UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to_________________________to__________________________________
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act:
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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.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 pursuant to Section 13(a) of the Ex- change Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes
As of May 20, 2025, the registrant had shares of Common Stock outstanding.
BOXABL Inc.
Form 10-Q
TABLE OF CONTENTS
Unless expressly indicated or the context requires otherwise, the terms “BOXABL,” “the Company,” “we,” “us,” and “our” in this document refer to BOXABL Inc., a Nevada corporation, and, where appropriate, its subsidiaries.
Unless otherwise indicated, dollar amounts above $1,000 in this Report have been rounded to the nearest thousand, million or billion, as applicable.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Report may contain forward-looking statements and information relating to, among other things, the Company, its business plan and strategy, and its industry. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to the Company’s management. All statements contained in this Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
| 2 |
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BOXABL INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
| As of | ||||||||
| (In Thousands, except share and per share amounts) | March 31, 2025 | December 31, 2024 | ||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Cash, cash equivalents and short-term investments | $ | $ | ||||||
| Accounts receivable | ||||||||
| Loan receivable - current | ||||||||
| Escrow receivable | ||||||||
| Inventories, net | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Restricted cash | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right of use assets, net | ||||||||
| Deposits on equipment | ||||||||
| Loan receivable – non-current | ||||||||
| Security deposits | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Customer deposits | ||||||||
| Deferred revenue | ||||||||
| Lease liability- current | ||||||||
| Subscription liability | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Lease liability - non-current | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies — See Note 13 | ||||||||
| Stockholders’ equity: | ||||||||
| Series A Preferred Stock $ par, billion shares authorized, thousand shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series A-1 Preferred Stock $ par, billion shares authorized, thousand and thousand shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series A-2 Preferred Stock $ par, billion shares authorized, thousand and thousand shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series A-3 Preferred Stock $ par, billion shares authorized, thousand and thousand shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Unclassified Preferred Stock $ par, billion shares authorized, shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Common Stock $ par, billion shares authorized, billion shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated Other Comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to unaudited interim condensed consolidated financial statements
| 3 |
BOXABL INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED Statements of COMPREHENSIVE LOSS
| For The Three Months Ended | ||||||||
| (In Thousands, except per share amounts) | March 31, 2025 | March 31, 2024 | ||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross loss | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ||||||||
| Other income: | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| Other income | ( | ) | ( | ) | ||||
| Total other income: | ( | ) | ( | ) | ||||
| Net loss attributed to common stockholders | $ | $ | ||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | ||||
| Comprehensive Loss | ||||||||
| Net Loss | $ | $ | ||||||
| Net loss on investments | ||||||||
| Comprehensive Loss | $ | $ | ||||||
See accompanying notes to unaudited interim condensed consolidated financial statements
| 4 |
BOXABL INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED statements of stockholders’ equity
Series A-3 Stock | Series A-2 Stock | Series A-1 Stock | Series A Stock | Common Stock | Paid -in | Accumulated | Accumulated Other Comprehensive Income | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In Thousands) | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Loss) | Equity | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Retired | (4 | ) | ( | ) | (5,882 | ) | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Offering costs | - | ( | ) | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss on investments | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited interim condensed consolidated financial statements
| 5 |
BOXABL INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED statements of cash flows
| For The Three Months Ended | ||||||||
| (In Thousands) | March 31, 2025 | March 31, 2024 | ||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ( | ) | ||||||
| Credit losses | ||||||||
| Accretion of investment discounts on debt securities | ( | ) | ||||||
| Inventory valuation adjustments | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Loan receivable | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Customer deposits | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Right of use assets and liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows provided by (used in) investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Security deposits | ( | ) | ||||||
| Purchase of intangible assets | ( | ) | ||||||
| Gross proceeds from sale and maturities of investments | ||||||||
| Gross purchase of investments | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows provided by financing activities: | ||||||||
| Proceeds from sale of preferred stock, net of offering costs | ||||||||
| Settlement of subscription liability | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Change in cash, cash equivalents, and restricted cash | ( | ) | ||||||
| Cash, cash equivalents, and restricted cash beginning of year | ||||||||
| Cash, cash equivalents, and restricted cash end of the period | $ | $ | ||||||
| Non cash investing and financing activities: | ||||||||
Acquisition of intellectual property
| $ | $ | ||||||
| Investments held in escrow | $ | ( | ) | $ | ||||
| Purchase of assets in accounts payable | $ | $ | ||||||
The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts recorded on the Company’s unaudited interim consolidated balance sheets
| March 31, | ||||||||
| (In Thousands) | 2025 | 2024 | ||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Cash, cash equivalents, and restricted cash end of the period | $ | $ | ||||||
See accompanying notes to unaudited interim condensed consolidated financial statements
| 6 |
BOXABL INC.
notes to UNAUDITED INTERIM CONDENSED CONSOLIDATED financial statements
(Unaudited, all figures in thousands, except per share amounts and unit quantities)
NOTE 1 – INCORPORATION AND NATURE OF OPERATIONS
Description of Business
BOXABL Inc., is a Nevada Corporation originally organized as a Nevada limited liability company, on December 2, 2017. The corporation converted from a Nevada limited liability company to a Nevada corporation on June 16, 2020. These consolidated financial statements of BOXABL Inc., (which may be referred to as the “Company”, “BOXABL”, “we”, “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s headquarters are in Las Vegas, Nevada.
BOXABL Inc. has developed a new type of building system using advanced manufacturing processes and by applying existing technology from the automotive industry. Its products, referred to as “Casitas” or “Boxes,” result in sustainable high-quality buildings at lower cost, benefiting from mass production practices, resolving the problems of housing shortages by offering a quick solution, and reducing the carbon footprint. The Company has also developed patented folding and shipping technology, enabling the Company to transport its building solution on existing roadways to serve large geographic areas.
The Company’s Casitas can be configured for sale in various ways, including Park Model RV and/or Modular, where a Statewide Modular program exists. The Company is approved to sell its product as a Park Model RV under ANSI A119.5 in the majority of US states.
Currently, the Company is approved to sell its product as a modular home into the following states:
| - | Arizona | |
- |
New Mexico | |
| - | Nevada | |
| - | California |
BOXABL also has the ability to sell its product in the following jurisdictions that do not currently have a state-regulated modular program:
| - | Oklahoma | |
| - | Utah | |
| - | Wyoming | |
| - | Kansas | |
| - | West Virginia | |
| - | Hawaii | |
| - | Vermont | |
| - | Alaska | |
| - | Oregon | |
| - | Connecticut | |
| - | Delaware | |
| - | Tribal Lands |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company’s management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025.
| 7 |
The financial data presented herein should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2024, included in the Company’s Annual Report on the Form 10-K filed with the SEC on April 14, 2025.
The Company is an “emerging growth company,” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as modified by the Jumpstart Our Business Start-ups Act of 2012 (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards applicable to public companies. An emerging growth company may delay the adoption of certain accounting standards until those standards would otherwise apply to non-public companies. The Company has elected to take advantage of this extended transition period and as a result, the Company is not required to adopt new or revised accounting standards on effective dates as they become applicable to public companies. The unaudited interim condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Amounts are expressed in US dollars, rounded to the nearest Thousandth (‘000’). The Company’s fiscal year is December 31.
Prior Period Reclassification
Certain prior period amounts have been reclassified to conform to the current period presentation.
Revision of Previously Issued Consolidated Financial Statements
The
Company had previously incorrectly reported $
The Company has summarized the impact of this revision to its previously issued unaudited interim condensed consolidated financial statements, including the impacts to specific financial statement line items, and related footnotes, as follows:
| Statement of Cash Flows - For The Period Ended March 31, 2024 | As Reported | Adj. | As Revised | |||||||||
| (In Thousands) | ||||||||||||
| Net gains on marketable securities | $ | ( | ) | $ | $ | |||||||
| Accretion of investment discounts on debt securities | $ | $ | ( | ) | $ | ( | ) | |||||
| Net cash used in operations | $ | ( | ) | $ | $ | ( | ) | |||||
| Gross proceeds from sale and maturities of investments | $ | $ | ( | ) | $ | |||||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
The Company has considered the impact of this error correction on its internal controls over financial reporting and its disclosure controls.
| 8 |
Use of Estimates
The preparation of these unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the unaudited interim condensed consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates. These estimates form the basis for judgements the Company makes about the carrying value of its assets and liabilities, which are not readily apparent from other sources. These estimates are based on information available as of the date of the unaudited interim condensed consolidated financial statements, including historical information and various other assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from these estimates.
Risks and Uncertainties
The Company’s business and operations are sensitive to general business and economic conditions in the US and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or governmental policy decisions. These adverse conditions could affect the Company’s financial condition, results of its operations and cash flows.
Fair Value of Financial Instruments
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 at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
| ● | Level 1 – Valuations based on quoted prices for identical assets and liabilities in active markets. Level 1 assets consist of investments. | |
| ● | Level 2 – Valuations based on observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. | |
| ● | Level 3 – Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The Company valued its employee stock options (NQSO’s and ISO’s) and stock grants (RSU’s) at grant date fair value using a Level 3 mark. See Note 12 – Stockholders Equity – Stock Based Compensation. |
Restricted Cash and Deposits
On
June 1, 2023, the Company was required to make a security deposit related to the expansion of premises of $
| 9 |
Investments in Marketable Debt Securities
The Company generally invests its excess cash into marketable debt securities, which consist of short-term and long-term investments in U.S. treasury bills and notes that were classified as held-to-maturity at March 31, 2024. The Company prospectively re-classified its short-term investments in U.S. treasury bills and notes as available-for-sale debt securities during the quarter ended December 31, 2024. Available-for-sale debt securities are financial instruments that are reported at fair value, with unrealized gains/losses recorded in Other Comprehensive Loss.
Prior to October 1, 2024, all investments in U.S. treasury bills and notes were classified as Held-to-maturity debt securities, which are financial instruments for which the Company has the intent and ability to hold to maturity and are reported at amortized cost. The Company reserves for expected credit losses on held-to-maturity debt securities through the allowance for expected credit losses. The Company utilizes a probability-of-default (“PD”) and loss-given-default (“LGD”) methodology to calculate the allowance for expected credit losses. The allowance for expected credit losses estimate reflects a lifetime loss estimate and is based on historical loss information for assets with similar risk characteristics, adjusted for management’s expectations. Adjustments for management’s expectations may be based on factors such as investee earnings performance, potential refinancing events, changes in the regulatory, economic or technological environment of an investee or doubt about an investee’s ability to continue as a going concern. An increase or a decrease in the allowance for expected credit losses is recorded through other gain (loss) as a credit loss expense or a reversal thereof. The allowance for expected credit losses is presented as a deduction from the amortized cost. A debt security is written off when deemed uncollectible. The Company’s investments in U.S. treasury bills and notes represent debt securities issued by the U.S government and as such, have a low level of inherent risk; generally any changes in their value are attributable to changes in interest rates and market liquidity.
Short-Term Investments in U.S. Treasury Notes, Available-for-Sale
Short-term investments in U.S. Treasury bills and notes are classified as available-for-sale when the Company does not have both the intent and ability to hold them to maturity. Available-for-sale debt securities are reported at fair value, with unrealized gains and losses recorded in Other Comprehensive Loss.
Short-Term Investments in U.S. Treasury Notes, Held-to-Maturity
Short-term investments in U.S. treasury notes include U.S treasury notes with maturities of less than 12 months. Where the Company has both the intent and ability to hold debt securities to maturity, these debt securities are carried at amortized cost. If a U.S. treasury note has an unrealized loss and we either intend to sell the security or it is more likely than not that we will be required to sell the security before its anticipated recovery, we will record an impairment charge to investment and other income (expense), net for the entire amount of the unrealized loss and adjust the amortized cost basis of the security.
Long-Term Investments in U.S. Treasury Notes, Held-to-Maturity
Long-term investments in U.S. treasury notes include U.S Treasury notes with maturities of 12 months or more. Where the Company has both the intent and ability to hold debt securities to maturity, these debt securities are carried at amortized cost. If a U.S. treasury note has an unrealized loss and we either intend to sell the security or it is more likely than not that we will be required to sell the security before its anticipated recovery, we will record an impairment charge to investment and other income (expense), net for the entire amount of the unrealized loss and adjust the amortized cost basis of the security.
Inventories, net
Inventories consist of raw materials, in-bound freight and duties, work in progress, and finished goods. Inventories available for sale are valued at the lower of cost or net realized value. Cost is determined using the weighted average method. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, bulk sales, and the expected recoverable values for each disposition category. On a periodic basis, the Company performs a physical count of its inventory and records an inventory valuation allowance for inventory that has become obsolete or inventory that has a cost basis in excess of the expected net realizable value. Damaged and obsolete inventory are valued based on specific identification and management’s estimate of net realizable value, including consideration of whether the items are usable in current or future production. Any difference between cost and estimated realizable value is recognized as an expense.
| 10 |
Loan Receivables, net
Loan receivables consist of formal credit sales in transactions with customers, where a portion of the sales proceeds consist of an interest-bearing loan originated by the Company. Loan receivables are recognized on the balance sheet and classified as long-term or short-term, respectively, based on the term of the loan. A portion of the loan receivable estimated to be uncollectible is recorded as a credit loss provision, a contra receivable balance in accordance with ASC 326 (ASU 2016-13), Current Expected Credit Losses (“CECL”). To reduce instances of credit losses, the Company performs a review of the borrower’s creditworthiness, credit terms are agreed by both parties and formally documented before any sale is completed. We further mitigate potential credit losses by requiring an unlimited personal guarantee from the borrower’s sponsor/owner and the loan is also secured by the underlying asset(s).
Property and Equipment, net
Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance, repairs, and minor improvements are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation and amortization are removed from the respective accounts, and any gain or loss is included within gain/loss on disposal of assets within the consolidated statements of comprehensive loss. Major improvements with economic lives greater than one year are capitalized. Leasehold improvements are depreciated over the lesser of the lease term or the estimated useful life. Depreciation is computed using the straight-line method over the following estimated useful lives:
| Computers and other peripheral equipment | ||||
| Furniture and fixtures | ||||
| Machinery and equipment | ||||
| Tenant improvements | ||||
| Vehicles | ||||
| Casita fixed assets |
Intangible Assets
The
Company has intangible assets that are amortized over the respective estimated lives on a straight-line basis unless the lives are determined
to be indefinite and reviewed for impairment whenever events or other changes in circumstances indicate that the carrying amount may
not be recoverable. The Company’s intangible assets include intellectual property associated with Patents and Trademarks that are
amortized over their estimated useful life of
| Intellectual property | ||||
| Software | ||||
| Domain |
The Company has also incurred costs to develop software that are being developed for sale and/or external-use. These software development costs are recognized in research and development expenses on the Company’s Statement of Comprehensive Loss, as these costs do not qualify for capitalization until the software has reached the point of technological feasibility, which is determined after the planning, designing, coding, and testing phases have been completed.
Revenue Recognition
Revenue is measured based on the amount of consideration that we expect to receive, reduced by allowance for estimated returns, chargebacks, promotional discounts, markdowns, and rebates based on management’s estimates and the Company’s historical experience. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the prices charged to customers.
The Company determines revenue recognition through the following steps in accordance with ASC Topic 606, Revenue from Contracts with Customers:
| - | Identification of a contract with a customer. |
| - | Identification of the performance obligations in the contract. |
| 11 |
| - | Determination of the transaction price. |
| - | The customer has the ability and intent to pay the contractual amount. |
| - | Allocation of the transaction price to the performance obligations in the contract. |
| - | Recognition of revenue when or as the performance obligations are satisfied. |
Revenues are recognized when performance obligations are satisfied through the sale and transfer of Casitas, services or parts to the Company’s customers. Generally, control transfers upon shipment of the Casita to the customer and the transfer of legal title and risk and rewards of ownership to the Customer. Occasionally, performance obligations for the Company may also include the delivery, installation and other services. The Company records a liability for customer deposits received prior to delivery of the Casita or fulfilment of the service. The liability is relieved, with revenue being recognized, once the performance obligations to the customer are satisfied. Generally, this occurs after the customer has paid the contracted amount and the product has been shipped.
Cost of Goods Sold
Cost of goods sold consists primarily of the cost of products used in the production of the Company’s finished products, inbound and outbound shipping costs, the related labor, and indirect overhead costs associated with that production.
On a periodic basis, the Company performs a physical count of its inventory and records an inventory valuation allowance for inventory that has become obsolete or inventory that has a cost exceeding expected net realizable value. Damaged and obsolete inventory are valued based on specific identification and management’s estimate of net realizable value, including consideration of whether the items are usable in current or future production. The difference between cost and estimated realizable value is charged to expense.
Advertising Costs
The Company incurs third party advertising costs as well as payroll-related costs for its marketing personnel engaged in promotional activities. Advertising and promotion costs to market our products and services are expensed as incurred. Certain marketing costs related to the issuance of the Company’s securities are accounted for as a reduction to the proceeds from the equity offering and not included in sales and marketing expenses.
Research and Development
Research and development costs consisting of design, materials, and consultants related to prototype and process improvements and developments are expensed as incurred.
Concentration of Credit Risk
Cash and Cash Equivalents:
Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash and cash equivalents. The Company classifies all highly liquid instruments with an original maturity of three months or less as cash equivalents. Due to the short maturity of these cash equivalents, the carrying amounts of these instruments approximate their fair values. Cash and cash equivalents are maintained at high quality financial institutions. As of March 31, 2025 and 2024, the Company’s deposits exceeded the Federal Deposit Insurance Corporation (FDIC) limit. The Company has not experienced any losses with respect to its cash balances. Based upon assessment of the financial condition of these institutions, management considers that the risk of loss of any uninsured balances does not have a significant impact on the Company’s operations.
| 12 |
Customers:
During
the three months ended March 31, 2025 and 2024 revenues from one customer and four customers were approximately
The Company applies ASC 718, Stock-Based Compensation for all stock-based awards, including stock options and restricted stock, that are measured at fair value on the date of grant and recognized over the associated vesting periods. The fair value of stock options is estimated on the date of grant using a Black-Scholes model. The fair value of restricted stock awards is estimated on the date of the grant based on the fair value of the Company’s underlying common stock. The Company recognizes compensation expense for stock options on a straight-line basis over the associated service or vesting periods. Effective October 18, 2024, restricted stock awards became subject to a performance condition, which defers vesting of restricted stock awards until a monetization event. Accordingly, the Company shall not recognize stock-based compensation from restricted stock awards until a monetization event becomes probable.
See Note 12 – Stockholders’ Equity – Preferred and Common Stock for a description of the amendments to the Company’s articles of incorporation and Note 12 – Stockholders’ Equity – Stock-based Compensation for a description of our amended and restated Plan, each of which became effective October 18, 2024
Determining the grant date fair value of options using the Black-Scholes option-pricing model requires management to make assumptions and judgments. These estimates involve inherent uncertainties and, if different assumptions had been used, stock-based compensation expense could have been materially different from the amounts recorded.
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Tax positions initially must be recognized in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently are to be measured at the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and relevant facts.
Contingencies
The Company is involved in lawsuits, claims, and proceedings, which arise in the ordinary course of business. In accordance with the FASB ASC Topic 450 Contingencies, the Company shall make a provision for a liability when it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company believes it has adequate provisions for any such matters. The Company reviews these provisions in conjunction with any related provisions on assets related to the claims at least quarterly and adjusts these provisions to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other pertinent information related to the case. Should developments in any of these matters outlined below cause a change in the Company’s determination as to an unfavorable outcome and result in the need to recognize a material provision, or, should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on the Company’s results of operations, cash flows, and financial position in the period or periods in which such a change in determination, settlement or judgment occurs.
| 13 |
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. Diluted net loss per share reflects the actual weighted average of common shares issued and outstanding during the period plus potential common shares. Stock options and convertible instruments are considered potential common shares and are included in the calculation of diluted net loss per share when their effect is dilutive. As all potentially dilutive securities are anti-dilutive for the periods presented as a result of the net loss, diluted net loss per share is the same as basic net loss per share for each period.
| Balance as of | ||||||||
| (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Stock options | ||||||||
| Restricted stock units | ||||||||
| Warrants | ||||||||
| Preferred stock | ||||||||
| Potentially dilutive shares | ||||||||
Leases
The Company leases some items of property, plant and equipment, including manufacturing and office space. On the lease commencement date, a lease is classified as a finance lease or an operating lease based on the classification criteria of the lease guidance under ASC 842. In accordance with ASC 842, the Company has recorded right-of-use (“ROU”) assets for all of its leased assets classified as operating leases. The Company has no finance leases. The ROU assets were computed as the present value of future minimum lease payments, including additional payments resulting from a change in an index such as a consumer price index or an interest rate, plus any prepaid lease payments minus any lease incentives received.
Warranty Provision
The
Company generally offers its customers a manufacturers’ warranty on Casita products sold for a period of one year. Management records
an expense to cost of goods sold for the costs of warranty repairs at the time of sale. Management’s estimate for warranties is
based on sales levels and historical costs of providing warranties. As of March 31, 2025 and December 31, 2024, respectively, the Company’s
reserve for warranty totaled $
Recent Accounting Pronouncements
As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
On November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires the Company to make disclosures about specific types of expenses included in the expense captions presented on the face of its consolidated income statement as well as disclosures about its selling expenses. These new requirements, as amended by ASU 2025-01, will be effective for annual periods beginning after December 15, 2026 and interim periods within fiscal periods beginning after December 15, 2027, with early adoption permitted and can be applied on either a prospective or retrospective basis. The Company is currently evaluating the potential impact of this update on its consolidated financial statements and does not expect the impact to be material.
On December 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The standard requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 was effective for annual periods beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial statements and related disclosures.
| 14 |
On November 2023 the FASB issued improvements to reportable segment disclosures ASU 2023-07, Segment Reporting. The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”). It also requires disclosure of other segment items by reportable segment and a description of its composition, whereas the other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. It also requires interim period disclosures about a reportable segment’s P&L and Assets and requires disclosure of the title and position of the Chief Operating Decision Maker (CODM) as well as how the CODM uses the segment P&L in assessing segment performance and deciding how to allocate resources. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU was applied on a retroactive basis, to all prior periods presented in the unaudited interim condensed consolidated financial statements, but did not have a material impact on the Company’s segment disclosures. The adoption of 2023-07 did not change the way that the Company identifies its reportable segment. However, it has resulted in incremental disclosures within the notes of the Company’s unaudited interim condensed consolidated financial statements (Note 15).
Management does not believe that any other recently issued, but not effective, accounting standards have a material impact on the consolidated financial statements.
NOTE 3 – GOING CONCERN
These
unaudited interim condensed consolidated financial statements have been prepared under the assumption that the Company will be able
to continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities
in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern is
probable. Primarily due to limited sales associated with delays in obtaining US statewide modular approvals, the Company reported a
net loss of $
The continuing viability of the Company and its ability to continue as a going concern is dependent on the Company being successful in its continued efforts in growing its revenue and/or accessing additional sources of capital. Management’s plan to address this need includes (a) continued exercise of tight controls to conserve cash, (b) accelerating sales of Casitas to generate revenue, and (c) raising funds through equity financing. The Company anticipates current capital on hand and expected future funding will be sufficient to fund the Company’s operations in excess of twelve months. The Company is currently selling shares of its preferred stock through Regulation A and Regulation D offerings in the United States. Management believes that the actions presently being taken by the Company will provide sufficient liquidity for the Company to continue to execute its business plan over the next year. However, there can be no assurances that management’s plans will be achieved.
NOTE 4 – INVESTMENTS
As of March 31, 2025 and December 31, 2024, investments in securities consists of U.S. Treasury Notes carried at fair value and amortized cost, respectively, consisted of the following:
| Balance as of | ||||||||
| (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Investments in short-term U.S. Treasury Notes | $ | $ | ||||||
| Investments in long-term U.S. Treasury Notes | ||||||||
| Total investments in U.S. Treasury Notes | $ | $ | ||||||
| 15 |
The long-term investments include maturities extending beyond 12 months from the balance sheet date.
The cost basis of investments held is determined by the Company using the specific identification method.
Interest Income on the consolidated Statement of Comprehensive Loss includes the accrued interest and realized interest earned on Treasuries. Unrealized gains and losses on treasuries, classified as available-for-sale, are reported within “unrealized net gains/losses” on the consolidated Statement of Comprehensive Loss.
| (In Thousands) | Amortized cost | Allowance for credit losses | Net Carrying Amount | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||||
| U.S. Government securities | $ | $ | $ | $ | $ | |||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
All available-for-sale debt securities have a weighted average maturity of one year or less.
The Company does not have any investments with unrealized loss positions. During 2024 the Company re-classified its short-term investments in U.S. treasury bills and notes as available-for-sale. Available-for-sale debt securities are financial instruments that are reported at fair value, with unrealized gains/losses recorded in Other Comprehensive Loss. No allowance for credit losses was recorded for these securities as of March 31, 2025.
NOTE 5 – INVENTORIES, NET
As of March 31, 2025 and December 31, 2024, inventory consists of the following:
| Balance as of | ||||||||
| (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Raw material | $ | $ | ||||||
| Inventory in-transit | ||||||||
| Work-in progress | ||||||||
| Finished goods | ||||||||
| Total inventory | $ | $ | ||||||
Inventories
are written down for any obsolescence or when the net realizable value considering future events and conditions is less than the
carrying value. For the three months ended March 31, 2025 and 2024, the Company recorded $
NOTE 6 – LOAN RECEIVABLES, NET
The
Company has originated two loan receivables comprised of formal credit sales in transactions with its customers. Based on the loan terms,
$
The Company has initiated loans to specific customers to assist them in their financing. The loans were negotiated on an arm’s length basis, accrue interest income, and were originated at market rates. Accordingly, there are no ASC 606 impacts related to a financing component embedded in the loan. Considering that the Company does not have a significant portfolio of loans, or any loss history, it does not have any basis to establish any anticipated expected credit loss. The Company has an on-going business relationship with these Customers and expects to deliver additional units in the future. As the loans are performing, the Company does not anticipate any credit loss associated with these loans. Management will continue to monitor the creditworthiness of these borrowers and apply an expected loss reserve if any anticipation of loss arises.
| 16 |
An
aging analysis was performed using historical and forecasted credit loss rates across various delinquency buckets, resulting in a total
expected credit loss estimate of $
NOTE 7 – PROPERTY AND EQUIPMENT, NET
The Company’s property and equipment consists of the following amounts as of March 31, 2025 and December 31, 2024:
| Balance as of | ||||||||
| (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Computers and other peripheral equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Machinery and equipment | ||||||||
| Tenant improvements | ||||||||
| Vehicles | ||||||||
| Casita fixed assets | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation
During
the three months ended March 31, 2025 and 2024, the Company recognized $
Deposits on Equipment
As
of March 31, 2025 and December 31, 2024, the Company recorded $86 thousand and $
NOTE 8 – INTANGIBLE ASSETS, NET
The Company held the following intangible assets as of March 31, 2025 and December 31, 2024:
| As of, | ||||||||
| Asset (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Intellectual property | $ | $ | ||||||
| Software | ||||||||
| Domain | ||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
| 17 |
NOTE 9 – CURRENT LIABILITIES
As of March 31, 2025 and December 31, 2024, respectively, current liabilities were comprised primarily of accounts payable, customer deposits and deferred revenue, the current portion of lease liabilities (See Note 10 – Leases), and subscription liabilities (See Note 12 – Stockholders’ Equity).
Accounts Payable
Accounts payable as of March 31, 2025 and December 31, 2024 consisted of the following:
| As of, | ||||||||
| (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Outstanding vendor bills | $ | $ | ||||||
| Sales tax payable | ( | ) | ||||||
| Credit card balances | ||||||||
| Total | $ | $ | ||||||
Customer Deposits
Customer
Deposits are comprised of pre-order deposits from customers and prepayments in advance of attendance at on-site installer training. As
of March 31, 2025 and December 31, 2024, Customer Deposits were reported at $
Deferred Revenue
Deferred
revenue is comprised of prepayments on unfulfilled purchase orders and prepayments for Site Surveys. During 2024, the Company began accepting
$
| As of, | ||||||||
| (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Customer prepayments | $ | $ | ||||||
| Site survey deposits | ||||||||
| Total | $ | $ | ||||||
NOTE 10 –LEASES
On
December 29, 2020, the Company signed a
On
June 10, 2022, the Company signed a
Effective
as of January 1, 2023, the Company leased to Supercar System four support squares located in the Company’s main property located
at 5435 E. N. Belt Road, Las Vegas, Nevada for $
| 18 |
The Company recognizes lease expense for its operating leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term. The Company has determined that it was reasonably certain that the renewal options would be exercised based on previous history and knowledge, current understanding of future business needs and the level of investment in leasehold improvements, among other considerations. The incremental borrowing rate used in the calculation of the lease liability is based on the rate available to the Company. The depreciable life of assets and leasehold improvements are limited by the expected lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Certain subsidiaries of the Company rent or sublease certain office space to/from other subsidiaries of the Company.
Maturities of lease liabilities for operating leases as of March 31, 2025, were as follows:
| Remaining lease payments (In Thousands) | Fiscal year | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total lease payments | $ | |||
| Less: Imputed interest | ( | ) | ||
| Total lease liability | $ | |||
As
of March 31, 2025 and December 31, 2024, the weighted average remaining lease term was
No
ROU asset is recorded for leases with a lease term, including any reasonably assured renewal terms, of 12 months or less. Upon adoption
of ASC 842, the Company also recorded lease liabilities computed as the present value of future minimum lease payments, including reductions
from any landlord incentives, plus any additional direct costs from executing the leases. Lease liabilities are amortized using the effective
interest method using a discount rate of
NOTE 11 – RELATED PARTY TRANSACTIONS
The Company had the following transactions with related parties:
| Three Months Ended March 31, | ||||||||
| (In Thousands) | 2025 | 2024 | ||||||
| Consolidated Statement of Comprehensive Loss | ||||||||
| Rental income (1) | $ | $ | ||||||
| Balance as of | ||||||||
| (In Thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Consolidated Balance Sheets | ||||||||
| Preferred Stock (2) | $ | $ | ||||||
| Accounts Receivable (1) | $ | $ | ||||||
| 19 |
| (1) | |
| (2) |
NOTE 12 – STOCKHOLDERS’ EQUITY
Preferred and Common Stock
The Company was converted to a C-Corporation in the state of Nevada on June 16, 2020. In conjunction with the conversion, the Company authorized the issuance of billion of common stock with a par value of $ and million shares of preferred stock with a par value of $. The Company initially designated all shares of preferred stock as “Series A Preferred Stock”, see below for rights and preferences.
On February 24, 2021, the Company filed an amendment to the articles of incorporation which increased the number of authorized preferred shares to million, for which thousand and thousand shares were classified as Series A Preferred Stock and Series A-1 Preferred Stock, respectively.
On
November 19, 2021, the Board of Directors approved a
On September 1, 2023, the Company filed an amendment to the articles of incorporation which authorized the issuance of billion shares of Series A-3 Preferred Stock of $ par value and increased the amount of authorized unclassified Preferred Stock to billion shares. On May 3, 2024, this amendment was refiled and accepted by the state of Nevada following completion of certain validation procedures under Nevada law associated with correcting defective corporate acts as discussed in the Company’s Definitive Information Statement filed with the Commission on March 29, 2024.
Effective October 21, 2024, the Company filed an amendment to the articles of incorporation which increased the authorized Common Stock from billion shares to billion shares of Common Stock, $ par value per share, and increased the authorized Preferred Stock from billion shares to billion shares of Preferred Stock, $ par value per share. The number of authorized Preferred Stock designated as Non-Voting Series A, A-1, A-2, and A-3 did not change, but the undesignated Preferred Stock of billion shares was increased to an authorized billion shares of undesignated Preferred Stock, $ par value per share.
| 20 |
Preferred Stock Liquidation Preference
The following table summarizes the liquidation preferences as of March 31, 2025, in order of liquidation:
| (In Thousands) | Shares Authorized | Shares Issued and Outstanding | Liquidation Preference Balance | |||||||||
| Series A-3 Preferred Stock | $ | |||||||||||
| Series A-2 Preferred Stock | ||||||||||||
| Series A-1 Preferred Stock | ||||||||||||
| Series A Preferred Stock | ||||||||||||
| Non-classified Preferred Stock | ||||||||||||
| Total Series A Preferred Stock | $ | |||||||||||
Sales of Preferred Stock
On
June 25, 2024, the Company commenced an offering of up to thousand shares of its Non-Voting Series A-3 Preferred Stock under Regulation
A of the Securities Act of 1933, as amended (the “Securities Act”), at a per share price of $, plus thousand Bonus
Shares (as defined in the Offering Circular on file in the Company’s Form 1-A Offering Statement (Commission File No. 024-12402)
(the “Form 1-A Offering Statement”)) for a maximum potential raise of $ million(the “Regulation A Offering”).
Assuming the Regulation A Offering is fully subscribed at the level where the maximum number of Bonus Shares are issued, the Company
would sell a total of million shares of Non-Voting Series A-3 Preferred Stock for gross proceeds of $
During
the three months ended March 31, 2025 and 2024, the Company issued thousand and
shares of Series A-3 Preferred Stock for gross proceeds of $
During
the three months ended March 31, 2025 and 2024, the Company issued thousand, and shares of Series A-2 preferred stock for gross
proceeds of $
Specifically, during the three months ended March 31, 2025, the Company issued:
| - |
shares of Series A-3 Preferred Stock for gross proceeds of $ | |
| - |
shares of Series A-3 Preferred Stock for gross proceeds of $ | |
| - |
shares of Series A-2 Preferred Stock for gross proceeds of $ |
Warrants
In
connection with the issuance of certain A-3 shares, as of March 31, 2025 and December 31, 2024, respectively, the Company has issued
Escrow Receivable
As
of March 31, 2025 and December 31, 2024, the Company recorded $
Offering Costs and Deferred Offering Costs
For
the years ended March 31, 2025 and December 31, 2024, the Company incurred offering costs of $
| 21 |
Subscription Liability
As
of March 31, 2025 and December 31, 2024, the Company had $
Stock-based Compensation
On August 12, 2024, the Company amended and restated the Amended 2021 Stock Incentive Plan (“Plan”) to increase the number of shares of Common Stock reserved for issuance under the Plan to million shares (previously million shares were reserved for issuance under the 2021 Stock Incentive Plan), as well as certain other amendments, subject to stockholder approval and notice. The Plan, as amended and restated, became effective on October 18, 2024.
Administration:
The Board of Directors delegated to the Compensation Committee of the Board of Directors the authority to administer the Plan (the “Plan Administrator”), which includes the authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interest of the Company, and to make all other determinations necessary for the administration of the Plan to the extent not contrary to the express provisions of the Plan.
Eligibility:
Eligible participants in this Plan include employees of, non-employee directors of, and consultants to the Company. To the extent permitted by applicable law, awards may also be granted to prospective employees and non-employee members of the Board, but no portion of any such award shall vest, become exercisable, be issued or become effective prior to the date on which such individual begins providing services to the Company.
The Plan Administrator has the sole discretion to determine which participants will receive an award, including the determination of whether an award to an eligible participant will further the Plan’s purposes of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the Company’s success by offering them an opportunity to participate in the Company’s future performance through the grant of awards, as well as the type of any award to be granted, the number of shares of Common Stock subject to any award, and the terms and conditions of any award.
Awards:
As of March 31, 2025, only Stock Options and Restricted Stock Units (“RSUs”) were outstanding under the Plan.
The Plan permits the following types of awards:
Stock Appreciation Rights:
Stock Appreciation Rights (“SARs”) may be granted to Participants and shall have a per-share base value equal to the Fair Market Value of a share of Common Stock on the Grant Date. SARs may be settled at such times, and subject to restrictions and conditions, which need not be the same for all Participants; provided that no SAR shall settle later than ten (10) years from the Grant Date. Upon settlement, the Participant shall be entitled to receive payment of an amount determined by multiplying (a) the difference, if any, between the Fair Market Value of one share of Common Stock on the date of settlement and the base value of one share of Common Stock on the Grant Date; and (b) the number of shares of Common Stock with respect to which the SAR is settled. Payment for SARs shall be in cash, shares of Common Stock of equivalent value, or in a combination thereof. As of March 31, 2025, the Company has not issued any SARs.
| 22 |
Restricted Stock Unit:
Restricted Stock Unit awards may be subject to transfer and other restrictions including, without limitation, continued employment, performance conditions, or limitations on voting and/or dividend rights. Restricted Stock awards will be forfeited if the restrictions imposed on the Grant Date have not expired at the time of termination of employment or service in the case of a non-employee director or consultant. As of March 31, 2025 and December 31, 2024, the Company had granted (net of forfeitures) and Restricted Stock Units, respectively, which are subject to time and performance vesting conditions.
Stock Grant Awards:
Stock Grant Awards grant the Participant the right to receive (or purchase at such price as previously determined in the award) a designated number of shares of Common Stock free of any vesting restrictions. The purchase price, if any, shall be payable in cash or other form of consideration. Stock Grant Awards may be granted or sold in respect of past services or other valid consideration, or in lieu of any cash compensation due to the Participant. As of March 31, 2025 and December 31, 2024, respectively, the Company has not issued any Stock Grant Awards.
Stock Options:
Under the Plan, Stock Options may be granted to Eligible Participants at a per-share exercise no less than 100% of the Fair Market Value of one share of Common Stock as of the Grant Date. The Administrator shall determine when the Stock Option may be exercised, including any performance, vesting or other conditions, provided the term does not exceed ten (10) years from the Grant Date. If the Participant’s employment or service is terminated for cause, their unexercised Stock Options immediately lapse, including any vested Stock Options. Incentive Stock Options (“ISOs”) may only be granted to Participants who are also employees. The exercise price of ISOs shall equal the Fair Market Value of one share of Common Stock as of the Grant Date and shall expire upon the earlier of ten (10) years from the Grant Date (unless a shorter time is set in the Participant’s award agreement), provided that, ISOs granted to an employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company must have a per-share exercise price of no less than 110% of the Fair Market Value of one share of Common Stock as of the Grant Date and cannot have a term exceeding five (5) years from the Grant Date. The vested portion of a Stock Option lapses three (3) months following the effective date of the Participant’s termination of employment or twelve (12) months following the effective date of the Participant’s termination of employment due to death or disability, as defined in the Plan (in each case, unless a shorter time is set in the Participant’s award agreement) but in no event later than the expiration of the Stock Option.
| Weighted Average Exercise Price per Share | ||||||||||||
| (In Thousands except for per share price) | Stock Options | Exercise Price per Share |
Term (in years) | |||||||||
| Outstanding as of December 31, 2024 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/cancelled | ) | |||||||||||
| Outstanding as of March 31, 2025 | $ | |||||||||||
| Exercisable as of March 31, 2025 | $ | |||||||||||
The Company accounts for share-based compensation arrangements using a fair value method which requires the recognition of compensation expense for costs related to all share-based payments, including stock options. The fair value method requires the Company to estimate the fair value of share-based payment awards on the date of grant using an option pricing model. The Company uses the Black-Scholes pricing model to estimate the fair value of Stock Options granted that are then expensed on a straight-line basis over the vesting period. The Company accounts for forfeitures as they occur in the year of forfeiture and share-based compensation expense adjusted accordingly. Option valuation models, including the Black-Scholes option-pricing model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award.
| 23 |
| Expected life (years) (1) | - | |||
| Risk-free interest rate (2) | - | % | ||
| Expected volatility (3) | - | % | ||
| Annual dividend yield (4) | % | |||
| Weighted average fair value of options granted | $ |
| (1) | |
| (2) | |
| (3) | |
| (4) |
Share-based compensation expense is not adjusted for estimated forfeitures but instead adjusted upon an actual forfeiture of a stock option. Amounts recorded for forfeited or expired unexercised options are accounted for in the year of forfeiture.
Restricted Stock Units:
Restricted Stock Units (“RSUs”) grant the Participant the right to receive a certain number of shares of Common Stock, a cash payment equal to the Fair Market Value of that number of shares of Common Stock (determined as of a specified date), or a combination thereof, based on the terms and conditions of the award, as determined by the Plan Administrator. Upon termination of employment (or service as a non-employee director or consultant), unvested RSUs shall be forfeited.
RSUs represent a right to receive a single common share.
The Company granted RSUs during the three months ended March 31, 2025 and 2024, respectively.
Weighted-Average |
||||||||
| (In Thousands except for per share amounts) | RSU’s | Fair Value per Share |
||||||
| Outstanding as of December 31, 2023 | $ | |||||||
| Awarded | $ | |||||||
| Vested | ||||||||
| Cancelled/Forfeited | ( | ) | $ | |||||
| Outstanding as of December 31, 2024 | $ | |||||||
| Awarded | ||||||||
| Vested | ||||||||
| Cancelled/Forfeited | ( |
) | ||||||
| Outstanding as of March 31, 2025 | $ | |||||||
| 24 |
For the three Months Ended March 31, |
||||||||
| (In Thousands) | 2025 | 2024 | ||||||
| Cost of Goods Sold | $ | ( |
) | $ | ||||
| General and Administrative | ( |
) | ||||||
| Sales and Marketing | ( |
) | ||||||
| Research and Development | ( |
) | ||||||
| Total Stock-Based Compensation Expense | $ | ( |
) | $ | ||||
The expected life of employee stock options was estimated using the “simplified method,” as the Company has no historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock option grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The expected life of awards that vest immediately use the contractual maturity since they are vested when issued. For stock price volatility, the Company uses public company compatibles as a basis for its expected volatility to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option at the grant-date.
The Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine an estimate of future forfeiture rates.
During the current period, new expense was recognized for RSU awards. However, forfeitures of previously granted
RSUs resulted in a reversal of $
Stock-based compensation expense for all stock-based awards, including stock options and restricted stock units (“RSUs”), is measured at fair value on the date of grant. The fair value of stock options is estimated on the date of grant using a Black-Scholes option-pricing model. The fair value of RSUs is estimated on the date of grant based on the fair value of the underlying common stock.
The Company has elected to recognize compensation expense for stock options granted to employees on a straight-line basis over the requisite service period, which is generally the vesting period. Compensation expense for RSUs is amortized using the accelerated attribution approach over the requisite service period as long as the performance condition in the form of a specified liquidity event is probable to occur.
The fair value of stock options granted to non-employees is calculated at each grant date and re-measured at each reporting date using the Black-Scholes option-pricing model and the resulting change in value, if any, is recognized in the consolidated statements of operations and comprehensive loss for the periods in which the related services are rendered.
During the year ended December 31, 2024, the Company granted Restricted Stock Units (RSUs) that vest upon the satisfaction of both a service-based and a performance-based requirement. The service condition is a stated service period generally requiring 36 months of service, with the total number of RSUs awarded vesting on a cliff basis after the 36-month anniversary date of the grant. The performance-based condition is an event-based criteria that will be satisfied as to any then-outstanding RSUs on the first to occur of a ‘Qualifying Transaction” defined as: (1) the closing date of a transaction resulting in a change in control; or (2) the effective date of an IPO.
The RSUs vest on the date upon which both the service-based and performance-based requirements are satisfied. If a Qualifying Transaction occurs prior to the Vesting Date, the RSUs shall fully (100%) vest effective immediately prior to and contingent upon the Qualifying Transaction. If the Grantee’s employment by the Company terminates for any reason prior to a Qualifying Transaction, such termination shall result in the immediate forfeiture and cancellation of the RSUs, which means the Grantee will not be entitled to any payment pursuant to this Agreement after the date of such termination. If the RSUs vest, the Company will deliver one share of common stock for each vested RSU on the settlement date. The unvested RSUs expire ten years from the grant date.
| 25 |
As of March 31, 2025 and December 31, 2024, respectively, the Company concluded that the performance condition described above for the RSUs was not probable of being satisfied at such time. As a result, the Company has not recognized any compensation cost to date for any RSUs granted. In the period in which the performance-based condition is achieved, the Company will accelerate all vesting and record the stock-based compensation expense using the accelerated attribution method, based on the grant date fair value of the RSUs.
| (In Thousands) | Number of Units | Weighted-Average Fair Value |
||||||
| Outstanding and unvested at December 31, 2024 | $ | |||||||
| RSUs Granted | $ | |||||||
| RSUs Forfeited | ( |
) | $ | ( |
) | |||
| Outstanding and unvested at March 31, 2025 | $ | |||||||
As of March 31, 2025 and December 31, 2024, respectively, all stock-based compensation expenses related to the Company’s RSUs remained unrecognized because the performance-based condition was not satisfied. No RSUs had met their service-based vesting condition as of December 31, 2024; also, no RSUs had met the performance vesting condition.
If
the performance vesting condition had been satisfied on March 31, 2025, the Company would have recorded $
NOTE 13 – COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, for which it is liable in future periods. These arrangements can include terms binding the Company to minimum payments and/or penalties if it terminates the agreement for any reason other than an event of default as described in the agreement.
In the course of business, the Company is party to various legal proceedings and claims from time to time. A liability will be accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss is remote. However, litigation is inherently uncertain, and it is not possible to predict the ultimate disposition of these proceedings. There are no legal proceedings, which the Company believes will have a material adverse effect on the Company’s financial position.
In 2025, the U.S. government implemented new tariff measures affecting a broad range of imported materials. The Company has evaluated the potential impact of these actions on its operations and supply chain and does not expect them to have a material impact on its financial position or results of operations in the near term. The Company’s operations are currently supported by a substantial inventory of completed units manufactured prior to the effective dates of the tariff adjustments, which reduces our near-term exposure to increased costs associated with imported materials. Additionally, as the Company transitions into the next phase of its product development, including Phase 2, its sourcing strategy reflects a greater emphasis on domestic procurement. This shift is expected to further mitigate exposure to international trade disruptions and tariff-related cost volatility. The Company will continue to monitor developments in U.S. trade policy and adjust its supply chain strategy as necessary.
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Legal Proceedings
Claims filed by the Company
| (i) | The
Company initiated legal action against former employees who violated their agreements post-termination. Specifically, the Company
filed two lawsuits against former employees alleging claims including breach of contract, violations of the Computer Fraud &
Abuse Act, violations of the Defend Trade Secrets Act, conversion, unjust enrichment, breach of covenant of good faith and fair
dealing, and demand for temporary and permanent injunctive relief. These litigation matters remain pending. Management does not
anticipate these matters will have a material impact on the Company’s results of operations or financial condition.
Quantifying the resulting harm is complex and ongoing. The Company anticipates that judgment will be entered in its favor for a sum
less than $ | |
| (ii) | The
Company uncovered potential misconduct by a former employee related to a stock scheme, the impact of which is challenging to measure.
| |
| (iii) | The
Company engaged in litigation with an Internet Blogger who posted defamatory information regarding the Company. On August 5, 2024,
the court entered a default judgment in favor of the Company, awarding $ | |
| (iv) | On April 30, 2024, the Company filed a lawsuit against Brave Control Solutions, Inc. and individual Brent McPhail in US District Court. The Company seeks damages equal to all amounts paid under the contracts, among other relief, to recover from these breaches and misrepresentations. The Company anticipates a judgment in its favor, but recovery of these assets is uncertain. |
Claims filed against the Company
| (i) | The Company received notifications of employment-related charges filed by former employees with the Equal Employment Opportunity Commission (“EEOC”) and the National Labor Relations Board (“NLRB”). The allegations involve various issues such as discrimination and interference with employee rights. The Company provided responses to both agencies and is awaiting further developments. The Company does not expect a material impact to its financial position. | |
| (ii) | The
Company’s former Chief Operating Officer, terminated for cause after seven months of employment, filed a civil complaint in
Nevada alleging various claims against the Company and its directors. The Company settled this matter in March 2025 without a material
impact to its financial position. The Company paid $ | |
| (iii) | Leader
Capital is a shareholder of the Company and has filed suit against the Company and its previous transfer agent, Transfer Online,
Inc. The Company is defending itself and Transfer Online in this lawsuit, which has a potential loss range of between $ | |
| (iv) | Ro-Matt International Inc. and Electra-Tech Manufacturing Inc. (“Applicants”) filed a lawsuit against Brave Control Solutions, Inc., BOXABL Inc., and Royal Bank of Canada in Ontario, Canada, in the Superior Court of Justice. This case was dismissed, with no damages asserted against BOXABL. | |
| (v) | The Company has received claims from various parties alleging that BOXABL violated certain California Laws, including the Trap and Trace Law and California Privacy Laws relating to its Facebook postings. The Company does not expect a material impact to its financial position. | |
| (vi) | Pronghorn
Homes, LLC, a party to the Arizona mining project, filed a lawsuit against the Company in the State of Arizona, which has a potential
loss exposure of up to $ | |
| (vii) | The Company entered into an agreement with a RV Park for the sale of certain PMRV units. It appears that the RV Park did not obtain required zoning and land use permits to install and use the units at their site in Arizona. The State of Arizona ‘red tagged’ the units and the RV Park asserted claims against the Company, demanding that the Company immediately remove the units. The Company has denied all liability and is negotiating a resolution of the dispute with the RV Park. Accordingly, the Company has not accrued a loss contingency for this matter. | |
| (viii) | The Company has received a claim from a plaintiff that purchased fraudulent shares of the Company’s stock from a former employee
of the Company, at a discounted price, incurring a loss of approximately $ |
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NOTE 14 – INCOME TAXES
The Company has not recorded any income tax expense for the three months ended March 31, 2025 and 2024.
Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
A valuation allowance is required to be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. A full review of all positive and negative evidence needs to be considered. The Company has established a full valuation allowance against the net deferred tax assets as of March 31, 2025 and December 31, 2024 due to historical losses and uncertainty surrounding the use of such assets.
NOTE 15 - SEGMENTS
The Company operates as one operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Financial Officer, who performs quarterly reviews of the financial information presented on a consolidated basis. The CODM utilizes the Company’s strategic plan, which includes product development roadmaps and the Company’s long-range financial model, including key inputs for resource allocation. Significant expenses include research and development, sales and marketing, and general and administrative expenses, which are each separately presented on the Company’s Consolidated Statements of Comprehensive Loss. See the unaudited interim condensed consolidated financial statements for other financial information regarding the Company’s single operating segment.
The Company has no significant long-lived assets recognized on the Consolidated Balance Sheets outside of the US jurisdiction.
NOTE 16– SUBSEQUENT EVENTS
The Company has evaluated subsequent events from March 31, 2025 through May 20, 2025, the issuance date of these unaudited interim condensed consolidated financial statements.
Sales
Between April 1, 2025 and May 20, 2025, the Company shipped 1 unit. There are currently 39 units that are under contract with our dealer network which are going through various steps required to be installed such as permitting and site preparation. In addition, the Company has signed contracts with various B2B customers for 161 units.
Equity Events
Subsequent to March 31, 2025, the Company issued the following:
| - |
thousand shares of Series A-3 Preferred Stock for gross proceeds of $ | |
| - |
thousand shares of Series A-3 Preferred Stock for gross proceeds of $ |
For awards previously issued under the Company’s Amended 2021 Stock Incentive Plan, the Company recognized employee forfeitures of RSUs and Stock Options subsequent to March 31, 2025. No additional grants of RSUs or Stock Options were made under the Plan.
Previously issued Stock Options totaling shares became fully vested at a weighted average exercise price per share of $. None of these options have been exercised.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes included elsewhere herein and our audited consolidated financial statements and related notes for the year ended December 31, 2024 included in our most recent annual report on Form 10-K filed on the Securities and Exchange Commission (“SEC”) on April 14, 2025. The condensed consolidated financial statements of the Company appearing in this Quarterly Report on Form 10-Q are unaudited, and may not include year-end adjustments necessary to make those financial statements comparable to audited results, although, in the opinion of management, all adjustments and disclosures necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. The results of operations for the three ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year.
Please note that certain prior period amounts have been reclassified to conform to the current period presentation. See “Note 2 – Summary of Significant Accounting Policies – Revision of Previously Issued Consolidated Financial Statements” for a description of these changes.
Unless otherwise indicated, dollar amounts above $1000 in this Report have been rounded to the nearest thousand, million or billion, as applicable.
In addition to our consolidated financial statements, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See above Note About Forward-Looking Statements.
Overview
The Company is a manufacturer of building systems and is in the process of aligning our production levels to match the demand for our products. In addition to our first Nevada manufacturing facility (“Factory 1”), which we took possession of in May 2021, we expanded our production capacity by signing leases for additional Nevada facilities (“Factory 2”) in June 2022 and (“Factory 3”) in May 2023, respectively. While our growth has mainly been funded by our capital raising activities as described below in “Liquidity,” we anticipate our increased manufacturing capacity will allow us to build Boxes more efficiently, and, in doing so generate additional revenue and profit in the future. We continue to improve our workforce, including the expansion of our business development and sales teams to focus and better support the outreach to B2B, B2C, and B2G sales channels, respectively.
The majority of US states have a statewide modular program which requires approval of a specific product prior to the product being able to be sold and installed within the state. The requirements to obtain these approvals vary across each state, and the approval process has resulted in delays in the Company’s ability to deliver the product across the country, which has impacted the timing and amount of the Company’s revenues.
The Company has recently obtained state modular approvals under state-wide modular housing programs in Arizona, New Mexico, California and Nevada. The approvals were obtained as follows:
| ● | During December 2023, we completed the required third-party inspection for the State of Arizona and received a report recommending Factory and Casita certification which was approved by the State. | |
| ● | During May 2024, we received approval to sell Casitas as Modular homes in California in certain climate zones. | |
| ● | During July 2024, we received approval to sell Casitas under the Statewide Modular Program in New Mexico. | |
| ● | During January 2025, we received approval to sell Casitas in Nevada under the Residential building code. | |
| ● | During January 2025, we received approval to sell Casitas under the Statewide Modular Program in all climate zones in California. |
New sales within recently approved states and jurisdictions may continue to face delays due to the time needed for site preparation, arranging funding for the project the purchaser, and other preparatory steps that are required to arrange delivery and installation of the units.
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BOXABL also has been focused on selling its products in multiple jurisdictions that do not have a statewide modular housing program. In these areas, the ultimate approval comes down to the local jurisdiction and is determined on a site-by-site basis. This pertains to the following areas:
| ● | Oklahoma | |
| ● | Utah | |
| ● | Wyoming | |
| ● | Kansas | |
| ● | West Virginia | |
| ● | Hawaii | |
| ● | Vermont | |
| ● | Alaska | |
| ● | Oregon | |
| ● | Connecticut | |
| ● | Delaware | |
| ● | Tribal Lands |
BOXABL is generally also able to sell its Casita, by adding a permanent chassis, as a Park Model RV under ANSI A119.5 in the majority of US states.
The Company retained multiple third-party inspection agencies to assist in achieving certification in multiples states with modular housing legislation simultaneously.
Trend Information
To date through May 20, 2025, we have manufactured 718 Casitas and have completed deliveries of 279 Casitas in 6 states, including Arizona, Nevada, California, Oklahoma, Utah, and Hawaii. The Company has remaining customer deposits of $3.4 million from 9,350 potential customers ranging from $100 to $5,000. The Company currently requires a $500 non-refundable order fee for Casitas to connect that Customer to a BOXABL Preferred Dealer/Installer and survey the related location where the product is intended to be installed. The Company also started accepting $200 non-refundable pre-order fees in January 2025 to be added to the priority list for the newly launched Baby Box.
The Company has been developing an expanded product line, which includes a variety of sizes and configurations that extend beyond our existing Casita model. The growing interest expressed by various external stakeholders including property developers and homebuilders have prompted us to explore additional sales channels. In January 2025, we announced the launch of prototypes of our Next Generation Products.
This includes the Baby Box, a 120 sq ft compact living space, towable trailer, built to RV Standard NFPA 1192 and our Phase 2 Modular Building System, comprising Boxes (modules) of varying dimensions that stack and/or connect allowing a system where homebuilder customers are able to customize the Boxes to build different building types and floorplans. We plan on beginning production of this product line manually with low capital investment to start.
For Phase 2 modular, we have been prototyping the production over the past few months and built two model homes in our Factory. This product will eventually need a new production line. We have developed various manufacturing concepts to manufacture this product in the future. We expect the design and development changes to be completed within 2025 and will focus design and manufacturing efforts based on the orders from developers for specific floorplans/models within the product offering. Manufacturing changes will be completed in parallel to the designs for initial manufacturing launch within the first half of 2026, subject to State approvals.
For Phase 2 Baby Box, we plan to start production of Baby Boxes in the fourth quarter of 2025.
In 2025, and following feedback from our customer base, we also introduced a 2-box configuration set up of our Casita including a 1 or 2 bedroom (for a total of 722 sq. ft.) set up for the California ADU market. This new floor plan can be produced with our existing production line.
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Tariffs and Inflation
The U.S. government recently implemented new tariff measures affecting a broad range of imported materials. We have evaluated the potential impact of these actions on our operations and supply chain and do not expect them to have a material impact on our financial position or results of operations in the near term. Our operations are currently supported by a substantial inventory of completed units manufactured prior to the effective dates of the tariff adjustments, which reduces our near-term exposure to increased costs associated with imported materials. Additionally, as we transition into the next phase of our product development, including Phase 2, our sourcing strategy reflects a greater emphasis on domestic procurement. This shift is expected to further mitigate exposure to international trade disruptions and tariff-related cost volatility.
We believe that we are well positioned to react to potential increased costs from our suppliers in the future due to our cost-effective building components and manufacturing process in the factory setting compared to the cost of traditional construction of stick-built homes in the field, which would face similar cost increases. As a result, the Company believes that it would be able to pass on those costs to end customers while keeping the BOXABL solution competitive.
However, recent proposals to change the international trade framework have resulted in substantial regulatory uncertainty regarding international trade and trade policy, both in the United States and abroad. The U.S. government has also raised the possibility of other initiatives that may affect our business, including renegotiation of trade agreements with other countries and the introduction of new or increased import duties or tariffs with respect to products from a number of different countries. In light of this uncertainty and the unknown impact on the broader US and global economy in the future, we do not have clarity at this point over the potential medium to long term impacts our business may face. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact the ability of our suppliers to deliver materials or manufacturing equipment to us and, therefore, delay or impede our deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand, which may impact the housing market more broadly, reducing demand for our products.
Results of Operations
Revenues
Our gross revenues for the three-months ended March 31, 2025 and 2024 were $123,000 and $625,000, respectively, with the decrease primarily related to the exclusion of revenue from seven Casitas that had been contracted and transported to a customer, American Campground LLC that were shipped in January 2025. The customer experienced delays in installation and the Company did not recognize revenue for these 7 Casitas. Had revenues from these Casitas been recognized, our revenue in the first quarter of 2025 would have been comparable to the first quarter of 2024. The BOXABL Casita finally received modular housing approval in Arizona during December 2023 followed by New Mexico and California in 2024, and Nevada in 2025. Revenue was generated by the sale of 1 Casita delivered to 1 customer during the three months ended March 31, 2025. This is in comparison to the sale of 6 Casitas delivered to 4 customers during the three months ended March 31, 2024. Significant customers included Pinnacle Construction (100% of revenues for the three months ended March 31, 2025). We are continuing to execute our sales strategy, which includes closing deals from our sales pipeline/waitlist and generating interest in our next generation of products. On July 17, 2024, the Company launched the BOXABL Directory which is a growing network of modular home Preferred Dealers/Installers across the States where the Company has approval to sell its Casita. Since most states require various dealer and installer licenses in order to sell and install modular homes, BOXABL utilizes a network of Preferred BOXABL Dealers/Installers to handle these transactions with its end customers. In addition to the network of Dealers/Installers, the Company has also launched an online dealer portal which allows the approved and trained Dealers/Installers to access a list of potential customers that have ordered a Casita in their area, are ready to proceed with their project, and need sitework and installation services. The launch of the Company’s dealer portal, combined with the expansion of our Preferred Dealer/Installer network, provides a platform for the Company to expand its sales and installation operations throughout the States where our product can be sold. Since launching the BOXABL Directory, the Company has trained and onboarded 80 Dealers/Installers and continues to expand its network. As the Company’s product obtains additional approvals throughout the country, the Company expects to utilize these systems to execute additional sales in these territories, with faster ramp up time.
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Cost of Goods Sold
Cost of goods sold were $2.1 million and $4.4 million for the three-months ended March 31, 2025 and 2024, respectively. Cost of goods sold consists primarily of the cost of products used in the production of the Company’s finished products, inbound and outbound shipping costs, the related labor, and indirect overhead costs associated with that production. During the three months ended March 31, 2025 and 2024, manufacturing overhead was $2.1 million and $4.1 million, respectively. This consisted primarily of the allocation of indirect labor, rent and lease expense, and depreciation expense. Other allocations to manufacturing overhead included indirect supplies, scrapped material, and maintenance costs. These overhead costs are relatively fixed and do not increase or decrease proportionally with an increase or decrease in production or sales.
Cost of goods sold for the three months ended March 31, 2025 and 2024, consist of the following:
| March 31, | ||||||||
| (In Thousands) | 2025 | 2024 | ||||||
| Direct material/shipping | $ | 34 | $ | 223 | ||||
| Direct labor | 29 | 67 | ||||||
| Manufacturing overhead | 2,055 | 4,120 | ||||||
| Cost of goods sold | $ | 2,118 | $ | 4,410 | ||||
Our costs of goods sold compared to revenues for each period presented were significantly elevated due to our reduced production levels as we faced delays on revenues mainly from permitting and regulatory issues, customer readiness and financing. As a result, the factory overhead, including the costs of leasing and operating our factories and indirect labor costs, was allocated to the inventory for total units produced during the year. While we estimate that we could produce and deliver 1,200 Casitas per year at full factory capacity, we only produced 140 Casitas in 2024, and 260 Casitas in 2023, respectively, which bore the full manufacturing overhead costs in each year. In the three months ended March 31, 2025, we produced 11 Casitas.
Operating Expenses
Operating expenses for the years ended March 31, 2025 and 2024, consisted of the following:
| March 31, | ||||||||
| (In Thousands) | 2025 | 2024 | ||||||
| General and administrative | $ | 1,807 | $ | 3,729 | ||||
| Sales and marketing | 6,350 | 2,859 | ||||||
| Research and development | 583 | 2,247 | ||||||
| Total Operating expenses | $ | 8,740 | $ | 8,835 | ||||
General and administrative expenses consist of compensation and benefits for various positions including company administration, rents, shop supplies, and utilities. The decrease in general and administrative expenses was primarily related to lower headcount due to restructuring of the workforce and aligning the production levels with sales and the Company’s cost control initiatives. As we expand the Company’s production capacity, we expect these expenses to decrease on a per unit basis.
We also incurred higher sales and marketing expenses in 2025, offset by the decrease in research and development and general and administrative expenses. Sales and marketing expenses generally consist of advertising and promotions. In 2025 and 2024, the Company undertook significant new advertising campaigns to refine the marketing of the Company’s products focused on generating sales activity, as well as advertising directly to investors, leading to a significant increase in sales and marketing expenses in the first quarter of 2025 compared to the first quarter of 2024. Research and development activity is essential to testing and developing BOXABL products and involves significant costs to obtain permits and approvals. These costs included test raw material used in production and researching industry standards and regulations. Research and development costs declined as the Company succeeded in obtaining state approvals under modular housing programs in several states. Following BOXABL obtaining California statewide approval for the Casita in all climate zones in January 2025, we expect to focus future research and development efforts on our Phase 2 Modular Building System and the Baby Box.
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Stock-based Compensation Expense
The Company recognizes stock-based compensation expense based on fair value on the date of grant and recognized over the associated vesting periods. Vesting of RSU awards is generally subject to a 3-year service period and, as of October 18, 2024, also subject to a performance condition. Accordingly, stock-based compensation is recognized upon satisfaction of the service and performance condition. In the case of options, the Company uses the Black-Scholes pricing model to estimate the fair value of options on the date of grant that are then expensed on a straight-line basis over the vesting period. The Company accounts for forfeitures as they occur in the year of forfeiture and share-based compensation expense is adjusted accordingly.
For the three-months ended March 31, 2025 and 2024, the Company recaptured $2.9 million and recognized $3.0 million in stock-based compensation, respectively. The decrease is attributable to employee forfeitures upon termination in 2024, offset by the vesting of Stock options and RSUs granted under the Company’s Amended 2021 stock incentive plan. See “Note 12. Stockholders’ Equity – Stock-based Compensation” for further discussion.
Total Other Income
For the three months ended March 31, 2025 and 2024, our total other income was $472,000 as compared to $569,000, respectively, primarily due to lower balances of interest-bearing deposits.
Liquidity and Capital Resources
Going Concern
The Company’s unaudited interim condensed consolidated financial statements have been prepared under the assumption that the Company will be able to continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern is probable. Primarily due to slower sales associated with delays in obtaining US statewide modular approvals and customer readiness, the Company reported a net loss of $10.3 million and an operating cash outflow of $12.4 million for the three months ended March 31, 2025. At March 31, 2025, the Company had an accumulated deficit of $728.7 million. Absent any other action, the Company will require additional liquidity to continue its operations over the next 12 months.
The continuing viability of the Company and its ability to continue as a going concern is dependent on the Company being successful in its continued efforts in growing its revenue and/or accessing additional sources of capital. Management’s plan to address this need includes (a) continued exercise of tight controls to conserve cash, (b) accelerating product sales, and (c) raising funds through equity financing. The Company anticipates current capital on hand, product revenue, and expected future funding will be sufficient to fund the Company’s operations in excess of twelve months. The Company is currently selling shares of its preferred stock through Regulation A and Regulation D offerings in the United States and in a Canadian offering. Management believes that the actions presently being taken by the Company will provide sufficient liquidity for the Company to continue to execute its business plan over the next year. However, there can be no assurances that management’s plans will be achieved.
Sources of Liquidity
To date, our operations have been financed by our exempt offerings of securities made in reliance on Regulation A, Regulation CF and both Rule 506(c) and Rule 506(b) of Regulation D in the United States and exempt offering regulations in Canada. For details regarding our securities offerings, see below Sales of Securities.
At March 31, 2025, our principal source of liquidity was our unrestricted cash and cash equivalents and short-term investments, which we achieved through our offerings of securities as discussed above. As of March 31, 2025, the Company held $11.4 million in unrestricted cash and cash equivalents and $7.1 million in investments in short-term treasury notes, compared to $5.8 million in cash and cash equivalents, and $15.9 million held in short-term treasury notes as of December 31, 2024. Based on the Company’s current burn rate of $1.5 million per month, we anticipate that the current liquidity together with cash generated from sales of our products as well as sales of additional securities will be sufficient to meet our immediate cash needs for more than 12 months.
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Historical Cash Flows
Three Months Ended March 31, |
||||||||
| (In Thousands) | 2025 | 2024 | ||||||
| Net cash used in operating activities | $ | (12,474 | ) | $ | (10,146 | ) | ||
| Net cash provided by (used in) investing activities | $ | 8,682 | $ | (1,818 | ) | |||
| Net cash provided by financing activities | $ | 9,455 |
$ | 139 | ||||
Operating Activities
Cash used in operating activities included net loss adjusted for several non-cash items such as depreciation & amortization, stock-based compensation, and other non-cash expenses, in addition to the change in working capital as inventory balances increased.
Investing Activities
Primary investing activities included purchase of property, equipment, leasehold improvement, payment of security deposit for our factory and other facility, and acquisition and sales of short-term and long-term investments. The increase in cash flows provided by investing activities was due to a sales and maturities of investments (U.S. Treasuries) during the first quarter of 2025 being slightly higher than the prior comparable quarter as well as purchases of investments in the 2024 period that did not recur in the 2025 period.
Financing Activities
Primary sources of our financing activities included net proceeds from issuance and sales of A-2 and A-3 Preferred Stock. This also includes proceeds received in advance of security issuance, which is included within the Company’s subscription liability.
Inventory
Our physical assets decreased with inventory of $23.8 million as of March 31, 2025, which is primarily finished goods including 395 Casitas, compared to $24.3 million as of December 31, 2024, which was also primarily finished goods including 397 Casitas. The decline in inventory value relates to our writing down the value of a group of older Casitas in inventory because of delivery delays and decreased resale value. As our sales cycle for Casitas took longer due to delays in permitting and site work and customers readiness, the amount of inventory consisting of finished goods and raw material remains elevated. Subsequent to March 31, 2025 and through May 20, 2025, we delivered an additional 1 Casita.
Property, Plant and Equipment
Property, Plant and Equipment decreased to $8.6 million as of March 31, 2025 compared to $8.9 million as of December 31, 2024 primarily resulting from depreciation of machinery and equipment at our manufacturing facility.
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Sales of Securities
During the three months ended March 31, 2025 and 2024, the Company conducted offerings under Regulation A, Regulation Crowdfunding, Regulation D, and in a Canadian offering. The progress of these offerings during those periods was as follows:
| (In Thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | ||||||||||||||
| Offering | Shares Sold | Gross Proceeds | Shares Sold | Gross Proceeds | ||||||||||||
| Regulation A (Series A-3)* | 16,539 | $ | 12,924 | $ | - | - | ||||||||||
| Regulation D (Series A-3)* | 2,128 | $ | 1,606 | - | - | |||||||||||
| Canada (Series A-2)* | 118 | $ | 94 | - | - | |||||||||||
| Total | 18,785 | $ | 14,624 | $ | - | $ | - | |||||||||
* These offering are ongoing.
Material Commitments and Obligations
Expense Commitments
As of March 31, 2025, we reported current lease liabilities of $3.6 million compared to $3.5 million as of December 31, 2024. Our long-term lease liability decreased to $6.2 million as of March 31, 2025, from $7.2 million as of December 31, 2024, due to the passage of time.
Customer Deposits
Our main non-lease liability is the Company’s obligation to customers who have placed deposits on the purchase of our products. As of March 31, 2025, the Company held customer deposits in the amount of $3.4 million, which represented a decrease from $3.6 million as of December 31, 2024. This decrease is due to refunds and/or application of customer deposits to customer orders that were fulfilled during 2025.
Deferred Revenue
As of March 31, 2025, our balance sheet carried $2.6 million of deferred revenue related primarily to advanced deposits on unfulfilled purchase orders, including $1.5 million to Pronghorn Services LLC, $108,000 deposit on a contract with Hideaway Inn, LLC, and $340,000 deposit for purchase orders from Punnet Construction in Oklahoma. This compares to $2.3 million of deferred revenue as of December 31, 2024. Deferred revenue generally occurs when the Company receives payments from the customer in advance of the Company shipping units to that customer. Pursuant to ASC 606, Revenue Recognition, the Company records deferred revenue for paid, unfulfilled performance obligations which are represented by the Casitas or installer training sessions that had not yet been delivered as of the date of the consolidated financial statements.
Off-Balance Sheet Arrangements
The Company did not have any off-balance sheet arrangements as of March 31, 2025 or December 31, 2024.
Critical Accounting Policies and Estimates
Inventory Valuation
Inventories consist of raw materials, in-bound freight and duties, work in progress, and finished goods. Inventories available for sale are valued at the lower of cost or net realized value. Cost is determined using the weighted average method. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, bulk sales, and the expected recoverable values for each disposition category. On a periodic basis, the Company performs a physical count of its inventory and records an inventory valuation allowance for inventory that has become obsolete or inventory that has a cost basis in excess of the expected net realizable value. Damaged and obsolete inventory are valued based on specific identification and management’s estimate of net realizable value, including consideration of whether the items are usable in current or future production. Any difference between cost and estimated realizable value is recognized as an expense.
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Intangible Assets
The Company has intangible assets that are amortized over the respective estimated lives on a straight-line basis unless the lives are determined to be indefinite and reviewed for impairment whenever events or other changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s intangible assets include intellectual property associated with patents and trademarks that are amortized over their estimated useful life of 14 years, or the stated expiration date, whichever is more determinable. The Company also has implementation costs for cloud computing and hosting arrangements for software-as-a-service arrangements that are recorded as an intangible asset on the balance sheet, and subsequently amortized over their economic or legal life, whichever is shorter. The Company applies the following useful lives to its intangible assets:
| Intellectual property | 14 years | |
| Software | 1-3 years | |
| Domain | 5 years |
The Company has also incurred costs to develop software that are being developed for sale and/or external-use. These software development costs are recognized in research and development expenses on the Company’s statement of comprehensive loss, as these costs do not qualify for capitalization until the software has reached the point of technological feasibility, which is determined after the planning, designing, coding, and testing phases have been completed.
Stock-Based Compensation
The Company applies ASC 718, Stock-Based Compensation for all stock-based awards, including stock options and restricted stock units, that are measured at fair value on the date of grant and recognized over the associated vesting periods. The fair value of stock options is estimated on the date of grant using a Black-Scholes model. The fair value of restricted stock awards is estimated on the date of the grant based on the fair value of the Company’s underlying common stock. The Company recognizes compensation expense for stock options on a straight-line basis over the associated service or vesting periods. Effective October 18, 2024, restricted stock awards became subject to a performance condition, which defers vesting of restricted stock awards until a monetization event. Accordingly, the Company shall not recognize stock-based compensation from restricted stock awards until a monetization event becomes probable.
Determining the grant date fair value of stock options using the Black-Scholes option-pricing model requires management to make assumptions and judgments. These estimates involve inherent uncertainties and, if different assumptions had been used, stock-based compensation expense could have been materially different from the amounts recorded.
Planned Timeline
With the success of our initial fundraising through our offerings under Regulation A, Regulation D, and Regulation CF, we have continued to advance our planned timeline. As of March 31, 2025, we see our next 12-month timeline as follows:
| Month 1-6: | ● | Continue delivery of Casita orders to California, Arizona, New Mexico and Nevada and to states that do not have modular housing legislation, or using Park Model RV configuration. |
| ● | Release to market Casita 2 boxes set up with one- or two-bedroom floorplans and get it approved in California. | |
| ● | Continue to expand our dealer & installer network to execute the B2C Casita sales. | |
| ● | Establish our RV Dealer in Nevada to facilitate sales of Baby Boxes. | |
| ● | Establish preferred lending relationships for customer financing of BOXABL products. |
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| ● | Obtain plant and Casita certification in South Carolina and Texas. Costs are estimated to be $50,000 per State. | |
| ● | Develop a product suitable for emergency response / temporary accommodation | |
| Month 6-12: | ● | Obtain certification in several states including Texas and Nevada for our Casita 2 boxes set up. |
| ● | Release to market our Emergency Response temporary with B2G focus. | |
| ● | Obtain orders for Phase 2 products to justify development costs for product & manufacturing. | |
| Month 12+: | ● | Obtain certification in several states including California, Texas and Nevada for our Phase 2 Modular Building System Boxes. Costs are estimated to be $50,000 per state. |
| ● | Begin Production of Phase 2 Modular Building System Boxes, depending on receipt of sufficient orders for Phase 2 products. | |
| ● | Develop a smart home, AI-enabled, solution to enhance our products experience. |
The Company believes the above referenced activities are achievable with its current cash and cash equivalents. However, there is no assurance that we will be able to meet this timeline. It is provided to identify our intentions for moving forward during the next 12 months of operation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company as defined by §229.10(f)(1), BOXABL is not required to provide the information under this Item.
Item 4. Controls and Procedures.
Limitations on Effectiveness of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact there are resource constraints and management are required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
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Based on the evaluation of our disclosure controls and procedures as of March 31, 2025, our Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in the design and operation of ineffective Information Technology General Controls (“ITGC”) over certain key financial IT systems and ineffective design and operation of certain business process controls over the preparation and timely review of financial statements and disclosures described below. This will require remediation in order to be effective at the reasonable assurance level.
Evaluation of Information Technology General Controls (ITGCs)
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The Company identified a material weakness related to the ineffective design and operation of effective ITGC’s over certain systems that are critical to the Company’s financial reporting process. Specifically, the Company had ineffective design and operation of controls over certain information technology general controls (ITGCs), including user segregation of incompatible duties, program change management, and user access controls to ensure: (i) that access to applications and data, and the ability to perform program changes, were adequately restricted to appropriate personnel and (ii) that the activities of individuals with access to modify data and make program changes were appropriately monitored and restricted. Automated process-level and manual controls that are dependent upon the information derived from such financially relevant systems were also determined to be ineffective as a result of such deficiency for the year ended December 31, 2024 and the three months ended March 31, 2025.
The Company identified a material weakness related to the ineffective design and operation of certain business process controls over the preparation and timely review of financial statements and disclosures, journal entries, reconciliations, schedules, and roll-forwards supporting financial statement account balances. Several material adjustments were identified. Management reviewed these errors identifying the root cause was due to the control environment component of internal control as the Company experienced continued personnel turnover and did not maintain a sufficient complement of personnel with the appropriate level of knowledge, experience, and training in certain areas important to financial reporting.
During 2024 and the three months ended March 31, 2025, significant turnover in the Company’s personnel across the Finance, IT, Legal, and Investor Relations departments contributed to these deficiencies.
Notwithstanding the material weakness in our internal control over financial reporting, Management has concluded that our consolidated financial statements and related notes included in this Report are prepared in accordance with generally accepted accounting principles. Our Co-Chief Executive Officers and Chief Financial Officer have certified that, based on each such officer’s knowledge, the financial statements, as well as the other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report.
Management’s Plan for Remediation of the Material Weakness
Management, with the oversight of the audit committee of the board of directors, is committed to maintaining a strong internal control environment. In response to the material weakness identified above, we have identified and begun to implement remediation efforts which include: (i) implementing user access rights to formally require segregation of duties over systems that are critical to the Company’s financial reporting; (ii) engaging third-party consultants to assist with the remediation efforts, including enhancing our risk assessment; (iii) hiring of additional and more experienced Accounting, IT, Legal, and Investor Relations personnel and; (iv) reporting remediation measures to the Audit Committee of the Board of Directors.
The Company believes that these actions, when fully implemented, will remediate the material weakness. However, the material weakness will not be considered fully remediated until management designs and implement effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. As the Company continues to evaluate operating effectiveness and monitor improvements to our internal control over financial reporting, we may take additional measures to address control deficiencies or modify the remediation plan described above.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for significant turnover in the Company’s personnel across the Finance, IT, Legal, Investor Relations, Business Development, Sales, and Human Resources departments.
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Part II Other Information
Item 1 Legal Proceedings.
The Company is party to various legal proceedings and claims from time to time. A liability will be accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss is remote. However, litigation is inherently uncertain, and it is not possible to predict the ultimate disposition of these proceedings.
Employment Matters
On or about June 13, 2023, the Company filed two lawsuits against former employees alleging claims including breach of contract, violations of the Computer Fraud & Abuse Act, violations of the Defend Trade Secrets Act, conversion, unjust enrichment, breach of covenant of good faith and fair dealing, and demand for temporary and permanent injunctive relief. These litigation matters remain pending. Management does not anticipate these matters will have a material impact on the Company’s results of operations or financial condition.
On or about March 2023, the Company discovered through one of its compliance programs that a former employee had issued fraudulent securities. An internal investigation was commenced and the matter was reported to the Federal Bureau of Investigation. Shortly thereafter, the Company filed a lawsuit against this former employee for breach of contract, violations of the Computer Fraud and Abuse Act, violations of the Defend Trade Secrets Act, Conversion, Unjust Enrichment, Breach of the Covenant of Good Faith and Fair Dealing and for a temporary and permanent injunction. The Company obtained a default judgment in its favor for a sum less than $1 million. The Company has information that certain of these investors intend to assert claims against the Company for their losses. The Company denies liability for these claims and it is not possible at this time to calculate the Company’s potential exposure for these claims.
The Company initiated legal action against former employees who violated their agreements post-termination. Quantifying the resulting harm is complex and ongoing. The Company anticipates that judgment will be entered in its favor for a sum less than $250,000.
On September 2, 2022, BOXABL received notice of a charge of employment discrimination had been filed with the Equal Employment Opportunity Commission (“EEOC”) against BOXABL under Title VII of the Civil Rights Act of 1964 (Title VII). The circumstances of the alleged discrimination are alleged to have occurred on or about May 1, 2022. On October 3, 2022, BOXABL (through counsel) filed a position statement refuting the allegations and providing supporting documentation of BOXABL’s position. The matter is pending before the EEOC. Management does not anticipate this matter will have a material impact on the Company’s results of operations or financial condition.
On or about September 25, 2023, BOXABL received notice of a charge of unfair labor practices had been filed with the National Labor Relations Board against BOXABL under Section 7 of the NLRA. The circumstances of the alleged charge are alleged to have occurred between March 2023 and September 2023. On or about October 12, 2023, BOXABL (through counsel) filed a position statement refuting the allegations and providing supporting documentation of BOXABL’s position. The matter is pending before the NLRB. Management does not anticipate this matter will have a material impact on the Company’s results of operations or financial condition.
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On May 7, 2024, BOXABL received notification that a former employee filed a charge of employment discrimination against BOXABL with the EEOC under Title VII of the Civil Rights Act of 1964 (Title VII). The alleged discrimination involves claims of race-based discrimination, retaliation, and harassment. On the same day, BOXABL engaged external legal counsel to submit a Position Statement, contesting these allegations and providing supporting documentation. The matter is currently under review by the EEOC and has not progressed to a formal court case. Management does not anticipate this matter will have a material impact on the Company’s results of operations or financial condition.
The Company’s former Chief Operating Officer, terminated after seven months of employment, filed a civil complaint in Nevada alleging various claims against the Company and its Directors. The Company settled this matter in March 2025 without a material impact to its financial position. On March 25, 2025, the Company settled claims asserted against a former employee as well as claims that the former employee asserted against the Company. The Company paid $105,000 to this former employee in exchange for the surrender of 5,882,353 shares of the Company’s Preferred A-1 Stock.
Other Litigation
The Company has received claims from various parties alleging that it violated certain California laws, including the Trap and Trace Law and California Privacy Laws relating to its Facebook postings. The Company does not expect a material impact to its financial position.
On January 23, 2023, the Office of Administration of the Arizona Dept. of Housing brought an administrative complaint against BOXABL, alleging that BOXABL did not comply with certain requirements prior to shipping housing units into Arizona, and seeking penalties up to suspension or revocation of its license, an administrative penalty, or probation. On February 9, 2023, BOXABL filed its verified Answer, explaining inter alia that BOXABL had acted in good faith and in accordance with its reasonable interpretation of the Department’s instructions regarding the shipments into Arizona, and that shipments were only made after requesting and obtaining the Department’s written consent and authorization in November 2022. This administrative complaint was resolved by settlement agreement on April 21, 2023. BOXABL paid an administrative penalty to Arizona Dept. of Housing in the amount of $48,000 on April 26, 2023, and had satisfied all of its obligations to the Arizona Department of Housing under the settlement agreement.
In a settlement dated May 30, 2023, regarding the costs of the reconstruction of the Casitas in Arizona, Freeport, the purchaser in the Pronghorn transaction, has assumed responsibility to pay reconstruction costs, but the Company will be responsible for 10% of any costs in excess of $1 million. The Company will also incur 50% of shipping costs in the event the contract is canceled and the Casitas removed. The Company accrued a $570,000 warranty for such costs and any costs related to the 10-year limited warranty offering to Pronghorn, which is recorded as a component of accrued expenses and other current liabilities.
On June 13, 2023, the Company filed a lawsuit against an internet blogger, not affiliated with the Company, alleging claims based on business disparagement and defamation of the Company. On August 5, 2024, the court entered a default judgment in favor of the Company, awarding $50,000 in damages. A judgment lien has been placed on property owned by the defendant and the Company is in the process of filing a foreclosure action against the property.
On or about October 5, 2023, Leader Capital High Quality Income Fund, a series of Leader Funds Trust, a Delaware statutory trust, commenced an action against BOXABL and other defendants in the District Court for Nevada asserting claims for breach of duty to register a transfer of a security (NRS 104.8401), Conversion, Intentional Interference with Prospective Economic Advantage. Plaintiff claims that it requested the removal of a restrictive legend to shares held by Plaintiff and that BOXABL refused and/or delayed approval of the removal and caused Plaintiff to suffer damages. The Company has agreed to provide a defense to Transfer Online Inc., its former transfer agent, and we have been engaged in defending the lawsuit. The discovery has commenced in the litigation and the Company intends to file a dispositive motion at the appropriate time. BOXABL denies the merit of the allegations and damages sought and will continue to defend against them. Management estimates a loss range of $1 to $3.7 million from this matter and believes that the Company has a reasonably good probability of success on summary judgment and a reasonably good probability of success at trial.
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On February 2, 2024, Pronghorn Homes, LLC, a party to the Arizona mining project, filed a lawsuit against the Company in the State of Arizona, which has a potential loss exposure of up to $295,000. The Company denies liability and intends to defend against this claim. Management does not anticipate the matter will have a material impact on the Company’s results of operations or financial condition.
On April 30, 2024, the Company filed a lawsuit against Brave Control Solutions, Inc. (“Brave”), and its CEO, Brent McPhail. The lawsuit was filed in the United States District Court for the Eastern District of Michigan. The lawsuit related to the Company’s claim of breach of contract by Brave related to the design, manufacture, and programming of specialized equipment to be used by the Company. The Company seeks damages equal to all amounts paid under the contracts, among other relief. The Company anticipates a judgment in its favor, but recovery of these assets is uncertain.
On July 3, 2024, Ro-Matt International Inc. and Electra-Tech Manufacturing Inc. (“Applicants”) filed a lawsuit against Brave Control Solutions, Inc., BOXABL Inc., and Royal Bank of Canada in Ontario, Canada, in the Superior Court of Justice. This case was dismissed, without any damages being asserted against the Company.
On November 19, 2024, the Company entered into an agreement with a RV Park for the sale of certain PMRV units. It appears that the RV Park did not obtain required zoning and land use permits to install and use the units at their site in Arizona. The State of Arizona ‘red tagged’ the units and the RV Park asserted claims against the Company, demanding that the Company immediately remove the units. The Company has denied all liability and is negotiating a resolution of the dispute with the RV Park. Management does not anticipate the matter will have a material impact on the Company’s results of operations or financial condition.
In May 2025, the Company received a claim from a plaintiff that purchased fraudulent shares of the Company’s stock from a former employee of the Company, at a discounted price, incurring a loss of approximately $144,000. The Plaintiff claims that he purchased the shares by writing a check to an entity that was controlled by the former employee and alleges negligence and violations of Nevada Revised Statute (NRS) 90.9570. The Company denies liability and intends to defend against this claim. Management does not anticipate the matter will have a material impact on the Company’s results of operations or financial condition.
We know of no other existing or pending legal proceedings against us, nor are we involved as a plaintiff in any other proceeding or pending litigation. There are no proceedings in which any of our directors, officers or any of their respective affiliates, or any beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors.
Rule 421(d) of the Securities Act of 1933 (§230.421(d) of this chapter). Smaller reporting companies are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
During the three months ended March 31, 2025, the Company has engaged in the following unregistered issuances of securities. The proceeds raised were generally used to fund the development of the Company’s manufacturing facilities, working capital and compensation of executive officers and employees.
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| ● | Beginning February 17, 2023, the Company commenced a Canadian offering, through FrontFundr and DealMaker, of its Non-Voting Series A-2 Preferred Stock and the underlying shares of Common Stock into which they convert. This offering is subject to applicable exemptions under Canadian securities laws and is strictly limited to investors from specific Canadian provinces, which was verified by FrontFundr. As of March 31, 2025, the Company had sold 712,696 shares of A-2 Preferred Stock for gross proceeds of $570,000. |
| ● | Beginning May 14, 2024, the Company commenced an exempt offering of Non-Voting Series A-3 Preferred Stock and the underlying shares of Common Stock into which they convert pursuant to Rule 506(c) of Regulation D. As of March 31, 2025, the Company had sold 4,949,769 shares of Series A-3 Preferred Stock for gross proceeds of $3.7 million under the Regulation D offering. |
| ● | The Company’s offering of Non-Voting Series A-3 Preferred Stock in reliance on Regulation A was qualified on June 24, 2024. As of March 31, 2025, the Company had sold 41,955,178 shares of Series A-3 Preferred Stock for gross proceeds of $36.4 million under Regulation A. |
NOTE: All classes of Preferred Stock convert into Common Stock upon the Company undertaking a firm underwriting registered offering (an “IPO”) or an offering of the Company’s Common Stock under Regulation A.
Please see Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources for a discussion of funds raised during the quarter.
Purchases of equity securities by the issuer and affiliated purchasers.
During the three months ended March 31, 2025, the Company repurchased the following shares:
Issuer Purchases of Equity Securities
| Period | (a) Total number of shares purchased | (b) Average price paid per share | (c) Total number of shares purchased as part of publicly announced plans or programs | (d) Approximate Dollar value of shares that may Yet be purchased under the plans | ||||||||||||
| March 1, 2025 to March 31, 2025 | 5,882,353 | $ | 0.02 | 0 | $ | 0 | ||||||||||
| Total | 5,882,353 | $ | 0.02 | 0 | $ | 0 | ||||||||||
On March 25, 2025, the Company repurchased 5,882,353 shares of A-1 Preferred Stock for $105,000 from a single stockholder. These shares were repurchased at an average price of $0.02/share, which was agreed upon as a settlement for claims with this former employee of the Company.
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Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits.
Exhibit Number |
Exhibit Description |
Form | File No. | Exhibit | Filing Date | Filed Herewith | ||||||
| 3.1 | Sixth Amended and Restated Articles of Incorporation | 8-K | 000-56579 | 3.1 | October 18, 2024 | |||||||
| 3.2 | Bylaws | 1-A POS | 024-11419 | 2.2 | September 19, 2022 | |||||||
| 9.1 | Voting Trust Agreement* | 10-Q | 000-56579 | 9.1 | August 19, 2024 |
| 10.1 | Facilities Lease Agreement | 1-A POS | 024-11419 | 6.2 | September 19, 2022 | |||||||
| 10.2 | Initial Purchase Orders and Related Agreements | 1-A POS | 024-11419 | 6.4 | September 19, 2022 | |||||||
| 10.3 | Form of Room Module Order Agreement | 1-A POS | 024-11419 | 6.5 | September 19, 2022 | |||||||
| 10.4 | Amended 2021 BOXABL Inc. Stock Incentive Plan | 8-K | 000-56579 | 10.4 | October 18, 2024 | |||||||
| 10.5 | Employment Agreement of Paolo Tiramani+ | 10-12G | 000-56579 | 10.6 | August 10, 2023 |
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| 10.6 | Employment Agreement of Galiano Tiramani+ | 10-12G | 000-56579 | 10.7 | August 10, 2023 | |||||||
| 10.7 | Merger Agreement | 10-12G | 000-56579 | 10.8 | August 10, 2023 | |||||||
| 10.8 | Purchase Agreement with Pronghorn Services LLC | 10-12G | 000-56579 | 10.9 | August 10, 2023 | |||||||
| 10.9 | Amendment No. 1 to Facilities Lease Agreement | 10-12G | 000-56579 | 10.10 | August 10, 2023 | |||||||
| 10.10 | Amendment No. 2 to Facilities Lease Agreement | 10-12G | 000-56579 | 10.11 | August 10, 2023 | |||||||
| 10.11 | Amendment No. 3 to Facilities Lease Agreement | 10-12G | 000-56579 | 10.12 | August 10, 2023 | |||||||
| 10.12 | Amendment No.4 to Facilities Lease Agreement | 10-Q | 000-56579 | 10.12 | November 12, 2024 | |||||||
| 10.13 | Lease Agreement for Second Manufacturing Facility | 10-12G | 000-56579 | 10.13 | August 10, 2023 | |||||||
| 10.14 | Supercar System, Inc. Services Agreement | 10-12G | 000-56579 | 10.15 | August 10, 2023 | |||||||
| 10.15 | Supercar System, Inc. Lease Agreement | 10-12G | 000-56579 | 10.16 | August 10, 2023 | |||||||
| 10.16 | Form of Award for Employees | 10-K | 000-56579 | 10.16 | April 14, 2025 | |||||||
| 10.17 | Form of Award for Directors | 10-K | 000-56579 | 10.17 | April 14, 2025 | |||||||
| 10.18 | Martin Noe Costas Offer Letter+ | 8-K | 000-56579 | 10.1 | October 13, 2023 | |||||||
| 10.19 | Restricted Stock Unit Agreement between the Company and Martin Noe Costas * | 8-K | 000-56579 | 10.2 | October 13, 2023 | |||||||
| 10.20 | Punnet Construction Purchase Contract | 10-K | 000-56579 | 10.20 | April 14, 2025 |
| 10.21 | Restricted Stock Unit Agreement between the Company and Martin Noe Costas * | 10-K | 000-56579 | 10.21 | April 14, 2025 | |||||||
| 10.22 | Form of Award for Consultants | 10-K | 000-56579 | 10.22 | April 14, 2025 | |||||||
| 14.1 | Code of Ethics | 10-K | 000-56579 | 14.1 | April 1, 2024 |
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* Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
+ Management contract or compensatory plan or arrangement.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) BOXABL Inc. | ||
| By: | /s/ Paolo Tiramani | |
| Paolo Tiramani | ||
| Co-Chief Executive Officer | ||
| Date: | May 20, 2025 | |
| By: | /s/ Galiano Tiramani | |
| Galiano Tiramani | ||
| Co-Chief Executive Officer and Director | ||
| Date: | May 20, 2025 | |
| By: | /s/ Martin Noe Costas | |
| Martin Noe Costas | ||
| Chief Financial Officer and Principal Accounting Officer | ||
| Date: | May 20, 2025 |
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