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BOXABL Inc.
Form 10-K
TABLE OF CONTENTS
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NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. All statements contained in this Annual Report on Form 10-K 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 Annual Report on Form 10-K 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.
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.
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PART I
Item 1. Business.
The Company uses, and will continue to use, its website, press releases, and various social media channels, including its X (formerly known as Twitter) account (twitter.com/BOXABL), its LinkedIn account (https://www.linkedin.com/company/BOXABL/), its Facebook account (facebook.com/BOXABL), its TikTok account (tiktok.com/BOXABL), its Instagram account (instagram.com/BOXABL), and its YouTube account (youtube.com/@BOXABL), as additional means of disclosing public information to investors, the media and others interested in the Company. It is possible that certain information that the Company posts on its website, disseminated in press releases and on social media could be deemed to be material information, and the Company encourages investors, the media and others interested in the Company to review the business and financial information that the Company posts on its website, disseminates in press releases and on the social media channels identified above, as such information could be deemed as material information.
BOXABL Overview
BOXABL is on a mission to bring building construction in line with modern manufacturing processes by creating a superior residential and commercial building that can be completed in far less time and cost than traditional construction. Our value proposition offers a sustainable, safe, high quality, affordable, and quickly available smart solution.
The core product that we offer is the “Building Box”, which consists of room modules (“Boxes”) that ship to site at a low cost and can be stacked and connected to build most any shape and style of finished buildings. Our first product available for sale is our 19x19 ft. Casita Box, featuring a full-size kitchen, bedroom, bathroom, and living area. We will continue to evaluate market demand for other dimensions, including 19x30 ft. and 19x40 ft.
We believe there is significant market interest in our product based on receiving reservations of interest from over 175,000 customers through our Room Module Order Agreement, some of whom have placed small deposits to formalize their pre-order of the Casita when production begins. The company is also receiving interest from Developers, including a pre-order from one of the largest home builders in the US, Distributors, other Business to Business, and Business to Government potential channels. Since we started operations, we have completed delivery of an order received from ADS Inc. for 156 Casitas, an order received from Pronghorn Services LLC for 51 Casitas, and additional orders of 14 Casitas from various Customers. We are using our current capital to fund additional upgrades to our initial facility in Las Vegas that includes three buildings/factories with a total of 421,823 sq ft, with the main objective of increasing the Company’s production capacity.
BOXABL was first organized as a limited liability company in Nevada on December 2, 2017, and reorganized as a Nevada corporation on June 16, 2020. Our core technology was invented by our Chief Executive Officer, Paolo Tiramani, Director of Marketing, Galiano Tiramani, and our Director of Engineering, Kyle Denman. Until recently, the technology was owned by Build IP LLC, a Nevada limited liability company specially formed as a holding company for the intellectual property (“Build IP”), owned by our CEO, Paolo Tiramani. Under an exclusive licensing agreement, BOXABL paid Build IP a license fee equivalent to 1% of the net selling price generated by the sale of Casitas. On June 15, 2023, BOXABL merged with 500 Group, Inc., a Nevada corporation that is controlled by Paolo Tiramani and parent to Build IP (“500 Group”). As a result of this merger, all of the intellectual property held by Build IP now belongs to BOXABL and the licensing agreement is now void. For details, see Certain Relationships and Related Transactions and Director Independence.
Our Mission and Innovation
One of the prime drivers of the limitations on construction is the ability to ship finished products to a job site. At BOXABL, we realized that innovation in modular construction would not be possible without innovation in shipping. BOXABL’s patented shipping technology allows us to serve large geographic areas from one BOXABL factory. With this shipping technology, we believe that the location of our flagship factory in North Las Vegas, Nevada will be able to produce products that can be delivered to anywhere in the US, and even international markets.
Our innovations in shipping are only possible because of our unique methods for constructing our building modules. Our “Building Box” system and Box design were created specifically to maximize repeatability in manufacturing and to leverage supply chain. In addition, our reimagined manufacturing process is simplified and efficient resulting in a sustainable, high quality, fast, and cost-effective solution. This is achieved in part by dramatically reducing the individual components in the build compared to traditional building, which requires stacks of lumber and thousands of nails. Significantly fewer components result in significantly less production costs during manufacturing.
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Market Opportunity
While we believe ADUs are an accessible entry point to the market, BOXABL is not limited to small residential units. We expect that the BOXABL product can be used in a wide range of building types — residential, commercial, disaster relief, high rise, multi-family, apartment, military, labor housing and more.
For instance, we recently announced a new prototype, frequently referenced as the “GOLDIBOX” with three-bedrooms, two-and-a-half bathrooms and an outdoor deck, which is expanding public understanding of BOXABL beyond tiny houses and is already getting a lot of attention from Developers. We can produce multi-bedroom units with our 19x19 ft. Boxes.
Our Products
The BOXABL Solution
The BOXABL product represents a new take on modular construction. It is a factory-finished room module system that can be quickly stacked and arranged on site (the “Boxes”), and that provides the majority of the building envelope and functions. We expect this will allow builders to dramatically reduce build time and costs while increasing quality and features.
The first step in factory manufacturing of large buildings was creating a feasible shipping solution. Our goal was to ship without the need for oversized loads, which require extra permitting, follow cars, police escorts, restricted routes and other problems that increase costs dramatically. Our design achieves the largest possible room that can be fit into standard shipping dimensions, meeting highway, sea and rail transportation requirements. It also allows for more delivery options for the delivery of our Boxes, including haulage by pickup truck. The first BOXABL product is the Casita, a 19X19 ft. room that folds down to 8.5 ft. wide for shipping, and still has sufficient space for factory-installed kitchens, bathrooms and more. Each Casita unit is a separate Box. Our Boxes take the heavy lifting of a building’s construction out of the field and move it into the factory, where it belongs.
Our sales and installation experience to date has experienced various delays due to required permits, the time needed to prepare the site for installation, arrange capital for payment of amounts due to the Company by the purchaser, and other preparatory steps that need to be taken in order to arrange delivery and installation of the units. To offset some of these delays, we implemented a training solution to certify installers across the United States. The BOXABL University program allows us to build a network of trusted contractors in various locations who can be easily connected to the end customer upon delivery.
Once the Boxes arrive at the jobsite, Boxes are installed and can be assembled together in a plug-and-play manner by the Company’s preferred installers to create a finished home of almost any size and style. A typical Box like our Casita model can be assembled on site in one day. The speed, quality, features and price of the BOXABL product are superior to traditional building methods.
Smart Manufacturing
BOXABL Boxes are not built like traditional homes, as they have been engineered with mass production in mind. This design includes a significant reduction in the number of standard components compared to traditional construction, aiding in the manufacturing process. BOXABL Boxes are built with laminated panel technology instead of a standard stick frame construction. This means each wall panel that BOXABL manufactures consists of fewer individual components. A comparable traditional wall has many individual components and requires 3 or more separate skilled trades to complete (e.g., framing, sheetrock, exterior finish, etc.). Many raw materials in the BOXABL Boxes will be processed by off-the-shelf computer numerical control (CNC) equipment to cut and form materials to a given design. The use of CNC equipment will give us a degree of automation right away, which we intend to expand to allow for the manufacturing process to be more fully automated.
We manufactured 260 Casitas Boxes in 2023. Our future production is expected to increase significantly with the introduction of new technology. We started making upgrades, including new equipment for approximately $15,000,000 from where we already paid approximately $13,000,000 and are currently under the final building phase by our vendor. These include equipment such as a new automated panel lamination system, CNC cutting equipment, a conveyor system that moves houses down our assembly line, a new paint booth system, assembly stations and electrical upgrades to our facilities. The new volume is expected to result in a superior value proposition in terms of sustainability, quality, affordability and availability.
The equipment was originally expected for Q2 2024. However, on March 13, 2024, the company formalized a notice to Brave Control Solutions Inc.(“Brave”), our main vendor for the new equipment as Brave is in breach of our Contracts for failing to timely manufacture and deliver the equipment specified in the Contracts. We understand that several of the delays were the result of Brave’s failure to pay its vendors and suppliers. We demanded Brave to immediately accelerate its work and processes and complete its performance under the Contracts as soon as possible.
The Company will continue to focus on, and improve, our Casita Generation 1 production line while expecting a quick resolution for Casita Generation 2 new equipment.
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The System
Efficient factory environments thrive on repeatability. We can achieve the lowest cost and better quality by building the same product over and over, leaving it to the final assembly to create unique structures. The BOXABL factory can build our Boxes in different sizes, with different floorplans, and the builder can stack, arrange and dress the boxes however they desire for a custom building.
Building Materials
Our laminated wall panel technology replaces standard lumber framing, by including steel exterior skin, expanded polystyrene (EPS) foam, magnesium oxide board, hybrid fiber-cement and nonstandard lumber frame. We are able to source these materials from multiple suppliers and are not reliant on any particular vendor. Our product is compatible with automation, CNC, and the factory environment.
BOXABL has differentiated certain building designs into “Generation 1.0” and “Generation 2.0”. In Generation 1.0, we utilized a proprietary structurally insulated panel design with steel and magnesium oxide skins, EPS core, and a hybrid lumber-PVC frame. As a result of our initial sales of Casitas, we were able to receive important feedback from our initial customers that allowed us to identify opportunities for improvement in the Generation 1.0 Casitas. We are committed to ensuring that all completed products are held to the highest standard of quality, consequently we started the process to improve our current inventory. See Note 4 – Inventory in the accompanying financial statements.
In Generation 2.0 that is expected to start production once we receive our new technology, we are utilizing a hybrid fiber-cement and steel skin with a reinforced EPS core and nonstandard lumber frame. We are currently working to secure the supply of materials that are essential to our production process, such as sheet steel, EPS foam, and PVC extrusions. We expect the removal of the magnesium oxide board in the Generation 2.0 product will result in expanded domestic supply chain opportunities and potential cost reductions.
Product Features
The BOXABL building system has many features and solutions that reduce pain points for builders and offer an attractive product for consumers. We continue to improve the product and experiment with different building materials and manufacturing methods. Our current product has the following features.
Resilient Panels: Fire resistant, Flood resistant, Bug resistant, and Mold resistant.
Structural Strength: Snow load rated, Hurricane wind load rated, seismic rated, Light-weight requires smaller equipment to move, Unlimited unit-to-unit connections horizontally, and Three-unit high unit-to-unit connections vertically.
Design and Engineering: Sealing gaskets at joints, Precut chase network for all utilities in walls/roof/floor enable low-cost retrofit of electrical/sprinkler system/HVAC, 19x19 feet room modules, Multiple floor plans of room modules for potentially innumerable combinations, Reduced components designed for factory automation, and a streamlined production process similar to automotive assembly, rather than modular.
Shipping and Installation: Connects to any foundation, Packs down for low-cost shipping, Unfolds to 2x shipping volume, Crane pick points for faster setting, Weatherproof roofing membrane ships with unit, Simple field assembly requires less skilled labor apart from site work, Pre-plumbed for on-site hook up and does not require crawl space, All finishing work/paint/trim inside and out ships complete.
Energy Efficiency: Qualify for top energy rating, Reduced energy bills, Smaller sized HVAC, Minimal thermal bridging, Tight building envelope, High R-values continuous EPS insulation, High efficiency appliances and LED lights for minimal energy requirement.
Approval: Applied for pre-approval of our modular design, Mix and stack building system for easy custom plans, Full testing that includes fire/energy/structural.
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Applicable Regulation
Our Boxes fall under different certification requirements depending on their end use. For instance, we are seeking to obtain Modular Manufacturer Licensure and Certification in every state that has an equivalent program. These products will be classified as units for Residential construction and are referred to as “Modular” or “Factory-Built” units, depending on the definitions established in the Authority Having Jurisdiction (AHJ). BOXABL was recently approved as a Master Manufacturer, under the Arizona Department of Housing, Factory Built Program, with License ID M-9E 9080. Now that BOXABL is certified in Arizona, we believe that it will be easier to obtain certification in other states as there are similarities in the certification requirements across jurisdictions. BOXABL has received a report recommending equivalent licensure and certification under the Nevada Housing Division, Manufactured Housing Division, program. Once processed, BOXABL will have completed licensure and certification under the existing Manufacturer License, ID M0996. BOXABL has achieved Modular Manufacturer licensure or registration in the following AHJs; California (#1547230), Texas (IHB-2214 & IHM-730), & New Mexico (#1514). Registration and licensure in the (x37) remaining AHJ with state level modular programs is in process.
For modular homes, some states require the approval of a third-party testing and inspection company, which will conduct product testing and factory inspections on behalf of the AHJ. There are a number of companies that provide such service. We have engaged several independent third-party inspection Agencies, including ICC-NTA, Twining Consulting (dba RADCO), PFS-TECO, NOAH, & MA Consulting & Engineering (MACE, LLC), to test and inspect our products for compliance in the applicable jurisdictions.
Some states like Alaska, Oklahoma, Utah, Wyoming, Hawaii, Delaware, West Virginia, and Vermont, do not have state modular housing programs. In those states, BOXABL buildings can be deployed by obtaining a permit from the local building departments. This has been validated by several projects located in Utah and Oklahoma.
BOXABL is also eligible to sell its Boxes as a Vehicle Manufacturer that produces Park Model Recreational Vehicles (PMRV), allowing us to deliver Casitas to customers under “park model” recreational vehicle classification in most states. This is done through compliance with the ANSI A119.5 code. Similar to the Federal Motor Vehicle Safety Standards (FMVSS), these require self-certification of compliance. In addition to self-certification, BOXABL maintains a membership in the Recreational Vehicle Association (“RVIA”), who authors the ANSI A119.5 PMRV requirements. By adding a permanent trailer/chassis to the BOXABL Casitas, this code is generally met.
Builders will still be required to obtain local building permits, as well as those necessary for tying into local water and electric services. The permitting and scope of work required will be dependent upon the end use. PMRV units fall under a different classification than Modular units and a regulated by different regulation and enforcement agencies.
In May 2023 we received a product listing from ICC-ES which indicates our Structurally Insulated Panels (SIP) meet the international building codes, for use in residential construction. This report can be found: https://icc-es.org/report-listing/ESR-4725/. BOXABL is engaged with Twining Consulting, dba RADCO, for testing and listing of the next generation of SIP. BOXABL is the sole consumer of the Listed SIP, though it can be sold to others as a listed building product, to be used in residential construction.
Recent adoption of “Tiny House” regulations opens additional markets for BOXABL’s products. These regulations are still in their infancy and vary drastically from one jurisdiction to another. Under “Tiny House” rules, a unit built to Modular, PMRV, HUD, or NOAH standards may qualify for installation. BOXABL is actively engaged in developing these regulations and standards to increase safety and quality of units produced, while bringing uniformity to the emerging industry.
Price
We believe that our production and shipping advantages will allow us to sell our BOXABL Boxes at competitive prices. The retail price for our initial product, the Casita, is $60 thousand, representing about $166/sq. ft. This price will not include shipping, land, permits, or site development, which will be the responsibility of the customer. The BOXABL solution is an attractive option for cost-conscious purchasers especially if compared to building costs in states like California that can be on the order of $400/sq. ft. Additionally, we think our large waitlist indicates that our price is very desirable.
As we increase our bulk purchasing and introduce greater amounts of automation into the production process, we may be able to reduce the consumer price in the future to capture a larger market.
Core Technology
The core technology covering the structure of the Boxes and transportation system used by the Company was developed by its founder, Paolo Tiramani. Innovations created by Paolo Tiramani have previously led to the creation of new billion-dollar product categories in the tool storage space.
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Patents
BOXABL has received and applied for patents for the structure and transportation of the BOXABL building system, covering all important aspects of its commercial designs, as well as the foreseeable alternatives. The filings closely track and reflect the product designs as they are updated. Further, the scope of protection sought extends beyond the design of the building structures themselves and includes innovative delivery and assembly equipment and techniques.
Structure Patents (1)
Transport Patents
Factory Patents
| Country | Title | Status | Application Number | Patent Number | Issue Date | |||||
| US | Equipment and Methods for Erecting a Transportable Foldable Building Structure | Granted | 16/786315 | 11220816 | 11-Jan-2022 | |||||
| WO | Equipment and Methods for Erecting a Transportable Foldable Building Structure | Completed | PCT/US2020/017528 | |||||||
| US | ENCLOSURE COMPONENT FABRICATION FACILITY | Published | 17/552108 | |||||||
| WO | ENCLOSURE COMPONENT FABRICATION FACILITY | Completed | PCT/US2021/063581 | |||||||
| CA | ENCLOSURE COMPONENT FABRICATION FACILITY | Published | 3204973 | |||||||
| EP | ENCLOSURE COMPONENT FABRICATION FACILITY | Published | 21920067.2 | |||||||
| WO | UNI-TOOL FOR FOLDABLE TRANSPORTABLE STRUCTURE DEPLOYMENT | Published | PCT/US2023/022727 | |||||||
| US | UNI-TOOL FOR FOLDABLE TRANSPORTABLE STRUCTURE DEPLOYMENT | Published | 18/199141 | |||||||
| WO | PLANAR COMPONENT ASSEMBLY LINE | Pending | PCT/US2023/035777 | |||||||
| US | PLANAR COMPONENT ASSEMBLY LINE | Pending | 18/383123 |
Furniture Patents
| Country | Title | Status | Application Number | Patent Number | Issue Date | |||||
| WO | COUCH | Published | PCT/US2023/026443 | |||||||
| US | QUICK-ASSEMBLY STORAGE BED | Pending | 18/231310 | |||||||
| WO | QUICK-ASSEMBLY STORAGE BED | Pending | PCT/US2023/029689 | |||||||
| US | COUCH | Pending | 18/343241 |
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Structural Patents
| Country | Title | Status | Application Number | Patent Number | Issue Date | |||||
| US | MODULAR PREFABRICATED HOUSE | Granted | 10/653,523 | 8,474,194 | 02-Jul-2013 | |||||
| US | Container | Granted | 15/241,446 | 10,196,173 | 05-Feb-2019 | |||||
| US | Customizable Transportable Structures & Components Therefor | Granted | 16/143,598 | 10,688,906 | 23-Jun-2020 | |||||
| WO | Customizable Transportable Structures & Components Therefor | Completed | PCT/US2018/053006 | |||||||
| US | Container | Granted | 16/220,629 | 10,961,016 | 30-Mar-2021 | |||||
| US | Customizable Transportable Structures and Components Therefor | Granted | 16/804,473 | 10,829,029 | 10-Nov-2020 | |||||
| EP | CUSTOMIZABLE TRANSPORTABLE STRUCTURES & COMPONENTS THEREFOR | Published | 18864413.2 | |||||||
| US | ENCLOSURE COMPONENT PERIMETER STRUCTURES | Granted | 16/786202 | 11560707 | 24-Jan-2023 | |||||
| US | Foldable Building Structures with Utility Channels and Laminate Enclosures | Granted | 16/786,130 | 11,118,344 | 14-Sep-2021 | |||||
| CA | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 3129693 | |||||||
| CA | Enclosure Component Perimeter Structures | Published | 3129822 | |||||||
| WO | Foldable Building Structures with Utility Channels and Laminate Enclosures | Completed | PCT/US2020/017524 | |||||||
| WO | Enclosure Component Perimeter Structures | Completed | PCT/US2020/017527 | |||||||
| US | Customizable Transportable Structures & Components Therefor | Granted | 15/931,768 | 10,926,689 | 23-Feb-2021 | |||||
| US | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Granted | 17/245187 | 11591789 | 28-Feb-2023 | |||||
| CN | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 202080014606.4 | |||||||
| CN | ENCLOSURE COMPONENT PERIMETER STRUCTURES | Allowed | 202080014607.9 | |||||||
| EP | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 20755992.3 | |||||||
| EP | ENCLOSURE COMPONENT PERIMETER STRUCTURES | Published | 20755993.1 | |||||||
| MX | Foldable Building Structures with Utility Channels and Laminate Enclosures | Published | MX/a/2021/009720 | |||||||
| JP | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 2021-547830 | |||||||
| JP | ENCLOSURE COMPONENT PERIMETER STRUCTURES | Published | 2021-547829 | |||||||
| US | ENCLOSURE COMPONENT PERIMETER STRUCTURES | Granted | 17/592990 | 11566414 | 31-Jan-2023 | |||||
| US | FOLDABLE ENCLOSURE MEMBERS JOINED BY HINGED I-BEAM | Granted | 17/592984 | 11578482 | 14-Feb-2023 | |||||
| US | FOLDABLE ENCLOSURE MEMBERS JOINED BY HINGED PERIMETER SECTIONS | Granted | 17/592986 | 11525256 | 13-Dec-2022 | |||||
| US | ENCLOSURE COMPONENT PERIMETER STRUCTURES | Granted | 17/592988 | 11566413 | 31-Jan-2023 | |||||
| US | STACKABLE FOLDABLE TRANSPORTABLE BUILDINGS | Granted | 17/675646 | 11739547 | 29-Aug-2023 | |||||
| US | LIFTABLE FOLDABLE TRANSPORTABLE BUILDINGS | Granted | 17/675653 | 11718984 | 08-Aug-2023 | |||||
| US | WALL COMPONENT APPURTENANCES | Published | 17/587051 | |||||||
| US | FOLDING ROOF COMPONENT | Published | 17/569962 |
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| US | Enclosure Component Panel Sections | Published | 17/539,706 | |||||||
| US | FOLDING BEAM SYSTEMS | Published | 17/527520 | |||||||
| US | ENCLOSURE COMPONENT EDGE SEAL SYSTEMS | Published | 17/513176 | |||||||
| US | Enclosure Component Compression Seal Systems | Published | 17/513,207 | |||||||
| US | Enclosure Component Shear Seal Systems | Published | 17/513,266 | |||||||
| US | Sheet/Panel Design for Enclosure Component Manufacture | Published | 17/504883 | |||||||
| WO | ENCLOSURE COMPONENT PANEL SECTIONS | Completed | PCT/US2021/061343 | |||||||
| WO | FOLDING BEAM SYSTEMS | Completed | PCT/US2021/059440 | |||||||
| WO | SHEET/PANEL DESIGN FOR ENCLOSURE COMPONENT MANUFACTURE | Completed | PCT/US2021/058912 | |||||||
| WO | Enclosure Component Sealing Systems | Completed | PCT/US2021/056415 | |||||||
| CA | SHEET/PANEL DESIGN FOR ENCLOSURE COMPONENT MANUFACTURE | Published | 3204970 | |||||||
| CA | FOLDING BEAM SYSTEMS | Published | 3204932 | |||||||
| CA | IMPROVED FOLDING ROOF COMPONENT | Published | 3204974 | |||||||
| CA | ENCLOSURE COMPONENT PANEL SECTIONS | Published | 3204937 | |||||||
| WO | IMPROVED FOLDING ROOF COMPONENT | Published | PCT/US2022/011415 | |||||||
| WO | FOLDABLE TRANSPORTABLE BUILDINGS | Completed | PCT/US2022/016999 | |||||||
| CA | FOLDABLE TRANSPORTABLE BUILDINGS | Published | 3216637 | |||||||
| CN | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 202211067336.0 | |||||||
| US | PERIMETER STRUCTURES FOR JOINING ABUTTING ENCLOSURE COMPONENTS | Published | 17/971230 | |||||||
| US | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Granted | 18/071902 | 11821196 | 21-Nov-2023 | |||||
| US | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 18/071905 | |||||||
| CN | ENCLOSURE COMPONENT PERIMETER STRUCTURES | Published | 202211434625.X | |||||||
| EP | ENCLOSURE COMPONENT SEALING SYSTEMS | Published | 21920047.4 | |||||||
| CN | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 202310349987.7 | |||||||
| CN | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Published | 202310349974.X | |||||||
| EP | IMPROVED FOLDING ROOF COMPONENT | Published | 22739884.9 | |||||||
| EP | ENCLOSURE COMPONENT PANEL SECTIONS | Published | 21920060.7 | |||||||
| EP | FOLDING BEAM SYSTEMS | Published | 21920055.7 | |||||||
| EP | SHEET/PANEL DESIGN FOR ENCLOSURE COMPONENT MANUFACTURE | Published | 21920053.2 | |||||||
| US | FOLDABLE TRANSPORTABLE BUILDINGS | Published | 18/231319 | |||||||
| WO | UNIVERSAL PANEL | Published | PCT/US2023/027363 | |||||||
| US | UNIVERSAL PANEL | Published | 18/220333 | |||||||
| SA | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Allowed | 521422646 | |||||||
| CA | CUSTOMIZABLE TRANSPORTABLE STRUCTURES & COMPONENTS THEREFOR | Granted | 3078484 | 3078484 | 13-Jul-2021 | |||||
| SA | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Pending | 522441249 | |||||||
| US | VACUUM INSULATED ENCLOSURE COMPONENTS | Pending | 63/440797 | |||||||
| AU | WALL COMPONENT APPURTENANCES | Pending | 2022268186 | |||||||
| EP | WALL COMPONENT APPURTENANCES | Pending | 22796310.5 | |||||||
| EP | FOLDABLE TRANSPORTABLE BUILDINGS | Pending | 22796315.4 | |||||||
| AU | FOLDABLE TRANSPORTABLE BUILDINGS | Pending | 2022264681 | |||||||
| JP | FOLDABLE TRANSPORTABLE BUILDINGS | Pending | 2023-566904 | |||||||
| WO | SUBASSEMBLY FOR ENCLOSURE COMPONENT MANUFACTURE | Pending | PCT/US2023/030033 | |||||||
| US | SUBASSEMBLY FOR ENCLOSURE COMPONENT MANUFACTURE | Pending | 18/232884 | |||||||
| CA | ENCLOSURE COMPONENT SEALING SYSTEMS | Pending | 3204967 | |||||||
| SA | FOLDABLE BUILDING STRUCTURES WITH UTILITY CHANNELS AND LAMINATE ENCLOSURES | Pending | 522441248 | |||||||
| AU | Foldable Building Structures with Utility Channels and Laminate Enclosures | Pending | 2020221056 |
| 10 |
Transportation Patents
| Country | Title | Status | Application Number | Patent Number | Issue Date | |||||
| US | VEHICLE SYSTEM | Granted | 14/601,348 | 10,661,835 | 26-May-2020 | |||||
| WO | CONTAINER WITH TAPERED EDGES | Completed | PCT/US2016/047717 | |||||||
| US | Wheeled Assembly for Item Transport | Granted | 16/143,628 | 11,007,921 | 18-May-2021 | |||||
| WO | Wheeled Assembly for Item Transport | Completed | PCT/US2018/053015 | |||||||
| US | Invertible Reversible Multi-Application Gearbox | Granted | 16/168,957 | 11,193,574 | 07-Dec-2021 | |||||
| US | Gearbox Mounting System | Granted | 16/168,978 | 10,823,273 | 03-Nov-2020 | |||||
| US | Customizable Engine Air Intake/Exhaust Systems | Granted | 16/168,984 | 10,760,538 | 01-Sep-2020 | |||||
| US | Dual-Angle Exhaust Manifold | Granted | 16/168,971 | 10,858,989 | 08-Dec-2020 | |||||
| US | Turbocharger Exhaust Manifold with Turbine Bypass Outlet | Granted | 16/168,999 | 10,570,813 | 25-Feb-2020 | |||||
| WO | Invertible Reversible Multi-Application Gearbox | Completed | PCT/US2018/057216 | |||||||
| WO | Dual-Angle Exhaust Manifold | Completed | PCT/US2018/057218 | |||||||
| WO | Gearbox Mounting System | Completed | PCT/US2018/057222 | |||||||
| WO | Customizable Engine Air Intake/Exhaust Systems | Completed | PCT/US2018/057228 | |||||||
| WO | Turbocharger Exhaust Manifold with Turbine Bypass Outlet | Completed | PCT/US2018/057233 | |||||||
| CA | INVERTIBLE REVERSIBLE MULTI-APPLICATION GEARBOX | Published | 3080329 | |||||||
| CA | Dual-Angle Exhaust Manifold | Published | 3080332 | |||||||
| CA | Customizable Engine Air Intake/Exhaust Systems | Published | 3080408 | |||||||
| CA | Turbocharger Exhaust Manifold with Turbine Bypass Outlet | Published | 3080388 | |||||||
| US | Intake Air Systems and Components | Granted | 16/446,355 | 11,136,950 | 05-Oct-2021 | |||||
| WO | Intake Air Systems and Components | Completed | PCT/US2019/038026 | |||||||
| CA | Intake Air Systems and Components | Published | 3,107,912 | |||||||
| US | Chassis Anchoring Systems | Granted | 16/579,554 | 11293467 | 05-Apr-2022 | |||||
| US | INLINE GEARBOX WITH FAST CHANGE GEARING | Granted | 16/670688 | 11391360 | 19-Jul-2022 | |||||
| US | Wheel Alignment Mechanism | Granted | 16/579,571 | 10,940,731 | 09-Mar-2021 | |||||
| US | Vehicle Suspension | Granted | 16/579,524 | 11,034,204 | 15-Jun-2021 | |||||
| CA | VEHICLE SUSPENSION | Published | 3114355 | |||||||
| CA | CHASSIS ANCHORING SYSTEMS | Published | 3114358 | |||||||
| CA | WHEEL ALIGNMENT MECHANISM | Published | 3114342 | |||||||
| WO | Vehicle Suspension | Completed | PCT/US2019/052475 | |||||||
| WO | Chassis Anchoring Systems | Completed | PCT/US2019/052479 | |||||||
| WO | Wheel Alignment Mechanism | Completed | PCT/US2019/052485 | |||||||
| US | Impact Attenuation Structure | Granted | 16/589,308 | 11,167,706 | 09-Nov-2021 | |||||
| WO | Impact Attenuation Structure | Completed | PCT/US2019/053946 | |||||||
| CA | IMPACT ATTENUATION STRUCTURE | Published | 3115229 | |||||||
| WO | Inline Gearbox with Fast Change Gearing | Completed | PCT/US2019/059211 | |||||||
| EP | WHEELED ASSEMBLY FOR ITEM TRANSPORT | Granted | 18863822.5 | 3691921 | 10-Jan-2024 | |||||
| GB | INVERTIBLE REVERSIBLE MULTI-APPLICATION GEARBOX | Granted | 2009417.3 | 2583265 | 24-Aug-2022 | |||||
| US | INLINE GEARBOX WITH FAST CHANGE GEARING | Granted | 17/847866 | 11536360 | 27-Dec-2022 | |||||
| WO | TRANSPORT SYSTEM | Published | PCT/US2023/014770 | |||||||
| US | TRANSPORT SYSTEM | Published | 18/118770 | |||||||
| CA | WHEELED ASSEMBLY FOR ITEM TRANSPORT | Granted | 3078486 | 3078486 | 02-Nov-2021 | |||||
| US | Impact Attenuation Structure | Conv Comple | 62/740,666 |
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Explanatory Endnotes
| 1. | All listed patents and patent applications were previously owned by Build IP LLC (a Nevada LLC) and licensed to BOXABL INC. (a Nevada Corp.), except for U.S. provisional patent application nos. 63/324,940, 63/335,880, 63/344,116, 63/356,771, 63/388,366, 63/395,936 and 63/399,389. The assignee of record of U.S. provisional patent application no. 63/344,116 is BOXABL INC. In June 2023, BOXABL acquired all patents and patent applications owned by Build IP when it merged with Build IP’s parent company, 500 Group Inc. For details see Certain Relationships and Related Transactions and Director Independence. | |
| 2. | Expired U.S. provisional patent applications are not listed. | |
| 3. | The status of PCT applications having a priority date within 31 months of the date of this table are listed as “pending.” PCT applications having a priority date more than 31 months from the date of this table are listed with no status provided (e.g., “—”). | |
| 4. | Jurisdictions (patent offices) are abbreviated as follows: Australia – AU, Canada – CA, China – CN, European Union – EU, Japan – JP, Mexico – MX, South Africa – SA, United States – US, and Patent Cooperation Treaty – PCT. |
Trademarks
BOXABL has acquired the BOXABL trademark through its merger with 500 Group as described above. The BOXABL trademark is registered in the United States, the European Union, and in multiple other countries around the world. BOXABL intends to aggressively enforce its rights in the BOXABL trademark whenever third-party uses of similar names are encountered. Consequently, we believe that the BOXABL brand has developed a secondary meaning and has come to represent valuable recognition in the market.
Strategy
BOXABL’s primary focus is in manufacturing a high quality, safe, sustainable and affordable housing solution. Consequently, after our flagship factory in Las Vegas is scaled up, BOXABL intends to increase manufacturing capacity to maximize the benefits from modern manufacturing processes through the multiplication of production lines at the same facility or in new facilities, and/or leveraging a factory franchise and/or Joint Venture business model, especially designed for international markets. We will use this first production-style factory to identify procedures, data, costs, raw materials, equipment, labor numbers and more to build a blueprint for future factories.
Our franchisees and/or Joint Venture partners will be supplied with raw materials, custom equipment, branding, proprietary components, quality control, and other services. We have received what we believe to be a significant number of inquiries from potential factory franchisees who have indicated that they have substantial amounts of capital to spend on factory startups. We have received over 12,000 requests from parties around the world who are interested in partnering with us. Of those 12,000 parties, roughly 1,500 submissions have indicated that they would like to partner with us as factory franchisees and/or Joint Ventures through our web form at BOXABL.com/partner, which allows them to also check a box indicating that they have at least $5 million to spend on startups of these factories. To date, we have not requested any payment from any of these parties as we feel it is premature. We do not yet have controls or procedures for evaluating potential franchisees, and expect to develop these procedures after evaluating the operations of our starter factory.
While the Company has received a considerable amount of positive media coverage, that coverage has been mostly over our Casita. Now that we recently announced a new prototype with three-bedrooms, two-and-a-half bathrooms and an outdoor deck, we believe that the positive media coverage trend will continue to increase as the new model will expand public awareness of BOXABL beyond tiny houses.
Our Manufacturing Facilities
We worked with industry-leading consultants to develop a plan for maximizing production efforts through automation, process efficiency, and supply chain considerations. The Boxes and panels move through 20 main assembly stations in the factory, where different sections are completed, similar to an automotive production process.
We entered into a lease for a facility on December 29, 2020, which we took possession of on May 1, 2021, on a sixty-five-month lease. The facility features 173,720 square feet of usable floor space, and is our first production facility (“Factory 1”) currently producing our first-generation of Casita Box.
On June 13, 2022, we entered into a seventy-three-month lease for additional industrial space (formerly known as “Factory 2,” since been renamed “Factory 3”) that allowed production efficiencies. Factory 3 is currently supporting Factory 1 with warehousing and in-house component fabrication (i.e., cutting EPS foam). The Factory 3 is 132,960 square feet.
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On May 2, 2023 we amended the lease agreement for Factory 1 to expand the space leased by the Company for purposes of establishing our third manufacturing facility (“Factory 2”). The agreement term is forty-eight months, and adds 114,613 square feet of additional floor space.
Factory 1 is now fully operational and produces our first-generation Casita Box. Factories 2 and 3 are necessary to transition to production of Casita Box second-generation and volume ramp up. Factory 3 is operational, producing components to support Factory 1 Casita production and warehousing. The first pieces of equipment have been installed in Factory 2. Due to the closer proximity of Factory 2 to Factory 1, all sub-component production will transition from Factory 3 to Factory 2. Factory 3 will become warehouse space supporting both Factory 1 and 2. For details see The Company’s Properties
We expect that our factories will create approximately 300 new direct jobs when new equipment is in place and fully staffed. Beyond the direct jobs that will be generated from ramping up production, we believe many more indirect jobs will be created on the building sites by our customers, and the surrounding areas of our facilities to logistically support the backlog of demand for the Casita.
Cumulatively we had produced over 550 homes as of December 31, 2023. We are expecting to substantially increase our production capacity after fully transitioning from Casita Generation 1 to Casita Generation 2, jointly with the installation of new automation equipment expected by the end of 2024.
Additional Factory
We have allocated funds from our capital-raising activities for research and development expenditure relating to the planning for expansion into additional production facilities with similar capacity to our Las Vegas facility. This strategy will allow us to increase capacity and reach more customers in other geographic areas more efficiently. BOXABL is currently considering seeking available sites in various regions across the United States and internationally. The Company aims to expand into two additional, similarly sized facilities by the end of 2025.
Boxzilla Factory
We have allocated funds from our capital-raising activities for research and development expenditures relating to the planning for expansion into additional production facilities. In this regard, BOXABL is currently in the planning stages to launch a new factory that will be significantly larger and more advanced than the current operations. The anticipated “Boxzilla” factory will require approximately $1 billion in funding; we believe it could be the world’s largest and most advanced mass production of housing ever attempted.
Our Customers
Rather than just making available “reservations”, we began taking deposits for positions on our waitlist in 2020. We currently have two options to complete a pre-order on our waitlist: 1) free and 2) $200 deposits. As of December 31, 2023, we had over 175,000 unique email addresses on our customer waitlist, with many of those potential customers indicating they want to purchase more than 1 Casita. Although most of the names on this waitlist have not paid a deposit, we have received payments from over 8,500 unique persons to purchase one or more Casitas.
While it is unlikely that we will receive these orders or revenue from most of these potential customers, even the ones who have placed deposits, it reinforces the market demand for the Casita. Conversion of even a small percentage of these potential customers will allow for full production of our planned production facility.
Competition
Our competition can be broken into the following categories:
| ● | Stick built: Traditional home building method accounts for the majority of the market. Raw materials are brought to site and built by hand into finished buildings. This market is made up of many small builders. We think this group represents our likely customer base, as we provide them with a better solution. | |
| ● | Manufactured: Manufactured homes are standardized homes built in a factory and shipped to site. These homes are generally built to a lower baseline standard of construction and attempt to come in at the lowest cost possible. The defining factor with this product is that they are generally deemed personal property and not real property. Only a few large companies dominate this category. | |
| ● | Modular: Modular homes are factory-built homes required to be built to the same or higher building code standards of stick-built homes. These homes are generally more customizable than a manufactured home. |
| ● | Panelized systems: Wall panels with different levels of finish are built in a factory and then assembled onsite, usually by those doing stick-built construction. |
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Sales Order History
We expect to generate sales volume from potential B2B, B2C, and B2G customers once we have obtained the required state certifications and are able to build at our desired production levels.
In December 2020, the Company received two purchase orders from ADS, Inc., to deliver 156 Casitas to the federal government. These purchase orders and related agreements are included as Exhibit 10.2 to this Annual Report.
BOXABL received $9.2 million from ADS, the full amount due under the terms of the contract, as final delivery was completed. This initial order allowed the Company to continue development of its manufacturing procedures and obtain end user feedback which was used to utilize for further developments to the Casita product.
On September 6, 2022 BOXABL received two purchase orders for a total amount of $13.2 million from a Customer in Arizona for 227 Casita Boxes. Of which, we delivered 51 units from this order during 2022. Also, during 2022 the Company delivered 8 Casita Boxes to fulfill 3 additional orders (Hillier Enterprises, Gateway Science, and Spring Mountain Resort).
During 2023 we delivered 2 Casitas Boxes to Michael Fortune and FabMac Homes. During 2023, we started the process to prepare the facilities for new equipment for Casita Generation 2, which resulted in a temporary stoppage of Casita Generation 1 production.
Inventory
We manufactured 260 Casitas during 2023. Our inventory of manufactured Casitas was originally intended to be delivered pursuant to a sales agreement in Arizona. However, our deliveries under that agreement were put on hold while the Company and its partners resolved issues that needed to be addressed pursuant to the Arizona Department of Housing, which reached a resolution in December 2023. See, below, Legal Proceedings – Arizona Department of Housing Settlement. In the meantime, the Company targeted sales to customers in states where there was no state modular program as well as for projects that were under a different classification such as park model RV’s or government projects. The Company can sell park model RVs in forty-five states without additional qualifications. Nevertheless, these new sales may face delays due to the time needed to prepare the site for installation of the Casitas, arranging capital for payment of amounts due to the Company by the purchaser, and other preparatory steps that need to be taken in order to fulfill the delivery and installation of the units. As of December 31st, 2023, the Company had 313 Casitas Boxes classified as Finished Goods Inventory (in addition to 15 Casitas Boxes classified as Fixed Assets). The Fixed Asset units are used as demonstration units at tradeshows as well as at our manufacturing facilities.
Also, BOXABL is now scheduling delivery of Casitas to Customers on its waitlist. The Company has recently hired a sales manager, a code inspector, two business development leads and implemented a sales process where we sort through our waitlist to prioritize and execute customer orders.
Employees
As of December 31, 2023, the Company had 65 direct hourly employees, 46 indirect salaried employees, 32 indirect hourly employees, and 0 direct salaried employees. This number experiences some fluctuation as we reduced Casita Generation 1 production on preparation of the new equipment, and we expect to increase hiring as we continue to scale up production at our facilities. BOXABL provides employees a share incentive plan to be awarded at the discretion of the Board of Directors (the “Board”). For details, see Compensation of Directors and Officers – Equity Incentive Plan.
In preparation to scale operations, the Company has made several pivotal hirings. These senior management improvements were made with the intention of accelerating the maturity of the Company. The most notable addition was the October 2023 hiring of Chief Financial Officer, Martin Costas, who started his career in public accounting with PwC, where he contributed to more than 100 audits, consulting and advisory engagements including capital markets engagements; and comes to BOXABL with vast CFO experience leading the finance function in companies such as Honeywell, Schlumberger, and Nexans. During his career, Martin worked with companies in their early maturity stages and contributed to their development, including complex IPO and M&A processes. See Item 10. Directors, Executive Officers and Corporate Governance.
In addition, the Company has strengthened its finance team with the hirings of a Corporate Controller as well as a Financial Planning and Analysis/Risk Manager. Other significant hires include an in-house Legal Manager, an Investor Relations Manager, an IT Manager, as well as experienced operational managers. The company is also in the hiring process of an experience Purchasing leader.
Systems
The Company has invested significant resources into marketing-leading systems that improve operational efficiency in areas such as: Accounting, spend management, inventory control, sales, investor relations, and human resources. The investment into these systems aims to generate enterprise-wide transparency and support the Company’s internal controls.
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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 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy.
The Company’s cyber risk management strategy has consisted of a focus on minimizing our attack surface and leveraging industry standard cyber threat prevention, detection, and remediation tools. The Company assesses cyber security risk as follows:
| (i) | We have executed on this strategy with a cloud-first approach, awareness training, and deliberate use of well-established vendors for software and hardware solutions. |
| (ii) | During February 2024, the Company engaged HUB International as its national insurance broker and risk services consultant. HUB brings industry expertise specifically in regard to cybersecurity. |
| (iii) | During February 2024, the Company hired an IT Manager with expertise in cybersecurity and risk mitigation. This hiring coupled with HUB’s consultancy positions us to assess and mitigate cybersecurity threats and protect the Company’s shareholders. |
To date, no cybersecurity threats have materially affected our business strategy, operations, or financial condition.
Corporate Governance
Our board of directors has oversight of our strategic and business risk management and has delegated cybersecurity risk management oversight to the Audit Committee of our board of directors (Audit Committee). Our Audit Committee is responsible for ensuring that management has processes in place designed to identify and evaluate cybersecurity risks to which the company is exposed and to implement processes and programs to manage cybersecurity risks and mitigate cybersecurity incidents. Management is responsible for identifying, assessing, and managing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures, maintaining cybersecurity policies and procedures, and providing regular reports to our board of directors, including the Audit Committee. The Company has strengthened its IT team with the hiring of an additional IT Manager.
Item 2. Properties.
Our principal office and initial manufacturing facility are located at: 5345 East North Belt Road, North Las Vegas, Nevada, which also serves as our mailing address. Leasing information is described below.
Initial Manufacturing Facility (Factory 1)
On December 29, 2020, we entered into a lease for industrial space which we made into our initial manufacturing facility. We took possession on May 1, 2021 on a sixty-five-month lease. The address of the facility is 5345 E Centennial Pkwy, Building 1, North Las Vegas, NV 89115.
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Material Lease Terms
| Premises: | Building 1 located at 5345 East North Belt Road, North Las Vegas, NV 89115 | |
| Square Feet: | 173,720 rentable square feet | |
| Commencement Date: | May 1, 2021 | |
| Term: | 65 months commencing on May 1, 2021 and ending August 31, 2026; the Company’s first five months of rent were abated by the landlord. The Company began making monthly rent payments on October 1, 2021. | |
| Security Deposit: | $525,000 |
| Lease Months | Monthly Base Rent | ||||
| 01 – 12 | $ | 87,9965 | |||
| 13 – 24 | $ | 90,636 | |||
| 25 – 36 | $ | 93,355 | |||
| 37 – 48 | $ | 96,156 | |||
| 49 – 60 | $ | 99,041 | |||
| 61 – 65 | $ | 102,012 | |||
| Triple Net Lease: | All costs, expenses, and obligations relating to the facility during the term of the lease, including operating expenses, repairs, insurance, and taxes, are the responsibility of BOXABL. |
Second Manufacturing Facility (Factory 3, formerly known as Factory 2)
On June 13, 2022, we entered into a lease for additional industrial space which will support and enhance our operations at our initial manufacturing facility. We took possession on February 1, 2023, which is when the property had been made ready under the terms of the lease. The address of the facility is 5553 N. Belt Road, North Las Vegas, NV.
Material Lease Terms
| Address: | 5553 N. Belt Road, North Las Vegas, NV 89115 | |
| Square Feet: | 132,960 rentable square feet | |
| Commencement Date: | January 27, 2023 | |
| Term: | 73 months commencing on after completion of the Landlord’s Work. | |
| Security Deposit: | $611,616 |
| Lease Months | Monthly Base Rent | ||||
| 01 – 12 | $ | 103,709 | |||
| 13 – 24 | $ | 107,857 | |||
| 25 – 36 | $ | 112,171 | |||
| 37 – 48 | $ | 116,658 | |||
| 49 – 60 | $ | 121,325 | |||
| 61 - 72 | $ | 126,178 | |||
| 73+ | $ | 131,225 | |||
| Triple Net Lease: | All costs, expenses, and obligations relating to the facility during the term of the lease, including operating expenses, repairs, insurance, and taxes, are the responsibility of BOXABL. |
Third Manufacturing Facility (Factory 2 formerly known as Factory 3)
On May 2, 2023, we amended the lease agreement for the initial manufacturing facility to add space to be used as our third manufacturing facility for a term of forty-eight months. We took occupancy of the facility on June 1, 2023. The address of the warehouse is 5445 East North Belt Road, North Las Vegas, NV 89115.
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Material Lease Terms
| Premises: | Building 3 located at 5445 East North Belt Road, North Las Vegas, NV 89115 | |
| Square Feet: | 114,613 rentable square feet | |
| Commencement Date: | June 1, 2023 | |
| Term: | 48 months commencing on June 1, 2023 and ending May 31, 2027. The Company began making monthly rent payments on June 1, 2023. | |
| Security Deposit: | $0 | |
| Letter of Credit | $3,714,190 |
| Lease Months | Monthly Base Rent | ||||
| 01 – 12 | $ | 115,759 | |||
| 13 – 24 | $ | 120,390 | |||
| 25 – 36 | $ | 125,205 | |||
| 37 – 48 | $ | 130,213 | |||
| Triple Net Lease: | All costs, expenses, and obligations relating to the facility during the term of the lease, including operating expenses, repairs, insurance, and taxes, are the responsibility of BOXABL. |
Item 3. Legal Proceedings.
Arizona Department of Housing Settlement
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 thousand on April 26, 2023, and has satisfied all of its obligations to the Arizona Department of Housing under the settlement agreement.
In a separate settlement between the Parties, dated May 30, 2023, regarding the costs of the reconstruction of the Casitas, Freeport 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 thousand warranty for such costs and any costs related to the 10-year limited warranty offering to Pronghorn.
Litigation Against Former Employees
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 matter remains pending in the U.S. District Court for the District of Nevada.
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.
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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.
Other Litigation
On June 13, 2023, the Company filed a lawsuit against a person, not affiliated with the Company, alleging claims based on business disparagement and defamation of the Company. Management does not anticipate the matter will have a material impact on the Company’s results of operations or financial condition.
On November 19, 2021, a former employee, who served as Chief Operating Officer during the seven-month period from March 2021 until September 27, 2021, at which time he was terminated, filed a complaint against the Company and its directors in the Eighth Judicial District Court of Clark County, Nevada, claiming breach of contract and wrongful termination. While the legal action has proceeded to discovery, the Company denies the merit of the allegations and will continue to defend against them.
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. BOXABL denies the merit of the allegations and damages sought and will continue to defend against them.
We know of no other existing or pending legal proceedings against us, nor are we involved as a plaintiff in any 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.
The Company is party to various legal proceedings and claims from time to time. A liability is 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.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
There is no established public trading market for the Company’s Common Stock. As of December 31, 2023, 2,987,511,600 shares of the Company’s Common Stock could be sold pursuant to Rule 144 of the Securities Act.
Holders
As of March 29, 2024 there were 3 billion shares of Common Stock, which were held by approximately 4,633 shareholders of record. In addition, there were 194,423K shares of our Non-Voting Series A Preferred Stock outstanding, which shares were held by 763 shareholders of record, there were 850,605K shares of our Non-Voting Series A-1 Preferred Stock outstanding, which shares were held by 4,071 shareholders of record, there were 173,956K shares of our Non-Voting Series A-2 Preferred Stock outstanding, which shares were held by 33,745 shareholders of record, and there were 8,343K shares of our Non-Voting Series A-3 Preferred Stock outstanding, which shares were held by 105 shareholders of record.
Dividends
We have never paid cash dividends on any of our capital stock and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. We do not intend to pay cash dividends to holders of our Common Stock in the foreseeable future.
Equity Compensation Plans
The information in the table below was prepared as of fiscal year end December 31, 2023.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted- average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Equity compensation plans approved by security holders | 115,736,218 | $ | 0.08635 | - | ||||||||
| Equity compensation plans not approved by security holders | - | $ | - | - | ||||||||
| Total | 115,736,218 | $ | 0.08635 | - | ||||||||
Recent Sales of Unregistered Securities and Use of Proceeds
Since December 31, 2019, the Company has engaged in the following offerings of securities (with the number of shared issued adjusted to reflect the 10-for-1 forward stock split effected by the company on November 23, 2021). The proceeds raised in each of these offerings were used to fund the development of the Company’s manufacturing facilities, working capital and compensation of executive officers and employees.
| ● | From July 14, 2020 through October 10, 2020, the Company sold 76,428,570 shares of Non-Voting Series A Preferred Stock* and the underlying Common Stock into which they convert under Regulation Crowdfunding for a total of $1,070,000. Commission File No. 020-26633. |
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| ● | From July 14, 2020 through October 10, 2020, the Company sold to accredited investors 78,730K shares of Non-Voting Series A Preferred Stock and the underlying Common Stock into which they convert under Rule 506(c) of Regulation D for a total of $1,102K. | |
| ● | From December 2, 2020 through May 22, 2021, the Company sold to no more than 35 purchasers in any 90-calendar day period who were either accredited investors (or the Company reasonably believed immediately prior to the sale that the investor had such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the prospective investment) 33,350K shares of Non-Voting Series A Preferred Stock and the underlying Common Stock into which they convert under Rule 506(b) of Regulation D for a total of $567K. In connection with this offering, the Company provided investors with an offering memorandum that provided the information required by Part 2 of Form 1-A under Regulation A, and audited financial statements for the fiscal years ended December 31, 2019 and 2018. | |
| ● | From November 17, 2020, through April 1, 2022, the Company sold Convertible Promissory Notes to accredited investors, which converted into shares of Non-Voting Series A-1 Preferred Stock* on April 1, 2022, under Rule 506(c) of Regulation D for a total of $44,852K. For details regarding the conversion of the Convertible Promissory Notes, see Item 2. Financial Information – Sale and Subsequent Conversion of Convertible Promissory Notes. | |
| ● | From May 3, 2021, through November 13, 2021, the Company sold 68,097K shares of Non-Voting Series A-1 Preferred Stock and the underlying shares of Common Stock into which they convert under Regulation Crowdfunding for a total of $4,835K. Commission File No. 020-28025. | |
| ● | On March 31, 2022, the Company commenced a Regulation A offering in which it sold Non-Voting Series A Preferred Stock, Non-Voting Series A-1 Preferred Stock, Non-Voting Series A-2 Preferred Stock* and the underlying shares of Common Stock into which they convert. The Regulation A offering also included selling securityholders selling Common Stock. The offering terminated on January 12, 2023, by which time the Company had sold 5,914K shares of Non-Voting Series A Preferred Stock for a total of $83K; 742K shares of Non-Voting Series A-1 Preferred Stock for a total of $59K; 81,064K shares of Non-Voting Series A-2 Preferred Stock for a total of $64,850K; and the selling securityholders sold 12,488K shares of Common Stock for a total of $9,991K. Commission File No. 024-11419. | |
| ● | From August 25, 2022 through February 20, 2023, the Company sold 5,914K shares of Non-Voting Series A-2 Preferred Stock and the underlying shares of Common Stock into which they convert for a total of $4,731K in reliance on Regulation Crowdfunding. Commission File No. 020-30797. | |
| ● | Beginning November 23, 2021, the Company commenced an exempt offering of Non-Voting Series A-2 Preferred Stock and the underlying shares of Common Stock into which they convert, pursuant to Rule 506(c) of Regulation D. The Company closed the offering August 31, 2023, having sold 45,011K shares for gross proceeds of $33,837K. |
| ● | On June 15, 2023, the Company engaged in a statutory merger with an affiliated corporation, 500 Group, in which the Company exchanged 37,500K shares of Non-Voting Series A-2 Preferred Stock in exchange for 500 Group’s 100 outstanding shares of Common Stock in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. For details, see Item 13. Certain Relationships and Related Transactions and Director Independence. See also Exhibit 10.7 to this Annual Report. | |
| ● | Between September 18 and October 9, 2023, the Company conducted an offering of its Series A-2 Preferred Stock in reliance on Regulation Crowdfunding. The Company sold 4,079K shares of Series A-2 Preferred Stock for gross proceeds of approximately $3,263K. Commission File No. 020-32926. | |
| ● | Beginning February 17, 2023, the Company commenced a Canadian exclusive offering, through FrontFundr, 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 is verified by FrontFundr. As of December 31, 2023, the Company has sold 388K shares for gross proceeds of $310K. | |
| ● | Beginning September 1, 2023, 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 December 31, 2023, the Company sold 8,343K shares for gross proceeds of $4,184K. |
* 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.
Item 6. [Reserved]
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Item 7. 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 consolidated financial statements and the related notes included elsewhere herein and in our consolidated financial statements.
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 Forward-Looking Statements.
Overview
We are in the process of scaling our factories and production of Casitas to meet the demand for our products, and our results to date reflect these efforts. In addition to Factory 1, which we took possession of in May 2021, we expanded our production capacity by signing a lease for Factory 2 in June 2022 and Factory 3 in May 2023. 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 more Boxes more efficiently, and, in doing so generate more revenue in the future. Consequently, we recently hired 3 sales associates.
In 2023, we manufactured 260 Casitas primarily planned to fulfill an order with one of our customers in Arizona but have not made any deliveries. Various permits from state and local governments are required in order to sell and install the Casitas as modular houses. The permitting process has caused delays in the delivery of the product and has affected the timing and amount of the Company’s revenues. Currently, the Company is in the process of obtaining various permits related to the Casitas. During the period that the Arizona order had been postponed, the units that were previously reserved for that project were made available to be sold to other customers. We sent a survey to those on our waitlist requesting information regarding who is able to receive delivery and whether that potential customer would install their unit or units in a jurisdiction with significant permitting or other regulatory requirements.
In December 2023, BOXABL completed the requested third-party inspection for the State of Arizona and received a report recommending Factory and Casita certification which was approved by the State. The Company expects to resume sales of Casitas in Arizona in 2024.
Accordingly, we are resuming sales to customers in Arizona, in states where there is no state modular program, and for projects that are under a different classification such as park model RVs or government projects. Nevertheless, these new sales may face delays due to the time needed to prepare the site for installation, arrange capital for payment of amounts due to the Company by the purchaser, and other preparatory steps that need to be taken in order to arrange delivery and installation of the units.
BOXABL has approved plans in several jurisdictions that do not have modular housing legislation (Oklahoma, Utah, Tribal Lands). The Company is also approved to sell Casitas as a Park Model RV configuration. We believe the Company can sell Park Model RVs in forty-five states without additional qualifications. The Company anticipates that the incoming demand from the aforementioned jurisdictions plus customers under Park Model RV categories will support the Company’s operations.
The Company retained multiple third-party inspection agencies to assist in achieving certification in multiples states with modular housing legislation simultaneously. The Company does not expect that this regulatory process will cause further delays in our ability to generate revenue with respect to our current or future production.
As of March 29, 2024, the company sold five units in 2024 to states that do not have modular housing legislation or under Park Model RV.
The Company maintains short-term liquidity of $46,259K as of December 31, 2023, including $18,574K of cash and cash equivalents and $27,685K as short-term investments in U.S. Treasury Notes. Currently the Company’s average negative operating cashflow needed to maintain operations beyond the short-term is approximately $3,000,000 per month . Accordingly, the Company’s liquidity is sufficient to fund approximately 15-months of operations in case of no revenues.
The Company does not have financial debt and has recorded $9,822K in deposits in advance as of December 31, 2023 related to production equipment to secure our operational ramp-up expected for 2024. The Company maintains a commitment to pay an additional $2,424K for this equipment upon delivery.
The Company expects to generate funds from the sale of its current inventory in H1 2024, sale of future inventory resulting from manufacturing, sales of equity securities pursuant to an offering under Regulation A in which a preliminary offering statement has been filed, and, if needed, could also look for financing opportunities related to our equipment.
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Results of Operations
Fiscal Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022
Revenues
Our FYE 2023 gross revenues were $343K compared to FYE 2022 gross revenues of $10,868K. Revenue in 2023 was generated by sales of our Casitas, supporting labor and materials, including the sale of two Casitas to two customers. We are continuing to work to scale to meet demand through the development of our factories and manufacturing processes. Revenue in FYE 2022 resulted from recognition of revenue received under the Company’s contract for delivery of Casitas to ADS, Inc.
Cost of Goods Sold
Gross revenues for FYE 2023 and 2022 were offset by cost of goods sold of $10,556K and $23,668K, respectively. Cost of goods sold consists primarily of the cost of products used in the production of the Company’s finished products, shipping, the related labor, stock compensation expense and overhead charges associated with that production. The Manufacturing Overhead represents the wages of salaried personnel directly involved in the manufacturing and production process, increasing year over year aligned with our strategy to increase production. The cost of goods sold for the years ended December 31, 2023 and 2022, consist of the following:
| December 31, | ||||||||
| (In Thousands) | 2023 | 2022 | ||||||
| Direct Material/Shipping | $ | 75 | $ | 10,962 | ||||
| Direct labor | 30 | 6,125 | ||||||
| Manufacturing Overhead | 9,535 | 5,760 | ||||||
| Stock Compensation | 916 | 821 | ||||||
| Cost of Goods Sold | $ | 10,556 | $ | 23,668 | ||||
During 2022 the Company started developing and implementing strategic cost-saving initiatives to reduce the cost of goods sold, which continued into 2023. In particular with the Vertical Integration of EPS foam, improving terms with suppliers with suppliers, implementing a MES (Manufacturing execution system) to gather data and drive improvements, implementing standard jobs, improving manufacturing efficiencies and reducing quality issues, and implementing a layered shop floor management system, management GEMBA walks, and fostering employee engagement.
During the second half of 2023 the Company started upgrading the manufacturing concept and installing more automated equipment. We expect this will allow the Company to ramp up production and reduce the cost per unit further.
During the years ended December 31, 2023, and 2022, manufacturing overhead was $9,535K and $5,760 K. 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.
In 2022, our costs of goods sold included as part of Manufacturing Overhead a 1% royalty paid to Build IP, a company controlled by our founder and CEO, Paolo Tiramani, under the terms of our exclusive license agreement to utilize the patented technology necessary to produce and deliver our Boxes. In June 2023, the Company acquired Build IP and its parent, 500 Group, both of which were owned by the Company’s CEO, for consideration of $30 million paid in Non-Voting Series A-2 Preferred Stock. As a result of this transaction, all royalty payments were ceased immediately. For details, see Certain Relationships and Related Transactions and Director Independence.
Operating Expenses
In FYE 2023, we also saw a significant increase in operating expenses from $20,291K in 2022 compared to $31,548K in FYE 2023. In FYE 2023 and 2022, respectively, our operating expenses were $14,855K, and $10,391K for general and administrative expenses, $8,401K and $6,523K for sales and marketing, and $8,292K and $3,377K for research and development. The most significant of these increases in operating expenses was research and development, which increased by $4,915K. This increase reflects a push to increase capacity, sales, and further test raw material used in production and researching industry standards and regulations.
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Advertising and marketing play a large role in BOXABL’s capital-raising strategy. We have undertaken advertising campaigns specific to the product, as well as advertising directly to investors. The investor-focused advertising has allowed for investors to learn more about the Company. As a result of these efforts, in 2022, BOXABL raised over $100M from over 30,000 investors and has achieved some of the most successful crowdfunding campaigns under Regulation Crowdfunding and Regulation A. Despite only raising funds under Regulation D and Crowdfunding, in 2023, the Company was still able to raise substantial capital. In addition to our investor marketing, advertising the Company has resulted in indications of interest to purchase a BOXABL unit from around 175,000 people. Our marketing has also resulted in more than 1.25M social media followers, which has generated interest in the company from prospective employees, potential partners and suppliers. We recorded over 350,000 visits from unique users to invest.boxabl.com in 2023.
Research and Development is essential to test and develop the BOXABL product further. The main cost drivers in 2023 were:
1. Testing SIP panels for the development of the next generation product both in-house and with 3rd parties to evaluate structural capacities, fire resistance, weather barrier, etc. along a wide range of materials and combinations thereof;
2. Performing destructive testing of units, panels, materials and other components of Casitas in order to improve and enhance the safety of manufactured units;
3. Continuing to upgrade, develop and revise engineering, in order to obtain independent third-party certification for our factory and product to facilitate certification by local and state agencies for our ultimate goal of sales to the consumers;
4. Developing a chassis/trailer system to better solve the transportation issue that plagues the modular home industry;
5. Develop engineering plans and structural testing for the next generation of our products such as the two-story, single-family home which first was exhibited in February 2023 at the International Builder’s Show (IBS), receiving positive reviews from prestigious publications such as New York Times among others;
6. Prototyping different plumbing and electrical designs in an attempt to improve functionality and reduce cost and labor requirements for installation;
7. Cooperating in the development and testing of transportation mechanisms in order to be able to sell and deliver the units in all USA; and
8. Continuing to develop and redesign sub-products such as cabinets, showers, roofing and others to enhance the usage of space.
Compensation Expense
The Company’s Equity Incentive Plan provides for the issuance of Stock Options and Restricted Stock Units (“RSUs”) among other types of equity incentives, including ISOs and NQSOs. The RSUs granted by the Board vest depending upon future events and are expensed periodically, over the vesting term. As of December 31, 2023 and 2022, the Company had 60,500,072 and 17,857,140 RSUs outstanding. As of December 31, 2023, 285,715 RSU shares were fully vested. As of December 31, 2023 and 2022, the Company had 55,236,146 and 61,288,154 ISO/NQSO shares outstanding. For details regarding Stock Options and Restricted Stock Units granted under the Plan, see Compensation of Directors and Officers – Equity Incentive Plan.
Extinguishment of Debt
In FYE 2022, the Company recorded $578,971K as an extinguishment of debt due to the conversion of our Convertible Promissory Notes into Series A-1 Preferred Stock of the Company.
Critical Accounting Policies and Estimates
Inventory
Inventory consists 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 management’s best estimate and any difference charged to expense.
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Intangible Assets
The Company evaluates its intangible assets for impairment annually, or more frequently whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company utilizes a qualitative assessment to evaluate whether it is more likely than not that the fair value of an intangible asset is less than its carrying value, and if so, the Company will perform a quantitative test. An impairment loss is recognized if the carrying value exceeds the fair value.
Stock-Based Compensation
The Company applies ASC 718 for its Stock-Based Compensation. Compensation for all stock-based awards, including stock options and restricted stock, 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. For stock options and restricted stock awards subject to a three-year vesting period, the Company recognizes compensation expense over the associated service periods.
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.
Liquidity and Capital Resources
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. For details regarding our securities offerings, see below Sales of Securities.
Cash and Cash Equivalents
As of December 31, 2023, the Company held $18,574K in cash and cash equivalents and $27,685K in investments in short-term treasury notes, compared to $9,025K in cash and cash equivalents, and $74,385K held in short-term treasury notes as of December 31, 2022.
Inventory
Our physical assets increased significantly with inventory of $18,694K as of December 31, 2023, which is primarily finished goods including 313 Casita Boxes units, compared to $8,243K as of December 31, 2022, which was primarily raw materials. As we continue producing Casita Boxes, the amount of inventory consisting of finished goods has increased compared to the amount of raw materials as inventory.
Property, Plant and Equipment
Property, Plant and Equipment increased to $10,766K as of December 31, 2023 primarily related with our manufacturing equipment, from $7,738K at December 31, 2022 resulting from additional capital improvements to our manufacturing facility.
In addition to installed capital equipment, as of December 31, 2023, we recorded $9,822K in deposits related to production equipment, compared to $3,902K as of December 31, 2022.
Sales of Securities
Sales of Capital Stock
Beginning November 23, 2021, the Company commenced an exempt offering of Non-Voting Series A-2 Preferred Stock and the underlying shares of Common Stock into which they convert, pursuant to Rule 506(c) of Regulation D. The Company closed the offering August 31, 2023, having sold 45,011K shares for gross proceeds of $33,837K.
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On March 31, 2022, the Company’s offering under Regulation A was qualified to sell Non-Voting Series A-2 Preferred Stock and the underlying shares of Common Stock into which they convert. The Regulation A offering closed on January 12, 2023, with the Company selling 5,913,600 shares of Series A Preferred Stock for gross proceeds of $83K, 742K shares of Series A-1 Preferred Stock for gross proceeds of $59K, and 81,064K shares of Series A-2 Preferred Stock for gross proceeds of $64,850K. The Selling Shareholders (Paolo Tiramani and Galiano Tiramani) sold 12,488K shares of Common Stock, directly to investors, for gross proceeds of $9,991K.
From August 25, 2022 through February 20, 2023, the Company conducted an offering of its Non-Voting Series A-2 Preferred Stock and the underlying shares of Common Stock into which they convert, in reliance on Regulation Crowdfunding. The Company sold 5,914K shares for gross proceeds of $4,731K.
Beginning February 17, 2023, the Company commenced a Canadian exclusive offering, through FrontFundr, 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 is verified by FrontFundr. As of December 31, 2023, the Company has sold 388K shares for gross proceeds of $310K.
On June 15, 2023, the Company engaged in a statutory merger with an affiliated corporation, 500 Group, in which the Company exchanged 37,500K shares of Non-Voting Series A-2 Preferred Stock in exchange for 500 Group’s 100 outstanding shares of Common Stock in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. For details, see Certain Relationships and Related Transactions and Director Independence.
Beginning September 1, 2023, 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 December 31, 2023, the Company sold 8,343K shares for gross proceeds of $4,184K.
From September 18 through October 9, 2023, the Company conducted an offering of its Series A-2 Preferred Stock and the underlying shares of Common Stock into which they convert, in reliance on Regulation Crowdfunding. The Company sold 4,079K shares for gross proceeds of $3,263K.
In February 23rd, 2024 the Company filed a Preliminary Form 1-A expecting to conduct an offering of its Non-Voting Series A-3 Preferred Stock under Regulation A.
Convertible Promissory Notes
Between November 17, 2020, and April 1, 2022, the Company sold $44,852K in Convertible Promissory Notes in an exempt offering made in reliance on Rule 506(c) of Regulation D. On April 1, 2022, all of the Convertible Promissory Notes converted into 781,541K shares of Non-Voting Series A-1 Preferred Stock representing the principal amount due plus $2,058K of accrued interest. As discussed above, our income statement includes a net loss of $612,395K for FYE 2022, of which $578,971K represents the extinguishment of debt through the conversion of our Convertible Promissory Notes. See above – Extinguishment of Debt and Interest Expense and Note 6 to the Consolidated Financial Statements for the fiscal years ending December 31, 2022 and 2021.
Material Commitments and Obligations
Expense Commitments
As of December 31, 2023, we reported current lease liabilities of $3,182K compared to $1,000 as of December 31, 2022. Our long-term lease liability increased to $10,661K as of December 31, 2023, from $3,091K as of December 31, 2022.
Customer Deposits
Our main non-lease liability is the Company’s obligation to customers who have placed deposits on the purchase of a Casita. As of December 31, 2023, the Company held Customer deposits in the amount of $3,987K, which represented a decrease from $4,257K as of December 31, 2022. See – Trend Information.
Deferred Revenue
As of December 31, 2023, our balance sheet carried $2,684K deferred revenue related to purchase orders from Oklahoma (see Trend Information) and the Purchase Agreement with Pronghorn Services LLC (included as Exhibit 10.8). The Company notes that while the agreement was never executed, the parties have been acting under the terms of the agreement, with the Company receiving the full payment of the purchase orders ahead of shipping units). Pursuant to our method for recognizing revenue (see Critical Accounting Policies below), deferred revenue reflects the amount that had not yet been delivered as of the date of the consolidated financial statements.
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Cash Flows
Historical Cash Flows
| Year Ended December 31 | ||||||||
| (In Thousands) | 2023 | 2022 | ||||||
| Net Cash Used in Operating Activities | $ | (38,288 | ) | $ | (33,276 | ) | ||
| Net Cash Used in Investing Activities | $ | 36,092 | $ | (83,009 | ) | |||
| Net Cash Provided by Financing Activities | $ | 15,503 | $ | 103,895 | ||||
At December 31, 2023, our principal source of liquidity was cash and cash equivalents and short- and long-term investments, which we achieved through our offerings of securities as discussed above. Based on the Company’s current burn rate, we anticipate that the current liquidity together with cash generated from sales of Casitas as well as sales of additional securities will be sufficient to meet our immediate cash needs for approximately 15 months.
Operating Activities
Cash used in operating activities included net loss adjusted for several non-cash items such as depreciation & amortization, stock-based compensation, extinguishment of debt and other non-cash expenses, in addition to the change in working capital.
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.
Financial Activities
Primary sources of our financial activities included net proceeds from issuance and sales of securities.
Trend Information
In total, we have received interest from more than 175,000 potential customers wishing to reserve their place in line for a Casita Box. Each of these potential customers has agreed to our Room Module Order Agreement. Of that number, we currently have deposits from over 8,500 potential customers ranging from $100, $200, $1,200 or $5,000 for over 15,000 Casitas. We are currently only accepting deposits of $200. While there is no assurance that any of these reservations will result in binding orders or revenue, we believe that the volume of reservations demonstrates significant interest in our product, which necessitates our efforts to focus on scaling up production capacity.
We also recently announced a new prototype, frequently referenced as the “GOLDIBOX” with three-bedrooms, two-and-a-half bathrooms and an outdoor deck, which is expanding public understanding of BOXABL beyond tiny houses and is already getting a lot of attention from Developers. We are now able to produce multi-bedroom units with our 19x19 ft. Boxes.
Inflation
We have not yet been materially impacted by those pressures because of the key differentiators in our building components compared to traditional, stick-built homes, as well as our manufacturing process in the factory setting compared to construction in the field. If the Company encounters significant increases in the cost of manufacture due to inflation, we believe we would be able to pass on those costs to end consumers as they would likely encounter greater inflationary impacts in traditionally built homes. Recent inflationary pressures have not materially impacted the Company’s operations.
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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 beyond initial testing of Casitas, delivery of orders, and developing Factory 2. As of March 29, 2024, we see our next 12-month timeline as follows:
| Month 1-3: | ● | Begin delivery of orders to states do not have modular housing legislation, Park Model RV configuration, and to Arizona. | ||
| ● | Ramp-up Generation 1.0 Casitas production. | |||
| ● | Obtain plant and Generation 1.0 Casita certification in Nevada, New Mexico, California, and Texas | |||
| Month 3-6: | ● | Upgrade manufacturing equipment including: CNC equipment, Lamination Line, Paint Line, and Casita Assembly Conveyor System and complete setup of Factory 2 and 3 and continue with the integration into our production process. | ||
| ● | ||||
| Month 7+: | ● | Begin production of our next generation Casita | ||
| ● | Begin ramp up of production to achieve our desired production at scale for our facilities in Nevada. | |||
| ● | Complete ramp up of production to achieve our desired production at scale for our facilities in Nevada. | |||
| ● | Obtain Generation 2.0 Casita certification in several states including Arizona, California and Nevada. |
The Company believes the above referenced activities are achievable with its current cash and cash equivalents as referenced in Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.
On the regulatory side of our business, we have received Generation 1.0 state modular approvals required for our Casitas in Arizona, which was finalized in December 2023. We still anticipate achieving Generation 1.0 state modular approvals for our Casitas in California and Nevada, followed by Generation 2.0 state modular approvals for our Casitas and our multifamily set-ups in California, Arizona, and Nevada later in 2024.
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 7A. 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.
| 27 |
Item 8. Financial Statements and Supplementary Data.
Index of the Financial Statements
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders of Boxabl Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Boxabl Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”), and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
PCAOB #3501
We have served as the Company’s auditor since 2020.
April 1, 2024
| F-2 |
BOXABL Inc.
Consolidated Balance Sheets
as of December 31, 2023 and 2022
| As of | ||||||||
| (In Thousands) | December 31, 2023 | December 31, 2022 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, equipment and other assets: | ||||||||
| Long-term investments | ||||||||
| Restricted cash | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right of use assets | ||||||||
| Deposits on equipment | ||||||||
| Deposits | ||||||||
| Total property, equipment, and other 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 - long-term | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies -- See note 11 | ||||||||
| Stockholders’ equity: | ||||||||
| Series A Preferred Stock $ par, billion shares authorized, shares issued and outstanding as of December 31, 2023 and December 2022, respectively | ||||||||
| Series A-1 Preferred Stock $ par, billion shares authorized, shares issued and outstanding as of December 31, 2023 and December 2022, respectively | ||||||||
| Series A-2 Preferred Stock $ par, billion shares authorized, and shares issued and outstanding as of December 31, 2023 and December 2022, respectively | ||||||||
| Series A-3 Preferred Stock $ par, billion shares authorized, and shares issued and outstanding as of December 31, 2023 and December 2022, respectively | ||||||||
| Common Stock $ par, billion shares authorized, and billion shares issued and outstanding as of December 31, 2023 and December 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| F-3 |
BOXABL Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2023 and 2022
| For The Years Ended | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| (In Thousands, except per share amounts) | ||||||||
| 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 expense/(income): | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| Other income | ( | ) | ( | ) | ||||
| Loss on disposal of assets | ||||||||
| Extinguishment of debt | ||||||||
| Forgiveness of Debt | ||||||||
| Total expense/income: | $ | ( | ) | $ | ||||
| $ | - | $ | - | |||||
| Provision for income taxes | ||||||||
| Net loss Attributed to Common Stockholders | $ | $ | ||||||
| Weighted average common shares outstanding - | ||||||||
| basic and diluted | ||||||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | ||||
See accompanying notes to the consolidated financial statements.
| F-4 |
BOXABL Inc.
Consolidated Statements of Changes to Stockholders’ Equity (Deficit)
For the Years Ended December 31, 2023 and 2022
| Series A-3 Preferred Stock | Series A-2 Preferred Stock | Series A-1 Preferred Stock | Series A Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| (In Thousands) | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | |||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A Preferred Stock | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A-1 Preferred Stock | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A-2 Preferred Stock | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Offering Costs | - | - | ( | ) | - | ( | ) | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A-2 Preferred Stock | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A-3 Preferred Stock | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common Control Transaction | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed Dividend | - | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Offering Costs | - | ( | ) | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
| F-5 |
BOXABL Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2023 and 2022
| For The Years Ended | ||||||||
| (In Thousands) | December 31, 2023 | December 31, 2022 | ||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile
net loss to net cash used in operating activities: | ||||||||
| Forgiveness of PPP loan | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Stock based compensation expense | ||||||||
| Extinguishment of debt | ||||||||
| Net gains on investments | ( | ) | ( | ) | ||||
| Loss on disposal of Assets | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Accrued Expenses and other current liabilities | ||||||||
| Right of use assets/Liabilities | ( | ) | ||||||
| Accrued interest on convertible notes | ||||||||
| - | - | |||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Purchase of property and equipment and deposits | ( | ) | ( | ) | ||||
| Deposits | ( | ) | ||||||
| Purchase of intangible assets | ( | ) | ||||||
| Purchase of investments | ( | ) | ( | ) | ||||
| Sale of investments | ||||||||