LLC-Delaware $ - $ 222,370
Issuance of note payable to settle accounts payable $ - $ 2,235,507
Issuance of note payable and long-term convertible note payable to acquire Mimio $ - $ 5,425,000
Issuance of Series B Preferred Stock for the acquisition of Genesis $ - $ 100
Issuance of Series C Preferred Stick for the acquisition of Boxlight Group $ - $ 14,391,104
Issuance of Class A common shares to settle accounts payable – related parties $ 1,500,000 $ -
Issuance of Class A common shares to settle long-term convertible notes payable –related parties $ 4,140,127 $ -

* Financial information has been retrospectively adjusted for the acquisition of Mimio and Genesis.

See accompanying notes to ~~the~~unaudited condensed consolidated financial statements.

~~F-3~~

Table of Contents

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.

Table of Contents

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.

Table of Contents

Boxlight Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

~~(Unaudited)~~

NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

~~THE COMPANY~~

NATURE OF OPERATIONS

Boxlight Corporation, ~~(the “Company” or “Boxlight Parent”) was incorporated in the State of~~a Nevada ~~on September 18, 2014 with its headquarters in Atlanta, Georgia for the purpose of becoming a~~Corporation (“Boxlight”), designs, produces and distributes interactive technology ~~company that sells interactive educational products.~~

Boxlight, Inc., Boxlight Latinoamerica, S.A. DE C.V. (“BLA”) and Boxlight Latinoamerica Servicios, S.A. DE C.V. (“BLS”) (together, “Boxlight Group”) were incorporated on July 11, 2009, October 17, 2002 and October 17, 2002, respectively. The Boxlight Group is involved principally in the distribution of interactive projectors and integrated solutions that enhance learning and enable people to collaborate with each other in innovative and effective ways. In June 2016, Boxlight Group engaged legal counsel in Mexico to start the process of closing the operations of BLA and BLS. BLA and BLS have been merged into Boxlight, Inc. in July 2016. Boxlight Group was wholly owned by Everest Display Inc., a manufacturing company in Taiwan. In May 2016, Everest Display Inc. agreed to sell all of its ownership in Boxlight Group to the ~~Company. On July 18, 2016, the Company acquired Boxlight Group.~~

education, corporate and government markets under its Clevertouch and Mimio LLC (“Mimio”) was formed in Delaware on July 1, 2013. Mimio designs, develops and sells interactive classroom technology products, of which Mimio owns most of the design and performance patents, and which are manufactured by a contract manufacturer (“CM”) in Shenzhen, China. Mimio also purchases and sells other non-proprietary products such as classroom projectors and flat panel displays as an original equipment manufacturer (“OEM”) from manufacturers in China and Taiwan. The primary market for Mimio’s products is classrooms K-12. All of the products are integrated in the classroom through Mimio’s award winning operating software “Mimio Studio.” Mimio’s products are distributed globally through a network of value added resellers (“VARs”) in the U.S. and Canada, and through master distributors in the rest of the world. On November 4, 2015, Mimio was acquired by Mim Holdings, Inc. (“Mim Holdings”), a Delaware corporation wholly-owned by Marlborough Trust. Marlborough Trust was established for the benefit of members of the families of affiliates of VC2 Partners, LLC (“VC2 Partners”). VC2 Partners and Mim Holdings are affiliates of Vert Capital. On April 1, 2016, Boxlight Parent acquired 100% of the membership interests in Mimio from Mim Holdings.

~~Genesis Collaboration, LLC (“Genesis”) was formed as a limited liability company in September 2011 in Atlanta, Georgia, to provide~~brands. Boxlight’s solutions that enhance interactive learning in the business, government, and education markets. Genesis is a technology provider that facilitates effective communication in schools, training facilities and workplaces around the world. Genesis offers a wide range of integrated products that change the way individuals collaborate and learn. In the classroom, Genesis offers a wide range of integrated interactive solutions that transform the way teachers deliver lessons and assess progress. Genesis’ products include interactive ~~whiteboard systems, interactive tables, interactive~~displays, collaboration software, supporting accessories, and standard projectors, audio systems, data loggers, software, assessment and student response systems. On October 31, 2013, Vert Capital’s subsidiary acquired all of the outstanding membership interests of Genesis. On May 12, 2016, the Company acquired Genesis from Vert Capital.professional services.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Acquisitions from Vert Capital and Mim Holdings are considered common control transactions. When businesses were acquired from Vert Capital and Mim Holdings that will be consolidated by us, they were accounted for as if the transfer had occurred at the beginning of the period of transfer, with prior periods retrospectively adjusted to furnish comparative information. The acquisitions of Mimio and Genesis were transfers of businesses between entities under common control. Accordingly, the accompanying financial statements and related notes have been retrospectively adjusted to include the historical results and financial position of the acquired entities prior to the effective dates of such acquisitions. The information prior to the Company’s incorporation on September 18, 2014 represents the historical results of Genesis as Genesis was first controlled by Vert Capital and determined to be our predecessor entity for accounting purposes. The financial information for Mimio has been included in the Company’s consolidated financial statements beginning on November 4, 2015, when Mimio was acquired by Mim Holdings. Boxlight Group was acquired by the Company on July 18, 2016. The acquisition of Boxlight Group was accounted for under the acquisition method of accounting. See Note 3— Acquisitions, for additional information.

~~F-4~~

The accompanying unaudited condensed consolidated financial statements include the accounts of Boxlight ~~Corporation, Boxlight Group, Mimio~~ and ~~Genesis. Transactions~~its wholly owned subsidiaries (collectively, the “Company”). All significant intercompany balances and ~~balances among Boxlight Corporation, Boxlight Group, Mimio and Genesis~~transactions have been ~~eliminated.~~ eliminated in consolidation.

The assets and liabilities of Mimio and Genesis in these financial statements have been reflected on a historical cost basis because the transfers of Mimio and Genesis to the Company are considered common control transactions. When the Company acquired Mimio and Genesis, the Company, Mimio and Genesis were under direct or indirect control of Vert Capital.

As of October 2016, Boxlight Parent transferred all of the assets and the associated liabilities of Mimio LLC to Boxlight, Inc. and voluntarily liquidated the Mimio LLC entity in April 2017. On June 14, 2017, Boxlight Parent merged Genesis into the Boxlight, Inc. subsidiary which now owns and operates substantially all of the assets and business of the consolidated group.

~~The~~accompanying unaudited condensed consolidated financial statements and ~~accompanying~~related notes ~~are~~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 ~~prepared in accordance with generally accepted accounting principles in the United States of America~~ have been ~~condensed or omitted~~condensed. The December 31, 2022 balance sheet included herein was derived from ~~these statements pursuant to such rules and regulations and, accordingly, they do not include all~~ the ~~information and notes necessary for comprehensive financial statements and should be read in conjunction with our~~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 ~~year ended December 31, 2016.~~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 ~~amounts~~results could differ materially from ~~those estimates.~~these estimates under different assumptions or conditions.

REVERSE STOCK SPLIT

~~FOREIGN CURRENCIES~~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

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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. 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 ~~functional currency is~~financial instruments primarily include cash, accounts receivable, derivative liabilities, accounts payable and debt. Due to the ~~U.S. Dollar. BLA~~short-term nature of cash, accounts receivable and ~~BLS’s functional currency is~~accounts payable, the ~~Mexican Peso. The Company translates their financial statements from their functional currencies into the U.S. dollar.~~

~~An entity’s functional currency is the currency~~carrying amounts of the primary economic environment in which it operates and is generally the currency in which the business generates and expends cash. BLA and BLS, whose functional currency is the Mexican Peso, translate theirthese assets and liabilities ~~into U.S. dollars at~~approximate their fair value. Debt approximates fair value due to either the ~~exchange rates in effect as~~short-term nature, variable rate, or recent execution of the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average exchange rates for the year. Translation adjustments are included in accumulated other comprehensive income (loss), a separate componentdebt agreement. The amount of ~~equity. Foreign exchange gains and losses included in net income result from foreign exchange fluctuations on transactions denominated in a currency other than an entity’s functional currency.~~

~~Acquisition OF BOXLIGHT GROUP~~

The financial statements include the operations of Boxlight Group after the completion of the acquisition on July 18, 2016. We accounted for the acquisition of Boxlight Group using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration ~~transferred over the assigned values of the net assets acquired~~received is ~~recorded as goodwill.~~

~~F-5~~

~~Common control transactions~~

Businesses acquired from Vert Capital are accounted for as common control transactions whereby the net assets (liabilities) acquired (assumed) are combined with the Company’s assets and liabilities at their historical carrying value. Any difference between carrying value and recognized consideration is treated as a capital transaction. Cash received from the acquired entities is presented as an investing activity in our consolidated statements of cash flows.

~~CASH AND CASH EQUIVALENTS~~

~~The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less~~deemed to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits of $250,000 for banks located in the U.S. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.

~~ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS~~

Accounts receivable are stated at historical carrying amounts, net of write-offs, allowance for doubtful accounts, sales returns and volume rebates. Allowance for doubtful accounts represents management’s estimate of the amount that ultimately will be realized in cash. The Company reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical payment trends, the age of receivables and knowledge of the individual customers. When the analysis indicates, management increases or decreases the allowance accordingly. However, if the financial condition of our customers were to deteriorate, additional allowances might be required.

~~INVENTORIES~~

Inventories are stated at the lower of cost or net realizable value and included spare parts and finished goods. Inventories are primarily determined using specific identification method and the first-in, first-out (“FIFO”) cost method. Cost includes direct cost from the CM or OEM, plus material overhead related to the purchase, inbound freight and import duty costs.

The Company continuously reviews its inventory levels to identify slow-moving merchandise and markdowns necessary to clear slow-moving merchandise, which reduces the cost of inventories to its estimated net realizable value. Consideration is given to a number of quantitative and qualitative factors, including current pricing levels and the anticipated need for subsequent markdowns, aging of inventories, historical sales trends, and the impact of market trends and economic conditions. Estimates of markdown requirements may differ from actual results due to changes in quantity, quality and mix of products in inventory, as well as changes in consumer preferences, market and economic conditions.

~~PROPERTY AND EQUIPMENT~~

~~Property and equipment is stated at cost and depreciated using the straight-line method over the estimated life of the asset. Repairs and maintenance are charged to expense as incurred.~~

~~LONG – LIVED ASSETS~~

Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based onapproximate the fair value of long-term debt net of any debt discount and issuance cost.

Fair value is defined as the ~~asset. Long-lived~~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

June 30,

Description

(Level 1)

(Level 2)

(Level 3)

2023

Derivative liabilities - warrant instruments

—

512

Markets for

Other

Significant

Carrying

Identical

Observable

Unobservable

Value as of

Assets

Inputs

December 31,

Description

(Level 1)

(Level 2)

(Level 3)

2022

Derivative liabilities - warrant instruments

—

472

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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 ~~disposed~~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 ~~by sale~~shares of common stock outstanding during the period giving effect to all potentially dilutive securities to the extent they are ~~reported~~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 ~~lower~~average market price for the period. The dilutive effect of ~~its carrying amount or fair value less cost to sell.~~

~~Intangible assets~~

~~Intangible assets are amortized~~convertible securities is calculated using the ~~straight-line~~“if-converted method.” Under the if-converted method, ~~over their estimated period of benefit. We evaluate~~securities are assumed to be converted at 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 anybeginning of the ~~periods presented. Intangible assets~~period, and ~~goodwill~~the resulting common shares are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Goodwill is not amortized and is not deductible for tax purposes.

~~F-6~~

~~DEBT DISCOUNT~~

~~Debt discount is amortized over~~included in the ~~term~~denominator of the ~~debt using~~diluted calculation for the ~~effective interest rate method.~~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.

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REVENUE RECOGNITION

~~DEFERRED REVENUE~~

~~Deferred revenue represents amounts collected for any extended warranty that is separately priced.~~ The Company recognizes revenue ~~from extended warranty contracts using~~at the ~~straight-line method over the estimated life~~amount to which it expects to be entitled when control of the products ~~which~~or services is ~~three years.~~

~~REVENUE RECOGNITION~~

~~Revenue~~transferred to its customers. Control is ~~comprised~~generally transferred when the Company has a present right to payment and the title, and the significant risks and rewards of ~~product sales and service~~ownership of the products or services, have been transferred to its customers. Product revenue net of sales returns, co-operative advertising credits, early payment discounts and volume discounts paid to VARs. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

~~Revenue from product sales~~ is derived from the sale of ~~projectors,~~ interactive ~~panels~~devices and related ~~accessories. Evidence of an arrangement consists of an order from its~~software and accessories to distributors, resellers orand end users. ~~The Company considers delivery to have occurred once title and risk of loss has been transferred.~~

Service revenue is ~~comprised of~~derived from hardware maintenance services, product installation, ~~services~~training, software maintenance and training services. These service revenues are normally entered into at the time products are sold. Service prices are established depending on product equipment sold and include a cost value for the estimated services to be performed based on historical experience. The Company outsources installation and training services to third parties and recognizes revenue upon completion of thesubscription services.

Nature of Products and Services and Related Contractual Provisions

The Company’s ~~standard~~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 ~~conditions~~if available basis, and error correction services. At times, non-interactive projectors are also sold with hardware maintenance services with terms of ~~sale~~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 ~~allow~~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 ~~product~~the products and services, and revenue is recorded net of estimated sales returns and itrebates 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.

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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 ~~warranty.~~assurance warranties or hardware maintenance contracts. However, the Company, on a ~~case by case~~case-by-case basis, will grant exceptions, mostly for “buyer’s remorse” where the ~~VAR’s~~distributor or reseller’s end ~~user~~ 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.

~~Before Mimio was acquired by~~ 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 Company, it generally provided 24 to 60 months of warranty coverage on all of its products. Mimio products’ standard warranty period is 24 months, which can be extended to 60 months upon the end user “registering” their device on-line. The Company’s warranty provides for repair or replacementamount of the ~~associated products during~~fee and it is probable there will not be a significant reversal. These estimates are generally made using the warranty period. The Company does not record warranty cost upon sale, and instead conducts a periodic review of the warranty liability reserve, and based on historical cost-to-trailing- revenue history, will adjust the warranty liability, with the offset to this adjustment recorded to cost of revenue.

~~F-7~~

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

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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 ~~offset~~remaining 3.7% recognized thereafter.

In accordance with Topic 606, the Company has elected not to ~~this adjustment recorded~~disclose the value of remaining performance obligations for contracts for which the Company recognizes revenue at the amount to ~~cost~~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 revenue. The warranty obligation is affected by product failure rates and the related use of materials, labor costs and freight incurred in correcting any product failure. Should actual product failure rates, use of materials, or other costs differ from the Company’s estimates, additional warranty liabilities couldremaining performance obligations for contracts with performance obligations that are expected, at contract inception, to be ~~required, which would reduce its gross profit.~~satisfied over a period that does not exceed one year.

Disaggregated Revenue

The Company ~~offers sales incentives where~~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 ~~offers discounted products delivered~~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 ~~its resellers~~be incremental costs to obtain the related contracts, which are deferred and ~~distributors~~amortized ratably over the estimated economic benefit period. For these sales commissions that are ~~redeemable~~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,

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respectively, in the accompanying condensed consolidated balance sheets. 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 ifwhen the ~~resellers~~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 ~~distributors complete specified cumulative levels~~(5) the seller cannot use the product or direct the product to another customer. As of June 30, 2023, $0.1 million of revenue ~~agreed~~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 ~~written~~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 ~~their reseller~~Europe, Middle East and ~~distributor agreements through an executed addendum. The resellers~~Africa (“EMEA”) and ~~distributors have to submit a request for~~other international markets, the ~~discounted products~~Company’s operations are now organized, managed and ~~cannot redeem additional discounts within 180 days from the date~~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 ~~discount given on like products. The value~~operations of the award products as compared to the value of the transactions necessary to earn the award is generally insignificant in relation to the value of the transactions necessary to earn the award. The Company estimatesSahara Holding Limited and ~~records the cost of the products related to the incentive as marketing expense based on analyses of historical data.~~

~~RESEARCH AND DEVELOPMENT EXPENSES~~

~~Research and development costs are expensed as incurred and~~its subsidiaries (the “Sahara Entities”). Our Americas segment consists primarily of ~~personnel related costs, prototype~~Boxlight, Inc. and ~~sample costs, design costs,~~its subsidiaries and ~~global product certifications~~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 ~~wireless certifications.~~

~~INCOME TAXES~~

~~An asset and liability approach is used for financial accounting and~~corporate functions that are not allocated to the Company’s individual reporting ~~for income taxes. Deferred income taxes arise from temporary differences~~segments. Transfers between ~~income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes~~segments are generally valued at market and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carryforwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.eliminated in consolidation.

~~SHARE-BASED COMPENSATION~~

The Company estimates the fair value of each share-based compensation award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest. Excess tax benefits, if any, are recognized as an addition to paid-in capital.

~~NET INCOME (LOSS) PER COMMON SHARE~~

Basic net income (loss) per common share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income per common share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of stock options.

For the nine months ended September 30, 2017 and 2016 and for the three months ended September 30, 2016, potentially dilutive securities were not included in the calculation of diluted net loss per share because to do so would be anti-dilutive. Following is a reconciliation of basic earnings per common share (“EPS”) and diluted EPS for the three months ended September 30, 2017:

Three months ended September 30, 2017
Net income Shares Per share amount
Basic EPS $ 470,294 5,379,762 $ 0.09
Dilutive effect of exercise of options - 430,993 (0.01 )
Diluted EPS $ 470,294 5,810,755 $ 0.08

~~SUBSEQUENT EVENTS~~

~~The Company has evaluated all transactions through the financial statement issuance date for subsequent event disclosure consideration.~~

~~NEW~~RECENTLY ADOPTED ACCOUNTING ~~PRONOUNCEMENTS~~

STANDARDS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue that is recorded. This accounting standard update, as amended, will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Early adoption is permitted, but no earlier than fiscal 2017. The Company is currently assessing the provisions of the guidance and has not determined the impact of the adoption of this guidance on its consolidated financial statements.

~~F-8~~

In August 2014, the FASB issued ACU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to assess the company’s ability to continue as a going concern. Disclosures are required if there is substantial doubt as to the company’s continuation as a going concern within one year after the issue date of financial statements. The standard provides guidance for making the assessment, including consideration of management’s plans which may alleviate doubt regarding the Company’s ability to continue as a going concern. ASU 2014-15 is effective for years ending after December 15, 2016. The Company has adopted this standard for the year ending December 31, 2016.

In February 2016, a pronouncement was issued that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the new pronouncement on its financial statements.

~~In April~~June 2016, the FASB issued ASU No. ~~2016-09, “Compensation~~2016-13, “Financial Instruments – ~~Stock Compensation” (topic 718)~~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 ~~FASB issued this update~~new guidance applies to ~~improve~~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 employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those ~~fiscal years.~~periods. The Company ~~adopted this guidance~~recognized a cumulative-effect adjustment to reduce retained earnings by $76 thousand, net of taxes. The change in the ~~first quarter of 2017. The adoption of this standard had no material effect on~~allowance for credit losses was not significant during the ~~Company’s financial position or results of operations.~~three and six months ended June 30, 2023.

ACCOUNTING STANDARDS PENDING ADOPTION

There were various other accounting standards and interpretations issued recently, ~~none~~some of which although applicable, are not expected to a have a material impact on ~~our~~the Company’s financial position, operations, or cash flows.

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NOTE 2 ~~– GOING CONCERN~~

These financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to repay its debt obligations currently in default or negotiate alternative repayment arrangements, to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As of September 30, 2017, the Company was in default of certain of its debt obligations and had an accumulated deficit of $7,394,001 and a working capital deficit of $4,414,859. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company is seeking to obtain funds for operations from its initial public offering and support from its majority shareholder.

~~F-9~~

~~NOTE 3 – ACQUISITIONS~~

~~Acquisition of Mimio~~

Effective April 1, 2016, pursuant to a membership interest purchase agreement, the Company acquired 100% of the membership interest in Mimio from Mim Holdings. As consideration, the Company issued a $2,000,000 unsecured convertible promissory note (the “Marlborough Note”) to Marlborough Trust. See Note 12.

Additionally, the Company assumed from Mim Holdings a $3,425,000 senior secured note (the “Skyview Note”) that is payable to Skyview Capital, LLC, (“Skyview”), the former equity owner of Mimio and interest accrued on the note. The Skyview Note was issued by Mim Holdings to Skyview on November 4, 2015 as payment for the acquisition of 100% of the membership equity of Mimio. See Note 9.

The Company’s financial statements included Mimio’s assets and liabilities at the historical cost of Mim Holdings. Mimio was acquired by Mim Holdings on November 4, 2015. Mim Holdings accounts for acquired businesses using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill.

The following table shows the purchase price, acquisition-date fair values of the assets acquired and liabilities assumed and calculation of goodwill utilizing the information at November 4, 2015 when Mim Holdings acquired Mimio. Subsequently on April 1, 2016, the Company acquired Mimio from Mim Holdings in a transaction between entities under common control. Accordingly, the purchase price allocation reflects the fair value as of the date acquired by Mim Holdings. Upon acquisition by the Company, these amounts were recorded on the historical cost basis of Mim Holdings.

Assets acquired:
Current assets $ 6,677,842
Intangible assets 179,722
Goodwill 44,931
Total assets 6,902,495
Total liabilities (3,477,495 )

Net assets acquired $ 3,425,000

~~Acquisition of Genesis~~

On May 12, 2016, Vert Capital contributed 100% of the membership interests in Genesis to the Company. In connection with the Company’s acquisition of Genesis, the former members of Genesis received 1,000,000 shares of the Company’s Series B Preferred Stock which, upon consummation of the Company’s initial public offering, will automatically convert into such number of shares that represents 4.0% of the Company’s fully diluted common stock as defined in the agreement. Upon completion of the Company’s initial public offering, an aggregate of 250,000 shares of the Company’s non-voting convertible Series A preferred stock will be issued to Vert Capital. Such 250,000 shares of the Company’s non-voting convertible Series A preferred stock will automatically convert into 398,406 shares of our Class A common stock on a date which shall be one year from the date of the Company’s initial public offering.

~~Common Control Transactions~~

The acquisitions of Mimio and Genesis were considered as transfers of businesses between entities under common control; and therefore, the assets acquired and liabilities assumed were transferred at historical cost of the ultimate parent, Vert Capital. Because the acquisitions were common control transactions in which the Company acquired businesses, the Company’s historical financial statements have been retrospectively adjusted to reflect the results of operations, financial position, and cash flows of Mimio and Genesis as if the Company owned Mimio and Genesis for all periods presented from the date Mimio, Genesis and the Company were under common control, which was November 4, 2015 and October 31, 2013, respectively.

~~F-10~~

~~Acquisition of Boxlight Group~~

On July 18, 2016, the Company acquired 100% of the equity interest of Boxlight Group, under the terms of a Share Purchase Agreement entered into on May 10, 2016 with Everest Display, Inc. (“EDI”). Under the terms of the share purchase agreement, Boxlight Holdings, Inc., a newly formed Delaware subsidiary of Boxlight Corporation acquired the equity of Boxlight Group. The Company issued to EDI 270,000 shares of Series C Preferred Stock, that has a stated or liquidation value of $20.00 per share. Upon completion of Boxlight Corporation’s initial public offering (“IPO”) and subject to the listing of its Class A common stock on the Nasdaq Capital Market or other securities exchange acceptable to EDI, the Series C Preferred Stock shall automatically convert into shares of Class A common stock. Such newly converted shares of Class A common stock to be issued to EDI or its subsidiaries represents approximately 22.22% of Boxlight Corporation’s fully-diluted common stock upon the Company’s IPO, excluding shares issued for private placements and debt conversions.

Under the terms of the share purchase agreement, as amended on September 28, 2016, the parties agreed that EDI and Boxlight Corporation would settle and pay approximately $5.75 million of accrued accounts payable owed to EDI at September 28, 2016, in the manner set forth below.

	~~(1)~~	~~$1,000,000 was paid at the closing of the acquisition out of the net proceeds of a note issued to Hitachi Capital America Corp. (See Note 9);~~

	~~(2)~~	An additional $1,500,000 of the $5.75 million owed to EDI was to be paid by Boxlight Corporation and its subsidiaries in six monthly installments of $250,000 each, commencing 30 days after the initial $1,000,000 payment referred to above. However, in view of the fact that such installment payments cannot be presently made by the Company under the subordination agreement between EDI and Crestmark Bank, we and EDI agreed that the net proceeds from the sale of 1,000,000 shares of Class A common stock upon IPO shall be applied, first, to prepay the $1,460,508 principal balance due under Skyview Note, and secondly to prepay the balance of the $1,500,000 installment obligation owed to EDI referred to above. Net Proceeds included costs for professional fees estimated at approximately $300,000, plus any commissions or underwriting fees that may be payable by the Company to brokers, placement agents or underwriters who assist us in selling the shares of Class A common stock in the offering.

	~~(3)~~	$2,000,000 of the unpaid balance of the account payable was settled with a 4% non-negotiable convertible promissory note of Boxlight Corporation payable to EDI, together with accrued interest, on March 31, 2019 (the “EDI Note”). (See Note 12)

The Company recognized the assets acquired and liabilities assumed from Boxlight Group at their fair value on the acquisition date, and the excess in purchase price over these values was allocated to goodwill. The estimated fair values of consideration paid, assets acquired and liabilities assumed were determined based on third-party valuation reports provided by specialists.

The following table shows the purchase price, estimated acquisition-date fair values of the assets acquired and liabilities assumed and calculation of goodwill for Boxlight Group utilizing the information at acquisition date.

~~F-11~~

Assets acquired:
Current assets $ 5,737,836
Property and equipment 65,866
Intangible assets 7,000,000
Other assets 514,696
Goodwill 4,137,060
Total assets acquired 17,455,458
Total liabilities assumed (9,212,161 )

Net assets acquired $ 8,243,297
Consideration paid:
Issuance of 270,000 shares of Series C preferred stock $ 8,828,353
Pre-existing net payable to Boxlight Group (585,056 )

Total $ 8,243,297

The Company valued the Series C Preferred shares issued to EDI based on an entity value of the Company of approximately $39,700,000 and 270,000 shares of the Series C Preferred Stock representing approximately 22.22% of ownership of the Company.

~~NOTE 4~~ – ACCOUNTS RECEIVABLE - TRADE

Accounts receivable consisted of the following at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016:~~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

September 30, 2017 December 31, 2016

Accounts receivable - trade $ 6,094,858 $ 3,562,832
Allowance for doubtful accounts (477,253 ) (453,059 )
Allowance for sales returns and volume rebates (448,964 ) (165,819 )

Accounts receivable – trade, net of allowances $ 5,168,641 $ 2,943,954

NOTE 53 – 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 ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016:~~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

September 30, 2017 December 31, 2016

Finished goods $ 2,268,100 $ 4,102,621
Spare parts 161,092 183,357
Reserves for inventory obsolescence (58,087 ) (121,862 )

Inventories, net $ 2,371,105 $ 4,164,116

~~During the nine months ended September 30, 2017 and 2016, the Company wrote off obsolete inventories of $48,692 and $311,493, respectively.~~

NOTE 64 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016:~~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

September 30, 2017 December 31, 2016

Prepayments to vendors $ 1,314,476 $ 351,408
Employee receivables 2,300 3,571
Prepaid state and local taxes - 16,385
Prepaid and refundable income taxes 33,435 30,879
Prepaid license and other 85,348 44,793

Prepaid expenses and other current assets $ 1,435,559 $ 447,036

~~Prepayments to vendors represent deposits made to vendors for purchases of inventories.~~

~~F-12~~

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NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

~~NOTE 7 – PROPERTY AND EQUIPMENT~~Intangible Assets

~~Property and equipment~~Intangible assets consisted of the following at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016:~~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

Useful lives September 30, 2017 December 31, 2016

Leasehold improvements 9-10 years $ 3,248 $ 3,355
Office equipment 3-5 years 21,341 21,341
Other equipment 5 years 42,485 42,485

Property and equipment, at cost 67,074 67,181
Accumulated depreciation (32,678 ) (7,141 )

Property and equipment, net of accumulated depreciation $ 34,396 $ 60,040

For the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, the Company recorded depreciation expense of $25,538 and $4,043, respectively.~~

~~NOTE 8 – INTANGIBLE ASSETS AND GOODWILL~~

~~Intangible assets and goodwill consisted of the following at September 30, 2017 and December 31, 2016:~~

Useful lives September 30, 2017 December 31, 2016

Patents 10 years $ 67,395 $ 67,395
Customer relationships 10 years 3,567,396 3,567,396
Trademarks 10 years 3,544,931 3,544,931

Intangible assets, at cost 7,179,722 7,179,722
Accumulated amortization (879,974) (346,245 )

Intangible assets, net of accumulated amortization $ 6,299,748 $ 6,833,477

Goodwill from acquisition of Mimio N/A $ 44,931 $ 44,931
Goodwill from acquisition of Boxlight N/A 4,137,060 4,137,060
$ 4,181,991 $ 4,181,991

~~For the nine months ended September 30, 2017 and 2016,~~2022, the Company recorded amortization expense of ~~$533,729~~$2.2 million. For the six months ended June 30, 2023 and ~~$159,058,~~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

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of any lease renewal options reasonably certain. 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:

	~~F-13~~
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

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NOTE 8 – DEBT

~~NOTE 9 – SHORT-TERM 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:

~~Line~~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 ~~– Sy Silverstein~~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 ~~3, 2015,~~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

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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. 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 ~~line of credit agreement with Sy Silverstein, an individual. Pursuant~~third amendment (the “Third Amendment”) to the ~~agreement,~~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 ~~obtained~~must maintain compliance with pertaining to certain Borrowing Base Requirements, among other adjustments. The completion of the ~~line of credit for up to a maximum of $300,000 to complete its initial public offering (“IPO”) process. The Company borrowed $100,000~~additional draw eliminates further delayed draws under the term loan agreement. ~~The advances from this agreement accrue interest at 12% per annum, along with a $10,000 documentation fee, and is due~~As discussed in Note 17, on ~~the effective date of the Company’s IPO. The $10,000 documentation fee was recorded as debt discount.~~

On October 4, 2016, Mr. Silverstein agreed to settle the outstanding principal of $100,000 and accrued interest of $15,919 with 109,915 shares of the Company’s Class A common stock. These shares were valued at $115,919 based on the Company’s most recent selling price of the Class A common stock on the settlement date.

~~Skyview Note~~

~~On April 1, 2016,~~July 20, 2023, the Company ~~assumed from Mim Holdings a $3,425,000 senior secured note that is payable to Skyview,~~paid the former equity owner of Mimio for the acquisition of Mimio. The Skyview Note accrues interest at 6% per annum and was due on July 3, 2016. The Skyview Note is secured by a lien and security interest on all of the assets of Mimio, subordinating to the Crestmark line of credit, and guaranteed by Vert Capital and VC2 Partners.

On July 5, 2016 and August 3, 2016, the Skyview Note was amended. On July 5, 2016, principal was increased to $3,660,508 to settle $235,508 of accounts payable owed by Mimio to Skyview’s affiliate. On August 3, 2016, the principal of the note was increased to $4,010,508 to include an additional fee of $350,000 to extend the maturity date to December 15, 2016. The Company recorded the $350,000 extension fee to interest expense. Additionally, the Company agreed to pay $2,500,000 of the note on the earlier of (1) September 30, 2016 or (2) the date the Company obtained a new debt facility. The Company made the $2,500,000 payment on September 29, 2016 with the proceeds from a line of credit with Crestmark Bank. The remaining outstanding balance together with any unpaid accrued interest was due and unpaid on December 15, 2016. On December 28, 2016, the Company received a Notice of Default from Skyview because the Company failed to make a $1,460,508 payment on December 15, 2016. On June 1, 2017, we were served with a lawsuit from Skyview seeking judgment on the $1,460,508 outstanding balance$3.0 million due under the ~~currently defaulted Skyview Note, plus accrued interest thereon, and also seeking to foreclose on~~terms of the ~~assets of Mimio that is now owned and operated by our Boxlight, Inc.~~Third Amendment.

On September 11, 2017, the outstanding principal and accrued interest were settled in full with funds from the Sallyport Commercial Finance, LLC line of credit. As of December 31, 2016, outstanding principal and accrued interest for the Skyview Note were $1,460,508 and $1,905, respectively.

~~AHA Note~~

On June 3, 2016, prior to the Company’s acquisition, Boxlight Group issued a promissory note to AHA Inc. Co Ltd., a Korean corporation, in the amount of $1,895,413 to settle unpaid accounts payable of $1,866,418 for the purchases of inventory for the Company. Interest shall be payable in the amount of 6.5% per annum. The principal was due and payable in eight equal monthly principal payments in the amount of $236,926 beginning on June 30, 2016. Interest shall be paid in consecutive monthly installments for eight months, due and payable upon the last business day of each month. As of September 30, 2017, outstanding principal and accrued interest for AHA note were $610,783 and $42,095, respectively. As of December 31, 2016, outstanding principal and accrued interest were $610,783 and $12,401, respectively. The Company was not able to make monthly principal payments in accordance with note agreement and, accordingly, the note was in default at September 30, 2017 and December 31, 2016.

~~F-14~~

~~Loan and Security Agreement – Hitachi Capital America Corp.~~

~~On July 6, 2016,~~26, 2023, the Company entered into a ~~loan~~fourth amendment (the “Fourth Amendment”) with the Collateral Agent and ~~security agreement~~the Lender for the sole purpose of replacing LIBOR-based rates with ~~Hitachi Capital America Corp. (“Hitachi”).~~ 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 ~~agreement allowed~~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 ~~borrow up~~engage a financial advisor and to ~~$2,500,000~~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 ~~balance~~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 ~~eligible accounts receivable~~$1,800,000, and ~~inventory at an interest rate equal~~(iv) a $500,000 original issue discount. In addition, the Company agreed to ~~1.75% in excess~~register for resale the shares issuable upon exercise of the ~~prime rate.~~Warrant. The ~~loan was due~~Company also incurred agency fees, legal fees, and ~~payable on demand. The outstanding amount payable to Hitachi was paid~~other costs in ~~full on September 29, 2016, from the proceeds of the line of credit financing received from Crestmark Bank. In~~ connection with the ~~agreement with Hitachi,~~execution of the ~~Company paid $18,000~~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 ~~loan fees which was included~~the increased number of warrant shares would be the same as the aggregate exercise price previously in ~~interest expense.~~effect. The warrants repriced on March 31, 2022 to $9.52 per share and the shares increased to 429,263.

~~Line of Credit – Crestmark Bank~~

On ~~September 21, 2016,~~July 22, 2022, the Company entered into a ~~$5,000,000 line of credit~~securities purchase agreement (the “Purchase Agreement”) with Crestmark Bank. Advances against this agreement accrued interest at 2.25% in excess of prime rate, with a minimum rate of 5.75% per annum. The outstanding balance under this agreement was due and payable upon demand.

~~As of December 31, 2016, outstanding principal and accrued interest were $720,291 and $0, respectively. $61,000 of loan fees related~~an accredited institutional investor. According to the ~~agreement with Crestmark Bank was included in interest expense.~~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.

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Paycheck Protection Program Loan

On ~~January 12, 2017,~~May 22, 2020, the Company received ~~a default notice from Crestmark Bank due to~~loan proceeds of $1.1 million under the ~~Notice of Default received from Skyview Capital and failure to meet the tangible net worth covenant requirement. On February 2, 2017,~~Paycheck Protection Program. During 2021, the Company ~~satisfied in full all obligations due to Crestmark.~~

~~Accounts Receivable Financing – Sallyport Commercial Finance~~

~~On August 15, 2017, Boxlight Inc, and Genesis entered into a 12-month term account sale and purchase agreement with Sallyport~~Commercial Finance, LLC (“Sallyport”). Pursuant to the agreement, Sallyport agreed to purchase 85% of the eligible accounts receivable of the Company with right of recourse back to the Company if the receivables are not collectible. This agreement requires a minimum monthly draw of $1,250,000 with a maximum facility limit of $6,000,000. Advances against this agreement accrue interest at 4% in excess of highest prime rate publicly announced from time to time with a floor of 4.25%. In addition, the Company is required to pay a $950 audit fee per day. The Company granted Sallyport a security interest to all of Boxlight Inc. and Genesis’s assets.

As of September 30, 2017, outstanding principal and accrued interest were $2,324,218 and $0, respectively. For the nine months ended September 30, 2017, the Company incurred interest expense and loan fees of $112,115.

~~NOTE 10 – SHORT-TERM DEBT– RELATED PARTIES~~

~~Line of Credit - Vert Capital~~

On September 30, 2014, the Company entered into a line of credit agreement with Vert Capital, the Company’s majority shareholder. Pursuant to the agreement, as amended, the Company obtained a line of credit from Vert Capital up to a maximum of $900,000 to complete its IPO process. The funds originally accrued interest at 10% per annum. Pursuant to an amendment to the purchase agreement with EDI entered in September 2016, the funds now accrue interest at 5.75% per annum. See Note 3. The advance is due on the effective date of the Company’s IPO. In connection with this agreement, the Company granted Vert Capital a security interest to all of its assets and properties which is subordinated to the Sallyport accounts receivable financing. As of September 30, 2017, outstanding principal and accrued interest under this agreement were $627,550 and $141,679, respectively. As of December 31, 2016, outstanding principal and accrued interest under this agreement were $822,550 and $115,319, respectively.

~~Line of Credit - Logical Choice Corporation-Delaware~~

On May 21, 2014, the Company entered into a line of credit agreement with Logical Choice Corporation-Delaware (“LCC-Delaware”), former sole member of Genesis. The line of credit allowed the Company to borrow up to $500,000applied for working capital and business expansion. The funds when borrowed accrued interest at 10% per annum. Interest accrued on any advanced funds was due monthly and the outstanding principal and any accrued interest were due in full on May 21, 2015. In May 2016, the maturity date was extended to May 21, 2018. The assets of Genesis have been pledged as a security interest against any advances on the line of credit. As of September 30, 2017, outstanding principal and accrued interest under this agreement was $54,000 and $14,555, respectively. As of December 31, 2016, outstanding principal and accrued interest under this agreement was $54,000 and $10,516, respectively.

~~F-15~~

On September 30, 2014, the Company entered into a line of credit agreement with LCC-Delaware. Pursuant to the agreement, the Company obtained an additional line of credit from LCC-Delaware up to a maximum of $500,000 for a term of 3 years. The advances from this agreement accrue interest at 10% per annum and is due on demand. In connection with this agreement, the Company granted LCC-Delaware a second lien and security interest to all of its assets and properties, subordinate to Vert Capital. Pursuant to an amendment to the purchase agreement with EDI entered in September 2016, LCC - Delaware forgave the entire payable balance of $185,129 and interest of $37,241 owed by the Company.

~~NOTE 11 – CONVERTIBLE NOTES PAYABLE – RELATED PARTIES~~

~~Convertible Note Payable – Mark Elliott~~

~~On January 16, 2015, the Company issued a note to Mark Elliott, the Company’s Chief Executive Officer,~~forgiveness in the amount of ~~$50,000.~~$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 ~~note~~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

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was (0.9)%. The negative effective tax rate for 2023 is due ~~on December 30, 2017 as amended and bears interest at an~~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 ~~10%, compounded monthly. The note is convertible~~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 ~~common stock at~~ability to generate taxable income in the ~~lesser of (i) $6.28 per share, (ii)~~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 ~~discount of 20%~~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 ~~stock price if~~expiration dates, the ~~Company’s common stock~~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 ~~publicly traded, or (iii) if applicable, such other amount negotiated~~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 ~~Company. The note holder may convert all but~~net deferred tax liability on the intangibles for which the Sahara entities do not ~~less than all of~~have tax basis. This includes the outstanding principal and interest due under this note upon the conversion date. As of September 30, 2017, outstanding principal and accrued interest under this agreement were $50,000 and $13,548, respectively. As of December 31, 2016, outstanding principal and accrued interest under this agreement were $50,000 and $9,809, respectively.

~~Convertible Note Payable – James Lofgren~~

On August 19, 2015, the Company issued a convertible promissory note to James Lofgren, spouse of Sheri Lofgren, the Company’s Chief Financial Officer, in the amount of $45,000. The note was due on April 30, 2016 and bears interest at an annual rate of 13%, compounded monthly. Mr. Lofgren may convert all, but not less than all, of the outstanding principal and interest due under this note into the Company’s Class A common stock, at the lesser of (i) $6.28 per share or (ii) a discount of 20% to the trading price if the Company’s common stock is then publicly traded. As of December 31, 2015, outstanding principal and accrued interest under this agreement were $45,000 and $2,404, respectively. The outstanding balance under this note was fully repaid on March 31, 2016.

~~Convertible Promissory Note– K Laser~~

On January 13, 2017, the Company issued a convertible promissory note to K Laser International Co., Ltd. (“K Laser”) in the amount of $1,000,000. The note is due on December 31, 2017 and bears interest at an annual rate of 8%, compounded monthly. The note is convertible into the Company’s common stock at $5.60 per share prior to a listing on a public exchange. If converted after a listing on a public exchange, the conversion shares shall be calculated as the average of the 7 days closing price. As of September 30, 2017, outstanding principal and accrued interest for the note were $1,000,000 and $28,055 respectively. The note is secured by all assets of the Company and subordinated to the Sallyport accounts receivable financing.

~~NOTE 12 – LONG-TERM DEBT – RELATED PARTIES~~

~~Marlborough Note~~

~~On April 1, 2016, the Company issued a $2,000,000 unsecured convertible promissory note to Marlborough Trust~~deferred tax liability recorded during 2021 for the acquisition of ~~Mimio.~~Interactive Concepts. The ~~Marlborough Note~~Company does not qualify for any consolidated filing positions in any of these countries, so there is ~~convertible by~~no ability to net the ~~holder into the Company’s Class A common stock at a per share conversion price equal to 55%~~deferred tax liabilities of the ~~initial offering price. The Marlborough note bears a one-time simple interest charge of 8% and is due on March 31, 2019. On June 27, 2017,~~Sahara companies against the ~~Marlborough Trust entered into a note conversion agreement with Boxlight Parent under which the Marlborough Trust agreed, upon the effective date~~deferred tax assets of the ~~Company’s post-effective amendment~~legacy Boxlight companies.

The tax years from 2009 to 2023 remain open to examination in the ~~Company’s registration statement~~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 ~~Form S-1, to convert 100%~~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 ~~$2,000,000 Marlborough Note and $79,853 of accrued interest into shares of~~IRA to have a material effect on our Class A common stock at a conversion price of $6.30 per share, a total of 330,135 shares upon conversion. The effective date was August 29, 2017 at which time the outstanding note and accrued interest was converted to 330,135 shares. As of December 31, 2016, outstanding principal and long-term accrued interest for the Marlborough Note were $2,000,000 and $40,183, respectively.financial results.

~~F-16~~

~~EDI Note~~

On September 28, 2016, the Company entered into an amendment with EDI for the acquisition of Boxlight Group. The Company agreed to issue a $2,000,000 non-negotiable convertible promissory note to settle the unpaid balance of the account payable owed by Boxlight Group to EDI. The note bears a one-time simple interest charge of 4% and all principal and accrued interest is due on March 31, 2019. Following the completion of Boxlight Corporation’s IPO, the EDI Note is convertible into shares of Boxlight Corporation’s Class A common stock at a conversion price equal to 80% of the initial per share offering price of the Class A common stock offered under the IPO. Boxlight Corporation has the option, in lieu of issuing its Class A common stock, to prepay the entire unpaid principal amount of the EDI Note plus accrued interest thereon within 72 hours of the first conversion notice.

~~On May~~NOTE 11 2017, the Company issued a $2,000,000 unsecured convertible promissory note to EDI replacing the 4% non-negotiable convertible promissory note of $2,000,000 issued at September 28, 2016. The new EDI Note is convertible into the Company’s Class A common stock at a per share conversion price equal to 55% of the initial offering price. The new note bears a one-time simple interest charge of 4% due on March 31, 2019.

On June 27, 2017, EDI entered into a note conversion agreement with Boxlight Parent under which EDI agreed, upon the effective date of the Company’s post-effective amendment to the Company’s registration statement on Form S-1, to convert 100% of the $2,000,000 convertible promissory note and $60,274 of accrued interest into shares of our Class A common stock at a conversion price of $6.30 per share, a total of 327,027 shares upon conversion. The effective date was August 29, 2017, at which time the outstanding note and accrued interest was converted to 327,027 shares.

~~As of December 31, 2016, outstanding principal and long-term accrued interest for EDI Note were $2,000,000 and $20,603, respectively.~~

~~NOTE 13 – DEFERRED REVENUE~~

On July 18, 2016, upon the acquisition of Boxlight Group, the Company assumed a $761,622 future performance obligation for separately priced extended warranties sold by Boxlight Group based on the assets acquired and liabilities assumed.

~~Change in deferred revenue consisted of the following for the nine months ended September 30, 2017 and for the year ended December 31, 2016:~~

September 30, 2017 December 31, 2016

Balance, beginning $ 767,726 $ -
Assumed from Boxlight Group - 761,622
Additions 247,349 259,744
Amortization (372,831 ) (253,640 )
Balance, ending $ 642,244 $ 767,726

Deferred revenue – short-term $ 403,870 $ 495,603
Deferred revenue – long-term $ 238,374 $ 272,123

~~F-17~~

~~NOTE 14~~ – 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 ~~shares~~stock, with such preferred stock consisting of: 1)(1) 250,000 shares of ~~voting~~non-voting Series A preferred stock, with a par value of $0.0001 per ~~share (of which none are issued); 2) 1,200,000~~share; (2) 1,586,620 shares of voting Series B preferred stock, with a par value of $0.0001 per ~~share (of which 1,000,000 shares are issued); 3) 270,000~~share; (3) 1,320,850 shares of voting Series C preferred stock, with a par value of $0.0001 per ~~share (all~~share; and (4) 48,280,000 shares of ~~which are issued); and 4) 48,280,000 shares~~“blank check” preferred stock to be designated by the Company’s ~~Board~~board of ~~Directors.~~directors. Each authorized series of preferred stock is described below.

Issuance of Preferred Shares

Series A Preferred Stock

~~Upon~~At the ~~effectiveness~~time of ~~a registration statement registering~~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 ~~resale~~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.

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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 ~~and~~on the ~~listing~~Nasdaq Stock Market on September 25, 2020 (the “Conversion Price”). Such conversion may occur either (i) at the option of ~~our~~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 ~~Nasdaq Capital Market~~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 ~~other securities exchange, all~~temporary equity in the Company’s condensed consolidated balance sheet. As of ~~the~~June 30, 2023, a total of 1,586,620 and 1,320,850 shares of Series B and ~~Series~~ C ~~Preferred~~preferred stock remained outstanding, respectively.

Common Stock ~~shall be automatically converted into the applicable number of shares of Class A common stock. All of the Series A Preferred Stock shall be automatically converted into Class A~~

The Company’s authorized common stock ~~not later than one year after the effective date~~consists of the Company’s registration statement in connection with an IPO of the Company’s Class A common stock. As of September 30, 2017 and December 31, 2016, the Company had issued 1,000,000 shares of Series B Preferred Stock for the acquisition of Genesis and 270,000 shares of Series C Preferred Stock for the acquisition of Boxlight Group.

~~Common Shares~~

In 2014, the Company issued 4,079,681 shares of its Class A common stock to various investors for cash of $2,560. The Company received promissory notes from the investors for the proceeds. These notes were due on March 31, 2015 and bear no interest through March 31, 2015. After March 31, 2015, the notes bear interest of 12% per annum. As of December 31, 2016, the Company has received proceeds of $2,335 from issuance of these shares and $225 was recorded by the Company as subscription receivable.

~~In January 2015, the Company amended its articles of incorporation to state that the Company’s common shares consist of:~~ 1) ~~150,000,000~~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 ~~shall~~would automatically convert into shares of Class A common stock. As of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, the Company had ~~5,808,346~~9,465,494 and ~~4,621,687~~9,339,587 shares ~~respectively,~~ of Class A common stock issued and ~~outstanding.~~outstanding, respectively. No Class B shares were outstanding at ~~September~~June 30, ~~2017 and~~2023 or December 31, ~~2016.~~2022.

~~Issuances~~Issuance of ~~common stock to K-Laser for cash~~Common Stock

Securities Purchase Agreement

On ~~September 28, 2016,~~July 22, 2022, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited institutional investor (the “Investor”) pursuant to ~~an amended agreement with EDI, K Laser,~~which the principal stockholder of EDI, purchased 178,572 shares of Class A common stock at $5.60 per share. The per share sale price was intended to be 80% of the initial price per share of the Company’s Class A common stock offered to the public under IPO. Accordingly, the 178,572 shares of Class A common stock are subject to increase in the event that the initial offering price of the shares offered is less than $7.00. The $5.60 price and the number of shares sold in the private placement will not change if the initial per share offering price is greater than $7.00. The Company agreed to ~~use $650,000 of the proceeds to retire~~issue and sell, in a ~~separate obligation owed by Boxlight Inc. to EDI.~~

~~Issuances of common stock for cash~~

In September 2016, the Company issued 18,014 shares of Class A common stock at $1.055 per share for cash of $19,000. As of September 30, 2017 and December 31, 2016, the Company had received cash of $18,900 and had subscriptions receivable of $100.

~~In November 2016, the Company issued 33,865 shares of Class A common stock at $5.906 per share for cash of $200,004.~~

~~Issuances of common stock for settlement of accounts payable and debt~~

In September and October 2016, the Company issued an aggregate of 94,735 shares at a fair value of $1.055 per share to settle accounts payable of $99,910 (including $77,268 accrued commission payable to Mark Elliott, the Company’s CEO).

~~F-18~~

~~In October 2016, the Company issued 3,556 shares of Class A common stock to a third party at $5.906 per share to settle accounts payable of $21,000.~~

In October 2016, the Company issued 109,915 shares of Class A common stock at a fair value of $1.055 per share to settle $100,000 of the outstanding principal short-term debt and $15,919 of accrued interest.

~~In June 2017, EDI agreed to convert $1,500,000 of accounts payable into 238,095 shares of Class A common stock at a conversion price of $6.30 per share. No gain or loss was recorded on the conversion.~~

In August 2017, EDI and Marlborough converted long-term convertible note payable and accrued interest of $4,140,127 in total into 657,162 shares of Class A common stock at a conversion price of $6.30 per share. See Note 12. No gain or loss was recorded on the conversion.

~~Distribution to Vert Capital~~

~~During the first quarter of 2016, Mimio was under the control of Vert Capital. It distributed cash of $700,375 to Vert Capital for payments of the Skyview Note prior~~registered direct offering directly to the ~~acquisition by the Company.~~

~~Adoption of the 2014 Stock Option Plan~~

~~On September 19, 2014, the Board approved the Company’s 2014 Stock Option Plan. The total number of underlying~~Investor, (i) 875,000 shares of the Company’s Class A common stock, ~~available~~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 ~~grant~~total gross proceeds to ~~directors, officers, key employees,~~the Company of $5.0 million (the “Offering”), before deducting estimated offering expenses, and ~~consultants~~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.

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The Purchase Agreement contains customary representations and warranties and agreements of the Company ~~or a subsidiary~~and the Investors and customary indemnification rights and obligations of the ~~Company under~~parties. Pursuant to the ~~plan is 2,390,438 shares. As~~terms of ~~September 30, 2017,~~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 ~~1,591,357 shares reserved for issuance under the plan.~~equity warrants outstanding of 920,993 and 920,680 at June 30, 2023 and December 31, 2022, respectively.

~~NOTE 15 – STOCK SPLITS~~Credit Facility

In ~~December 2016,~~conjunction with its receipt of the Whitehawk loan, the Company ~~completed a stock split of 0.948207171 for 1 of its Class A common stock increasing its outstanding Class A common stock~~issued to ~~4,621,687 shares. All share numbers or per share information presented give effect to the stock splits.~~

~~NOTE 16 – STOCK-BASED COMPENSATION~~

~~Stock Options~~

~~Following is a summary of the option activities during the nine months ended September 30, 2017:~~

Number of Units Weighted
Average
Exercise Price Weighted
Average
Remaining Contractual
Term (in years)
Outstanding, December 31,2016 850,405 $ 0.08 7.29
Granted 18,000 $ 5.60 5.00
Exercised (291,402 ) $ 0.0001
Cancelled (120,971 ) $ 0.12
Outstanding, September 30, 2017 456,032 $ 0.35 5.25
Exercisable, September 30, 2017 334,091 $ 0.17 6.96

~~F-19~~

~~On May 13, 2016, the Company granted options to purchase 120,971~~Whitehawk 66,022 shares of Class A common stock, ~~at $0.12 per~~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 to an employee for services. These options vest in four years and commenced in the quarter ended June 30, 2016 and expire 5 years from the date of grant. The options have a fair value of $109,000 that was calculated using the Black-Scholes option-pricing model.

~~On November 1, 2016,~~repurchase program (the “Repurchase Program”) authorizing the Company entered into an amended employment agreement with its Chief Financial Officer, which amended the exercise price of the 291,402 options granted from $0.13 to $0.0001 per share. The options vesting term was changed to (i) 50% of the remaining unvested options shall vest immediately following the agreement, (ii) all remaining unvested options shall vest on March 31, 2017. Pursuant to the amendment of employment agreement, the fair value of options granted was changed to approximately $484,000 using the Black-Scholes option-pricing model. In 2017, the officer exercised the options and the Company issued 291,402 shares to the officer.

~~On April 4, 2017, the Company granted options~~ to purchase ~~18,000 shares of Series A common stock at $5.60 per share~~up to an employee for services. These options vest in four years and commenced in the quarter ended June 30, 2017 and expire 5 years from the date of grant. The options have a fair value of approximately $7,000 that was calculated using the Black-Scholes option-pricing model.

Variables used in the Black-Scholes option-pricing model for options granted during the year ended December 31, 2016 include: (1) discount rate of 0.97 - 0.99% (2) expected life of 3.75 to 3.96 years, (3) expected volatility range of 66 to 69%, and (4) zero expected dividends.

Variables used in the Black-Scholes option-pricing model for options granted during the nine months ended September 30, 2017 include: (1) discount rate of 1.47% (2) expected life of 3.75 years, (3) expected volatility of 68%, and (4) zero expected dividends.

~~For the nine months ended September 30, 2017 and 2016, the Company recorded stock compensation expense of $50,046 and $13,531, respectively.~~

~~NOTE 17 –RELATED PARTY TRANSACTIONS~~

~~Management Agreement – VC2 Advisors, LLC~~

On July 15, 2015, the Company executed an agreement with VC2 Advisors, LLC (“VC2”), a Delaware limited liability company, in which Michael Pope, the Company’s President and Director, is a managing member. VC2 is owned by Sugar House Trust and AEL Irrevocable Trust, trusts for the benefit of the families of Michael Pope and Adam Levin, respectively. The effective date of this agreement is the date of the consummation of the IPO$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

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expense. 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.

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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 ~~VC2 shall perform~~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 ~~for~~to assist the Company ~~relating~~in sourcing and entering into agreements with one or more customers to ~~among other things,~~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 ~~introductions to various financing sources. VC2 shall receive an annual~~other services. As consideration for the services provided, the Company will pay Mr. Pope a management fee ~~payable in cash~~ equal to ~~1.5%~~0.375% of ~~total~~the consolidated net revenues atof the ~~end of each fiscal year ended December 31, 2016, 2017 and 2018,~~Company, payable in monthly installments, ~~commencing as of the date of the Company’s IPO. The annual fee is subject~~not to ~~a cap of $1,000,000~~exceed $250,000 in ~~each of 2016, 2017 and 2018.~~any calendar year. At ~~its~~his option, ~~VC2~~Mr. Pope may ~~also~~ defer payment until the end of each year ~~payable as an option to purchase~~and/or receive payment in the form of shares of Class A common stock of the Company, at a price per share equal to 100% of the closing price of the Company’s Class A common stock as traded on Nasdaq or any other national securities exchange as of December 31 of such year. Effective as of October 12, 2016, as a result of Adam Levin and Michael Pope no longer being employed at VC2, the consulting agreement with VC2 was terminated. Subsequently, the Company entered into new consulting agreements on identical terms with other entities which now employ Michael Pope and Adam Levin.Company.

~~Warrant Agreement~~

On November 7, 2014, we issued to Vert Capital and a consultant five year warrants to purchase 796,813 and 23,904 shares of our Class A common stock, respectively, at an exercise price, equal to 110% of the initial per share offering price of the shares being sold under the Company’s initial public offering. Among other provisions, such warrants contain “cashless” exercise rights and prohibit the holder from selling any of the shares issuable upon exercise of such warrants for a period of not less than nine months from the date of issuance. Effective as of October 12, 2016, and as a result of Adam Levin and Michael Pope no longer being employed at Vert Capital, Boxlight Parent cancelled the remaining balance of the Vert Capital warrants and reissued 597,610 and 199,203 of such warrants to entities associated with Adam Levin and to Michael Pope, respectively. These warrants had a value at par per share at the grant date because the Company was incorporated in September 2014 and at development stage. These warrants expire on December 31, 2019. These warrants will be valued using Black-Scholes option-pricing model upon the completion of the Company’s initial public offering.

~~F-20~~

~~Sales and Purchases - EDI~~

EDI, an affiliate of the Company’s major shareholder K-Laser, is a major supplier of products to the Company. For the nine months ended September 30, 2017 and 2016, the Company had purchases of $3,210,252 and $804,122, respectively, from Everest Display Inc. For the nine months ended September 30, 2017 and 2016, the Company had sales of $30,527 and $160,048, respectively, to Everest Display Inc. As of September 30, 2017 and December 31, 2016, the Company had accounts payable of $4,143,544 and $3,379,161, respectively, to Everest Display Inc.

~~Other advance - EDI~~

In 2017, the Company received cash of $235,000 and $250,000 from Taiwanese individuals and EDI, respectively. These individuals and EDI intended to purchase the Company’s Class A common shares. However, the sales were not finalized and these investors requested cash refunds. As of September 30, 2017, the Company has paid EDI $250,000. and has recorded the advances from Taiwanese individuals in accounts payable and accrued liabilities to third parties.

NOTE 1814 – COMMITMENTS AND CONTINGENCIES

Contingencies

~~Litigation~~

~~In July 2015, a supplier filed a lawsuit against~~The Company assesses its exposure related to legal matters and other items that arise in the regular course of its business. If the Company ~~for outstanding payables owed by the Company of approximately $72,000. In February 2016, the supplier and the Company agreed to settle the indebted balance for $43,000 provided~~determines that the Company paid on or before March 16, 2016. The Company failed to make the payment and the judgement amount was therefore increased to approximately $70,000 and with interest and court costs of approximately $2,300. The Companyit is ~~currently negotiating new settlement terms with the supplier.~~

~~In October 2017,~~probable a ~~supplier filed a lawsuit against the Company. See Note 20.~~

~~Trademark~~

On April 16, 2009, Boxlight Inc. entered into a trademark license agreement with Herbert H. Myers whereby Boxlight Inc. agreed to pay Mr. Myers 15% of the quarterly net income of Boxlight Inc. This payment shall continue until $1,250,000 is paid upon which the license fee shall drop to 10%. Upon reaching the aggregate sum of $2,500,000 or 10 years of licensing, whichever comes first, the trademark will be sold to Boxlight Inc. for $1. Through the period ended December 31, 2014, Boxlight Inc.loss has ~~paid $32,580 related to this agreement.~~

In October 2014, Boxlight Inc. entered into an amendment to the trademark license agreement with Mr. Myers, where Mr. Myers agreed to sell the trademark for $250,000. Payment would be made through the issuance of shares of Boxlight Corporation by dividing $250,000 by the initial price per share of shares of Boxlight Corporation’s common stock sold in the initial public offering of Boxlight Corporation on the date the registration statement is declared effective by the Securities and Exchange Commission. Trademark cost of $250,000 is included in the accompanying consolidated balance sheets under the caption “Intangible assets”, with the corresponding liability included under the caption “Other current liabilities”.

~~Operating Lease Commitments~~

The Company leases two office spaces under non-cancelable lease agreements. The leases provide that the Company pays only a monthly rental and is not responsible for taxes, insurance or maintenance expenses related to the property. Future minimum lease payments of the Company’s operating leases with a term subsequent to September 30, 2017 are as follows:

Year ending December 31, Amount
2017 $ 67,350
2018 265,050
2019 60,600
Net Minimum Lease Payments $ 393,000

~~F-21~~

~~The Company also has another office lease on a month-to-month basis. For the nine months ended September 30, 2017, aggregate rent expense was approximately $210,250.~~

~~Agreements with Board of Directors~~

In March 2015, as amended on February 26, 2016, the Company entered into agreements with two new Board members. In consideration of their agreement to serve on the Company’s Board, the Company agreed to sell a number of common shares equal to 0.5% and 1.25%, respectively, of the Company’s fully-diluted common shares to these members. The number of the fully-diluted common shares are to be determined on a date no later than 2 business days prior to the effective date of a registration statement in connection with an IPO of the Company’s Class A common stock. The purchase price per share will be $0.0001 per share. The issuance of these shares will be recorded after the IPO. Additionally, one of the directors receives a fee of $50,000 per annum, which commenced on February 26, 2016.

~~Warrant Agreement~~

On November 7, 2014, the Company granted warrants to Lackamoola, LLC to purchase an aggregate of 23,904 shares of common stock with an exercise price equal to 110% of the price per share of the Company’s IPO or, in the situation that the Company becomes a publicly traded company through reverse merger or other alternative methods, the volume weighted average price per share for the 20 consecutive trading days immediately after the Company becomes a publicly traded company. These warrants expire on December 31, 2019. These warrants will be valued using Black-Scholes option-pricing Model upon the completion of the Company’s initial public offering.

~~Agreement with Loeb & Loeb~~

On December 16, 2015, the Company executed an agreement with its legal counsel, Loeb & Loeb LLP (“Loeb”), pursuant to which the Company agreed to issue 231,152 shares of Class A common stock as partial compensation for services rendered by Loeb in connection with the Company’s IPO. The shares will be issued upon the consummation of the Company’s IPO. Upon timely payment of the cash component of compensation due and owing to Loeb as set forth in the agreement, Loeb will be obligated to return to the Company up to 207,864 shares of common stock not yet sold by Loeb for no further consideration and will continue to beneficially own 23,288 shares of our Class A common stock.

On April 24, 2017, the agreement was amended to increase the payable to Loeb for services rendered in connection with the Company’s IPO to $900,000. Pursuant to the amended agreement, the Company shall make a cash payment to Loeb of $235,000 and issue 231,152 restricted shares of Class A common stock at the closing of the IPO. Commencing with the first month after the closing of the IPO, the Company shall make six monthly cash payments to Loeb each inbeen incurred, the amount of ~~$39,166 no later than~~ the ~~fifth day~~loss, or an amount within the range of each month for a total amount of $235,000. Upon receipt of the entire $235,000, Loeb will return 69,345 shares to the Company. Not later than 12 months after the closing of the IPO, the Company shall pay to Loeb the remaining balance of $430,000. Upon receipt of such final payment, Loeb will return an additional 138,691 shares to the Company. Loeb will continue to beneficially own 23,116 shares of our Class A common stock.

~~NOTE 19 – CUSTOMER AND SUPPLIER CONCENTRATION~~

~~Significant customers and suppliers are those~~loss, that ~~account for greater than 10% of the Company’s revenues and purchases.~~

~~F-22~~

can be reasonably estimated is recorded.The Company generated a portion of its revenues from two customers (13% and 10%) for the nine months ended September 30, 2017. As of September 30, 2017 and December 31, 2016, the amount due from the two customers included in accounts receivable was $1,295,937 and $174,217, respectively. The loss of the significant customers or the failure to attract new customershas not identified any legal matters that could have a material adverse effect on our ~~business,~~consolidated results of operations, ~~and~~ financial ~~condition.~~position or cash flows.

Purchase Commitments

The Company ~~purchased a portion~~is legally obligated to fulfill certain purchase commitments made to vendors that supply materials used in the Company’s products. As of ~~materials from two vendors (41% and 31%)~~June 30, 2023, the total amount of such open inventory purchase orders was $30.6 million.

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NOTE 15 – CUSTOMER AND SUPPLIER CONCENTRATION

There was one customer that accounted for greater than 10% of the Company’s consolidated revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017. As of September~~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, ~~2017 and December 31, 2016,~~ 2023, the ~~amounts due to~~Company’s purchases were concentrated primarily with one ofvendor. For the ~~vendors included in accounts payable – related party was $4,143,544 and $3,379,161, respectively. As of September~~six months ended June 30, ~~2017 and December 31, 2016,~~2022, the ~~Company had prepayments to another vendor included in prepaid expenses and other current assets of $724,856 and $228,552, respectively.~~ 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 ~~numerous~~ other suppliers that could be substituted should the ~~supplier~~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.

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		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 2017 – SUBSEQUENT EVENTS

~~In October 2017, a supplier filed a lawsuit against~~On July 20, 2023, the Company paid $3.0 million on its Credit Agreement with Whitehawk. The payment was for ~~outstanding debt and accrued interest owed~~amounts borrowed under the Third Amendment to the Credit Agreement that were required to be repaid by ~~the Company of approximately $838,214. The lawsuit also~~September 29, 2023. There were no pre-payment penalties or premiums included ~~a claim for attorney fees of $83,846. The Company has obtained legal counsel and is in the process of negotiating a settlement.~~with this payment.

~~F-23~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~In addition to historical information, this Form 10-Q may contain~~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 relating to Boxlight Corporation. All statements, trend analyses and other information relative to markets for our products and trends in revenue, gross margins and anticipated expense levels, as well as other statements including words such as “anticipate”, “believe”, “plan”, “estimate”, “expect”, and “intend”, and other similar expressions, constitute forward-looking statements. Prospective investors are cautioned that ~~any such forward-looking statements are not guarantees of future performance and~~ involve risks and uncertainties, ~~including those factors described below under “Factors That May Affect Future Operations”~~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 ~~such forward-looking~~these statements. ~~ISC undertakes~~We undertake no obligation to publicly update or revise any forward-looking statements, ~~to reflect changed assumptions, the occurrence of unanticipated~~including any changes that might result from any facts, events, or ~~changes in~~circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future ~~operating results.~~results, events, levels of activity, performance, or achievements.

Overview

We are a ~~visual display~~ technology company that is seeking to become a ~~world~~world-wide leading innovator and integrator of interactive products and software for schools, ~~as well as for~~education, business, and government ~~conferencing.~~interactive spaces. We currently design, produce and distribute interactive ~~projectors~~displays, collaboration software, supporting accessories and ~~distribute interactive LED flat panels in the education market.~~professional services. We also distribute science, technology, engineering, and math (or “STEM”) ~~data logging~~ 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 ~~educational market.~~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”).

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To date, we have generated substantially all of ~~our~~the Company’s revenue from the sale of ~~our~~hardware (primarily consisting of interactive displays) and software ~~and expanding product line of projectors, LED panels, interactive whiteboards and display devices~~ to the educational ~~market.~~market in the United States and Europe.

~~In addition, we~~We have also implemented a comprehensive plan to reach and maintain profitability ~~for~~both from our core business operations and as a result of making strategic business acquisitions. Highlights of ~~this~~the plan include:

●

~~Making immediate strides to integrate~~Integrating products of the ~~acquisition~~acquired companies and cross ~~train our~~training sales ~~reps~~representatives to increase their ~~offerings. The combination of products~~offerings and cross training has already resulted in increased sales. The synergy we have found between the products of Boxlight and Mimio are adding opportunities to resellers for both companies to increase their sales.productivity;


	●	~~Proceeds from our public offering will allow us to add additional inventory on hand to fulfill currently existing orders.~~

	●	~~Recently hired~~Hiring new sales ~~reps~~representatives with significant ~~education technology sales~~industry experience in their respective territories, ~~has resulted in our current pipeline reaching a record high level.~~and


	●	~~We are seeing increased demand~~Expanding our reseller partner network both in ~~the US market for technology sales~~key territories and ~~have the products~~in new markets, thereby increasing our penetration and ~~infrastructure in place to handle our expected growth.~~reach.

Acquisition Strategy and Challenges

~~Our~~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. WeIn 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.~~resources;


	●	Economies of scale – improved purchasing power with a greater ability to negotiate prices with ~~suppliers.~~suppliers; and


	●	Improved market reach and industry visibility – ~~increase in~~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;

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●

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 ~~result,~~global company with suppliers centered in Asia and customers located worldwide, we ~~believe that an analysis of~~have used, and may in the ~~historical costs and expenses~~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 ~~Target Sellers prior to acquisition will not provide guidance as~~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 ~~anticipated results after acquisition.~~ 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 ~~anticipate that we will be able to achieve significant reductions in~~classify our ~~costs of revenue and selling,~~operating expenses into two categories: general and administrative ~~expenses~~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 ~~levels currently incurred~~examination of our tax returns by the ~~Target Sellers operating independently, thereby increasing~~U.S. Internal Revenue Service, or IRS, and other tax authorities to determine the adequacy of our ~~EBITDA~~income tax reserves and ~~cash flows.~~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.

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Operating Results – Boxlight Corporation ~~(Retrospectively adjusted for the acquisitions of Mimio and Genesis)~~

~~For the nine-month periods ended September 30, 2017 and 2016~~

~~Revenues.~~Total revenues for the nine months ended September 30, 2017 were $20,407,258 as compared to $15,371,130 for the nine months ended September 30, 2016. Revenues consist of product revenues, software revenues, installation and professional development. The increase was mainly due to the inclusion of Boxlight Group’s operating results for the nine months ended September 30, 2017. Boxlight Group was acquired on July 18, 2016, and was only included from July 18 through September 30 in the nine-month period ended September 30, 2016.

~~Cost of Revenues.~~ Cost of revenues for the nine months ended September 30, 2017 was $14,595,780 as compared to $9,485,596 for the nine months ended September 30, 2016. Cost of revenues consist primarily of product cost, freight expenses and inventory write-downs. Cost of revenues increased because of the increase in revenues. Gross profit decreased mainly because Boxlight Group’s margin is lower than Mimio’s margin. Sales to Mimio’s customers decreased for the nine months ended September 30, 2017 and Mimio’s gross margin for the nine months ended September 30, 2016 was higher than usual. In addition, the Company incurred significantly more freight fees in early 2017 due to the usage of air freight shipments instead of ocean cargo in order to more quickly meet our customer’s needs.

~~General and Administrative Expenses.~~ General and administrative expenses for the nine months ended September 30, 2017 was $7,049,288 as compared to $4,701,275 for the nine months ended September 30, 2016. The increase mainly resulted from the inclusion of Boxlight Group’s operating expenses for the nine months ended September 30, 2017 and additional professional expenses incurred related to the initial public offering.

~~Research and Development Expenses.~~ Research and development expenses for the nine months ended September 30, 2017 was $357,955 as compared to $846,621 for the nine months ended September 30, 2016. The decrease mainly resulted from lower research and development activity in 2017.

~~Other income (expense), net.~~Other expense for the nine months ended September 30, 2017 was $309,424 as compared to $680,398 for the nine months ended September 30, 2016. The decrease was a result of the reduction in interest expense resulting from the conversion and payoff of debt in the third quarter of 2017.

~~Net loss.~~Net loss was $1,905,189 and $342,760 for the nine months ended September 30, 2017 and 2016, respectively. The change was mainly attributable to the decrease in gross profit, primarily due to the increase in freight costs incurred to air freight to our customers, along with the increase in operating expenses from the inclusion of Boxlight Group’s results for the nine months ended September 30, 2017.

For the three-month periods ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022

Revenues.Total revenues for the three months ended ~~September~~June 30, ~~2017~~2023 were ~~$10,228,389~~$47.1 million as compared to ~~$7,877,595~~$59.6 million for the three months ended ~~September~~June 30, ~~2016. Revenues consist of product~~2022, resulting in a 21.1% decrease. The decrease in revenues ~~software revenues, installation and professional development. The increase~~ was ~~mainly~~primarily due to the inclusion of Boxlight Group’s operating results for the three months ended September 30, 2017. Boxlight Group was acquired on July 18, 2016, and was only included from July 18 through September 30 in the three-month period ended September 30, 2016.lower sales volume across all markets.

Cost of Revenues. Cost of revenues for the three months ended ~~September~~June 30, ~~2017 was $7,327,701~~2023 were $29.2 million as compared to ~~$5,084,340~~$42.8 million for the three months ended ~~September~~June 30, ~~2016. Cost~~2022, resulting in a 31.7% decrease. The decrease in cost of revenues ~~consist primarily~~was attributable to the decrease in units sold, along with lower manufacturing and shipping costs in the second quarter of ~~product cost, freight expenses and inventory write-downs. Cost of revenues increased because of~~2023 compared to the ~~increase in revenues.~~ prior year’s second quarter.

Gross Profit. Gross profit ~~decreased mainly because Boxlight Group’s margin is lower than Mimio’s margin. Sales to Mimio’s customers decreased~~ for the three months ended ~~September~~June 30, ~~2017.~~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 ~~September~~June 30, ~~2017 was $2,295,101~~2023 were $15.2 million and 32.4% of revenue as compared to ~~$2,049,917~~$15.3 million and 25.7% of revenue for the three months ended ~~September~~June 30, ~~2016.~~2022. The ~~increase mainly resulted from the inclusion of Boxlight Group’s operating~~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 ~~September~~June 30, ~~2017~~2023 and ~~additional professional expenses incurred~~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 ~~initial public offering.~~decrease in manufacturing and shipping costs noted above.

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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 ~~three~~six months ended ~~September~~June 30, ~~2017~~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 ~~$60,403~~$5.3 million as compared to ~~$244,515~~$2.3 million for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2022, representing an increase of $3.0 million. The ~~decrease mainly resulted from lower research~~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 ~~development activity~~a $0.5 million increase in ~~2017.~~interest expense.

~~Other income (expense), net.Other~~Income Tax (Expense) Benefit. Income tax expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 was ~~$74,890~~$306 thousand, as compared to ~~$601,258~~$45 thousand in income tax benefit for the ~~three~~six months ended ~~September~~June 30, ~~2016. For~~2022. The increase in tax expense year-over-year is largely due to foreign pretax book income for the ~~three~~six months ended ~~September~~June 30, 2016, the Company incurred additional interest expense for the extension of debt. In addition, for the three months ended September 30, 2017, the Company converted certain related parties’ debt into common shares.

~~Net Income and loss.~~~~Net income was $470,294 for the three months ended September 30, 2017~~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 ~~$102,435~~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.

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The following table contains reconciliations of net income and losses to EBITDA and adjusted EBITDA for the ~~three months ended September 30, 2016. The change was mainly attributable to the decrease in interest expense and research and development expenses.~~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 onin our ~~balance sheets~~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 ~~June,~~ July, August ~~and~~or September. To prepare for ~~the upcoming~~each school year, we generally build up inventories during the second quarter of the year. ~~However, this year our~~As a result, inventories ~~have decreased, as we have are either drop shipping products directly to the customer or bringing inventory in and immediately shipping out to customers in order to cover our backorders.~~

~~We have been very proactive, and will continue~~tend to be ~~proactive,~~at their highest levels at that point in ~~obtaining contracts~~time. In the first quarter of the year, inventories tend to decline significantly as products are delivered to customers. Thereafter, during the ~~fourth and~~ first ~~quarters that will help offset~~quarter, we do not generally need to restock inventories at the ~~seasonality~~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 ~~our business.~~sales.

Liquidity and Capital Resources

As of ~~September~~June 30, ~~2017,~~2023, we had cash and cash equivalents of ~~$783,181 and~~$15.6 million, a working capital ~~deficit~~balance of ~~$4,414,859.~~ $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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, we had net cash provided by ~~(used in)~~and used in operating activities of ~~($596,727)~~$10 thousand and ~~184,354,~~$6.9 million, respectively. ~~In addition,~~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 ~~(used in)~~ financing activities of ~~$948,448~~$1.0 million and ~~($706,084),~~$621 thousand, respectively.

~~On August 15, 2017, the Company entered into~~ Cash provided by financing activities is primarily related to a ~~12-month term line of credit agreement with Sallyport Commercial Finance, LLC. As of September 30, 2017, the outstanding principal balance on this facility was $2,324,218.~~

The Company must continue to raise funds and negotiate its debt payment terms, including the AHA Note that is currently in default, to continue to meet its liquidity requirements. Our principal plan to meet our liquidity requirements are to raise up to $7,000,000 in an IPO; with the option of converting up to $1,050,000 of debt into Class A common stock; and use a portion of the IPO proceeds to repay or renegotiate$3.0 million under the Company’s ~~debt obligations.~~

~~We financed our capital expenditures during the nine months ended September 30, 2017 primarily through the Sallyport line of credit, along with delaying~~Credit Facility, partially offset by $1.4 million in principal payments on ~~accounts payable, conversion~~our Credit Facility and $635 thousand in payments of ~~accounts payable to equity and the issuance of note payable to K-Laser.~~

On January 13, 2017, the Company issued a convertible promissory note to K-Laser International Co., Ltd. in the amount of $1,000,000. The note is due on December 31, 2017 and bears interest at an annual rate of 8%, compounded monthly. The note is convertible to the Company’s common stock at $5.60 per share prior to a listing on a public exchange. If converted after a listing on a public exchange, the conversion shares shall be calculated as the average of the 7 days closing price. As of September 30, 2017, outstanding principal and accrued interest for the note were $1,000,000 and $28,055, respectively. The note is secured by all assets of the Company. We used the proceeds for general working capital requirements.

~~In addition~~fixed dividends to our cash and banking arrangements, we had accounts receivable of $5,168,641 on September 30, 2017. Our accounts receivable provides an additional source of liquidity as cash payments are collected from customers in the normal course of business. Our accounts receivable balance fluctuates throughout the year based on the seasonality of the business.

Series B preferred shareholders.

Our ~~other~~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, capital equipment leases and other operating~~ 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

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available as of June 30, 2023. 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 ~~generally accepted accounting principles accepted in the United States.~~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 ~~the~~ 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 ~~each set of~~ the unaudited condensed consolidated financial ~~statements.~~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.:

Revenue Recognition

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

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in a change in the composition of our reporting units. 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.

~~Revenue Recognition~~

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.

~~Revenue is comprised~~As of ~~product sales~~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 ~~service~~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 ~~net~~growth rate of sales returns, co-operative advertising credits, early payment discounts and volume discount paid to VARs. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured.

~~Revenue from product sales is derived from the sale of projectors, interactive panels and related accessories. Evidence of an arrangement consists of an order~~approximately 5.0% from its ~~distributors, resellers or end users. The Company considers delivery to have occurred once title and risk~~forecasted 2023 revenue. Beyond fiscal 2028, we assumed a long-term revenue growth rate of ~~loss has been transferred.~~

~~Service revenue is comprised~~3.0% in the terminal year. As of product installation services and training services. These service revenues are normally entered into at the time products are sold. Service prices are established depending on product equipment sold and includeJune 30, 2023, we utilized a ~~cost value~~WACC of 14.0% for the ~~estimated services to be performed based on historical experience. The Company outsources installation and training services to third parties and recognizes revenue upon completion of the services.~~

The Company’s standard terms and conditions of sale do not allow for product returns and it generally does not allow product returns other than under warranty. However, the Company, on a case by case basis, will grant exceptions, mostly “buyer’s remorse” where the VAR’s end user customer either did not understand what they were ordering, or determined that the product did not meet their needs. An allowance for sales returns is estimated based on an analysis of historical trends.

Before Mimio was acquired by the Company, it generally provided 24 to 60 months of warranty coverage on all of its products. Mimio products’ standard warranty period is 24 months, which can be extended to 60 months upon the end user “registering” their device on-line. The Company’s warranty provides for repair or replacement of the associated products during the warranty period. The Company does not record warranty cost upon sale, and instead conducts a periodic review of the warranty liability reserve, and based on historical cost-to-trailing- revenue history, will adjust the warranty liability, with the offset to this adjustment recorded to cost of revenue.

After the acquisitions of Mimio, Genesis and Boxlight Group, the Company determined a new warranty policy to provide 12 to 36 months of warranty coverage on projectors, displays, accessories, batteries and computers except when sold through a “Premier Education Partner” or sold to schools where the Company provides a 60 month warranty. The Company does not record warranty costs upon sale, and instead conducts a periodic review of the warranty liability reserve, and based on historical experience, will adjust the warranty liability, with the offset to this adjustment recorded to cost of revenue. The warranty obligation is affected by product failureAmericas reporting unit. Given expected growth projections from industry sources, we believe these modest long-term growth rates and the ~~related~~WACC are appropriate to use ~~of materials, labor costs and freight incurred in correcting any product failure. Should~~for our future cash flow assumptions. We also believe that it is possible that our actual ~~product failure~~revenue growth rates ~~use of materials, or other costs differ from the Company’s estimates, additional warranty liabilities~~ could be ~~required, which would reduce its gross profit.~~

The Company offers sales incentives where the Company offers discounted products delivered by the Company to its resellers and distributors that are redeemable only if the resellers and distributors complete specified cumulative levels of revenue agreed to and written into their reseller and distributor agreements through an executed addendum. The resellers and distributors have to submit a request for the discounted products and cannot redeem additional discounts within 180 days from the date of the discount given on like products. The value of the award products as compared to the value of the transactions necessary to earn the award is generally insignificant in relation to the value of the transactions necessary to earn the award. The Company estimates and records the cost of the products related to the incentive as marketing expense based on analyses of historical data.

~~Inventories~~

The Company continuously reviews its inventory levels to identify slow-moving merchandise and markdowns necessary to clear slow-moving merchandise, which reduces the cost of inventories to its estimated net realizable value. Consideration is givensignificantly higher due to a number of ~~quantitative and qualitative~~ factors, ~~including current pricing levels and~~including: (i) the ~~anticipated need for subsequent markdowns, aging~~availability of ~~inventories, historical sales trends, and~~government funding allocated to the ~~impact of market trends and economic conditions. Estimates of markdown requirements may differ from actual results due to changes in quantity, quality and mix of products in inventory,~~education sector as ~~well as changes in consumer preferences, market and economic conditions.~~

~~Intangible Assets and Impairment~~

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 and goodwill are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Goodwill is not amortized and is not deductible for tax purposes.

Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount or fair value less cost to sell.

~~Emerging Growth Company~~

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Certain specified reduced reporting and other regulatory requirements that are available to public companies that are emerging growth companies.

~~These provisions include:~~

	~~(1)~~	~~an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002;~~

	~~(2)~~	~~an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;~~

	~~(3)~~	an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements; and

	~~(4)~~	~~reduced disclosure about our executive compensation arrangements.~~

~~We have elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they would apply to private companies. 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 ~~election,~~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 ~~statements may not be comparable~~condition.

Stock-based Compensation Expense

Derivative Warrant Liabilities

Income Taxes

Recent Accounting Pronouncements

For information on accounting pronouncements that have impacted or are expected to ~~companies that comply with public company effective dates.~~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.

~~Not applicable.~~34

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Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

~~Under the supervision and with the participation of management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the Company conducted an evaluation of its~~We maintain disclosure controls and procedures as ~~such term is~~ defined ~~under Rule~~in Rules 13a-15(e) ~~promulgated~~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 ~~Securities~~ Exchange Act ~~of 1934,~~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 ~~amended (the “Exchange Act”) as~~appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of ~~March 31, 2014. Based on this evaluation, its CEO and CFO concluded the Company’s~~ disclosure controls and procedures ~~are~~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 lack of a functioning audit committee, a majority of independent members and a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment, and lack of monitoring of required internal control and procedures.

~~(b) Changes in internal controls over financial reporting.~~

~~There were no changes~~material weaknesses described in our ~~internal control over~~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 ~~reporting that occurred during~~statements included in this Quarterly Report on Form 10-Q fairly present in accordance with the ~~nine-month period ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect,~~GAAP, in all material respects, our ~~internal controls over~~ financial ~~reporting.~~condition, results of operations and cash flows for the periods presented in this report.

~~Inherent~~ 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 ~~control~~controls systems, no ~~control system~~evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Notwithstanding these limitations, with the changes referenced above, we believe that ourOur disclosure controls and procedures are designed to provide reasonable assurance of achieving ~~their~~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

~~On June 1, 2017, a lawsuit was filed against the Company, Mimio LLC, Mim Holdings, VC2 Partners~~While we are not currently involved in any material legal proceedings, from time-to-time we are, and ~~Vert Capital Corp by Skyview Capital for breach of a $1,460,508 restated note. On September 11, 2017,~~ we ~~paid Skyview the sum of $1,577,653, which included the principal balance of $1,460,508, plus accrued interest of $117,145, due and payable to Skyview. Although we believe~~anticipate that we ~~have paid this obligation~~will be, involved in ~~full, Skyview may seek additional costs~~legal proceedings, claims, and ~~penalties as we have not received a release from Skyview in connection with the pending lawsuit.~~

In October 2017, a supplier filed a lawsuit against the Company for outstanding debt and accrued interest owed by the Company of approximately $838,214. The lawsuit also included a claim for attorney fees of $83,846. The Company has obtained legal counsel and islitigation arising in the ~~process~~ordinary course of ~~negotiating~~our business and otherwise. The ultimate costs to resolve any such matters could have a ~~settlement.~~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.

~~Not Applicable.~~35

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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 ~~SALE~~SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

~~None.~~

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

~~Item~~

ITEM 6. ~~Exhibits~~

EXHIBITS

The following exhibits are filed or furnished with this report:

Exhibit No.

~~Exhibit No.~~		Description of Exhibit
3.1		Eleventh Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.5 to the Registration Statement on Form S-1 (File No. 333-204811) filed on December 15, 2016).
~~31.1~~ 3.2		Amended and Restated Bylaws adopted June 24, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on June 24, 2021).
4.1		Certificate of Designations of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.1 in the Registration Statement on Form S-1 (Reg. No. 377-00845) filed on June 9, 2015).
4.2		Amended and Restated Certificate of Designations of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1/A (Reg. No 333-204811) filed on October 9, 2015.
4.3		Operating Agreement of EOSEDU, LLC, dated September 17, 2018, by and between the Boxlight Corporation and EOSEDU, LLC dated September 17, 2018 (incorporated by reference to Exhibit 4.8 to Amendment No. 1 to the Registration Statement on Form S-1 (Reg. No. 333-226068) filed on September 24, 2018).
4.4		Form of Amended and Restated Certificate of Designations for Series B Convertible Preferred Stock (incorporated by reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q for the period ended September 30, 2020).
4.5		Form of Amended and Restated Certificate of Designations for the Series C Convertible Preferred Stock (incorporated by reference to Exhibit 4.4 to the Quarterly Report on Form 10-Q for the period ended September 30, 2020).
4.6		Form of Warrant, dated December 31, 2021, issued to WhiteHawk Finance LLC (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8- K filed January 5, 2022).

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4.7		Description of Securities. (incorporated by reference to Exhibit 4.9 to the Annual Report on Form 10- K filed March 17, 2023).
4.8		Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed July 26, 2022).
4.9		Form of Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed July 26, 2022).
10.1		Third Amendment to Credit Agreement, dated April 24, 2023, between Boxlight Corporation, its subsidiaries, Whitehawk Capital Partners, LP and Whitehawk Finance LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed April 26, 2023).
10.2		Note of Borrowing, dated April 24, 2023, from Boxlight Corporation addressed to Whitehawk Capital Partners, LP(incorporated by reference to exhibit 10.2 to the Current Report on Form 8-k filed April 26, 2023).
10.3*		Consent of Waiver of Borrowing Base Default, SOFR Amendment and amendment of Prepayment Premium dated June 15, 2023, between Boxlight Corporation, its subsidiaries, Whitehawk Capital Partners, LP and Whitehawk Finance LLC.
10.4*		Fourth Amendment to the Credit Agreement, dated June 26, 2023, between Boxlight Corporation, its subsidiaries, Whitehawk Capital Partners, LP and Whitehawk Finance LLC.
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
~~31.2~~		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
~~32.1~~		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
~~32.2~~		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

** Furnished herewith.

SIGNATURES

~~Pursuant to~~In accordance with the requirements of the ~~Securities~~Exchange Act, ~~of 1933~~ the registrant ~~has duly~~ caused this ~~registration statement~~report to be signed on its behalf by the undersigned, thereunto duly ~~authorized, in the city of Lawrenceville, of the State of Georgia, on this 14~~^th~~day of November, 2017.~~

authorized.

	~~BOXLIGHT CORPORATION~~
			BOXLIGHT CORPORATION
	~~By:~~
August 9, 2023	By:	/s/ ~~JAMES MARK ELLIOTT~~Michael Pope
		~~James Mark Elliott~~ Michael Pope
		Chief Executive Officer

~~Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.~~

~~Signature~~		~~Title~~	~~Date~~
August 9, 2023	By:		/s/ Greg Wiggins
*~~/s/ JAMES MARK ELLIOTT~~*		~~Chief Executive Officer and Chairman~~	~~November 14, 2017~~ Greg Wiggins
~~James Mark Elliott~~		~~(Principal Executive Officer)~~

/*S~~/ Henry (“Hank”) Nance~~*		~~Chief Operating Officer~~	~~November 14, 2017~~
~~Henry (“Hank”) Nance~~

*~~/s/ SHERI LOFGREN~~*		Chief Financial Officer	~~November 14, 2017~~
~~Sheri Lofgren~~		(Principal Financial and Accounting Officer)

*~~/s/ MICHAEL POPE~~*		~~President and Director~~	~~November 14, 2017~~
~~Michael Pope~~

*		~~Director~~	~~November 14, 2017~~
~~Tiffany Kuo~~

*		~~Director~~	~~November 14, 2017~~
~~Robin Richards~~

*		~~Director~~	~~November 14, 2017~~
~~Dr. Rudolph Crew~~

*/s/ JAMES MARK ELLIOTT
~~James Mark Elliott~~
~~Authorized Signatory~~

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company