Boxlight(US:BOXL)2023-03-16 16:00Part I Business Overview Boxlight Corporation is a technology company providing interactive solutions for the global education market, expanding into enterprise and government sectors through strategic acquisitions and integrated offerings - Boxlight Corporation's core business involves developing, selling, and maintaining interactive solutions for the global education market, actively expanding into enterprise and government sectors106392417 - The company's product portfolio includes interactive and non-interactive flat panel displays, LED video walls, media players, classroom audio and campus communication systems, cameras, other peripherals, STEM products (3D printing, robotics, portable science labs), and integrated classroom software suites106392417 - Company solutions have been sold in over 70 countries, covering more than 1.5 million classrooms and meeting spaces, distributed through over 1,000 global reseller partners106392417 - The company achieves growth through acquisitions of companies with complementary products, technology, industry expertise, or geographic reach, aiming to improve economies of scale, bargaining power, and market penetration396397446 - Recent acquisitions include FrontRow Calypso LLC (December 31, 2021, classroom and campus communication solutions), Interactive Concepts BV (March 23, 2021, interactive technology distributor), and Sahara Holdings Ltd. (September 24, 2020, Clevertouch brand manufacturer)2190112113395445 - The global interactive education technology industry is undergoing significant transformation, with technology's importance in education growing, sustained investment in education, and a booming e-learning market9799100 - The US display market is projected to reach $37 billion in 2022, increasing to $49 billion by 2026; the global display market is estimated at approximately $10.5 trillion in 2022. The enterprise sector is growing faster than education, expected to account for 47% of the global display market by 2026122 - The e-learning market is projected to generate $65.41 billion in revenue by 2023, with a compound annual growth rate of 7.07%, primarily driven by cloud infrastructure, P2P learning, and mobile AR/VR102154 - Boxlight's 'Connected Classroom™' solutions (hardware, software, content, and professional development) position it as a leader in the global education technology market, supported by strong brands, operations, supply chain, and global technical support123 - The company's product portfolio includes: front-of-class displays (Clevertouch, Mimio series), classroom audio and campus communication (Juno, EzRoom, Conductor), STEM products (Mimio MyBot, Robo3D, MyStemKits), educational software (MimioStudio, OKTOPUS, MimioConnect), and peripherals and accessories128129155156169172174207208 - The company centrally manages its business through an ERP system, integrating accounting and customer relationship management systems to enhance information sharing and decision-making efficiency188212 - Logistics are provided through global third-party logistics (3PL) partners, while contract manufacturing is performed by ODM/OEM partners in the US, Taiwan, China, and Germany213236 - Technical support centers are located in Atlanta, London, and Belfast, aiming to resolve over 60% of customer service calls immediately with professional technicians190237 - Sales and marketing teams consist of account managers worldwide, selling through an indirect channel distribution model and over 800 reseller partners214238 - EOS Education provides differentiated, hands-on, teacher-centric professional development training, integrated with student contexts, to ensure effective use of technology tools by educators185186187211233234235 Employee Distribution (as of December 31, 2022) | Category | Number of Employees | | :--------------- | :------------------ | | Operations | 44 | | Sales & Marketing| 98 | | Administration | 45 | | Total | 187 | Risk Factors Boxlight faces high risks from global economic instability, cybersecurity threats, customer retention, cash flow management, intense competition, acquisition integration, and the need for continuous product innovation, alongside challenges in international operations and intellectual property protection - Adverse global economic or political conditions, including the Russia-Ukraine conflict, COVID-19 pandemic, inflation, and banking system instability, could negatively impact the company's business, financial condition, and operating results224225280587 - Increased risk of cybersecurity incidents could lead to operational disruptions, reputational damage, and significant costs281308331 - Approximately 80% of the company's revenue is derived from interactive display product sales, and a decline in demand would severely impact revenue230256 - Business is subject to seasonal fluctuations in the education market's purchasing cycles, leading to volatility in quarterly operating results and working capital257284 - Intense industry competition and rapid product updates, coupled with competitors potentially having greater resources, could lead to price wars, reduced profit margins, or loss of market share240260288289 - The company's success depends on continuous product innovation and timely introduction of competitive new technologies and products; failure to do so could result in inventory obsolescence and reduced working capital262263264291293 - Expansion into overseas markets faces challenges such as pricing pressure, long sales cycles, and demand for customized solutions; growth in enterprise and government markets remains uncertain265267268269294295296297 - High reliance on third-party suppliers for all products and components poses risks from supply chain disruptions, long lead times, and lack of written agreements270300 - Complex products may contain design defects or software errors, leading to decreased market acceptance, warranty claims, and reputational damage319320342343 - Intellectual property protection (patents, copyrights, trademarks, trade secrets) is crucial but uncertain, facing risks of independent development, unauthorized disclosure, and infringement claims321322344345346348365 Unresolved Staff Comments The company currently has no unresolved staff comments - No unresolved staff comments360 Properties Boxlight's corporate headquarters are in Duluth, Georgia, with additional offices and warehouses across the US and Europe supporting global operations - The company's headquarters are in Duluth, Georgia, with approximately 12,000 square feet of office space and a monthly rent of approximately $23,000378 - Warehouse space is leased in Lawrenceville, Georgia, with a monthly rent of approximately $13,000378 - Sales, marketing, technical support, and service offices are located in the US (Scottsdale, Utica) and Europe (Dartford, London, Leeds, Livingston, Belfast, Apeldoorn, Anzexheim, Helsinki, Oskarshamn, Düsseldorf)361 Legal Proceedings As of the report date, Boxlight Corporation is not involved in any material pending or threatened legal or governmental proceedings - As of the report date, the company has no material pending or threatened legal or governmental proceedings379403795 Mine Safety Disclosures This item is not applicable - This item is not applicable362 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Boxlight's common stock has traded on Nasdaq since November 2017, with 74,774,556 shares outstanding held by 378 record holders as of March 13, 2023, and the company plans to reinvest earnings, having never paid cash dividends - The company's common stock has traded on the Nasdaq Capital Market under the ticker 'BOXL' since November 30, 2017381 - As of March 13, 2023, the company had 378 record holders of common stock and 74,774,556 shares of common stock outstanding69382 - The company has never paid cash dividends and does not intend to do so in the foreseeable future, planning to use all surplus cash for business operations and expansion357375404 - The company has two shareholder-approved equity incentive plans from 2014 and 2021 for issuing Class A common stock to directors, officers, employees, and consultants; approximately 2.3 million shares were available for issuance under the 2021 plan as of December 31, 2022384387405 - Recently, 528,169 shares of Class A common stock and warrants to purchase 2,043,291 shares of Class A common stock (exercise price adjusted to $1.10 per share, increasing shares to 3,715,075) were issued to WhiteHawk220385408 - For the Sahara acquisition, 1,586,620 shares of Series B preferred stock (fair value $16.5 million) and 1,320,850 shares of Series C preferred stock (fair value $12.4 million) were issued386 Equity Incentive Plan Information (as of December 31, 2022) | Plan Category | Number of Securities to be Issued (Options, Warrants, and Rights) | Weighted-Average Exercise Price of Securities to be Issued | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :----------------------------------------- | :------------------------------------------------ | :--------------------------------------- | :----------------------------------------------------------- | | Equity compensation plans approved by security holders | 5,383,586 | | 2,293,933 | | Equity compensation plans not approved by security holders | 983,321 | | - | | Total | 6,366,907 | $1.61 | 2,293,933 | Reserved This item is reserved with no specific information - This item is reserved81390 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of Boxlight's financial condition and operating results, highlighting growth through acquisitions, significant revenue increase, improved gross margin, reduced net loss, and positive operating cash flow in 2022 - This section presents management's discussion and analysis of the company's financial condition and operating results, including forward-looking statements, noting that historical performance is not indicative of future results391414 - The company's core business is developing, selling, and maintaining interactive solutions for global education, enterprise, and government markets, with a growth strategy focused on acquisitions to achieve economies of scale, reduce costs, and expand market reach392396397417420446 - Revenue recognition follows ASC Topic 606, with product revenue recognized when control transfers (typically upon shipment) and service revenue recognized proportionally over the service period34474475476502504505575 - Cost of revenues includes procurement costs for components and finished goods, freight, duties, professional development training costs, warranty repair costs, and inventory write-downs399423448 - Gross margin is influenced by product, channel, and geographic revenue mix, product costs, component/supplier pricing, foreign exchange, and shipping costs424449 - Operating expenses are categorized into research and development (primarily personnel, prototype, design, and product certification costs) and general and administrative expenses (personnel, professional services, facilities, IT, depreciation, amortization, etc.)427450451614 - Other income (expense) primarily includes interest expense on debt financing, gains or losses on settlement of debt and accounts payable, and changes in the fair value of derivative liabilities428452 - Income tax expense is affected by tax laws and rates in multiple jurisdictions, including the US, UK, Mexico, Sweden, Finland, Netherlands, and Germany428453615 Summary of Operating Results (in thousand USD, except per share amounts) | Metric | 2022 (thousand USD) | 2021 (thousand USD) | | :------------------------------------------ | :------------------ | :------------------ | | Net revenues | $221,781 | $185,177 | | Cost of revenues | 156,913 | 138,652 | | Gross profit | 64,868 | 46,525 | | General and administrative expenses | 59,337 | 47,270 | | Research and development | 2,482 | 1,826 | | Total operating expenses | 61,819 | 49,096 | | Income (loss) from operations | 3,049 | (2,571) | | Interest expense, net | (9,923) | (3,382) | | Other expense, net | (267) | (20) | | Gain (loss) on settlement of liabilities, net | 856 | (4,532) | | Change in fair value of derivative liabilities | 2,591 | 13 | | Total other expenses | (6,743) | (7,921) | | Loss before income taxes | (3,694) | (10,492) | | Income tax expense | (49) | (3,310) | | Net loss | (3,743) | (13,802) | | Net loss attributable to common stockholders | $(5,012) | $(14,704) | | Net loss per common share – basic and diluted | $(0.07) | $(0.23) | | Weighted average number of common shares outstanding – basic and diluted (in thousands) | 69,153 | 58,849 | EBITDA and Adjusted EBITDA Reconciliation (in thousand USD) | Metric | 2022 (thousand USD) | 2021 (thousand USD) | | :------------------------------------------ | :------------------ | :------------------ | | Net loss | $(3,743) | $(13,802) | | Depreciation and amortization | 9,129 | 7,177 | | Interest expense | 9,923 | 3,382 | | Income tax expense | 49 | 3,310 | | EBITDA | 15,358 | 67 | | Stock-based compensation expense | 3,313 | 4,060 | | Change in fair value of derivative liabilities | (2,591) | (13) | | Purchase accounting impact of fair value inventory | 1,496 | 60 | | Purchase accounting impact of fair value deferred revenue | 2,229 | 2,980 | | Net gain (loss) on settlement of liabilities | (856) | 4,940 | | Adjusted EBITDA | 18,949 | 12,094 | - As of December 31, 2022, the company's cash and cash equivalents were $14.6 million, working capital was $62.8 million, and the current ratio was 2.29, showing improvement from 202116437 - Net cash provided by operating activities was $1.2 million in 2022, compared to net cash used of $2.3 million in 2021, primarily due to increased operating income in 202219488 - The company primarily uses WhiteHawk credit financing for the FrontRow acquisition and to repay existing debt; in 2022, $10.4 million in principal and $8.3 million in interest were repaid to WhiteHawk219490669 Debt Maturity Schedule (in thousand USD) | Year | Amount (thousand USD) | | :--- | :-------------------- | | 2023 | $2,680 | | 2024 | 2,681 | | 2025 | 44,672 | | 2026 | — | | 2027 | — | | Total | $50,033 | - The company has no significant off-balance sheet arrangements500 - Key accounting policies and estimates include revenue recognition, business acquisitions, goodwill and intangible assets, stock-based compensation, and derivative warrant liabilities, all involving significant management judgment and assumptions50150264 Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company is a smaller reporting company - This item is not applicable as the company is a smaller reporting company482542 Financial Statements and Supplementary Data This section presents Boxlight Corporation's audited consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows for 2021 and 2022, with FORVIS, LLP issuing an unqualified opinion while noting key audit matters - FORVIS, LLP (formerly Dixon Hughes Goodman LLP) issued an unqualified opinion on the company's consolidated financial statements as of December 31, 2022, and 2021, stating they are fairly presented in all material respects in accordance with US GAAP8514544 - Key audit matters include: 1) fair value of liability-classified warrants (due to subjectivity and measurement uncertainty of unobservable inputs); 2) classification of warrants (due to complexity in identifying relevant features and obligations); and 3) goodwill impairment assessment (due to measurement uncertainty in determining the fair value of reporting unit equity)111214515516517519546548550 Consolidated Balance Sheets (in thousand USD, except share and per share amounts) | ASSETS | Dec 31, 2022 (thousand USD) | Dec 31, 2021 (thousand USD) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $14,591 | $17,938 | | Accounts receivable – trade, net | 31,009 | 29,573 | | Inventories, net | 58,211 | 51,591 | | Prepaid expenses and other current assets | 7,433 | 9,444 | | Total current assets | 111,244 | 108,546 | | Property and equipment, net | 1,733 | 1,073 | | Operating lease right of use asset | 4,350 | — | | Intangible assets, net | 52,579 | 65,532 | | Goodwill | 25,092 | 26,037 | | Other assets | 397 | 248 | | Total assets | $195,395 | $201,436 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable and accrued expenses | $36,566 | $33,638 | | Short-term debt | 845 | 9,804 | | Operating lease liabilities, current | 1,898 | — | | Deferred revenues, current | 8,308 | 7,575 | | Derivative liabilities | 472 | 3,064 | | Other short-term liabilities | 386 | 667 | | Total current liabilities | 48,475 | 54,748 | | Deferred revenues, non-current | 15,603 | 13,952 | | Long-term debt | 43,778 | 42,137 | | Deferred tax liabilities, net | 4,680 | 8,449 | | Operating lease liabilities, non-current | 2,457 | — | | Other long-term liabilities | — | 340 | | Total liabilities | 114,993 | 119,626 | | Preferred Series B mezzanine equity | 16,146 | 16,146 | | Preferred Series C mezzanine equity | 12,363 | 12,363 | | Total mezzanine equity | 28,509 | 28,509 | | Common stock | 7 | 6 | | Additional paid-in capital | 117,843 | 110,867 | | Accumulated deficit | (65,043) | (61,300) | | Accumulated other comprehensive (loss) income | (914) | 3,728 | | Total stockholders' equity | 51,893 | 53,301 | | Total liabilities and stockholders' equity | $195,395 | $201,436 | Consolidated Statements of Operations and Comprehensive Loss (in thousand USD, except per share amounts) | Metric | 2022 (thousand USD) | 2021 (thousand USD) | | :------------------------------------------ | :------------------ | :------------------ | | Revenues, net | $221,781 | $185,177 | | Cost of revenues | 156,913 | 138,652 | | Gross profit | 64,868 | 46,525 | | General and administrative expenses | 59,337 | 47,270 | | Research and development | 2,482 | 1,826 | | Total operating expense | 61,819 | 49,096 | | Income (loss) from operations | 3,049 | (2,571) | | Interest expense, net | (9,923) | (3,382) | | Other expense, net | (267) | (20) | | Gain (loss) on settlement of liabilities, net | 856 | (4,532) | | Change in fair value of derivative liabilities | 2,591 | 13 | | Total other expense | (6,743) | (7,921) | | Loss before income taxes | (3,694) | (10,492) | | Income tax expense | (49) | (3,310) | | Net loss | (3,743) | (13,802) | | Fixed dividends - Series B Preferred | (1,269) | (1,269) | | Deemed contribution - Series B Preferred | — | 367 | | Net loss attributable to common stockholders | $(5,012) | $(14,704) | | Foreign currency translation adjustment | (4,642) | (1,464) | | Total comprehensive loss | $(8,385) | $(15,266) | | Net loss per common share – basic and diluted (USD) | $(0.07) | $(0.23) | | Weighted average number of common shares outstanding – basic and diluted (in thousands) | 69,153 | 58,849 | Consolidated Statements of Cash Flows (in thousand USD) | Cash Flows from Operating Activities | 2022 (thousand USD) | 2021 (thousand USD) | | :------------------------------------------ | :------------------ | :------------------ | | Net loss | $(3,743) | $(13,802) | | Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | | Amortization of debt discount and issuance cost | 2,158 | 2,132 | | Bad debt expense | 266 | 425 | | (Gain) loss on settlement of liabilities | (856) | 3,345 | | Changes in deferred tax assets and liabilities | (3,776) | 788 | | Change in allowance for sales returns and volume rebate | 316 | 1,145 | | Change in inventory reserve | (68) | 250 | | Change in fair value of derivative liability | (2,591) | (13) | | Shares issued for interest payment on notes payable | — | 617 | | Stock compensation expense | 3,313 | 4,060 | | Depreciation and amortization | 9,129 | 7,175 | | Change in right of use assets and lease liabilities | 8 | — | | Changes in operating assets and liabilities: | | | | Accounts receivable – trade | (3,800) | (6,427) | | Inventories | (10,272) | (20,998) | | Prepaid expenses and other current assets | 1,602 | (2,470) | | Other assets | (161) | (158) | | Accounts payable and accrued expenses | 5,756 | 17,948 | | Other short-term liabilities | 256 | 344 | | Deferred revenues | 3,965 | 4,318 | | Other liabilities | (312) | (1,009) | | Net cash provided by (used in) operating activities | $1,190 | $(2,330) | | Cash Flows from Investing Activities: | | | | Asset acquisition | (100) | (33,604) | | Cash paid to settle earnout obligations | — | (119) | | Purchases of furniture and fixtures, net | (1,106) | (285) | | Net cash used in investing activities | $(1,206) | $(34,008) | | Cash Flows from Financing Activities: | | | | Net proceeds from issuance of common stock and warrants, net of issuance costs | 4,700 | — | | Proceeds from issuances of short-term debt | — | 54,225 | | Proceeds from exercise of options and warrants | — | — | | Principal payments on debt | (11,141) | (66,912) | | Discount on notes payable | — | (500) | | Proceeds from long term debt | 2,500 | 58,500 | | Debt issuance costs | — | (3,324) | | Payments of fixed dividends to Series B Preferred stockholders | (1,269) | (1,269) | | Proceeds from issuance of common stock | 84 | 428 | | Other Share based payments | — | — | | Net cash (used in) provided by financing activities | $(5,126) | $41,148 | | Effect of foreign currency exchange rates | 1,795 | (332) | | Net (decrease) increase in cash and cash equivalents | $(3,347) | $4,478 | | Cash and cash equivalents, beginning of the period | 17,938 | 13,460 | | Cash and cash equivalents, end of the period | $14,591 | $17,938 | | Supplemental cash flow disclosures: | | | | Cash paid for income taxes | $1,615 | $1,476 | | Cash paid for interest | $8,342 | $1,497 | | Non-cash investing and financing transactions: | | | | Shares issued to settle accounts payable | — | 1,626 | | Shares issued for closing fees related to outstanding notes payable – Lind Global | — | 17,454 | | Exercise of warrants | — | 350 | | Shares issued for asset acquisition | 150 | 403 | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure Boxlight's independent registered public accounting firm, Dixon Hughes Goodman LLP, merged with BKD, LLP to form FORVIS, LLP in June 2022, with no disagreements on accounting principles or audit scope occurring before or during the merger - Dixon Hughes Goodman LLP (DHG) merged with BKD, LLP to form FORVIS, LLP, effective June 1, 2022, becoming the company's new independent registered public accounting firm800 - During the two most recent fiscal years and through June 2, 2022, no 'disagreements' occurred between the company and DHG regarding accounting principles, financial statement disclosures, or audit scope801828829 Controls and Procedures As of December 31, 2022, Boxlight management assessed its disclosure controls and procedures and internal control over financial reporting as ineffective due to insufficient financial transaction review and lack of process documentation for monitoring controls, yet believes the financial statements are fairly presented - As of December 31, 2022, the company's management assessed its disclosure controls and procedures as ineffective due to material weaknesses in internal control over financial reporting804 - Management believes that despite the material weaknesses, the consolidated financial statements in this report fairly present the company's financial position, results of operations, and cash flows in all material respects in accordance with US GAAP831 - Material weaknesses in internal control include: insufficient review of certain financial transactions (non-preparer review) and lack of process documentation for accounting and financial reporting monitoring controls809833 - No significant changes in the company's internal control over financial reporting occurred during the three months ended December 31, 2022810849 Other Information This item is not applicable - This item is not applicable835 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - This item is not applicable850 Part III Directors, Executive Officers and Corporate Governance The information required for this item will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - This information will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders600812836 Executive Compensation The information required for this item will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - This information will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders600812852 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - This information will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders600813853 Certain Relationships and Related Transactions, and Director Independence The information required for this item will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - This information will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders600813837 Principal Accountant Fees and Services The information required for this item will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - This information will be incorporated by reference into the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders600813 Part IV Exhibits, Financial Statement Schedules This section lists exhibits filed with the 10-K report, including valuation and qualifying accounts schedules for bad debt allowances for 2021 and 2022, alongside corporate charters, preferred stock designations, warrant forms, various acquisition, debt, and employment agreements, and Sarbanes-Oxley certifications and XBRL documents Valuation and Qualifying Accounts Schedule (in thousand USD) | Year Ended December 31, | Balance at Beginning of Period (thousand USD) | Charged to Costs and Expenses (thousand USD) | Charged to Other Accounts (thousand USD) | Deductions (a) (thousand USD) | Balance at End of Period (thousand USD) | | :---------------------- | :------------------------------------ | :----------------------------------- | :------------------------------- | :---------------------------- | :------------------------------ | | 2021 | $473 | $425 | $ - | $493 | $405 | | 2022 | $405 | $239 | $ - | $230 | $414 | - The exhibit list includes corporate charters, preferred stock designation certificates, warrant forms, various agreements related to acquisitions, debt, and employment, as well as Sarbanes-Oxley mandated CEO and CFO certifications and XBRL documents601602606607840845846854860 Form 10-K Summary This item is not applicable as the company is a smaller reporting company - This item is not applicable860 Signatures This report was duly signed by Michael R. Pope, Chairman and Chief Executive Officer, Gregory S. Wiggins, Chief Financial Officer, and other directors of Boxlight Corporation on March 16, 2023 - This report was signed by Michael R. Pope (Chairman and Chief Executive Officer), Gregory S. Wiggins (Chief Financial Officer), and other directors on March 16, 2023603848861