Financial Performance Overview

Revenue and Profit Trends

Revenues for the first quarter of 2024 were $37.1 million, down 9.9% compared to $41.2 million in the first quarter of 2023. This revenue decline was primarily due to lower sales volume in the U.S. markets.

Net loss was $7.1 million in Q1 2024, compared to $2.9 million in Q1 2023. The larger net loss was mainly attributable to a 15.4% decrease in gross profit and higher operating expenses, including $0.9 million in severance charges.

Strengths

• Diversified product portfolio including interactive displays, accessories, and professional services
• International presence with sales in the U.S., Europe, Australia, and other countries
• Acquisition strategy to extend product offerings and geographic coverage

Weaknesses

• Declining sales volume and revenues
• High operating expenses as a percentage of revenue
• Tight liquidity constraints requiring cost control and capital raises

Outlook

The company aims to reach profitability through sales growth of acquired products, increasing sales force productivity, and expanding its reseller network.

However, the company faces substantial doubt about its ability to continue as a going concern within one year due to tight liquidity and challenges meeting financial covenants required by its lenders. Its ability to continue as a going concern depends on achieving positive cash flow, obtaining covenant waivers, or refinancing its debt facility.

Seasonal Trends

The company’s sales are highly seasonal, with the majority of products shipped to educational customers prior to the start of the school year in July-September.

Inventories tend to peak in Q2 as the company builds up stock ahead of the school year rush. Then inventories decline significantly in Q1 as products are delivered to customers.

Accounts receivable balances tend to be highest in Q3 after the rush of school year sales.

Liquidity and Capital Resources

Metric	Q1 2024	Q1 2023
Cash and cash equivalents	$11.8 million	$11.3 million
Working capital	$46.6 million	$61.6 million
Current ratio	2.17	2.75

In Q1 2024, net cash used in operating activities was $1.9 million. Cash used in investing activities was $0.4 million, largely for equipment purchases. Cash used in financing activities was $2.6 million, comprising debt principal payments and dividend payments.

The company has limited liquidity and credit availability. It is required to prepay a percentage of inventory purchases upfront, further constraining liquidity.

In April 2024, the company secured a $5 million working capital loan, with $2 million immediately funded and $3 million to be made available in June 2024 contingent on meeting certain covenants.

The company’s Series B preferred shares can be redeemed for cash by investors starting January 2024, presenting a refinancing risk if cash is insufficient. Alternatives such as extending the maturity are being evaluated.

Critical Accounting Policies

The company’s critical accounting policies relate to:

1. Revenue recognition
2. Valuation of intangible assets
3. Stock-based compensation
4. Valuation of derivative warrant liabilities
5. Income taxes

These policies require complex, subjective estimates and judgments about the effect of matters that are inherently uncertain. Actual results could differ significantly from estimates.