Form 10-Q Boxlight Corp For: Mar 31

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X]

Quarterly Report UNDER Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2021

 

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)

 

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)

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		BOXL		The Nasdaq Stock Market LLC

 

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 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	[X]		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. [  ]

 

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 May 13, 2021 was 56,786,557.

 

 

 

BOXLIGHT CORPORATION

 

TABLE OF CONTENTS

 

		Page No.
	PART I. Financial Information
Item 1.	Unaudited Condensed Consolidated Financial Statements	F-1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020	F-1
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	F-2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020	F-3
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	F-4
	Notes to Unaudited Condensed Consolidated Financial Statements	F-5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	11
Item 4.	Controls and Procedures	11
	PART II. Other Information
Item 1.	Legal Proceedings	12
Item 1A.	Risk Factors	12
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	12
Item 3.	Defaults Upon Senior Securities	12
Item 4.	Mine Safety Disclosures	12
Item 5.	Other Information	12
Item 6.	Exhibits	13
	Signatures	14

 

 

PART I. Financial Information

 

Item 1. Financial Statements

 

Boxlight Corporation

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the Three Months Ended March 31, 2021 and 2020

(Unaudited)

(in thousands, except share amounts)

 

		Three Months Ended
		March 31,
		2021				2020
Revenues, net		$	33,424			$	5,723
Cost of revenues			24,872				4,132
Gross profit			8,552				1,591
Operating expense:
General and administrative expenses			10,112				3,938
Research and development			474				317
Total operating expense			10,586				4,255
Loss from operations			(2,034	)			(2,664	)
Other income (expense):
Interest expense, net			(1,018	)			(459	)
Other income, net			15				58
(Loss) gain on settlement of liabilities, net			(1,846	)			28
Change in fair value of derivative liabilities			(265	)			1,087
Total other income (expense)			(3,114	)			714
Net loss before income taxes			(5,148	)		$	(1,950	)
Income tax expense			(21	)			-
Net loss			(5,169	)			(1,950	)
Fixed dividends to Series B preferred shareholders			317				-
Net loss attributable to common stockholders		$	(5,486	)		$	(1,950	)
Comprehensive loss:
Net loss		$	(5,169	)		$	(1,950	)
Foreign currency translation adjustment			(261	)			(103	)
Total comprehensive loss		$	(5,430	)		$	(2,053	)
Net loss per common share – basic and diluted		$	(0.09	)		$	(0.16	)
Weighted average number of common shares outstanding – basic and diluted			55,150				12,493

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Boxlight Corporation

Condensed Consolidated Balance Sheets

As of March 31, 2021 and December 31, 2020

(Unaudited)

(in thousands, except share amounts)

 

		March 31, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	10,002			$	13,460
Accounts receivable – trade, net of allowances			22,924				20,869
Inventories, net of reserves			22,561				20,913
Prepaid expenses and other current assets			5,390				6,161
Total current assets			60,877				61,403
Property and equipment, net of accumulated depreciation			612				562
Intangible assets, net of accumulated amortization			54,870				55,157
Goodwill			23,262				22,742
Other assets			119				91
Total assets		$	139,740			$	139,953
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	14,367			$	14,245
Accounts payable and accrued expenses – related parties			-				1,967
Short-term debt			15,668				16,817
Earn-out payable – related party			119				119
Deferred revenues – short-term			6,033				5,671
Derivative liabilities			577				363
Other short-term liabilities			2,337				1,209
Total current liabilities			39,101				40,392
Deferred revenues – long-term			11,433				10,482
Long-term debt			4,932				7,831
Deferred tax liability			7,680				7,902
Other long-term liabilities			364				2
Total liabilities			63,510				66,609
Commitments and contingencies (Note 13)
Mezzanine equity:
Preferred Series B			16,513				16,513
Preferred Series C			12,363				12,363
Total mezzanine equity			28,876				28,876
Stockholders’ equity:
Preferred Series A, $0.0001 par value, 50,000,000 shares authorized; 167,972 and 167,972 shares issued and outstanding, respectively			-				-
Common stock, $0.0001 par value, 200,000,000 shares authorized; 56,786,557 and 53,343,518 Class A shares issued and outstanding, respectively			6				5
Additional paid-in capital			95,084				86,768
Accumulated deficit			(52,667	)			(47,498	)
Accumulated other comprehensive income			4,931				5,192
Total stockholders’ equity			47,354				44,467
Total liabilities and stockholders’ equity		$	139,740			$	139,953

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Boxlight Corporation

Consolidated Condensed Statements of Changes in Stockholders’ Equity (Deficit)

For the Three Months Ended March 31, 2021 and March 31, 2020

(Unaudited)

($ in thousands, except shares)

 

		Series A								Class A								Additional								Accumulated Other
		Preferred Stock								Common Stock								Paid-in				Subscriptions				Comprehensive				Accumulated
		Shares				Amount				Shares				Amount				Capital				Receivable				Loss				Deficit				Total
Balance as of December 31, 2020			167,972			$	-				53,343,518			$	5			$	86,768			$	-			$	5,192			$	(47,498	)		$	44,467
Shares issued for:
Stock options exercised			-				-				319,434				-				246				-				-				-				246
Conversion of liabilities				-			-				3,044,038				1				7,659				-				-				-				7,660
Conversion of Restricted Shares			-				-				58,818				-				-				-				-				-				-
Warrants exercised			-				-				20,749				-				51				-				-				-				51
Stock compensation			-				-				-				-				677				-				-				-				677
Foreign currency translation adjustment			-				-				-				-				-				-				(261	)			-				(261	)
Fixed dividends for preferred shareholders			-				-				-				-				(317	)			-				-								(317	)
Net loss			-				-				-				-				-				-				-				(5,169	)			(5,169	)
																																			-
Balance as of March 31, 2021			167,972				-			$	56,786,557			$	6			$	95,084				-			$	4,931			$	(52,667	)		$	47,354

 

		Series A								Class A								Additional								Accumulated Other
		Preferred Stock								Common Stock								Paid-in				Subscriptions				Comprehensive				Accumulated
		Shares				Amount				Shares				Amount				Capital				Receivable				Loss				Deficit				Total
Balance as of December 31, 2019			167,972			$	-				11,698,697			$	1			$	30,736			$	-			$	(38	)		$	(31,346	)		$	(648	)
Shares issued for:
Conversion of liabilities			-				-				2,165,379				-				1,749				-				-				-				1,749
Stock compensation			-				-				-				-				271				-				-				-				271
Other shared based payments			-				-				7,111				-				8				-				-				-				8
Foreign currency translation income			-				-				-				-				-				-				(103	)			-				(103	)
Net loss			-				-				-				-				-				-				-				(1,950	)			(1,950	)
																																			-
Balance as of March 31, 2020			167,972			$	-			$	13,871,187			$	1			$	32,763			$	-			$	(141	)		$	(33,296	)		$	(673	)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Boxlight Corporation

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2021 and 2020

(Unaudited)

(in thousands)

 

		Three Months Ended
		March 31, 2021				March 31, 2020
Cash flows from operating activities:
Net loss		$	(5,169	)		$	(1,950	)
Adjustments to reconcile net loss to net cash (used) provided in operating activities:
Amortization of debt discount and issuance cost			544				170
Bad debt expense			(66	)			(9	)
Loss (gain) on settlement of liabilities			1,846				(1,087	)
Change in allowance for sales returns and volume rebate			150				1,661
Change in inventory reserve			(74	)			(44	)
Change in deferred tax assets and liabilities, net			(497	)
Change in fair value of derivative liabilities			265				(28	)
Change in fair value of earn-out payable			-				(36	)
Shares issued for interest payment on notes payable			204				42
Stock compensation expense			677				271
Other share-based payments			-				8
Depreciation and amortization			1,754				219
Changes in operating assets and liabilities:
Accounts receivable – trade			(1,255	)			(588	)
Inventories			(1,527	)			478
Prepaid expenses and other current assets			800				586
Other assets			(30	)			(3	)
Accounts payable and accrued expenses			(533	)			830
Warranty			(80	)			19
Accounts payable and accrued expenses - related parties			16				270
Other short-term liabilities			3				23
Deferred revenues			1,411				(61	)
Other liabilities			4				(4	)
Net cash used in operating activities			(1,557	)			(890	)
Cash flows from investing activities:
Acquisition of Interactive Concepts (net of cash acquired)			(148	)			-
Purchases of furniture and fixtures			(46	)			-
Net used in investing activities			(194	)			-
Cash flows from financing activities:
Proceeds from short-term debt			8,343				2,817
Principal payments on short-term debt			(9,374	)			(3,092	)
Proceeds from convertible debt			-				750
Proceeds from the exercise of stock options and warrants			297				-
Debt issuance costs			-				(41	)
Payments of fixed dividends to Series B Preferred stockholders			(13	)			-
Net cash (used in) provided by financing activities			(747	)			434
Effect of foreign currency exchange rates			(960	)			(103	)
Net decrease in cash and cash equivalents			(3,458	)			(560	)
Cash and cash equivalents, beginning of the period			13,460				1,173
Cash and cash equivalents, end of the period		$	10,002			$	613
Supplemental cash flow disclosures:
Cash paid for income taxes		$	179			$	-
Cash paid for interest		$	769			$	340
Non-cash investment and financing transactions:
Shares issued to settle accounts payable		$	1,627			$	567
Shares issued for conversion of notes payable and accrued interest		$	6,033			$	1,134
Declared but unpaid fixed dividends on Series B Preferred Stock		$	317			$	49
Deferred consideration for Interactive acquisition		$	1,493			$	-

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Boxlight Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

THE COMPANY AND RECENT ACQUISITIVE GROWTH

 

Boxlight Corporation (“Boxlight”) designs, produces and distributes interactive technology solutions to the education, corporate and government markets under its Clevertouch and Mimio brands. The Company’s solutions include interactive displays, collaboration software, supporting accessories and professional services.

 

On March 23, 2021 the Company acquired Interactive Concepts BV, a Belgium company (“Interactive”) and a distributor of interactive technologies. On September 24, 2020, Boxlight acquired Sahara Presentation Systems PLC (“Sahara”), a leader in distributed and manufactured AV solutions, headquartered in the United Kingdom.

 

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Boxlight and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim unaudited condensed consolidated financial information and interim financial reporting guidelines and rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. The unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2020 and notes thereto contained in the Company’s Annual Report on Form 10-K. Certain information and note disclosures normally included in the consolidated financial statements have been condensed or omitted. The December 31, 2020 balance sheet included herein was derived from the audited consolidated financial statements, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

 

ESTIMATES AND ASSUMPTIONS

 

The preparation of financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Note _ in the Notes to the Consolidated Financial Statements for 2020 contained in the Annual Report describes the significant accounting policies that the Company used in preparing our consolidated financial statements. On an ongoing basis, The Company evaluates our estimates, including, but not limited to, those related to revenue/reserves and allowances. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates under different assumptions or conditions.

 

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 receivables and accounts payable, the carrying amounts of these assets and liabilities approximate their fair value. Debt approximates fair value due to either the short-term nature or recent execution of the debt agreement. The amount of consideration received is deemed to approximate the fair value of long-term debt net of any debt discount and issuance cost.

 

 

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.

 

The following table sets 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 March 31, 2021 and December 31, 2020 (in thousands):

 

		Markets for Identical Assets				Other Observable Inputs				Significant Unobservable Inputs				Carrying Value as of March 31,
Description		(Level 1)				(Level 2)				(Level 3)				2021
Derivative liabilities - warrant instruments		$	-			$	-			$	577			$	577
Earn-out payable – related party			-				-				119				119
										$	696			$	696

 

		Markets for Identical Assets				Other Observable Inputs				Significant Unobservable Inputs				Carrying Value as of December 31,
Description		(Level 1)				(Level 2)				(Level 3)				2020
Derivative liabilities - warrant instruments		$	-			$	-			$	363			$	363
Earn-out payable – related party			-				-				119				119
										$	482			$	482

 

The following table shows the change in the Company’s warrant instruments rollforward for the three months ended March 31, 2021:

 

		Amount
Balance, December 31, 2020		$	363
Exercise of warrants			(51	)
Change in fair value of derivative liabilities			265
Balance, March 31, 2021		$	577

 

The following table shows the change in the Company’s earn-out payable rollforward for the three months ended March 31, 2021:

 

		Amount
Balance, December 31, 2020		$	119
Change in fair value of earn-out payable			-
Balance, March 31, 2021		$	119

 

 

REVENUE RECOGNITION

 

In accordance with the FASB’s Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), 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 projectors, interactive panels 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, projectors, and other interactive devices generally include hardware maintenance services, a license to software, and the provision of related software maintenance. In most cases, interactive devices are sold with hardware maintenance services with terms of approximately 60 months. Software maintenance includes technical support, product updates on a when and if available basis, and error correction services. At times, non-interactive projectors 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 software product sales, control is transferred when the customer receives the related interactive hardware since the customer’s 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. However, the Company does have certain performance obligations for which pricing is highly variable or uncertain, and contracts with those performance obligations generally contain multiple performance obligations with highly variable or uncertain pricing. For these contracts the Company allocates the transaction price to those performance obligations using an alternative method of allocation that is consistent with the allocation objective and the guidance on determining SSPs in Topic 606 considering, when applicable, the estimated cost to provide the performance obligation, market pricing for competing product or service offerings, residual values based on the estimated SSP for certain goods, product-specific business objectives, incremental values for bundled transactions that include a service relative to similar transactions that exclude the service, and competitor pricing and margins. A separate price has not been established by the Company for its hardware maintenance services and software maintenance services. In addition, hardware maintenance services, software solutions, and the related maintenance services are never sold separately and are proprietary in nature, and the related selling price of these products and services is highly variable or uncertain. Therefore, the SSP of these products and services is estimated using the alternative method described above, which includes residual value techniques.

 

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 on March 31, 2021 or December 31, 2020. During the three months ended March 31, 2021 and March 31, 2020, the Company recognized $1.6 million and $0.9 million, respectively of revenue that was included in the deferred revenue balance as of December 31, 2020 and December 31, 2019, 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 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 expected value method based on historical experience and are measured at each reporting date. There was no material revenue recognized in Q1 of 2021 related to changes in estimated variable consideration that existed at December 31, 2020.

 

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 March 31, 2021 and December 31, 2020, the aggregate amount of the contractual transaction prices allocated to remaining performance obligations was $17.2 million and $16.1 million, respectively. The Company expects to recognize revenue on 27% of the remaining performance obligations during the 2^nd thru 4^th quarters of 2021, 28% in 2022, 37% in 2023 and 2024, with the remaining 8% 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 contracts). 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 keys 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 over five years from the contract execution date as measured based upon the passage of time.

 

		Three Months Ended
		March 31, 2021 (in thousands)				March 31, 2020 (in thousands)
Product Revenues:
Hardware		$	30,761			$	4,789
Software			867				159
Service Revenues:
Professional Services			270				342
Maintenance and Subscription Services			1,526				433
		$	33,424			$	5,723

 

 

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 fulfill 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 are 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 be recognized over a period that is one year or less, the Company has 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 condensed consolidated balance sheets. Total deferred commissions at March 31, 2021 and December 31, 2020 and the related amortization for 2021 were less than $0.1 million. No impairment losses were recognized for the three months ended March 31, 2021 and 2020.

 

The Company has not historically incurred any material fulfillment costs that meet the criteria for capitalization.

 

SUBSEQUENT EVENTS

 

We reviewed all material events through the date of these condensed consolidated financial statements were issued for subsequent event disclosure consideration as described in Note 16.

 

NEW ACCOUNTING STANDARDS

 

In February 2016, the FASB issued ASC 842 “Leases” that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Under the previous guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily depended on its classification as a finance or operating lease. The new guidance also requires disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. For Emerging Growth Companies, the new standard is not effective until annual reporting periods beginning after December 15, 2021, including interim periods within that reporting period. Earlier application is permitted. The Company is currently evaluating the impact of this new pronouncement on its financial statements.

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments Credit Losses” (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance replaces the incurred loss methodology with the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including trade accounts receivable. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842. This new guidance changes the impairment model for most financial assets and certain other instruments. Since the Company is an Emerging Growth Company, the ASU is not effective until fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. The Company is currently evaluating the impact that this standard will have, if any, on its financial statements.

 

 

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic 740). The new guidance modifies the requirements for the timing of adoption of enacted changes in tax law. The effects of changes on taxes currently payable or refundable for the current year must be reflected in the computation of the annual effective tax rate. Since the Company is an Emerging Growth Company, the ASU is not effective until fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have, if any, on its financial statements.

 

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The new guidance simplifies the accounting for certain convertible instruments and for contracts in an entity’s own equity. Key provisions include the elimination of the “cash conversion” guidance and the “beneficial conversion feature” guidance in ASC 470-20 as well as a simplification of the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification by removing certain conditions in ASC 815-40-25. Since the Company is an Emerging Growth Company, the ASU is not effective until annual reporting periods beginning after December 15, 2023. Earlier application is permitted. The Company is currently evaluating the impact that this standard will have on its financial statements.

 

There were various other accounting standards and interpretations issued recently, some of which although applicable, are expected to a have a material impact on our financial position, operations or cash flows.

 

NOTE 2 – RECENT BUSINESS ACQUISITION

 

Interactive Concepts

 

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

 

The valuation of intangible assets acquired was not final at the date these condensed consolidated financial statements were issued. Amounts recorded for acquired intangibles and goodwill are provisional. The finalization of the valuation of certain acquired intangibles may result in measurement period adjustments to the fair value of customer relationships and intangibles and corresponding changes to the carrying value of goodwill. As a result of the eight-day period between the acquisition date and March 31, 2021, such adjustments are not expected to materially affect prospective amortization, which will be calculated as if the accounting had been completed at the acquisition date, or have other material effects on the reported results of operations or cash flows.

 

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

 

		(in thousands)
Assets acquired:
Cash		$	1,647
Accounts receivable			1,045
Inventories			191
Property and equipment			37
Total assets acquired			2,920
Accounts payable and accrued expenses			(821	)
Deferred tax liability			(275	)
Total liabilities assumed			(1,096	)
Net tangible assets acquired			1,824
Identifiable intangible assets:
Customer relationships			986
Total intangible assets subject to amortization			986
Goodwill			478
Total net assets acquired		$	3,283
Consideration paid:
Cash		$	1,795
Deferred cash consideration			1,075
Common shares issued			413
Total consideration paid		$	3,283

 

 

Sahara Presentation Systems PLC

 

On September 24, 2020, the Company acquired 100% of the outstanding shares of Sahara Holdings Limited, a private limited company operating under the laws of the UK and all of its subsidiaries, including Sahara Presentation Systems PLC (collectively, “Sahara”). Sahara is a distributor of audio and video software and equipment including the Clevertouch branded product line of interactive touch screens. This strategic acquisition expanded the Company’s geographic footprint, industry verticals served, and enhanced the Company’s technology and product offerings.

 

As consideration for the purchase of Sahara, the Company transferred $73.7 million to the Sellers, including $44.9 million in cash (net of $6.0 million in cash acquired) and $28.9 million in convertible preferred stock. The convertible preferred stock was comprised of 1,586,620 shares of Series B convertible redeemable preferred stock (the “Series B Preferred Stock”) and 1,320,850 shares of Series C convertible redeemable preferred stock (the “Series C Preferred Stock”). The fair value of the preferred shares issued was $16.5 million and $12.4 million for the Series B Preferred Stock and Series C Preferred Stock, respectively. See further discussion of the features of the preferred shares in Note 10.

 

On March 24, 2021 the Company entered into a share redemption and conversion agreement with the former shareholders of Sahara Presentation Systems PLC (“Sahara”) who together own approximately 96% of our Series B and Series C preferred stock. Under the terms of the agreement, we agreed to redeem and purchase from such preferred stockholders on or before June 30, 2021 all of the shares of Series B preferred stock for £11.5 million (or approximately $15.9 million) being the stated or liquidation value of the Series B preferred stock plus (b) accrued dividends from January 1, 2021 to the date of purchase. In addition, the holders of 96% of the Series C preferred stock agreed to convert those shares into 7,.6 million shares of our Class A Common Stock at a conversion price of $1.66 per share. In the event for any reason, we do not complete the conversion and redemption by June 30, 2021, and the Sahara shareholders do not agree to an extension, the agreement will terminate without liability by any party.

 

The consideration transferred to the selling shareholders along with the assets acquired and liabilities assumed were recorded at their estimated fair values at the acquisition date. The excess consideration over the net fair values of the assets acquired and liabilities assumed was recognized as goodwill.

 

The fair value of the deferred revenue at the date of acquisition was determined based on the estimated direct and incremental costs to fulfill the remaining performance obligations associated with the deferred revenue, plus a reasonable profit margin. Accordingly, the carrying amount of deferred revenue at the acquisition date was reduced to its estimated fair value based on the assumptions above which has resulted in and will result in a reduction in revenue that otherwise would have been recognized in periods subsequent to the acquisition date.

 

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

 

		(in thousands)
Assets acquired:
Cash		$	6,049
Accounts receivable			16,066
Inventories			17,257
Prepaid expenses and other current assets			2,277
Property and equipment			183
Total assets acquired			41,832
Accounts payable and accrued expenses			(8,624	)
Deferred revenue			(9,435	)
Deferred tax liability			(8,794	)
Other liabilities			(293	)
Total liabilities assumed			(27,146	)
Net tangible assets acquired			14,686
Identifiable intangible assets:
Customer relationships			39,629
Trademarks			5,319
Technology			3,372
Total intangible assets subject to amortization			48,320
Goodwill			16,774
Total net assets acquired		$	79,780
Consideration paid:
Cash		$	50,903
Preferred shares issued			28,877
Total consideration paid		$	79,780

 

 

The results of operations of Sahara since the acquisition are included in the Condensed Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2021. Revenue and net income attributable to Sahara for the 1^st quarter of 2021 were $22.8 million and $2.0 million, respectively.

 

Pro Forma Financial Results

 

The following unaudited pro forma information reflects our consolidated results of operations for the three months ending March 31, 2020 as if the acquisition of Sahara had taken place on January 1, 2020. The unaudited pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the acquisition actually occurred at the beginning of these periods nor is it necessarily indicative of future results. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated costs savings from synergies or other operational improvements. The nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination are included in the pro forma revenue and net earnings reflected below.

 

		Quarter ended March 31, 2020
		(Unaudited) in thousands As Reported				(Unaudited) in thousands Proforma
Revenues, net		$	5,723			$	23,738
Net loss attributable to common shareholders		$	(1,950	)		$	(3,895	)

 

NOTE 3 – ACCOUNTS RECEIVABLE - TRADE

 

Accounts receivable consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

 

		2021				2020
Accounts receivable – trade		$	23,947			$	21,768
Allowance for doubtful accounts			(408	)			(473	)
Allowance for sales returns and volume rebates			(615	)			(426	)
Accounts receivable - trade, net of allowances		$	22,924			$	20,869

 

 

NOTE 4 – INVENTORIES.

 

Inventories consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

 

		2021				2020
Finished goods		$	22,574			$	20.997
Spare parts			262				265
Reserve for inventory obsolescence			(275	)			(349	)
Inventories, net		$	22,561			$	20,913

 

NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

 

		2021				2020
Prepayments to vendors		$	4,125			$	5,727
Prepaid licenses and other			1,127				339
Unbilled revenue			138				95
Prepaid expenses and other current assets		$	5,390			$	6,161

 

NOTE 6 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

 

		Useful lives		2021				2020
Patents		7 years		$	182			$	182
Customer relationships		10 years			48,034				46,614
Technology		3 years			3,932				3,900
Domain		7 years			14				14
Trademarks		10 years			9,740				9,682
Intangible assets, at cost					61,902				60,392
Accumulated amortization					(7,032	)			(5,235	)
Intangible assets, net of accumulated amortization				$	54,870			$	55,157

 

For the three months ended March 31, 2021 and 2020, the Company recorded amortization expense of $1.7 million and $215 thousand, respectively.

 

NOTE 7 – DEBT

 

The following is a summary of our debt on March 31, 2021 and December 31, 2020 (in thousands):

 

		2021				2020
Debt – Third Parties
Note payable – Lind Global		$	17,475			$	21,085
Paycheck Protection Program			1,008				1,008
Accounts receivable financing – Sallyport Commercial			3,481				4,512
Note payable – STEM Education Holdings			175				175
Total debt			22,139				26,780
Less: Discount and issuance cost – Lind Global			1,539				2,132
Current portion of debt			15,668				16,817
Long-term debt		$	4,932			$	7,831
Total debt		$	22,139			$	26,780

 

 

Debt - Third Parties:

 

Lind Global Marco Fund and Lind Global Asset Management

 

On February 4, 2020, the Company and Lind Global Macro Fund L.P. (“Lind”) entered into a second securities purchase agreement pursuant to which the Company received $750 thousand in exchange for the issuance to Lind of (1) $825 thousand convertible promissory note, payable at an 8% interest rate, compounded monthly, (2) certain shares of restricted Class A common stock valued at $60 thousand, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended February 4, 2020, and (3) a commitment fee of $26.25 thousand. The Note matures over 24 months, with repayment that commenced on August 4, 2020, after which time the Company is obligated to make monthly payments of $45,833 thousand plus interest. Interest accrued during the first six months of the note, after which time the interest payments, including accrued interest is payable monthly in either conversion shares or in cash. The commitment fee in the amount of $26 thousand was paid to Lind, along with legal fees in the amount of $15 thousand. The Company paid Lind $60 thousand for closing fees by issuing 44,557 shares of Class A common stock.

 

On September 21, 2020, the Company and Lind Global Asset Management, LLC (“Lind Global”) entered into a securities purchase agreement (the “Lind SPA”) pursuant to which the Company received $20.0 million in exchange for the issuance to Lind of (1) a $22.0 million convertible promissory note, payable at a 4% interest rate, compounded monthly, (2) 310,399 shares of restricted Class A common stock valued at $900 thousand, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended September 21, 2020, and (3) a commitment fee of $400 thousand. The Note matures over 24 months, with repayment commencing on November 22, 2020, after which time the Company became obligated to make monthly payments of $1.0 million, plus interest. Interest accrued during the first two months of the note, after which time the interest payments, including accrued interest is payable monthly in either conversion shares or in cash. The commitment fee in the amount of $400 thousand was paid to Lind Global, along with legal fees in the amount of $20 thousand. The Company paid Lind $500 thousand for closing fees by issuing 310,399 shares of Class A common stock.

 

During the three months ended March 31, 2021, the Company repaid principal of $3.63 million and interest of $204 thousand by issuing 2.25 million shares Class A common stock with an aggregate value of $5.96 million to Lind and recognized a $2.2 million loss.

 

Paycheck Protection Program Loan

 

On May 22, 2020, the Company received loan proceeds of $1.09 million under the Paycheck Protection Program (“PPP”) established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The loans and accrued interest received under the PPP are forgivable to the extent borrowers use the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains their payroll levels during the designated period prior to which the PPP would otherwise be repayable. The Company used the proceeds for purposes consistent with the PPP. During 2020, the Company applied for forgiveness in the amount of $837 thousand of the original PPP loan and is presently awaiting a decision from the Small Business Administration. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months.

 

Everest Display, Inc.

 

On June 22, 2020, the Company entered into an agreement with Everest Display, Inc., a Taiwan corporation (“EDI”), and EDI’s subsidiary, AMAGIC Holographics, Inc., a California corporation (“AMAGIC”), effective June 11, 2020, pursuant to which $1,000,000 in accounts payable owed by the Company to EDI was settled in exchange for the Company’s issuance of 869,565 shares (the “Shares”) of its Class A common stock to AMAGIC at a $1.15 per share purchase price. The Shares were issued to AMAGIC pursuant to an exemption from registration provided by Rule 506 of Regulation D under Section 4(a)(2) of the Securities Act of 1933, as amended.

 

Accounts Receivable Financing – Sallyport Commercial Finance

 

On September 30, 2020, Boxlight Inc., and EOS EDU LLC. entered into a 12-month term asset-based lending agreement with Sallyport Commercial Finance, LLC (“Sallyport”). Pursuant to the agreement, Sallyport agreed to purchase 90% of the eligible accounts receivable of the Company with a right of recourse back to the Company if the receivables are not collectible. This agreement requires a minimum monthly sales volume of $1,250,000 with a maximum facility limit of $8,000,000. Advances against this agreement accrue interest at the rate of 3.50% in excess of the highest prime rate publicly announced from time to time with a floor of 3.25%. In addition, the Company is required to pay a daily audit fee of $950 per day. The Company granted Sallyport a security interest in all of the assets of Boxlight Inc. and Genesis Collaboration, LLC.

 

 

NOTE 8 – DERIVATIVE LIABILITIES

 

The Company determined that certain warrants to purchase common stock do not satisfy the criteria for classification as equity instruments due to the existence of certain net cash and non-fixed settlement provisions that are not within the sole control of the Company. Conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future. Such warrants are measured at fair value at each reporting date, and the changes in fair value are included in determining net income (loss) for the period. In determining the fair value of the derivative liabilities, the Company used the Black-Scholes option pricing model at March 31, 2021 and December 31, 2020:

 

		March 31, 2021
Common stock issuable upon exercise of warrants			270,000
Market value of common stock on measurement date		$	2.53
Exercise price		$	0.42
Risk free interest rate (1)			0.16	%
Expected life in years			0.75 years
Expected volatility (2)			142	%
Expected dividend yields (3)			0	%

 

		December 31, 2020
Common stock issuable upon exercise of warrants			295,000
Market value of common stock on measurement date		$	1.53
Exercise price		$	0.42
Risk free interest rate (1)			0.13	%
Expected life in years			1 year
Expected volatility (2)			160	%
Expected dividend yields (3)			0	%

 

	(1)	The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.
	(2)	The expected volatility was determined by calculating the volatility of the Company’s peers’ common stock.
	(3)	The Company does not expect to pay a dividend in the foreseeable future.

 

The following table shows the change in the Company’s derivative liabilities rollforward for the three months ended March 31, 2021 and 2020 (in thousands):

 

		Amount
Balance, December 31, 2019		$	147
Change in fair value of derivative liabilities			(29	)
Balance, March 31, 2020		$	118

 

		Amount
Balance, December 31, 2020		$	363
Exercise of warrants			(51	)
Change in fair value of derivative liabilities			265
Balance, March 31, 2021		$	577

 

The change in fair value of derivative liabilities includes losses from exercise price modifications.

 

 

NOTE 9 – INCOME TAXES

 

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

 

		Three Months Ended March, 31				Three Months Ended March, 31
		2021				2020
United States		$	(5,243	)		$	(1,950	)
Foreign			44				-
Total pretax book loss			(5,199	)		$	(1,950	)

 

The Company recorded income tax expense of $21 thousand for the three months ended March 31, 2021.

 

The Company operates in the United States, United Kingdom and other jurisdictions. Income taxes have been provided based upon the tax laws and rates of the countries in which operations are conducted and income is earned.

 

Prior to the Sahara acquisition, the Company had a net deferred tax asset position in the United States, the United Kingdom, and other jurisdictions, primarily driven by the aforementioned net operating losses. The recoverability of these deferred tax assets depends on the Company’s ability to generate taxable income in the jurisdiction to which the carryforward applies. The Company also depends on specific tax provisions in each jurisdiction that could impact utilization. The Company has evaluated both positive and negative evidence as to the ability of its legacy entities in each jurisdiction to generate future taxable income. Based on its long history of cumulative losses in those jurisdictions, we believe it is appropriate to maintain a full valuation allowance on the Company’s net deferred tax asset at March 31, 2021 and December 31, 2020.

 

Due to the Sahara acquisition, the Company has recognized a net deferred tax liability for the acquired entities, primarily driven by acquired intangible assets for which it does not have tax basis in the jurisdictions in which operates (primarily the United Kingdom, the Netherlands, and the United States). The Company does not expect to qualify for any consolidated filing positions in any of these countries, so there is no ability to net the deferred tax liabilities of the Sahara companies against the deferred tax assets of the legacy Boxlight companies.

 

The tax years from 2016 to 2020 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company has not identified any uncertain tax positions at this time.

 

NOTE 10 – EQUITY

 

Preferred Shares

 

The Company’s articles of incorporation, as amended on September 18, 2020, provide that the Company is authorized to issue 50,000,000 shares of preferred stock consisting of: 1) 250,000 shares of non-voting Series A preferred stock, par value of $0.0001 per share; 2) 1,586,620 shares of voting Series B preferred stock, par value of $0.0001 per share; 3) 1,320,850 shares of voting Series C preferred stock, par value of $0.0001 per share; and 4) 46,842,530 shares of “blank check” preferred stock to be designated by the Company’s Board of Directors.

 

Issuance of preferred shares

 

Series A Preferred Stock

 

At the time of the Company’s initial public offering 250,000 shares of the Company’s non-voting convertible Series A preferred stock were issued to Vert Capital for the acquisition of Genesis. All of the Series A preferred stock was convertible into 398,406 shares of Class A common stock. On August 5, 2019 a total of 82,028 shares of Series A preferred stock were converted into a total of 130,721 shares of Class A common stock.

 

 

Series B Preferred Stock and Series C Preferred Stock

 

As discussed in Note 2, on September 25, 2020, in connection with the acquisition of Sahara, the Company issued 1,586,620 shares of Series B Preferred Stock and 1,320,850 shares of Series C Preferred Stock. The Series B Preferred Stock has a stated and liquidation value of $10.00 per share and pays a dividend out of the earnings and profits of the Company at the rate of 8% per annum, payable quarterly. The Series B Preferred Stock is convertible into the Company’s Class A common stock at a conversion price of $1.66 per share which was the closing price of the Company’s Class A common stock on the Nasdaq Stock Market on September 25, 2020 (the “Conversion Price”). Such conversion may occur either (i) at the option of the holder at any time after January 1, 2024 or (ii) automatically upon the Company’s Class A common stock trading at 200% of the Conversion Price for 20 consecutive trading days (based on a volume weighted average price). The Series C Preferred Stock has a stated and liquidation value of $10.00 per share and is convertible into the Company’s Class A common stock at the Conversion Price either (i) at the option of the holder at any time after January 1, 2026 or (ii) automatically upon the Company’s Class A common stock trading at 200% of the Conversion Price for 20 consecutive trading days (based on a volume weighted average price).

 

To the extent not previously converted into the Company’s Class A common stock, the outstanding shares of Series B Preferred Stock shall be redeemable at the option of the holders at any time or from time to time commencing on January 1, 2024, upon thirty (30) days prior written notice to the holders, for a redemption price, payable in cash, equal to the sum of (a) ($10.00) multiplied by the number of shares of Series B Preferred Stock being redeemed (the “Redeemed Shares”), plus (b) all accrued and unpaid dividends, if any, on such Redeemed Shares. The Series C Preferred Stock is also subject to redemption on the same terms commencing January 1, 2026.

 

As disclosed in in Note 2, the aggregate estimated fair value of the Series B and C Preferred Stock of $28.9 million was included as part of the total $79.7 million consideration paid for the purchase of Sahara.

 

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

 

On March 24, 2021 the Company entered into a share redemption and conversion agreement with certain holders of Series B and Series C preferred stock which allows the Company to redeem and purchase each stockholder’s shares of Series B preferred stock on or before June 30, 2021 for the stated or liquidation value of approximately £11.5 million (or approximately $15.9 million) plus accrued dividends from January 1, 2021 to the date of purchase. The same stockholders hold 96% of the Series C preferred stock. Upon redemption, the Series C shares would convert into approximately 7.6 million shares of Class A Common Stock at the stated conversion price of $1.66 per share. In the event for any reason, we do not complete the conversion and redemption by June 30, 2021, and the Sahara shareholders do not agree to an extension, the agreement will terminate without liability by any party.

 

Common Stock

 

The Company’s common stock consists of 200,000,000 shares of Class A voting common stock and 50,000,000 shares of Class B non-voting common stock. Class A and Class B common stock have the same rights except that Class A common stock is entitled to one vote per share while Class B common stock has no voting rights. Upon any public or private sale or disposition by any holder of Class B common stock, such shares of Class B common stock shall automatically convert into shares of Class A common stock. As of March 31, 2021, and December 31, 2020, the Company had 56,786,557 and 53,3436,518 shares of Class A common stock issued and outstanding, respectively. No Class B shares were outstanding at either March 31, 2021 or December 31, 2020.

 

Issuance of common stock

 

Public Offering

 

On July 31, 2020, the Company issued 17,250,000 shares of the Company’s Class A common stock at a public offering price of $2.00 per share. Gross proceeds from the issuances were $34,500,000, including the underwriting overallotment. Net proceeds were $32.0 million after deducting underwriting discounts and offering expenses of $2.5 million.

 

On June 11, 2020, the Company issued 13,333,333 shares of the Company’s Class A common stock at a public offering price of $0.75 per share. In addition, on June 24, 2020 the Company issued an additional 1,999,667 shares of Class A common stock to the underwriter at $0.75 per share. Gross proceeds from the issuances were $11.5 million. Net proceeds were $10.6 million after deducting underwriting discounts and offering expenses of $906 thousand.

 

Debt Conversion

 

During the three months ended March 31, 2021, the Company repaid principal of $3.6 million and interest of $204 thousand by issuing 2.25 million shares Class A common stock to Lind and recognized a $2.2 million loss.

 

 

Accounts Payable and Other Liabilities Conversion

 

During the three months ended March 31, 2021, the Company converted $1.98 million of EDI accounts payable in exchange for 793 thousand shares of Class A common stock with an aggregate value of $1.63 million and recognized a $357 thousand gain.

 

Compensation

 

During the three months ended March 31, 2021 and in accordance with the terms of his employment agreement, Michael Pope, our Chairman and Chief Executive Officer, received 875,000 shares of restricted Class A common stock, which shares remain subject to certain vesting conditions. The shares will vest in substantially equal monthly installments over a period of 12 months.

 

Exercise of stock options

 

During the three months ended March 31, 2021, options to purchase a total of 319,434 shares of Class A common stock were exercised.

 

NOTE 11 – STOCK COMPENSATION

 

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 Company’s 2021 and 2014 Equity Inventive Plans, as amended (the “Equity Incentive Plans”), in the aggregate were 5,000,000 and 116,837 shares, respectively. The 2021 Equity Incentive Plan was approved by the Company’s Board of Directors on April 12, 2021 and is pending shareholder approval. All grants made under the Equity Incentive Plans must be approved by the Company’s Board of Directors prior to issuance.

 

Stock Options

 

Under our Equity Incentive Plan, an employee may receive an award that provides the opportunity in the future to purchase the Company’s shares at the market price of our stock on the date the award is granted (the strike price). The options become exercisable over a range of immediately vested to four-year vesting periods and, if not exercised, expire five years from the grant date, unless stated differently in the relevant option agreements. Stock options have no financial statement effect on the date they are granted but rather are recorded over time as compensation expense. We record compensation expense based on the estimated fair value of the awards which is amortized as compensation expense on a straight-line basis over the vesting period. Accordingly, total expense related to the award is reduced by the fair value of options that are forfeited by employees that leave the Company prior to vesting.

 

The following is a summary of the stock option activities during the three months ended March 31, 2021:

 

		Number of Units				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (in years)
Outstanding, December 31, 2020			4,850,784			$	1.76				3.51
Granted			-				-
Exercised			(319,434	)		$	0.77
Cancelled			(275,625	)		$	1.02
Outstanding, March 31, 2021			4,255,725			$	1.88				2.97
Exercisable, March 31, 2021			2,550,572			$	2.39				2.28

 

The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option pricing model. As of March 31, 2021 and December 31, 2020, the stock options had an intrinsic value of approximately $5.5 million and $2.9 million, respectively.

 

 

Restricted Stock Units

 

Under our Equity Incentive Plans, pursuant to the Equity Incentive Plans, the Company may grant restricted stock units (“RSUs”) to certain employees and non-employee directors. Upon granting the RSUs, the Company records a fixed compensation expense equal to the fair market value of the underlying shares of RSUs granted on a straight-line basis over the requisite services period for the RSUs. Compensation expense related to the RSUs is reduced by the fair value of units that are forfeited by employees that leave the Company prior to vesting. The restricted stock units vest over a range of immediately vested to four-year vesting periods in accordance with the terms of the applicable RSU grant agreement.

 

The following is a summary of the restricted stock activities during the three months ended March 31, 2021.

 

		Number of Units				Weighted Average Grant Date Fair Value
Outstanding, December 31, 2020			2,721,347			$	1.62
Granted			1,005,792			$	2.83
Vested			(243,062	)		$	1.37
Outstanding, March 31, 2021			3,484,077			$	1.99

 

On February 24, 2021, the Company granted an aggregate of 130,547 RSUs to its board members. These RSUs vest ratably over one year and had an aggregated fair value of approximately $374 thousand on the grant date.

 

In addition, on March 20, 2021, the Company granted an aggregate of 875,245 shares of restricted common stock to Michael Pope, CEO pursuant to his employment agreement. These shares were issued pursuant to the 2014 Equity Incentive Plan, vest ratably over one year, are issued monthly as they vest, and had an aggregated fair value of approximately $2.5 million on the grant date.

 

Warrants

 

Following is a summary of the warrant activities during the three months ended March 31, 2021:

 

		Number of Units				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (in years)
Outstanding, December 31, 2020			365,000			$	1.44				1.27
Granted			-
Exercised			(25,000	)			0.42				-
Outstanding, March 31, 2021			340,000			$	1.52				1.04
Exercisable, March 31, 2021			323,750			$	1.55				0.91

 

Stock compensation expense

 

For the three months ended March 31, 2021 and 2020, the Company recorded the following stock compensation in general and administrative expense (in thousands):

 

		2021				2020
Stock options		$	237			$	271
Restricted stock units			439				-
Warrants			1				-
Total stock compensation expense		$	677			$	271

 

As of March 31, 2021, there was approximately $8.0 million of unrecognized compensation expense related to unvested options, restricted stock units, and warrants, which will be amortized over the remaining vesting period. Of that total, approximately $3.5 million is estimated to be recorded as compensation expense in the remaining nine months of 2021.

 

 

NOTE 12 – RELATED PARTY TRANSACTIONS

 

Management Agreement

 

On January 31, 2018, the Company entered into a management agreement (the “Management Agreement”) with an entity owned and controlled by our Chief Executive Officer, President and Director, Michael Pope. The Management Agreement is separate and apart from Mr. Pope’s employment agreement with the Company’s Management Agreement, effective as of the first day of the same month that Mr. Pope’s employment with the Company shall terminate, and for a term of 13 months, Mr. Pope shall provide consulting services to the Company including sourcing and analyzing strategic acquisitions, assisting with financing activities, and other services. As consideration for the services provided, the Company shall pay a management fee equal to 0.375% of the consolidated net revenues of the Company, payable in monthly installments, not to exceed $250,000 in any calendar year. At his option, Mr. Pope may defer payment until the end of each year and receive payment in the form of shares of Class A common stock of the Company.

 

On June 21, 2018, the Company issued a warrant to purchase 270,000 Class A common stock, at an exercise price of $1.20 per share, to Canaan Parish, LLC, an entity wholly owned by Mr. Pope (the “Canaan Warrant”). The Canaan Warrant was issued in exchange for the cancellation of a warrant that had been issued to Vert Capital Corporation, an entity owned by Mr. Pope and Mr. Levin (“Vert”), in November 2014 as compensation for certain advisory services rendered by Vert to the Company. A similar replacement warrant had also been issued to Mr. Levin’s entity, Dynamic Capital, but that warrant has since expired.

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Operating Lease Commitments

 

The Company leases six office building facilities located in Lawrenceville, Georgia, Poulsbo, Washington, Lexington, Massachusetts, Scottsdale, Arizona, Miami, Florida and Utica, New York in the U.S., and two office building facilities in Dartford and Kent in the U.K. for sales, marketing, technical support and service staff. All such facilities are under non-cancelable lease agreements with terms ending in 2023.

 

For the three months ended March 31, 2021 and 2020, aggregate rent expense was $310 thousand and $132 thousand respectively.

 

Purchase Commitments

 

The Company is legally obligated to fulfill certain purchase commitments made to vendors that supply materials used in the Company’s products. As of March 31, 2021 the total amount of such open inventory purchase orders was $49.5 million.

 

NOTE 14 – CUSTOMER AND SUPPLIER CONCENTRATION

 

There were no customers that account for greater than 10% of the Company’s consolidated revenues for the three months ended March 31, 2021.

 

Purchases were concentrated among a few vendors for the three months ended March 31, 2021 and 2020:

 

Vendor		% of Total purchases from the vendor to total purchases for the three months ended March 31, 2021				Accounts payable to the vendor as of March 31, 2021 (in thousands)
1			40	%		$	3,916
2			31	%			5,948

 

Vendor		% of Total purchases from the vendor to total purchases for the three months ended March 31, 2020				Accounts payable (prepayment) to the vendor as of March 31, 2020 (in thousands)
1			36	%		$	1.218

 

The Company believes there are other suppliers that could be substituted should the supplier become unavailable or non-competitive.

 

NOTE 15 – SUBSEQUENT EVENTS

 

Pursuant to the terms of the share purchase agreement, dated March 23, 2021, between our subsidiaries, Sahara Holdings Ltd. and Clevertouch BV and the holders of 100% of the outstanding shares of Interactive Concepts BV, a Belgium company, we issued a total of 142,882 shares of the Company’s Class A common stock in April and May, 2021, as partial consideration for the purchase price.

 

On April 5, 2021, the Company issued 23,574 shares of Class A common stock in lieu of principal and interest payment of notes payable with an aggregate amount of $48,583.

 

On April 21, 2021, the Company issued 601,339 shares of Class A common stock in lieu of principal and interest payment of notes payable with an aggregate amount of $1,057,753.

 

On May 4, 2021, the Company issued 28,179 shares of Class A common stock in lieu of principal and interest payment of notes payable with an aggregate amount of $48,889.

 

 

Item 2. 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 (“MD&A”) 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.

 

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. 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.

 

Overview

 

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

 

To date, we have generated substantially all of our revenue from the sale of our interactive displays and software to the educational market in the United States and Europe.

 

We have also implemented a comprehensive plan to reach profitability both from our core business operations and as a result of making strategic business acquisitions. We have already started to implement this strategy as set forth below. Highlights of our plan include:

 

	●	Integrating products of the acquired companies and cross training our sales reps to increase their offerings.
	●	Hiring new sales representatives with significant industry experience in their respective territories.
	●	Expanding our reseller partner network both in key territories and in new markets, increasing our penetration and reach.

 

Recent Acquisitions

 

On September 24, 2020, the Company acquired Sahara Presentation Systems PLC, a leader in distributed and manufactured AV solutions (“Sahara”). Headquartered in the United Kingdom, Sahara is a leader in distributed AV products and a manufacturer of multi-award-winning touchscreens and digital signage products, including the globally renowned Clevertouch and Sedao brands. In consideration for the acquisition, the Company paid to the shareholders of Sahara a total purchase price of GBP 74.0 million (approximately USD $94.9 million) in the form of GBP 52.0 million (approximately USD $66.7 million) in cash and GBP 22.0 million (approximately USD $28.2 million) in our Series B convertible preferred stock and our Series C convertible preferred stock.

 

 

On March 24, 2021, we entered into a share redemption and conversion agreement with the former Sahara shareholders who own approximately 96% of our Series B and Series C preferred stock. Under the agreement, we agreed to redeem and purchase from such preferred stockholders on or before June 30, 2021 all of the shares of Series B preferred stock for £11.5 million being the stated or liquidation value of the Series B preferred stock plus (b) accrued dividends from January 1, 2021 to the date of purchase. In addition, the holders of 96% of the Series C preferred stock agreed to convert those shares into 7.6 million shares of our Class A Common Stock at a conversion price of $1.66 per share. In the event, for any reason, we do not complete the conversion and redemption by June 30, 2021, and the Sahara shareholders do not agree to an extension, the agreement will terminate without liability by any party.

 

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.

 

Components of our Results of Operations and Financial Condition

 

Revenues

 

Revenues are comprised of hardware products, software services, and professional development revenues less sales discounts.

 

	●	Product revenue. Product revenue is derived from the sale of our interactive projectors, flat panels, peripherals and accessories, along with other third-party products, directly to our customers, as well as through our network of domestic and international distributors.
	●	Professional development revenue. We receive revenue from providing professional development services through third parties and our network of distributors.

 

Cost of revenues

 

Our cost of revenues is comprised of the following:

 

	●	costs to purchase components and finished goods directly;
	●	third-party logistics costs;
	●	inbound and outbound freight costs, and customs and duties charges;

 

 

	●	costs associated with the repair of products under warranty;
	●	write-downs of inventory carrying value to adjust for excess and obsolete inventory and periodic physical inventory counts;
	●	cost of professionals to deliver professional development training related to the use of our products; and

 

We outsource some of our warehouse operations and order fulfillment and purchase products from related and third parties. Our product costs will vary directly with volume and the costs of underlying product components as well as the prices we are able to negotiate with our contract manufacturers. Shipping costs fluctuate with volume as well as with the method of shipping chosen in order to meet customer demand. As a global company with suppliers centered in Asia and customers located worldwide, we have used, and may in the future use, air shipping to deliver our products directly to our customers. Air shipping is more costly than sea or ground shipping or other delivery options. We primarily use air shipping to meet the demand of our products during peak seasons and new product launches.

 

Gross profit and gross profit margin

 

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: general and administrative and research and development.

 

General and administrative. General and administrative expense consists of personnel related costs, which include salaries and stock-based compensation, as well as the costs of professional services, such as accounting and legal, facilities, information technology, depreciation and amortization and other administrative expenses. General and administrative expense may fluctuate as a percentage of revenue, notably in the second and third quarters of our fiscal year when we have historically experienced our highest levels of revenue.

 

Research and development. Research and development expense consist primarily of personnel related costs, prototype and sample costs, design costs and global product certifications mostly for wireless certifications.

 

Other income (expense), net

 

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

 

Income tax expense

 

We are subject to income taxes in the United States, United Kingdom, Mexico, Sweden, Finland, Holland, and Germany where we do business. The United Kingdom, Mexico, Sweden, Finland, Holland, and Germany have a statutory tax rate different from that 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

 

For the three month periods ended March 31, 2021 and 2020

 

Revenues. Total revenues for the three months ended March 31, 2021 were $33.4 million as compared to $5.7 million for the three months ended March 31, 2020, resulting in a 484% increase. Revenues primarily consist of hardware revenue, software revenue, and professional development. The increase in revenues was primarily a result of the acquisition of Sahara Presentation Systems in September 2020 and increased demand for our solutions in both the U.S. and Europe, the Middle East, and Africa.

 

Cost of Revenues. Cost of revenues for the three months ended March 31, 2021 was $25.2 million as compared to $4.1 million for the three months ended March 31, 2020, resulting in an 509% increase. Cost of revenues consists primarily of product cost, freight expenses, customs expense and inventory adjustments. The increase in cost of revenues was associated with the increase in revenues, and also additional customs/freight costs which increased from approximately $700 thousand in Q1 2020 to $1.3 million in Q1 2021 due to supply chain challenges caused by product fulfillment complications attributable to the Covid-19 pandemic.

 

Gross Profit. Gross profit for the three months ended March 31, 2021 was $8.2 million as compared to $1.6 million for the three months ended March 31, 2020. The Gross Profit Margin decreased from 28% in Q1 2020 to 25% in Q1 2021. The gross margin decrease was primarily driven by the effects of customs and freight expenses discussed above, and certain purchase accounting adjustments stemming from the Sahara acquisition and effecting recognized revenues.

 

General and Administrative Expenses. General and administrative (“G&A”) expense for the three months ended March 31, 2021 were $10.0 million and 30% of revenue as compared to $3.9 million and 69% of revenue for the three months ended March 31, 2020. The increase resulted from additional personnel costs associated with the acquired Sahara operations. The reduction in G&A costs as a percentage of revenue was due to the effect of significant cost cutting actions undertaken during 2020 in response to the general depressed economic environment caused by the Covid-19 pandemic.

 

Research and Development Expenses. Research and development expense was $474 thousand and 1% of revenue for the three months ended March 31, 2021 as compared to $316 thousand and 5% of revenue for the three months ended March 31, 2020. Research and development expense primarily consists of costs associated with development of proprietary technology. The increase in research and development expense was primarily driven by an increase in contract services related to software development.

 

Other Income (Expense). Other expense for the three months ended March 31, 2021 was $(3.1) million as compared to income of $713 thousand for the three months ended March 31, 2020. Other expense increased primarily due to an $601 thousand increase in interest expense associated with increased borrowings, and $2.9 million of additional losses recognized upon the settlement of certain debt obligations in exchange for issuance of common shares.

 

Net loss. Net losses were $5.2 million and $1.9 million for the three months ended March 31, 2021 and 2020, respectively. The increase in the net loss was primarily due to the lower gross profit margins, increased interest expense, and losses incurred on the settlement of certain debt obligations in exchange for shares of our common stock.

 

To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding operations, we supplement our condensed consolidated financial statements which are prepared in accordance with GAAP with EBITDA and Adjusted EBITDA, both non-GAAP financial measures of earnings.

 

 

EBITDA represents net income (loss) before income tax expense, interest income, interest expense, depreciation and amortization. Adjusted EBITDA represents EBITDA, plus stock compensation expense, the change in fair value of derivative liabilities, purchase accounting impact of fair valuing inventory and deferred revenue, and non-cash losses associated with debt settlement. Our management uses EBITDA and Adjusted EBITDA as financial measures to evaluate the profitability and efficiency of our business model, and to assess the strength of the underlying operations of our business. These adjustments, and the non-GAAP financial measure that is derived from them, provide supplemental information to analyze our operations between periods and over time. Investors should consider 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 three months ended

March 31, 2021 and 2020 to EBITDA and adjusted EBITDA

 

(in thousands)		March 31, 2021				March 31, 2020
Net loss		$	(5,167	)		$	(1,950	)
Depreciation and amortization			1,754				219
Interest expense			1,018				459
Income tax benefit			21				-
EBITDA		$	(2,374	)		$	(1,272	)
Stock-based compensation expense			677				271
Change in fair value of derivative liabilities			265				(29	)
Purchase accounting impact of fair valuing inventory			15				6
Purchase accounting impact of fair valuing deferred revenue			807				-
Net loss on settlement of Lind debt in stock			2,203				347
Adjusted EBITDA		$	1,593			$	(677	)

 

Discussion of Effect of Seasonality on Financial Condition

 

Certain accounts on our financial statements are subject to seasonal fluctuations. As our business and revenues grow, we expect these seasonal trends to be reduced. The bulk of our products are shipped to our educational customers prior to the beginning of the school year, usually in between June and 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.

 

Due to travel restrictions and concerns for the safety for our employees during the ongoing COVID-19 pandemic, we have reduced face-to-face meetings with customers and attendance at tradeshow events. We are currently assessing the impact these changes will have on our peak season sales. Our initial assessment is that funding priority will be given to initiatives that provide for continuity of learning which may result in lower priority on total learning solution sales including hardware, software and teacher training.

 

Liquidity and Capital Resources

 

As of March 31, 2021, we had cash and cash equivalents of $10.0 million and a working capital balance of $21.8 million. This financial position represents a significant improvement from a year ago at March 31, 2020 when we had a working capital deficit of $(7.1) million and $612 thousand of cash and cash equivalents.

 

For the three months ended March 31, 2021 and 2020, we had net cash used in operating activities of $1.6 million and $890 thousand, respectively, net cash used by investing activities of $194 thousand and $0 respectively, and net cash (used in) provided by financing activities of $(747) thousand and $434 thousand, respectively. We had accounts receivable net of allowances of $22.9 million and $4.3 million as of March 31, 2021 and year ended December 31, 2020, respectively.

 

 

In addition to the cash flows generated by our ongoing operating activities we financed our operations during 2021 with a new $20.0 million tranche of debt funded by our primary lender, and from a pre-existing accounts receivable financing arrangement with another lender who purchases 85% of the eligible accounts receivable of the Company, for up to $6.0 million, with the right of recourse. Our accounts receivable and our ability to borrow against accounts receivable provides us with 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 our business.

 

In the current COVID-19 pandemic environment, the availability of capital has been significantly reduced and the cost of capital has increased. Increasing our capital through equity issuance at this time could cause significant dilution to our existing stockholders as a result of diminished stock value due to market volatility and uncertainty arising from the COVID-19 pandemic. However, we are confident that the Company will be able to manage through the current challenges in the equity and debt finance markets by managing payment terms with customers and vendors.

 

Our 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. We have limited credit available from our major vendors and are required to prepay for the majority of our inventory purchases, which further constrains our cash liquidity.

 

Recent Financing

 

On September 21, 2020, we and Lind Global Asset Management LLC (“Lind Global”) entered into a securities purchase agreement (the “Lind Global SPA”), pursuant to which Lind Global purchased from the Company a $22,000,000 secured convertible note (the “Convertible Note”) in exchange for payment to us of $20,000,000 (the “Funding”). Under the terms of the Lind Global SPA, in addition to the issuance of the Convertible Note, the Company paid to Lind (i) a commitment fee of $400,000 and (ii) a bonus fee (the “Bonus Payment”) of $500,000 payable in shares of Class A common stock of the Company, with the per share price of the Bonus Payment shares calculated based on the 20-day VWAP of the Class A Common Stock prior to closing. The Convertible Note has a term of 24-months, bears a 4% interest rate (0% interest so long as the Class A Common Stock trades at $3.50 or more per share), is repayable in 22 equal instalments commencing 60 days after the Funding and, at the option of the Company, may be repaid in either cash or Class A common stock. Class A common stock issuable to Lind Global in conjunction with the Bonus Payment and the Convertible Note was registered pursuant to a shelf takedown on the Company’s existing shelf registration statement on Form S-3 (SEC File No. 333-239939).

 

In conjunction with our entry into the Lind Global SPA and the issuance of the Convertible Note, on September 21, 2020, the Company and Lind Global Macro Fund, LP, an affiliate of Lind Global(“Lind”), entered into a third amended and restated security agreement (the “Third A&R Security Agreement”) for purposes of amending and restating a prior security agreement, dated as of February 4, 2020, between the Company and Lind in order to incorporate the Lind Global SPA and the Convertible Note therein. In addition, on September 21, 2020, the Company, Sallyport Commercial Finance, LLC (“Sallyport”), as first lien creditor, and Lind and Lind Global, as second lien creditors, entered into a third amended and restated intercreditor agreement (the “Third A&R Intercreditor Agreement”) for purposes of amending and restating the second amended and restated intercreditor agreement, dated as of February 4, 2020, between the Company, Sallyport and Lind, in order to (i) incorporate Lind Global as a second lien creditor and (ii) reaffirm and confirm the relative priority of each creditor’s respective security interests in the Company’s assets, among other matters.

 

On July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group, LLC, a Delaware limited liability company (“Maxim”), pursuant to which Maxim, as representative of the underwriters, agreed to underwrite the public offering (the “Offering”) of up to 15,000,00 shares of the Company’s Class A common stock, at a public offering price of $2.00 per share, in addition to an overallotment option (the “Overallotment Option”) of 2,250,000 shares of Common Stock. The Offering closed on July 31, 2020, with the sale of all 17,250,000 shares of the Company’s Common Stock, including the Overallotment Option, for gross proceeds of $34,500,000. Maxim acted as sole book-running manager, National Securities Corporation acted as a co-manager for the Offering, and A.G.P./Alliance Global Partners (“A.G.P.”) acted as financial advisor. As compensation for underwriting the Offering, the underwriters received an underwriting discount of 7%, equaling approximately $2,415,000, in addition to $60,000 in expenses. A.G.P.’s compensation was paid out of the underwriting discount. The Offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (SEC File No. 333-239939) (the “Registration Statement”) and the related base prospectus included therein, as supplemented by the prospectus supplement dated July 28, 2020 (the “Preliminary Prospectus”) and the final prospectus supplement, filed July 29, 2020 (the “Final Prospectus” and collectively with the Preliminary Prospectus, the “Prospectus”)

 

 

As approved by the Company’s board of directors on June 22, 2020, the Company entered into an agreement with Everest Display, Inc., a Taiwan corporation (“EDI”), and EDI’s subsidiary, AMAGIC Holographics, Inc., a California corporation (“AMAGIC”), effective June 11, 2020, pursuant to which EDI forgave $1,000,000 in accounts payable owed by the Company to EDI in exchange for the Company’s issuance of 869,565 shares (the “Shares”) of its Class A common stock, par value $0.0001 per share, to AMAGIC at a $1.15 per share purchase price. The Shares were issued to AMAGIC pursuant to an exemption from registration provided by Rule 506 of Regulation D under Section 4(a)(2) of the Securities Act of 1933, as amended.

 

On June 8, 2020, the Company entered into an underwriting agreement (the “June Underwriting Agreement”) with Maxim pursuant to which Maxim agreed to underwrite the public offering (the “June Offering”) of 13,333,333 shares (the “Shares”) of the Company’s Class A common stock at a public offering price of $0.75 per share. National acted as co-manager of the June Offering. The June Offering closed on June 11, 2020, with the Company’s sale of the Shares for gross proceeds of $10,000,000. In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 2,000,000 shares of Class A common stock at the public offering price less discounts and commissions (the “June Over-Allotment Option”). The June Over-Allotment Option was exercised in full on June 24, 2020, for additional proceeds of $1,500,000, through the sale of an additional 1,999,667 shares of Class A common stock. Maxim acted as sole-bookrunner and National acted as co-manager for the Offering. Gross proceeds, before underwriting discounts and commissions and estimated offering expenses, totaled $11.5 million. As compensation for underwriting the Offering, Maxim and National together received an underwriting discount of 7% of the Offering and the Over-Allotment Option and were reimbursed for up to $85,000 in underwriting expenses. The June Offering was conducted pursuant to the Company’s registration statement on Form S-1 (SEC File No. 333-238634) previously filed with and subsequently declared effective by the SEC.

 

On February 4, 2020, we and Lind Global Marco Fund, LP (the “Investor” or “Lind”) entered into a purchase agreement (the “2020 SPA”) pursuant to which we received $750,000 in exchange for the issuance to Lind of (1) an $825,000 convertible promissory note, payable at an 8% interest rate, compounded monthly (the “2020 Note”), (2) certain shares of restricted Company Class A common stock valued at $60,000, calculated based on the 20-day volume average weighted price of the Class A common stock for the period ended February 4, 2020, and (3) a commitment fee of $26,250. The Note matures over 24 months, with repayment commencing on August 4, 2020, after which time the Company will be obligated to make monthly payments of $45,833 (the “Monthly Payments”), plus interest. Interest payments owed under the 2020 Note (the “Interest Payments”) began accruing on the one-month anniversary of the issuance of the Note, however such accrued Interest Payments, which may be paid in either conversion shares or cash, did not become until after the six month anniversary of the Note’s issuance. We may make the Monthly Payments and any Interest Payments in shares of the Company’s Class A common stock so long as such shares are either registered for resale under the Securities Act of 1933, as amended, or may be sold without restriction pursuant to Rule 144 thereunder. As such, the Monthly Payments may be subject to reduction in any month by any amounts converted into the Company’s Class A common stock. In connection with this transaction the Company and Lind amended and restated the $4,400,000 note and the $1,375,000 note referred to below that we issued to Lind in March and December 2019, respectively, to provide that we would not make any payments under the Lind notes in the form of Class A Common Stock if such payments could cause the Company to violate any rules of the Nasdaq Capital Market. In addition, on February 4, 2020, we and Lind entered into a second amended and restated security agreement for purposes of amending and restating a prior security agreement, dated as of December 13, 2019. Also, Sallyport Commercial Finance, LLC, as first lien creditor, and Lind, as second lien creditor, entered into a second amended and restated intercreditor agreement for purposes of amending and restating the intercreditor agreement between the parties, dated as of December 13, 2019, in order to reaffirm and confirm the relative priority of each creditor’s respective security interests in our assets.

 

Off Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations or liquidity and capital resources.

 

 

Critical Accounting Policies and Estimates

 

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

 

Our significant accounting policies are discussed in the notes to the unaudited condensed consolidated financial statements. 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.	Business acquisitions
	3.	Goodwill and Intangible assets
	4.	Share-based compensation expense

 

 

Emerging Growth Company

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of 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.

 

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 3. Quantitative and Qualitative Disclosure About Market Risk

 

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

 

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures.

 

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report (“Evaluation Date”), pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective due to material weaknesses described in our 2020 Annual Report on Form 10-K.

 

Notwithstanding the existence of the material weaknesses, we believe that the consolidated financial statements included in this report fairly present in accordance with U.S. GAAP, in all material respects, our financial condition, results of operations and cash flows for the periods presented in this report.

 

Limitations on Effectiveness of Controls.

 

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

 

 

(b) Changes in internal controls over financial reporting.

 

There were no changes in our internal control over financial reporting that occurred during the three-month period ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS 

 

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

 

For additional risk factors pertinent our business please refer to the Part I Item 1A of the Company’s 2020 Annual Report on Form 10-K, which is incorporated by reference herein.

 

ITEM 2. RECENT SALES OF UNREGISTERED EQUITY SECURITIES

 

On January 29, 2021, pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D thereunder, the Company issued 793,375 shares of Class A common stock to Amagic Holographics Inc., an affiliate of K Laser Technology Inc. (“K Laser”) in exchange for cancellation of $1,983,436 in accounts payable owed by the Company to K Laser’s affiliate.

 

On March 24, 2021 we entered into a share redemption and conversion agreement with the former Sahara Presentation Systems PLC (“Sahara”) shareholders. Under the agreement, the Company has an option to redeem and purchase from such preferred stockholders on or before June 30, 2021 all of the shares of Series B preferred stock for £11,508,495 (or approximately $15,876,084) being the stated or liquidation value of the Series B preferred stock plus (b) accrued dividends from January 1, 2021 to the date of purchase. In addition, the holders of 96% of the Series C preferred stock agreed to convert those shares into 7,630,699 shares of our Class A Common Stock at a conversion price of $1.66 per share. In the event that we do not complete the conversion and redemption by June 30, 2021, and the Sahara shareholders do not agree to an extension, the redemption and conversion agreement will terminate without liability by any party.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

Item 6. Exhibits

 

The following exhibits are filed or furnished with this report:

 

Exhibit No.		Description of Exhibit
10.1		Share Purchase Agreement, dated March 19, 2021, between Sahara Holdings Ltd., Clevertouch BV and Karel Callens.
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
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	BOXLIGHT CORPORATION
May 13, 2021	By:	/s/ Michael Pope
		Michael Pope
		Chief Executive Officer

 

May 13, 2021	By:	/s/ PATRICK FOLEY
		Patrick Foley
		Chief Financial Officer (Principal Financial and Accounting Officer)

 

 

Exhibit 10.1

 

Dated 19   March 2021

 

SHARE PURCHASE AGREEMENT

 

relating to

 

THE SALE OF THE ENTIRE ISSUED SHARE CAPITAL OF INTERACTIVE CONCEPTS BV

 

KAREL CALLENS

 

and

 

CLEVERTOUCH B.V.

 

 

CONTENTS

 

1	INTERPRETATION	1
2	SALE AND PURCHASE	7
3	PURCHASE PRICE	8
4	CLOSING	9
5	LEAKAGE	11
6	WARRANTIES	13
7	LIMITATIONS ON CLAIMS	13
8	CLAIMS	15
9	SPECIFIC INDEMNITIES	16
10	SUBSEQUENT SALE OF THE SALE SHARES	17
11	RESTRICTIONS ON THE SELLER	17
12	CONFIDENTIALITY AND ANNOUNCEMENTS	19
13	LIQUIDATED DAMAGES	21
14	NO CLAIMS AGAINST THE COMPANY	21
15	FURTHER ASSURANCE	22
16	ASSIGNMENT	22
17	ENTIRE AGREEMENT	23
18	VARIATION AND WAIVER	23
19	COSTS	23
20	NOTICES	23
21	INTEREST	25
22	SEVERANCE	25
23	AGREEMENT SURVIVES CLOSING	25
24	SUCCESSORS	25
25	THIRD PARTY RIGHTS	26
26	COUNTERPARTS	26
27	RIGHTS AND REMEDIES	26
28	INADEQUACY OF DAMAGES	26
29	LANGUAGE	26
30	GOVERNING LAW AND JURISDICTION	26
SCHEDULE 1 - PARTICULARS OF THE COMPANY		27
SCHEDULE 2 - WARRANTIES		28
Part 1 - General warranties		28
Part 2 - Tax Warranties		47
SCHEDULE 3 - PARTICULARS OF THE LEASEHOLD PROPERTY		50
SCHEDULE 4 - DISCLOSURE SCHEDULE		51
SCHEDULE 5 – TAX COVENANT		53
SCHEDULE 6 – MANAGEMENT AGREEMENT		54

 

 

AGREEMENT DATED 19 MARCH 2021.

 

BETWEEN

 

(1)	KAREL CALLENS, residing at Tempelierstraat 14, 8570 Anzegem, Belgium (Seller)
(2)	CLEVERTOUCH B.V., incorporated and registered in the Netherlands with company number 76186458 whose registered office is at Office Room 13, The Mixer, Landdrostlaan 51 at Apeldoorn, the Netherlands (Buyer)
(3)	SAHARA HOLDINGS LIMITED, incorporated and existing under the laws of England and Wales with company number 03947832 whose registered office is at Europa House Littlebrook Dc1, Shield Road, Dartford, Kent, England, DA1 5UR (Parent)

 

The Seller, the Buyer and the Parent are hereinafter jointly referred to as the Parties or each a Party.

 

RECITALS

 

(A)	The Company is Interactive Concepts BV incorporated in Belgium.
(B)	The Company has an issued share capital of EUR 30,000 divided into 300 registered shares without nominal value.
(C)	Further particulars of the Company at the date of this Agreement are set out in Schedule 1.
(D)	The Seller is the owner of the legal and beneficial title to the Sale Shares.
(E)	The Seller has agreed to sell and the Buyer has agreed to buy the Sale Shares subject to the terms and conditions of this Agreement.

 

IT IS HEREBY AGREED

 

1	Interpretation
	The definitions and rules of interpretation in this Clause apply in this Agreement.
1.1	Definitions:

 

Accounts	the financial statements of the Company as at and to the Accounts Date comprising the individual accounts of the Company, including the balance sheet, profit and loss account together with the notes on them (copies of which are attached to the Disclosure Schedule).
Accounts Date	31 December 2020.
Boxlight	Boxlight Corporation a United States corporation organized under the laws of the State of Nevada, whose registered office is at 1045 Progress Circle, Lawrenceville, Georgia 30043, being the ultimate parent company of the Buyer.
Business	the business of the Company carried out at Closing, namely the distribution of audio, visual and software solutions in Belgium.
Business Day	a day other than a Saturday, Sunday or public holiday in England when banks in London are open for business.

 

 

Buyer’s Lawyers	Cripps LLP of Number 22 Mount Ephraim, Tunbridge Wells, Kent, TN4 8AS, United Kingdom.
Carve-Out	has the meaning given in Clause 4.3.6.
Claim	a claim for breach of any of the Warranties.
Class A Common Stock	means the shares of the Class A voting common stock of Boxlight, par value $0.0001 per share.
Clause	means any clause in this Agreement.
Closing	the closing of the sale and purchase of the Sale Shares in accordance with this Agreement.
Closing Date	has the meaning given in Clause 4.2.
Company	Interactive Concepts BV, a company incorporated and registered in Belgium with the Crossroads Bank for Enterprises under number 0822607312 whose registered office is at Tempeliersstraat 14, 8570 Anzegem, further details of which are set out in Schedule 1.
Connected	in relation to a person, (a) such person’s spouse, and (b) any other person related to the first person or the first persons’ spouse within the third degree, (c) any physical person residing with the first person, and (d) any legal persons in which the first person and the persons set forth under (a) to (c) above or their respective successors directly or indirectly have an interest in any capacity including as provider of finance, director, manager, partner or shareholder of any company or any other legal entity, or as an employee, consultant, agent or subcontractor of any individual, company or other legal entity.
Consents	has the meaning given in paragraph 6.1 of Part 1 of Schedule 2.
Control	in relation to a body corporate, the power of a person to secure that the affairs of the body corporate are conducted in accordance with the wishes of that person either:

 

	(a)	by means of the holding of shares, or the possession of voting power, in or in relation to that or any other body corporate; or
	(b)	by virtue of any powers conferred by the constitutional or corporate documents, or any other document, regulating that or any other body corporate;

 

	and a Change of Control occurs if a person who controls any body corporate ceases to do so or if another person acquires control of it.
Current Use	has the meaning given in paragraph 22.1 of Part 1 of Schedule 2.
Databases	has the meaning given in paragraph 19.1 of Part 1 of Schedule 2.
Director	each person who is a director of the Company as set out in Schedule 1.

 

 

Disclosed	fairly disclosed (in or under the Disclosure Schedule and/or this Agreement (including its Schedules), in a clear and unambiguous manner, and in sufficient detail in order to allow a normally prudent and diligent buyer or its professional advisors to assess the significance and scope of the matter disclosed and its impact on the Company, and provided that there is no omission from the information disclosed that would prevent the significance or impact of the information disclosed to be apparent to the Buyer.
Disclosure Schedule	Schedule 4 to this Agreement.
EHS Laws	has the meaning given in paragraph 17.1 of Part 1 of Schedule 2.
EHS Matters	has the meaning given in paragraph 17.1 of Part 1 of Schedule 2.
EHS Permits	has the meaning given in paragraph 17.1 of Part 1 of Schedule 2.
Employee	has the meaning given in paragraph 21.1 of Part 1 of Schedule 2.
Employment Legislation	has the meaning given in paragraph 21.1 of Part 1 of Schedule 2.
Encumbrance	any interest or equity of any person (including any right to acquire, option or right of pre-emption) or any mortgage, charge, pledge, lien, assignment, hypothecation, security interest, title retention or any other security agreement or arrangement.
Environment	has the meaning given in paragraph 17.1 of Part 1 of Schedule 2.
Financial Facilities	has the meaning given in paragraph 13.1.2 of Part 1 of Schedule 2.
First Deferred Consideration	means the sum of EUR 450,000.
Fundamental Warranties	has the meaning given in Clause 7.8.2.
Group	in relation to a company (wherever incorporated), that company, any company of which it is a Subsidiary from time to time (its holding company) and any other Subsidiaries from time to time of that company or its holding company. Each company in a Group is a member of the Group.
Harm	has the meaning given in paragraph 17.1 of Part 1 of Schedule 2.
Hazardous Substances	has the meaning given in paragraph 17.1 of Part 1 of Schedule 2.
Indemnity Claim	a claim for breach of any of the indemnities in Clause 9.
Initial Cash Consideration	means the sum of EUR 1,502,981.

 

 

Initial Consideration Shares	means that number of shares of Class A Common Stock as shall be determined by dividing (a) EUR 350,000, by (b) 100% of the closing price per share of Boxlight’s Class A Common Stock, as traded in the United States on Nasdaq on the trading day which shall be five Business Days following Closing, to be allotted, credited as fully paid, to the Seller, in accordance with Clause 4.4.2.
Intellectual Property Rights	has the meaning given in paragraph 18.1 of Part 1 of Schedule 2.
IT Contracts	has the meaning given in paragraph 19.1 of Part 1 of Schedule 2.
IT System	has the meaning given paragraph 19.1 of Part 1 of Schedule 2.
Lease	has the meaning given in paragraph 22.1 of Part 1 of Schedule 2.
Leasehold Property	has the meaning given in paragraph 22.1 of Part 1 of Schedule 2.
Lease Sums	has the meaning given in paragraph 22.9 of Part 1 of Schedule 2.
Loss(es)	any expense, cost, penalty, payment, loss of value or income, or damage on a euro-for-euro basis incurred, borne or suffered by the Company or the Buyer in connection with a breach of the Warranties (i.e. any Warranty not being true, complete correct and/or not misleading to the extent that it omits to state a fact that should have been stated for the Warranty not to be misleading) or any of the undertakings and/or obligations of the Seller provided for in this agreement, but excluding reputational damages.
Management Agreement	has the meaning given in Clause 4.3.5.
Material Contract	has the meaning given in paragraph 11.1 of Part 1 of Schedule 2.
Material Counterparty	has the meaning given in paragraph 10.1 of Part 1 of Schedule 2.
Nasdaq	means the Nasdaq Capital Market securities exchange of the Nasdaq Stock Market.
Policies	has the meaning given in paragraph 7.2 of Part 1 of Schedule 2.
Proceedings	has the meaning given in paragraph 8.1 of Part 1 of Schedule 2.
Prospective Customer	has the meaning given in Clause 11.1.
Purchase Price	the purchase price for the Sale Shares to be paid by the Buyer to the Seller in accordance with Clause 3.
Records	has the meaning given in paragraph 24.1 of Part 1 of Schedule 2.

 

 

Restricted Business	has the meaning given in Clause 11.1.
Restricted Customer	has the meaning given in Clause 11.1.
Restricted Person	has the meaning given in Clause 11.1.
Sale Shares	the 300 registered shares without nominal value in the Company, all of which are fully paid.
Second Deferred Consideration	means the sum of EUR 450,000.
Seller’s Lawyers	Ms. Nathalie Blauwblomme at Uniqum Advocaten of Beneluxpark 15, 8500 Kortrijk, [email protected].
Schedule	means any schedule to this Agreement.
Software	has the meaning given in paragraph 19.1 of Part 1 of Schedule 2.
Source Code	has the meaning given in paragraph 19.1 of Part 1 of Schedule 2.
Subsidiary	in relation to a company wherever incorporated (a holding company), any company in which the holding company (or persons acting on its behalf) directly or indirectly holds or controls either:

 

	(a)	a majority of the voting rights exercisable at shareholder meetings of that company; or
	(b)	the right to appoint or remove a majority of its board of directors,

 

	and any company which is a Subsidiary of another company is also a Subsidiary of that company’s holding company. Unless the context otherwise requires, the application of the definition of Subsidiary to any company at any time shall apply to the company as it is at that time.
“Tax”	all forms of taxation and statutory, governmental, state, federal, provincial, local, government or municipal charges, duties, imposts, contributions, levies, withholdings or other liabilities in the nature of taxation wherever chargeable and whether of Belgium or any other jurisdiction (including, for the avoidance of doubt, social security contributions in Belgium and corresponding obligations elsewhere) and any penalty, fine, surcharge, interest, charges or costs relating to it, including (but without limitation):

 

(a)

any amount of tax which is the subject of or results in a charge, security or right to sell imposed by, or provided by law to, a Tax Authority over any of the assets of the Company; and

 

 

(b)

all interest, penalties, surcharges, fines and other charges relating to any of the above or to a failure to make any return, comply with any reporting requirements or supply any information in connection with any of the above or any failure to register, deregister or give any notification in respect of any of them and the cost of removing any charge or other encumbrance imposed by a Tax Authority.

 

“Tax Authority”	means any government, state or municipality or any local, state, federal or other fiscal, revenue, customs or excise authority, body or official anywhere in the world having functions in relation to Tax (including, for the avoidance of doubt, the Federal or Flemish tax administration).
Tax Covenant	the tax covenant set out in Schedule 5.
Tax Savings	has the meaning given in Clause 7.11.
Tax Warranties	the warranties set out in Part 2 of Schedule 2.
Transaction	the transaction contemplated by this Agreement or any part of that transaction.
Transaction Documents	this Agreement, and any other document to be entered into pursuant to this Agreement in connection with the Transaction.
Usual Business Hours	has the meaning given in Clause 20.6.
Virus	has the meaning given in Paragraph 19.1 of Part 1 of Schedule 2.
Warranties	the warranties given pursuant to Clause 6.1 and set out in Schedule 2.

 

1.2	Clause, Schedule and paragraph headings shall not affect the interpretation of this Agreement.
1.3	References to Clauses and Schedules are to the Clauses of and Schedules to this Agreement and references to paragraphs are to paragraphs of the relevant Schedule.
1.4	The Schedules form part of this Agreement and shall have effect as if set out in full in the body of this Agreement. Any reference to this Agreement includes the Schedules.
1.5	A reference to this Agreement or to any other agreement or document referred to in this Agreement is a reference to this Agreement or such other agreement or document as varied or novated (in each case, other than in breach of the provisions of this Agreement) from time to time.
1.6	Unless the context otherwise requires, words in the singular shall include the plural and the plural shall include the singular.
1.7	A person includes a natural person, a corporate or unincorporated body (whether or not having separate legal personality) and that person’s personal representatives, successors and permitted assigns.

 

 

1.8	This Agreement shall be binding on and ensure to the benefit of, the parties to this Agreement and their respective successors and permitted transferee and references to a party shall include that party’s personal representatives, successors and permitted transferees.
1.9	A reference to a company shall include any company, corporation or other body corporate, wherever and however incorporated or established.
1.10	A reference to writing or written includes email (unless otherwise expressly provided in this Agreement).
1.11	Any words following the terms including, include, in particular, for example or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms.
1.12	Unless otherwise provided, a reference to a law is a reference to it as amended, extended or re-enacted from time to time provided that, as between the parties, no such amendment, extension or re-enactment made after the date of this Agreement shall apply for the purposes of this Agreement to the extent that it would impose any new or extended obligation, liability or restriction on, or otherwise adversely affect the rights of, any party.
1.13	A reference to a law shall include all subordinate legislation made from time to time under that law.
1.14	Any obligation on a party not to do something includes an obligation not to allow that thing to be done.
1.15	References to times of day are, unless the context otherwise requires, to London time and references to a day are to a period of 24 hours running from midnight on the previous day.
1.16	Any amount expressed to be in Euros shall, to the extent that it requires, in whole or in part, to be expressed in any other currency in order to give full effect to this Agreement, be deemed for that purpose to have been converted into the relevant currency immediately before the close of business on the date of this Agreement (or, if that is not a Business Day, the Business Day immediately following it). Subject to any applicable legal requirements governing conversions into that currency, the rate of exchange shall be Barclays Bank Plc’s spot rate for the purchase of that currency with Euros at the time of the deemed conversion.

 

2	Sale and purchase
2.1	On the terms of this Agreement, the Seller shall sell and the Buyer shall buy, with effect from Closing, the Sale Shares with full title guarantee free from all Encumbrances and together with all rights that attach (or may in the future attach) to the Sale Shares including, in particular, the right to receive all dividends and distributions declared, made or paid on or after the Closing Date.
2.2	The Seller covenants with the Buyer that:

 

	2.2.1	it has the right to sell the Sale Shares on the terms set out in this Agreement;
	2.2.2	it shall take all further actions as required to give the Buyer the full legal and beneficial title to the Sale Shares;
	2.2.3	it sells the Sale Shares free from all Encumbrances;

 

 

	2.2.4	there is no right to require the Company to issue any share capital or create an Encumbrance affecting any unissued shares or debentures or other unissued securities of the Company; and
	2.2.5	no commitment has been given to create an Encumbrance affecting the Sale Shares (or any unissued shares or debentures or other unissued securities of the Company), or for the Company to issue any share capital and no person has claimed any rights in connection with any of those things.

 

2.3	The Buyer is not obliged to complete the purchase of any of the Sale Shares unless the purchase of all the Sale Shares is completed simultaneously.
3	Purchase Price
3.1	The Purchase Price for the Sale Shares shall be the aggregate of the following payments:

 

	3.1.1	the Initial Cash Consideration, to be paid in cash on Closing to the Seller in accordance with Clause 3.3; plus
	3.1.2	the Initial Consideration Shares, to be issued to the Seller in accordance with Clause 4.4.2; plus
	3.1.3	the First Deferred Consideration, to be paid in cash to the Seller on the date falling 90 days after the Closing Date; plus
	3.1.4	the Second Deferred Consideration, to be paid in cash to the Seller, subject to and in accordance with the Clause 3.4.

 

3.2	The Purchase Price shall be deemed to be reduced by the amount of any payment made to the Buyer for each and any:

 

	3.2.1	Claim; or
	3.2.2	Indemnity Claim.

 

3.3	All payments to be made to the Seller under this Agreement shall be made in Euros by electronic transfer of immediately available funds to the account of the Seller with number BE15 0634 9185 7430 GKCC BEBB (Belfius).
3.4	The Second Deferred Consideration shall be paid by the Buyer in three equal tranches of EUR 150,000, whereby the first tranche will be payable on 31 December 2021, the second tranche will be payable on 31 December 2022 and the third tranche will be payable on 31 December 2023.
3.5	The Buyer shall be entitled (at its sole discretion) to withhold the amount of any claim it has against the Seller under this agreement from the First Deferred Consideration and/or Second Deferred Consideration and to treat its obligation to make such payment as being suspended pro tanto by the amount so withheld.
3.6	The Parent guarantees the performance of the payment obligations of the Buyer in relation to the First Deferred Consideration and the Second Deferred Consideration, as well as the obligations of the Buyer in relation to the issuance of the Initial Consideration Shares, provided that (i) the Buyer fails to perform or satisfy its payment obligations in relation to the payment of the First Deferred Consideration and/or the Second Deferred Consideration for thirty (30) calendar days following a notice of default sent by the Seller in accordance with Clause 20 and (ii) the Seller has complied with all its obligations under this Agreement. Any obligation of the Parent under this Clause 3.6 shall be subject to any exceptions and defenses the Buyer has under this Agreement and the applicable laws. The obligations of the Parent pursuant to this Agreement are limited to the obligations set out in this Clause 3.6.

 

 

4	Closing
4.1	Closing shall take place on the Closing Date at such place or time as agreed in writing by the Seller and the Buyer.
4.2	In this Agreement, Closing Date means the date of this Agreement.
4.3	At Closing, the Seller shall:

 

	4.3.1	transfer the Sale Shares in such form as is necessary for the Buyer to acquire legal ownership of the Sale Shares in accordance with the laws of Belgium;
	4.3.2	deliver to the Buyer the original copy of the Company’s share register;
	4.3.3	deliver to the Buyer any documents necessary to transfer the Sale Shares in accordance with Clause 4.3.1 and any other documents referred to in this Agreement as being required to be delivered by the Seller;
	4.3.4	deliver the written resignations, in agreed form, of the Seller as the statutory director (“statutair bestuurder”) of the Company, and his successors, resigning from their offices with the Company, without prejudice to Clause 4.5.2;
	4.3.5	deliver two (2) originals of the management agreement in the form as attached in Schedule 6 (“Management Agreement”) and the representative letter duly signed and initialled by the Seller on the Closing Date; and
	4.3.6	deliver evidence, to the satisfaction of the Buyer, of the completion of a transfer and assignment of the pension, life and invalidity insurances with respect to the Seller with KBC Verzekeringen, (“Carve-Out”) whereby the Company shall have no further liability in relation to such policies and the Carve-Out and the Seller shall irrevocably and unconditionally (a) assume full and exclusive responsibility for such insurance policies and (b) waive and release, and hold harmless and indemnify, the Company, to the maximum extent allowed by law, from and against any liability in relation to the aforementioned policies and the carve-out, it being understood that if the Carve-Out is not fully completed at Closing, the Buyer may elect to proceed with Closing, and the Parties shall fulfil any further formalities to complete the Carve-Out as soon as possible after the Closing Date pursuant to Clause 15;
	4.3.7	provide to the Buyer and the Buyer’s Lawyers an electronic encrypted storage device (e.g. USB memory stick) with a copy of all documents made available to the Buyer for purposes of conducting its due diligence; and
	4.3.8	provide to the Buyer a detailed overview of the inventory of the Company as at the Closing Date.

 

4.4	At (or where stated following) Closing, the Buyer shall, or shall procure (subject to the Seller complying with Clause 4.3):

 

4.4.1

pay the Initial Cash Consideration in accordance with Clause 3;

 

 

	4.4.2	within 30 days after Closing, the Initial Consideration Shares (to be determined as indicated in the relevant definition, taking into account the closing price per share as traded in the United States on Nasdaq on the trading day which shall be five Business Days following Closing) are issued to the Seller, by Boxlight issuing a share certificate evidencing the Initial Consideration Shares appropriately registered in the name of the Seller;
	4.4.3	deliver a copy of the resolution in agreed form adopted by the board of directors of the Buyer authorising the Transaction and the execution and delivery by the officers specified in the resolution of this Agreement and any other documents referred to in this Agreement as being required to be delivered by the Buyer;
	4.4.4	deliver to the Seller an executed counterpart of the Management Agreement.

 

4.5	At (or where stated following) Closing, the Parties:

	4.5.1	or their duly authorised attorney-in-fact shall record the transfer of the Sale Shares to the Buyer in the share register of the Company, and shall sign the Company’s share register to that effect.
	4.5.2	shall procure that a resolution of the shareholders of the Company is passed to approve the appointment for an indefinite term of Mr. Mark Starkey, Mr. Patrick Foley and the Seller as non-statutory directors of the Company, whose offices shall be non-remunerated; to the extent practicable the Parties shall procure that, an extraordinary general meeting of shareholders of the Company shall be held at the Closing Date or as soon as possible after Closing, before a notary public, which will decide on (i) a name change of the Company, (ii) the adoption of the new Code of Companies and Associations, (iii) the acknowledgement of the resignation of the Seller as a statutory director of the Company, (iv) the granting of discharge to the Seller for its management during any period prior to Closing and (v) any other amendments to the Articles of Association as the Buyer may decide in its sole discretion, in accordance with article 5:98 of the Belgian Code of Companies and Associations. The Parties explicitly acknowledge that the granting of (interim) discharge will not affect any of the rights of the Buyer under this Agreement. The Buyer shall make sure that at the next annual general meeting(s) of shareholders of the Company discharge will be granted to the Seller for the full period of his mandate, in accordance with and subject to article 5:98 of the Belgian Code of Companies and Associations taking into account the information that has been Disclosed prior to the date of this agreement.
	4.5.3	shall procure that a meeting of the board of directors of the Company is held to approve (i) the entering by the Company into the Management Agreement, (ii) a new delegation of management and banking powers, as determined by the Buyer and (iii) such further matters as identified by the Parties.
	4.5.4	shall procure that the registered office address of the Company is changed within 60 days following Closing.

 

4.6	As soon as possible after Closing, the Seller shall send to the Buyer (at the Company’s registered office for the time being) all records, correspondence, documents, files, memoranda and other papers relating to the Company, which are not kept at the Leasehold Property and which are not otherwise required to be delivered at Closing.
4.7	The effectiveness of the actions taken by the Seller on Closing is conditional upon the Buyer duly taking the actions required to be taken by it at or shortly following Closing and vice versa. The Buyer may at any time waive some or all of the Seller’s obligations on Closing by giving advance notice.

 

 

5	LEAKAGE
5.1	In this Clause 5 and in this Agreement the following words shall have the following meanings:

 

Leakage: has the meaning given in Clause 5.2;

 

Leakage Amount: means, in relation to any breach of a Leakage Undertaking, the aggregate of (as appropriate):

 

	5.1.1	the amount of the payment made, payable or incurred by the Company;
	5.1.2	the amount (or, if it is satisfied otherwise than in cash, the market value) of the dividend or distribution declared, made or paid by the Company;
	5.1.3	the market value of the asset transferred or surrendered, or of the benefit provided, by the Company;
	5.1.4	the amount of the liability undertaken, assumed, indemnified, incurred or guaranteed by the Company; or
	5.1.5	the amount of the debt or liability waived, released, reduced or discharged by the Company,

 

in the case of 5.1.3, 5.1.4 or 5.1.5 above, net of the amount of any cash consideration, or the market value of any other consideration, received by the Company for the relevant asset, benefit, liability, assumption, indemnity, incurring, guarantee, waiver, release, reduction or discharge;

 

in each case net of and reduced with the amount of any associated Tax Savings from which the Company benefits in connection with or in respect of any matter referred to above.

 

Leakage Undertaking: has the meaning given in Clause 5.2;

 

Permitted Leakage: each and any of the following:

 

	5.1.6	any payments made (or to be made) by the Company to the Seller or a in the ordinary course, on arm’s length terms and on a basis consistent with past practice, but not exceeding in aggregate EUR 500;
	5.1.7	any payments made (or to be made) by the Company which have been specifically accrued or provided for in the Accounts; and
	5.1.8	any other payment, accrual, transfer of assets or assumption of liability by the Company which the Buyer has expressly approved in writing,
	5.1.9	the dividend declared and paid by the Company on 12/3/2021, to the amount of EUR 249,272.52, provided that applicable withholding tax is fully paid by the Company
	5.1.10	the payment of the current account due to the Seller, to the amount of EUR 57,772.93;

 

 

5.2	Save in respect of any Permitted Leakage, the Seller undertakes to the Buyer that between 31 December 2020 and Closing that:

 

	5.2.1	the Company has not declared, made or paid any dividend or distribution (whether in cash or in kind) to any of the Seller (or any person Connected with the Seller);
	5.2.2	the Company has not made any repayment of principal on, payment of any interest on or other payment in relation to any debt or other obligation to any of the Seller or any person Connected with the Seller;
	5.2.3	the Company has not made any payments of any kind (including salary, pension contributions, bonuses, ex gratia payments, fees, charges or compensation) to, or granted future benefits to, or transferred or surrendered assets to, or for the benefit of the Seller or any person Connected with the Seller;
	5.2.4	the Company has not assumed, incurred, indemnified or discharged any liability or obligation (whether actual, future or contingent) in favour of or for the benefit of the Seller or any person Connected with the Seller;
	5.2.5	the Company has not made any payments to any of the Seller or any person Connected with the Seller in respect of the issue, redemption, purchase, repayment or cancellation of any share capital, loan capital or other securities of the Company or any other return of capital;
	5.2.6	the Company has not created any charge or other Encumbrance over any of its assets in favour of or for the benefit of the Seller or any person Connected with the Seller;
	5.2.7	the Company has not made any payments by way of management or similar fees to the Seller or any person Connected with the Seller;
	5.2.8	the Company has not waived, deferred, released, reduced or discharged all or any part of any liability or obligation owed to it by the Seller or any person Connected with the Seller, whether that amount was due and payable;
	5.2.9	the Company has not made any payments in respect of fees or expenses to any advisor of the Seller or any person Connected with the Seller in relation to the transaction which is the subject matter of this Agreement;
	5.2.10	no Tax has been incurred or become payable by the Company as a consequence of any of the matters referred to in Clauses 5.2.1 to 5.2.9 (inclusive) occurring;
	5.2.11	the Company has not undertaken, agreed or arranged (conditionally or otherwise) to do or give effect to any of the matters referred to in Clauses 5.2.1 to 5.2.9 (inclusive).

 

(each a “Leakage Undertaking” and together the “Leakage Undertakings” and the occurrence of any of the matters set out in this Clause 5.2 on or after the 31 December 2020 and at or before Closing constituting an incident of “Leakage”).

 

5.3	The Seller undertakes to the Buyer to notify the Buyer in writing ten Business Days after becoming aware of any Leakage, and in each case within 90 days following Closing.

 

 

5.4	In the event of any breach of any Leakage Undertaking, the Seller shall pay to the Buyer within ten Business Days of a written demand a sum equal to the Leakage Amount.
5.5	The parties acknowledge and agree that notwithstanding any other provision of this Agreement none of the provisions of Clause 7 shall apply to any claim or demand under this Clause 5.
5.6	Notwithstanding any other provision of this Agreement, nothing in the Disclosure Schedule shall qualify or limit the liability of the Seller under this Clause 5.
5.7	Nothing in this Clause 5 shall apply to limit the liability of the Seller in respect of any claim for breach of the Leakage Undertakings to the extent that it arises or is increased as a consequence of, or is delayed as a result of, fraud or wilful deceit (bedrog) on the part of the Seller.
6	Warranties
6.1	The Seller warrants to the Buyer that each Warranty is true and not misleading to the extent that it omits to state a fact that should have been stated for the Warranty not to be misleading on the date of this Agreement (or on any other date specifically indicated in the Warranties) and shall indemnify the Buyer or the Company (at the option of the Buyer) for any Losses.
6.2	Warranties qualified by the expression so far as the Seller is aware (or any similar expression) are deemed to be given and refer to the actual knowledge of the Seller and the knowledge which the Seller could or should have had in his capacity of shareholder and sole statutory director of the Company.
6.3	The Buyer and its advisors have been entitled to conduct a due diligence investigation regarding the Company and have had the opportunity to investigate and review the information made available by the Seller in a data room. The Buyer confirms that, at the date of this Agreement, it is not aware, on the basis of the data room or the information Disclosed of any facts, matters, events or circumstances which could give rise to a Claim under this Agreement. The Seller shall not be liable in respect of any Claim to the extent that the matters, facts, events and circumstances have been Disclosed in the Disclosure Schedule and unless these matters, facts, events and circumstances relate to a breach of the Fundamental Warranties or result in an Indemnity Claim.
6.4	For the avoidance of doubt, the rights and remedies of the Buyer in respect of any Claim or claim under the Tax Covenant shall not be affected by Closing.
7	Limitations on Claims
7.1	Save as provided under Clause 7.8, this Clause 7 limits the liability of the Seller in relation to any Claim.
7.2	The aggregate liability of the Seller for all Claims shall not exceed an amount equal to 30% of the Purchase Price, with the exception of any Claim for a breach of the Tax Warranties for which the aggregate liability of the Seller shall amount to 50% of the Purchase Price
7.3	The Seller shall not be liable for a Claim unless:

 

7.3.1

the Seller’s liability in respect of such Claim (together with any connected Claims) exceeds EUR 5,000; and

 

 

7.3.2

the amount of the Seller’s liability in respect of such Claim, either individually or when aggregated with the Seller’s liability for all other Claims (other than those excluded under Clause 7.3.1) exceeds EUR 50,000, in which case the Seller shall be liable for the whole amount of the Claim and not just the amount above the threshold specified in this Clause 7.3.2.

 

7.4	The Seller shall not be liable for a Claim if and to the extent that the Claim:

 

	7.4.1	arises from facts, events or circumstances that have been Disclosed; or
	7.4.2	relates to a matter specifically and fully provided for in the Accounts.

 

7.5	The Seller shall not be liable for a Claim (other than a Claim pursuant to the Tax Warranties) unless notice in writing summarising the nature of the Claim (in so far as it is known to the Buyer) and, as far as is reasonably practicable, the amount claimed, has been given by or on behalf of the Buyer to the Seller in the period of 2 years commencing on the Closing Date. Any Claim for a breach of the Tax Warranties shall lapse unless it has been notified by or on behalf of the Buyer to the Seller within 3 months after the expiry, under the applicable legal statute of limitation, of the right of any relevant Tax Authority to make or issue a claim against the Company.
7.6	Where notice of a Claim (other than a Claim pursuant to the Tax Warranties) is given under Clause 7.5 but legal proceedings have not been issued and served within the period of 12 months (beginning with the day on which the notice is deemed to be received), such Claim shall be deemed to be withdrawn.
7.7	The Buyer is not entitled to recover damages or otherwise obtain restitution more than once in respect of the same Losses.
7.8	Nothing in this Clause 7 or Schedule 5 applies to exclude or limit the liability of the Seller:

 

	7.8.1	If and to the extent that a Claim or a claim under the Tax Covenant arises or is delayed as a result fraud, or wilful deceit (bedrog) by the Seller, its agents or advisers; or
	7.8.2	for any Claim made under the Warranties in paragraph 1.1, paragraph 1.2, paragraph 2.1, paragraph 2.2, or paragraph 2.3 of Part 1 of Schedule 2 (the “Fundamental Warranties”).

 

7.9	Recovery from insurers or other third parties: The Seller shall have no obligation to reimburse the Buyer nor the Company of any Claim if and to the extent that the Losses in respect of which the Claim is made are actually recovered from any third party, it being understood that the Buyer shall and shall procure that the Company shall make all commercially reasonable efforts with a view to the recovery of any (part of any) Losses from any third party, insofar this is permitted by applicable laws.
7.10	Duty to mitigate: nothing in this agreement restricts or limits the Buyer’s general obligation under the law to avoid or mitigate any loss or damage which it may incur in connection with a matter giving rise to a Claim.
7.11	Any amount owed by the Seller in respect of any Claim shall be reduced by the amount of any Tax Savings for the Buyer or the Company arising from the Loss in respect of which the Claim has been made.

 

 

If the amount of the Tax Savings arising from a Loss as contemplated in this Clause is determined after payment by the Seller of any amount in discharge of the Claim, the Buyer shall pay to the Seller an amount equal to the difference between:

 

	7.11.1	the amount paid by the Seller to the Buyer; and
	7.11.2	the amount that the Purchaser would have received if such Tax Savings had been taken into account in determining the amount due by the Seller in accordance with this Clause.

 

For the purposes of this Clause “Tax Savings” means the amount by which any Tax for which the Buyer or the Company as the case may be would otherwise have been liable is reduced as a result of such Loss in the same financial year as the financial year in which the Loss occurs.

 

7.12	Tax Gross-Up. If any amount paid in relation to a Claim is subject to any Tax, the amount so payable shall be increased by such amount as is necessary to ensure that after the payment of such Tax there shall be left a sum equal to the amount that the Buyer would have received pursuant to this Agreement in the absence of such Tax.
7.13	The Seller shall not be liable for any Claim to the extent that the matter giving rise to the relevant Claim would not have arisen (or the amount of Losses would have been lower) but for the passing of, or a change in, a law or administrative practice of a government, governmental agency or regulatory body, or an increase in the Tax rates or an imposition of a new Tax after the date of the agreement.

 

8	CLaims
8.1	Defence of third-party claims

 

If a Claim notified by the Buyer to the Seller arises as a result of or in connection with a claim brought or threatened by a third party (a “Third Party Claim”), then, until such time as any final compromise, agreement, final judgment or award by a competent court or arbitral tribunal in respect of that Third Party Claim is made or that Third Party Claim is otherwise finally disposed of, the following shall apply:

 

	(a)	the Buyer shall (i) consult with, and shall procure that the Company consults with, the Seller in the defence of such Third Party Claim and (ii) ensure that the remarks of the Seller in respect of the conduct of any proceedings relating to the Third Party Claim or on draft letters or other material documents and material correspondence which the Company proposes to send to such third party in connection with the Third Party Claim are taken into account;
	(b)	the Buyer shall procure that the Company does not make any admission of liability, agreement or settlement in relation to the Third Party Claim without the approval of the Seller (which shall not be unreasonably withheld or delayed). If the Buyer or the Company receives a bona fide settlement proposal in respect of a Third Party Claim, the Buyer shall and shall cause the Company to inform the Seller as soon as reasonably practicable.
	(c)	the Buyer shall, and shall procure that the Company shall, provide the Seller with reasonable information as to the progress of the Third Party Claim from time to time;

 

 

	(d)	the Buyer shall use its best efforts, and shall procure that the Company shall use its best efforts, to conduct the dispute, defense or compromise in relation a Third Party Claim in a diligent and careful manner;
	(f)	the Seller shall bear alone all costs which he incurs in connection with his participation in the defence of a Third Party Claim.

 

8.2	Conduct of claims

 

In connection with any Claim made by the Buyer against the Seller (other than any Claim for Tax under 0 or for breach of the Tax Warranties), the Buyer shall describe in reasonable detail the facts or circumstances that give rise to the Claim and state the amount of the Loss claimed (or a preliminary estimate thereof) including a copy of the relevant supporting documentation establishing the basis of the Claim.

 

9	SPECIFIC Indemnities
9.1	Without limiting any other rights or remedies the Buyer may have, the Seller shall indemnify the Buyer or , at the Buyer’s option, the Company -taking into account that the Buyer and the Company shall in no event be indemnified twice for the same Loss as a result of a provision allowing the Buyer to choose whether the indemnification shall be paid to itself or the Company- against all Losses suffered or incurred by the Buyer or the Company arising out of or in connection with any of the following matters:

 

	9.1.1	the cash of the Company at Closing being less than EUR 1,400,000;
	9.1.2	the Accounts not providing a true and complete view of the equity of the Company, at the Accounts Date, it being understood that the impact of any Claim or Indemnity Claim (with the exception of any Indemnity Claim pursuant to this Clause 9.1.2) on the equity of the Company at the Accounts Date shall not be considered to result in the Accounts not providing a true and complete view of the equity of the Company, for the purposes of this Clause 9.1.2;
	9.1.3	any obligation under the Tax Covenant, as set out in 0.

 

9.2	Any payment made by the Seller in respect of an Indemnity Claim shall include:

 

	9.2.1	an amount in respect of all reasonable costs and expenses incurred by the Buyer or the Company (as the case may be) in bringing the relevant Indemnity Claim; and
	9.2.2	any amount necessary to ensure that, after the deduction of any Tax due on the payment, the Buyer or, the Company (as the case may be) is left with the same amount it would have had if the payment was not subject to Tax.

 

9.3	For the avoidance of doubt, Parties acknowledge that any Indemnity Claim shall not be subject to the limitations set forth in Clause 7, except for:

 

	-	Clause 7.11 and 7.12;
	-	Clause 7.2, with the understanding that the aggregate liability of the Seller under this Clause 9 shall not exceed 50% of the Purchase Price, which amount shall not be reduced as a result of a Claim;

 

 

-

Time limitations as stated in Clause 7.5, it being understood that an Indemnity Claim pursuant to the Tax Covenant shall lapse unless it has been notified by or on behalf of the Buyer to the Seller within 3 months after the expiry, under the applicable legal statute of limitation, of the right of any relevant Tax Authority to make or issue a claim against the Company.

 

10	Subsequent sale of the sale shares
10.1	The Buyer shall not sell or otherwise transfer all or part of the Sale Shares to any non-EEA Company for a twelve-months period as from the date of Closing and shall fully indemnify Seller in case of breach of this covenant and shall reimburse the Seller for all related or resulting Taxes.
10.2	The Buyer further agrees and undertakes not to sell or otherwise transfer all or part of the Sale Shares to any individual or any EEA company without first obtaining a written statement of the transferee (a copy of which shall be delivered to the Seller) not to subsequently sell or otherwise transfer all or part of the Shares to any non-EEA company for a twelve-months period as from the Completion Date. Buyer shall fully indemnify and hold harmless Seller in case of breaches of this covenant or statement by the transferee and shall reimburse the Seller for all related or resulted Taxes.
11	Restrictions on the Seller
11.1	In this Clause, the following words and expressions shall have the following meanings:
11.2	Prospective Customer: a person who is at Closing, or has been at any time during the period of 12 months immediately preceding the Closing Date, in discussions with the Company with a view to becoming a client or customer of the Company.
11.3	Restricted Business: any business that is or would be in competition with any part of the Business, as it is being carried on at the Closing Date.
11.4	Restricted Customer: any person who is at Closing, or who has been at any time during the period of 12 months immediately preceding the Closing Date, a client or customer of, or in the habit of dealing with, the Company.
11.5	Restricted Person: any person who is at Closing, or who has been at any time during the period of 12 months immediately preceding the Closing Date, employed or directly or indirectly engaged by the Company.
11.6	The Seller undertakes to each of the Buyer and the Company that it shall not (either directly or indirectly shall):

 

	11.6.1	at any time during the period of 3 years commencing on the Closing Date, in Belgium, carry on or be engaged, concerned or interested in, or in any way assist, a Restricted Business;
	11.6.2	at any time during the period of 3 years commencing on the Closing Date:

 

11.6.2.1

canvass, solicit or otherwise seek the custom of Restricted Customer or Prospective Customer with a view to providing goods or services to that Restricted Customer or Prospective Customer in competition with the Business (or any part of it); or

 

 

11.6.2.2

induce or attempt to induce a Restricted Customer or Prospective Customer to cease or refrain from conducting business with, or to reduce the amount of business conducted with, or to vary adversely the terms upon which it conducts business with, the Company, or do any other thing which is reasonably likely to have such an effect;

 

	11.6.3	at any time during the period of 3 years commencing on the Closing Date, have any business dealings with a Restricted Customer or a Prospective Customer in connection with the provision of goods or services to that Restricted Customer or Prospective Customer in competition with the Business (or any part of it);
	11.6.4	at any time during the period of 3 years commencing on the Closing Date, have any business dealings with, solicit, entice or attempt to entice away any person who is at Closing, or has been at any time during the period of 3 years immediately preceding the Closing Date, a supplier of goods or services to the Company, if such dealings, solicitation or enticement causes or is reasonably likely to cause such supplier to cease supplying or to reduce its supply of goods and/or services to the Company or to vary adversely the terms upon which it conducts business with the Company;
	11.6.5	at any time during the period of 3 years commencing on the Closing Date offer employment to, enter into a contract for the services of, or otherwise entice or attempt to entice away from the Company, any Restricted Person or procure or facilitate the making of any such offer or attempt by any other person;
	11.6.6	at any time after Closing, use in the course of any business:

 

	11.6.6.1	the words “Interactive Concepts”;
	11.6.6.2	any trade or service mark, business or domain name, design or logo which, at Closing, is or has been used by the Company in connection with the Business; or
	11.6.6.3	anything which, in the reasonable opinion of the Buyer, is capable of confusion with the words, marks, names, designs or logos referred to in Clause 11.6.6.1 or Clause 11.6.6.2;

 

	11.6.7	at any time after Closing, do or say anything which may be harmful to the reputation of the Company; or
	11.6.8	at any time after Closing, present himself or permit himself to be presented as (other than in the course of the Management Agreement and directorship with the Company):

 

	11.6.8.1	connected in any capacity with the Company; or
	11.6.8.2	interested or concerned in any way in the Sale Shares (or any of them).

 

11.7

The undertakings in Clause 11.6 are intended for the benefit of, and shall be enforceable by, each of the Buyer and the Company and shall apply to actions carried out by the Seller in any capacity (including as shareholder, partner, director, principal, consultant, officer, agent or otherwise) and whether directly or indirectly, on behalf of the Seller or on behalf of, or jointly with, any other person.

 

 

11.8	Each of the Seller’s undertakings in Clause 11.6 is a separate undertaking and shall be enforceable by the Buyer and the Company separately and independently of their right to enforce any one or more of the other undertakings contained in that Clause.
11.9	The parties acknowledge that the Seller has confidential information relating to the Business and that the Buyer is entitled to protect the goodwill of the Business as a result of buying the Sale Shares. Accordingly, each of the undertakings in Clause 11.6 is considered fair and reasonable by the parties.
11.10	The consideration for the undertakings contained in Clause 11.6 is included in the Purchase Price.
12	Confidentiality and announcements
12.1	The Seller undertakes to each of the Buyer and the Company that he shall:

 

	12.1.1	keep confidential the terms of this Agreement and all confidential information or trade secrets in its possession concerning the business, affairs, customers, clients or suppliers of the Company or any member of the Buyer’s Group;
	12.1.2	not disclose any of the information referred in Clause 12.1.1 (whether in whole or in part) to any third party, except as expressly permitted by this Clause 12; and
	12.1.3	not make any use of any of the information referred in Clause 12.1.1, other than to the extent necessary for the purpose of exercising or performing its rights and obligations under this Agreement or the Management Agreement or the directorship.

 

12.2	Nothing in this Agreement shall be construed as imposing on the Buyer an obligation to keep confidential, or restrict its use after Closing, of any information relating to the Company or to restrict its use of such information after Closing.
12.3	Notwithstanding any other provision of this Agreement, neither party is required to keep confidential or to restrict its use of any information that:

 

	12.3.1	is or becomes public knowledge or otherwise generally available to the public (other than as a direct or indirect result of the information being disclosed in breach of this Agreement);
	12.3.2	the parties agree in writing is not confidential; or
	12.3.3	was, is or becomes available to the receiving party on a non-confidential basis from a person who, to the receiving party’s knowledge, is not bound by a confidentiality agreement with the disclosing party or otherwise prohibited from disclosing the information to the receiving party.

 

12.4	Either party may disclose any information that it is otherwise required to keep confidential under this Clause 12:

 

12.4.1

to any employees, officers, consultants, representatives or advisers of any member of its Group who need to know such information for the purposes of advising on this Agreement or facilitating the Transaction, provided that the party making the disclosure informs the recipient of the confidential nature of the information before disclosure and procures that the recipients shall, in relation to the information disclosed to them, comply with the obligations set out in this Clause 12 as if the recipients were that party. The party making a disclosure under this Clause shall, at all times, be liable for the failure by its recipients to comply with the obligations set out in this Clause;

 

 

	12.4.2	in the case of the Buyer only, to a proposed transferee of the Sale Shares for the purpose of enabling the proposed transferee to evaluate the proposed transfer;
	12.4.3	in the case of the Buyer only, to its funders, potential investors and their respective advisers, employees, officers, representatives or consultants in connection with the financing of the Transaction;
	12.4.4	with the prior consent in writing of the other party;
	12.4.5	to confirm either that the Transaction has taken place or the Closing Date, but without otherwise revealing any other terms of the Transaction or making any other announcement; or
	12.4.6	to the extent that the disclosure is required:

 

	12.4.6.1	by the laws of any jurisdiction to which the disclosing party is subject;
	12.4.6.2	by an order of any court of competent jurisdiction, or any regulatory, judicial, governmental or similar body, or any Tax Authority or securities exchange of competent jurisdiction;
	12.4.6.3	to make any filing with, or obtain any authorisation from, any regulatory, governmental or similar body, or any Tax Authority or securities exchange of competent jurisdiction;
	12.4.6.4	under any arrangements in place under which negotiations relating to terms and conditions of employment are conducted; or
	12.4.6.5	to protect the disclosing party’s interest in any legal proceedings,

 

PROVIDED that in each case (and to the extent it is legally permitted to do so) the disclosing party gives the other party as much notice of the disclosure as possible.

 

12.5	Each party shall supply the other party with such information about itself, its Group or this Agreement as the other party may reasonably require for the purposes of satisfying the requirements of any law or any judicial, governmental, regulatory or similar body or any Tax Authority or securities exchange of competent jurisdiction to which the other party is subject.
12.6	Subject to Clause 12.7, Clause 12.8 and Clause 12.9, neither party shall make, or permit any person to make, any public announcement, communication or circular concerning this Agreement or the Transaction (announcement) without the prior written consent of the other party.
12.7	Nothing in Clause 12.6 shall prevent either party from making an announcement required by law or any governmental or regulatory authority (including any Tax Authority), any securities exchange or any court or other authority of competent jurisdiction provided that the party required to make the announcement consults with the other party and takes into account the reasonable requests of the other party in relation to the content of such announcement before it is made.

 

 

12.8	The parties shall issue a press release in agreed form immediately after Closing.
12.9	The Buyer may at any time after Closing announce its acquisition of the Sale Shares to any employees, clients, customers or suppliers of the Company or any other member of the Buyer’s Group.
13	Liquidated damages
13.1	In case of breach or infringement of any of the undertakings set out in Clause 10 and 12.1 by the Seller or a person connected to the Seller, the Seller shall pay to the Buyer or, at the Buyer’s sole option, to the Company, an amount of EUR 100,000 for each breach or infringement and, in addition, an amount of EUR 10,000 for each day such breach or infringement continues, without the need to serve notice on the Seller or the need of a court order and without prejudice to the right of the Buyer and/or the Company to recover damages in excess of the amounts specified in this Clause 13.1.
13.2	The Parties recognize that irreparable harm would result from any breach of Clause 10 and 12.1 and that monetary damages alone would not provide adequate relief for any such breach. Accordingly, in addition to any other remedy which may be available to the Buyer, including the indemnification undertakings set forth this Clause 13, if the Seller or a person connected to the Seller breach a restriction included in Clause 10 and 12.1, the Parties acknowledge that the Buyer or, at the Buyer’s option, the Company, may seek injunctive relief in a court of competent jurisdiction to stop any such breach.
14	No claims against the Company
14.1	The Seller confirms to the Buyer and the Company that (other than in respect of the Transaction Documents):

 

	14.1.1	the Company has no liability, obligation or commitment of any kind to any of the Seller (or any person Connected with the Seller); and
	14.1.2	no circumstances or arrangements exist under which the Company could have any liability, obligation or commitment of any kind to any of the Seller (or any person Connected to the Seller).

 

14.2	To the extent that any such liability, obligation or commitment exists (without prejudice to Clause 14.1), the Seller irrevocably and unconditionally:

 

	14.2.1	agrees with the Buyer that he shall not (and undertakes to procure that each person Connected to him shall not) at any time bring any claim or other action of any kind against the Company or any of their directors, officers or employees in relation to any such liability, obligation or commitment;
	14.2.2	waives (and undertakes to procure that each person Connected to him shall waive) any and all rights which it or any of them may have or be entitled to exercise or which may arise (now or in the future and whether now known or not) in relation to any such liability, obligation or commitment; and
	14.2.3	releases (and undertakes to procure that each person Connected to him shall release) the Company from any and all liabilities, obligations and commitments which may be owing by the Company to him or any of them (except for any liability, obligation or commitment arising from the Transaction Documents),

 

 

14.3	and the Seller shall indemnify and hold harmless the Buyer against and accordingly pay to the Buyer an amount equal to all losses to the extent incurred or suffered by the Buyer or Company arising as a result of or in connection with any failure of that Seller to comply with his obligations under Clause 14.2.
15	Further assurance
15.1	The Seller shall, (and shall use reasonable endeavours to procure that any relevant third party shall) promptly execute and deliver such documents and perform such acts as the Buyer may reasonably require from time to time for the purpose of giving full effect to this Agreement.
15.2	Pursuant to this Clause 15.2, the Seller shall, among other things, provide further assistance as further required to ensure the completion of the required formalities by the Company in order for it to benefit from the tax shelter regime resulting in a tax free reserve of EUR 316,840, which the Company applied for in the financial years 2018 and 2019.
16	Assignment
16.1	Subject to the further provisions of this Clause 16, no party shall assign, transfer, mortgage, charge, declare a trust of, or deal in any other manner with any or all of its rights and obligations under this Agreement (or any other Transaction Document).
16.2	Each party confirms it is acting on its own behalf in relation to the Transaction and not for the benefit of any other person.
16.3	The Buyer may assign or transfer its rights (but not its obligations) under this Agreement (or any other Transaction Document) to:

 

	16.3.1	another member of its Group for so long as that company remains a member of the Buyer’s Group. The Buyer shall procure that any company assigns any rights assigned to it in accordance with this Clause 16.3 back to the Buyer or to such other member of the Buyer’s Group as it may nominate immediately before that company ceases to be a member of the Buyer’s Group; or
	16.3.2	any person to whom the Sale Shares are sold or transferred by the Buyer following Closing.

 

16.4	The Buyer may grant security over, or assign by way of security, any or all of its rights under this Agreement for the purposes of, or in connection with, the financing (whether in whole or in part) of the Transaction or any of its working capital or other requirements. On the enforcement of any security of a kind referred to in this Clause 16.4, the Buyer, or any administrative receiver of the Buyer or any person having the benefit of such security may assign any or all of the relevant rights to any person, but the Seller’s liability to any assignee in respect of those rights shall not be greater than if no assignment had taken place.
16.5	If there is an assignment or transfer of the Buyer’s rights under Clause 16.3 or Clause 16.4:

 

	16.5.1	the Seller may discharge its obligations under this Agreement to the Buyer until it receives notice of the assignment or transfer; and
	16.5.2	the assignee or transferee may enforce this Agreement as if it were named in this Agreement as the Buyer, but the Buyer shall remain liable for any obligations under the agreement.

 

 

17	Entire agreement
17.1	This Agreement (together with any other Transaction Document), constitutes the entire agreement between the parties and supersedes and extinguishes all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to their subject matter.
17.2	Each party acknowledges that in entering into this Agreement, and any other Transaction Document, it does not rely on, and shall have no rights or remedies in respect of, any statement, representation, assurance or warranty (whether made innocently or negligently) that is not set out in this Agreement or any other Transaction Document.
17.3	Each party agrees that it shall not have any claim for innocent or negligent misrepresentation or negligent misstatement based on any statement or warranty in this Agreement or any other Transaction Document.
17.4	Nothing in this Clause 17 operates to limit or exclude any liability for fraud.
18	Variation and waiver
18.1	No variation of this Agreement shall be effective unless it is in writing and signed by the parties (or their authorised representatives).
18.2	A waiver of any right or remedy under this Agreement or by law is only effective if it is given in writing. Any such waiver shall apply only to the circumstances for which it is given and shall not be deemed a waiver of any subsequent breach or default.
18.3	A failure or delay by any person to exercise any right or remedy provided under this Agreement or by law shall not constitute a waiver of that or any other right or remedy, nor shall it prevent or restrict any further exercise of that or any other right or remedy. No single or partial exercise of any right or remedy provided under this Agreement or by law shall prevent or restrict the further exercise of that or any other right or remedy.
18.4	A party that waives a right or remedy provided under this Agreement or by law in relation to one party, or takes or fails to take any action against that party, does not affect its rights in relation to any other party.
19	Costs

 

Except as expressly provided in this Agreement, each party shall pay its own costs and expenses incurred in connection with the Transaction, including the negotiation, preparation and execution of this Agreement and the other Transaction Documents.

 

20	Notices
20.1	For the purposes of this Clause 20 (but subject to Clause 20.7), notice includes any other communication.
20.2	A notice given to a party under or in connection with this Agreement:

 

20.2.1

shall be in writing and in English (or be accompanied by an accurate translation into English);

 

 

	20.2.2	shall be sent to the relevant party for the attention of the contact and to the address or, email address specified in Clause 20.3, or such other contact, address or email address as that party may notify in accordance with Clause 20.4;
	20.2.3	shall be:

 

	20.2.3.1	delivered by hand;
	20.2.3.2	sent by pre-paid first class post or another next working day delivery service;
	20.2.3.3	sent by pre-paid airmail or by reputable international overnight courier (if the notice is to be served by post to an address outside the country from which it is sent); or
	20.2.3.4	sent by email; and

 

20.2.4

unless proved otherwise is deemed received as set out in Clause 20.5.

 

20.3	The addresses and email addresses and contacts for service of notices are:

 

20.3.1

SELLER

 

	20.3.1.1	address: Tempeliersstraat 14, 8570 Anzegem
	20.3.1.2	email address: [email protected]
	20.3.1.3	with a copy to Seller’s lawyer at [email protected]

 

20.3.2

BUYER

 

	20.3.2.1	address: the Buyer’s registered office from time to time
	20.3.2.2	for the attention of: Patrick Foley
	20.3.2.3	email address: [email protected]

 

20.4	A party may change its details for service of notices as specified in Clause 20.3 by giving notice in writing to the other party. Any change notified pursuant to this Clause shall take effect at 9.00 am on the later of:

 

	20.4.1	the date (if any) specified in the notice as the effective date for the change; and
	20.4.2	the date five Business Days after deemed receipt of the notice of change.

 

20.5	A notice is deemed to have been received (provided that all other requirements in this Clause 20 have been satisfied):

 

	20.5.1	if delivered by hand, on signature of a delivery receipt or at the time the notice is left at the address;
	20.5.2	if sent by pre-paid first class post or another next working day delivery service to an address in Belgium, at 9.00 am on the second Business Day after posting or at the time recorded by the delivery service;

 

 

	20.5.3	if sent by pre-paid airmail to an address outside the country from which it is sent, at 9.00 am on the fifth Business Days after posting or at the time recorded by the delivery service;
	20.5.4	if sent by reputable international overnight courier to an address outside the country from which it is sent, on signature of a delivery receipt or at the time the notice is left at the address; or
	20.5.5	if sent by email, at the time of transmission,

 

20.6	PROVIDED that if deemed receipt under the previous paragraphs of this Clause would occur outside the Usual Business Hours, the notice shall be deemed to have been received when Usual Business Hours next recommence. For the purposes of this Clause, Usual Business Hours means 9.00 am to 5.30 pm local time on any day which is not a Saturday, Sunday or public holiday in the place of receipt of the notice (which, in the case of service of a notice by email shall be deemed to be the same place as is specified for service of notices on the relevant party by hand or post). For the purposes of this Clause, all references to time are to local time in the place of deemed receipt.
20.7	This Clause 20 does not apply to the service of any proceedings or other documents in any legal action, except for notifications of for example Claims under this Agreement, or, where applicable, any arbitration or other method of dispute resolution.
21	Interest
21.1	Subject to Clause 22 if either party fails to make any payment due to the other party under this Agreement by the due date then the defaulting party shall pay interest on the overdue sum from the due date until payment of the overdue sum, whether before or after judgment.
21.2	Interest under this Clause will accrue each day at rate of 5% a year above Barclay’s Bank Plc’s base rate from time to time.
22	Severance

 

If any provision or part-provision of this Agreement is or becomes invalid, illegal or unenforceable, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision shall be deemed deleted. Any modification to or deletion of a provision or part-provision under this Clause shall not affect the validity and enforceability of the rest of this Agreement.

 

23	Agreement survives Closing

 

This Agreement (other than obligations that have already been fully performed) remains in full force after Closing.

 

24	Successors

 

This Agreement (and any of the Transaction Documents) are made for the benefit of the parties and their successors and permitted transferees, and the rights and obligations of the parties under this Agreement (and any of the Transaction Documents) shall continue for the benefit of, and shall be binding on, their respective successors and permitted transferees.

 

 

25	Third party rights
25.1	Save as otherwise provided in this Agreement, no one other than a party to this Agreement, their personal representatives, successors and permitted transferees, shall have any right to enforce any of its terms.
25.2	The following provisions are intended to benefit future buyers of the Sale Shares and (to the extent that they are identified in the relevant Clauses as recipients of rights or benefits under that Clause), the Company, its Subsidiaries, and shall be enforceable by each of them to the fullest extent permitted by law:

 

	25.2.1	Clause 6.1 (Warranties) and Schedule 2, subject to Clause 7 (Limitations on claims);
	25.2.2	Clause 8 and Schedule 5 (Tax Covenant).
	25.2.3	Clause 9 (Indemnities);
	25.2.4	Clause 11 (Restrictions on the Seller); and
	25.2.5	Clause 12.1 (Confidentiality and announcements).

 

25.3	The rights of the parties to terminate, rescind or vary this Agreement or to agree any waiver or settlement under this Agreement are not subject to the consent of any other person.

 

26	Counterparts

 

This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute a duplicate original, but all the counterparts shall together constitute the one agreement.

 

27	Rights and remedies

 

Except as expressly provided in this Agreement, the rights and remedies provided under this Agreement are in addition to, and not exclusive of, any rights or remedies provided by law. Without prejudice to any rights or remedies the Buyer may have under applicable laws, it is agreed that the Seller does not grant any representations or warranties, other than the Warranties, Tax Covenants and any other undertakings of the Seller as provided in this Agreement.

 

28	Inadequacy of damages

 

Without prejudice to any other rights or remedies that the Buyer may have, the Seller acknowledges and agrees that damages alone would not be an adequate remedy for any breach of the terms of Clause 10 or Clause 12 by the Seller. Accordingly, the Buyer shall be entitled to seek the remedies of injunction, specific performance or other equitable relief for any threatened or actual breach of the terms of those Clauses.

 

29	Language
29.1	If this Agreement is additionally signed in, or is translated into, any language other than English, the English language version shall prevail.
29.2	Any other document provided in connection with this Agreement, including any Transaction Document, shall be in English, or there shall be a properly prepared translation into English and the English translation will prevail in the case of any conflict between them.
30	Governing law and jurisdiction
30.1	This Agreement and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it or its subject matter or formation shall be governed by and construed in accordance with Belgian law.
30.2	Each party irrevocably agrees that the Dutch-speaking courts of Brussels, Belgium, (gerechtelijk arrondissement Brussel, Nederlandstalige rechtbanken) shall have exclusive jurisdiction to settle any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with this Agreement or its subject matter or formation.

 

IN WITNESS WHEREOF this document has been executed and delivered on the date first stated above.

 

 

SCHEDULE 1 - Particulars of the Company

 

Name:	Interactive Concepts BV
Registration number:	0822.607.312
Registered office:	Tempeliersstraat 14, 8570 Anzegem
Issued share capital:	Amount: EUR 30,000.00   Divided into: 300 registered shares without nominal value
Registered shareholder(s) (and number of Sale Shares held):	Karel Callens - 300 registered shares with share numbers 1-300
Beneficial owner of Sale Shares (if different) and number of Sale Shares held:	N/A
Directors:	Karel Callens
Auditor(s):	N/A
Details of charges:	N/A

 

 

SCHEDULE 2 - Warranties

 

Part 1 - General warranties

 

1	Power to sell the Company

 

1.1

The Seller has taken all necessary action and has all requisite power and authority to enter into and perform this Agreement and each of the other Transaction Documents to which he is a party in accordance with their respective terms.

 

1.2

This Agreement and each of the other Transaction Documents constitute (or shall constitute when executed) valid, legal and binding obligations on the Seller in accordance with their respective terms.

 

1.3

The execution and delivery by the Seller of this Agreement and each of the other Transaction Documents to which it is a party and compliance with their respective terms shall not breach or constitute a default under any of the following:

 

1.3.1

any agreement or instrument to which the Seller is a party or by which the Seller is bound; or

 

1.3.2

any order, judgment, decree or other restriction applicable to the Seller.

 

2

Shares in the Company and subsidiaries

 

2.1

The Sale Shares constitute the whole of the issued share capital of the Company and are fully paid.

 

2.2

The Seller is the sole legal and beneficial owner of the Sale Shares and is entitled to transfer the legal and beneficial title to the Sale Shares to the Buyer free from all Encumbrances, without the consent of any other person.

 

2.3

The Sale Shares are free from all Encumbrances.

 

2.4

No person has any right to require, at any time, the transfer, creation, issue or allotment of any share, loan capital or other securities (or any rights or interest in them) of the Company and neither the Seller nor the Company has agreed to confer any such rights and no person has claimed any such right.

 

2.5

No Encumbrance has been granted to any person or otherwise exists affecting:

 

2.5.1

the Sale Shares; or

 

2.5.2

any unissued shares, debentures or other unissued securities of the Company.

 

No commitment to create any such Encumbrance has been given nor has any person claimed any right to such an Encumbrance.

 

2.6

The Company:

 

2.6.1

does not hold or beneficially own, or has agreed to acquire, any shares, loan capital or other securities in any company;

 

2.6.2

does not have any subsidiaries or subsidiary undertakings;

 

 

2.6.3

is not nor has agreed to become a member of any partnership or other unincorporated association, joint venture or consortium (other than recognised trade associations);

 

2.6.4

does not have outside its country of incorporation, any branch or permanent establishment; or

 

2.6.5

does not control or take part in the management of any company or business organisation, nor has it agreed to do so.

 

2.7

The Company has not at any time:

 

2.7.1

purchased, redeemed or repaid any of its own share capital; or

 

2.7.2

given any financial assistance in contravention of any applicable law or regulation; or

 

2.7.3

issued any securities that are convertible into shares.

 

2.8

No shares in the capital of the Company have been issued and no transfer of any such shares has been registered (where applicable), except in accordance with all applicable laws and constitutional documents of the Company.

 

3

Constitutional and corporate documents

 

3.1

Copies of the constitutional and corporate documents of the Company have been Disclosed. Such copy documents:

 

3.1.1

are true, accurate and complete in all respects; and

 

3.1.2

have attached to them copies of all resolutions and agreements required by applicable law to be so attached; and

 

3.1.3

fully set out all the rights and restrictions attaching to each class of shares in the capital of the Company.

 

3.2

All statutory books and registers of the Company:

 

3.2.1

have been properly kept in accordance with all applicable laws;

 

3.2.2

are correctly written up to date; and

 

3.2.3

contain a true, complete and accurate record of all matters and information which should be contained in them.

 

No notice or allegation has been received that any such registers or books are incorrect or should be rectified.

 

3.3

All returns, particulars, resolutions and other documents that the Company is required by law to file with, or deliver to, any authority in any jurisdiction (including, in particular, any authority responsible for maintaining a register of companies) have been correctly made up and duly filed or, as the case may be, delivered.

 

3.4

All dividends or distributions declared, made or paid by the Company have been declared, made or paid in accordance with its memorandum and articles of association, all applicable laws and regulations.

 

 

3.5

All deeds and documents belonging to the Company, or to which it is a party, are in the possession of the Company.

 

4

Information

 

4.1

All information contained in the Disclosure Schedule is true, complete and not misleading.

 

4.2

All information given by or on behalf of the Seller (or its advisers or agents) to the Buyer (or its advisers or agents) in the course of negotiating the Transaction was, when given, and is, now, true, complete. and not misleading

 

4.3

The particulars of the Company in this Agreement are accurate.

 

5

Compliance with laws

 

5.1

The Company has at all times conducted its business in accordance with, and has acted in compliance with, all applicable laws and regulations of any relevant jurisdiction, as well as any judicial decisions, arbitration awards or decisions of any public authority to which it may be subject.

 

5.2

The Company, nor any of its respective directors or employees (current or past) has been convicted of any offence in relation to the Business or affairs of the Company.

 

6

Licences and consents

 

6.1

The Company has all necessary licences, consents, permits and authorities required to carry on its business in the places and in the manner in which such business is carried on at the date of this Agreement (Consents). Details of the Consents and copies of all related documentation have been Disclosed.

 

6.2

Each of the Consents is valid and subsisting the Company is not in breach of the terms or conditions of the Consents (or any of them).

 

6.3

There is no reason why any of the Consents may be suspended, cancelled, revoked or not renewed on the same terms.

 

7

Insurance

 

7.1

The Company maintains, and has at all material times maintained, adequate insurance cover against all losses and liabilities, including business interruption, and all other risks that are normally insured against by a person carrying on the same type of business as the Business.

 

7.2

The Disclosure Schedule includes complete and accurate details of all insurance policies maintained by or on behalf of the Company (Policies).

 

7.3

The Policies are in full force and effect, all premiums due on them have been paid and all other conditions of the Policies have been performed and observed.

 

7.4

The Company has not done, or omitted to do, anything that may result in an increase in the premium payable for any of the Policies, or that may adversely affect the renewal of any of the Policies.

 

7.5

None of the Policies:

 

 

7.5.1

are subject to any special or unusual terms or restrictions, or to the payment of any premium in excess of the normal rate;

 

7.5.2

are void or voidable, and nothing has been done, or omitted to be done, which could make any of them void or voidable; or

 

7.5.3

are capable of being terminated, or will otherwise cease to be available to the Company as a result of Closing.

 

7.6

The Disclosure Schedule contains complete and accurate details of all insurance claims made by the Company during the period of 12 months ending on the date of this Agreement.

 

7.7

There are no material outstanding claims under, or in respect of the validity of, any of the Policies and, so far as the Seller is aware, there are no circumstances likely to give rise to a claim under any of the Policies.

 

8

Disputes and investigations

 

8.1

Neither the Company, nor any of its respective Directors nor any person for whose acts the Company may be vicariously liable, is engaged or involved in, or otherwise subject to any of the following matters (such matters being referred to in this paragraph 8 as Proceedings):

 

8.1.1

any litigation or administrative, mediation, arbitration or other proceedings, or any claims, actions or hearings before any court, tribunal or any governmental, regulatory or similar body or any department, board or agency (except for debt collection in the normal course of business); or

 

8.1.2

any dispute with or investigation, inquiry or enforcement proceedings by any governmental, regulatory or similar body or agency in any jurisdiction.

 

8.2

No Proceedings have been threatened or are pending by or against the Company, any Director or any person for whose acts the Company may be vicariously liable, and there are no circumstances likely to give rise to any such Proceedings.

 

8.3

Company is not:

 

8.3.1

affected by any subsisting or pending judgment, order or other decision or ruling of a court, tribunal or arbitrator, or of any governmental, regulatory or similar body or agency in any jurisdiction; or

 

8.3.2

has given to any court, tribunal or arbitrator, or any governmental, regulatory or similar body or agency in any jurisdiction, or to any other third party a subsisting undertaking arising out of, or in connection with, any Proceedings.

 

9

Defective products and services

 

9.1

The Company has not sold any products or supplied any services which were at the time they were sold or supplied, faulty or defective, or which did not or do not comply with:

 

9.1.1

any warranties or representations expressly or impliedly made by or on behalf of the Company in connection with such products or services; or

 

9.1.2

any laws, regulations, standards and requirements applicable to such products or services.

 

 

9.2

No proceedings have been started, are pending or have been threatened against the Company:

 

9.2.1

in which it is claimed that any product sold by the Company is defective, not appropriate for its intended use or has caused bodily injury or material damage to any person or property when applied or used as intended; or

 

9.2.2

in respect of any services supplied by the Company.

 

9.3

There are no disputes between the Company and any of its respective customers, clients or any other third parties in connection with any products or services sold or supplied by the Company.

 

10

Customers and suppliers

 

10.1

The definition in this paragraph applies in this Agreement.

 

Material Counterparty: any customer, client or supplier of the Company who is of material importance to the business or profits of the Company.

 

10.2

In the period of 12 months ending on the date of this Agreement:

 

10.2.1

no Material Counterparty, except for Casio projectors, has ceased, or threatened to cease to do business with, or reduced, or threatened to reduce in any material respect the extent to which it does business with the Company;

 

10.2.2

there has been no material adverse change in the basis or terms on which any Material Counterparty does business with the Company; and

 

10.2.3

the Business has not been materially affected in an adverse manner as a result of (either individually or in combination) the loss of, or a reduction in trading with, any customer, client or supplier of the Company, or a change in the terms on which any such customer, client or supplier does business with the Company.

 

10.3

Other than the Buyer, no customer, client or supplier accounted for more than 25% of the aggregate sales or purchases (as applicable) made by the Company during the period of 12 months ending on the date of this Agreement.

 

11

Contracts

 

11.1

The definition in this paragraph applies in this Agreement.

 

Material Contract: any agreement, arrangement, understanding or commitment that the Company is a party to or bound by, and which is of material importance to the business, profits or assets of the Company.

 

11.2

Except as Disclosed, the Company is not a party to, or otherwise subject to, any agreement, arrangement, understanding or commitment which:

 

11.2.1

is a Material Contract;

 

11.2.2

is of an unusual or exceptional nature;

 

11.2.3

is not in the ordinary and usual course of the Business;

 

11.2.4

may be terminated as a result of any Change of Control of the Company;

 

 

11.2.5

restricts the freedom of the Company to carry on the whole or any part of the Business in any part of the world in such manner as it thinks fit;

 

11.2.6

involves agency or distributorship;

 

11.2.7

involves partnership, joint venture, consortium, joint development, shareholders or similar arrangements;

 

11.2.8

involves the grant of any sole or exclusive rights by or to the Company;

 

11.2.9

is incapable of complete performance in accordance with its terms within 6 months after the date on which it was entered into;

 

11.2.10

cannot be readily fulfilled or performed by the Company on time without undue or unusual expenditure of money and effort;

 

11.2.11

involves or is likely to involve an aggregate consideration payable by or to the Company in excess of EUR 10,000;

 

11.2.12

requires the Company to pay any commission, finders’ fee, royalty or the like;

 

11.2.13

is not on arm’s length terms;

 

11.2.14

is for the supply of goods and/or services by or to the Company on terms under which retrospective or future discounts, price reductions or other financial incentives are given; or

 

11.2.15

provides for payments or other dealings in or calculated by reference to the euro; or

 

11.2.16

is a finance lease, hire purchase, rental or credit sale agreement, or which otherwise provides for the purchase or right to purchase any asset by instalment payments.

 

11.3

There are no outstanding or ongoing negotiations of material importance to the business, profits or assets of the Company, or any outstanding quotations or tenders for a contract that, if accepted, would give rise to a Material Contract, or a contract of any other type as referred to in paragraph 11.2 of Part 1 of Schedule 2.

 

11.4

Each Material Contract is in full force and effect and binding on the parties to it.

 

11.5

Neither the Company, nor, to the best of the knowledge of the Seller, any counterparty is (or will, with the lapse of time, be) in default of:

 

11.5.1

any Material Contract; or

 

11.5.2

any other agreement, arrangement, undertaking or commitment a default of which would be material having regard to the trading, profits or financial position of the Company.

 

11.6

No notice of termination of a Material Contract has been received or served by the Company and there are to the knowledge of the Seller no grounds for the termination, rescission, avoidance, repudiation or a material change in the terms of any such contract.

 

 

12

Transactions with the Seller

 

12.1

There is no outstanding indebtedness or other liability (actual or contingent) and no outstanding contract, commitment or arrangement between the Company and any of the following the Seller or any or any person Connected with him.

 

12.2

The Seller is not entitled to a claim of any nature against the Company, or has assigned to any person the benefit of such claim.

 

12.3

Neither the Seller nor any person Connected with the Seller is at the date of this Agreement, nor has been at any time during the period of 5 years immediately preceding the date of this Agreement, concerned, interested or engaged, directly or indirectly and in whatever capacity, in any other business similar to or competitive with all or any part of the Business.

 

13

Finance and guarantees

 

13.1

The Disclosure Schedule contains full particulars of all:

 

13.1.1

money borrowed by the Company; and

 

13.1.2

loans, overdrafts or other financial facilities currently outstanding or available to the Company (Financial Facilities), including copies of all material documents relating to such Financial Facilities.

 

13.2

The total amount borrowed by the Company (whether pursuant to the Financial Facilities or otherwise) does not exceed any limitations on the borrowing powers the Company contained in:

 

13.2.1

its constitutional documents; or

 

13.2.2

in any debenture or other deed or document binding on the Company.

 

13.3

There are no circumstances or matters which could affect the continuance of any of the Financial Facilities, or which may result in an amendment of their terms.

 

13.4

No indebtedness of the Company is due and payable and no Encumbrance over any of the assets of the Company is now enforceable, whether by virtue of the stated maturity date of the indebtedness having been reached or otherwise.

 

13.5

The Company has not received any notice (the terms of which have not been fully complied with or carried out) from any creditor requiring any payment to be made in respect of any indebtedness (whether arising pursuant to the Financial Facilities or otherwise), or intimating the enforcement of any Encumbrance which it holds over the assets of the Company.

 

13.6

Except as Disclosed, no Encumbrance, guarantee, indemnity or other similar security arrangement has been given or entered into (or agreed to be given or entered into) by the Company or any third party in respect of borrowings or other obligations of the Company (whether arising pursuant to the Financial Facilities or otherwise).

 

13.7

The Company has not given or entered into (or agreed to give or enter into), any Encumbrance, guarantee, indemnity or other similar security arrangement in respect of the indebtedness of, or the default in the performance of any obligation by, any other person.

 

 

13.8

The Company has not:

 

13.8.1

factored or discounted any of its debts; or

 

13.8.2

engaged in financing of a type which would not need to be shown or reflected in the Accounts; or

 

13.8.3

waived any right of set-off it may have against any third party.

 

13.9

The Company does not have any outstanding loan capital or has lent any money that has not been repaid and there are no debts owing to the Company other than debts that have arisen in the normal course of the Business.

 

13.10

The debts owing to the Company as reflected in the Accounts:

 

13.10.1

have either been realised prior to the date of this Agreement or will, within three months after the date of this Agreement, be realised in cash for their full amount as included in those Accounts or books;

 

13.10.2

have not been outstanding (in whole or in part) for more than two months from its due date for payment; and

 

13.10.3

are as far as the Seller is aware not subject to any right of set-off or counterclaim.

 

13.11

The Company is not subject to any arrangement for receipt or repayment of any grant, subsidy or financial assistance from any government department or other body.

 

13.12

Particulars of the balances of all the bank accounts of the Company, showing the position as at the day immediately preceding the date of this Agreement, have been Disclosed and the Company does not have any other bank account. Since the date of those particulars, there have been no payments out of those bank accounts other than payments in the ordinary course of the Business.

 

13.13

The Company does not have any liabilities (including contingent liabilities) other than as disclosed in the Accounts or incurred in the ordinary and proper course of the Business since the Accounts Date.

 

13.14

No sum is owing by the Company to their auditors, solicitors or other professional advisers, and no accrual ought properly be made by it in respect of any such sum.

 

14

Insolvency

 

14.1

The Company:

 

14.1.1

is not insolvent nor unable to pay its debts within the meaning of the insolvency legislation applicable to the Company; and

 

14.1.2

has stopped paying its debts as they fall due.

 

14.2

No step has been taken in any jurisdiction to initiate any process by or under which:

 

14.2.1

the ability of the creditors of the Company to take any action to enforce their debts is suspended, restricted or prevented;

 

 

14.2.2

some or all of the creditors of the Company accept, by agreement or in pursuance of a court order, an amount less than the sums owing to them in satisfaction of those sums with a view to preventing the dissolution of the Company;

 

14.2.3

a person is appointed to manage the affairs, business and assets of the Company on behalf of their creditors; or

 

14.2.4

the holder of a charge over all or any of the assets of the Company is appointed to control the business and/or all or any assets of the Company.

 

14.3

No process has been initiated which could lead to the Company being dissolved and its assets being distributed among their creditors, shareholders or other contributors.

 

14.4

No distress, execution or other process has been levied or enforced on, and no creditor or encumbrancer has taken control of, any goods or assets of the Company.

 

14.5

None of the events referred to in paragraph 14.1 to paragraph 14.4 above has occurred in relation to the Seller.

 

15

Assets

 

15.1

The assets included in the Accounts, together with any assets acquired since the Accounts Date and all other assets used by the Company in connection with the Business (except for those disposed of since the Accounts Date in the normal course of the Business) are:

 

15.1.1

owned by the Company, and the relevant owner has good and marketable title to such assets;

 

15.1.2

not the subject of any lease, lease hire agreement, hire purchase agreement or agreement for payment on deferred terms, or any licence or factoring arrangement; except for the car lease to be transferred to the Seller (or its management company) as soon as possible following Closing, and

 

15.1.3

in the possession and control of the Company.

 

15.2

Except as Disclosed, none of the assets, undertaking or goodwill of the Company is subject to an Encumbrance, or to any agreement or commitment to create an Encumbrance, and no person has claimed to be entitled to create such an Encumbrance.

 

15.3

The assets of the Company comprise all the assets necessary for the continuation of the Business.

 

16

Plant and equipment

 

16.1

The facilities and any equipment used by the Company in connection with the Business are:

 

16.1.1

in good working order and have been regularly and properly maintained;

 

16.1.2

capable, and will continue to be capable, of doing the work for which they were designed; and

 

16.1.3

not surplus to the current or proposed requirements of the Company.

 

 

17

Environment and health and safety

 

17.1

The definitions in this paragraph apply in this Agreement.

 

	Environment	the natural and man-made environment including all or any of the following media: air (including air within buildings and other natural or man-made structures above or below the ground), water, land, and any ecological systems and living organisms (including natural persons) supported by those media.
	EHS Laws	all applicable laws, statutes, regulations, subordinate legislation, by-laws, common law and other national, international, federal, European Union, state and local laws, judgments, decisions and injunctions of any court or tribunal, and legally binding codes of practice and guidance notes to the extent that they relate to or apply to the Environment energy efficiency, climate change or the health and safety of any person.
	EHS Matters	all matters relating to:

 

	(a)	pollution or contamination of the Environment;
	(b)	the presence, disposal, release, spillage, deposit, escape, discharge, leak, migration or emission of Hazardous Substances or Waste;
	(c)	the exposure of any person to any Hazardous Substances or Waste;
	(d)	the health and safety of any person, including any accidents, injuries, illnesses and diseases;
	(e)	the creation or existence of any noise, vibration, odour, radiation, common law or statutory nuisance or other adverse impact on the Environment; or
	(f)	the condition, protection, maintenance, remediation, reinstatement, restoration or replacement of the Environment or any part of it.

 

	EHS Permits	any permits, licences, consents, certificates, registrations, notifications or other authorisations required under any EHS Laws for the operation of the Business or in relation to the Leasehold Property.
	Harm	harm to the Environment, and in the case of natural person, this includes offence caused to any of its senses or harm to its property.
	Hazardous Substances	any material, substances or organism which, alone or in combination with others, is capable of causing Harm.
	Waste	any waste, including any by-product of an industrial process and anything that is discarded, disposed of, spoiled, abandoned, unwanted or surplus, irrespective of whether it is capable of being recovered or recycled or has any value.

 

 

17.2

The Company has obtained and complied at all times with all EHS Permits. All EHS Permits are in full force and effect, and there are no facts or circumstances that may lead to the revocation, suspension, variation or non-renewal of or the inability to transfer any EHS Permits.

 

17.3

The Company has at all times operated in compliance with all EHS Laws in force from time to time and there are no facts or circumstances that may lead to any breach of or liability under any EHS Laws or any claim or liability in respect of EHS Matters.

 

17.4

All information provided by or on behalf of the Company to any relevant enforcement authority, and all records and data required to be maintained by the Company under the provisions of any EHS Laws, are complete and accurate.

 

17.5

So far as the Seller is aware, there are no Hazardous Substances at, on or under, nor have any Hazardous Substances been emitted, escaped or migrated from, the Leasehold Property.

 

17.6

The Company has not been required to hold, nor has it ever applied for, a waste disposal licence or waste management licence under any EHS Laws.

 

17.7

There have been, so far as the Seller is aware, no claims, investigations, prosecutions or other proceedings brought or threatened against the Seller or the Company (or any of their respective directors, officers or employees) in respect of Harm arising from the operation of the Business. At no time has the Seller or the Company received any notice, communication or information alleging any liability in relation to any EHS Matters or that any remediation works are required.

 

17.8

The Company has adequate exploitation liability insurance cover in respect of the Business and the Leasehold Property and no claims have been made or are contemplated under any such insurance.

 

17.9

The Company does not have, nor is likely to have any actual or potential liability under any EHS Laws by reason of it having owned, occupied or used any Previously-owned Land and Buildings.

 

17.10

The Company has not given or received any warranties or indemnities or entered any other agreement in respect of any liabilities, duties or obligations that arise under EHS Laws.

 

18

Intellectual property

 

18.1

The definition in this paragraph applies in this Agreement.

 

Intellectual Property Rights

patents, rights to inventions, copyright and related rights trademarks and service marks, business names and domain names, rights in get-up, goodwill and the right to sue for passing off rights in designs, rights in computer software, database rights, rights to use, and protect the confidentiality of, confidential information (including know-how and trade secrets), and all other intellectual property rights, in each case whether registered or unregistered and including all applications and rights to apply for and be granted, renewals or extensions of, and rights to claim priority from, such rights and all similar or equivalent rights or forms of protection which subsist or will subsist now or in the future in any part of the world.

 

 

18.2

The Seller confirms that the Company does not own any Intellectual Property Rights, other than licenses on the computer software it uses, her domain name and company and trade name.

 

18.3

All licences, agreements, authorisations and permissions (in whatever form and whether express or implied) under which the Company:

 

18.3.1

uses or exploits Intellectual Property Rights owned by any third party; or

 

18.3.2

has licensed or agreed to license Intellectual Property Rights to, or otherwise permitted the use of any Intellectual Property Rights by, any third party, have been Disclosed.

 

18.4

Except as Disclosed, the Company is the sole legal and beneficial owner of (or applicant for) the Intellectual Property Rights used in the course of Business, free from all Encumbrances.

 

18.5

The Company does not require any Intellectual Property Rights other than those Disclosed in order to carry on the Business as it is conducted at the date of this Agreement.

 

18.6

The Intellectual Property Rights Disclosed are valid, subsisting and enforceable and nothing has, as far as the Seller is aware, been done, or not been done, as a result of which any of them has ceased or might cease to be valid, subsisting or enforceable. In particular:

 

18.6.1

all application and renewal fees and other steps required for the maintenance or protection of such rights have been paid on time or taken;

 

18.6.2

all confidential information (including know-how and trade secrets) owned or used by the Company has, as far as the Seller is aware, been kept confidential and has not been disclosed to third parties (other than parties who have signed, if applicable, written confidentiality undertakings in respect of such information, details of which are set out in the Disclosure Schedule);

 

18.6.3

no trade name or domain name identical or similar to any such rights has, as far as the Seller is aware, been registered or is being used by any person in the same or a similar business to that of the Company, in any jurisdiction in which the Company or any Subsidiary has registered or is using that trade name or domain name; and

 

18.6.4

there are and have been, to the knowledge of the Seller, no claims, challenges, disputes or proceedings, pending or threatened, in relation to the ownership, validity or use of such rights.

 

18.7

As far as the Seller is aware, nothing is due to be done within 30 days of the date of this Agreement the omission of which would jeopardise the maintenance or prosecution of any of the Intellectual Property Rights owned or used by the Company.

 

18.8

As far as the Seller is aware, there has been no infringement by any third party of any of the Intellectual Property Rights Disclosed, nor, as far as the Seller is aware, any third party breach of confidence, passing off or actionable act of unfair competition in relation to the business or assets of the Company, and no such infringement, breach of confidence, passing off or actionable act of unfair competition is, as far as the Seller is aware, current or anticipated.

 

 

18.9

The activities of the Company, and any licensee of Intellectual Property Rights granted by the Company have not:

 

18.9.1

infringed, do not infringe and are not likely to infringe the Intellectual Property Rights of any third party;

 

18.9.2

constituted, do not constitute and are not likely to constitute any breach of confidence, passing off or actionable act of unfair competition; and

 

18.9.3

given and do not give rise to any obligation to pay any royalty, fee, compensation or any other sum whatsoever.

 

19

Information technology

 

19.1

The definitions in this paragraph apply in this Agreement.

 

	IT Contracts	all written and oral arrangements and agreements (including those currently being negotiated) under which any third party (including, without limitation, any source code deposit agent) provides or will provide any element of, or services relating to, the IT System, including leasing, hire purchase, licensing, maintenance, website hosting, outsourcing, security, back-up, disaster recovery, insurance, cloud computing and other types of services agreements).
	IT System	all computer hardware (including network and telecommunications equipment), databases (Databases) and software (including associated user manuals, object code and source code and other materials sufficient to enable a reasonably skilled programmer to maintain and modify the software (Source Code)) (Software) owned, used, leased or licensed by or to the Company.
	Virus	any program which contains malicious code or infiltrates or damages a computer system without the owner’s informed consent or is designed to do so or which is hostile, intrusive or annoying to the owner or user and has no legitimate purpose.

 

19.2

The IT System of the Company consists of the hardware indicated in the Accounts and Disclosed. The IT Contracts are limited to the software licenses Disclosed. To the best knowledge of the Seller, the IT Contracts are adequate for the purposes of the Business.

 

19.3

Except to the extent provided in the IT Contracts, the Company is the owner and in possession of the IT System free from Encumbrances. The Company has obtained all necessary rights from third parties to enable them to make exclusive and unrestricted use of the IT System for the purposes of the Business both before and after Closing.

 

19.4

The IT Contracts are valid and binding and no act or omission has, as far as the Seller is aware, occurred which would, if necessary with the giving of notice or lapse of time, constitute a breach of any such contract.

 

19.5

There are and have been no claims, disputes or proceedings arising or, as far as the Seller is aware, threatened under any IT Contracts.

 

19.6

The elements of the IT System:

 

 

19.6.1

are functioning properly and in accordance with all applicable specifications and with the service levels set out in the IT Contracts, and are reasonably fit for the purposes of the Business;

 

19.6.2

are not defective in any respect;

 

19.6.3

do not contain any Virus;

 

19.6.4

have reasonable sufficient capacity and performance to meet the current requirements of the Business;

 

19.6.5

include sufficient user information to use and operate the IT System for the current Business; and

 

19.6.6

all versions of the Software used by the Business are currently supported by the respective owners of the Software.

 

19.7

The Company has implemented appropriate but reasonable procedures in accordance with best industry practice (including in relation to off-site working where applicable) for ensuring the security of the IT System and the confidentiality and integrity of all data stored in it.

 

19.8

A copy of the disaster recovery plan and a data security breach plan, is attached to the Disclosure Schedule.

 

19.9

The Company has not been or is in breach of any data security breach reporting or notification requirement under any applicable law, regulation or mandatory code.

 

20

Data protection

 

20.1

The Company has fully complied with the requirements of all applicable legislation concerning rights in respect of privacy and personal data.

 

21

Employment

 

21.1

The definitions in this paragraph apply in this Agreement.

 

	Employee	any person employed by the Company under a contract of employment.
	Employment Legislation	legislation applying in Belgium affecting contractual or other relations between employers and their employees including (but not limited to) any legislation (and any amendment, extension or re-enactment of such legislation) and any claim arising under European treaty provisions or directives enforceable against the Company or by any Employee.

 

21.2

The Company does not and never has had any Employees.

 

22

Property

 

22.1

The definitions in this paragraph apply in this Agreement.

 

	Current Use	the identified use for the Leasehold Property as set out in Schedule 3.
	Lease	the lease under which a Leasehold Property is held.
	Leasehold Property	means the Leasehold Property or part or parts of it, detailed of which are as set out in Schedule 3.

 

 

22.2

The particulars of the Leasehold Property set out in Schedule 3 are true and complete.

 

22.3

The Leasehold Property is the only land and buildings used or occupied by the Company.

 

22.4

The Company does not have any right of ownership, right of use, option, right of first refusal or contractual obligation to purchase, or any other legal or equitable right or interest in, or affecting, any land or buildings other than the Leasehold Property.

 

22.5

The Company does not have any actual or contingent liability in respect of any other property.

 

22.6

The Company identified as the owner in Schedule 3 is, as far as the Seller is aware, in possession and actual occupation of the whole of the Leasehold Property on an exclusive basis and, as far as the Seller is aware, no right of occupation or enjoyment has been acquired or is in the course of being acquired by any third party, or has been granted or agreed to be granted to any third party.

 

22.7

The Seller has in its possession and control and has Disclosed:

 

22.7.1

copies of all the agreements and documents necessary to prove good and marketable title to the Leaseholder Property; and

 

22.7.2

in relation to the Lease:

 

22.7.2.1

all consents required under the Lease;

 

22.7.2.2

copies of all assignments of the Lease; and

 

22.7.2.3

evidence of the current annual rent payable under the Lease.

 

22.8

The Lease has been validly granted.

 

22.9

In relation to the Lease, all rent and other sums payable by the Company have been paid as and when they became due and no Lease Sums have been:

 

22.9.1

set off or withheld; or

 

22.9.2

commuted, waived or paid in advance of the due date for payment.

 

22.10

No collateral assurances, undertakings or concessions have been made by the Company to the Lease.

 

22.11

All replies given in writing by or on behalf of the Seller or the Company in response to any enquiries raised in writing by or on behalf of the Buyer in relation to the Leasehold Property were complete and accurate at the date they were given and would still be complete and accurate if the replies were instead being given on the Closing Date.

 

22.12

All covenants, restrictions, stipulations and other Encumbrances affecting the Leasehold Property have been fully observed by the Company and performed and no notice of any alleged breach has been received by the Company.

 

 

22.13

There are, as far as the Seller is aware, no disputes relating to or affecting the Leasehold Property.

 

22.14

The Company has complied with any applicable law or regulation in respect of the Leasehold Property. All planning permissions, orders and regulations issued under the applicable laws and regulations have to the extent applicable been fully complied with.

 

22.15

The Leasehold Property is in a good state of repair and condition and is fit for the Current Use.

 

23

Accounts

 

23.1

The Accounts:

 

23.1.1

have been prepared in accordance with Belgian GAAP and using the accounting standards, policies and practices generally accepted in Belgium; and

 

23.1.2

comply with the requirements of the law of Belgium.

 

23.2

The Accounts:

 

23.2.1

Make at the Accounts Date proper and adequate provision or reserve for all bad and doubtful debts, obsolete or slow-moving inventory and for depreciation on fixed assets;

 

23.2.2

do at the Accounts Date not overstate the value of current or fixed assets; and

 

23.2.3

do at the Accounts Date not understate any liabilities (whether actual or contingent); and

 

23.2.4

contain at the Accounts Date either provision adequate to cover, or full particulars in notes of, all Taxes (including deferred taxes) and other liabilities (whether quantified, contingent, disputed or otherwise) of the Company as at the date to which they have been prepared.

 

23.3

The Accounts:

 

23.3.1

give a true and fair view of the state of affairs of the Company as at the Accounts Date and of the profit and loss of the Company for the accounting period ended on the date to which they have been prepared; and

 

23.3.2

(save as the Accounts expressly disclose) are not affected by any extraordinary, exceptional or non-recurring items or any other factor that would make the financial position and results shown by the Accounts unusual or misleading in any material respect.

 

23.4

The Accounts have been approved and filed in accordance with the requirements of applicable law.

 

23.5

The Accounts have been prepared on a basis consistent with the accounts of, the Company, for the two prior accounting periods without any change in accounting policies used.

 

23.6

The Accounts have not been influenced in any material respect by calling in debtors in advance of the usual debtor days, and the level of creditors was not influenced in any material respect by paying creditors outside of the usual creditor days.

 

 

24

Financial and other records

 

24.1

All financial and other records of the Company (Records):

 

24.1.1

have been properly prepared and maintained;

 

24.1.2

constitute an accurate record of all matters required by law to appear in them and, in the case of the accounting records, comply with the requirements of the law of Belgium;

 

24.1.3

do not contain any material inaccuracies or discrepancies; and

 

24.1.4

are in the possession of the Company.

 

24.2

No notice has been received or allegation made that any of the Records are incorrect or should be rectified.

 

24.3

All statutory records, including the accounting records, required to be kept or filed by the Company have been properly kept or filed and comply with all requirements of applicable legislation.

 

24.4

All deeds and documents belonging to the Company are in the possession of the Company.

 

24.5

To the extent that any of the Records are maintained or stored electronically:

 

24.5.1

either the Company is the owner or licensee of any hardware and software required to access, maintain, copy and use such Records, and such ownership is not shared with any other person; and

 

24.5.2

such Records are adequately backed-up.

 

25

Changes since Accounts Date

 

25.1

Since the Accounts Date:

 

25.1.1

the Company has conducted its Business in the normal course and as a going concern;

 

25.1.2

there has been no material adverse change in the turnover, financial position or, as far as the Seller is aware, the prospects of the Company;

 

25.1.3

the Company has not issued or agreed to issue any share or loan capital;

 

25.1.4

no dividend or other distribution of profits or assets has been, or agreed to be, declared, made or paid by the Company;

 

25.1.5

the Company has not borrowed or raised any money or given or taken any form of financial security;

 

25.1.6

no capital expenditure has been incurred on any individual item by the Company in excess of EUR 10,000 and the Company has not acquired, invested or disposed of (or agreed to acquire, invest or dispose of) any individual item in excess of EUR 10,000, except as set out in Schedule 4;

 

 

25.1.7

no shareholder resolutions of the Company have been passed other than as routine business at the annual general meeting;

 

25.1.8

there has been no abnormal increase or reduction of inventory;

 

25.1.9

none of the inventory reflected in the Accounts has realised an amount less than the value placed on it in the Accounts;

 

25.1.10

the Company has not offered price reductions or discounts or allowances on sales of inventory or sold inventory at less than its value in the Accounts;

 

25.1.11

the Company has paid its creditors within the applicable periods agreed with the relevant creditor and there are no amounts owing by the Company at the Accounts Date which have been outstanding for more than 90 days; and

 

25.1.12

there has been no reduction in the value of the net assets of the Company determined in accordance with the same accounting principles and policies as those applied in the Accounts (and on the basis that each of the assets is valued at a figure no greater than the value attributed to it in the Accounts or, in the case of any of the assets acquired by the Company after the Accounts Date, at a figure no greater than cost).

 

26

Effect of the Transaction

 

26.1

Neither the acquisition of the Sale Shares by the Buyer nor compliance with the terms of this Agreement will:

 

26.1.1

relieve any person of any obligation to the Company (whether contractual or otherwise), or enable any person to determine any such obligation or any right or benefit enjoyed by the Company, or to exercise any other right in respect of, the Company;

 

26.1.2

give rise to, or cause to become exercisable, any right of pre-emption over the Sale Shares;

 

26.1.3

entitle any person to receive from the Company any finder’s fee, brokerage or other commission in connection with the Transaction;

 

26.1.4

entitle any person to acquire, or affect the entitlement of any person to acquire, shares in the Company;

 

26.1.5

as far as the Seller is aware, result in any customer, client or supplier being entitled to cease dealing with the Company or reducing its level of business, or changing the terms on which it deals, with the Company;

 

26.1.6

result in a breach of contract, law, regulation, order, judgment, injunction, undertaking, decree or other like imposition;

 

26.1.7

result in the loss or impairment of, or any default under any licence, authorisation or consent required by the Company for the purposes of the Business;

 

26.1.8

result in any present or future indebtedness of the Company becoming due and payable or capable of being declared due and payable prior to its stated maturity date, or cause any Financial Facility to be terminated or withdrawn; or

 

26.1.9

result in the creation, imposition, crystallisation or enforcement of any Encumbrance on any of the assets of the Company.

 

 

27

Warranties as to Initial Consideration Shares.

 

27.1

As to the Initial Consideration Shares of Boxlight to be issued to Seller at Closing, the Seller represents, warrants and acknowledges that:

 

27.1.1

the Initial Consideration Shares have not been registered to sale under the United States Securities Act of 1933, as amended (Securities Act), and may not be sold, pledged,, hypothecated or assigned in the absence of a registration statement declared effective under the Securities Act by the United States Securities and Exchange Commission (SEC), or the receipt of a legal opinion from counsel acceptable to Boxlight that such registration is not required by reason of the existence of an applicable exemption from such registration requirements;

 

27.1.2

a restrictive legend consistent with Clause 27.1 may be included in the share certificate evidencing the Initial Consideration Shares;

 

27.1.3

the Initial Consideration Shares are “restricted securities” within the meaning of Rule 144(a)(1) as promulgated under Regulation D of the Securities Act (Regulation D), and may only be publicly sold by Seller without registration under the Securites Act in a brokers transaction under Rule 144 following six (6) months from the date of issuance of such Initial Consideration Shares; and

 

27.1.4

Seller and his spouse have a combined net worth in excess of USD$1,000,000 and meets the requirements of an accredited investor within the definition of such term as set forth in Rule 501 of Regulation D, and has no immediate need for liquidity in his investment in the Initial Consideration Shares.

 

 

Part 2 - Tax Warranties

 

1

Tax returns and compliance

 

1.1

The Company has within the relevant time limits complied with all applicable laws in respect of Tax, especially with regard to correctly making all returns, giving all notices and submitting all computations, accounts or other information required to be made, given or submitted to any Tax Authority and all such returns and other documentation were and are true, complete and accurate and gave disclosure of all material facts and circumstances.

 

1.2

All claims, elections and disclaimers assumed for the purposes of the Accounts or the returns have within the relevant time limits been correctly made and submitted, and remain valid in all respects and the Disclosure Schedule contains full details of any claims, elections, disclaimers, returns or other documentation which need to be submitted to a Tax Authority, where the time limit has not expired at Closing.

 

1.3

The Company has no agreement or arrangement with a Tax Authority whereby it is assessed to or accounts for Tax other than in accordance with the strict terms of relevant legislation or published practice of the relevant Tax Authority.

 

2

Deductions and Payments of Tax

 

2.1

The Company has:

 

2.1.1

properly deducted and/or withheld from payments made by it all Tax required to be deducted and/or withheld; and

 

2.1.2

within the relevant time limits paid or accounted for all Tax which it is or was liable to pay or account for (including Tax required to be deducted or withheld from payments).

 

3

Records

 

3.1

The Company has maintained and is in possession of all records required for Tax purposes and all such records remain true and complete. In particular, without limitation, the Company has sufficient records to enable it to calculate any present or, so far as possible, future liability for Tax or its entitlement to any deduction, relief or repayment of Tax and any claims or elections it has made relating to Tax.

 

3.2

All transactions in respect of which any clearance or consent was required from any Tax Authority have been entered into by the Company after such consent or clearance has been properly obtained. Any application for such clearance or consent has been made on the basis of full and accurate disclosure of all the relevant material facts and considerations, and all such transactions have been carried into effect only in accordance with the terms of the relevant clearance or consent.

 

4

Penalties, disputes and investigations

 

4.1

The Company is not, and has not within the last six years been, liable to pay any fine, interest, surcharge or penalty in relation to Tax, nor has it been involved in any dispute with, or the subject of (as far as the Seller is aware) an enquiry or investigation by, a Tax Authority and there are no facts which are likely to cause it to become liable to pay any fine, interest, surcharge or penalty nor to give rise to any such dispute, enquiry or investigation.

 

4.2

No enquiry which has been made into a tax return of the Company remains outstanding.

 

 

5

Secondary Liabilities

 

No Tax has been or may be assessed on or required to be paid by the Company where the amount in question is the primary liability of another person, and where such assessment or requirement arises or arose by reason of the failure by any other person to satisfy a Tax liability.

 

6

Residence and Overseas Matters

 

6.1

The Company is, and always has been, resident only in Belgium for Tax purposes (and has never been treated as resident outside Belgium for the purposes of any double tax convention).

 

6.2

The Company is not carrying on and has never carried on any trade or otherwise been liable to Tax other than in Belgium, or is acting or has ever acted as the branch, agent, factor, or tax representative of any person resident outside Belgium for Tax purposes and no such person carries on any trade or business through the Company.

 

7

Withholding Tax (“bedrijfsvoorheffing”)

 

7.1

The Company has properly operated all Belgian company withholding taxes and complied with all its obligations in respect of national insurance and has complied with all its reporting, accounting and payment obligations to the relevant authorities.

 

7.2

No person other than the Seller with respect to the Sale Shares, has within the last three years held any shares or securities or options over or interests in any shares or securities of the Company and the Company could not be liable after Closing to pay any Tax in respect of, or in consequence of any event occurring in relation to, any such shares, securities, options or interests.

 

8

VAT and Indirect Taxes

 

8.1

The Company is registered in Belgium for the purposes of the legislation relating to Belgian VAT and is not registered, and is not required to register, in any other jurisdiction in respect of VAT or any similar tax.

 

8.2

All supplies made by the Company are taxable supplies for Belgian VAT purposes.

 

9

Chargeable Gains

 

The amount at which any asset is included in the Accounts and/or the amount of consideration given on the acquisition of any asset by the Company since the Accounts Date, is such that on the disposal of such asset for a consideration equal to such amount (disregarding any statutory right to make any election or to claim any allowance or relief), no liability to tax in respect of any chargeable gain will arise.

 

10

Capital Allowances

 

The value attributed in the Accounts to each asset, or the aggregates of the values attributed to the assets in each pool of assets in respect of which separate computations for capital allowances are required to be made or, as a result of any election, are made, is such that on a disposal of each such asset or pool of assets on the Accounts Date for a consideration equal to such a value or aggregate value no balancing charge would arise.

 

 

11

Groups

 

11.1

The Company has no outstanding obligation to make or any entitlement to receive any payment to or from another company in respect of any amounts surrendered, or agreed to be surrendered, by way of group relief, either to or by the Company.

 

11.2

No liability to Tax (disregarding any statutory right to make any election, or to claim any allowance or relief) will or may arise to the Company or be increased as a result of or in consequence of the entry into this Agreement and/or the sale of the Company pursuant to this Agreement.

 

12

Anti-avoidance

 

12.1

Neither the Company nor any Connected person has carried out, been party to, or otherwise involved in any transaction:

 

12.1.1

which could give rise to a liability to Tax under any legislation introduced to counter tax avoidance;

 

12.1.2

where the sole or main purpose or one of the main purposes was the avoidance of Tax or the obtaining of a tax advantage, whether as part of a scheme, arrangement, series of transactions or otherwise; and/or

 

12.1.3

in relation to which the Company considered or was advised that there was a risk of a liability or increased liability to Tax in accordance with principles established in relation to tax avoidance in case law.

 

12.2

The Company has not been party to any transaction in respect of which a different amount or value than the amount or value of the actual consideration given or received by the Company should or could be substituted for Tax purposes.

 

12.3

In relation to each transaction for the supply of goods or services or the lending or borrowing of money into which the Company has entered with a party with which it was connected, the Company has full contemporaneous documentary evidence of the process used to establish that arm’s length terms applied.

 

13

Events since Accounts Date

 

13.1

Since the Accounts Date:

 

13.1.1

the Company has not been involved in any transaction outside the ordinary and normal course of business which has given or could give rise to a liability to Tax or would have given rise to such a liability but for the availability of any relief ;

 

13.1.2

the Company has not incurred or become liable to incur, and there is no continuing obligation to pay, any amount which will not be wholly deductible in computing taxable profits, except for capital expenditure qualifying for capital allowances and expenditure on entertainment, except as indicated in Schedule 4; and

 

13.1.3

the Company has not entered into any transaction which will or may (disregarding any statutory right to make any election or claim any allowance or relief) give rise to a liability to Tax on chargeable gains.

 

 

SCHEDULE 3 - Particulars of the Leasehold Property

 

Description of the Property	Warehouse (100m²) at Maalbeekstraat 2, 8790, Waregem, Belgium
Owner	Arcadia NV (headlease)   Sulmon NV (sublease)
Description of Lease	Use of the warehouse in accordance with article 18, §1, paragraph 2, 9° of the Belgian VAT-code, solely to be used for storage of digital boards. Other products can be stored with prior written approval of the lessor. Q&A contains a question whether previously, such an approval has been obtained.
Registered/unregistered	Not specified
Title number (if registered)	Not specified
Contractual date of termination of Lease	31/03/2028 (9 years)
Occupier	Interactive Concepts BV
Current Use	Storage of digital boards.

 

 

SCHEDULE 4 - Disclosure Schedule

 

Content data room

 

Legal DD

 

A. Checklist legal due dilligence – Interactive Concepts BV

 

B. Checklist 210203 QA Project Felix

 

1.1 Statuten

1.2 Inschrijving KBO

1.3 AV verslagen

1.3.1 AV getekend verslag 2015

1.3.2 AV getekend verslag 2016

1.3.3 AV getekend verslag 2017

1.3.4 AV getekend verslag 2018

1.3.5 AV getekend verslag 2019

1.3.6 AV getekend verslag 2020

1.4 Samenstelling bestuur

1.5 Grootte onderneming

1.6 Bevestiging registratie UBO Interactive Concepts BV

1.6.1 Aandelenregister

1.9 Samenstelling dagelijks bestuur

1.10 Bankgegevens

 

2.13 Folder _ toelichting AXXI BV

 

4.22.1 Huurcontract magazijn

4.22.2 Factuur handling Sulmon NV

4.22.3 Extra duiding bij facturatie handling

4.23.1 Onderhoudscontract bedrijfswagen

4.23.2 Renting bedrijfswagen

4.24.1 Casio invoice

4.24.2 Conen Mounts invoice

4.24.3 Kindermann invoice

4.24.4 Lumens invoice _ shipment from Holland warehouse

4.24.5 Lumens invoice _ shipment from Taiwan factory

4.24.6 Main supplier conditions

4.26 Algemene voorwaarden Interactive Concepts BV

4.27.1 Financiering leasing project scholengroep Ferdinand Verbiest

4.27.2 Fiscoline Belfius 071020

4.27.3 Fiscoline Belfius 171220

4.29.1 Taks Shelter 2018

4.29.2 Taks Shelter 2019

 

5.39 Contracten verzekering

5.39 Folder _ toelichting Q&O verzekeringen

5.39.1 Polis IVECO

5.39.2 Polis brand

5.39.3 Polis BA uitbating

5.39.4 Polis BA na levering

5.39.5 Polis 2573862

5.39.6 Polis bedrijfswagen

5.40.1 Attest betaling auto

5.40.2 Attest betaling BA

5.40.3 Attest betaling brand

 

6.43 IPT contract Karel Callens

 

 

Financial DD

 

A. Interactive Concepts Information Request 210127

 

1. Fiche 281.20 bezoldiging bedrijfsleider 2020

2. Afschrijvingstabellen

2.1 2018

2.2 2019

2.3 2020

2.4 Herziening investeringen

3. Vervaldagbalans klanten anoniem

4. Stock units 311220v2

5. Cash balance updates

5.1 See initial cash balance in Word document “Information request 210127”

6.1 Vervaldagbalans leveranciers

6.2 Garantiekosten

6.2.1 2017

6.2.2 2018

6.2.3 2019

7. Rekening Courant Karel Callens _ verrichtingen 211231 tot closing

8.1.1 BTW aangiftes

8.1.2 BTW ontvangstbevestigingen

8.2.1 Aflossingstabel voorafbetaling 150k 2020

8.2.2 Contract voorbetaling 30k 2020

8.3 Berekening tax shelter 2018

8.3.1 Tax shelter 2018

8.4 Berekening tax shelter 2019

8.4.1 Tax shelter 2019

9. Belastingaangiftes

9.1 2017 aangifte

9.2 2018 aangifte

9.3 2019 aangifte

9.4 Aanslagbiljet vennootschapsbelasting 2018

9.5 Aanslagbiljet vennootschapsbelasting 2019

9.6 Aanslagbiljet vennootschapsbelasting 2020

10. Aangifte RV intresten

10.1 aangifte RV intresten 2017

10.2 aangifte RV intresten 2018

10.3 aangifte RV intresten 2019

11.1 IC 12 2018 jaarrapport

11.2 IC 12 2018 btw omzetvergelijking

11.3 IC 12 2019 jaarrrapport

11.4 IC 12 2019 btw omzetvergelijking

12. Afsluiting boekjaar 2020

12.1 IC 12 2020 jaarrapport

12.2 Notulen AV IC BV 31 12 2020

12.3 Brief betaling RV op intresten RC 2020

13. BAV _ uitkering liquidatiereserve 2021

13.1 Notulen BAV

13.2 Notulen bestuursorgaan IC BV – uitkering liquidatiereserve 2021

13.3 Bijzonder verslag bestuursorgaan liquiditeitstest 2021

13.4 Verklaring Axxi – uitvoering testen

13.5 Aangifte RV liquidatiereserve 2021

14. Brief betaling bedrijfsvoorheffing IC BV 1e kwartaal 2021

 

 

SCHEDULE 5 – TAX COVENANT

 

The Seller shall indemnify and hold harmless the Buyer or, at Buyer’s option, the Company, on a euro-for-euro basis from and against:

 

●

all Taxes incurred (including all additional taxes, increases and penalties imposed by any Governmental Authority) by the Company in respect of any period ending on the Accounts Date (together with all expenses incurred in connection therewith) which have not been paid on or before the Accounts Date or which have not been sufficiently accounted for in the Accounts;

 

●

all Taxes or other obligations in relation to Tax incurred by the Company with respect to the period since the Accounts Date until the Closing Date which are not incurred in the ordinary course of business of the Company as a result of the profitable continuance of the Company’s activities in the ordinary course of business and in compliance with all applicable laws and the Agreement;

 

●

all Taxes incurred by the Company resulting from the non-deductibility, or refusal by the Tax authorities or any other competent authority to accept the deductibility, for income tax purposes (in whole or in part) of any expenses or costs borne by the Company on or before the Closing Date and deducted by the Company for Tax purposes;

 

●

all Taxes incurred by the Company, or the Buyer, arising out of or in connection with the payment of the Purchase Price to the Seller;

 

●

all Taxes incurred or payable by the Company arising out of or in connection with any Leakage, including any Permitted Leakage;

 

●

all Losses arising out of or in connection with any Tax liability resulting from an overstatement of provisions or from or in connection with transactions between the Company and the Seller or any person Connected with the Seller on or before the Closing Date;

 

●

all Losses incurred by the Company arising out of or in connection with a failure to file or late filing of Tax returns or filings, or other documents (including tax slips (“fiscale fiches” / “fiches fiscales”) for any remuneration, commission or benefit granted to any person), required to be filed by the Company on or before the Closing Date or as a consequence of such Tax returns or filings, or other documents containing inaccurate or incomplete information; and

 

●

all Taxes incurred (including e.g. VAT adjustments) by the Company resulting from incorrect reporting for Tax purposes or the absence, incompleteness or inaccuracy of documentary evidence in relation to any transaction, reorganization (including mergers, demergers or similar transactions) or revaluation by the Company which has taken place up to and including the Closing Date.

 

 

SCHEDULE 6 – Management Agreement

 

 

Done in Anzegem, Belgium on 19 March 2021, in two (2) originals, each party acknowledging receipt of one such original, whereby the Parent and the Buyer acknowledge having the same interest

 

The Seller

 

Karel Callens

 

 

[Signature page of the Buyer to the share purchase agreement]

 

The Buyer

 

Clevertouch B.V.
Name:
Title: Director

 

 

[Signature page of the Parent to the share purchase agreement]

 

The Parent

 

Sahara Holdings Limited
Name:
Title: Director

 

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Michael M. Pope, certify that:

 

1. I have reviewed this quarterly Report on Form 10-Q Pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended March 31, 2021 of Boxlight Corporation (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 13, 2021	/s/ Michael Pope
	Michael Pope
	Chief Executive Officer (Principal Executive Officer)

 

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, Patrick Foley, certify that:

 

1. I have reviewed this quarterly Report on Form 10-Q Pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended March 31, 2021 of Boxlight Corporation (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 13, 2021	/s/ Patrick Foley
	Patrick Foley
	Chief Financial Officer (Principal Financial and Accounting Officer)

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Boxlight Corporation (the “Company”) on Form 10-Q pursuant to Rule 15d-2 Under the Securities Exchange Act of 1934 for the period ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Pope, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 13, 2021

 

	/s/ Michael Pope
	Michael Pope
	Chief Executive Officer (Principal Executive Officer)

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Boxlight Corporation (the “Company”) on Form 10-Q pursuant to Rule 15d-2 Under the Securities Exchange Act of 1934 for the period ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick Foley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 13, 2021

 

	/s/ Patrick Foley
	Patrick Foley
	Chief Financial Officer (Principal Financial and Accounting Officer)