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Section 1: 10-K/A

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

(Amendment No. 1)

 

(Mark One)

 

  [X] annual Report UNDER Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Fiscal Year Ended December 31, 2017

 

OR

 

  [  ] Transition Report UNDER Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from ______________ to ______________

 

Commission file number: 001-37564

 

BOXLIGHT CORPORATION

(Exact name of registrant as specified in its charter)

 

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

 

BOXLIGHT CORPORATION

1045 Progress Circle

Lawrenceville, Georgia 30043

Phone: (678) 367-0809

(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Name of each exchange on which registered

 

Common Stock, $0.0001 par value NASDAQ Capital Market

 

Securities registered pursuant to section 12(g) of the Act: NONE

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
       
Non-accelerated filer [  ] Smaller reporting company [X]
       
    Emerging growth company [X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [  ]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $0

 

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

 

The number of shares outstanding of the registrant’s common stock on March 28, 2018 was 9,648,198.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None

 

 

 

   

 

 

Boxlight Corporation

Form 10-K/A Amendment No. 1

Explanatory Note

 

This Amendment No. 1 to the annual report of Boxlight Corporation (the “Company”) on Form 10-K/A amends our Annual Report on Form 10-K for the years ended December 31, 2017 and 2016 (the “Original 10-K”), which was originally filed on April 2, 2018. Subsequent to the filing of the Company’s Form 10-K filed on April 2, 2018, the Company identified (1) misstatements of stock compensation expense and (2) improper classification of certain warrants with net cash and non fixed settlement provisions through internal discussions and reviews.

 

The Company is filing this amendment to (i) to amend Item 8 – “Financial Statements and Supplementary Data” to restate our audited consolidated financial statements for the year ended December 31, 2017 to correct the misstatement to stock compensation and reflect the reclassification of certain warrants from equity to liabilities, and (ii) to make corresponding amendments to Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), item 10 – “Directors, Executive Officers And Corporate Governance, and item 12 – “Security Ownership Of Certain Beneficial Owners And Management To Related Stockholder Matters”. The impact of the restatement is summarized at the consolidated financial statement footnote No. 19 – restatement.

 

The Company reviewed its internal control over financial reporting and revised its disclosures regarding material weaknesses over its review of material agreements to ensure the accuracy of financial reporting at Item 9.A.

 

This Amendment No. 1 does not reflect subsequent events occurring after the original filing date of the Original 10-K or modify or update in any way disclosures made in the Original 10-K except as noted above. This Amendment No. 1 should be read in conjunction with the Original 10-K and with other Company filings with the Securities and Exchange Commission subsequent to the filing of the Original 10-K.

 

 
 

 

BOXLIGHT CORPORATION

 

TABLE OF CONTENTS

 

    Page
     
  PART II  
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 4
Item 6. Selected Financial Data 6
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 6
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

13 

Item 9A. Controls and Procedures 13
Item 9B. Other Information 14
     
  PART III  
Item 10. Directors, Executive Officers and Corporate Governance 15
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 24
Item 13. Certain Relationship and Related Transactions, and Director Independence 26
Item 14. Principal Accounting Fees and Services 28
     
  PART IV  
Item 15. Exhibits, Financial Statement Schedules 29
     
SIGNATURES 31

 

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FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K (including the section regarding Management’s Discussion and Analysis and Results of Operation) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Forward-looking statements include statements concerning the following:

 

  our possible or assumed future results of operations;
     
  our business strategies;
     
  our ability to attract and retain customers;
     
  our ability to sell additional products and services to customers;
     
  our cash needs and financing plans;
     
  our competitive position;
     
  our industry environment;
     
  our potential growth opportunities;
     
  expected technological advances by us or by third parties and our ability to leverage them;
     
  the effects of future regulation; and
     
  our ability to protect or monetize our intellectual property.

 

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the reports we file with the SEC. Actual events or results may vary significantly from those implied or projected by the forward-looking statements due to these risk factors. No forward-looking statement is a guarantee of future performance. You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed as exhibits thereto with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results and circumstances may be materially different from what we expect.

 

Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as may be required by applicable law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

 

Unless the context otherwise requires, the terms “the Company,” “we,” “us,” and “our” in this report refer to Boxlight Corporation and its consolidated subsidiaries.

 

 3 
 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock commenced trading on the NASDAQ Capital Market, or NASDAQ, under the symbol “BOXL” on November 30, 2017. Prior to that time, our common stock was not traded on any exchange or quoted on any over the counter market. The prices set forth below reflect the quarterly high and low sales prices per share for our common stock, as reported by the NASDAQ:

 

 4 
 

 

   High  Low
2018          
First Quarter (through March 9)  $6.97   $4.00 
           
2017          
First Quarter  $N/A   $N/A 
Second Quarter  $N/A   $N/A 
Third Quarter  $N/A   $N/A 
Fourth Quarter  $7.98   $5.74 
           
2016          
First Quarter  $N/A   $N/A 
Second Quarter  $N/A   $N/A 
Third Quarter  $N/A   $N/A 
Fourth Quarter  $N/A   $N/A 

 

Holders

 

As of March 22, 2018, we have 407 holders of record of our common stock.

 

Dividends

 

We have never paid cash dividends on our common stock. Holders of our common stock are entitled to receive dividends, if any, declared and paid from time to time by the Board of Directors out of funds legally available. We intend to retain any earnings for the operation and expansion of our business and do not anticipate paying cash dividends on our common stock in the foreseeable future. Any future determination as to the payment of cash dividends will depend upon future earnings, results of operations, capital requirements, our financial condition and other factors that our Board of Directors may consider.

 

Equity Compensation Plans

 

Adoption of the 2014 Stock Option Plan

 

On September 19, 2014, prior to the listing of our common stock on NASDAQ, the Board approved the Company’s 2014 Stock Option Plan. The total number of underlying shares of the Company’s Class A common stock available for grant to directors, officers, key employees, and consultants of the Company or a subsidiary of the Company under the plan is 2,390,438 shares.

 

The following table provides information as of December 31, 2017 about our equity compensation plans and arrangements.

 

Plan category   Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
    Weighted-average
exercise price of
outstanding options,
warrants and rights
    Number of securities remaining available for future issuance under equity compensation plans  
Equity compensation plans approved by security holders     812,574     $ 3.01       1,577,864  
Equity compensation plans not approved by security holders     870,717     $                     7.70       -  
Total                        

 

 5 
 

 

Recent Sales of Unregistered Securities

 

None.

 

Issuer Purchases of Equity Securities

 

None.

 

Use of Proceeds

 

On January 30, 2017, a Registration Statement on Form S-1 (Reg. No. 333-204811) was declared effective with the Securities and Exchange Commission. A Post-Effective Amendment to the Registration Statement was declared effective on August 29, 2017, for the sale of up to 1,000,000 shares of Class A common stock of the Company at an initial offering price of $7.00 per share. The offering was consummated on November 30, 2017 by the Company with Aegis Capital Corp, as the lead placement agent on a “best efforts” basis, without a firm commitment by Aegis, who had no obligation or commitment to purchase any of the Company’s shares. The Company received gross proceeds in the amount of $7,000,000.

 

From the effective date of the Registration Statement to December 31, 2017, we incurred actual expenses in the amount of approximately $1,034,000. We had net proceeds from the offering in the amount of $5,678,609 and converted accounts payable into common stock on IPO of $287,119.

 

We have used approximately $3,500,000 of the net proceeds as of December 31, 2017. The net proceeds were used to pay the Skyview Note, purchase inventory and for general working capital requirements.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not required for smaller reporting companies.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere herein. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our 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. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” of the reports filed with the Securities and Exchange Commission.

 

We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this transition report.

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our 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. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in “Risk Factors.” 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 that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

 

 6 
 

 

Overview

 

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

 

To date, we have generated substantially all of our revenue from the sale of our software and expanding product line of projectors, LED panels, interactive whiteboards and display devices to the educational market.

 

In addition, we have implemented a comprehensive plan to reach profitability for our business acquisitions. Highlights of this plan include:

 

  We have integrated products of the acquisition companies and cross trained our sales reps to increase their offerings. The combination of products and cross training has already resulted in increased sales. The synergy we have found between the products of Boxlight and Mimio are adding opportunities to resellers for both companies to increase their sales.
     
 

Recently hired new sales representatives with significant education technology sales experience in their respective territories and our current pipeline has reached a record high level.

     
  We are seeing increased demand in the US market for technology sales and have the products and infrastructure in place to handle our expected growth.

 

Acquisition Strategy and Challenges

 

Our 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. 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.
     
  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.

 

As a result, we believe that an analysis of the historical costs and expenses of our Target Sellers prior to their acquisition will not provide guidance as to the anticipated results after acquisition. We anticipate that we will be able to achieve significant reductions in our costs of revenue and selling, general and administrative expenses from the levels currently incurred by the Target Sellers operating independently, thereby increasing our EBITDA and cash flows.

 

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Components of our Results of Operations and Financial Condition

 

Revenue

 

Our revenue is comprised of product revenue, software revenue, installation revenue and professional development revenue.

 

  Product revenue. Product revenue is derived from the sale of our 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.
     
  Installation and professional development. We receive revenue from installation and professional development that we outsource to third parties.

 

Cost of revenue

 

Our cost of revenue is comprised of the following:

 

  third-party logistics costs;
     
  costs to purchase components and finished goods directly;
     
  inbound and outbound freight costs and duties;
     
  costs associated with the repair of products under warranty; and
     
  write-downs of inventory carrying value to adjust for excess and obsolete inventory and periodic physical inventory counts.

 

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 based on 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

 

Our gross profit and gross profit margin have been, and may in the future be, influenced by several factors including: product, channel and geographical revenue mix; changes in product costs related to the release of projector models; 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 our 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: research and development and general and administrative.

 

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.

 

 8 
 

 

General and administrative. General and administrative expense consists of personnel related costs, which include salaries, as well as the costs of professional services, such as accounting and legal, facilities, information technology, depreciation and amortization and other administrative expenses. We expect our general and administrative expense to increase in absolute dollars following the completion of our initial public offering due to the anticipated growth of our business and related infrastructure as well as accounting, insurance, investor relations and other costs associated with becoming a public company. 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.

 

Other income (expense), net

 

Other income (expense), net consists of interest expense associated with our debt financing arrangements and interest income earned on our cash. We do not utilize derivatives to hedge our foreign exchange risk, as we believe the risk to be immaterial to our results of operations.

 

Income tax expense

 

We are subject to income taxes in the United States and Mexico in which we do business. Mexico has a statutory tax rate different from those in the United States. Additionally, certain of our 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.

 

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

 

For the years ended December 31, 2017 and 2016

 

Revenues. Total revenues for the year ended December 31, 2017 were $25,743,612 as compared to $20,371,826 for the year ended December 31, 2016. Revenues consist of product revenue, software revenue, installation and professional development. For the year ended December 31, 2016, Boxlight Group’s operating results were only included in the balances from their acquisition date on July 18, 2016 through December 31, 2016. Accordingly, the increase in revenues in 2017 is primarily attributable to the inclusion of Boxlight Group’s revenues for a full year in 2017.

 

Cost of Revenues. Cost of revenues for the year ended December 31, 2017 was $19,329,831 as compared to $12,959,749 for the year ended December 31, 2016. Cost of revenues consists primarily of product cost, freight expenses and inventory write-downs. Cost of revenues increased due to the increase in revenues. Another factor resulting in an increase in cost of revenues was the Company sold product in some instances at a lower margin in exchange for improved payment terms. Freight expenses as a component of cost of revenues increased approximately $1.7 million in 2017 due to alternative freight arrangements. Prior to the completion of our IPO, we had restrictive credit terms with existing freight vendors due to cash restrictions. These costs are expected to be significantly reduced in 2018.

 

Gross Profit. Gross profit for the year ended December 31, 2017 was $6,413,781 as compared to $7,412,077 for the year ended December 31, 2016 due to the sale of some products at lower margins to increase cash flow and increased freight costs in the amount of approximately $1.7 million.

 

General and Administrative Expense. General and administrative expense for the year ended December 31, 2017 was $13,189,879 as compared to $7,689,898 for the year ended December 31, 2016. The increase resulted from the inclusion of a full year of Boxlight Group’s operating expenses included for the year ended December 31, 2017, along with $4 million of non-cash stock compensation expense.

 

Research and Development Expense. Research and development expense was $465,940 and $1,008,433 for the years ended December 31, 2017 and 2016, respectively. Research and development expense primarily consists of costs associated with Mimio’s development of proprietary technology. The decrease was due to the company’s decision to decrease research and development expenditures in 2017. The R&D investments are cyclical and we had limited major enhancements to our software products or new hardware launches. A significant portion of our research and development is now paid for by several of our contract manufacturers.

 

Other income (expense), net. Other expense for the year ended December 31, 2017 was $702,472 as compared to $(775,729) for the year ended December 31, 2016. During 2017, the Company settled debt and other liabilities with a net gain of $276,026. In addition, the Company recognized a change in the fair value of warrant derivative liabilities of $861,302. In 2016, the Company amended a note payable agreement that resulted in $350,000 of additional interest expense in August, which resulted in a significant increase in interest expense. Additionally, the Company issued additional notes to acquire Mimio and Boxlight Group during 2016 resulting in an increase in interest expense.

 

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Net loss. Net loss was $6,539,566 and $2,061,983 for the years ended December 31, 2017 and 2016, respectively. There were some major contributing factors to the increase in net loss in 2017, including expense incurred in the amount of $4 million for non-cash stock compensation expense and approximately $1.7 million in additional freight expense.

 

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 consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles and EBITDA and Adjusted EBITDA, both non-GAAP financial measures of earnings.

 

EBITDA represents net income before income tax expense, interest income, interest expense, depreciation and amortization. Adjusted EBITDA represents EBITDA, plus stock compensation expense and non-recurring expenses and minus changes in fair value of derivative liabilities. Our management uses EBITDA and Adjusted EBITDA as financial measures to evaluate the profitability and efficiency of our business model. We use these non-GAAP financial measures to assess the strength of the underlying operations of our business. These adjustments, and the non-GAAP financial measure that is derived from them, provide supplemental information to analyze our operations between periods and over time. We find this especially useful when reviewing results of operations, which include large non-cash amortizations of intangibles assets from acquisitions. Investors should consider our non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

 

The following table contains reconciliations of net losses to EBITDA and adjusted EBITDA for the periods presented.

 

Reconciliation of net loss for the year ended

December 31, 2017 and 2016 to EBITDA

 

(in thousands)  2017   2016 
Net loss  $(6,540)  $(2,062)
Depreciation and amortization   747    353 
Interest expense   635    818 
EBITDA  $(5,158)  $(891)
Stock compensation expense   4,344    464 
Change in fair value of derivative liabilities   (861)   - 
Non-recurring IPO expenses   -    528 
Adjusted EBITDA  $(1,675)  $101 

 

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Discussion of Effect of Seasonality on Financial Condition

 

Certain accounts on our balance sheets 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 school year, we generally build up inventories during the second quarter of the year. Therefore, inventories tend to be at the 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 we do not need the same inventory levels during the first quarter. Accounts receivable balances tend to be at the highest levels in the third quarter, in which we record the highest level of sales.

 

We have been very proactive, and will continue to be proactive, in obtaining contracts during the fourth and first quarters that will help offset the seasonality of our business.

 

Liquidity and Capital Resources

 

In 2017, the Company struggled with liquidity issues due to credit limitations and the added expenses necessary to fund the initial public offering. The liquidity issues led to a significant increase in freight costs to enable us to meet shipping demands of our customers. We also sold product, in some instances, at lower margins in exchange for improved payment terms.

 

Our liquidity and capital resources were significantly improved through funding from our initial public offering in November 2017, along with our ability to close on a lending agreement in August 2017 that allows us to borrow using our accounts receivable as collateral.

 

The Company made great strides in 2017 improving our balance sheet through debt repayments and debt conversions. Our total short-term and long-term debt was decreased from $7,778,917 at December 31, 2016 to $856,449 at December 31, 2017.

 

As of December 31, 2017, we had cash and cash equivalents of $2,010,325. We financed our operations and our capital expenditures during the year ended December 31, 2017 primarily through our initial public offering and a financing agreement entered into with a lender.

 

The Company’s initial public offering was completed on November 30, 2017. The Company raised the maximum amount offered of 1,000,000 shares and received net proceeds through the offering of $5,678,609.

 

On August 15, 2017, the Company entered into a $6,000,000 accounts receivable sale and purchase agreement with Sallyport Commercial Finance, LLC (“Sallyport”). Pursuant to the agreement, Sallyport agreed to purchase 85% of the eligible accounts receivable of the Company with the right of recourse.

 

In addition to our cash and banking arrangements, we had accounts receivable of $3,089,932 on December 31, 2017. Our accounts receivable and our ability to borrow agains accounts receivable provides an additional source of liquidity as cash payments are collected from customers in the normal course of business. Our accounts receivable balance fluctuates throughout the year based on the seasonality of the business. At December 31, 2017, we had additional borrowings available under the credit agreement of $1.5 million.

 

Our other cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases and other operating leases. We lease all of our office facilities. We expect to make future payments on existing leases from cash generated from operations.

 

Critical Accounting Policies and Estimates

 

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

 

 11 
 

 

Our significant accounting policies are discussed in notes of the consolidated financial statements. 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:

 

1.Revenue recognition
2.Acquisition of Boxlight Group
3.Common control transactions
4.Long-lived assets
5.Intangible assets
6.Fair value of financial instruments
 7.Share-based compensation

 

Emerging Growth Company

 

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

 

These provisions include:

 

(1) an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002;
   
(2) an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;
   
(3) an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements; and
   
(4) reduced disclosure about our executive compensation arrangements.

 

 12 
 

 

We have elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they would apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company,” this item is not required.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

As required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures and internal control over financial reporting as of the end of the period covered by this Annual Report.

 

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 Annual 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 related to the following:

 

Insufficient review of material agreements to ensure the accuracy and completeness of financial reporting;
insufficient personnel resources within the accounting function to segregate the duties between preparation and review of financial statements; and
insufficient written policies and procedures over accounting transaction processing and period end financial disclosure,

 

resulting in ineffective oversight in the establishment and proper monitoring controls over accounting and financial reporting.

 

Notwithstanding the existence of the internal control deficiencies, management believes that the consolidated financial statements in this annual report on Form 10-K fairly present, in all material respects, the Company’s financial condition as of the Evaluation Date, and results of its operations and cash flows for the Evaluation Date, in conformity with United States Generally Accepted Accounting Principles (“GAAP”).

 

Limitations on the 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 absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives.

 

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Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The internal controls for the Company are provided by executive management’s review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:

 

1. pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and

 

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

 

Based on this assessment, management has concluded that as of December 31, 2017, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, due to insufficient personnel resources within the accounting function to segregate the duties and insufficient written policies and procedures over accounting transaction processing and period end financial disclosure.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting for the year ended December 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

The following table sets forth information concerning our directors, executive officers and other key members of our management team as of March 29, 2018:

 

Name   Age   Position(s)
James Mark Elliott   66   Chief Executive Officer and Director
Henry (“Hank”) Nance   45   Chief Operating Officer
Takesha Brown   45   Chief Financial Officer
Michael Pope   37   President and Director
Tiffany Kuo   28   Non-Executive Director
Rudolph F. Crew   67   Independent Director (1) (2) (3)
Steve Hix   79   Independent Director (1) (3)
Dale Strang   58    Independent Director (1) (2) (3)
Robin D. Richards*   61   Independent Director
Harold Bevis   58   Independent Director (2) (3)

 

* Mr. Richards resigned for personal reasons on February 23, 2018.

 

(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Corporate Governance Committee.

 

Set forth below is biographical information about each of the individuals named in the tables above:

 

James Mark Elliott. Mr. Elliott has served as our Chief Executive Officer and a director since September 18, 2014. From 2012 to date, he has also served as the President of Genesis. From 2005 through 2012, he was the President of Promethean, Inc., a manufacturer and distributor of whiteboards and interactive learning devices and led the team that grew Promethean in the Americas from $5 million in revenue to $250 million, with over 1,300,000 interactive whiteboards installed around the world. Throughout his career, Mr. Elliott has held senior executive roles, including president, senior vice president or director roles with Apple Computer, Lawson Software, E3 Corporation, PowerCerv Technologies, Tandem Computers, and Unisys/Burroughs. Mr. Elliott received a BBA in Economics from the University of North Georgia and a Master of Science degree in Industrial Management from Georgia Institute of Technology. Based on Mr. Elliott’s position as the chief executive officer of both the Company and Genesis, and his executive level experience in interactive learning devices and computer technology industries, our board of directors believes that Mr. Elliott has the appropriate set of skills to serve as a member of the board.

 

Henry (“Hank”) Nance Mr. Nance has been our Chief Operating Officer since September 18, 2014 and served as our President from September 18, 2014 until July 15, 2015. Mr. Nance began his career with the Boxlight Group in 1999 and has served as the Boxlight Group’s President since 2009. At the Boxlight Group, he developed the company’s first business-to-consumer division, generating over $12 million in sales within the first 24 months of inception. Shortly thereafter he took over product development, corporate relations, and negotiations for business-to-consumer and business-to-business products. Prior to Mr. Nance’s tenure at the Boxlight Group, he managed commercial and residential construction working in the San Juan Islands, Washington State and Northern California.

 

Takesha Brown. Ms. Brown was appointed by our Board on March 15, 2018 as our Chief Financial Officer. Since April 2017, Ms. Brown has served as the Company’s Controller. Prior to that, from 2010 through 2017, Ms. Brown first served in the role as Controller and then as Financial Reporting Manager at General Electric in Atlanta, Georgia. Ms. Brown started her career in public accounting, first with PricewaterhouseCoopers, then moving to Ernst & Young and staying there until 2010. At the time of her departure from Ernst & Young, Ms. Brown was an Audit Senior Manager. Ms. Brown is a licensed CPA with a Bachelor of Science in Commerce and Business Administration and a Masters of Accounting from The University of Alabama.

 

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Michael Pope. Mr. Pope has served as our President since July 15, 2015 and has been a director of our Company since September 18, 2014. Mr. Pope served as Managing Director of Vert Capital Corp., a Los Angeles based merchant bank, and its affiliates from October 2011 to October 2016, managing portfolio holdings in education, consumer products and digital media. Prior to joining Vert Capital, from May 2008 to October 2011, Mr. Pope was Chief Financial Officer and Chief Operating Officer for the Taylor Family, managing family investment holdings in consumer products, professional services, real estate and education. Mr. Pope also held positions including senior SEC reporting at Omniture and Assurance Associate at Grant Thornton. Mr. Pope holds an active CPA license and serves on the boards of various organizations. Mr. Pope earned his undergraduate and graduate degrees in accounting from Brigham Young University with academic honors.

 

Tiffany Kuo. Ms. Kuo has been a director of our Company since September 18, 2014. Ms. Kuo has been a General Management Consultant in Strategy and Operations for Deloitte Consulting, LLP in Houston, TX since August 2011. Ms. Kuo graduated from Rice University with a Bachelor of Science and Masters of Science in Electrical Engineering in 2011 and is currently in the Sloan Masters of Business Administration Program at The Massachusetts Institute of Technology. We believe that Ms. Kuo should serve as a member of our board of directors due to her experience in business strategy and operations at Deloitte Consulting, LLP.

 

Rudolph F. Crew. Dr. Crew has been a director of our Company since April 1, 2015. Since August 2013, Dr. Crew has served as the president of Medgar Evers College. From July 2012 to July 2013, he was the chief education officer at Oregon Education Investment Board, overseeing the PK-16 system. From September 2011 to July 2012, Dr. Crew served as the president of K12 Division at Revolution Prep, a company that offers preparation courses for the SAT and ACT standardized achievement tests. Prior to that, from January 2009 to July 2013, he was a professor at USC Rossier School of Education, teaching graduate school courses. From January 2009 to September 2011, Dr. Crew also served as the president of Global Partnership Schools, an organization offers planning support services and collaborative programs to public schools and school districts. Dr. Crew received his bachelor’s degree in management from Babson College in 1972. He earned his master’s degree in urban education in 1973 and his degree of doctor of education in educational administration in 1978, both from University of Massachusetts. We believe that Dr. Crew’s in-depth knowledge and extensive experience in education field make him a valuable member of our board of directors.

 

Steve Hix. Mr. Hix has been a director of our company since June 30, 2017. He is a business executive and founder of numerous public and private companies spanning his 40-year business career. Since 2012, Mr. Hix has served as the President of Circle Technology, a wireless presentation company. Previously, he was the Founder & CEO of InFocus Systems from 1987-1993 (projector company) which grew to nearly $1 billion in sales and had a market value of more than $2 billion as a public company. He was also the Founder, CEO & President of Phix Focus (R&D in Display Technology and Touch Screen Technology) 2005-2012, CEO of i3 Identification International (finger printing technology company) 2005-2010, Founder of Advan Media (Advertising Trucks with Digital Display Screens) 2003-2005, Founder & CEO of SARIF (High Temperature Poly-silicon LCD) 1993-2002, founder of Motif, Inc. (High Speed LCD Technology) 1990-1993, and co-Founder of Planar Systems (Electroluminescence Technology) 1983-1987. Mr. Hix has nearly a dozen patents in the display technology and wireless transmission space and continues to be a pioneer in the industry. He began his career serving the US Navy as Naval Intelligence and sits on the board of several companies including Melexis, Community Foundation of Southwest Washington and Puget Sound Blood Center.

 

Dale Strang. Mr. Strang has been a director of our company since August 10, 2017. He has served as a Senior Vice President of Media Strategy & Operations at Healthline Networks since 2015. Mr. Strang was President and Chief Excutive officer of SpinMedia from 2013 to 2015. Mr. Strang was the Chief Executive Officer and President at Viximo from 2010 to 2012. Mr. Strang has over 25 years of media experience with successful businesses including IDG, Ziff-Davis and IGN/Fox Interactive. Mr. Strang has more than 18 years of experience in consumer technology and video game publishing, including 14 years at the senior management level. He served as Executive Vice President and General Manager, Media Division, of IGN Entertainment. In this position, he oversaw advertising sales, marketing and the production of editorial content for all IGN entertainment media properties.

 

Harold Bevis. Mr. Bevis has served as a Director since March 2018. He has 25 years of business leadership experience, including 15 years as a Chief Executive Officer. He was a business leader at both GE and Emerson Electric. He has led or directed 8 businesses in 6 industries, 148 plants in 22 countries, 12 new business/new plant startups, 11 acquisitions, 24 business/plant expansions, and over 10,000 employees. Mr. Bevis is currently President of OmniMax International, a portfolio of building products businesses, since October 2017. Mr. Bevis earned a BS degree in industrial engineering from Iowa State University and an MBA degree from Columbia Business School. He is a member of the National Association of Corporate Directors and has served on 5 Boards of Directors. Since June 2014, he has served at Commercial Vehicle Group, a NASDAQ listed company, where he serves as a member of the audit and compensation committees.

 

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Family Relationships

 

There are no family relationships between any of our directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

No executive officer or director is a party in a legal proceeding adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries. No executive officer or director has been involved in the last ten years in any of the following:

 

  Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
     
  Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
     
  Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
     
  Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
     
  Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or
     
  Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Board of Directors

 

All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Directors are elected at the annual meetings to serve for one-year terms. Officers are elected by, and serve at the discretion of, the board of directors. Our board of directors shall hold meetings on at least a quarterly basis.

 

Director Independence

 

As of the date of this Annual Report, Dr. Rudy Crew, Steve Hix and Dale Strang are our current independent directors. As a Nasdaq listed company, we believe that the foregoing directors satisfy the definition of “Independent Director” under Nasdaq Rule 5605(a)(2). In making this determination, our board of directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent directors will meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive session without the presence of non-independent directors and management.

 

 17 
 

 

On February 23, 2018, Mr. Robin D. Richards resigned from the Board of Directors for personal reasons and not as a result of any disagreements between Mr. Richards and the Company on any matter relating to the Company’s operations, policies or practices. On March 15, 2018 the Board elected Harold Bevis to join the Board of Directors. Mr. Bevis accepted the position on March 29, 2018.

 

Board Committees

 

Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our board of directors has adopted written charters for each of these committees. Copies of the charters are available on our website at www.boxlightcorp.com. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

 

Board Leadership Structure and Role in Risk Oversight

 

Mr. Elliott holds the positions of chief executive officer and chairman of the board of the Company. The board believes that Mr. Elliott’s services as both chief executive officer and chairman of the board is in the best interest of the Company and its shareholders. Mr. Elliott possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing us in our business and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters relating to the business. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to our shareholders, employees and customers.

 

The Board has not designated a lead director. The independent directors can call and plan their executive sessions collaboratively and, between meetings of the Board, communicate with management and one another directly. Under these circumstances, the directors believe designating a lead director to take on responsibility for functions in which they all currently participate might detract from rather than enhance performance of their responsibilities as directors.

 

Corporate Governance

 

Audit Committee

 

According to its charter, the Audit Committee consists of at least three members, each of whom shall be a non-employee director who has been determined by the Board to meet the independence requirements of NASDAQ, and also Rule 10A-3(b)(1) of the SEC, subject to the exemptions provided in Rule 10A-3(c). A copy of our Audit Committee Charter is located under the “Corporate Governance” tab on our website at www.boxlight.com. The Audit Committee members shall consist of Mr. Hix, serving as our Audit Chair, Mr. Strang and Dr. Crew. All members of the Audit Committee are independent directors. The Audit Committee will assist the Board by overseeing the performance of the independent auditors and the quality and integrity of our internal accounting, auditing and financial reporting practices. The Audit Committee is responsible for retaining (subject to stockholder ratification) and, as necessary, terminating the engagement of, the independent auditors, annually reviews the qualifications, performance and independence of the independent auditors and the audit plan, fees and audit results, and pre-approves audit and non-audit services to be performed by the auditors and related fees. Our board has determined that we have at least one “audit committee financial expert,” as defined by the rules and regulations of the SEC and that is Mr. Hix.

 

Compensation Committee

 

The Compensation Committee members are Mr. Strang, Dr. Crew and Mr. Bevis. The Compensation Committee shall make recommendations to the Board concerning salaries and incentive compensation for our officers, including our principal executive officer, and employees and administers our stock option plans. A copy of our Compensation Committee Charter is located under the “Corporate Governance” tab on our website at www.boxlight.com.

 

 18 
 

 

Corporate Governance and Nominating Committee

 

The Corporate Governance and Nominating Committee members are Dr. Crew, Mr. Hix, Mr. Bevis Steve Hix and Mr. Strang. All members of the Corporate Governance and Nominating Committee are independent directors. The Corporate Governance and Nominating Committee assists the Board in identifying qualified individuals to become board members, in determining the composition of the Board and in monitoring the process to assess Board effectiveness. A copy of our Corporate Governance and Nominating Committee Charter is located under the “Corporate Governance” tab on our website at www.boxlight.com.

 

Material Changes to the Procedures by which Security Holders May Recommend Nominees to the Board

 

We do not currently have a procedure by which security holders may recommend nominees to the Board. Prior to the listing of our common stock on NASDAQ, as a private company with a limited shareholder base, we did not believe that it was important to provide such a procedure. However, in connection with our listing on NASDAQ and the requirement to hold annual shareholder meetings, we will consider implementing such a policy in the future.

 

Director Qualifications

 

The Board of Directors is responsible for overseeing the Company’s business consistent with their fiduciary duty to the stockholders. This significant responsibility requires highly-skilled individuals with various qualities, attributes and professional experience. There are general requirements for service on the Board that are applicable to directors and there are other skills and experience that should be represented on the Board as a whole but not necessarily by each director. The Corporate Governance and Nominating Committee considers the qualifications of director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.

 

In its assessment of each potential candidate, including those recommended by the stockholders, the Corporate Governance and Nominating Committee will consider the nominee’s judgment, integrity, experience, independence, understanding of the Company’s business or other related industries and such other factors it determines are pertinent in light of the current needs of the Board. The Corporate Governance and Nominating Committee also takes into account the ability of a director to devote the time and effort necessary to fulfill his or her responsibilities to the Company. evaluate the business experience, specialized skills and experience of director candidates. Diversity of background including diversity of race, ethnicity, international background, gender and age, may be considered by the Nominating and Corporate Governance Committee when evaluating candidates for Board membership.

 

Code of Business Conduct and Ethics

 

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code will be made available on the Corporate Governance section of our website, which is located at www.boxlight.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

 

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms furnished to us and written representations by our officers and directors regarding their compliance with applicable reporting requirements under Section 16(a) of the Exchange Act, we believe that all Section 16(a) filing requirements for our executive officers, directors and 10% stockholders were met during the year ended December 31, 2017; except for the following:

 

      Transactions  Number of 
Name  Late Reports  Covered  Shares 
Michael Pope  Form 3  Common stock   637,453 
      Warrants   249,203 
   Form 5  Common stock   659,987 
Steven Hix  Form 3  Common stock   - 
   Form 5  Stock options   50,000 
Dale Strang  Form 3  Common stock   - 
   Form 5  Stock options   50,000 
John Patrick Henry  Form 3  Common stock   - 
   Form 5  Stock options   8,990 
Everest Display Inc.  Form 3  Common stock   565,122 
   Form 4  Common stock   1,903,586 

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table sets forth information regarding the total compensation received by, or earned by, our Chief Executive Officer, our President and Chief Operating Officer and our Chief Financial Officer (collectively, the “named executive officers”) during the years ended December 31, 2017 and 2016.

 

Name and Principal Position  Year   Salary ($)    Option
Awards ($)
  

Total

($)

 
James Mark Elliott, Chief Executive Officer   2016    125,000    -(2)   125,000 
James Mark Elliott, Chief Executive Officer   2017    129,884    -(2)   129,884 
                     
Michael Pope, President   2016    23,885    -    23,885 
Michael Pope, President   2017    163,419    -    163,419 
                     
Henry (“Hank”) Nance, Chief Operating Officer   2016    130,545    -    130,545 
Henry (“Hank”) Nance, Chief Operating Officer   2017    147,606    126,452(5)   274,058 
                     
Sheri Lofgren, former Chief Financial Officer (1)   2016    170,000    484,235(3)   654,235 
Sheri Lofgren, former Chief Financial Officer (1)   2017    227,500    204,397(3)   431,897 
                     
Takesha Brown, Chief Financial Officer (1)   2016    -    -    - 
Takesha Brown, Chief Financial Officer (1)   2017    98,116    6,617(4)   104,733 

 

  (1) On March 15, 2018, Sheri Lofgren, the Chief Financial Officer of the Company tendered her resignation from such position. On the same date, the Board appointed Ms. Takesha Brown to serve as the new Chief Financial Officer of the Company.
     
  (2) On September 18, 2014, the Company granted 331,841 options to Mark Elliott Chief Executive Officer, with an exercise price of $0.13 per share, a term of 5 years and vesting over a 3-year period. The options have a fair value of $1 at grant date using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 2.09% (2) expected life of 5.75 years, (3) expected volatility of 69%, and (4) zero expected dividends. During the years ended December 31, 2017 and 2016, the Company recorded $0 stock compensation expense.
     
  (3) On September 18, 2014, the Company granted 291,402 options to Sheri Lofgren, former Chief Financial Officer, with an exercise price of $0.13 per share, a term of 5 years and vesting over a 3-year period. The options have a fair value of $1 at grant date using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 2.09% (2) expected life of 5.75 years, (3) expected volatility of 69%, and (4) zero expected dividends.
     
    On November 1, 2016, the Company entered into an amended employment agreement with its Chief Financial Officer, which amended the exercise price of the 291,402 options granted from $0.13 to $0.0001 per share. The options vesting term was changed to (i) 50% of the remaining unvested options shall vest immediately following the agreement, (ii) all remaining unvested options shall vest on March 31, 2017. Pursuant to the amendment of employment agreement, the fair value of options granted was changed to approximately $484,000 using the Black-Scholes option-pricing model.
     
    In November 2017, the Company granted options to purchase 29,200 options at $0.0001 per share to its former Chief Financial Officer for services. These options vested immediately and expire 5 years from the date of grant. The options had a fair value of approximately $204,000 on the grant date that was calculated using the Black-Scholes option-pricing model.
     
  (4) On April 4, 2017, the Company granted options to purchase 18,000 shares of Series A common stock at $5.60 per share to the Chief Financial Officer for services. These options vest in four years and commenced in the quarter ended June 30, 2017 and expire 5 years from the date of grant. The options have a fair value of approximately $7,000 that was calculated using the Black-Scholes option-pricing model.
     
  (5) In November 2017, the Company granted options to purchase 37,829 options at $7.00 per share to its Chief Operating Officer for service.  These options vest in 3 years and expire 5 years from the date of grant. The options had a fair value of approximately $126,000 on grant date that was calculated using the Black-Scholes option-pricing model.

 

Employment Agreements

 

We entered into employment agreements with Mr. Elliott, Mr. Nance, Ms. Lofgren, Mr. Pope and Ms. Brown, the terms of which are set forth below.

 

James Mark Elliott

 

The Company entered into an employment agreement with Mr. Elliott dated as of November 30, 2017, pursuant to which Mr. Elliott shall receive a base salary of $195,000 per year and shall, upon evaluation of his performance and at the discretion of the Company’s board of directors, be awarded a cash bonus in the amount of $25,000 on a quarterly basis commencing on the quarter ending December 31, 2017. In addition to (and not in lieu of) the base salary, the Company shall grant Mr. Elliott employee stock options to purchase up to 100,000 shares of common stock (vesting in equal monthly installments over a one-year period, commencing on January 31, 2018), pursuant to the Corporation’s 2014 Stock Incentive Plan.

 

Mr. Elliott’s agreement contains confidentiality and non-competition and non-solicitation covenants that continue during and for two years following the expiration or termination of his employment agreement; provided, that such restrictive covenants expire immediately if Mr. Elliott terminates his employment agreement for “good reasons” or, in nine months if we elect to terminate his employment prior to the expiration of the term of the agreement without “cause”.

 

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Henry “Hank” Nance

 

The Company entered into an employment agreement with Mr. Nance, dated as of November 30, 2017, pursuant to which Mr. Nance shall receive a base salary of $195,000 per year and shall, upon evaluation of his performance and at the discretion of the Company’s chief executive officer, be awarded a cash bonus in the amount of $25,000 on a quarterly basis commencing on the quarter ending December 31, 2017. In addition to (and not in lieu of) the base salary, the Company shall grant Mr. Nance employee stock options to purchase up to 200,000 shares of common stock (vesting in equal monthly installments over a one-year period, commencing on January 31, 2018), pursuant to the Corporation’s 2014 Stock Incentive Plan.

 

Mr. Nance’s agreement contains confidentiality and non-competition and non-solicitation covenants that continue during and for two years following the expiration of his employment agreement; provided that such restrictive covenants expire immediately if we breach his employment agreement or, in nine months, if we elect to terminate his employment prior to the expiration of the term of the agreement for reasons other than cause (as defined in the employment agreement).

 

Sheri Lofgren

 

The Company entered into an employment agreement with Ms. Lofgren dated as of November 30, 2017, pursuant to which Ms. Lofgren shall receive a base salary of $195,000 per year and shall, upon evaluation of her performance and at the discretion of the Company’s Chief Executive Officer, be awarded a cash bonus in the amount of $25,000 on a quarterly basis commencing on the quarter ending December 31, 2017. In addition to (and not in lieu of) the base salary, the Company shall grant Ms. Lofgren employee stock options to purchase up to 100,000 shares of common stock (vesting in equal monthly installments over a one-year period, commencing on January 31, 2018), pursuant to the Corporation’s 2014 Stock Incentive Plan.

 

Ms. Lofgren’s agreement contains confidentiality and non-competition and non-solicitation covenants that continue during and for two years following the expiration of her employment agreement; provided, that such restrictive covenants expire immediately if we breach her employment agreement or, in nine months, if we elect to terminate her employment prior to the expiration of the term of the agreement for reasons other than for cause (as defined in the employment agreement).

 

On March 15, 2018, Sheri Lofgren, the Chief Financial Officer of the Company tendered her resignation. Ms. Lofgren’s resignation was for personal reasons and not as the result of disagreements between Ms. Lofgren and the Company on any matter relating to the Company’s operations, policies or practices.

 

 21 
 

 

Michael Pope

 

The Company entered into an employment agreement with Mr. Pope dated as of November 30, 2017, pursuant to which Mr. Pope shall receive a base salary of $195,000 per year and shall, upon evaluation of his performance and at the discretion of the Company’s Chief Executive Officer, be awarded a cash bonus in the amount of $25,000 on a quarterly basis commencing on the quarter ending December 31, 2017. In addition to (and not in lieu of) the base salary, the Company shall grant Mr. Pope employee stock options to purchase up to 100,000 shares of common stock (vesting in equal monthly installments over a one-year period, commencing on January 31, 2018), pursuant to the Corporation’s 2014 Stock Incentive Plan.

 

Mr. Pope’s agreement contains confidentiality and non-competition and non-solicitation covenants that continue during and for two years following the expiration of his employment agreement; provided, that such restrictive covenants expire immediately if we breach his employment agreement or, in nine months, if we elect to terminate his employment prior to the expiration of the term of the agreement for reasons other than for cause (as defined in the employment agreement).

 

Takesha Brown

 

The Company entered into an employment agreement with Ms. Brown, dated as of March 19, 2018, pursuant to which Ms. Brown shall receive a base salary of $165,000 per year and shall, upon evaluation of her performance and at the discretion of the Company’s chief executive officer, be awarded a cash bonus in the amount of $12,500 on a quarterly basis commencing on the quarter ending June 30, 2018. In addition to (and not in lieu of) the base salary, the Company shall grant Ms. Brown employee stock options to purchase up to 35,000 shares of common stock (vesting in equal monthly installments over a one-year period, commencing on March 19, 2018), pursuant to the Corporation’s 2014 Stock Incentive Plan.

 

Ms. Brown’s agreement contains confidentiality and non-competition and non-solicitation covenants that continue during and for two years following the expiration of her employment agreement; provided, that such restrictive covenants expire immediately if we breach her employment agreement or, in nine months, if we elect to terminate her employment prior to the expiration of the term of the agreement for reasons other than for cause (as defined in the employment agreement).

 

Outstanding Equity Awards at December 31, 2017

 

The following table provides information regarding outstanding equity awards held by our named executive officers as of December 31, 2017. All share amounts and exercise prices in the following table reflects stock splits after grant date.

 

    Option Awards
Name   Grant Date   Number of
Securities
Underlying
Options
(#)
Exercisable
    Number of
Securities
Underlying
Options
(#)
Unexercisable
    Option
Exercise
Price
($)
    Option
Expiration Date
James Mark Elliott   September 18, 2014     331,841       -     $ 0.13     September 18, 2024
Sheri Lofgren   September 18, 2014 and amended at November 1, 2016     29,200       -     $ 0.0001     November 30, 2022
Henry Nance   December 31, 2014     12,001       132,091     $ 0.13-7.00     November 30, 2022
Takesha Brown   April 4, 2017      3,375       14,625     $ 5.60     April 4, 2022

 

 22 
 

 

Director Compensation

 

We reimburse all members of our board of directors for their direct out of pocket expenses incurred in attending meetings of our board. This table summarizes the compensation paid to each of our independent directors who served in such capacity during the fiscal year ended December 31, 2017.

 

Name   Fees Earned or Paid in
Cash ($)
  Stock Awards
($)
  Total($)
             
Rudolph F. Crew   50,000   370,995   420,995
             
Steve Hix    5,000   159,466   164,466
             
Dale Strang    -   159,466   159,466
             
Robin D. Richards   -   930,987   930,987
             
Tiffany Kuo   -   -   -

 

Director Compensation Arrangements

 

Rudolph F. Crew

 

Dr. Crew receives an annual fee of $50,000, payable monthly, which commenced on March 26, 2016. In addition, in connection with the listing on NASDAQ, Dr. Crew was entitled to a one-time purchase, at par value, of 53,000 shares of our Class A common stock.

 

Dr. Crew will not be permitted to sell any of his shares for the six months immediately following the consummation of this public offering and thereafter, not more than 50% of his shares between the seventh month and 12th month after the consummation of this public offering, and not more than 50% of the remaining shares between the 12th month and 18th months after the consummation of this public offering.

 

 23 
 

 

Steve Hix

 

Mr. Hix receives an annual fee of $10,000 for serving as the Chair of our Audit Committee. The fee is payable quarterly, with the first payment to be made on September 30, 2017. On November 30, 2017, Mr. Hix was granted stock options to purchase 50,000 shares of our Class A common stock exercisable at $7.00 per share with vesting over one year.

 

Dale Strang

 

On November 30, 2017, Mr. Strang was granted stock options to purchase 50,000 shares of our Class A common stock exercisable at $7.00 per share with vesting over one year.

 

Robin D. Richards

 

On November 30, 2017, Mr. Richards purchased, at the par value, 133,000 shares of our common stock, representing 1.25% of the number of fully diluted shares of common stock after giving effect to the acquisitions of the Boxlight Group and Genesis.

 

Mr. Richards is not permitted to sell any of his shares until May 30, 2018, which is six months following the consummation of our public offering and thereafter, not more than 50% of his shares between the seventh month and 12th month after the consummation of our public offering, and not more than 50% of the remaining shares between the 12th month and 18th months after the consummation of our public offering.

 

On February 23, 2018, Mr. Robin D. Richards resigned from the Board of Directors for personal reasons and not as a result of any disagreements between Mr. Richards and the Company on any matter relating to the Company’s operations, policies or practices.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth, as of March 28, 2018, certain information with respect to the beneficial ownership of our Class A common stock, by each beneficial owner of more than 5% of the Company’s Class A common stock, each director and each named executive officer and all directors and executive officers of the Company as a group, except as qualified by the information set forth in the notes to this table. As of December 31, 2017, 9,558,997 shares of our Class A common stock were issued and outstanding.

 

Unless otherwise noted, the address for each director and executive officer is c/o Boxlight Corporation, 1045 Progress Circle, Lawrenceville, Georgia 30043.

 

Name of Beneficial Owner   Number     Percentage  
Named Executive Officers                
James Mark Elliott     497,618 (1)     4.43 %
Henry(“Hank”) Nance    

97,715

(2)     .87 %
Sheri Lofgren     320,602 (3)     2.85 %
Michael Pope     249,203 (4)     1.77 %
Directors                
Tiffany Kuo     -0-       -  
Rudolph F. Crew     53,000 (6)     .47 %
Robin D. Richards     133,000 (7)     1.18 %
Steve Hix     12,500       .11 %
Dale Strang     12,500       .11 %
All Directors and Executive Officers as a Group(7 persons)    

1,326,138

      11.80 %
                 
Beneficial Owners of 5% or More of Our Outstanding Common Stock                
Everest Display, Inc.     2,468,708 (5)     21.97 %
Sugar House Trust     577,450 (8)     5.14 %
AEL Irrevocable Trust     1,912,350 (9)     17.02 %
Dynamic Capital, LLC     747,610 (10)     5.32 %

 

 24 
 

 

(1) Represents 100% of 331,841 shares subject to a stock option granted to Mr. Elliott which have vested as of December 31, 2016. Upon completion of our initial public offering, Mr. Elliott will receive an additional 92,510 shares of our Class A common stock representing 25% of the shares to be issued to the former members of Genesis upon automatic conversion of BOXL’s Series B convertible preferred stock. In addition, Mr. Elliott converted accounts payable due from Genesis into 73,267 shares of common stock.

 

(2) Upon completion of our initial public offering, Mr. Nance will receive 85,714 shares of our Class A common stock representing his pro-rata portion of the 2,055,873 shares to be issued to the former stockholders of Boxlight upon automatic conversion of BOXL’s Series C convertible preferred stock. In addition, stock options to purchase 144,020 shares were granted to Mr. Nance under our 2014 Stock Incentive Plan. These options commenced vesting on December 31, 2017.

 

(3) Represents 100% of 320,602 shares subject to a stock option grant to Ms. Lofgren which have vested as of March 31, 2017.

 

(4) Consists of 249,203 shares issuable upon exercise of a warrant issued to an entity associated with Mr. Pope in October 2016 and November 2017. Does not include 82,534 shares, Mr. Pope’s portion of 330,135 shares held by Mim Holdings, LLC, or 577,450 shares held by Sugar House Trust. Mim Holdings is a limited liability company owned by the Marlborough Brothers Family Trust, a trust established for the benefit of members of the families of Michael Pope and Adam Levin. Sugar House Trust is a trust established for the benefit of the family of Michael Pope. Mr. Pope does not have voting or dispositive power and authority of the shares beneficially owned by Mim Holdings or Sugar House Trust and disclaims any voting or dispositive power with respect to those shares.

 

(5) Represents 1,903,586 shares of Class A common stock that were issued upon the automatic conversion of our Series C preferred stock issued to Everest Display, Inc., or its wholly owned subsidiary, in connection with our July 2016 acquisition of the Boxlight Group. In June, 2017, Everest Display, Inc. agreed to convert $1,500,000 of accounts payable into 238,095 shares of Class A common stock at a conversion price of $6.30 per share. In August, 2017, Everest Display, Inc. converted a long-term convertible note payable and accrued interest into 327,027 shares of common stock at $6.30 per share. K Laser is the majority stockholder of Everest Display, Inc.. Mr. Alex Kuo is the majority stockholder of K Laser and holds the power to vote and dispose of our shares issued and issuable to EDI. Such 1,903,586 shares do not include (a) 178,572 shares of Class A common stock that K Laser purchased at $5.60 per share in the September 2016 private placement, and (b) an additional 142,857 shares of Class A common stock that Alex Kuo, K Laser or other affiliates or business associates of Mr. Kuo may elect to purchase at a price of $7.00 per share in our initial public offering.

 

(6) Includes 53,000 shares of common stock that Dr. Crew purchased at par value on November 30, 2017.

 

(7) Includes 133,000 shares of common stock that Mr. Richards purchased at par value on November 30, 2017.

 

(8) Mr. Lane, 26716 Via Colina, Stevanson Ranch, CA 91381 is trustee of Sugar House Trust, established for the benefit of the family of Michael Pope, our President and a Director. Mr. Lane has sole investment and voting power with respect to the shares.

 

 25 
 

 

(9) Mr. Edwin Hur, 11441 Beach St., Cerritos, CA 90703 is trustee of AEL Irrevocable Trust, established for the benefit of the family of Adam Levin. Mr. Hur has sole investment and voting power with respect to the shares.

 

(10) Consists of 747,610 shares issuable upon exercise of a warrant issued to Dynamic Capital, LLC in October, 2016 and November 2017. Dynamic Capital is owned by the AEL Irrevocable Trust.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

On September 30, 2014, the Company entered into a line of credit agreement with Vert Capital. The line of credit allowed the Company to borrow up to $500,000 for public offering expenses. On March 31, 2016, we amended the line of credit to increase it to $900,000. The funds accrued interest at 10% per annum. The interest rate decreased to 5.75% pursuant to the amendment to purchase agreement with EDI entered in September 2016. Interest on any advanced funds was accrued monthly and all outstanding principal and accrued interest was due in full from the proceeds of our initial public offering. On December 1, 2017, the outstanding principal and accrued interest in the amount of $775,259 was paid in full.

 

On July 15, 2015, the Company entered into a management agreement with VC2 Advisors LLC, a Delaware limited liability company, in which Michael Pope, our President and Director, was a manager. VC2 Advisors is owned by Sugar House Trust and AEL Irrevocable Trust, trusts established for the benefit of the families of Michael Pope and Adam Levin. Pursuant to the agreement, VC2 shall perform consulting services for the Company relating to, among other things, sourcing and analyzing strategic acquisitions and introductions to various financing sources. VC2 shall receive an annual management fee payable in cash equal to 1.5% of total consolidated revenues at the end of each fiscal year ended December 31, 2016, 2017 and 2018, payable in monthly installments, commencing as of the date of the Company’s IPO. The annual fee is subject to a cap of $1,000,000 in each of 2016, 2017 and 2018. At its option, VC2 may also defer payment until the end of each year, payable as an option to purchase shares of Class A common stock of the Company, at a price per share equal to 100% of the closing price of the Company’s Class A common stock as traded on Nasdaq or any other national securities exchange as of December 31 of such year in question. Effective October 12, 2016, as a result of Adam Levin and Michael Pope no longer being employed at VC2, the consulting agreement with VC2 was terminated. Subsequently, the Company entered into new consulting agreements on identical terms with other entities which now employ Michael Pope and Adam Levin. As of December 31, 2017, the Company had a payable of $35,632 pursuant to these agreements.

 

In 2018, as a result of Adam Levin and Michael Pope no longer working at VC2 Advisors, the Company canceled the VC2 Advisors agreement and entered into a new management agreement, with substantially the same terms, with Canaan Parish, LLC, an entity affiliated with Michael Pope.

 

 26 
 

 

On July 18, 2016, Boxlight Holdings, Inc., a newly formed Delaware subsidiary of Boxlight Parent, consummated the acquisition of the Boxlight Group under a share purchase agreement, dated May 10, 2016, with Everest Display, Inc., a Taiwan corporation (“EDI”) and its subsidiary, Guang Feng International Ltd. (“Guang Feng”) subsidiary, the former shareholder of the Boxlight Group. K Laser Technology, Ltd., a Taiwan corporation (“K Laser”) is the majority shareholder of EDI and one of our major shareholders. Under the terms of the share purchase agreement, we issued EDI 270,000 shares of our Series C Preferred Stock, that has a stated or liquidation value of $20.00 per share. Upon completion of our initial public offering on November 30, 2017, the Series C Preferred Stock automatically converted into shares of our Class A common stock. Such newly converted shares of Class A common stock, (including certain bonus shares of Class A common stock represented 8% of the shares issuable upon conversion of the Series C Preferred Stock) to be issued to EDI or its subsidiaries, and totaled 2,055,872 shares of our Class A common stock, representing approximately 22.22% of our fully-diluted common stock as defined in the purchase agreement. Hank Nance, our Chief Operating Officer and the President of the Boxlight Group, will received 85,714 of these shares.

 

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

 

  (1) $1,000,000 was paid at the closing of the acquisition out of the net proceeds of a note issued to Hitachi Capital America Corp. (See Note 10);
     
  (2) An additional $1,500,000 of the $5.75 million owed to EDI was to be paid by Boxlight Corporation and its subsidiaries in six monthly installments of $250,000 each, commencing 30 days after the initial $1,000,000 payment paid at closing. However, in view of the fact that such installment payments could than not be made by the Company, EDI agreed to convert $1,500,000 accounts payable into 238,095 shares of Boxlight’s Class A common stock in June 2017.
     
  (3) $2,000,000 of the unpaid balance of the account payable was settled with a 4% non-negotiable convertible promissory note of Boxlight Corporation payable to EDI, together with accrued interest, on March 31, 2019 (the “EDI Note”). In August 2017, the EDI Note was converted into 327,027 shares of Boxlight Corporation’s Class A common stock at a conversion price of $6.30 pursuant to an agreement. The Company recorded no gain or loss from the conversion.

 

On May 5, 2016, pursuant to a membership interest purchase agreement, dated as of April 1, 2016, Boxlight Parent acquired 100% of the membership interest in Mimio, from Mim Holdings, LLC., a Delaware limited liability company wholly-owned by the Marlborough Brothers Trust, a trust established for the benefit of members of the families of Adam Levin and Michael Pope, our President and Director, in exchange for a 4% $2,000,000 unsecured convertible promissory note due March 31, 2019, and the assumption of a 6% $3,425,000 senior secured note of Mim Holdings that was due July 3, 2016 and was payable to Skyview Capital, LLC, (“Skyview”), the former equity owner of Mimio (the “Skyview Note”). For purposes of the purchase agreement, the sale to Boxlight Parent, was deemed to have been consummated as of April 1, 2016.

 

 27 
 

 

The Skyview Note was issued by Mim Holdings to Skyview on November 4, 2015 as payment for the acquisition of 100% of the membership equity of Mimio. Skyview Note was guaranteed and secured by a lien and security interest on all of the assets of Mimio. Prior to the sale of Mimio to Boxlight Parent, VC2 Partners LLC (the former owner of Mim Holdings) assigned its equity in Mim Holdings to the Marlborough Brothers Family Trust (the “Marlborough Trust”). Adam Levin and Michael Pope, our President and Director, and members of their families, are beneficiaries of the Marlborough Trust and other trusts who are principal stockholders of Boxlight Parent. See “Principal Stockholders”.

 

In connection with the acquisition of Mimio by Boxlight Parent, in May 2016 we issued a $2,000,000 note payable to Mim Holdings, Inc., the former stockholder of Mimio. In June, 2017 this convertible promissory note was converted into 330,135 shares of our Class A common stock at $6.30 per share.

 

Mim Holdings is wholly-owned by the Marlborough Brothers Family Trust, a trust established for the benefit of members of the families of Adam Levin and Michael Pope. Mr. Pope is the President and a member of our board of directors.

 

On September 28, 2016, we sold to K Laser, the principal stockholder of EDI, an aggregate of 178,572 shares of our Class A common stock at a purchase price of $5.60 per share and received net proceeds of $1,000,003. The per share sales price is intended to be 80% of the initial price per share of Class A common stock offered to the public. Accordingly, the 178,572 shares of Class A common stock are subject to increase in the event that the initial offering price of the shares offered is less than $7.00. The private placement was conducted through the efforts of our management and with the assistance of K Laser and its affiliates. No commissions or other compensation was paid in connection with such private placement. The $1,000,003 of net proceeds of such private placement was used together with advances from Crestmark under the above line of credit to retire outstanding indebtedness to Hitachi and pay the $2,500,000 installment due under Skyview Note.

 

In October 2016, the Company issued 73,266 shares to Mark Elliott, the Company’s CEO, at $1.055 per share to settle accounts payable of $77,268.

 

On November 30, 2017, in connection with the listing on NASDAQ, Dr. Crew purchased, at the par value, 53,000 shares of our Class A common stock representing 0.5% of the number of fully diluted shares of Class A common stock after giving effect to the acquisitions of the Boxlight Group and Genesis and our initial public offering. If we file a registration statement registering for resale shares held by its officers or directors, Dr. Crew may request that we include his shares in such registration statement. Dr. Crew will not be permitted to sell any of his shares until May 30, 2018 (six months following the consummation of our public offering) and thereafter, not more than 50% of his shares between the seventh month and 12th month after the consummation our public offering, and not more than 50% of the remaining shares between the 12th month and 18th months after the consummation of our public offering.

 

On November 30, 2017, in connection with the listing on NASDAQ, Mr. Richards purchased, at the par value, 133,000 shares of our Class A common stock representing 1.25% of the number of fully diluted shares of Class A common stock after giving effect to the acquisitions of the Boxlight Group and Genesis and our initial public offering. 

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table represents fees for professional audit services for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2017 and 2016, respectively, rendered by GBH, CPA’s.

 

   Fiscal year ended December 31, 
   2016   2017 
Audit fees 1  $277,987   $293,075 
Audit-related fees 2   -    43,910 
Tax fees 3   -    - 
Total fees  $277,987   $336,985 

 

 28 
 

 

1. Audit fees consist of fees for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of the financial statements included in the Company’s Form 10-Q and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.
   
2. Audit-related fees consist primarily of fees for assurance and related services by the accountant that are reasonably related to the performance of the audit or review of the Company’s financial statements.
   
3. Tax fees include the preparation of federal tax returns as well as tax planning and consultation on new tax legislation, regulations, rulings, and developments.

 

Audit Committee Pre-Approval Policies

 

The Audit Committee shall pre-approve any non-audit services proposed to be provided to the Company by the independent auditors.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit No.   Description of Exhibit
3.1   Eleventh Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.2 in the Draft Registration Statement on Form S-1 (Reg. No. 377-00845) filed on November 12, 2014)
     
3.2   Bylaws (Incorporated by reference to Exhibit 3.3 in the Draft Registration Statement on Form S-1(Reg. No. 377-00845) filed on November 12, 2014)
     
4.1   Certificate of Designations of Series A Convertible Preferred Stock (Incorporated by reference to Exhibit 4.4 in the Draft Registration Statement on Form S-1 (Reg. No. 377-00845) filed on November 12, 2014)
     
4.2   Certificate of Designations of Series B Convertible Preferred (Incorporated by reference to Exhibit 34.5 in the Draft Registration Statement on Form S-1 (Reg. No. 377-00845) filed on November 12, 2014)
     
4.3   Amended and Restated Certificate of Designations of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 4.6 in the Draft Registration Statement on Form S-1(Reg. No. 377-00845) filed on November 12, 2014)
     
4.4   Form of Warrant Held by Vert Capital Corp. (Incorporated by reference to Exhibit 4.6 in the Draft Registration Statement on Form S-1(Reg. No. 377-00845) filed on February 12, 2015)

     
4.5   Form of Warrant Held by Lackamoola, LLC (Incorporated by reference to Exhibit 4.7 in the Draft Registration Statement on Form S-1 (Reg. No. 377-00845) filed on November 12, 2014)
     
4.6   Form of Subscription Agreement for $1.00 per share (Incorporated by reference to Exhibit 4.6 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on October 28, 2016)
     
4.7   Share Purchase Agreement, dated as of May 10, 2016 by and among Everest Display, Inc., Guang Feng International Ltd., Boxlight Holdings, Inc., the registrant, Boxlight, Inc., Boxlight Latinoamerica, S.A. DE C.V. and Boxlight Latinoamerica, Servicios S.A. DE C.V. (Incorporated by reference to Exhibit 10.1 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on May 13, 2016)
     
10.1   Amended and Restated Share Exchange Agreement, dated as of May 9, 2016, by and among Vert Capital Corp. and the former members of Genesis Collaboration LLC, the Delaware subsidiary of the registrant (Incorporated by reference to Exhibit 10.2 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on May 13, 2016)
     
10.2   Membership Interest Purchase Agreement, dated as of April 1, 2016, by and among the registrant, Mim Holdings, Inc., Mimio LLC and the Marlborough Partners Family Trust (Incorporated by reference to Exhibit 10.13 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on May 13, 2016)
     
10.3   Trademark Assignment between Herbert Myers, the registrant and Boxlight Inc. (Incorporated by reference to Exhibit 10.6 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on May 13, 2016)
     
10.4*   Employment Agreement by and between Boxlight Corporation and James Mark Elliott, dated November 30, 2017*

 

 29 
 

 

10.5*   Employment Agreement by and between Boxlight Corporation and Michael Pope, dated November 30, 2017*
     
10.6*   Employment Agreement by and between Boxlight Corporation and Sheri Lofgren, dated November 30, 2017*
     
10.7*   Employment Agreement by and between Boxlight Corporation and Henry Nance, dated November 30, 2017*
     
10.8   $2,000,000 convertible promissory note of the registrant to Mim Holdings, dated as of April 1, 2016 (Incorporated by reference to Exhibit 10.14 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on May 13, 2016)
     
10.9   Agreement by and between Loeb & Loeb LLP and the registrant (Incorporated by reference to Exhibit 10.38 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on December 28, 2015)
     
10.10   Amendment No. 2 to Membership Interest Purchase Agreement among Skyview Capital, LLC, Mimio LLC, MIM Holdings, LLC and the registrant. (Incorporated by reference to Exhibit 10.30 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on December 15, 2016)
     
10.11   Amendment No. 3 to Membership Interest Purchase Agreement among Skyview Capital, LLC, Mimio LLC, MIM Holdings, LLC and the registrant (Incorporated by reference to Exhibit 10.1 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on August 12, 2016)
     
10.12   Promissory Note between Boxlight, Inc. and AHA Inc Co Ltd. (Incorporated by reference to Exhibit 10.32 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on July 11, 2016)
     
10.13   Loan and Security agreement with Hitachi Capital America Corp (Incorporated by reference to Exhibit 10.1 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on August 12,, 2016)
     
10.14   Crestmark Loan and Security Agreement (Incorporated by reference to Exhibit 10.35 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on January 12, 2017)
     
10.15   Amendment 1 to Share Purchase Agreement and Option Agreement by and Among Everest Display, Inc., Guang Feng International, Ltd., Boxlight Holdings, the Registrant, Boxlight Inc., Boxlight Latinoamerica S.A. and Boxlight Latinoamerica Servicios, S.A. DE C.V. (Incorporated by reference to Exhibit 10.36 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on October 28, 2016)
     
10.16   Subscription Agreement between K Laser International Co., Ltd. And the Registrant for $1,000,000 equity investment at $5.60 per share (Incorporated by reference to Exhibit 10.37 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on October 28, 2016)
     
10.17   $2,000,000 Convertible Promissory Note between the Registrant and Everest Display, Inc., dated September 29, 2016 (Incorporated by reference to Exhibit 10.38 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on October 28, 2016)
     
10.18   Notice of Default – Skyview Capital (Incorporated by reference to Exhibit 10.39 in the Registration Statement on Form S-1(Reg. No. 333-204811) filed on January 12, 2017)
     
10.19*   Account Sale and Purchase Agreement between Sallyport Commercial Finance LLC and registrant*
     
21*   Subsidiaries
     
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
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   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

 

* Filed with the Original 10-K 

 

101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Label Linkbase Document
101.PRE   XBRL Taxonomy Presentation Linkbase Document

 

 30 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933 the registrant has duly caused this Amendment No.1 to the Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lawrenceville, of the State of Georgia, on this 16th 1 day of April, 2018.

 

  BOXLIGHT CORPORATION
     
  By: /s/ JAMES MARK ELLIOTT
    James Mark Elliott
    Chief Executive Officer

 

  By: /s/ TAKESHA BROWN
    Takesha Brown
    Chief Financial Officer

 

 31 
 

 

Index to Financial Statements

 

  Page
   
Report of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheets as of  December 31, 2017 and 2016 F-2
   
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2017 and 2016 F-3
   
Consolidated Statements of  Changes in Stockholders’ Equity for the years ended December 31, 2017 and 2016 F-4
   
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016 F-5
   
Notes to Consolidated Financial Statements F-6

 

 32 
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the stockholders and the board of directors of
Boxlight Corporation

Lawrenceville, Georgia

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Boxlight Corporation (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Restatement of Previously Issued Financial Statements

 

As discussed in Note 19 to the consolidated financial statements, the Company has restated its consolidated financial statements as of and for the year ended December 31, 2017 to correct misstatements.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Other matters

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net cash used in operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ GBH CPAs, PC

 

We have served as the Company’s auditor since 2014.

 

GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
April 2, 2018, except for the effects of the restatements discussed in Note 19 as to which the date is August 16, 2018

 

F-1
 

 

Boxlight Corporation

Consolidated Balance Sheets

As of December 31, 2017 and December 31, 2016

 

   

December 31, 2017

(As Restated)

    December 31, 2016*  
ASSETS                
Current asset:                
Cash and cash equivalents   $ 2,010,325     $ 456,502  
Accounts receivable – trade, net of allowances     3,089,932       2,943,954  
Inventories, net of reserve     4,626,569       4,164,116  
Prepaid expenses and other current assets     388,006       447,036  
Total current assets     10,114,832       8,011,608  
                 
Property and equipment, net of accumulated depreciation     29,752       60,040  
Intangible assets, net of accumulated amortization     6,126,558       6,833,477  
Goodwill     4,181,991       4,181,991  
Other assets     292       33,262  
Total assets   $ 20,453,425     $ 19,120,378  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
Current liabilities:                
Accounts payable and accrued expenses   $ 2,994,918     $ 4,453,893  
Accounts payable and accrued expenses – related parties     4,391,713       3,754,050  
Short-term debt     752,449       2,791,582  
Short-term debt – related parties     54,000       876,550  
Convertible notes payable – related party     50,000       50,000  
Deferred revenues – short-term     1,127,423       495,603  
Derivative liabilities    

1,857,252

      -  
Other short-term liabilities     -       251,537  
Total current liabilities     11,227,755       12,673,215  
                 
Long-term convertible note payable – related parties     -       4,060,785  
Deferred revenues – long-term     175,294       272,123  
                 
Total liabilities     11,403,049       17,006,123  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
Preferred stock, $0.0001 par value, 50,000,000 shares authorized; 250,000 and 1,270,000 shares issued and outstanding, respectively     25       127  
Common stock, $0.0001 par value, 200,000,000 shares authorized; 9,558,997 and 4,621,687 Class A shares issued and outstanding, respectively     956       461  
Additional paid-in capital     21,125,956       7,615,732  
Subscriptions receivable     (325 )     (325 )
Accumulated deficit     (12,028,388 )     (5,488,822 )
Other comprehensive loss     (47,848 )     (12,918 )
Total stockholders’ equity     9,050,376       2,114,255  
                 
Total liabilities and stockholders’ equity   $ 20,453,425     $ 19,120,378  

 

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

See accompanying notes to the financial statements.

 

F-2
 

 

Boxlight Corporation

Consolidated Statements of Operations and Comprehensive Loss

For the Years Ended December 31, 2017 and 2016

 

  

2017

(As Restated)

   2016* 
         
Revenues  $25,743,612   $20,371,826 
Cost of revenues   19,329,831    12,959,749 
Gross profit   6,413,781    7,412,077 
           
Operating expense:          
General and administrative expenses   13,189,879    7,689,898 
Research and development   465,940    1,008,433 
Total operating expense   13,655,819    8,698,331 
           
Loss from operations   (7,242,038)   (1,286,254)
           
Other income (expense):          
Interest expense, net   (635,445)   (818,234)
Other income, net   200,589    42,505 
Gain on settlement of liabilities, net   276,026    - 
Change in fair value of derivative liabilities   861,302    - 
Total other income (expense)   702,472    (775,729)
           
Net loss  $(6,539,566)  $(2,061,983)
           
Comprehensive loss:          
Net loss  $(6,539,566)  $(2,061,983)
Other comprehensive loss:          
Foreign currency translation loss   (34,930)   (12,918)
Total comprehensive loss  $(6,574,496)  $(2,074,901)
           
Net loss per common share – basic and diluted  $(1.20)  $(0.48)
Weighted average number of common shares outstanding – basic and diluted   5,455,161    4,299,315 

 

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

See accompanying notes to the financial statements

 

F-3
 

 

Boxlight Corporation

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

As Restated For the Years Ended December 31, 2017 and 2016

 

    Series A     Series B     Series C     Class A     Additional           Other              
    Preferred Stock     Preferred Stock     Preferred Stock     Common Stock     Paid-in     Subscriptions     Comprehensive     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Capital*     Receivable*     Loss     Deficit*     Total  
                                                                               
Balance, December 31, 2015     -     $ -       -     $ -       -     $ -       4,183,030     $ 418      $ 3,469,703      $ (1,975)      $ -      $ (3,426,839 )   41,307  
                                                                                                         
Equity transactions in connection with the acquisitions:                                                                                                        
Additional consideration given to Mim Holdings for Mimio acquisition     -       -       -       -       -       -       -       -       (2,000,000 )     -       -       -       (2,000,000 )
Acquisition of Genesis     -       -       1,000,000       100       -       -       -       -       (100 )     -       -       -       -  
Assumption of debt for Mimio acquisition     -       -       -       -       -       -       -       -       (3,425,000 )     -       -       -       (3,425,000 )
Acquisition of Boxlight Group     -       -       -       -       270,000       27       -       -       8,243,270       -       -       -       8,243,297  
Shares issued for:                                                                                                        
Issuance of common stock for cash to K-Laser     -       -       -       -       -       -       178,572       18       999,985       -       -       -       1,000,003  
Issuance of common stock for cash     -       -       -       -       -       -       51,879       5       218,999       (100)       -       -       218,904  
Settlement of accounts payable and debt     -       -       -       -       -       -       208,206       20       236,809       -       -       -       236,829  
Collection of subscriptions receivable     -       -       -       -       -       -       -               -       1,750       -       -       1,750  
Forgiveness of related party debt     -       -       -       -       -       -       -       -       222,370       -       -       -       222,370  
Distribution to Vert Capital     -       -       -       -       -       -       -       -       (814,625 )     -       -       -       (814,625 )
Stock compensation     -       -       -       -       -       -       -       -       464,321       -       -       -       464,321  
Foreign currency translation loss     -       -       -       -       -       -       -       -       -       -       (12,918 )     -       (12,918 )
Net loss     -       -       -       -       -       -       -       -       -       -       -       (2,061,983 )     (2,061,983 )
      -       -                                                                                          
Balance, December 31, 2016     -       -       1,000,000     $ 100       270,000     $ 27       4,621,687     $ 461       7,615,732       (325)       (12,918 )     (5,488,822 )     2,114,255  
Equity transactions in connection with IPO:                                                                                                        
Issuance of common shares for cash     -       -       -       -       -       -       958,983       96       5,678,513               -       -       5,678,609  
Issuance of common shares for settlement of accounts payable     -       -       -       -       -       -       41,017       4       287,115       -       -       -       287,119  
Conversion of preferred stock to common stock for Genesis     -       -       (1,000,000 )     (100 )                     370,040       37       63       -       -       -       -  
Conversion of preferred stock to common stock for Boxlight Group acquisition     -       -       -       -       (270,000 )     (27 )     2,055,873       206       (179 )     -       -       -       -  
Issuance of Series A preferred stock for Genesis acquisition     250,000       25       -       -       -       -       -       -       (25 )     -       -       -       -  
Issuance of common shares to directors     -       -       -       -       -       -       186,000       19       1,301,981       -       -       -       1,302,000  
Settlement of trademark liability     -       -       -       -       -       -       -       -       278,887       -       -       -       278,887  
Issuance of common shares for legal services     -       -       -       -       -       -       138,692       14       (14 )     -       -       -       -  
Shares issued for:                                                                                                        
Settlement of accounts payable – related parties for common shares     -       -       -       -       -       -       238,095       24       1,499,976       -       -       -       1,500,000  
Conversion of EDI note for common shares     -       -       -       -       -       -       327,027       33       2,060,241       -       -       -       2,060,274  
Conversion of Marlborough note for common shares                                                     330,135       33       2,079,820       -       -       -       2,079,853  
Exercise of stock options     -       -       -       -       -       -       291,448       29       (29 )     -       -       -       -  
Stock compensation     -       -       -       -       -       -       -       -       323,875       -       -       -       323,875  
Foreign currency translation loss     -       -       -       -       -       -       -       -       -       -       (34,930 )     -       (34,930 )
Net loss     -       -       -       -       -       -       -       -       -       -       -       (6,539,566 )     (6,539,566 )
                                                                                                         
Balance, December 31, 2017     250,000     $ 25       -     $ -       -     $ -       9,558,997     $ 956     21,125,956      $ (325)      $ (47,848 )    $ (12,028,388 )    $ 9,050,376  

 

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

See accompanying notes to the financial statements

 

F-4
 

 

Boxlight Corporation

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2017 and 2016