Boxlight(BOXL) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Boxlight Corporation's unaudited condensed consolidated financial statements and notes for Q2 and H1 2022 and 2021 Item 1. Financial Statements Boxlight Corporation's unaudited condensed consolidated financial statements and notes for Q2 and H1 2022 and 2021 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss This statement details Boxlight Corporation's revenues, costs, and net income or loss for Q2 and H1 2022 and 2021 | Metric (in thousands, except per share) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues, net | $59,628 | $46,754 | $110,231 | $80,177 | | Cost of revenues | $42,794 | $33,920 | $80,781 | $58,791 | | Gross profit | $16,834 | $12,834 | $29,450 | $21,386 | | Operating expense: | | | | | | General and administrative expenses | $15,304 | $10,800 | $30,762 | $20,911 | | Research and development | $649 | $481 | $1,261 | $955 | | Total operating expense | $15,953 | $11,281 | $32,023 | $21,866 | | Income (loss) from operations | $881 | $1,553 | $(2,573) | $(480) | | Net income (loss) | $26 | $(2,220) | $(4,829) | $(7,388) | | Net loss per common share – basic and diluted | $(0.00) | $(0.04) | $(0.08) | $(0.13) | | Weighted average common shares outstanding | 65,820 | 57,871 | 65,405 | 56,518 | - For the three months ended June 30, 2022, net income was $26 thousand, a significant improvement from a $2.2 million loss in the prior year period. For the six months ended June 30, 2022, net loss decreased to $4.8 million from $7.4 million in the prior year[13] Unaudited Condensed Consolidated Balance Sheets This statement presents Boxlight Corporation's assets, liabilities, and equity as of June 30, 2022, and December 31, 2021 | ASSETS (in thousands) | June 30, 2022 (unaudited) | December 31, 2021 | | :-------------------- | :------------------------ | :---------------- | | Cash and cash equivalents | $11,620 | $17,938 | | Accounts receivable – trade, net | $41,153 | $29,573 | | Inventories, net | $45,287 | $51,591 | | Total current assets | $108,149 | $108,546 | | Total assets | $196,691 | $201,436 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2022 (unaudited) | December 31, 2021 | | :-------------------------------------------------- | :------------------------ | :---------------- | | Accounts payable and accrued expenses | $33,385 | $33,638 | | Short-term debt | $9,159 | $9,804 | | Total current liabilities | $54,319 | $54,748 | | Total liabilities | $124,634 | $119,626 | | Total stockholders' equity | $43,548 | $53,301 | - As of June 30, 2022, cash and cash equivalents decreased to $11.6 million from $17.9 million at December 31, 2021. Total assets slightly decreased from $201.4 million to $196.7 million, while total liabilities increased from $119.6 million to $124.6 million[18] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity This statement details changes in Boxlight Corporation's stockholders' equity for the six months ended June 30, 2022 - Total stockholders' equity decreased from $53.3 million at December 31, 2021, to $43.5 million at June 30, 2022. This change was primarily influenced by a foreign currency translation adjustment of $(6.4) million and a net loss of $(4.8) million for the six months ended June 30, 2022[22][24] - During the six months ended June 30, 2022, 196,841 shares were issued for stock options exercised and 1,660,806 shares for conversion of restricted shares. Stock compensation expense contributed $2.1 million to additional paid-in capital[22] Unaudited Condensed Consolidated Statements of Cash Flows This statement presents Boxlight Corporation's cash flows from operating, investing, and financing activities for H1 2022 and 2021 | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(6,876) | $(4,570) | | Net cash used in investing activities | $(659) | $(852) | | Net cash provided by (used in) financing activities | $621 | $(139) | | Effect of foreign currency exchange rates | $596 | $(462) | | Net decrease in cash and cash equivalents | $(6,318) | $(6,023) | | Cash and cash equivalents, beginning of period | $17,938 | $13,460 | | Cash and cash equivalents, end of period | $11,620 | $7,437 | - Net cash used in operating activities increased to $6.9 million for the six months ended June 30, 2022, from $4.6 million in the prior year. Net cash provided by financing activities significantly improved to $621 thousand in 2022, compared to a net use of $139 thousand in 2021, primarily due to proceeds from short-term debt[28] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES This note outlines Boxlight Corporation's business, accounting policies, estimates, and revenue recognition - Boxlight Corporation designs, produces, and distributes interactive technology solutions under its Clevertouch and Mimio brands, serving education, corporate, and government markets[29] - The Company adopted ASU 2016-02 'Leases' on January 1, 2022, recognizing an operating lease right-of-use asset of $3.8 million and related liabilities, with no impact on the statement of operations or cash flows[68][69] - Revenue is recognized when control of products or services is transferred to customers, with product revenue from hardware and software sales, and service revenue from maintenance, installation, training, and subscriptions[46][47][48] Disaggregated Revenue (in thousands) | Revenue Type | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Hardware | $56,569 | $43,145 | $103,863 | $73,905 | | Software | $1,038 | $1,818 | $2,556 | $2,685 | | Professional Services | $479 | $205 | $833 | $475 | | Maintenance and Subscription Services | $1,542 | $1,586 | $2,979 | $3,112 | | Total | $59,628 | $46,754 | $110,231 | $80,177 | NOTE 2 – RECENT BUSINESS ACQUISITIONS This note details Boxlight Corporation's recent acquisitions, FrontRow Calypso LLC and Interactive Concepts BV - On December 31, 2021, Boxlight acquired FrontRow Calypso LLC for $34.7 million, expanding its offerings in network-based communication solutions for learning environments[74][75] FrontRow Acquisition - Net Assets Acquired (in thousands) | Assets Acquired: | Amount | | :----------------- | :----- | | Cash | $2,752 | | Accounts receivable | $3,381 | | Inventories | $10,240 | | Total assets acquired | $17,604 | | Total liabilities assumed | $(2,738) | | Net tangible assets acquired | $14,866 | | Identifiable intangible assets | $16,866 | | Goodwill | $2,920 | | Total net assets acquired | $34,652 | | Consideration paid: Cash | $34,652 | - On March 23, 2021, Boxlight acquired Interactive Concepts BV for approximately $3.3 million, enhancing its distribution network in Belgium and Luxembourg[82] NOTE 3 – ACCOUNTS RECEIVABLE - TRADE This note details accounts receivable, trade, net of allowances, which increased to $41.2 million at June 30, 2022 Accounts Receivable - Trade (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :------------ | :---------------- | | Accounts receivable – trade | $42,619 | $31,053 | | Allowance for doubtful accounts | $(344) | $(405) | | Allowance for sales returns and volume rebates | $(1,122) | $(1,075) | | Accounts receivable - trade, net of allowances | $41,153 | $29,573 | NOTE 4 – INVENTORIES This note details inventory composition, which decreased to $45.3 million at June 30, 2022, primarily due to reduced finished goods Inventories (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :------------------------- | :------------ | :---------------- | | Finished goods | $46,227 | $51,346 | | Spare parts | $240 | $260 | | Reserve for inventory obsolescence | $(1,348) | $(599) |\ | Advanced shipping costs | $168 | $584 | | Inventories, net | $45,287 | $51,591 | - The reserve for inventory obsolescence increased significantly from $599 thousand at December 31, 2021, to $1.3 million at June 30, 2022[88] NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS This note shows prepaid expenses and other current assets increased to $10.1 million at June 30, 2022, driven by higher prepayments Prepaid Expenses and Other Current Assets (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :---------------------------------- | :------------ | :---------------- | | Prepayments to vendors | $8,574 | $7,739 | | Prepaid licenses and other | $1,515 | $1,705 | | Prepaid expenses and other current assets | $10,089 | $9,444 | NOTE 6 – INTANGIBLE ASSETS This note details intangible assets, net of amortization, which decreased to $56.8 million at June 30, 2022, due to amortization and foreign currency adjustments Intangible Assets, Net (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :------------------------------------------- | :------------ | :---------------- | | Intangible assets, at cost | $72,524 | $77,731 | | Accumulated amortization | $(15,717) | $(12,199) | | Intangible assets, net of accumulated amortization | $56,807 | $65,532 | - Amortization expense for intangible assets was $2.2 million for the three months ended June 30, 2022 (vs. $1.8 million in 2021) and $4.4 million for the six months ended June 30, 2022 (vs. $3.5 million in 2021)[90] - Changes to gross carrying amount of recognized intangible assets due to translation adjustments include approximately $2.2 million reduction as of the six months ended June 30, 2022[90] NOTE 7 – LEASES This note outlines the Company's operating lease commitments and recognized right-of-use assets and liabilities following ASC 842 adoption - Operating lease expense was $579 thousand for the three months ended June 30, 2022, and $1.0 million for the six months ended June 30, 2022[94] Future Maturities of Operating Lease Liabilities (in thousands) | Fiscal year ended | Amount | | :---------------- | :----- | | 2022 | $974 | | 2023 | $1,918 | | 2024 | $1,206 | | 2025 | $1,033 | | 2026 | $731 | | Thereafter | $235 | | Total | $6,097 | | Less imputed interest | $(1,474) | | Total | $4,623 | - The weighted-average remaining lease term is 3.6 years, with a weighted-average discount rate of 15.5%[95] NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES This note shows accounts payable and accrued expenses remained stable at $33.4 million at June 30, 2022, with a slight increase in accrued expenses Accounts Payable and Accrued Expenses (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :------------ | :---------------- | | Accounts payable | $23,877 | $25,714 | | Accrued expense | $8,316 | $6,440 | | Other | $1,192 | $1,484 | | Accounts payable and other liabilities | $33,385 | $33,638 | NOTE 9 – DEBT This note details the Company's debt structure, primarily a $68.5 million term loan credit facility with Whitehawk Finance LLC Summary of Debt (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :------------------------- | :------------ | :---------------- | | Debt – Third Parties | $59,873 | $59,509 | | Less: Discount and issuance cost | $6,474 | $7,568 | | Current portion of debt | $9,159 | $9,804 | | Long-term debt | $44,240 | $42,137 | | Total debt (net of discount) | $53,399 | $51,941 | - The Company entered into a $68.5 million term loan credit facility with Whitehawk Finance LLC on December 31, 2021, with an initial loan of $58.5 million, bearing interest at LIBOR plus 10.75%[99] - Amendments to the Whitehawk credit agreement extended the repayment of an $8.5 million principal amount to February 28, 2023, and adjusted interest rates and borrowing base requirements[103][104] NOTE 10 – DERIVATIVE LIABILITIES This note explains derivative liabilities, primarily warrant instruments, which decreased from $3.06 million to $1.41 million at June 30, 2022 Derivative Liabilities - Warrant Instruments (in thousands) | Description | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :------------ | :---------------- | | Derivative liabilities - warrant instruments | $1,414 | $3,064 | - The change in fair value of derivative liabilities was a gain of $1.66 million for the three months ended June 30, 2022, and a gain of $1.65 million for the six months ended June 30, 2022[41] Warrant Valuation Inputs | Metric | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :------------ | :---------------- | | Common stock issuable upon exercise of warrants | 3,434,103 | 2,043,291 | | Market value of common stock on measurement date | $0.68 | $1.38 | | Exercise price | $1.19 | $2.00 | | Risk free interest rate | 2.97% | 1.25% | | Expected life in years | 4.5 years | 5 years | | Expected volatility | 81.1% | 79% | NOTE 11 – INCOME TAXES This note discusses income tax expense and benefit, showing a significant decrease year-over-year, with an effective tax rate of 0.9% for H1 2022 Pretax (Loss) Income by Jurisdiction (in thousands) | Jurisdiction | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $510 | $(105) | $(3,908) | $(5,428) | | Foreign | $(443) | $407 | $(966) | $583 | | Total pretax book income (loss) | $67 | $302 | $(4,874) | $(4,845) | - Income tax expense for the three months ended June 30, 2022, was $41 thousand, down from $2.5 million in the prior year, largely due to foreign pretax loss and a UK tax rate change in 2021[120][121] - The effective tax rate for the six months ended June 30, 2022, was 0.9%, primarily because U.S. operations have no material tax expense due to net operating loss carryforwards offset by a valuation allowance[120][123][211] NOTE 12 – EQUITY This note details the Company's equity structure, including preferred and common stock, and issuances related to debt conversion, RSUs, and stock options - As of June 30, 2022, 167,972 shares of Series A preferred stock, 1,586,620 shares of Series B preferred stock, and 1,320,850 shares of Series C preferred stock were outstanding[128][129] - Series B and C Preferred Stock are classified as mezzanine equity due to redemption features not solely within the Company's control[131] - As of June 30, 2022, 66,207,717 shares of Class A common stock were issued and outstanding, an increase from 63,821,901 shares at December 31, 2021[136] - During the six months ended June 30, 2022, 1,660,806 restricted stock units vested and converted into Class A common stock, and 196,841 stock options were exercised[141][142] NOTE 13 – STOCK COMPENSATION This note outlines the Company's stock compensation plans, including stock options and RSUs, detailing award activity and recognized expense Stock Option Activity (Six Months Ended June 30, 2022) | Metric | Number of Units | Weighted Average Exercise Price | | :--------------------------- | :-------------- | :------------------------------ | | Outstanding, December 31, 2021 | 4,054,116 | $1.92 | | Granted | 1,071,744 | $1.19 | | Exercised | (196,841) | $0.32 | | Cancelled | (699,014) | $1.79 | | Outstanding, June 30, 2022 | 4,230,005 | $1.83 | | Exercisable, June 30, 2022 | 2,874,787 | $2.27 | Restricted Stock Unit (RSU) Activity (Six Months Ended June 30, 2022) | Metric | Number of Units | Weighted Average Grant Date Fair Value | | :--------------------------- | :-------------- | :------------------------------------- | | Outstanding, December 31, 2021 | 1,973,947 | $1.81 | | Granted | 2,411,662 | $1.20 | | Vested | (836,497) | $1.87 | | Forfeited | (58,611) | $1.37 | | Outstanding, June 30, 2022 | 3,490,501 | $1.38 | Total Stock Compensation Expense (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options | $440 | $154 | $555 | $391 | | Restricted stock units | $489 | $154 | $1,506 | $1,467 | | Warrants | $0 | $0 | $1 | $1 | | Total stock compensation expense | $929 | $308 | $2,062 | $1,859 | - As of June 30, 2022, there was approximately $5.7 million of unrecognized compensation expense related to unvested awards, with $1.3 million estimated to be recorded in the remaining six months of 2022[156] NOTE 14 – RELATED PARTY TRANSACTIONS This note discloses a management agreement with an entity owned by the CEO for consulting services, with a fee of 0.375% of net revenues, capped at $250,000 annually - The Company has a management agreement with an entity owned by CEO Michael Pope, effective upon his employment termination, for consulting services[157] - The management fee is 0.375% of consolidated net revenues, capped at $250,000 annually, and can be paid in cash or Class A common stock[157] NOTE 15 – COMMITMENTS AND CONTINGENCIES This note details the Company's operating lease commitments and inventory purchase commitments, totaling $11.6 million in open orders as of June 30, 2022 - The Company leases seven office facilities in the U.S. and two in the U.K., with non-cancelable lease agreements extending from 2023 to 2027[158] - As of June 30, 2022, the total amount of open inventory purchase orders was $11.6 million[161] NOTE 16 – CUSTOMER AND SUPPLIER CONCENTRATION This note highlights customer and supplier concentration, with one customer at 11.7% of revenues and two vendors at 39.5% and 17.6% of cost of sales for H1 2022 Customer Concentration | Customer | Total revenues as % of total revenues (6 months ended June 30, 2022) | Accounts receivable (in thousands) as of June 30, 2022 | | :--------- | :------------------------------------------------------------------- | :----------------------------------------------------- | | Customer 1 | 11.7% | $4,923 | Supplier Concentration | Vendor | Total purchases as % of total cost of sales (6 months ended June 30, 2022) | Accounts payable (prepayment) (in thousands) as of June 30, 2022 | | :------- | :--------------------------------------------------------------------------- | :----------------------------------------------------------------- | | Vendor 1 | 39.5% | $10,894 | | Vendor 2 | 17.6% | $409 | NOTE 17 – SUBSEQUENT EVENTS This note discloses significant subsequent events, including a $5.0 million registered direct offering, a Nasdaq deficiency, and a new CFO appointment - On July 22, 2022, the Company completed a registered direct offering, issuing 7 million shares and warrants for $5.0 million in gross proceeds, with net proceeds of approximately $4.6 million for working capital[163] - On July 6, 2022, Nasdaq notified the Company of non-compliance with the minimum $1.00 bid price requirement, providing 180 calendar days to regain compliance[166][167] - Greg Wiggins commenced service as the Company's Chief Financial Officer on July 5, 2022, replacing Patrick Foley[168] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of Boxlight Corporation's financial condition and operational results for Q2 and H1 2022 Overview This section provides an overview of Boxlight Corporation's business, market position, and strategic goals - Boxlight is a technology company aiming to be a global leader in interactive products and software for education, business, and government markets, offering interactive displays, collaboration software, and STEM products[172] - The Company's revenue is primarily generated from hardware sales (interactive displays) and software to the educational market in the U.S. and Europe[173] - A comprehensive plan is in place to achieve profitability through integrating acquired products, cross-training sales teams, and expanding the reseller network[173][174] Recent Acquisitions This section summarizes Boxlight Corporation's recent acquisitions, FrontRow Calypso LLC and Interactive Concepts BV - On December 31, 2021, Boxlight acquired FrontRow Calypso LLC for $34.7 million, enhancing its communication technology solutions for learning environments[175][176] - On March 23, 2021, the Company acquired Interactive Concepts BV for approximately $3.3 million, strengthening its distribution in Belgium and Luxembourg[177] Acquisition Strategy and Challenges This section discusses Boxlight Corporation's growth strategy through acquisitions and associated challenges - Boxlight's growth strategy involves acquiring companies with complementary products, technologies, industry specializations, or geographic coverage[178] - The Company anticipates achieving cost-savings post-acquisition through staff reductions, economies of scale (improved purchasing power), and increased market reach[180][181] Components of our Results of Operations and Financial Condition This section explains the key components influencing Boxlight Corporation's financial results and condition - Revenues consist of hardware products, software services, and professional development, recognized net of sales discounts[182] - Cost of revenues includes direct product costs, logistics, freight, customs, warranty repairs, inventory write-downs, and professional development costs[184] - Gross profit and margin are influenced by product, channel, and geographical mix, product costs, and foreign currency exchange rates, with potential fluctuations due to increased freight costs[186] - Operating expenses are categorized into general and administrative (personnel, professional services, IT, depreciation) and research and development (personnel, prototype, design, certifications)[188][189][190] Operating Results – Boxlight Corporation This section analyzes Boxlight Corporation's operating performance for Q2 and H1 2022 and 2021 For the three-month periods ended June 30, 2022 and 2021 This section details Boxlight Corporation's financial performance for Q2 2022 and 2021 - Total revenues increased by 27.5% to $59.6 million for Q2 2022, primarily due to the FrontRow acquisition ($6.8 million) and increased demand in the U.S. and Europe[193] - Gross profit margin for Q2 2022 was 28.2%, an 80 basis point increase YoY, but still impacted by increased global freight/shipping costs[195][197] - Net income was $26 thousand for Q2 2022, a significant improvement from a $2.2 million loss in Q2 2021, driven by a decrease in income tax expense and changes in derivative liabilities[202][200][201] For the six-month periods ended June 30, 2022 and 2021 This section details Boxlight Corporation's financial performance for H1 2022 and 2021 - Total revenues increased by 37.5% to $110.2 million for H1 2022, with organic growth of 19.5% and contributions from FrontRow ($13.3 million) and Interactive Concepts ($407 thousand) acquisitions[203] - Gross profit margin remained flat at 26.7% for H1 2022 compared to H1 2021, despite increased cost of revenues due to acquisitions and higher freight costs[204][205] - Net loss decreased to $4.8 million for H1 2022 from $7.4 million in H1 2021, primarily due to a $1.7 million change in the fair value of Whitehawk derivative liability and decreased loss on settlement of liabilities, partially offset by increased interest expense[210][212] EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $26 | $(2,220) | $(4,829) | $(7,388) | | Depreciation and amortization | $2,266 | $1,815 | $4,587 | $3,567 | | Interest expense | $2,417 | $764 | $4,733 | $1,782 | | Income tax expense (benefit) | $41 | $2,522 | $(45) | $2,543 | | EBITDA | $4,750 | $2,881 | $4,446 | $504 | | Stock compensation expense | $929 | $1,182 | $2,062 | $1,859 | | Change in fair value of derivative liabilities | $(1,660) | $(41) | $(1,650) | $225 | | Purchase accounting impact of fair valuing inventory | $589 | $15 | $1,206 | $30 | | Purchase accounting impact of fair valuing deferred revenue | $589 | $790 | $1,238 | $1,597 | | Net loss on settlement of debt | $(3) | $533 | $(856) | $2,735 | | Adjusted EBITDA | $5,194 | $5,360 | $6,446 | $6,950 | Discussion of Effect of Seasonality on Financial Condition This section discusses the impact of seasonal fluctuations on Boxlight Corporation's financial condition - The Company's financial statements are subject to seasonal fluctuations, with the bulk of products shipped to educational customers in July, August, or September[218] - Inventories typically peak in the second quarter to prepare for the school year and decline significantly in the first quarter. Accounts receivable are highest in the third quarter due to peak sales[218] Liquidity and Capital Resources This section analyzes Boxlight Corporation's cash position, working capital, and financing activities - As of June 30, 2022, cash and cash equivalents were $11.6 million, working capital was $53.8 million, and the current ratio was 1.99, representing a significant improvement from June 30, 2021[219] - Operations were financed by cash flows from operating activities and a new credit facility from Whitehawk in the first half of 2022[220] - The Company faces challenges in debt and equity markets due to global economic uncertainty but is confident in managing through these challenges by managing payment terms with customers and vendors[221] Off Balance Sheet Arrangements This section confirms Boxlight Corporation has no significant off-balance sheet arrangements - The Company has no significant off-balance sheet arrangements that materially affect its financial condition, results of operations, or liquidity[225] Critical Accounting Policies and Estimates This section identifies Boxlight Corporation's critical accounting policies and estimates requiring significant judgment - Critical accounting estimates include revenue recognition, business acquisitions, goodwill and intangible assets, and stock-based compensation expense, which require significant management judgment[227] Status as Emerging Growth Company This section discusses Boxlight Corporation's status as an emerging growth company under the JOBS Act - Boxlight is an 'emerging growth company' under the JOBS Act, benefiting from reduced reporting and regulatory requirements, including an exemption from adopting new accounting standards until they apply to private companies[228][229][230] - The Company will lose its emerging growth company status on January 1, 2023, marking the fifth anniversary of its first equity securities sale under an effective registration statement[232] Item 3. Quantitative and Qualitative Disclosure About Market Risk As a 'smaller reporting company,' Boxlight Corporation is exempt from market risk disclosures in this report - The Company is exempt from this disclosure requirement as a 'smaller reporting company'[233] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of June 30, 2022, due to material weaknesses - Disclosure controls and procedures were deemed not effective as of June 30, 2022, due to material weaknesses previously described in the 2021 Annual Report on Form 10-K[235] - Despite material weaknesses, management believes the consolidated condensed financial statements fairly present the Company's financial condition, results of operations, and cash flows[236] - The Company engaged professional services firms to assist with income tax provision review and warrant valuation during 2022, with no other material changes to internal controls over financial reporting[238] PART II. Other Information This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings The Company reported no legal proceedings for the period - There are no legal proceedings to report[239] Item 1A. Risk Factors The Company highlights global supply chain challenges, component shortages, and increased freight costs, exacerbated by geopolitical and pandemic uncertainties - Global supply chain challenges have led to production delays, shipping delays, and increased shipping costs, adversely affecting gross profit margins[240] - A global silicon chip supply shortage poses a potential risk to the Company's ability to timely obtain and deliver finished goods[240] - Heightened global economic uncertainty due to the Russia-Ukraine conflict and the continuing COVID-19 pandemic adds to existing risks[242] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds The Company reported no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities or use of proceeds to report[245] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities for the period - There were no defaults upon senior securities to report[246] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[247] Item 5. Other Information The Company reported no other information for the period - There is no other information to report[248] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including warrants, employment agreements, credit agreement amendments, and certifications - Exhibits include Form of Pre-Funded Warrant (4.1), Form of Warrant (4.2), Employment Agreement with Greg Wiggins (10.1), Second Amendment to Credit Agreement (10.2), Form of Securities Purchase Agreement (10.3), and Form of Placement Agency Agreement (10.4)[251] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included (31.1, 31.2, 32.1, 32.2)[251] Signatures The report is signed by Michael Pope, Chief Executive Officer, and Greg Wiggins, Chief Financial Officer, on August 11, 2022 - The report was signed by Michael Pope, Chief Executive Officer, and Greg Wiggins, Chief Financial Officer, on August 11, 2022[255]