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ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES COMPANY HISTORY AND RECENT ACQUISITIVE GROWTH Boxlight Corporation (the “Company,” “we,” “us,” and “our”) was incorporated in the State of Nevada on September 18, 2014 with its headquarters in Atlanta, Georgia for the purpose of becoming a technology company that sells interactive educational products. The Company designs, produces and distributes interactive technology solutions predominantly to the education market. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of Boxlight Corporation and its wholly owned subsidiaries. Intercompany transactions and account balances among all affiliated entities have been eliminated. In the opinion of management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature and necessary for fair financial statement presentation. ESTIMATES AND ASSUMPTIONS The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. Significant estimates include estimates of reserves for inventory obsolescence; the recoverability of deferred tax assets; the fair value of warrants; the fair value and recoverability of intangible assets and goodwill; the fair value of stock compensation; the relative stand-alone selling prices of goods and services; variable consideration; and long-term incentive plans. REVERSE STOCK SPLITS AND RECLASSIFICATIONS In order to regain compliance with NASDAQ Listing Rule 5550(a)(2) (the "Bid Price Rule"), on February 14, 2025, the Company effected a reverse stock split of the Company’s Class A common stock whereby each five shares of the Company’s authorized and outstanding Class A common stock was converted into one share of common stock. The par value of the common stock was not adjusted. Following the reverse split, the authorized shares for Class A common stock was adjusted to 3,750,000, the authorized shares for Class B common stock remained at 50,000,000 shares, and the authorized shares of preferred stock remained unchanged at 50,000,000 shares. All Class A common share and per share amounts for all periods presented in the consolidated financial statements and the notes to the consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in aggregate par value of Class A common stock to additional paid-in capital on the consolidated balance sheets of approximately $1 thousand. The quantity of Class A common stock equivalents and the conversion and exercise ratios were adjusted for the effect of the reverse stock split for warrants, stock compensation arrangements, and the conversion features on preferred shares. There are presently no shares of Class B common stock outstanding and none were outstanding as of December 31, 2024 and 2023. The Company issued 33 shares of Class A common stock to adjust fractional shares following the reverse stock split to the nearest whole share. On June 14, 2023, the Company effected a reverse stock split of the Company’s Class A common stock whereby each eight shares of the Company’s authorized and outstanding Class A common stock was converted into one share of common stock. The par value of the common stock was not adjusted. Following the reverse split, the authorized shares for Class A common stock was adjusted to 18,750,000, the authorized shares for Class B common stock remained at 50,000,000 shares, and the authorized shares of preferred stock remained unchanged at 50,000,000 shares. All Class A common share and per share amounts for all periods presented in the consolidated financial statements and the notes to the consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in aggregate par value of Class A common stock to additional paid-in capital on the consolidated balance sheets of approximately $6 thousand. The quantity of Class A common stock equivalents and the conversion and exercise ratios were adjusted for the effect of the reverse stock split for warrants, stock compensation arrangements, and the conversion features on preferred shares. All of the agreements included existing conversion language in the event of a stock split and thus did not result in modification accounting or additional incremental expense as a result of this transaction. The Company issued 6,683 shares of Class A common stock to adjust fractional shares following the reverse stock split to the nearest whole share. GOING CONCERN The Company’s financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business. As described in Note 9, the Company was not in compliance with the Senior Leverage Ratio financial covenant under its Credit Agreement at December 31, 2023, June 30, 2024, September 30, 2024, and December 31, 2024. Non-compliance was waived by the Agent and Lender under amendments to the Credit Agreement. In addition, the Company was also not in compliance with its borrowing base covenant under the Credit Agreement at December 31, 2024. On March 24, 2025, the Company entered into an eighth amendment to the Credit Agreement with the Collateral Agent and Lender (the “Eighth Amendment”) to (i) provide the Company with an additional $2.5 million working capital bridge loan in March 2025 and (ii) waive any events of default that may have arisen directly as a result of (i) the Financial Covenant Event of Default (as defined in the Eighth Amendment) for the periods ended December 31, 2024 and March 31, 2025 and (ii) the Borrowing Base defaults described in the Eighth Amendment for the months ended December 31, 2024, January 31, 2025 and February 28, 2025. The bridge loan, including the related fee, is due and payable in full on August 31, 2025, and are not subject to prepayment penalties. In conjunction with obtaining the waiver, the Company must now also comply with the following covenants: •Initiate recapitalization efforts and/or other financing arrangements with target completion milestones starting on March 21, 2025 through an expected completion of the recapitalization and/or repayment of the debt by June 16, 2025. Not meeting these dates is an event of default under the credit facility. •Provide budgets to the lender with variances in excess of specified thresholds resulting in an event of default at the discretion of the lender. The Company will also be required to meet with a financial advisor, as designated by the lender, if requested. In addition, the amendment prohibits the Company from paying dividends or distributions to the preferred stockholders and reduces the borrowing base calculations by reducing the value assigned to its intellectual property to $11.2 million. There can be no assurance that the Lender will not declare an event of default and acceleration of all of our obligations under the Credit Agreement in the event we are unable to maintain full compliance with these covenants in the future. Because of the significant decreases in the required Senior Leverage Ratio, the Company’s current forecast projects the Company may not be able to maintain compliance with this ratio. In addition, the Company’s Term Loan, which has an outstanding balance of $37.6 million as of December 31, 2024, matures on December 31, 2025. As of December 31, 2024, the Company reclassified all of its long-term debt to short-term debt due to its maturity date being within the next 12 months. The Company is actively working to refinance its debt with new lenders, however there can be no assurance that these efforts will be successful prior to the maturity date at which time all amounts under the Term Loan will become due. These conditions raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the financial statements are issued. In view of the Term Loans being payable in full within the next twelve months and the required Senior Leverage Ratio, continuation as a going concern is dependent upon the Company’s ability to continue to achieve positive cash flow from operations, obtain waivers or other relief under the Credit Agreement for any future non-compliance with the Senior Leverage Ratio, or refinance its Credit Agreement with a different lender on more favorable terms. The Company is actively working to refinance its debt with new lenders. While the Company has currently engaged financial advisors and is actively working to refinance its existing debt, it does not have written or executed agreements as of the issuance of this Form 10-K. The Company’s ability to refinance its existing debt is based upon credit markets and economic forces that are outside of its control. We believe we have a good working relationship with our current lender. However, there can be no assurance that the Company will be successful in refinancing its debt, on a timely basis, or on terms acceptable to the Company, or at all. To the extent not converted into the Company’s Class A common stock, the outstanding shares of our Series B preferred stock became redeemable at the option of the holders at any time or from time to time commencing on January 1, 2024 upon, 30 days’ prior written notice to the Company, for a redemption price, payable in cash, equal to the sum of (a) ($10.00) multiplied by the number of shares of Series B preferred stock being redeemed (the “Redeemed Shares”), plus (b) all accrued and unpaid dividends, if any, on such Redeemed Shares. If all unconverted shares of Series B Preferred Stock were redeemed on December 31, 2024, the total amount payable by the Company would be $15.9 million. In addition, our Series C preferred stock will become redeemable at the option of the holders at any time or from time to time commencing on January 1, 2026 upon, 30 days’ prior written notice to the Company for a redemption price, payable in cash, equal to the sum of (a) ($10.00) multiplied by the number of shares of Series C preferred stock being redeemed (the “Redeemed Shares”), plus (b) all accrued and unpaid dividends, if any, on such Redeemed Shares. If all unconverted shares of Series C Preferred Stock were redeemed, the total amount payable by the Company would be $13.2 million. We may be required to seek alternative financing arrangements or restructure the terms of the agreements with the Series B and C preferred shareholders on terms that are not favorable to us if cash and cash equivalents are not sufficient to fully redeem the Series B and C preferred shares. We are currently evaluating alternatives to refinance or restructure the Series B and C preferred shares including extending the maturity of the Series B preferred shares beyond the current optional conversion date. As a result of the aforementioned factors, cash and cash equivalents, along with anticipated cash flows from operations, may not provide sufficient liquidity for our working capital needs, debt service requirements or to maintain minimum liquidity requirements under our Credit Agreement. These financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern. REVISIONS OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS During the fourth quarter of 2024, the Company determined that the prior year financial statements contained immaterial errors related to the classification of its rebate liability and sales return reserve. Specifically, the Company notes that the rebate liability should be recorded as a reduction to revenue with an offset to other current liabilities in the Company’s consolidated balance sheets. In addition, the Company notes that the offset to its sales return reserve balance should have been recorded as a refund liability included in other current liabilities in the Company’s consolidated balance sheets. As a result, certain prior year amounts have been revised for consistency with the current presentation. The Company has evaluated these corrections in accordance with Accounting Standards Codification ("ASC") Topic 250, Accounting Changes and Error Corrections, FASB Concepts Statement No. 2, Qualitative Characteristics of Accounting Information, and SAB No. 99- Materiality, and determined it was not necessary to amend its previously issued fiscal year consolidated financial statements upon overall considerations of both quantitative and qualitative factors. The corrections had no impact on the fiscal year 2023 Statement of Operations and Comprehensive Loss or Statement of Changes in Stockholders’ Equity. A summary of immaterial corrections to the Company’s previously issued consolidated balance sheet are as follows (in thousands):
| 12/31/2023
| As reported | Adjustments | As revised
Accounts receivable – trade, net of allowances | $ | 29,523 |  | $ | 3,145 |  | $ | 32,668 |
Prepaid expenses and other current assets | 9,471 |  | 57 |  | 9,528 |
Total assets | 158,571 |  | 3,202 |  | 161,773 |
Other short-term liabilities | 1,566 |  | 3,202 |  | 4,768 |
Total current liabilities | 46,232 |  | 3,202 |  | 49,434 |
Total liabilities | 113,311 |  | 3,202 |  | 116,513 |
Total stockholders’ (deficit) equity | 158,571 |  | 3,202 |  | 161,773 |
A summary of immaterial corrections to the Company’s previously issued consolidated statements of cash flows are as follows (in thousands):
| December 31, 2023
| As reported | Adjustments | As revised
Change in allowance for sales returns and volume rebate | $ | 1,356 |  | $ | 74 |  | $ | 1,430 |
Accounts receivable – trade | 781 |  | (18) |  | 763 |
Prepaid expenses and other current assets | (1,874) |  | (56) |  | (1,930) |
COMPREHENSIVE LOSS Comprehensive income (loss) reflects the change in equity during the year except those resulting from investments by and distributions to stockholders and is comprised of all components of net loss and foreign currency translation adjustments. FOREIGN CURRENCIES The Company’s reporting currency is the U.S. dollar. The U.S. dollar is the currency of the primary economic environment in which it operates and is generally the currency in which the Company’s business generates and expends cash. Subsidiaries with different functional currencies, translate their assets and liabilities into U.S. dollars at the exchange rates in effect as of the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average exchange rates for the year. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of equity (deficit). Foreign exchange gains and losses arise from transactions denominated in currencies other than the functional currency. Gains and losses on those foreign currency transactions are included in determining net loss for the period in which the exchange rates change. CASH AND CASH EQUIVALENTS The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits of $250,000 for banks located in the U.S. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR EXPECTED CREDIT LOSS Accounts receivable are stated at contractual amounts, net of an allowance for expected credit losses. The allowance for credit losses represents management’s estimate of the amounts that ultimately will not be realized in cash. The Company reviews the adequacy of the allowance for credit losses on an ongoing basis, using historical payment trends, the age of receivables and knowledge of the individual customers. Estimated credit losses consider relevant information about past events, current conditions and reasonable and supporting forecasts that affect the collectability of financial assets. When the analysis indicates, management increases or decreases the allowance accordingly. However, if the financial condition of our customers were to deteriorate, additional allowances might be required. The Company also offers customers rights to return product and sales incentives, which primarily consist of volume rebates. The Company's terms for product returns and sales incentives generally do not exceed a year. The Company estimates sales returns and volume rebate accruals throughout the year based on various factors, including contract terms, historical experience and performance levels. Total accrued sales returns were approximately $2.4 million and $2.0 million as of December 31, 2024 and 2023, respectively, and are reported in other current liabilities. Total accrued sales incentives were approximately $0.9 million and $1.2 million as of December 31, 2024 and 2023, respectively, and are reported in other current liabilities. INVENTORIES Inventories are stated at the lower of cost or net realizable value and include spare parts and finished goods. Inventories are primarily determined using specific identification and the first-in, first-out (“FIFO”) cost methods. Cost includes direct cost from the Current Manufacturer (“CM”) or Original Equipment Manufacturer (“OEM”), plus material overhead related to the purchase, inbound freight and import duty costs. The Company continuously reviews its inventory levels to identify slow-moving merchandise and markdowns necessary to clear slow-moving merchandise, which reduces the cost of inventories to its estimated net realizable value. Consideration is given to several quantitative and qualitative factors, including current pricing levels and the anticipated need for subsequent markdowns, aging of inventories, historical sales trends, and the impact of market trends and economic conditions. Estimates of markdown requirements may differ from actual results due to changes in quantity, quality and mix of products in inventory, as well as changes in consumer preferences, market and economic conditions. PROPERTY AND EQUIPMENT Property and equipment is stated at cost and depreciated using the straight-line method over the estimated life of the asset. Repairs and maintenance are charged to expense as incurred. LONG–LIVED ASSETS Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell. There was no impairment recognized for 2024 and 2023. GOODWILL Goodwill represents the cost in excess of the fair value of the net tangible and intangible assets of acquired businesses, and represents implied synergies expected of the completed business combinations. Most goodwill is not deductible for tax purposes. In analyzing goodwill for potential impairment in the quantitative impairment test, the Company uses a combination of the income and market approaches to estimate the fair value. Under the income approach, the Company calculates the fair value based on estimated future discounted cash flows. The assumptions used are based on what the Company believes a hypothetical marketplace participant would use in estimating fair value. Under the market approach, the Company estimates the fair value based on market multiples of revenue or earnings before interest, income taxes, depreciation, and amortization for benchmark companies. If the fair value exceeds carrying value, then no further testing is required. However, if the fair value were to be less than carrying value, the Company would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the goodwill exceeded its implied value. During the year 2023, due to declines in the Company’s market capitalization and a reduction in cash-flows resulting from continued softening in the industry leading to a reduction in sales from interactive flat-panel displays, the Company determined that a triggering event had occurred. As of September 30, 2023, the Company performed an interim goodwill impairment test as a result of the triggering event identified. Certain estimates and assumptions, including the Company’s operating forecast for 2023 and future periods, were revised based on current industry and Company trends. As of September 30, 2023, the Company recorded goodwill impairment charges of $10.4 million and $2.8 million to the Americas and EMEA reporting units, respectively. As of December 31, 2023, the Company performed another goodwill impairment test as a result of additional triggering events identified. Based upon that testing, the Company determined the remaining goodwill was fully impaired and the Company recognized goodwill impairment charges for the year ended December 31, 2023 of $22.4 million and $2.8 million in the Americas and EMEA reporting units, respectively. INTANGIBLE ASSETS Intangible assets are amortized using the straight-line method over their estimated period of benefit and presented net of accumulated amortization. The Company reviews the carrying amounts of intangible assets for impairment whenever an event or change in circumstances indicates that the carrying amount of the assets may not be recoverable. The Company measures the recoverability of intangible assets by comparing the carrying amount of each asset group to the future undiscounted cash flows the Company expects the asset to generate. Impairment is measured by the amount in which the carrying value of the asset exceeds its fair value. In addition, the Company periodically evaluates the estimated remaining useful lives of long-lived intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization. During the quarter ended September 30, 2024, the Company determined that a triggering event had occurred as a result of a decline in the Company’s revenues resulting from lower sales volume primarily resulting from lower global demand for interactive flat panel displays. As a result, the Company performed an interim impairment test on its finite-lived intangible assets using undiscounted cash flows. There was no impairment recorded on finite-lived intangible assets during the nine months ended September 30, 2024. As of December 31, 2024, the Company performed intangible impairment testing as a result of another triggering event identified due to further declines in the Company's revenues. The Company’s methodology for estimating the total value of undiscounted cash flows was consistent with the approach used for the intangible asset recoverability test as of September 30, 2024. Certain estimates and assumptions, including the Company’s operating forecast for 2025 and future periods, were further revised based on current industry and Company trends. Based on the quantitative test performed, no impairment was deemed necessary. Due to forecasted industry changes in the interactive flat panel display market as well as the Company's operational strategy, the useful lives of certain intangible assets have been revised to reflect the current expected economic useful lives. The modification in useful lives resulted in accelerated amortization of approximately $12.3 million for both the Americas and EMEA reporting segments during the year ended December 31, 2024. DERIVATIVE TREATMENT OF STOCK PURCHASE WARRANTS The Company classifies common stock purchase warrants as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required. The Company determined that certain warrants to purchase common stock do not satisfy the criteria for classification as equity instruments due to the existence of certain net cash and non-fixed settlement provisions that are not within the sole control of the Company. Such warrants are measured at fair value at each reporting date, and the changes in fair value are included in determining net loss for the period. See Note 10 “Derivative Liabilities” for more information. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company’s financial instruments primarily include cash, accounts receivable, derivative liabilities, accounts payable and debt. Due to the short-term nature of cash, accounts receivable and accounts payable, the carrying amounts of these assets and liabilities approximate their fair value. The Company has determined that the estimated fair value of debt is approximately $39.4 million while the carrying value, excluding discounts, premiums and issuance costs, is approximately $37.6 million. The fair value of debt was estimated using market rates the Company believes would be available for similar types of financial instruments and represents a Level 2 measurement. Derivative liabilities are recorded at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. Transfers into Level 3 measurements during the year ended December 31, 2024 of $0.4 million were related to the Company's long-term incentive plan. There were no transfers into or out of Level 3 measurements in 2023. The following tables set forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2024 and 2023 (in thousands):
Description |  | Markets for Identical Assets (Level 1) |  | Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Carrying Value as of December 31, 2024
Derivative liabilities - warrant instruments |  | — |  |  | — |  |  | $ | 1 |  |  | $ | 1 |
Long-term incentive plan |  | $ | — |  |  | $ | — |  |  | $ | 358 |  |  | $ | 358 |
Description |  | Markets for Identical Assets (Level 1) |  | Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Carrying Value as of December 31, 2023
Derivative liabilities - warrant instruments |  | $ | — |  |  | $ | — |  |  | $ | 205 |  |  | $ | 205 |
The following tables reconcile the beginning and ending balances of the warrant instruments and long-term incentive plan within Level 3 of the fair value hierarchy, respectively:
| Derivative Liabilities (in thousands) | Long-term incentive plan (in thousands)
Balance, December 31, 2023 | $ | 205 |  | $ | — |
Change in fair value | (204) |  | 358
Balance, December 31, 2024 | $ | 1 |  | $ | 358 |
| (in thousands) | (in thousands)
Balance, December 31, 2022 | $ | 472 |  | $ | — |
Change in fair value | (267) |  | — |
Balance, December 31, 2023 | $ | 205 |  | $ | — |
See Note 10 and Note 13 for discussion of the valuation techniques and inputs. NET LOSS PER COMMON SHARE Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting and warrants to purchase common stock were considered to be common stock equivalents. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. The dilutive effect of convertible instruments is determined using the if-converted method, presuming share settlement. Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted calculation for the entire period being presented. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. For the year ended December 31, 2024, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 34 thousand shares from options to purchase common shares, 15 thousand of unvested restricted shares, and 0.3 million shares issuable upon exercise of warrants. Additionally, potentially dilutive securities of 0.4 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive. For the year ended December 31, 2023, potentially dilutive securities that were not included in the diluted per share calculation because they would be anti-dilutive comprise 70.0 thousand shares from options to purchase common shares, unvested restricted shares of 82.0 thousand and 0.3 million shares issuable upon exercise of warrants. Additionally, potentially dilutive securities of 0.4 million shares from the assumed conversion of preferred stock are excluded from the denominator because they would be anti-dilutive. REVENUE RECOGNITION In accordance with Topic 606 Revenue from Contracts with Customers, the Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present right to payment and the title and the significant risks and rewards of ownership of products or services are transferred to its customers. Product revenue is derived from the sale of interactive panels, audio and communication equipment and related software and accessories to distributors, resellers, and end users. Service revenue is derived from hardware maintenance services, product installation, training, software maintenance, and subscription services. Nature of Products and Services and Related Contractual Provisions The Company’s sales of interactive devices, including panels, audio and communication equipment and other interactive devices generally include hardware maintenance services, a license to software, and the provision of related software maintenance. Interactive devices are generally sold with hardware maintenance services with terms of approximately 36-60 months. Software maintenance includes technical support, product updates on a when and if available basis, and error correction services. At times, non-interactive panels are also sold with hardware maintenance services with terms of approximately 60 months. The Company also licenses software independently of its interactive devices, in which case it is bundled with software maintenance, and in some cases, subscription services that include access to on-line content, and cloud-based applications. The Company’s software subscription services provide access to content and software applications on an as needed basis over the Internet, but do not provide the right to take delivery of the software applications. The Company’s product sales, including those with software and related services, generally include a single payment up front for the products and services, and revenue is recorded net of estimated sales returns and rebates based on the Company’s expectations and historical experience. For most of the Company’s product sales, control transfers, and therefore, revenue is recognized when products are shipped at the point of origin. When the Company transfers control of its products to the customer prior to the related shipping and handling activities, the Company has adopted a policy of accounting for shipping and handling activities as a fulfillment cost rather than a performance obligation. For many of the Company’s software product sales, control is transferred when shipped at the point of origin since the software is installed on the interactive hardware device in advance of shipping. For other software product sales, control is transferred when the customer receives the related access code or interactive hardware since the customer’s access code or connection to the interactive hardware activates the software license at which time the software is made available to the customer. For the Company’s software maintenance, hardware maintenance, and subscription services, revenue is recognized ratably over time as the services are provided since time is the best output measure of how those services are transferred to the customer. The Company’s installation, training and professional development services are generally sold separately from the Company’s products. Control of these services is transferred to our customers over time with hours/time incurred in providing the service being the best depiction of the transfer of services since the customer is receiving the benefit of the services as the work is performed. For the sale of third-party products and services where the Company obtains control of the products and services before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of the third-party products and services including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product or service. The Company has not historically entered into transactions where it does not take control of the product or service prior to transfer to the customer. The Company excludes all taxes assessed by a governmental agency that are both imposed on and concurrent with the specific revenue-producing transaction from revenue (for example, sales and use taxes). In essence, the Company is reporting these amounts collected on behalf of the applicable government agency on a net basis as though they are acting as an agent. The taxes collected and not yet remitted to the governmental agency are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. Significant Judgments For contracts with multiple performance obligations, each of which represent promises within a contract that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). The Company’s products and services included in its contracts with multiple performance obligations generally are not sold separately and there are no observable prices available to determine the SSP for those products and services. Since observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, when applicable, the estimated cost to provide the performance obligation, market trends in the pricing for similar offerings, product-specific business objectives, and competitor or other relevant market pricing and margins. Because observable prices are generally not available for the Company’s performance obligations that are sold in bundled arrangements, the Company does not apply the residual approach to determining SSP. The Company has applied the portfolio approach to its allocation of the transaction price for certain portfolios of contracts that are executed in the same manner, contain the same performance obligations, and are priced in a consistent manner. The Company believes that the application of the portfolio approach produces the same result as if they were applied at the contract level. Contract Balances The timing of invoicing to customers often differs from the timing of revenue recognition and these timing differences can result in receivables, contract assets, or contract liabilities (deferred revenue) on the Company’s consolidated balance sheets. Fees for the Company’s product and most service contracts are fixed, except as adjusted for rebate programs when applicable, and are generally due within 30-60 days of contract execution. Fees for installation, training, and professional development services are fixed and generally become due as the services are performed. The Company has an established history of collecting under the terms of its contracts without providing refunds or concessions to its customers. The Company’s contractual payment terms do not vary when products are bundled with services that are provided over multiple years. In these contracts where services are expected to be transferred on an ongoing basis for several years after the related payment, the Company has determined that the contracts generally do not include a significant financing component. The upfront invoicing terms are designed 1) to provide customers with a predictable way to purchase products and services where the payment is due in the same timeframe as when the products, which constitute the predominant portion of the contractual value, are transferred, and 2) to ensure that the customer continues to use the related services, so that the customer will receive the optimal benefit from the products over their lives. Additionally, the Company has elected the practical expedient to exclude any financing component from consideration for contracts where, at contract inception, the period between the transfer of services and the timing of the related payment is not expected to exceed one year. The Company has an unconditional right to consideration for all products and services transferred to the customer. That unconditional right to consideration is reflected in accounts receivable in the accompanying consolidated balance sheets in accordance with Topic 606. Contract liabilities are reflected in deferred revenue in the accompanying consolidated balance sheets and reflect amounts allocated to performance obligations that have not yet been transferred to the customer related to software maintenance, hardware maintenance, and subscription services. The Company has no material contract assets at December 31, 2024 or 2023. During the years ended December 31, 2024 and 2023, the Company recognized $8.5 million and $7.9 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2023 and 2022, respectively. Variable Consideration The Company’s otherwise fixed consideration in its customer contracts may vary when refunds or credits are provided for sales returns, stock rotation rights, price protection provisions, or in connection with certain other rebate provisions. The Company generally does not allow product returns other than under assurance warranties or hardware maintenance contracts. However, the Company, on a case-by-case basis, will grant exceptions, mostly “buyer’s remorse” where the distributor or reseller’s end customer either did not understand what they were ordering, or determined that the product did not meet their needs. An allowance for sales returns is estimated based on an analysis of historical trends. In very limited situations, a customer may return previous purchases held in inventory for a specified period of time in exchange for credits toward additional purchases. The Company provides rebates to certain customers based on the achievement of certain sales targets. The provision for rebates is estimated based on customers’ contracted rebate programs and our historical experience of rebates paid. The Company includes variable consideration in its transaction price when there is a basis to reasonably estimate the amount of the fee and it is probable there will not be a significant reversal. These estimates are generally made using the most likely method based on historical experience and are measured at each reporting date. There was no material revenue recognized in 2024 related to changes in estimated variable consideration that existed at December 31, 2023. Remaining Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting within the contract. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies performance obligations at contract inception so that it can monitor and account for the obligations over the life of the contract. Remaining performance obligations represent the portion of the transaction price in a contract allocated to products and services not yet transferred to the customer. As of December 31, 2024 and 2023, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $24.2 million and $25.0 million, respectively. The Company expects to recognize revenue on approximately 37% of the remaining performance obligations in 2025, 29% in 2026, 19% in 2027, 11% in 2028, with the remainder recognized thereafter. In accordance with Topic 606, the Company has elected not to disclose the value of remaining performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (for example, a time-and-materials professional services contract). In addition, the Company has elected not to disclose the value of remaining performance obligations for contracts with performance obligations that are expected, at contract inception, to be satisfied over a period that does not exceed one year. Disaggregated Revenue The Company disaggregates revenue based upon the nature of its products and services and the timing and in the manner which it is transferred to the customer. Although all products are transferred to the customer at a point in time, hardware and some software is pre-installed on the interactive device are transferred at the point of shipment, while some software is transferred to the customer at the time the hardware is received by the customer or when software product access codes are delivered electronically to the customer. All service revenue is transferred over time to the customer; however, professional services are generally transferred to the customer within a year from the contract date as measured based upon hours or time incurred while software maintenance, hardware maintenance, and subscription services are generally transferred 3- 5 years from the contract execution date as measured based upon the passage of time.
| Year Ended December 31, (in thousands)
| 2024 |  | 2023
Product revenues: |  |  |
Hardware | $ | 124,378 |  |  | $ | 163,948 |
Software and embedded firmware | 1,198 |  |  | 2,402 |
Service revenues: |  |  |
Professional services | 903 |  |  | 1,480 |
Maintenance and subscription services | 9,414 |  |  | 8,891 |
| $ | 135,893 |  |  | $ | 176,721 |
Contract Costs The Company capitalizes incremental costs to obtain a contract with a customer if the Company expects to recover those costs. The incremental costs to obtain a contract are those that the Company incurs to obtain a contract with a customer that it would not have otherwise incurred if the contract were not obtained (e.g., a sales commission). The Company capitalizes the costs incurred to fulfil a contract only if those costs meet all the following criteria: •The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify. •The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future. •The costs are expected to be recovered. Certain sales commissions incurred by the Company were determined to be incremental costs to obtain the related contracts, which are deferred and amortized ratably over the estimated economic benefit period. For these sales commissions that are incremental costs to obtain where the period of amortization would have been recognized over a period that is one year or less, the Company elected the practical expedient to expense those costs as incurred. Commission costs that are deferred are classified as current or non-current assets based on the timing of when the Company expects to recognize the expense and are included in prepaid and other assets and other assets, respectively, in the accompanying consolidated balance sheets. Total deferred commissions, net of accumulated amortization, at December 31, 2024 and 2023 were less than $500,000 and $550,000, respectively. The Company has not historically incurred any material fulfillment costs that meet the criteria for capitalization. SEGMENT REPORTING ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. The Company’s operations are organized, managed and classified into three reportable segments – Europe, Middle East and Africa ("EMEA"), North and Central America (the “Americas”) and all other geographic regions (“Rest of World”). Our EMEA segment consists of the operations of Sahara Holding Limited and its subsidiaries (the “Sahara Entities”). Our Americas segment consists primarily of Boxlight, Inc. and its subsidiaries and the Rest of World segment consists primarily of Boxlight Australia, PTY LTD ("Boxlight Australia”). Each of our operating segments are primarily engaged in the sale of education technology products and services in the education market but which are also sold into the health, government and corporate sectors and derive a majority of their revenues from the sale of flat-panel displays, audio and other hardware accessory products, software solutions and professional services. Generally, our displays produce higher net operating revenues but lower gross profit margins than our accessory solutions and professional services. The Americas operating segment includes salaries and overhead for corporate functions that are not allocated to the Company’s individual reporting segments. Transfers between segments are generally valued at market and are eliminated in consolidation. The CODM evaluates the performance of each segment based on revenues, gross profit, and operating income, with operating income being the primary GAAP measure. Gross margin can influence key decisions as margins can be indicative of the level of saturation in the market with existing products or can be indicative of changes in manufacturing or shipping costs. If trends are sustained, the CODM may seek to adjust operations to more favorable markets or may evaluate whether the Company should introduce new products in a given area. Operating income provides the CODM with an overview of the profitability of a given segment and whether resources should be allocated or removed to ensure sustained profitability for both the segment and the consolidated entity. Since the Company’s operating segments are organized by geography, this structure allows the CODM to be responsive to needs of customers and can execute strategic plans and initiatives accordingly. RESEARCH AND DEVELOPMENT EXPENSES Research and development costs are expensed as incurred and consist primarily of personnel related costs, prototype and sample costs, design costs, and global product certifications mostly for wireless certifications. INCOME TAX An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carryforwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. STOCK COMPENSATION The Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model; the fair value for each restricted stock unit award is the market price of the underlying shares at the date of grant. The fair value determined represents the cost for the award and is recognized on a straight-line basis over the vesting period during which an employee is required to provide service in exchange for the award. Total expense is reduced by the previously recognized compensation expense for options and restricted stock units that are forfeited prior to vesting when the forfeiture occurs. The Company estimates the fair value of the long-term incentive plan by using a Model Monte Carlo Simulation model. The amount of each award earned will depend on the performance of the Company relative to certain performance targets related to share price appreciation of the Company’s Class A common stock during the respective performance cycles. As amounts earned for the awards are based on changes in the Company's stock price, the Company will recognize a liability for compensation cost each reporting period based on the fair value as of each reporting date proportionally with the elapsed time at each reporting period. LEASES Operating lease assets and liabilities are reflected within operating lease assets, operating lease liabilities, current, and operating lease liabilities, non-current, on the consolidated balance sheets. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Many of the leases have one or more lease renewal options. The exercise of lease renewal options is at our sole discretion. The Company does not consider the exercise of any lease renewal options reasonably certain to occur. Certain of our lease agreements contain early termination options. No renewal options or early termination options have been included in the calculation of the operating right-of-use assets or operating lease liabilities. Certain of our lease agreements provide for periodic adjustments to rental payments for inflation, which is recognized as variable lease cost when they occur. As the majority of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments. The incremental borrowing rate is based on the terms of the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For these short-term leases, lease expense is recognized on a straight-line basis over the lease term. The Company is not a lessor in any lease agreement. ADVERTISING COSTS Advertising costs are expensed as incurred and included in General and Administrative expenses in the accompanying consolidated statements of operations and comprehensive loss. Advertising expense for the year ended December 31, 2024 and December 31, 2023 totaled $162 thousand and $218 thousand, respectively. NEW ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (“CECL”). The new guidance applies to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new guidance also applies to debt securities and other financial assets measured at fair value through other comprehensive income. Estimated credit losses under CECL consider relevant information about past events, current conditions and reasonable and supporting forecasts that affect the collectability of financial assets. The new guidance was effective January 1, 2023 and was applied using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of January 1, 2023. Prior period comparative information has not been recast and continues to be reported under the accounting guidance in effect for those periods. The Company recognized a cumulative-effect adjustment to reduce retained earnings by $76 thousand, net of taxes. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280. The enhanced disclosure requirements include: title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances. The Company adopted this change for the year ended December 31, 2024 and interim periods beginning 2025. This change was applied retrospectively to all periods presented. Recent Accounting Pronouncements not yet Adopted In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change is effective for annual periods beginning after December 15, 2024. This change will apply on a prospective basis to annual financial statements for periods beginning after the effective date. However, retrospective application in all prior periods presented is permitted. The Company is currently evaluating the impact of this ASU on its financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement-reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40), which improves the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). This change is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. This change will apply on a prospective basis to annual financial statements for periods beginning after the effective date. However, retrospective application in all prior periods presented is permitted. The Company is currently evaluating the impact of this ASU on its financial statements.

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