~~Boxlight Corporation~~

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

For the three and nine months ended September 30, 2023 and 2022

~~(unaudited)~~

(Unaudited)

(in thousands, except per 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 June 30, 2022

167,972

$
—

66,207,717

$
7

$
112,352

$
(2,681)

$
(66,130)

$
43,548

Shares issued for:

















Shares issued for acquisition

—

—

230,770

—

150

—

—

150

Issuance of warrants and prefunded warrants

—

—

—

—

2,348

—

—

2,348

Warrants exercised

—

—

352,940

—

—

—

—

—

Issuance of stock, net

—

—

7,000,000

—

2,352

—

—

2,352

Vesting of restricted share units

—

—

332,065

—

11

—

—

11

Stock compensation

—

—

—

—

603

—

—

603

Foreign currency translation

—

—

—

—

—

(5,040)

—

(5,040)

Fixed dividends Preferred Series B

—

—

—

—

(317)

—

—

(317)

Net income

—

—

—

—

—

—

3,105

3,105

Balance as of September 30, 2022

167,972

$
—

74,123,492

$
7

$
117,499

$
(7,721)

$
(63,025)

$
46,760

Balance as of December 31, 2021

167,972

$
—

63,821,901

$
6

$
110,867

$
3,728

$
(61,300)

$
53,301

Shares issued for:











Stock options exercised

—

—

193,841

—

69

—

—

69

Shares issued for acquisition

—

—

230,770

—

150

—

—

150

Issuance of warrants and prefunded warrants

—

—

—

—

2,348

—

—

2,348

Debt issuance costs

—

—

528,169

—

—

—

—

—

Vesting of restricted share units

—

—

1,995,871

—

—

—

—

—

Stock compensation

—

—

—

—

2,665

—

—

2,665

Issuance of stock

—

—

7,000,000

1

2,352

—

—

2,353

Warrants exercised

—

—

352,940

—

—

—

—

—

Foreign currency translation

—

—

—

—

—

(11,449)

—

(11,449)

Fixed dividends Preferred Series B

—

—

—

—

(952)

—

—

(952)

Net loss

—

—

—

—

—

—

(1,725)

(1,725)

Balance as of September 30, 2022

167,972

$
—

74,123,492

$
7

$
117,499

$
(7,721)

$
(63,025)

$
46,760


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues, net	$	49,667	$	68,736	$	137,909	$	178,967
Cost of revenues	31,653		47,716		86,919		128,497
Gross profit	18,014		21,020		50,990		50,470

Operating expense:
General and administrative	15,408		13,952		45,366		44,714
Research and development	979		604		2,101		1,865
Impairment of goodwill	13,226		—		13,226		—
Total operating expense	29,613		14,556		60,693		46,579

(Loss) income from operations	(11,599)		6,464		(9,703)		3,891

Other (expense) income:
Interest expense, net	(2,987)		(2,598)		(8,222)		(7,330)
Other expense, net	(181)		(128)		(231)		(204)
Gain on settlement of liabilities, net	—		—		—		856
Change in fair value of derivative liabilities	90		(113)		50		1,537
Total other expense	(3,078)		(2,839)		(8,403)		(5,141)
(Loss) income before income taxes	$	(14,677)	$	3,625	$	(18,106)	$	(1,250)
Income tax expense	(3,073)		(520)		(3,379)		(475)
Net (loss) income	$	(17,750)	$	3,105	$	(21,485)	$	(1,725)
Fixed dividends - Series B Preferred	(317)		(317)		(952)		(952)
Net (loss) income attributable to common stockholders	$	(18,067)	$	2,788	$	(22,437)	$	(2,677)

Comprehensive loss:
Net (loss) income	$	(17,750)	$	3,105	$	(21,485)	$	(1,725)
Other comprehensive loss:
Foreign currency translation adjustment	(2,854)		(5,040)		(574)		(11,449)
Total comprehensive loss	$	(20,604)	$	(1,935)	$	(22,059)	$	(13,174)

Net (loss) income per common share – basic, as adjusted	$	(1.90)	$	0.31	$	(2.39)	$	(0.32)

Net (loss) income per common share - diluted, as adjusted	$	(1.90)	$	0.28	$	(2.39)	$	(0.32)

Weighted average number of common shares outstanding – basic, as adjusted	9,484		8,943		9,399		8,432

Weighted average number of common shares outstanding – diluted, as adjusted	9,484		11,197		9,399		8,432

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Boxlight Corporation

Condensed Consolidated ~~Statements~~Balance Sheets

As of ~~Changes in Stockholders’ Equity~~

~~For the three~~September 30, 2023 and ~~nine months ended September 2021~~

~~(unaudited)~~

December 31, 2022

(in thousands, except share and per 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 June 30, 2021

167,972

$
—

59,102,072

$
6

$
100,559

$
5,461

$
(54,886)

$
51,140

Shares issued for:

















Conversion of restricted shares

—

—

216,418

—

—

—

—

—

Conversion of debt obligations

—

—

1,755,009

—

3,911

—

—

3,911

Stock options exercised

—

—

162,400

—

159

—

—

159

Warrants exercised

—

—

75,000

—

152

—

—

152

Stock compensation

—

—

—

—

1,161

—

—

1,161

Fixed dividends Preferred Series B

—

—

—

—

(317)

—

—

(317)

Foreign currency translation

—

—

—

—

—

(2,008)

—

(2,008)

Net income

—

—

—

—

—

—

729

729

Balance as of September 30, 2021

167,972

$
—

61,310,899

$
6

$
105,625

$
3,453

$
(54,157)

$
54,927

Balance as of December 31, 2020

167,972

$
—

53,343,518

$
6

$
86,768

$
5,192

$
(47,498)

$
44,468

Shares issued for:

















Conversion of accounts payable liabilities

—

—

793,375

—

1,626

—

—

1,626

Conversion of debt obligations

—

—

5,693,481

—

13,783

—

—

13,783

Conversion of restricted shares

—

—

760,060

—

—

—

—

—

Stock compensation

—

—

—

—

3,020

—

—

3,020

Stock options exercised

—

—

481,834

—

405

—

—

405

Warrants exercised

—

—

95,749

—

203

—

—

203

Shares issued for acquisition

—

—

142,882

—

404

—

—

404

Fixed dividends Preferred Series B

—

—

—

—

(951)

—

—

(951)

Deemed contribution from Series B preferred

—

—

—

—

367

—

—

367

Foreign currency translation

—

—

—

—

—

(1,739)

—

(1,739)

Net loss

—

—

—

—

—

—

(6,659)

(6,659)

Balance as of September 30, 2021

167,972

$
—

61,310,899

$
6

$
105,625

$
3,453

$
(54,157)

$
54,927


	September 30, 2023		December 31, 2022
	(Unaudited)		(as adjusted)
ASSETS
Current assets:
Cash and cash equivalents	$	18,415	$	14,591
Accounts receivable – trade, net of allowances	40,421		31,009
Inventories, net of reserves	44,142		58,211
Prepaid expenses and other current assets	8,099		7,433
Total current assets	111,077		111,244

Property and equipment, net of accumulated depreciation	1,500		1,733
Operating lease right of use asset	8,428		4,350
Intangible assets, net of accumulated amortization	46,547		52,579
Goodwill	11,969		25,092
Other assets	851		397
Total assets	$	180,372	$	195,395

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	35,988	$	36,566
Short-term debt	1,022		845
Operating lease liabilities, current	1,570		1,898
Deferred revenues, current	8,202		8,308
Derivative liabilities	422		472
Other short-term liabilities	2,441		386
Total current liabilities	49,645		48,475

Deferred revenues, non-current	15,531		15,603
Long-term debt	43,355		43,778
Deferred tax liabilities, net	5,584		4,680
Operating lease liabilities, non-current	7,106		2,457
Total liabilities	121,221		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; 9,605,360 and 9,339,587 Class A shares issued and outstanding, respectively	1		1
Additional paid-in capital	118,733		117,849
Accumulated deficit	(86,604)		(65,043)
Accumulated other comprehensive loss	(1,488)		(914)
Total stockholders’ equity	30,642		51,893

Total liabilities and stockholders’ equity	$	180,372	$	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 ~~nine~~three months ended September 30, ~~2022 and 2021~~

~~(unaudited)~~

Nine Months Ended

September 30,

September 30,

2022

2021

Cash flows from operating activities:




Net loss

$
(1,725)

$
(6,660)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Amortization of debt discount and issuance cost

1,645

1,473
Bad debt expense (recovery)

9

(114)
(Gain) loss on settlement of liabilities

(856)

2,992
Changes in deferred tax assets and liabilities

(654)

912
Change in allowance for sales returns and volume rebate

431

542
Change in inventory reserve

634

56
Change in fair value of derivative liability

(1,537)

164
Shares issued for interest payment on notes payable

—

512
Stock compensation expense

2,665

3,020
Depreciation and amortization

6,818

5,264
Non-cash lease expense

(20)

—
Changes in operating assets and liabilities:

Accounts receivable – trade

(26,240)

(26,658)
Inventories

(4,722)

(10,084)
Prepaid expenses and other assets

(41)

(8,375)
Other assets

(332)

—
Accounts payable and accrued expenses

21,592

17,865
Other liabilities

(1,737)

2,134
Deferred revenues

4,570

3,875
Net cash provided by (used in) operating activities

500

(13,082)

Cash flows from investing activities:



Business acquisitions (net of cash acquired)

—

(804)
Asset acquisition

(100)

—
Purchases of property and equipment, net

(960)

(139)
Net cash used in investing activities

(1,060)

(943)

Cash flows from financing activities:



Net proceeds from issuance of common stock and warrants, net of issuance costs

4,700

405
Proceeds from issuances of short-term debt

2,500

43,269
Proceeds from exercise of options and warrants

70

—
Principal payments on debt

(1,878)

(35,487)
Debt issuance costs

—

(70)
Payments of fixed dividends to Series B Preferred stockholders

(952)

(952)
Net cash provided by financing activities

4,440

7,165

Effect of foreign currency exchange rates

134

(377)

Net increase (decrease) in cash and cash equivalents

4,014

(7,237)

Cash and cash equivalents, beginning of the period

17,938

13,460

Cash and cash equivalents, end of the period

$
21,952

$
6,223

Supplemental cash flow disclosures:

Cash paid for income taxes

$
1,615

$
1,458
Cash paid for interest

$
7,346

$
2,130

Non-cash investing and financing transactions:



Shares issued to settle accounts payable

$
—

$
1,626
Exercise of warrants

$
—

$
203
Deemed contribution - Series B Preferred

$
—

$
367
Deferred consideration for acquisition

$
—

$
537
Shares issued to convert notes payable and accrued interest

$
—

$
13,786
Shares issued for asset acquisition

$
150

$
403

2023

(Unaudited)

(in thousands, except share amounts)


	Series A Preferred Stock			Class A Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount

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

Shares issued for:



Vesting of restricted share units	—	—		139,866	—		—		—		—		—



Stock compensation	—	—		—	—		671		—		—		671

Foreign currency translation	—	—		—	—		—		(2,854)		—		(2,854)

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

Net loss	—	—		—	—		—		—		(17,750)		(17,750)

Balance as of September 30, 2023	167,972	$	—	9,605,360	$	1	$	118,733	$	(1,488)	$	(86,604)	$	30,642

See accompanying notes to unaudited condensed consolidated financial statements.

~~Table of Contents~~

There were various other accounting standards and interpretations issued recently, some of which although applicable, are not expected to a have a material impact on the Company’s financial position, operations, or cash flows.

~~SUBSEQUENT EVENTS~~

~~We reviewed all material events through the date on which these condensed consolidated financial statements were issued for subsequent event disclosure consideration as described in Note 17.~~

~~NOTE 2 – RECENT BUSINESS ACQUISITIONS~~

~~FrontRow Calypso LLC~~

On December 31, 2021, the Company, and its wholly owned subsidiary, Boxlight, Inc., consummated the acquisition of 100% of the membership interests of FrontRow Calypso LLC, a Delaware limited liability company (“FrontRow”). FrontRow was acquired in exchange for payment of $34.7 million to Phonic Ear Inc. and Calypso Systems LLC, the equity holders of FrontRow.

Based in Petaluma, California, FrontRow makes technology that improves communication in learning environments, including developing network-based solutions for intercom, paging, bells, mass notification, classroom sound, lesson sharing, AV control and management. FrontRow also has offices in Toronto, Copenhagen, Brisbane, Hamilton (UK) and Shenzhen.

In order to finance the acquisition of FrontRow, the Company and substantially all of its direct and indirect subsidiaries, including Boxlight and FrontRow as guarantors, entered into a term loan credit facility with Whitehawk Finance LLC described in more detail in Note 9.

The assets acquired and liabilities assumed were recorded at their estimated fair values at the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, and selection of comparable companies. The Company engaged the assistance of an independent third-party valuation specialist to determine certain fair value measurements related to acquired assets. The excess consideration over the net fair values of the assets acquired and liabilities assumed was recognized as goodwill.

The fair value or net realizable value of inventories at the date of acquisition was determined using a “top-down” approach based upon the estimated sales value, less a reasonable profit margin and less the estimated costs to dispose of the inventory, including selling costs and other disposal costs such as freight. Accordingly, the carrying amount of inventories at the acquisition date was increased to its estimated fair value based on these assumptions which will result in an increase in cost of revenues subsequent to the acquisition date in 2022. The fair value of accounts receivable acquired in connection with the acquisition approximated the contractual amount due from customers at that date.

Table of Contents

The Company has early adopted ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” and therefore, the acquired contract liabilities of FrontRow have been recognized and measured in accordance with Topic 606 as follows.

(in thousands)
Assets acquired:

Cash

$
2,752
Accounts receivable

3,381
Inventories

10,240
Prepaid expenses

883
Property and equipment

348
Total assets acquired

17,604

Accounts payable and accrued expenses

(1,501)
Deferred revenue

(1,225)
Other liabilities

(12)
Total liabilities assumed

(2,738)

Net tangible assets acquired

$
14,866

Identifiable intangible assets:

Customer relationships

8,195
Trademarks

3,244
Technology

5,036
Non-compete

391
Total intangible assets subject to amortization

16,866

Goodwill

2,920

Total net assets acquired

$
34,652

Consideration paid:

Cash

$
34,652

The following table presents the useful lives over which the acquired intangible assets will be amortized on a straight-line basis, which approximates the pattern by which the related economic benefits of the assets are consumed:


		~~Estimated~~
		~~Weighted Average~~
		~~Life (years)~~
~~Customer relationships~~		8
~~Trademarks~~		10
~~Technology~~		8
~~Non-compete agreements~~		3

~~Interactive Concepts~~

On March 23, 2021, the Company acquired 100% of the outstanding shares of Interactive Concepts BV, a company incorporated and registered in Belgium and a distributor of interactive technologies (“Interactive”), for total consideration of approximately $3.3 million in cash, common stock and deferred consideration. Interactive has been Boxlight’s key distributor in Belgium and Luxembourg.

~~Table of Contents~~

~~The following table summarizes the estimated acquisition date fair values of the net assets acquired and liabilities assumed, and the estimate of the fair value of consideration paid:~~

(in thousands)
Assets acquired:

Cash

$
1,647
Accounts receivable

1,045
Inventories

191
Property and equipment

37
Total assets acquired

2,920

Accounts payable and accrued expenses

(821)
Deferred tax liability

(230)
Total liabilities assumed

(1,051)

Net tangible assets acquired

1,869
Identifiable intangible assets:

Tradename

220
Customer relationships

745
Total intangible assets subject to amortization

965

Goodwill

439

Total net assets acquired

$
3,273

Consideration paid:

Cash

$
1,795
Deferred cash consideration

1,075
Common shares issued

403

Total consideration paid

$
3,273

NOTE 32 – ACCOUNTS RECEIVABLE - TRADE

Accounts receivable consisted of the following at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

2022

2021

Accounts receivable – trade

$
53,174

$
31,053
Allowance for doubtful accounts

(555)

(405)
Allowance for sales returns and volume rebates

(1,365)

(1,075)
Accounts receivable - trade, net of allowances

$
51,254

$
29,573


	2023		2022

Accounts receivable – trade	$	43,773	$	33,198
Allowance for doubtful accounts	(315)		(414)
Allowance for sales returns and volume rebates	(3,037)		(1,775)
Accounts receivable - trade, net of allowances	$	40,421	$	31,009

NOTE 43 – 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.

~~Table of Contents~~

Inventories consisted of the following at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

2022

2021

Finished goods

$
49,577

$
51,346
Spare parts

998

260
Reserve for inventory obsolescence

(1,232)

(599)
Advanced shipping costs

92

584
Inventories, net

$
49,435

$
51,591


	2023		2022

Finished goods	$	43,680	$	56,583
Spare parts	1,329		775
Reserve for inventory obsolescence	(1,807)		(531)
Advanced shipping costs	940		1,384
Inventories, net	$	44,142	$	58,211

NOTE 54 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

2022

2021

Prepayments to vendors

$
7,085

$
7,739
Prepaid licenses and other

1,928

1,705
Prepaid expenses and other current assets

$
9,013

$
9,444


	2023		2022

Prepayments to vendors	$	4,352	$	4,131
Prepaid licenses and other	3,747		3,302
Prepaid expenses and other current assets	$	8,099	$	7,433

Table of Contents

NOTE 65 – INTANGIBLE ASSETS

AND GOODWILL

Intangible Assets

Intangible assets consisted of the following at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

Useful lives

2022

2021

Patents

4-10 years

$
182

$
182
Customer relationships

8-15 years

47,650

55,158
Technology

3-5 years

8,521

8,901
Domain

7 years

14

14
Non-compete

8-15 years

391

391
Tradenames

2-10 years

12,065

13,085
Intangible assets, at cost

68,823

77,731
Accumulated amortization

(16,910)

(12,199)
Intangible assets, net of accumulated amortization

$
51,913

$
65,532


	Useful lives	2023		2022
INTANGIBLE ASSETS
Patents	4-10 years	$	182	$	182
Customer relationships	8-15 years	51,031		52,736
Technology	3-5 years	8,804		8,943
Domain	7 years	14		14
Non-compete	8-15 years	391		391
Tradenames	2-10 years	12,528		12,769
Intangible assets, at cost		72,950		75,035
Accumulated amortization		(26,403)		(22,456)
Intangible assets, net of accumulated amortization		$	46,547	$	52,579

For the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded amortization expense of $2.1 ~~million and $1.8 million, respectively.~~million. For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded amortization expense of ~~$6.5~~$6.4 million and ~~$5.2~~$6.5 million, respectively. Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately ~~$6.3~~$2.1 million reduction as of September 30, ~~2022~~2023 and ~~$3.0~~$3.1 million ~~increase~~reduction as of December 31, ~~2021.~~

2022.

During the quarter ended September 30, 2023, as a result of the triggering events disclosed below, the Company performed an interim impairment test on its finite-lived intangible assets using undiscounted cash flows. There was no impairment recorded on finite-lived intangible assets during the nine months ended September 30, 2023.

Goodwill

During the quarter ended June 30, 2023, 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 $22.4 million and $2.8 million of goodwill to the Americas 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.

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During the quarter ended September 30, 2023, due to further declines in the Company’s market capitalization and a reduction in cash-flows resulting from continued softening in the industry leading to a reduction in sales from interactive flat-panel displays, the Company determined that a triggering event had occurred.

As of September 30, 2023, the Company performed an interim goodwill impairment test as a result of the triggering events identified. The Company’s methodology for estimating fair value was consistent with the income and market approaches used as of June 30, 2023. Certain estimates and assumptions, including the Company’s operating forecast for 2023 and future periods, were revised based on current industry and Company trends. For the three and nine months ended September 30, 2023, the Company recorded goodwill impairment charges of $10.4 million and $2.8 million to the Americas and EMEA reporting units, respectively, which also represents total accumulated goodwill impairment charges for each reporting unit.

NOTE 76 – LEASES

The Company has entered into various operating leases for certain ~~office,~~offices, support locations and vehicles with terms extending through ~~February 2027.~~July 2038. 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 ~~its~~the Company’s sole discretion. The Company does not consider the exercise of any lease renewal options reasonably certain. ~~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. ~~In connection with~~

~~Table of Contents~~

~~the adoption of ASC 842, the Company used incremental borrowing rates on January 1, 2022 for operating leases that commenced prior to that date.~~ 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 September 30, ~~2022,~~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 $712 thousand and $439 thousand for the three months ended September 30, 2023 and September 30, 2022, respectively and $1.8 million and $1.5 million for the nine months ended September 30, ~~2022.~~2023 and September 30, 2022, respectively. Variable lease costs and short-term lease cost were not material for the three and nine months ended September 30, 2023 and September 30, 2022. Cash paid for amounts included in the measurement of lease liabilities was $660 thousand and $267 thousand for the three months ended September 30, 2023 and September 30, 2022, respectively and $1.9 million and $1.4 million for the nine months ended September 30, ~~2022. During the three months ended~~2023 and September 30, 2022, the Company obtained new operating lease right-of-use assets totaling $143 thousand and for the nine months ended September 30, 2022, the Company obtained $2.0 million in operating right-of-use assets.

2022.

Future maturities of the Company's operating lease liabilities are summarized as follows (in thousands):

Fiscal year ended,

2022

$
647
2023

2,000
2024

1,271
2025

1,068
2026

731

5,717
Less imputed interest

(1,356)
Total

$
4,361

~~Supplemental~~


2023	$	697
2024	1,396
2025	1,490
2026	1,137
2027	697
Thereafter	4,371
	9,788
Less imputed interest	(1,112)
Total	$	8,676

The following is supplemental lease information

at September 30, 2023:


Weighted-average remaining lease term (years)	9.9		~~3.5~~
Weighted-average discount rate	11.0	~~15.5~~	%

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NOTE 87 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expense consisted of the following at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

2022

2021
Accounts payable

$
38,955

$
25,714
Accrued expense

8,648

6,440
Other

807

1,484
Accounts payable and other liabilities

$
48,410

$
33,638


	2023		2022
Accounts payable	$	30,096	$	30,719
Accrued expense and other	5,892		5,847
Accounts payable and other liabilities	$	35,988	$	36,566

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NOTE 98 – DEBT

The following is a summary of the Company’s debt as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

2022

2021
Debt – Third Parties




Paycheck Protection Program

$
140

$
1,009
Note payable - Whitehawk

59,063

58,500
Total debt

59,203

59,509
Less: Discount and issuance costs

5,923

7,568
Current portion of debt

9,224

9,804
Long-term debt

$
44,056

$
42,137
Total debt (net of discount and issuance costs)

$
53,280

$
51,941


	2023		2022
Debt – Third Parties
Paycheck Protection Program	$	85	$	127
Note payable - Whitehawk	47,900		49,906
Total debt	47,985		50,033
Less: Premium, discount and issuance costs	3,608		5,410
Current portion of debt	1,022		845
Long-term debt	$	43,355	$	43,778
Total debt (net of premium, discount and issuance costs)	$	44,377	$	44,623

Debt - Third Parties:

Whitehawk Finance LLC

In order to finance the acquisition of FrontRow Calypso LLC (“FrontRow”), which closed on December 31, 2021, the Company and substantially all of its direct and indirect subsidiaries, including Boxlight and FrontRow as guarantors, entered into a maximum $68.5 million term loan credit facility, dated December 31, 2021 (the “Credit Agreement”), with Whitehawk Finance LLC, as lender (the “Lender”), and White Hawk Capital Partners, LP, as collateral ~~agent.~~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~~available for additional working capital purposes under certain conditions (the “Delayed Draw”). The Initial Loan and Delayed Draw are collectively referred to as the “Term Loans.” The proceeds of the Initial Loan were used to finance the Company’s acquisition of FrontRow, pay off all indebtedness owed to the Company’s then existing lenders, Sallyport Commercial Finance, LLC and Lind Global Asset Management, LLC, pay related fees and transaction costs, and provide working capital. Of the Initial Loan, $8.5 million was subject to repayment on February 28, 2022, with quarterly principal payments of $625,000 and interest payments commencing March 31, 2022 and the $40.0 million remaining balance plus any Delayed Draw loans becoming due and payable in full on December 31, 2025. The Term Loans bear interest at the LIBOR rate plus 10.75%; provided that after March 31, 2022, if the Company’s Senior Leverage Ratio (as defined in the Credit Agreement) is less than 2.25, the interest rate would be reduced to LIBOR plus 10.25%. Such terms are subject to the Company maintaining a borrowing base in ~~terms compliant~~compliance with the Credit Agreement.

In the event of non-compliance with the borrowing base, the Company would be subject to an increased interest rate as stated in the Credit Agreement.

On April 4, 2022, the Collateral Agent and Lender agreed to extend the terms of repayment of the $8.5 million originally due on February 28, 2022 until February 28, 2023. The principal elements of the April amendment included (a) an extension of time to repay $8.5 million of the principal amount of the term loan from February 28, 2022 to February 28, 2023, and (b) forbearance on $3.5 million in over advances until May 16, 2022 to allow the Company to come into compliance with the borrowing base requirements set forth in the Credit Agreement. In such connection, the Company and substantially all of its direct and indirect subsidiaries (together with the Company, 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, the accounts of these key customers had been deemed ineligible for inclusion in the borrowing base

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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 excess cash flow or casualty events.

On June 21, 2022, the Loan Parties entered into a second amendment (the “Second Amendment”) to the Credit Agreement with the Collateral Agent and Lender. The Second Amendment to the Credit Agreement was entered into for purposes of the Lender funding a $2.5 million delayed draw term loan and adjusting certain terms to the Credit Agreement, including adjusting the Applicable Margin (as defined in the Second Amendment) to 13.25% for LIBOR Rate Loans and 12.25% for Reference Rate Loans, increasing the definition of change of control from 33% voting power to 40% voting power, requiring the Company to engage a financial advisor, and allowing additional time, until July 15, 2022, for the Company to come into compliance with certain borrowing base requirements set forth in the Second Amendment to the Credit Agreement, among other adjustments.

On April 24, 2023, the Company entered into a third amendment (the “Third Amendment”) to the Credit Agreement, with the Collateral Agent and the Lender. The Third Amendment was entered into for purposes of the Lender funding an additional $3.0 million delayed draw term loan (the “Additional Draw”). The Additional Draw was funded on April 24, 2023, must be repaid on or prior to September 29, 2023, is not subject to any prepayment penalties, and adjusts certain terms to the Credit Agreement, including adjusting the test period end dates and corresponding Senior Leverage Ratios (as defined in the Credit Amendment) and revising the minimum liquidity requirements that the Company must maintain compliance with pertaining to certain Borrowing Base Requirements, among other adjustments. The completion of the additional draw eliminates further delayed draws under the term loan agreement. On July 20, 2023, the Company paid the $3.0 million due under the terms of the Third Amendment. There were no prepayment penalties or premiums included with this payment. During the nine months ended September 30, 2023, the Company repaid principal of $5.0 million and interest of $6.4 million to Whitehawk.

On June 26, 2023, the Company entered into a fourth amendment (the “Fourth Amendment”) with the Collateral Agent and the Lender for the sole purpose of replacing LIBOR-based rates with a SOFR-based rate. Following the Fourth Amendment, the Company’s interest rate is calculated as the Daily Simple SOFR, subject to a floor of 1%, plus the SOFR Term Adjustment and Applicable Margin, as defined in the Credit Agreement, as amended. The Fourth Amendment made no other changes to the Credit Agreement.

Covenant Compliance and Liquidity Considerations

The Company's Credit Agreement, as amended to date, requires compliance with certain monthly covenants, which include provisions regarding over advance limitations based upon a borrowing base. In the second quarter of 2023, as part of obtaining an appropriate waiver, the Company agreed to engage a financial advisor and to use commercial reasonable efforts to refinance the Credit Agreement with an alternative lender and repay the Credit Facility by September 30, 2023, or as soon thereafter as practical. The waiver did not amend the maturity date of the Credit Agreement. Upon repayment, the Company will be subject to a prepayment premium that is higher than the prepayment premium included in the original Credit Agreement, as defined in the waiver.

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.

The Company was not in compliance with its financial covenant related to the Senior Leverage Ratio under the Credit Agreement at September 30, 2023. The Company cured the non-compliance by paying $4.3 million inclusive of $0.3 million in prepayment penalties and accrued interest in November 2023 which would have resulted in the Company being in compliance with the Senior Leverage Ratio at September 30, 2023.

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Issuance Cost and Warrants

In conjunction with its receipt of the Initial Loan, the Company issued to the Lender (i) ~~528,169~~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 ~~2,043,291~~255,411 shares of Class A common stock (subject to increase to the extent ofthat 3% of any Series B and Series C convertible preferred stock converted into Class A common stock), exercisable at ~~$2.00~~$16.00 per share (the “Warrant”), which Warrant was subject to repricing on March 31, 2022 based on the arithmetic volume weighted average prices for the 30 trading days prior to September 30, 2022, in the event the Company’s stock is then trading below ~~$2.00~~$16.00 per share, (iii) a 3% fee of $1,800,000, and (iv) a $500,000 original issue discount. In addition, the Company agreed to register for resale the shares issuable upon exercise of the Warrant. The Company also incurred agency fees, legal fees, and other costs in connection with the execution of the Credit Agreement totaling approximately $1.7 million. Under the terms of the warrant issued to Whitehawk on December 31, 2021, the exercise price of the warrants would reprice if the stock price on March 31, 2022 was less than the original exercise price, at which time the number of warrants would also be increased proportionately, so that after such adjustment the aggregate exercise price payable for the increased number of warrant shares would be the same as the aggregate exercise price previously in effect. The warrants repriced on March 31, 2022 to ~~$1.19~~$9.52 per share and the shares increased to ~~3,434,103.~~

429,263.

On July 22, 2022, the Company entered into a ~~Securities Purchase Agreement~~securities purchase agreement (the “Purchase Agreement”) with an accredited institutional investor. According to the terms of the ~~Whitehawk agreement, this purchase agreement~~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 ~~$1.10~~$8.80 and shares increased to ~~3,715,075.~~

On March 29, 2022, the Company received a notice from the collateral agent, alleging, among other things, defaults as a result of (i) failure to repay $8.5 million of the facility by February 28, 2022, (ii) non-compliance with the borrowing base resulting in the Company being in an over advance position under the Credit Agreement, and (iii) failure to timely provide certain reports and

464,385.

~~Table of Contents~~

documents. As a result, all accrued and unpaid interest owed under the Term Loan, became subject to a post-default interest rate equal to the highest interest rate allowed for under the Credit Agreement plus 2.50% until such time as the events of default were either waived or cured. In February 2022, WhiteHawk and the Company agreed in principle to an extension of the February 2022 Payment. Pursuant to amendment to the Credit Agreement, dated April 4, 2022, the Collateral Agent and Lender agreed to extend the terms of repayment of the $8.5 million originally due on February 28, 2022 until February 28, 2023 and waive and/or otherwise extend compliance with certain other terms of the Credit Agreement in order to allow the Loan Parties adequate time to comply with such terms. In July 2022, the Company and Whitehawk agreed that the notice had inadvertently included the default with respect to the failure to repay ~~$8.5 million of the facility. As a result, notwithstanding the notice, both WhiteHawk and the Company have agreed that the Company was not in default in making the February 2022 Payment to WhiteHawk.~~

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 $3,500,000 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 have 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. In conjunction with the amendment to the Credit Agreement, the parties entered into an amended and restated fee letter (the “Fee Letter”) pursuant to which the parties agreed to prepayment premiums of (i) 5% for payments made on or before December 31, 2022, (ii) 4% for payments made between January 1, 2023 and December 31, 2023, and (iii) 2% for payments made between January 1, 2024 and December 31, 2025. Furthermore, the parties agreed that no prepayment premiums would be payable with respect to the first $5.0 million paid under the Term Loan, any payments made in relation to the $8.5 million due on or before February 28, 2023, any required amortization payments under the Credit Agreement and any mandatory prepayments by way of ECF or casualty events.

On June 21, 2022, the Company and substantially all of its direct and indirect subsidiaries (together with the Company, the “Loan Parties”), entered into a second amendment (the “Second Amendment”) to the four year term loan credit facility, originally entered into December 31, 2021 and as amended on April 4, 2022 (the “Credit Agreement”), with the Collateral Agent and Lender.

The Second Amendment to the Credit Agreement was entered into for purposes of the Lender funding a $2.5 million delayed draw term loan and adjusting certain terms to the Credit Agreement, including adjusting the Applicable Margin (as defined in the Second Amendment) to 13.25% for LIBOR Rate Loans and 12.25% for Reference Rate Loans, increasing the definition of change of control from 33% voting power to 40% voting power, requiring the Company to engage a financial advisor, and allowing additional time, until July 15, 2022, for the Company to come into compliance with certain borrowing base requirements set forth in the Second Amendment to the Credit Agreement, among other adjustments. During the three-month period ending September 30, 2022, the Company repaid principal of $656 thousand and interest of $2.0 million to Whitehawk. During the nine-month period ending September 30, 2022, the Company repaid principal of $1.9 million and interest of $5.6 million to Whitehawk.

~~Lind Global Marco Fund and Lind Global Asset Management~~

During the nine months ended September 30, 2021, the Company repaid principal of $9.9 million and interest of $511 thousand, to Lind Global by issuing a total of 5.7 million shares of Class A common stock with an aggregate value of $13.8 million to Lind Global and recognized a loss extinguishment of debt of approximately $3.4 million.

Paycheck Protection Program Loan

On May 22, 2020, the Company received loan proceeds of $1.1 million under the Paycheck Protection Program. During 2021, the Company applied for forgiveness in the amount of $836 thousand. On March 2, 2022, we received a decision letter from the lender that the forgiveness application had been approved, leaving a remaining balance of $173 thousand to be paid. The Company received a payment schedule from our lender on May 5, 2022, extending the payoff date until May 2025. ~~The~~As of September 30, 2023, the amount remaining on the loan ~~at September 30, 2022~~ was ~~$140~~less than $100 thousand.

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~~Everest Display, Inc.~~

On January 26, 2021, the Company entered into an agreement with EDI and EDI’s subsidiary, AMAGIC, settling $1,983,436 in accounts payable owed by the Company to EDI for 793,375 shares of Class A common stock. During the nine months ended September 30, 2021, the Company recognized a $357 thousand gain.

~~Accounts Receivable Financing – Sallyport Commercial Finance~~

On September 30, 2020, Boxlight Inc. and EOS EDU LLC entered into an asset-based lending agreement with Sallyport Commercial Finance, LLC (“Sallyport”). Sallyport agreed to purchase 90% of the eligible accounts receivable of the Company during the Term with a right of recourse back to the Company if the receivables are not collectible. Advances against this agreement accrue interest at the rate of 3.50% in excess of the highest prime rate publicly announced from time to time with a floor of 3.25%. In addition, the Company is required to pay a daily audit fee of $950 per day.

On July 20, 2021, Boxlight and Sallyport amended the Accounts Receivable Agreement (the “ARC Amendment”) for purposes of increasing the Maximum Facility Limit Amount to $13,000,000, as well as increasing the minimum monthly sales from $1,250,000 to $3,000,000. In exchange for entry into the ARC Amendment, Boxlight agreed to a fee of $50,000, representing one percent of the increased Maximum Facility Limit Amount. Other terms of the Accounts Receivable Agreement remain unchanged. On August 6, 2021, Boxlight and Sallyport entered into an additional amendment of the Accounts Receivable Agreement (the “Second ARC Amendment”), which further increased the Maximum Facility Limit Amount to $15,000,000. In exchange for entry into the Second ARC Amendment, Boxlight agreed to a fee of $20,000, representing one percent of the increased Maximum Facility Limit Amount. Other terms of the Accounts Receivable Agreement remain unchanged.

NOTE 109 – 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 atas of September 30, ~~2022~~2023 and December 31, ~~2021.~~

September 30, 2022

Common stock issuable upon exercise of warrants

3,715,075

Market value of common stock on measurement date

$
0.62

Exercise price

$
1.10

Risk free interest rate (1)

4.07
%
Expected life in years

4.25 years

Expected volatility (2)

92
%
Expected dividend yields (3)

—
%

December 31, 2021

Common stock issuable upon exercise of warrants

2,043,291

Market value of common stock on measurement date

$
1.38

Exercise price

$
2.00

Risk free interest rate (1)

1.25
%
Expected life in years

5 years

Expected volatility (2)

79
%
Expected dividend yields (3)

—
%

~~(1)~~

~~The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.~~

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2022.

	~~(2)~~	~~The Company does not expect to pay a~~
			September 30, 2023
Common stock issuable upon exercise of warrants			464,385
Market value of common stock on measurement date			$	1.91
Exercise price			$	8.80
Risk free interest rate (1)			4.66		%
Expected life in years			3.25 years
Expected volatility (2)			106.0		%
Expected dividend ~~in the foreseeable future.~~ yields (3)			—		%

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	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 1110 – INCOME TAXES

Pretax (loss) income resulting from domestic and foreign operations is as follows (in thousands):

Three Months

Three Months

Ended

Ended

September 30

September 30,

2022

2021
United States

$
3,320

$
(3,114)
Foreign

305

5,234
Total pretax book income

$
3,625

$
2,120

Nine Months Ended

Nine Months Ended

September 30

September 30,


2022

2021
United States

$
(589)

$
(8,541)
Foreign

(661)

5,817
Total pretax book loss

$
(1,250)

$
(2,724)


	Three Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,		Nine Months Ended September 30,
	2023		2022		2023		2022
United States	$	(8,041)	$	3,320	$	(11,761)	$	(589)
Foreign	(6,636)		305		(6,345)		(661)
Total pretax book (loss) income	$	(14,677)	$	3,625	$	(18,106)	$	(1,250)

The Company recorded income tax expense of $3.1 million and $520 thousand ~~and $1.4 million~~ for the three months ended September 30, ~~2022~~2023 and ~~September 30, 2021,~~2022, respectively, and income tax expense of $3.4 million and $475 thousand ~~of $3.9 million~~ for the nine months ended September 30, ~~2022~~2023 and ~~September 30, 2021,~~2022, respectively. The year-to-date effective tax rate is ~~38%~~18.7% while the September 30, 2022 year-to-date effective rate was 38.0%. The negative effective tax rate for 2023 is due to ~~there being no material tax expense/benefit for~~ the ~~legacy Boxlight entities, due to their valuation allowance position,~~Company paying income taxes in various jurisdictions while ~~the Sahara entities are fully taxable.~~

incurring a worldwide net loss.

The ~~decrease~~increase in tax expense year-over-year is largely due to ~~foreign pretax book loss for~~ the ~~nine months ended September 30, 2022 as compared to foreign pretax income for~~increase in the ~~nine months ended September 30, 2021, as well as the impact of a significant~~estimated annual effective tax rate ~~change in~~of the ~~UK on the Company’s deferred tax liability that was recorded in~~US legacy Boxlight entities for the three months ended September 30, ~~2021.~~

2023 as compared to the estimated annual effective tax rate of the US legacy Boxlight entities for the three months ended September 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 and income is earned.~~

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 ~~the aforementioned~~ net operating losses. The recoverability of these deferred tax assets depends on the Company’s ability to generate taxable income in the jurisdiction toin which the carryforward applies. It also depends on specific tax provisions in each jurisdiction that could impact utilization. For example, in the United States, a change in ownership, as defined by federal income tax regulations, could significantly limit the Company’s ability to utilize its U.S. net operating loss carryforwards. The company is in process of analyzing whether an ownership change has occurred in recent years. Additionally, because U.S. tax laws limit the time during which the net operating losses generated prior to 2018 may be applied against future taxes, if the Company fails to generate U.S. taxable income prior to the expiration dates, the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes. The Company has evaluated both positive and negative evidence as to the ability of its legacy entities in each jurisdiction to generate future taxable income. Based on its long history of cumulative losses in those jurisdictions, it believes it is appropriate to maintain a full valuation allowance on its net deferred tax asset atas of September 30, ~~2022~~2023 and December 31, ~~2021.~~

2022.

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The Sahara entities have recorded a net deferred tax liability, which is primarily driven by the net deferred tax liability on the intangibles for which ~~it does~~the Sahara entities do not have tax basis. This includes the deferred tax liability recorded during 2021 for the acquisition of Interactive Concepts. The Company does not qualify for any consolidated filing positions in any of these countries, so there is no ability to net the deferred tax liabilities of the Sahara companies against the deferred tax assets of the legacy Boxlight companies.

~~Table of Contents~~

The tax years from 2009 to 2022 remain open to examination in the U.S. federal ~~jurisdiction.~~jurisdiction and in most U.S. state jurisdictions. The tax years from 2020 to 2022 remain open to examination in the U.K. Statutes of limitations vary in other immaterial jurisdictions.

On August 16, 2022, the president signed the Inflation Reduction Act (IRA) into law. The IRA enacted a 15% corporate minimum tax effective in 2024, a 1% tax on share repurchases after December 31, 2022, and created and extended certain tax-related energy incentives. We currently do not expect the tax-related provisions of the IRA to have a material effect on our financial results.

During the second quarter of 2021, the Company became aware of a potential state tax exposure for failure to file minimum tax returns in a state for several years. The Company has recorded an exposure item of ~~$82~~$82 thousand for its best estimate of the amount for which it will settle the exposure. This amount includes ~~$24~~$24 thousand of income tax and ~~$58~~$58 thousand of penalties and interest. The Company has not identified any other material uncertain tax positions ~~at this time.~~

during the nine months ended September 30, 2023.

NOTE 1211 – EQUITY

Preferred Shares

The Company’s articles of incorporation, as amended, provide that the Company is authorized to issue 50,000,000 shares of preferred stock, with such preferred stock consisting of: 1)(1) 250,000 shares of non-voting Series A preferred stock, with a par value of $0.0001 per share; ~~2) 1,200,000~~(2) 1,586,620 shares of voting Series B preferred stock, with a par value of $0.0001 per share; ~~3) 270,000~~(3) 1,320,850 shares of voting Series C preferred stock, with a par value of $0.0001 per share; and 4)(4) 48,280,000 shares of “blank check” preferred stock to be designated by the Company’s board of directors.

Each authorized series of preferred stock is described below.

Issuance of ~~preferred shares~~

Preferred Shares

Series A Preferred Stock

At the time of the Company’s initial public offering, the Company issued 250,000 shares of the Company’s non-voting convertible Series A preferred stock to Vert Capital for the acquisition of Genesis. All of the Series A preferred stock was convertible into ~~398,406~~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 ~~130,721~~16,341 shares of Class A common stock. As of September 30, ~~2022,~~2023, a total of 167,972 shares of Series A preferred stock remained ~~outstanding.~~

outstanding which can be converted into 33,461 shares of Class A common stock, at the discretion of the Series A stockholder.

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~~preferred stock and 1,320,850 shares of Series C ~~Preferred Stock.~~preferred stock. The Series B ~~Preferred Stock~~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~~preferred stock is convertible into the Company’s Class A common stock at a conversion price of ~~$1.66~~$13.28 per share which was the closing price of the Company’s Class A common stock on the Nasdaq Stock Market on September 25, 2020 (the “Conversion Price”). Such conversion may occur either (i) at the option of the holder at any time after January 1, 2024, or (ii) automatically upon the Company’s Class A common stock trading at 200% of the Conversion Price for 20 consecutive trading days (based on a volume weighted average price). The Series C ~~Preferred Stock~~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).

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To the extent not previously converted into the Company’s Class A common stock, the outstanding shares of Series B ~~Preferred Stock~~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~~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~~preferred stock is also subject to redemption on the same terms commencing January 1, 2026. The aggregate estimated fair value of the Series B and C ~~Preferred Stock~~preferred stock of $28.5 million was included as part of the total ~~$94.9 million~~ consideration paid for the purchase of Sahara.

As the redemption features in the Series B ~~Preferred Stock~~preferred stock and Series C ~~Preferred Stock~~preferred stock are not solely within the control of the Company, the Company has classified the Series B ~~Preferred Stock~~preferred stock and Series C ~~Preferred Stock~~preferred stock as mezzanine or temporary equity in the Company’s condensed consolidated balance sheet.

~~Table~~ As of ~~Contents~~

~~On March 24, 2021, the Company entered into~~September 30, 2023, a ~~share redemption~~total of 1,586,620 and ~~conversion agreement with certain holders~~1,320,850 shares of Series B and ~~Series~~ C preferred stock (the “Redemption Agreement”) which allows the Company to redeem and repurchase each such stockholder’s shares of Series B preferred stock on or before June 30, 2021 for the stated or liquidation value of approximately £11.5 million (or approximately $15.9 million) plus accrued dividends from January 1, 2021 to the date of purchase. Such stockholders hold 96% of the Series C preferred stock. Upon redemption, the Series C shares held by such stockholders would convert into approximately 7.6 million shares of Class A remained outstanding, respectively.

Common Stock ~~at the stated conversion price of $1.66 per share.~~

On June 14, 2021, the Company entered into an amendment to the Redemption Agreement (the “Amended Redemption Agreement”) for purposes of extending the completion date to on or before December 31, 2021. In addition, the Amended Redemption Agreement changed the definition of “Redemption Payments” such that the redemption payment schedule would begin on or before May 31, 2021, for the quarter then ended and continue quarterly until the date of completion.

Regarding these amendments, the Company applied the accounting guidance from ASC 470-50 pertaining to determining whether an amendment to an equity-classified preferred share is an extinguishment or modification, and concluded that the Amended Redemption Agreement on June 14, 2021, as it effected the Series B Preferred Stock, resulted in an extinguishment of the original equity instruments subject to redemption agreement. Accordingly, the Series B Preferred Stock subject to the Amended Redemption Agreement was recorded at its fair value as of June 14, 2021, and a $367 thousand deemed contribution was credited to additional-paid-in-capital. With the Redemption Agreement, the Series B Preferred Stock includes a beneficial conversion feature. The Company early adopted (as of January 1, 2021) ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which includes a key provision eliminating the beneficial conversion feature guidance in ASC Subtopic 470-20, ~~“Debt with Conversion and Other Options.~~

~~Common Stock~~

The Company’s authorized common stock consists 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 would automatically convert into shares of Class A common stock. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~74,123,492~~9,605,360 and ~~63,821,901~~9,339,587 shares of Class A common stock issued and outstanding,, respectively. No Class B shares were outstanding at September 30, ~~2022~~2023 or December 31, ~~2021.~~

2022.

Issuance of ~~common stock~~

~~Securities Purchase Agreement~~

Common Stock

Securities Purchase Agreement

On July 22, 2022, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited institutional investor (the “Investor”) pursuant to which the Company agreed to issue and sell, in a registered direct offering directly to the Investor, ~~7.0 million~~(i) 875,000 shares ~~(the “Shares”)~~ of the Company’s Class A common stock, par value of $0.0001 per share, ~~(“Common Stock”),~~(ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase ~~352,940~~44,118 shares of ~~Common Stock~~common stock at an exercise price of ~~$0.0001~~$0.0008 per share, which Pre-Funded Warrants were issued in lieu of shares of ~~Common Stock~~common stock to ensure that the Investor did not exceed certain beneficial ownership limitations, and (iii) warrants to purchase an aggregate of ~~7,352,940~~919,118 shares of ~~Common Stock~~common stock at an exercise price of ~~$0.68~~$5.44 per share (the ~~“Warrants”,~~“Warrants,” and collectively with the Pre-Funded Warrants and the Shares, the “Securities”). The Securities were sold at a price of ~~$0.68~~$5.44 per share for total gross proceeds to the Company of $5.0 million (the “Offering”), before deducting estimated offering expenses, and excluding the exercise of any Warrants or Pre-Funded Warrants. The Pre-Funded Warrants were exercisable immediately and the Warrants ~~will be~~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 ~~was~~ allocated to common stock, $2.2 million ~~was~~ allocated to warrants and $118 thousand ~~was~~ allocated to the pre-funded warrants. ~~The net proceeds received by the Company will be used for working capital purposes.~~

The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Investors and customary indemnification rights and obligations of the parties. Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on the issuance and sale of its ~~Common Stock~~common stock or ~~Common Stock Equivalents~~common stock equivalents (as defined in the Purchase

~~Table of Contents~~

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 inwithin 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.

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Warrants
The Company had equity warrants outstanding of 921,150 and 920,680 at September 30, 2023 and December 31, 2022, respectively.

Credit Facility

In conjunction with its receipt of the Whitehawk loan, the Company issued to Whitehawk ~~528,169~~66,022 shares of Class A common stock, which were registered pursuant to the Company’s existing shelf registration statement and were delivered to ~~the~~ Whitehawk in January 2022.

~~Debt Conversion~~

~~During~~

Repurchase Plan

On February 14, 2023, the ~~three months ended September 30, 2021,~~Board of Directors of Boxlight Corporation approved the Company’s establishment of a share repurchase program (the “Repurchase Program”) authorizing the Company ~~repaid principal~~to purchase up to $15.0 million of ~~$3.1 million and interest of $138 thousand by issuing 1.8 million shares~~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 ~~Lind~~qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in accordance with applicable securities laws and ~~recognized a $0.7 million loss. During~~other restrictions. The timing and total amount of any repurchases made under the ~~nine months ended September 30, 2021,~~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 ~~repaid principal of $9.9 million and interest of $511 thousand by issuing 5.7 million shares Class A common stock with an aggregate value of $13.8 million~~ to ~~Lind and recognized a $3.4 million loss.~~

~~Accounts Payable and Other Liabilities Conversion~~

~~During the nine months ended September 30, 2021, the Company converted $2.0 million of EDI accounts payable in exchange for 793 thousand shares~~acquire any amount of Class A common ~~stock with an aggregate value~~stock. As of ~~$1.6 million and recognized a $357 thousand gain.~~

~~Conversion of restricted stock units~~

~~During the three and nine months ended~~ September 30, ~~2022, respectively, 332,065 and 1,995,871 restricted stock units vested and were converted into Class A common stock. During~~2023, the ~~three and nine months ended September 30, 2021, 217,000 and 760,060 restricted stock units vested and were converted into Class A common stock.~~

~~Exercise of stock options~~

~~During~~Company has not utilized the three months ended September 30, 2022, no options to purchase stock were exercised and during the nine months ended September 30, 2022, options to purchase a total of 193,841 shares of Class A common stock were exercised. During the three months ended September 30, 2021, 162,000 options were exercised and during the nine months ended September 30, 2021, options to purchase a total of 481,834 shares of Class A common stock were exercised.

~~Warrants~~

~~The following is a summary of the equity warrant activities during the nine months ended September 30, 2022.~~

Weighted

Average

Weighted

Remaining

Number of

Average

Contractual

Units

Exercise Price

Term (in years)
Outstanding, December 31, 2021

70,000

$
5.70

0.94
Granted

7,705,880

$
0.65

Exercised

(352,940)

$
-

Expired

(50,000)

7.70

Outstanding, September 30, 2022

7,372,940

$
0.68

5.25
Exercisable, September 30, 2022

12,500

$
0.70

2.56

Repurchase Program.

~~Table of Contents~~

The Company used the following inputs to value warrants issued during the nine months ending September 30, 2022 using the Black Scholes option valuation method: market value on measurement date, $0.59; exercise price $0.68; risk free interest rate, 2.86%; expected term, 6 years; expected volatility, 132% and expected dividend yield of 0%.

~~Exercise of warrants~~

During the three and nine months ended September 30, 2022, pre-funded warrants to purchase 352,940 shares of Common Stock at an exercise price of $0.001 per share were exercised. During the three and nine months ended September 30, 2021, 75,000 and 95,749 warrants were exercised, , respectively with an exercise price of $0.42.

NOTE 1312 – STOCK COMPENSATION

~~Grants made~~

The Company has issued grants under ~~the Equity Incentive Plans must be~~two equity incentive plans, both of which have been approved by the Company’s ~~board~~shareholders: (i) the 2014 Equity Incentive Plan, as amended (the “2014 Plan”), pursuant to which a total of ~~directors. As of September 30, 2022, the total number of underlying~~798,805 shares of the Company’s Class A common stock ~~available~~have been approved for ~~grant to directors, officers, key employees~~issuance, and ~~consultants of~~(ii) the ~~Company or a subsidiary of the Company under the Company’s~~ 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 September 2021, any shares remaining available for issuance under the 2014 Plan were ~~2,725,400 shares.~~

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 nine months ended September 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 during the second quarter.

Stock Options

Under the Company’s stock option program, pursuant to the ~~Equity Incentive Plans, an employee receives an award~~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). ~~The~~Following the issuance, such options become exercisable over a range of immediately vested to four-year vesting periods and expire five years from the grant date, unless stated differently in the option agreements, if they are not exercised. Stock options have no financial statement effect on the date they are granted but rather are reflected over time through compensation expense. 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.

Table of Contents

The following is a summary of the option activities during the nine months ended September 30, ~~2022:~~

Weighted

Average

Weighted

Remaining

Number of

Average

Contractual

Units

Exercise Price

Term (in years)
Outstanding, December 31, 2021

4,054,116

$
1.92

2.29
Granted

1,221,744

$
1.12

Exercised

(193,841)

$
0.24

Cancelled

(724,408)

$
1.75

Outstanding, September 30, 2022

4,357,611

$
1.80

2.28
Exercisable, September 30, 2022

3,042,376

$
2.20

1.80

2023:


			Number of Units
Outstanding, December 31, 2022			489,485
Granted			364,299
Exercised			(12,500)
Cancelled			(491,336)
Outstanding, September 30, 2023			349,948
Exercisable, September 30, 2023			275,150

During the first quarter of 2023, the Company granted 364,299 options of which 322,040 were subsequently cancelled and 42,259 vested during the period. During the third quarter of 2023, 59,116 out of the money options were cancelled, with such shares being returned to the 2021 Plan and becoming available for re-issuance in new grants. The Company ~~estimates~~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 ~~warrants~~options issued during the nine months ~~ending~~ended September 30, ~~2022 using the Black Scholes option valuation method:~~2023: market value on measurement date, ~~$0.59~~$1.68 to ~~$0.93;~~$2.24; exercise price of ~~$5.01~~$2.48 to ~~$0.68;~~$3.20; risk free interest rate, ~~1.69%~~4.19% to ~~2.87%~~4.22%; expected term, 3 years to 4 years; expected volatility, ranged from ~~141~~111.45% to ~~148~~111.74% and expected dividend yield of 0%.

~~As of September 30, 2022 and December 31, 2021, the stock options had an intrinsic value of approximately $150 thousand and $1.9 million, respectively.~~

~~Table of Contents~~

On May 3, 2022, the Boxlight board of directors adopted a resolution, in exchange for a three-year non-compete agreement, to grant Mark Elliott, a member of the board and former CEO of the Company, an extension for one year, of previously granted stock options to purchase a total of 577,675 shares of Class A common stock, par value $0.001 per share, which had expired on January 12, 2022. The stock price on the remeasurement date was $1.04 and the incremental compensation recognized was $314,000.

On June 13, 2022, the Boxlight board of directors granted Greg Wiggins, our Chief Financial Officer, stock options for 150,000 shares of the Company’s Class A common stock will vest in equal quarterly installments over a four-year term commencing on July 5, 2022.

Restricted Stock Units

Under the Company’s ~~Equity Incentive Plans~~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 nine months ended September 30, ~~2022.~~

Weighted

Average

Grant Date Fair

Number of Units

Value
Outstanding, December 31, 2021

1,973,947

$
1.81
Granted

2,411,662

$
1.20
Vested

(1,179,754)

$
1.73
Forfeited

(370,151)

$
1.38
Outstanding, September 30, 2022

2,835,704

$
1.37

~~On March 21,~~2023:


			Number of Units
Outstanding, December 31, 2022			303,879
Granted			498,398
Vested			(219,859)
Forfeited			(72,297)
Outstanding, September 30, 2023			510,121

During the first quarter of 2023, the Company granted ~~an aggregate~~72,348 RSUs of ~~348,840~~which 62,300 were subsequently cancelled and 10,048 vested during the first six months of the year. During the third quarter of 2023, the Company granted 426,049 RSUs to its board ~~members. These RSUs vest ratably over one year and had an aggregated fair value of approximately $450 thousand on the grant date.~~

On February 14, 2022, with an effective date of January 1, 2022, the Company entered into a letter agreement with Michael Pope, the Chairman and Chief Executive Officer, extending Mr. Pope’s term of employment with the Company. Under the terms of the agreement, Mr. Pope received a grant of 163,637 RSU’s, valued at approximately $180,000, and vesting over three years and 494,069 options to purchase Class A Common Stock, which are valued using the Black-Scholes Model with the Company’s customary inputs.

~~On February 24, 2022, following approval by the Company’s board~~ of directors the Company’s senior management issued a total of 1,771,950 RSUs under the terms of Amendment No. 2 to the Boxlight Corporation 2014 Stock Incentive Plan, vesting over four years, as long-term incentive awards to its employees in the U.S. and ~~Europe. The aggregate fair value of the shares was $2.1 million.~~

During the first quarter ended March 31, 2022, Jens Holstebro, a former FrontRow employee, received 39,683 in restricted shares of Class A common stock, valued at $50,000, as a bonus, which restricted stock vested immediately.

key executive officers.

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Stock Compensation Expense

For the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded the following stock compensation in general and administrative expense (in thousands):

Three months ended September 30,

Nine months ended September 30,

2022

2021

2022

2021
Stock options

$
128

$
153

$
683

$
544
Restricted stock units

474

1,005

1,980

2,472
Warrants

1

3

2

4
Total stock compensation expense

$
603

$
1,161

$
2,665

$
3,020

As of September 30, 2022, there was approximately $4.7 million of unrecognized compensation expense related to unvested options, restricted stock units, and warrants, which expense will be amortized over the remaining vesting period of such awards. Of that total, approximately $608 thousand is estimated to be recorded as compensation expense in the remaining three months of 2022.


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Stock options	$	125	$	128	$	446	$	683
Restricted stock units	545		474		1,375		1,980
Warrants	1		1		2		2
Total stock compensation expense	$	671	$	603	$	1,823	$	2,665

NOTE 1413 – RELATED PARTY TRANSACTIONS

Management Agreement

On November 1, 2022, the Company entered into a consulting agreement with Mark Elliott, former CEO of Boxlight and a current member of the Board of Directors. Under the terms of the agreement, Mr. Elliott is to provide sales, marketing, management and related consulting services to assist the Company in sourcing and entering into agreements with one or more customers to provide products and services for specified school districts. The Company will pay Mr. Elliott a fixed payment of $4 thousand per month and commissions equal to 15% of gross profit derived by the Company based on total purchase order revenue. The agreement, unless renewed or extended, will expire on December 31, 2023. For the nine months ended September 30, 2023, the Company paid $92 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 ~~the~~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 ~~shall terminate.~~terminates. Thereafter, and for a term of 13 months, Mr. Pope ~~shall~~will provide consulting services to the Company including sourcing and analyzing strategic acquisitions, assisting with financing activities, and other services. As consideration for the services provided, the Company will pay Mr. Pope a management fee equal to 0.375% of the consolidated net revenues of the Company, payable in monthly installments, not to exceed $250,000 in any calendar year. At his option, Mr. Pope may defer payment until the end of each year and/or receive payment in the form of shares of Class A common stock of the Company.

NOTE 1514 – COMMITMENTS AND CONTINGENCIES

~~Operating Lease Commitments~~

Contingencies

The Company ~~leases seven office building facilities located in Lawrenceville, Georgia~~assesses its exposure related to legal matters and ~~Duluth, Georgia; Poulsbo; Scottsdale, Arizona; Miami, Florida and Utica, New York~~other items that arise in the ~~U.S., and two office building facilities in Dartford and Kent in~~regular course of its business. If the ~~U.K. for sales, marketing, technical support, and service staff. During~~Company determines that it is probable a loss has been incurred, the ~~second quarter~~amount of ~~2022, FrontRow entered into~~the loss, or an amount within the range of loss, that can be reasonably estimated is recorded. The Company has not identified any legal matters that could have a ~~building lease in Australia and assumed a lease from FrontRow’s former owner in Denmark. All such leased facilities are under non-cancelable lease agreements with terms ending from 2023 to 2027.~~

material adverse effect on our consolidated results of operations, financial position or cash flows.

Purchase Commitments

The Company is legally obligated to fulfill certain purchase commitments made to vendors that supply materials used in the Company’s products. As of September 30, ~~2022,~~2023, the total amount of such open inventory purchase orders was ~~$33.8~~$28.4 million.

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NOTE 1615 – CUSTOMER AND SUPPLIER CONCENTRATION

There was one customer ~~that accounts for greater than 10% of the Company’s consolidated revenues for the nine months ended September 30, 2022. There were two customers~~ that accounted for greater than 10% of the Company’s consolidated revenues for the nine months ended September 30, ~~2021.~~2023 and 2022. Details are as follows:


Customer	Total revenues from the customer as a percentage of total revenues for the nine months ended September 30, 2023		Accounts receivable from the customer as of September 30, 2023 (in thousands)		Total revenues from the customer as a percentage of total revenues for the nine months ended September 30, 2022		Accounts receivable from the customer as of September 30, 2022 (in thousands)
1	12.8	%	$	5,417	14.1	%	$	8,532

For the nine months ended September 30, 2023,

Total revenues

Total revenues

Accounts

from the customer

Accounts

from the customer

receivable from

as a percentage of

receivable from

as a percentage of

the customer as

total revenues

this customer as of

total revenues

of

for the nine months ended

September 30,

for the nine months ended

September 30,

September 30,

2022

September 30,

2021
Customer

2022

(in thousands)

2021

(in thousands)
1

14.1
%
$
8,532

12.8
%
$
9,815
2

—

—

10.1
%
$
5,142

the Company’s purchases were concentrated primarily with one vendor

. For the nine months ended September 30, 2022, ~~and 2021,~~ the Company’s purchases were concentrated primarily with two vendors. Details are as follows:

Total purchases



Total purchases


from the vendor

from the vendor

Accounts payable

as a percentage of

Accounts payable

as a percentage

(prepayment) to

total cost of

(prepayment) to

of total cost of

the

revenues for

the vendor as of

revenues for

vendor as of

the nine months ended

September 30,

the nine months ended

September 30,

September 30,

2022

September 30,

2021
Vendor

2022

(in thousands)

2021

(in thousands)
1

44.0
%
$
8,275

47.0
%
$
4,188
2

20.0
%
$
(10,482)

18.4
%
$
(2,070)


Vendor	Total purchases from the vendor as a percentage of total cost of revenues for the nine months ended September 30, 2023		Accounts payable to the vendor as of September 30, 2023 (in thousands)		Total purchases from the vendors as a percentage of total cost of revenues for the nine months ended September 30, 2022		Accounts payable (prepayment) to the vendors as of September 30, 2022 (in thousands)
1	45.1	%	$	22,715	44.0	%	$	8,275
2	—	%	$	—	20.0	%	$	(10,482)

The Company believes there are other suppliers that could be substituted should the above cited ~~supplier~~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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue, net
Americas	$	25,717	$	31,780	$	76,851	$	79,537
EMEA	24,330		37,537		68,249		100,143
Rest of World	799		168		2,443		359
Eliminations and Adjustments (1)	(1,179)		(749)		(9,634)		(1,072)
Total Revenue, net	$	49,667	$	68,736	$	137,909	$	178,967
(Loss) Income from Operations
Americas	(5,124)		3,861		(2,330)		1,772
EMEA	(6,945)		2,721		(8,205)		2,264
Rest of World	401		12		806		25
Eliminations and Adjustments (1)	69		(130)		26		(170)
Total (Loss) Income from Operations	$	(11,599)	$	6,464	$	(9,703)	$	3,891

(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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	September 30, 2023		December 31, 2022
Identifiable Assets
Americas	$	93,644	$	88,451
EMEA	84,135		104,978
Rest of World	2,593		1,966
Total Identifiable Assets	$	180,372	$	195,395

NOTE 17 – SUBSEQUENT EVENTS

On November ~~4, 2022,~~3, 2023, the Company ~~made a $4.25~~paid $4.3 million ~~payment~~inclusive of $0.3 million in prepayment penalties and accrued interest on its Credit Agreement. The Company made the payment in order to cure it's non-compliance with the Senior Leverage Ratio financial covenant under the Credit Agreement as of September 30, 2023. In conjunction with ~~Whitehawk. The~~the $4.3 million payment, ~~will be credited by WhiteHawk toward~~ the ~~repayment~~Company obtained a waiver from its lender stating that the Company was in compliance with all covenants under the Credit Agreement as of ~~the $8.5 million term loan due on February 28, 2023.There were no pre-payment penalties or premiums included with this payment.~~

September 30, 2023.

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

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the financial statements and the related notes thereto included elsewhere herein. The ~~Management’s Discussion and Analysis (“~~MD~~&A”)~~&A contains forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this ~~form.~~report. The actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.

Historical results may not be indicative of future performance. The Company’s forward-looking statements reflect its current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof

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that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

Overview

We are a technology company that is seeking to become a world-wide leading innovator and integrator of interactive products and software for schools, education, business, and government interactive spaces. We currently design, produce and distribute interactive displays, collaboration software, supporting accessories and professional services. We also distribute science, technology, engineering, and math (or “STEM”) products, including a robotics and coding system, 3D printing solution and portable science lab. The Company’s products are integrated into its software suite that provides tools for presentation creation and delivery, assessment, and collaboration.

Effective January 1, 2023, we changed our segment reporting to align with the geographic markets in which we operate. Our operations are now organized, managed, and classified into three reportable segments – Europe, Middle East, and Africa (“EMEA”), North and Central America (“Americas”), and all other geographic regions (“Rest of World”). Our EMEA segment consists of the operations of Sahara Holding Limited and its subsidiaries. Our Americas segment consists primarily of Boxlight, Inc. and its subsidiaries, and the Rest of World segment consists primarily of Boxlight Australia, PTY LTD (“Boxlight Australia”).

Each of our operating segments are primarily engaged in the sale of education technology products and services in the education market but which are also sold into the health, government and corporate sectors and derive a majority of their revenues from the sale of flat-panel displays, audio and other hardware accessory products, software solutions and

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professional services. Generally, our displays produce higher net operating revenues but lower gross profit margins than our accessory solutions and professional services.

To date, we have generated substantially all of the Company’s revenue from the sale of hardware (primarily consisting of interactive displays) and software to the educational market in the United States and Europe.

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

●

•Integrating products ~~of the acquired companies and cross training sales representatives to increase their offerings and productivity.~~

●

~~Hiring new sales representatives with significant industry experience in their respective territories.~~

●

~~Expanding our reseller partner network both in key territories and in new markets, thereby increasing our penetration and reach.~~

~~Recent Acquisitions~~

~~On December 31, 2021, the Company and its wholly owned subsidiary, Boxlight, Inc, consummated the acquisition of 100%~~ of the ~~membership interests of FrontRow Calypso LLC, a Delaware limited liability company (“FrontRow”). FrontRow was~~ acquired companies and cross training sales representatives to increase their offerings and productivity;

•Hiring new sales representatives with significant industry experience in ~~exchange for payment of $34.7 million to Phonic Ear Inc.~~their respective territories, and Calypso Systems LLC, the equity holders of FrontRow (the “Equityholders”). The acquisition occurred pursuant to the terms of a membership interest purchase agreement, dated October 29, 2021 (the “Purchase Agreement”), between the Company, Boxlight, FrontRow

•Expanding our reseller partner network both in key territories and ~~the Equityholders.~~

~~Based~~ in Petaluma, California, FrontRow makes technology that improves communication in learning environments, including developing network-based solutions for intercom, paging, bells, mass notification, classroom sound, lesson sharing, AV controlnew markets, thereby increasing our penetration and ~~management. FrontRow also has offices in Toronto, Copenhagen, Brisbane, Hamilton (UK) and Shenzhen.~~

On March 23, 2021, the Company acquired 100% of the outstanding shares of Interactive Concepts BV, a company incorporated and registered in Belgium and a distributor of interactive technologies (“Interactive Concepts”), for total consideration of approximately $3.3 million in cash, common stock, and deferred consideration. Interactive has been the Company’s key distributor in Belgium and Luxembourg.

reach.

Acquisition Strategy and Challenges

The Company has completed multiple acquisitions from 2015 through 2021 and may target additional acquisition opportunities in the future. The Company’s growth strategy includes acquiring assets and technologies of companies that have products, technologies, industry specializations or geographic coverage that extend or complement our existing business. The process to undertake a potential acquisition is time-consuming and costly. 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.~~

•Staff reductions – consolidating resources, such as accounting, marketing and human resources;

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

•Improved market reach and industry visibility – increasing our customer base and entry into new markets.

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●

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

●

~~Improved market reach and industry visibility – increase in 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.~~

•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;~~

●

~~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.~~

•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 global company with suppliers centered in Asia and customers located worldwide, we have used, and may in the future use, air shipping to deliver our products directly to our customers. Air shipping is more costly than sea or ground shipping or other delivery options. We primarily use air shipping to meet the demand of our products during peak seasons and new product launches.

Gross profit and gross profit margin

Gross profit and gross profit margin have been, and may in the future be, influenced by several factors including: product, channel and geographical revenue mix; changes in product costs related to the release of projector models; and component, contract manufacturing and supplier pricing and foreign currency exchange. As we primarily procure our product components and manufacture our products in Asia, our suppliers incur many costs, including labor costs, in other currencies. To the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on future average selling prices and unit costs. Gross profit and gross profit margin may fluctuate over time based on the factors described above.

Operating expenses

We classify our operating expenses into two categories: general and administrative and research and development.

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

Other (expense) income, ~~(expense),~~ net primarily consists of interest expense associated with our debt financing arrangements, gains (losses) on the settlements of debt, and ~~trade payable obligations exchanged for common shares, and~~ the effects of changes in the fair value of derivative liabilities.

Income tax expense

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 inof the United States. Additionally, certain jurisdictions of the Company’s international earnings are also taxable in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the absorption of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws. We regularly assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S. Internal Revenue Service, or IRS, and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary. Any such adjustments could have a significant impact on our results of operations.

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Operating Results – Boxlight Corporation

For the three-month periods ended September 30, ~~2022~~2023 and ~~2021~~

2022

Revenues. Total revenues for the three months ended September 30, 2023 were $49.7 million as compared to $68.7 million for the three months ended September 30, 2022, resulting in a 27.7% decrease. The decrease in revenues was primarily due to lower sales volume across all markets.

Cost of Revenues. Cost of revenues for the three months ended September 30, 2023were ~~$68.7~~$31.7 million as compared to ~~$61.0~~$47.7 million for the three months ended September 30, ~~2021,~~2022, resulting in a ~~12.7% increase~~33.7% decrease. The decrease in ~~revenue. Revenues primarily consist~~cost of ~~hardware revenue, software revenue, and professional development. The increase in~~ revenues was ~~primarily due~~attributable to the ~~acquisition~~decrease in units sold, along with lower manufacturing and shipping costs in the third quarter of ~~FrontRow in December 2021, as well as increased demand~~2023 compared to the prior year’s third quarter.

Gross Profit. Gross profit for the ~~Company’s solutions in the U.S. FrontRow revenue~~three months ended September 30, 2023 was $18.0 million as compared to $21.0 million for the three months ended September 30, 2022, a decrease of 14.3%. The gross profit margin was ~~$5.6 million.~~

~~Cost of Revenues.~~ ~~Cost of revenues~~36.3% for the three months ~~ended~~ September 30, ~~2022 was $47.7 million compared to $45.2 million~~2023 and 30.6% for the three months ~~ended~~ending September 30, ~~2021, resulting in a 5.5% increase. Cost of revenues consists primarily of product cost, freight expenses, customs expense, and inventory adjustments.~~2022. The increase in ~~cost of revenues was associated with increased sales and the FrontRow acquisition.~~

~~Gross Profit.~~ ~~Gross profit for the three months ended September 30, 2022, was $21.0 million, as compared to $15.8 million for the three months ended September 30, 2021. The~~ gross profit margin ~~for the three months ended September 30, 2022 was 30.6% which~~ is ~~an increase of 470 basis points compared~~primarily related to the ~~comparable three months~~decrease in ~~2021. Gross profit margin, adjusted for the net effect of acquisition-related purchase accounting of $698 thousand~~manufacturing and ~~$730 thousand, was 31.6% as compared to the 27.1%, as adjusted, reported for the three months ended September 30, 2022 and September 30, 2021, respectively.~~

shipping costs noted above.

General and Administrative Expenses. General and administrative expenses for the three months ended September 30, ~~2022~~2023 were ~~$14.0~~$15.4 million, ~~and 20.4%~~representing 31.0% of ~~revenues,~~revenue as compared to ~~$11.9~~$14.0 million ~~and 19.6%~~or 20.3% of ~~revenues~~revenue for the three months ended September 30, ~~2021.~~2022. The increase ~~was~~can be attributed primarily ~~a result~~to an increase in payroll related expenses to support the growth of ~~new hires for planned growth and equity-based compensation issuances.~~

the business in certain markets.

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Research and Development Expenses. Research and development expenses were ~~$604~~$979 thousand and ~~0.9% of revenues~~$604 thousand for the three months ended September ~~2022, as compared to $355 thousand~~30, 2023 and ~~0.6%~~2022, respectively, and representing 2.0% of ~~revenues~~revenue for the three months ended September 30, 2023, and 0.9% of revenue for the three months ended September 30, ~~2021.~~

~~Other Income (Expense).~~ ~~Other expense (net) for the three months ended September 30, 2022 was $2.8 million, as compared to $1.4~~2022.

Impairment of Goodwill. The Company recorded goodwill impairment charges of $13.2 million for the three months ended September 30, ~~2021.~~ 2023. There were no goodwill impairment charges recorded in 2022.

Other Expense. Other expense, ~~increased~~net for the three months ended September 30, 2023 was $3.1 million as compared to $2.8 million for the three months ended September 30, 2022, representing an increase of $0.2 million. The increase in other expenses was primarily due to a ~~$1.7~~$0.4 million increase in interest expense, ~~associated with increased borrowings due to~~partially offset by a $0.2 million change in the ~~new credit facility.~~

fair value of derivative liabilities.

Income Tax Expense. Income tax expense for the three months ~~ending~~ended September 30, 2023 was $3.1 million, as compared to $520 thousand for the three months ended September 30, 2022. The increase in tax expense year-over-year is largely due to foreign pretax book income for the three months ended September 30, 2023 as compared to foreign pretax loss for the three months ended September 30, 2022.

Net (Loss) Income. Net loss was $17.8 million for the three months ended September 30, 2023. Net income was $3.1 million for the three months ended September 30, 2022 and was a result of the changes noted above.

For the nine-month periods ended September 30, 2023 and 2022

Revenues. Total revenues for the nine months ended September 30, 2023 were $137.9 million as compared to $179.0 million for the nine months ended September 30, 2022, resulting in a 22.9% decrease. The decrease in revenues was ~~$520 thousand~~primarily due to lower sales volume across all markets.

Cost of Revenues. Cost of revenues for the nine months ended September 30, 2023 were $86.9 million as compared to $128.5 million for the nine months ended September 30, 2022, resulting in a 32% 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 three quarters of 2023 compared to the first three quarters of the prior year.

Gross Profit. Gross profit for the nine months ended September 30, 2023was ~~$1.4~~$51.0 million as compared to $50.5 million for the nine months ended September 30, 2022, an increase of 1.0%. Gross profit margin was 37.0% for

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the nine months ended September 30, 2023 and 28.2% for the nine months ended September 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 nine months ended September 30, 2023 were $45.4 million, representing 32.9% of revenue as compared to $44.7 million representing 25.0% of revenue for the nine months ended September 30, 2022. The increase in general and administrative expenses for the period ended September 30, 2023 can be attributed primarily to an increase in payroll related expenses to support the growth of the business in certain markets.

Research and Development Expenses. Research and development expenses for the nine months ended September 30, 2023 and 2022 were $2.1 million and $1.9 million and represented 1.5% and 1.0% of revenue, respectively.

Impairment of Goodwill. The Company recorded goodwill impairment charges of $13.2 million for the nine months ended September 30, ~~2021~~

~~Net Income.~~ ~~Net income was $3.1 million for the three months ended September 30, 2022 and $729 thousand for the three months ended September 30, 2021.~~

~~For the nine-month periods ended September 30, 2022 and 2021~~

~~Revenues.~~ ~~Total revenues for the nine months ended September 30, 2022~~2023. There were ~~$179.0 million as compared to $141.2 million for the nine months ended September 30, 2021, resulting~~no goodwill impairment charges recorded in a 26.8% increase. The increase in revenues was primarily due to the acquisition of FrontRow in December 2021, as well as increased demand for our solutions across all markets. Organic revenue growth for Boxlight for the nine months ended September 30, 2022 was 13.3%. FrontRow revenue for the first nine months of 2022 was $19.0 million.

~~Cost of Revenues.~~ Cost of revenues for the nine months ended September 30, 2022 were $128.5 million as compared to $104.0 million for the nine months ended Septembers 30, 2021, resulting in an 23.6% increase. The increase in cost of revenues was associated with the acquisitions and growth of the business as discussed above and was also due to additional increases in global freight/shipping which the Company has experienced following the COVID-19 pandemic. In 2021 we reported the cost increase to be approximately four times higher compared to pre-pandemic levels, this continued through the first half of 2022 but has recently begun to decline.

~~Gross Profit.~~ Gross profit for the nine months ended September 30, 2022 was $50.5 million as compared to $37.2 million for the nine months ended September 30, 2021, an increase of $13.3 million. The gross profit margin was 28.2% for the nine months ended September 30, 2022 and $26.3% for the nine months ending September 30, 2021. The increase in gross profit and an increase in demand for the Company’s services.

2022.

~~margin during the nine months ended September 30, 2022 was a result increased margin associated with FrontRow products~~

~~General and Administrative Expenses.~~ General and administrative (“G&A”) expense for the nine months ended September 30, 2022 were $44.7 million and 25% of revenue as compared to $32.8 million and 23.3% of revenue for the nine months ended September 30, 2021. The increase in G&A expenses resulted from additional personnel costs associated with the acquired FrontRow operations, new hires for planned growth and stock compensation issuances.

~~Research and Development Expenses.~~ Research and development expenses were $1.9 million and 1.0% of revenue for the nine months ended September 30, 2022 as compared to $1.3 million and 0.9% of revenue for the nine months ended September 30, 2021. The increase in research and development expense was primarily driven by an increase in contract services related to software development. The acquisition of FrontRow contributed $180 thousand to the increase.

Other ~~Income (Expense).~~ Expense. Other expense, net for the nine months ended September 30, ~~2022~~2023 was ~~$5.1~~ $8.4 million as compared to ~~other expense, net, of $5.8~~$5.1 million for the nine months ended September 30, ~~2021,~~2022, representing ~~a decrease~~an increase of ~~$0.7 million.~~$3.3 million. The ~~decrease~~increase was ~~primarily~~ due to a ~~$1.7~~$1.5 million ~~change~~ decrease in the fair value of derivative liabilities, a ~~$3.8~~$0.9 million ~~reduction~~ increase in ~~gain~~interest expense, and $0.9 million recognized upon the settlement of certain debt obligations ~~offset by a $4.7 million increase in interest expense associated with increased borrowings due to~~during the ~~new credit facility.~~

nine months ended September 30, 2022.

Income Tax Expense. Income tax expense for the nine months ~~ending~~ended September 30, ~~2022~~2023 was ~~$475 thousand,~~$3.4 million, as compared to ~~$3.9 million~~a $475 thousand in income tax expense for the nine months ~~ending~~ ended September 30, ~~2021. This significant decrease~~2022. The increase in ~~income~~ tax expense year-over-year ~~was primarily~~is largely due to the ~~Company’s recording the discrete impact of a change in UK tax rates that was~~

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~~enacted during second quarter 2021.The Company recorded $2.2 million of income tax expense in 2021 to adjust its deferred tax liability~~increase in the ~~UK to this new rate. The remaining decrease in income tax expense is due to the lower earnings in 2022 as compared to 2021 in our foreign jurisdictions. The year-to-date~~estimated annual effective tax rate ~~is (34.7)% due to there being no material tax expense/benefit for~~of the US legacy Boxlight ~~entities, due to their valuation allowance position, while the Sahara entities are fully taxable.~~

entities.

Net Loss. Net loss was ~~$1.7~~$21.5 million and ~~$6.6~~$1.7 million for the nine months ended September 30, 2023 and 2022 respectively and ~~2021 respectively. The decrease in net loss~~ was ~~primarily due to~~ a ~~$1.7 million change in the fair value~~result of the ~~Whitehawk derivative liability, and a $3.8 million decrease in loss on settlement~~changes noted above.

Use of ~~liabilities, partially offset by an increase in interest expense due to the new credit facility.~~

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 ~~income (loss)~~loss before income tax expense, interest income, interest expense, depreciation and amortization. Adjusted EBITDA represents EBITDA, plus stock compensation expense, impairment of goodwill, the change in fair value of derivative liabilities, purchase accounting impact of fair valuing inventory and deferred revenue, and non-cash losses associated with debt ~~settlement and gain on the forgiveness of our PPP loan.~~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 periods ~~presented.~~

Three Months Ended

Three Months Ended

Nine Months Ended

Nine Months Ended



September 30,


September 30,

September 30,


September 30,
(in thousands)


2022


2021

2022


2021
Net income (loss)

$
3,105

$
729

$
(1,725)

$
(6,660)
Depreciation and amortization

2,231

1,697

6,818

5,264
Interest expense

2,598

870

7,330

2,652
Income tax expense

520

1,391

475

3,936
EBITDA

$
8,454

$
4,687

$
12,898

$
5,192
Stock compensation expense

603

1,161

2,665

3,020
Change in fair value of derivative liabilities

113

(60)

(1,537)

164
Purchase accounting impact of fair valuing inventory

189

15

1,395

45
Purchase accounting impact of fair valuing deferred revenue

509

715

1,747

2,312
Net (gain) loss on settlement of debt

—

638

(856)

3,373
Adjusted EBITDA

$
9,868

$
7,156

$
16,312

$
14,106

presented:


(in thousands)	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Net (Loss) Income	$	(17,750)	$	3,105	$	(21,485)	$	(1,725)
Depreciation and amortization	2,332		2,231		6,893		6,818
Interest expense	2,987		2,598		8,222		7,330
Income tax expense	3,073		520		3,379		475
EBITDA	$	(9,358)	$	8,454	$	(2,991)	$	12,898
Stock compensation expense	671		603		1,823		2,665
Change in fair value of derivative liabilities	(90)		113		(50)		(1,537)
Purchase accounting impact of fair valuing inventory	113		189		336		1,395
Purchase accounting impact of fair valuing deferred revenue	366		509		1,308		1,747
Gain on settlement of debt	—		—		—		(856)
Impairment of goodwill	13,226		—		13,226		—
Adjusted EBITDA	$	4,928	$	9,868	$	13,652	$	16,312

Discussion of Effect of Seasonality on Financial Condition

Certain accounts onin our financial statements are subject to seasonal fluctuations. As our business and revenues grow, we expect these seasonal trends to be reduced. The bulk of our products are shipped to our educational customers prior to the beginning of the school year, usually in July, August or September. To prepare for ~~the upcoming~~each school year, we generally build up inventories during

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the second quarter of the year. ~~Therefore,~~As a result, inventories tend to be at ~~the~~their highest levels at that point in time. In the first quarter of the year, inventories tend to decline significantly as products are delivered to ~~customers and~~customers. Thereafter, during the first quarter, we do not generally need to restock inventories at the same inventory ~~levels during the first quarter.~~levels. Accounts receivable balances tend to be at the highest levels in the third quarter, inat which point we record the highest level of sales.

Liquidity and Capital Resources

As of September 30, ~~2022,~~2023, we had cash and cash equivalents of $18.4 million, a working capital balance of $61.4 million, and a current ratio of 2.24. On September 30, 2022, we had $22.0 million of cash and cash equivalents, a working capital balance of $62.3 million, and a current ratio of ~~1.90. This financial position represents a significant improvement from a year ago on~~1.9.

For the nine months ended September 30, ~~2021 when~~2023 and 2022, we had ~~$6.2 million of~~net cash ~~and cash equivalents, a working capital balance of $32.0 million, and a current ratio of 1.48.~~

~~In addition to the cash flows generated~~provided by ~~our ongoing~~ operating activities ~~we financed our operations during first nine months~~ of ~~2022 with our credit facility from Whitehawk.~~

~~Given uncertainty surrounding global supply chains, global markets~~$8.2 and ~~general global economic uncertainty~~$0.5 million, respectively. Cash provided by operating activities increased year over year as a result of higher margins on our products leading to increased operating income. We had net cash used in investing activities of $226 thousand and $1.1 million for the ~~ongoing conflict between Russia~~nine months ended September 30, 2023 and 2022, respectively. Cash used in investing activities is related to purchases of property and equipment. For the ~~Ukraine~~nine months ended September 30, 2023 and ~~the continuing COVID-19 pandemic, the availability~~2022, we had net cash used in financing activities of $3.0 million and net cash provided by investing activities of $4.4 million, respectively. Cash provided by financing activities is primarily related to principal payments on debt of $5.0 million and ~~equity capital has been reduced and the cost~~$1.0 million in payments of ~~capital has increased. Increasing our capital through equity issuance at this time could cause significant dilution~~fixed dividends to our ~~existing stockholders. However, we~~Series B preferred shareholders, slightly offset by a $3.0 million draw under the Company’s Credit Facility and stock option exercise proceeds of $13 thousand.

Our liquidity needs are ~~confident that the Company will be able to manage through the current challenges in the equity~~funded by operating cash flow and ~~debt finance markets by managing payment terms with customers and vendors.~~

available cash. Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases. We lease all of our office facilities. We expect to make future payments on existing leases from cash generated from operations. We have limited credit available from our major vendors and are required to prepay ~~for the majority~~a percentage of our inventory purchases, which further constrains our cash liquidity.

~~Recent Financing;~~

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

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limiting disruptions related to product installation. This seasonality makes our needs for cash vary significantly from quarter to quarter.

In addition to the cash flows generated by our ongoing operating activities we financed our operations during 2023 and 2022 with our Credit Facility with Whitehawk. Prior to April 24, 2023, we maintained a delayed draw term loan of which we had $7.5 million available. On April 24, 2023, we drew $3.0 million on our delayed draw term loan that was used for working capital purposes. The completion of the additional draw eliminates further delayed draws under the term loan agreement. 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.

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

The Company was not in compliance with its Senior Leverage Ratio financial covenant under the Credit Agreement at September 30, 2023. The non-compliance was cured by the Company paying $4.3 million, inclusive of $0.3 million in prepayment penalties and interest in November 2023 in order to bring the Company into compliance with the Senior Leverage Ratio at September 30, 2023. The Senior Leverage Ratio, as stated in the Third Amendment to the Credit Agreement, decreases to 2.50 at December 31, 2023, 2.00 at March 31, 2024 and June 30, 2024 and 1.75 thereafter. Because of the significant decreases in the required Senior Leverage Ratio within the next twelve months, the Company’s current forecast projects the Company may not be able to maintain compliance with this ratio. These conditions raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the financial statements are issued.

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

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Financing

See ~~Footnote 9~~Note 8 – Debt for a discussion of ~~recent financing.~~

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 ~~condensed~~ financial statements are prepared in accordance with ~~accounting principles generally accepted in the United States (“GAAP”).~~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 ~~condensed~~ financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in the notes to the unaudited condensed consolidated financial ~~statements.~~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~~

~~Business acquisitions~~

~~Goodwill and Intangible assets~~

~~Stock-based compensation expense~~

1.Revenue Recognition

2.Goodwill and Intangible assets

~~Table~~As of ~~Contents~~

~~Status~~June 30, 2023, we determined that a triggering event had occurred as ~~Emerging Growth Company~~

~~We are an “emerging growth company,” as defined~~a result of our market capitalization that suggested one or more of the reporting units may have fallen below the carrying amounts. In addition, changes in our reporting segments resulted in a change in the ~~Jumpstart Our Business Startups Act~~composition of ~~2012, or the JOBS Act. As an emerging growth company, we were able to take advantage of certain specified reduced~~our 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 elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they would apply to private companies.~~units. As a result of ~~this election, our financial statements may not be comparable~~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 ~~companies that comply with public company effective dates.~~

~~Under Section 2(a)(19)~~the reporting units based upon a relative fair value allocation approach and assigned approximately $22.4 million and $2.8 million of goodwill to the America and EMEA reporting units, respectively.

As of June 30, 2023, we performed an interim goodwill impairment test as a result of the ~~Securities Act of 1933 and Section 3(a)(80)~~triggering events identified. In analyzing goodwill for potential impairment in the quantitative impairment test, we used a combination of the ~~Securities Exchange Act~~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 ~~1934,~~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 ~~amended, an emerging growth company will lose its status upon~~of June 30, 2023, we concluded that the ~~earliest~~estimated fair value of ~~several conditions,~~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 ~~which~~the goodwill impairment test.

As of June 30, 2023, we determined that our Americas reporting unit had an estimated fair value in excess of its respective carrying value of approximately 4%. The estimated fair value of our reporting units are closely aligned with the ultimate amount of revenue and operating income that it achieves over the projected period. Our discounted cash flows, for goodwill impairment testing purposes, assumed that, through fiscal year 2028, this reporting unit would achieve a compounded annual revenue growth rate of approximately 5.0% from its forecasted 2023 revenue. Beyond fiscal 2028, we assumed a long-term revenue growth rate of 3.0% in the terminal year. As of June 30, 2023, we utilized a WACC of 14.0% for the Americas reporting unit. Given expected growth projections from industry sources, we believe these modest long-term growth rates and the WACC are appropriate to use for our future cash flow assumptions. We also believe that it is ~~reaching~~possible that our actual revenue growth rates could be significantly higher due to a number of factors, including: (i) the ~~last day~~

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availability of government funding allocated to the education sector as a result of the ~~fiscal year~~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 ~~which~~sales to enterprise customers. Modest changes in other key assumptions used in our June 30, 2023 impairment analysis may result in the ~~fifth anniversary~~requirement to proceed to step two of the ~~company’s first sale~~goodwill impairment test in future periods. If this reporting unit fails step one in the future, we would be required to perform step two of ~~equity securities pursuant~~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.

As of September 30, 2023, the Company performed an ~~effective registration statement occurs.~~interim goodwill impairment test as a result of the triggering event identified. The Company’s methodology for estimating fair value was consistent with the income and market approaches used as of June 30, 2023. Certain estimates and assumptions, including the Company’s operating forecast for 2023 and future periods, were revised based on current industry and Company trends. For the three and nine months ended September 30, 2023, the Company ~~this will occur~~recorded goodwill impairment charges of $10.4 million and 2.8 million to the Americas and EMEA reporting units, respectively, which also represents total accumulated goodwill impairment charges for each reporting unit.

3.Stock-based Compensation Expense

4.Derivative Warrant Liabilities

5.Income Taxes

Recent Accounting Pronouncements

For information on ~~January~~accounting pronouncements that have impacted or are expected to materially impact our consolidated financial condition, results of operations or cash flows, see Note 1 ~~2023.~~

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.

Item 4. Controls and Procedures

(a)Evaluation of disclosure controls and procedures.

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report (“Evaluation Date”), pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective due to material weaknesses described in our ~~2021~~2022 Annual Report on Form ~~10-K.~~

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 ~~condensed~~ financial statements included in this ~~quarterly report~~Quarterly Report on Form 10-Q fairly present in accordance with ~~U.S.~~the GAAP, in all material respects, our financial condition, results of operations and cash flows for the periods presented in this report.

Limitations on Effectiveness of Controls.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all controls systems, no evaluation of controls can provide

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absolute assurance that all control issues and instances of fraud, if any, within a

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company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives.

(b)Changes in internal controls over financial reporting.

During 2022, the Company’s management has engaged professional services firms to assist with the preparation and review of the income tax provision. Management has also engaged third-party professional services who prepared the valuation of warrants issued in connection with Whitehawk credit facility.

There were no ~~additional~~ changes made in the internal controls over financial reporting for the quarter ended September 30, ~~2022,~~2023 that have materially affected our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~None.~~

While we are not currently involved in any material legal proceedings, from time-to-time we are, and we anticipate that we will be, involved in legal proceedings, claims, and litigation arising in the ordinary course of our business and otherwise. The ultimate costs to resolve any such matters could have a material adverse effect on our financial statements. The Company’s management believes, based on current information, matters currently pending or threatened are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

ITEM 1A. RISK FACTORS

The Company has experienced challenges within the global supply chain which has impacted the business in three key areas: (i) movement and/or delay in production schedules due to component shortages, (ii) continued delays to global shipping and receipt of goods and (iii) increased shipping costs which has reduced gross profit margin. In addition, there is presently a global silicon chip supply shortage that could potentially cause disruptions in our supply chain. While the Company’s business has not yet been materially affected by such disruption, in the event any of the Company’s suppliers experience such supply chain disruption, there is potential that such disruption could ultimately affect our ability to timely obtain and deliver finished goods and products. Furthermore, there is heightened uncertainty surrounding global supply chains, global markets and general global economic uncertainty as a result of the ongoing conflict between Russia and the Ukraine and the continuing COVID-19 pandemic.

As a result of our operations outside of the U.S., the Company is exposed to exchange rate risk that our operations and profitability may be affected by changes in the exchange rates between currencies. There are three types of risk caused by currency volatility: transaction exposure, translation exposure, and economic or operating exposure. Transaction exposure arises from the effect that exchange rate fluctuations have on a company’s obligations to make or receive payments in a foreign currency, translation exposure arises from the effects of currency fluctuations on a company’s consolidated financial statements and economic exposure is the effect of unexpected currency fluctuations on a company’s future cash flows and market value. In general, our reported financial results are affected positively by a weaker U.S. Dollar and are affected negatively by a stronger U.S. Dollar as compared to the foreign currencies in which we conduct our business.

For ~~additional~~information regarding risk factors pertinent to the Company’s business please refer to ~~the~~ Part I Item 1A of the Company’s ~~2021~~2022 Annual Report on Form 10-K, which was filed with the SEC on ~~April 13, 2022~~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.

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.

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ITEM 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITY SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None.~~

Not Applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

~~Table of Contents~~

ITEM 5. OTHER INFORMATION

None.

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~~Item~~

ITEM 6. ~~Exhibits~~

EXHIBITS

The following exhibits are filed or furnished with this report:


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).
3.2		Amended and Restated Bylaws adopted June 24, 2021 (incorporated by reference to Exhibit ~~No.~~ 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).
4.7		Description of Securities. (incorporated by reference to Exhibit 4.9 to the Annual Report on Form 10- K filed March 17, 2023).
~~4.1~~ 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).
~~4.2~~ 4.9		Form of Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed July 26, 2022).
~~10.2~~



10.1*		~~Second Amendment to Credit Agreement (including Exhibit A),~~Consent of Waiver of Leverage Ratio Default, dated ~~June 21, 2022,~~November 2, 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 June 27, 2022).~~LLC.
~~10.3~~ 31.1*		~~Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 26, 2022).~~
~~10.4~~	Form of Placement Agency Agreement, dated July 22, 2022, between Boxlight Corporation and Maxim Group LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed July 26, 2022).

~~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
~~101.INS~~	Inline XBRL Instance Document
101.SCH
~~101.SCH~~	Inline XBRL Taxonomy Extension Schema Document
101.CAL
~~101.CAL~~	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
~~101.DEF~~	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
~~101.LAB~~	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
~~101.PRE~~	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
~~104~~	Cover Page Interactive Data File (embedded within the Inline XBRL document)

*Filed herewith.

**Furnished herewith.

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SIGNATURES

~~In accordance with~~

Pursuant to the ~~requirements~~requirement of the Securities Exchange Act of 1934, the registrant has duly caused this ~~report~~reort to be signed on its behalf by the undersigned thereunto duly authorized.


	BOXLIGHT CORPORATION

November ~~9, 2022~~ 8, 2023	By:	/s/ Michael Pope
		Michael Pope
		Chief Executive Officer


November ~~9, 2022~~ 8, 2023	By:	/s/ Greg Wiggins
		Greg Wiggins
		Chief Financial Officer (Principal Financial and Accounting Officer)


Nevada		~~8211~~		~~46-4116523~~ 36-4794936
(State or other jurisdiction of	~~(Primary Standard Industrial~~	~~(I.R.S. Employer~~
incorporation or organization)	~~Classification Code Number)~~		(I.R.S. Employer Identification Number)


				Page No.

			PART I. Financial Information

Item 1.			Unaudited Condensed Consolidated Financial Statements	3

			Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months and nine months ended September 30, ~~2022~~2023 and ~~2021~~ 2022	3

			Unaudited Condensed Consolidated Balance Sheets as of September 30, ~~2022~~2023 and December 31, ~~2021~~ 2022	4

			Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months and nine months ended September 30, ~~2022~~2023 and ~~2021~~ 2022	5

			Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2022~~2023 and ~~2021~~ 2022	7 9

			Notes to Unaudited Condensed Consolidated Financial Statements	8 10

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	30 31

Item 3.			Quantitative and Qualitative Disclosure About Market Risk	37 39

Item 4.			Controls and Procedures	37
		39

			PART II. Other Information

Item 1.			Legal Proceedings	38 40

Item 1A.			Risk Factors	38 40

Item 2.			Unregistered Sale of Equity Securities, ~~and~~ Use of Proceeds and Issuer Purchase of Equity Securities	38 41

Item 3.			Defaults Upon Senior Securities	38 41

Item 4.			Mine Safety Disclosures	38

~~Item 5.~~41	~~Other Information~~	39

~~Item 6.~~	~~Exhibits~~	39


Item 5.			Other Information	41

Item 6.			Exhibits	42

			Signatures	40 43


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in thousands)		(in thousands)		(in thousands)		(in thousands)
Product revenues:
Hardware	$	64,601	$	57,400	$	167,967	$	131,865
Software		906		1,395		3,959		3,445
Service revenues:
Professional services		1,359		534		2,192		1,103
Maintenance and subscription services		1,870		1,679		4,849		4,773
	$	68,736	$	61,008	$	178,967	$	141,186


	Three Months Ended September 30,				Nine Months Ended September 30,
	(in thousands)				(in thousands)
	2023		2022		2023		2022
Product revenues:
Hardware	$	46,650	$	64,601	$	128,781	$	167,967
Software	733		906		1,818		3,959
Service revenues:
Professional services	45		1,359		872		2,192
Maintenance and subscription services	2,239		1,870		6,438		4,849
	$	49,667	$	68,736	$	137,909	$	178,967


			☒x			QUARTERLY REPORT ~~UNDER~~PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			☐o			TRANSITION REPORT ~~UNDER~~PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	September 30,		December 31,
	2022		2021
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	21,952	$	17,938
Accounts receivable – trade, net of allowances		51,254		29,573
Inventories, net of reserves		49,435		51,591
Prepaid expenses and other current assets		9,013		9,444
Total current assets		131,654		108,546

Property and equipment, net of accumulated depreciation		1,675		1,073
Operating lease right of use asset		4,370		—
Intangible assets, net of accumulated amortization		51,913		65,532
Goodwill		24,524		26,037
Other assets		363		248
Total assets	$	214,499	$	201,436

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	48,410	$	33,638
Short-term debt		9,224		9,804
Operating lease liabilities, current		1,767		—
Deferred revenues, current		8,194		7,575
Derivative liabilities		1,527		3,064
Other short-term liabilities		258		667
Total current liabilities		69,380		54,748

Deferred revenues, non-current		15,016		13,952
Long-term debt		44,056		42,137
Deferred tax liabilities, net		8,036		8,449
Operating lease liabilities, non-current		2,594		—
Other long-term liabilities		148		340
Total liabilities		139,230		119,626

Commitments and contingencies (Note 15)
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, 200,000,000 shares authorized; 74,123,492 and 63,821,901 Class A shares issued and outstanding, respectively		7		6
Additional paid-in capital		117,499		110,867
Accumulated deficit		(63,025)		(61,300)
Accumulated other comprehensive (loss) income		(7,721)		3,728
Total stockholders’ equity		46,760		53,301

Total liabilities and stockholders’ equity	$	214,499	$	201,436


									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 June 30, 2022	167,972	$	—	66,207,717	$	7	$	112,352	$	(2,681)	$	(66,130)	$	43,548

Shares issued for:

Shares issued for acquisition	—		—	230,770		—		150		—		—		150

Issuance of warrants and prefunded warrants	—		—	—		—		2,348		—		—		2,348

Warrants exercised	—		—	352,940		—		—		—		—		—

Issuance of stock, net	—		—	7,000,000		—		2,352		—		—		2,352

Vesting of restricted share units	—		—	332,065		—		11		—		—		11

Stock compensation	—		—	—		—		603		—		—		603

Foreign currency translation	—		—	—		—		—		(5,040)		—		(5,040)

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

Net income	—		—	—		—		—		—		3,105		3,105

Balance as of September 30, 2022	167,972	$	—	74,123,492	$	7	$	117,499	$	(7,721)	$	(63,025)	$	46,760


Balance as of December 31, 2021	167,972	$	—	63,821,901	$	6	$	110,867	$	3,728	$	(61,300)	$	53,301

Shares issued for:

Stock options exercised	—		—	193,841		—		69		—		—		69

Shares issued for acquisition	—		—	230,770		—		150		—		—		150

Issuance of warrants and prefunded warrants	—		—	—		—		2,348		—		—		2,348

Debt issuance costs	—		—	528,169		—		—		—		—		—

Vesting of restricted share units	—		—	1,995,871		—		—		—		—		—

Stock compensation	—		—	—		—		2,665		—		—		2,665

Issuance of stock	—		—	7,000,000		1		2,352		—		—		2,353

Warrants exercised	—		—	352,940		—		—		—		—		—

Foreign currency translation	—		—	—		—		—		(11,449)		—		(11,449)

Fixed dividends Preferred Series B	—		—	—		—		(952)		—		—		(952)

Net loss	—		—	—		—		—		—		(1,725)		(1,725)

Balance as of September 30, 2022	167,972	$	—	74,123,492	$	7	$	117,499	$	(7,721)	$	(63,025)	$	46,760


	Nine Months Ended
	September 30, 2023		September 30, 2022
Cash flows from operating activities:
Net loss	$	(21,485)	$	(1,725)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of debt premium, discount and issuance cost	1,800		1,645
Bad debt expense	(197)		9
Gain on settlement of liabilities	—		(856)
Changes in deferred tax assets and liabilities	907		(654)
Change in allowance for sales returns and volume rebates	1,266		431
Change in inventory reserve	676		634
Change in fair value of derivative liabilities	(50)		(1,537)
Stock compensation expense	1,823		2,665
Depreciation and amortization	6,893		6,818
Impairment of goodwill	13,226		—
Change in right of use assets and lease liabilities	249		(20)
Changes in operating assets and liabilities:
Accounts receivable – trade	(10,344)		(26,240)
Inventories	13,788		(4,722)
Prepaid expenses and other assets	(602)		(41)
Other assets	(450)		(332)
Accounts payable and accrued expenses	(972)		21,592
Other liabilities	2,036		(1,737)
Deferred revenues	(322)		4,570
Net cash provided by operating activities	$	8,242	$	500

Cash flows from investing activities:
Asset acquisition	—		(100)
Purchases of furniture and fixtures, net	(226)		(960)
Net cash used in investing activities	$	(226)	$	(1,060)

Cash flows from financing activities:
Proceeds from short-term debt	3,000		—
Proceeds from long-term debt	—		2,500
Principal payments on short term debt	(3,000)		—
Principal payments on long term debt	(2,048)		(1,878)
Net proceeds from issuance of common stock and warrants, net of issuance costs	—		4,700
Payments of fixed dividends to Series B Preferred stockholders	(952)		(952)
Proceeds from the exercise of options and warrants	13		70
Net cash (used in) provided by financing activities	$	(2,987)	$	4,440

Effect of foreign currency exchange rates	(1,206)		134

Net increase in cash and cash equivalents	3,823		4,014

Cash and cash equivalents, beginning of the period	14,591		17,938

Cash and cash equivalents, end of the period	$	18,414	$	21,952

Supplemental cash flow disclosures:

Cash paid for income taxes	$	2,650	$	1,615
Cash paid for interest	$	6,390	$	7,346

Non-cash investing and financing transactions:
Addition of operating lease liabilities	$	5,369	$	—
Shares issued for asset acquisition	$	—	$	150


Description	Markets for Identical Assets (Level 1)	Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		Carrying Value as of September 30, 2023
Derivative liabilities - warrant instruments	—	—	$	422	$	422



	(in thousands)
Balance, June 30, 2022	$	1,414
Change in fair value of derivative liabilities		113
Balance, September 30, 2022	$	1,527


	(in thousands)
Balance, December 31, 2021	$	3,064
Change in fair value of derivative liabilities		1,537
Balance, September 30, 2022	$	1,527


	(in thousands)
Balance, June 30, 2021	$	536
Exercise of warrants		(171)
Change in fair value of derivative liabilities		(9)
Balance, September 30, 2021	$	356


	(in thousands)
Balance, December 31, 2020	$	363
Exercise of warrants		(171)
Change in fair value of derivative liabilities		164
Balance, September 30, 2021	$	356


	(in thousands)
Balance, June 30, 2023	$	512
Change in fair value of derivative liabilities	(90)
Balance, September 30, 2023	$	422


	(in thousands)
Balance, December 31, 2022	$	472
Change in fair value of derivative liabilities	(50)
Balance, September 30, 2023	$	422

	(in thousands)
Balance, June 30, 2022	$	1,414
Change in fair value of derivative liabilities	113
Balance, September 30, 2022	$	1,527

	(in thousands)
Balance, December 31, 2021	$	3,064
Change in fair value of derivative liabilities	(1,537)
Balance, September 30, 2022	$	1,527


		(in thousands)
Assets acquired:
Cash	$	2,752
Accounts receivable		3,381
Inventories		10,240
Prepaid expenses		883
Property and equipment		348
Total assets acquired		17,604

Accounts payable and accrued expenses		(1,501)
Deferred revenue		(1,225)
Other liabilities		(12)
Total liabilities assumed		(2,738)

Net tangible assets acquired	$	14,866

Identifiable intangible assets:
Customer relationships		8,195
Trademarks		3,244
Technology		5,036
Non-compete		391
Total intangible assets subject to amortization		16,866

Goodwill		2,920

Total net assets acquired	$	34,652

Consideration paid:
Cash	$	34,652




	Useful lives	2022		2021

Patents	4-10 years	$	182	$	182
Customer relationships	8-15 years		47,650		55,158
Technology	3-5 years		8,521		8,901
Domain	7 years		14		14
Non-compete	8-15 years		391		391
Tradenames	2-10 years		12,065		13,085
Intangible assets, at cost			68,823		77,731
Accumulated amortization			(16,910)		(12,199)
Intangible assets, net of accumulated amortization		$	51,913	$	65,532


2022	$	647
2023		2,000
2024		1,271
2025		1,068
2026		731
		5,717
Less imputed interest		(1,356)
Total	$	4,361


	2022		2021
Debt – Third Parties
Paycheck Protection Program	$	140	$	1,009
Note payable - Whitehawk		59,063		58,500
Total debt		59,203		59,509
Less: Discount and issuance costs		5,923		7,568
Current portion of debt		9,224		9,804
Long-term debt	$	44,056	$	42,137
Total debt (net of discount and issuance costs)	$	53,280	$	51,941


	September 30, 2022
Common stock issuable upon exercise of warrants		3,715,075
Market value of common stock on measurement date	$	0.62
Exercise price	$	1.10
Risk free interest rate (1)		4.07	%
Expected life in years		4.25 years
Expected volatility (2)		92	%
Expected dividend yields (3)		—	%


	December 31, 2021
Common stock issuable upon exercise of warrants		2,043,291
Market value of common stock on measurement date	$	1.38
Exercise price	$	2.00
Risk free interest rate (1)		1.25	%
Expected life in years		5 years
Expected volatility (2)		79	%
Expected dividend yields (3)		—	%


	Three Months		Three Months
	Ended		Ended
	September 30		September 30,
	2022		2021
United States	$	3,320	$	(3,114)
Foreign		305		5,234
Total pretax book income	$	3,625	$	2,120


				Weighted
				Average
			Weighted	Remaining
	Number of		Average	Contractual
	Units		Exercise Price	Term (in years)
Outstanding, December 31, 2021	70,000	$	5.70	0.94
Granted	7,705,880	$	0.65
Exercised	(352,940)	$	-
Expired	(50,000)		7.70
Outstanding, September 30, 2022	7,372,940	$	0.68	5.25
Exercisable, September 30, 2022	12,500	$	0.70	2.56


		Weighted
		Average
		Grant Date Fair
	Number of Units	Value
Outstanding, December 31, 2021	1,973,947	$	1.81
Granted	2,411,662	$	1.20
Vested	(1,179,754)	$	1.73
Forfeited	(370,151)	$	1.38
Outstanding, September 30, 2022	2,835,704	$	1.37


		Three months ended September 30,				Nine months ended September 30,
		2022		2021		2022		2021
Stock options	$	128	$	153	$	683	$	544
Restricted stock units		474		1,005		1,980		2,472
Warrants		1		3		2		4
Total stock compensation expense	$	603	$	1,161	$	2,665	$	3,020


	Total revenues				Total revenues		Accounts
	from the customer		Accounts		from the customer		receivable from
	as a percentage of		receivable from		as a percentage of		the customer as
	total revenues		this customer as of		total revenues		of
	for the nine months ended		September 30,		for the nine months ended		September 30,
	September 30,		2022		September 30,		2021
Customer	2022		(in thousands)		2021		(in thousands)
1	14.1	%	$	8,532	12.8	%	$	9,815
2	—			—	10.1	%	$	5,142


	Total purchases				Total purchases
	from the vendor				from the vendor			Accounts payable
	as a percentage of			Accounts payable	as a percentage			(prepayment) to
	total cost of			(prepayment) to	of total cost of			the
	revenues for			the vendor as of	revenues for			vendor as of
	the nine months ended			September 30,	the nine months ended			September 30,
	September 30,			2022	September 30,			2021
Vendor	2022			(in thousands)	2021			(in thousands)
1	44.0	%	$	8,275	47.0	%	$	4,188
2	20.0	%	$	(10,482)	18.4	%	$	(2,070)