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Implications of Being an Emerging Growth Company

We are currently not subject to the ongoing reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because we did not register our securities under the Exchange Act.  Rather, we are subject to the more limited reporting requirements under the Regulation A reporting regime until this Registration Statement is declared effective.

When we become subject to the ongoing reporting requirements of the Exchange Act, as an issuer with less than $1.07 billion in total annual gross revenues during our last fiscal year, we will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company we:

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our consolidated financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our common stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to us due to the fact that we also qualify, once this Registration Statement is declared effective, as a “smaller reporting company” under the SEC’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are

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not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited consolidated financial statements and related MD&A disclosure.

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. 

The core product that we offer is the “Building Box", which consists of room modules that ship to site at a low cost and can be stacked and connected to build most any shape and style of finished buildings. We are currently evaluating market demand, but anticipate that available dimensions will be 19x20 ft., 19x30 ft., 19x40 ft., and 19x60 ft. Our first product available for sale is our 19x19 ft. Casita Box, featuring a full-size kitchen, bathroom, and living area.

We believe there is significant market interest in our product based on receiving reservations of interest from over 170,000 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. We have also completed delivery of an order received from ADS, Inc. for 156 Casitas. In order to meet our understanding of the potential demand, we are undertaking our current capital raise to secure raw materials ahead of need, to fund additional buildout of our initial factory, and to accelerate production.

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 lead engineer, 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 Item 7. Certain Relationships and Related Transactions and Director Independence.

Our Mission and Innovation

Over the past several hundred years, little has changed in the construction industry. Most buildings are built by hand, one at a time. Modern construction has not yet adopted advantages of the assembly line, robotics, or economies of scale. Even in housing developments with substantially similar homes, while components may be purchased in bulk, the work still involves construction by hand, one at a time. To compound this problem, labor shortages are rising, and new entries to the building construction workforce are slowing. These factors all contribute to a significant backlog of housing demand and price increases that are putting affordable housing out of the reach of common Americans.

One of the prime drivers of the limitations on construction is the ability to ship finished product 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. In addition, our reimagined manufacturing process is simplified and efficient. 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 labor costs during manufacturing.

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We believe the resulting product boasts many benefits over traditional construction for the end user. Not only does the Boxabl solution have the potential to reduce building costs and build time compared to traditional home building, but we simultaneously improve upon other metrics that can be used to evaluate building solutions, such as installation speed, fire resistance, energy ratings, mold resistance, environmental impact, wind ratings, flood resistance, pest resistance, impact resistance and much more.

Market Opportunity

Stick framing, invented over 100 years ago, is still the most popular residential building method. Stick framing means laborers build homes one at a time, by hand, using simple tools. This is a slow, expensive and labor-intensive process that has failed to adapt to modern manufacturing processes.

Stick framing includes no mass production, no robotics, no economies of scale, no assembly line, and costs that are dependent on the availability of construction labor, which has experienced shortages in recent years. According to the Associated General Contractors of America, 81% of construction firms have reported difficulty in filling salaried and hourly craft positions. The discussions contained in this registration statement relating to the market conditions and industry of the Company represent the opinions of management informed by third-party sources that we believe to be reliable. Our management has not independently verified the information, and any third-party sources are not incorporated by reference into this registration statement.

During 2022 and into 2023, the construction market has been slowing. According to the US Census Bureau, privately owned housing stats in December 2022 were at a seasonally adjusted annual rate of 1,382,000, which represents a 21.8% reduction from the housing stats in December 2021 of 1,768,000. We anticipate the economic impact of inflation and rising interest rates has resulted in a decrease in housing stats generally. For instance, the US Census Bureau reported 1,330,000 seasonally adjusted building permits in December 2022, which is 1.6% below the November 2022 estimate of 1,351,000, and 29.9% below the December 2021 rate of 1,896,000. 

Changes in zoning laws designed to increase housing density and solve housing affordability are allowing people around the country, and especially in California, to build accessory dwelling units (“ADUs”) for use and rent. In the city of Los Angeles alone, 5,188 permits were issued by the end of 2021 and 4,999 ADU permits were issued in the first eight months of 2022. This is a burgeoning market for which the Boxabl product is well positioned. 

While we believe ADUs are an easy way to enter the market, Boxabl is not limited to small residential units. We expect the Boxabl product can be used in a wide range of building types — residential, commercial, high rise, multi-family, apartment, disaster relief, military, labor housing and more. 

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. This allows builders to dramatically reduce build time and costs while increasing quality and features.

The Boxabl product is a large, almost 20 ft. in width room that folds down to 8.5 ft. wide for shipping, and still has sufficient space for factory-installed kitchens, bathrooms and more. Each unit is a separate Box. Our Boxes take the heavy lifting of a building’s construction out of the field and moves it into the factory, where it belongs. 

Once the Boxes arrive at the jobsite, Boxes are assembled together in a plug-and-play manner by builders to create a finished home of almost any size and style. A typical Box can be assembled in one day. The goal is for the speed, quality, features and price of the Boxabl product to be superior to traditional building methods.

To date, the Casita is the main model of Box we have been producing. We recently announced a new prototype with three-bedrooms, two-and-a-half bathrooms and an outdoor deck, which we believe will expand public understanding of Boxabl beyond tiny houses.

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Shipping Solution

The first step in factory manufacturing of large buildings is creating a feasible shipping solution. Our goal was to ship without the need for oversized loads. Oversized loads have extra permitting, follow cars, police escorts, restricted routes and other problems that increase costs dramatically. Our design achieves the largest possible room that is able to fit into standard shipping dimensions, meeting highway, sea and rail transportation requirements.  It also allows us to use our own drivers, as well as third parties, for delivery of our Casitas.

Smart Manufacturing

Boxabl Boxes are not built like traditional homes, they have been engineered with mass production in mind. This redesign includes a significant reduction in the number of components involved in the manufacturing process. Boxabl Boxes will be built with a laminated panel technology instead of a standard stick frame construction. This means each wall panel that Boxabl manufactures only consists of a few individual components. A comparable traditional wall has thousands of 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. 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.

The System

Efficient factory environments thrive on repeatability. We can achieve the lowest cost 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 wall design doesn't use standard lumber framing, instead, we use a laminated panel technology that includes steel skin, expanded polystyrene (EPS) foam, and magnesium oxide board. We are able to source these materials from multiple vendors, 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. In Generation 2.0 we are utilizing a hybrid fiber-cement and steel skin with a reinforced EPS core and lumber frame.

Product Features

The Boxabl building system is planned to have many features and solutions that reduce pain points for builders and offer an attractive product for consumers.

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Applicable Regulation

Our Boxes fall under different state certification requirements for housing depending on their end use. For instance, we are seeking to obtain state certifications under modular home building (or factory-built building) codes, with an initial emphasis on Arizona, Nevada, and California. Eventually, we plan to obtain approvals for every state’s modular home building program. Boxabl currently has a manufacturer license in Arizona, and we are currently waiting for the state to approve reconstruction plans to bring our buildings into compliance with Arizona Department of Housing requirements, which we believe is the last stage of obtaining the factory build certification in Arizona. For information please see Item 8. Legal Proceedings – Arizona Department of Housing Settlement. Once Boxabl is certified in Arizona, Boxabl believes that it will be easier to obtain certification in other states as there are similarities in the certification requirements across states. In the meantime, Boxabl has manufactured 173 Casitas during 2023 so far, and intends to sell those units for other projects. As discussed below, we plan to resume sales to customers in states where there is no state modular program as well as for projects that are under a different classification such as park model RVs or government projects.

Some states like Alaska, Oklahoma, Utah, Wyoming, Hawaii, Delaware, West Virginia, and Vermont do not have state modular house programs. In those states, we believe Boxabl buildings can be deployed right now by obtaining a permit from the local building department.

We can also deliver Casitas to customers under “park model” recreational vehicle rules in all 50 states. This is done through the ANSI 119.5 code; manufacturers are required to self-certify that they meet these requirements. By adding a permanent trailer/chassis, Boxabl Casitas do meet this code.

Builders will still be required to obtain local building permits, as well as those necessary for tying into local water and electric services. 

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 projected to be $60,000, representing about $166/sq. ft. Shipping, setup, land development and connection to water and electric services would be in addition to this amount, increasing the total price by approximately $5,000 to $50,000 depending on the specific project. However, compared to building costs in states like California that can be on the order of $400/sq. ft., the Boxabl solution is an attractive option for cost-conscious purchasers. Additionally, we think our large waitlist indicates our price is very desirable.

As we are able to increase our bulk purchasing and introduce greater amounts of automation in the production process, we may be able to reduce the consumer price in the future to capture a larger market.

In fact, our costs have consistently come down since we began our manufacturing, May 2023 was our lowest cost yet, approximately $32,532 for direct material and $10,739 for direct labor.

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 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)

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Transport Patents

Factory Patents

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 Item 7. 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.   

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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 goodwill.

Strategy

Boxabl intends to create a factory franchise business model. After our flagship factory in Las Vegas is scaled up, we want to expand internationally by setting up franchisees to build their own factories. 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.

We believe a franchise model would let us rapidly scale worldwide. Under this scenario, Boxabl becomes a logistics company with franchisees constructing factories around the world. We would supply franchisees 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. Over 2,273 parties from around the world have indicated that they would like to partner with us as factory franchisees 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 will develop these procedures after evaluating the operations of our starter factory.

While these initial stages for the Company will be capital intensive as we develop our operations and outfit our starter factory, once moving into a focus on the factory franchise business model, we believe that we will be able to scale operations with less capital.

While the Company has received a considerable amount of positive media coverage, that coverage has been mostly prospective and has not included detailed looks and reviews of our Casita. To remedy that, we are considering construction of a showcase community in the Las Vegas area to allow for evaluation of our Boxes through a controlled, real-world test. We have not yet committed to this idea and have not allocated any proceeds from our public capital-raising activities under Regulation A or Regulation Crowdfunding to the showcase community. 

We also recently announced a collaboration with Elevate.Money, Inc., a Delaware corporation operating in California (“Elevate”), that identifies, acquires and manages commercial real estate through real estate investment trusts (“REIT”). Through this collaboration, Elevate plans to raise funds for the purpose of developing communities utilizing Boxabl’s Casitas. Our non-exclusive agreement with Elevate includes granting Elevate a right of first refusal to purchase a minimum of 10% of Boxabl’s production of Casitas.

Our Manufacturing Facilities

Our starter production facility has now been built and is expected to produce six Boxes per shift once we ramp up production. 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 will 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 our starter production 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, which we have begun to outfit with capital equipment necessary for the construction of our Boxes. We believe this factory should create approximately 300 new direct jobs when fully staffed. Many more indirect jobs will be created on the building sites by our customers when they use our modules to build.

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We will also support operations of our starter facility with a second facility nearby, for which we have entered into a lease agreement on June 13, 2022. This second facility will allow us to better stage inventory and in-house component fabrication. The new factory is 132,960 square feet.

With the move into our second facility, we are also making some significant improvements. During 2023, we plan to spend approximately $15,000,000 on equipment upgrades. These include equipment such as a new automated panel lamination system, CNC cutting equipment, a conveyor system that moves houses down our assembly line, and a new paint booth system.

During 2022, operations in our facilities allowed us to better see where improvements could be made to the design of the Casita. These improvements will be part of our “next gen” Casita, which we expect to simplify the design, reduce components, reduce labor and increase structural ratings. Over the next six months, as we ramp up production utilizing our second facility and refine processes in our first facility, we believe we will be able to achieve gains in our unit economics and production rate.

Between the second half of 2021, when we were able to begin production in our starter facility, to the date of this registration statement, we have produced over 420 homes. In May 2023, we signed a lease for our third manufacturing facility. For details see Item 3. Properties.

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. We believe we have proven the basic principles of the Company in our current manufacturing facility and are ready to take things to the next level of scale. 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.

The knowledge gained from our manufacturing facilities and any additional production facilities will assist with the expansion into the franchise model.

Our Customers

In 2019, Boxabl delivered the first prototype at the International Builders’ Show in Las Vegas and received an overwhelming response. Builders were ecstatic to see the development of a solution to many issues they struggle with. We received the equivalent of 6,000,000+ sq. ft. of “reservations” from hundreds of professional builders. These reservations were simply an indication of interest and we did not take any deposits. They are not a guarantee of future revenues.

After the show, we ordered basic manufacturing equipment and continued to perfect the system and address feedback we got from the builder community. We were invited back to the 2020 show through a sponsorship with Professional Builder Magazine. Once we decided our initial building product focus would be the ADU market, we built three more units for the show. In January 2020, we debuted the “Casita” at the Builders’ Show and again received a high level of interest from potential customers.

Rather than just making available “reservations”, we began taking deposits for positions on our waitlist. We currently have two options of deposit amounts to complete a pre-order on our waitlist: 1) free; 2) $200 deposits; As of June 30, 2023, we have over 170,000+ names 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 currently have deposits from over 8,300 unique persons to purchase one or more Casitas.

Further, if each of the 170,000 potential customers purchases a single Casita, that extrapolates to potential revenue of more than $10 billion. 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 shows the excitement and interest in the Casita. Conversion of even a small percentage of these potential customers will allow for full production of our planned production facility.

We delivered one Casita to a customer in Texas as part of a demonstration project, but no revenues were recorded for that order and delivery.

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Initial Purchase Orders 

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 registration statement.

Boxabl received $9,245,574 from ADS, the full amount due under the terms of the contract, as final delivery has been completed.

We have also begun production and delivery on a 227 Casita order to a customer in the United States. The order was for a total price of $13.2 million. So far, we have delivered 51 units from this order during 2022. Subsequently, the Company has entered into a settlement agreement with the Arizona Department of Housing and the other parties to the agreement regarding reconstruction for the purpose of bringing the Casitas into compliance with Arizona regulations. For more details, see Item 8. Legal Proceedings – Arizona Department of Housing Settlement.

We intend to bring production and final sales to our retail and home builder potential customers once we are able to build at our desired production rates, and obtain state certifications. The initial ADS order and 227 Casita order allow us to continue development of our manufacturing procedures, and obtain end user feedback which we intend to utilize for further developments to the Casita product. Although we have manufactured 173 Casitas during 2023, none have been paid for or delivered in 2023. Our inventory of manufactured Casitas was intended to be delivered pursuant to an agreement in Arizona. However, our deliveries under that agreement have been on hold while we and our partners remedy issues that need to be addressed pursuant to the Arizona Department of Housing. See Item 8. Legal Proceedings – Arizona Department of Housing Settlement. In the meantime, we intend to resume sales to customers in states where there is no state modular program as well as for projects that are under a different classification such as park model RV’s or government projects. 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 arrange delivery and installation of the units.

Boxabl is now scheduling delivery of Casitas to people on its waitlist. We have hired a sales manager and implemented a sales process where we sort through our waitlist to determine which customers and projects are viable.

Competition

Our competition can be broken into the following categories:

Employees

As of July 5, 2023, the Company had 89 direct hourly employees, 47 indirect salaried employees, 33 indirect hourly employees, and 5 direct salaried employees. This number experiences some fluctuation, and we expect to increase hiring as we continue to scale up production at our facility. Boxabl provides employees a share incentive plan to be awarded at the discretion of the Board of Directors (the “Board”). For details, see Item 6. Executive Compensation – Equity Incentive Plan.

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If we cannot raise sufficient funds, we will not succeed. To date, our primary source of funding has been from offerings of our securities. Until we generate enough revenue from our operations to fund our working capital and other business plans, we are likely to need additional funds in the future in order to continue to grow, including from offerings of securities, loans or other types of financing. If we cannot raise those funds for whatever reason, including reasons relating to the Company itself or to the broader economy, the Company may not survive. If we are unable to raise enough funds to develop our Company as outlined herein, we will have to find other sources of funding.

We are dependent on our ability to receive debt financing and fully draw down our potential future debt financing, which may restrict our ability to conduct our business. Our plan for manufacturing our room modules that are stacked and connected to almost any shape and style of finished buildings, and for developing the world’s largest and most advanced house factory (the “Boxzilla”) depends on our ability to receive sufficient financing. We are anticipating applying for a loan. There is no assurance this loan will move past the application stages. If the loan is approved, we anticipate the need to fully draw down on the potential loan facility. We may not, however, access all of these funds at once, but only over a period through periodic draws as eligible costs are incurred. Our ability to draw down these potential funds may be conditioned upon several draw conditions, including the potential achievement of progress milestones relating to the design and development of the Boxzilla, and any positive covenants, such as completed and approved facility assessments. Additionally, we anticipate the loan facility, if accepted, will require us to comply with certain operating covenants and will place additional restrictions on our ability to operate our business. We are unaccustomed to managing our business with such restrictions and others that are associated with a significant credit agreement. If we are unable to draw down the anticipated funds under the potential loan facility, or our ability to make such draw downs is delayed, we may need to obtain additional or alternative financing to operate our facilities to the extent our cash on hand is insufficient. Any failure to obtain the loan or secure other alternative funding could materially and adversely affect our business and prospects. Such additional or alternative financing may not be available on attractive terms, if at all, and could be more costly for us to obtain. As a result, our plans for building our Boxes and Boxzilla could be significantly delayed which would adversely affect our business, prospects, financial condition, and operating results.

There is no assurance that Boxabl will be able to finalize the Boxzilla manufacturing facility at all or to achieve the described square footage and size it intends. A smaller manufacturing facility than anticipated poses several risks, including reduced production capacity, increased production costs per unit, competitive disadvantages, and negative market perceptions. A smaller manufacturing facility may have limited production capacity, which could lead to reduced output and sales. This could impact the Company’s ability to meet market demand and generate profits, potentially resulting in a decrease in the Company’s value. A smaller manufacturing facility may not benefit from economies of scale, leading to higher production costs per unit. This could result in lower profit margins and potentially reduced shareholder returns. If the Company’s competitors build larger, more efficient manufacturing facilities, the Company may struggle to compete in terms of price and quality. This could result in lower sales and reduced market share. If the Company creates a smaller manufacturing facility than anticipated, then it may expect a lower ability to execute its business plan. This could lead to a negative perception among investors, potentially resulting in reduced interest in the Company’s potential future financing rounds. Overall, the anticipated Boxzilla carries significant risks for investors, which should be carefully considered before making any investment decisions.

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The Company has realized significant operating losses to date and expects to incur losses in the future. The Company has operated at a loss since inception, and these losses are likely to continue. Boxabl’s net loss for the fiscal years ended December 31, 2022 and 2021, as reflected in our audited consolidated financial statements, was $610,748,564 and $13,584,157, respectively. A significant amount of the increased loss for the fiscal year ended December 31, 2022, was the result of the conversion of outstanding Convertible Promissory Notes being accounted as extinguishment of debt at fair market value. See Item 2. Financial Information – Overview. Nevertheless, we expect to continue to see a net loss in connection with our results of operations as we continue to increase production, expand our manufacturing facilities, and develop our manufacturing processes. Until the company achieves profitability, it will have to seek other sources of capital in order to continue operations.

The Company has incurred much higher production costs during 2021 and 2022, and those costs may continue. From October 2021, when we first began producing Casitas, through December 2022, the Company’s cost of goods sold increased significantly for various reasons, including the following:

·Inefficiencies due to new machinery and newness of product and procedures which required significant training of the workforce. 

·In order to catch up with its delivery obligation under the ADS sales contract, the Company hired additional outside labor and paid overtime and double-time shifts. 

·Tight skilled labor market which caused higher labor rate. 

·Supply chain delivery issues which caused the purchase of several items of material from local vendors with a substantially higher price. 

·The Company is still undertaking major research and development activities to streamline its production, substitute new material, and upgrade its equipment in order to automate its production. 

The regular one-shift production capacity of the factory was two per day.  The actual units produced in the last quarter of 2021 was 35 units and 259 units were produced during 2022 due to the above factors. We have expanded our production capacity by leasing a second factory during 2022 and seek to automate our manufacturing process. More recently, we leased a third manufacturing facility in May 2023. However, there is no guarantee that our efforts will resolve all of the challenges we face in ramping up production of Casitas sufficient to meet demand. If we fail to successfully scale up our production, or incorrectly estimated the cost of production related to the price of each Casita, the Company’s results of operations and financial condition may be adversely impacted. Moreover, if we fail to produce enough Casitas to meet demand, we may lose potential customers who have indicated interest in our products.

The Company is the process of becoming a reporting company with the SEC. Pursuant to this Registration Statement, the Company is registering its Non-Voting Series A Preferred Stock, Non-Voting Series A-1 Preferred Stock, Non-Voting Series A-2 Preferred Stock, and its Common Stock with the SEC and becoming a reporting public company. Becoming a reporting company will subject the Company to additional initial and ongoing compliance and reporting costs and administrative burdens, additional professional fees (legal and accounting) as well as costs associated with internal staff. Therefore, the costs for these functions in previous years are not indicative of future costs.

As we grow our business, we may not be able to manage our growth successfully, including development of our internal controls. As we build and scale up our factories, develop our automated processes for building casitas, increase the output of our casitas and other products, and grow our customer base, we will face business risks commonly associated with rapidly growing companies, including the risk that existing management, information systems and financial and internal controls may be inadequate to support our growth. We cannot predict whether we will be able to respond on a timely basis, or at all, to the changing demands that our growth may impose on our existing management and infrastructure. For example, increasing demands on our infrastructure and management could cause any of the following to occur or increase:

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We have found it difficult to hire and retain qualified persons to manage our internal controls and reporting functions, including roles such as chief financial officer, controller and other accounting positions. In terms of employee oversight, we have become aware of at least one instance in which an employee engaged in fraudulent conduct. As part of our work in establishing strong internal controls, we have undertaken an internal audit for compliance with all applicable laws. If we fail to adapt our management, information systems and financial and internal controls to our growth, or if we encounter other unexpected difficulties, our business, financial condition and operating results will suffer.

Our future success is dependent on the continued service of our senior management and in particular our Founder and Chief Executive Officer Paolo Tiramani. Any loss of key members of our executive team could have a negative impact on our ability to manage and grow our business effectively. This is particularly true of our Founder and Chief Executive Officer Paolo Tiramani, who designed and patented our core intellectual property. We do not maintain “key person” life insurance coverage for our CEO. The experience, technical skills and commercial relationships of our key personnel provide us with a competitive advantage, particularly as we are building our brand recognition and reputation.

We may not be able to effectively manage our growth, and any failure to do so may have an adverse effect on our business and operating results. We have received substantial interest in our Casita Boxes and will strive to meet that demand. This will require significant scaling up of operations, including acquiring additional facilities space, and skilled labor. To date, we have limited experience manufacturing our products at a commercial scale. If we are unable to effectively manage our scaling up in operations, we could face unanticipated slowdowns, problems and costs that harm our ability to meet production demands. 

We may not succeed in developing our business plans, or our business plans may not work as we intend. There is no assurance that the Company will be successful in marketing any of its products, or that the revenues from the sale of such products will be significant. Consequently, the Company’s revenues may vary by quarter, and its operating results may experience fluctuations. If our business plans do not succeed, our Company may liquidate, dissolve or declare bankruptcy and our investors may receive nothing.

Decreased demand in the housing industry would adversely affect our business. Demand for new housing construction is tied to the broader economy and factors outside the Company’s control. Should factors such as the post-COVID-19 economy, including rising interest rates, a slowdown in the housing market, concerns regarding the health of the U.S. economy, and a continued loss of general economic activity, we could experience a slower growth in demand for our Boxes. 

We are subject to different macro-economic sensitivity. The Company’s business is subject to the impact of changes in global economic conditions, including, but not limited to, recessionary or inflationary trends, market conditions, consumer credit availability, interest rates, consumers’ disposable income and spending levels, job security and unemployment, and overall consumer confidence. These economic conditions may be further affected by political events throughout the world that cause disruptions in the financial markets, either directly or indirectly. Adverse economic and political developments could have a material adverse effect on the Company’s profitability, results of operations and financial condition.

Insufficient or delayed supply of materials for manufacturing and assembling our products threatens our ability to meet customer demands while over capacity threatens our ability to generate profits. Any failure by us to properly manage our supply chain could have a material adverse effect on our business, financial condition, and results of operations. As we increase the scale of our operations, we may need to change partners and suppliers on a frequent basis to ensure quality control, manage costs, and production schedules. Changing partners or suppliers could result in delays or other unintended consequences, such as an increase in costs and/or a decrease in quality. Additionally, any border restriction, delays, or closures may threaten our ability to meet customer demands, earn revenues, or impact

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our ability to either continue or develop relationships with partners and suppliers. The extent of the impact of natural disasters, climate events, COVID-19 or other epidemics, war, inflation, and other potential macroeconomic events on future periods will depend on future developments, all of which are uncertain and cannot be predicted; including the duration or resurgence of the pandemic, government responses and health and safety measures or directives put in place by public health authorities, and sustained pressure on global supply chains causing supply and demand imbalances. Limited or disrupted supply of our products, including key raw materials to make these products could have an adverse effect on our business. There is a risk of the inability to scale production and manage our supply chain. Overall, the ongoing effects of COVID-19 could have a material adverse impact on our business, results of operations, financial condition and cash flows.

The global COVID-19 pandemic and containment measures taken in response to it have adversely impacted our business, results of operations, capital spending, business planning, and financial condition, and may continue to do so depending on uncertain future developments. Global health concerns relating to the COVID-19 outbreak have impacted the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. The outbreak resulted in governments in countries across the globe implementing measures to try to contain the virus, such as travel restrictions, social distancing, and restrictions on business operations which have impacted consumers and businesses. These measures have adversely impacted and may further impact our workforce and operations and the operations of our business partners, customers, stakeholders, and suppliers. While some of these measures have eased in certain jurisdictions, others have remained in place. The extent to which current health measures are removed or new measures are put in place will depend on how the pandemic evolves, as well as the progress of the local and global roll-out and acceptance of vaccines. Even after the COVID-19 pandemic has subsided, we may continue to experience material adverse impacts on our business and our results of operations because of its global economic impact, including any recession that has occurred or may occur in the future.

If we do not protect our brand and reputation for quality and reliability, or if consumers associate negative impressions of our brand, our business will be adversely affected. As a new entrant in the highly competitive home construction market, our ability to successfully grow our business is highly dependent on the reputation we establish for quality and reliability. To date, we have built a positive reputation based on our demonstration products for trade shows and conferences. As we expand operations to selling Boxes, we will need to deliver on the quality and reliability that is expected of us. If potential customers create a negative association about our brand, whether warranted or not, our business could be harmed.  

Public perception is important as a public company engaged in equity crowdfunding, potentially making Boxabl susceptible to negative postings and false allegations about the Company and its products. As a company raising money from the crowd, Boxabl’s funding is highly dependent upon investors who get information from a wide variety of sources that rely on user-generated content (e.g., social media, Reddit, message boards, blogs, etc.). These sources often have little to no standards for posting, and many of them allow people to post without even requiring a real name. As a result, these mediums can be susceptible to misinformation, disinformation, and campaigns where individuals using bots and/or fake accounts can create the illusion of “social proof.” For instance, Boxabl and its management have previously been the subject of negative postings, including misinformation and false allegations, made on multiple social media platforms. To the extent the Company becomes the target of a negative PR campaign from one or more individuals, the negative publicity may have an adverse impact on the Company, its fundraising, its reputation, and has the potential to distract management’s attention from the Company’s business.

Our business depends upon our patents and trademarks. Any failure to protect those intellectual property rights, or any claims that our technology infringes upon the rights of others may adversely affect our competitive position and brand equity. Our future success depends significantly on the intellectual property created by our founder and CEO. If the Company is unable to protect that intellectual property from infringement, or if it is found to infringe on others, our business would be materially harmed as competitors could utilize our same building and shipping designs.

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Inability to license other intellectual property rights. The technology we use may require the use of other existing technologies and processes, which are currently, or in the future, will be, subject to patents, copyrights, trademarks, trade secrets or other intellectual property rights held by other parties, in which case we will need to obtain one or more licenses to use those other technologies. If we are unable to obtain licenses on reasonable commercial terms from the holders of such other intellectual property rights, we could be required to halt development and manufacturing or redesign our technology, failing at which it could bear a substantial risk of litigation for misuse of the other technologies. In any such event, our business and operations could be materially adversely affected.

Additional engineering is required for our manufacturing facility to begin production as the scale necessary to make the business viable. We are in the process of outfitting our initial manufacturing space, and second facility in the Las Vegas area for our Boxes and to refine the manufacturing process. Our business relies on being able to produce our Boxes at scale, which can only be done once we refine our manufacturing process for specialization of functions. If we are not able to refine our processes to achieve production at scale, our financial results may be negatively impacted. 

We have accepted deposits for a product we are not yet able to produce at scale. As of the date of this registration statement, we currently hold deposits ranging from $100, $200, $1,200 or $5,000 from approximately 8,300 prospective customers as of June 30, 2023. These deposits are being recorded as liabilities of the Company and have not been maintained in a segregated account. As such, if the Company is not able to deliver the requested product, we will be obligated to return the deposit, whether funds are available or not. If the prospective purchaser merely decides to not purchase a Box once they are available, they will forfeit their deposit.

Volatility in commodity prices and product shortages may adversely affect our gross margins. Volatility in commodity prices and product shortages may adversely affect our gross margins. Our Boxes contain commodity-priced materials. Commodity prices and supply levels affect our costs. For example, steel is a key material in our Casita. The price of steel will vary based on the level of supply in the market, and demand from other users. Any shortages could adversely affect our ability to produce our Boxes and significantly raise the cost of their production. Further, our ability to pass on such increases in costs in a timely manner depends on market conditions, and the inability to pass along cost increases could result in lower gross margins.

We will rely on third-party builders to construct our Boxes on site as well as we intend to rely on third-party franchisees. The failure of those builders to properly construct homes and franchisee manufacturers to properly manufacture Boxes could damage our reputation, result in costly litigation and materially impact our ability to succeed. We sell our Boxes to Boxabl trained and certified builders, who are then responsible for on-site building and assembly. Purchasers can also order directly from us, and they will need to engage their own builders. We may discover that builders are engaging in improper construction practices, negatively impacting the reliability of our Boxes. Further, we not only intend to manufacture the Boxes at our own factories but also to rely on third-party franchisees to manufacture our Boxes. To the extent that we do, we cannot be certain that any such franchisees will act in a manner consistent with our standards and requirements and produce Boxes in accordance with our quality standards. We may discover that our franchisees do not end up operating their franchises in accordance with our standards or applicable law.  The occurrence of such events by the builders or franchisees could result in liability to us, or reputational damage.  

If an unknown defect was detected in our Boxes or Box designs, our business would suffer and we may not be able to stay in business. In the ordinary course of our business, we could be subject to home warranty and construction defect claims. Defect claims may arise for a significant period of time after a building with our Boxes has been completed. Although we maintain general liability insurance that we believe is adequate and may be reimbursed for losses by subcontractors that we engage to assemble our homes, an increase in the number of warranty and construction defect claims could have a material adverse effect on our results of operations. Furthermore, any design defect in our components may require us to correct the defect in all of the projects sold up until that time.  Depending on the nature of the defect, we may not have the financial resources to do so and would not be able to stay in business.  Even a defect that is relatively minor could be extremely costly to correct in every home and could impair our ability to operate profitably.

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We may be subject to litigation arising out of our operations. Damages claimed under such litigation may be material, and the outcome of such litigation may materially impact our operations and the value of the Company’s securities. While we will assess the merits of any lawsuits and defend such lawsuits accordingly, we may be required to incur significant expenses or devote significant financial resources to such defenses. In addition, the adverse publicity surrounding such claims may have a material adverse effect on our operations. Some potential examples include the following: reputational damage, legal action, regulatory scrutiny, financial impacts, and operational impacts. Additionally, a negative outcome could make it more difficult for Boxabl to secure financing or investment in the future. The various risks and material impacts may result in lower revenue and market shares, financial penalties, legal fees, potential litigation that could be costly and time-consuming, potential restrictions on business operations, refunds, returns, or other forms of compensation to the customer. Furthermore, a negative outcome to the complaint may require us to make changes to our business practices, processes, or products which could be time-consuming and costly and impact our ability to deliver on our commitments to other customers.

The Company’s activities will generally be taxable in the jurisdictions in which it operates. Changes to taxation laws in any jurisdiction where the Company operates could materially affect the business. No assurance can be given that new taxation rules will not be enacted or that existing rules will not be applied in a manner that could materially affect the Company’s profits and that may result in a material adverse effect on the Company’s profitability, results of operations and financial condition.

Interest-bearing financial instruments can pose risks with any changes in market interest rates. The Company may hold both cash and loans payable with variable interest rates as well as loans receivable, loans payable, or other forms of debt securities. These interest-bearing financial instruments pose risks with any changes in market interest rates of the period in which they are held.

A significant uninsured loss or a loss that significantly exceeds the limits of the Company’s insurance policies could have a material adverse effect on our operations. We maintain insurance policies covering usual and customary risks associated with our business. A large-scale manufacturer is generally exposed to the risks inherent in the construction and operation of manufacturing facilities, such as breakdowns, manufacturing defects, natural disasters, theft, terrorist attacks and sabotage. We rely on our own insurance policies to cover losses as a result of force majeure, natural disasters, terrorist attacks or sabotage among other things. While we perform a review of insurance policies, a significant uninsured loss or a loss that significantly exceeds the limits of such insurance policies or the failure to renew such insurance policies on similar or favorable terms could have a material adverse effect on our operations and ability to continue as a going concern.

The housing industry is highly competitive and many of our competitors have greater financial resources than we do. Increased competition may make it difficult for us to operate and grow our business. The housing industry is highly competitive and we compete with traditional custom builders, manufactured and modular home builders, and other innovative entrants. In addition, we compete with existing homes that are offered for sale, which can reduce the interest in new construction. Many of our competitors have significantly greater resources than we do, a greater ability to obtain financing and the ability to accept more risk than we can prudently manage. If we are unable to compete effectively in this environment, we may not be able to continue to operate our business or achieve and maintain profitability.

Government regulations may cause project delays, increase our expenses, or increase the costs to our customers which could have a negative impact on our operations. We are subject to state modular home building codes, and projects are subject to permitting processes at the local level.  If we encounter difficulties obtaining such approvals or with such processes, we could experience increased costs and may be limited in our ability to access such state or local markets, and may face penalties for purported non-compliance with applicable regulations. For more details, see Item 8. Legal Proceedings. Further, modular home codes may change over time, potentially increasing our costs, which we may not be able to pass on to customers, negatively impacting our sales and profitability. Existing or new laws and regulations affecting modular home construction, shipping and installation and the housing industry generally could adversely affect our business, including significant expenses necessary to comply with such laws and regulations, and could limit our business growth.

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Increases in the cost of raw materials, or supply disruptions, could have a material adverse effect on our business. Our raw materials consist of steel, foams, and plastics, which primarily are sourced from, or dependent on materials sourced from domestic vendors who may source their material from overseas. The costs of these materials may increase due to increased tariffs or shipping costs or reduced supply availability of these materials more generally.  Further, global or local natural disruptions, including the COVID-19 pandemic, may impact the supply chain, including limiting work in factories producing the materials into useable forms or impacts on the supply chain. Disruptions in supply could result in delays in our production line, delaying delivery of products. Further, we may not be able to pass through any increased material costs to our customers which could have a material adverse effect on our ability to achieve profitability. To the extent that we are able to pass through increased costs, it may lessen any competitive advantage that we have based on price. 

Disruptions in payment processing systems could adversely impact our operations. We receive payments for our products and services using a variety of different payment methods, including credit and debit cards. We rely on systems of third parties to process payment. Acceptance and processing of these payment methods are subject to certain rules and regulations and require payment of interchange and other fees. To the extent there are disruptions in payment processing systems, increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors, or changes to rules or regulations concerning payment processing, our revenue, operating expenses, and results of operations could be adversely impacted. If these third parties become unwilling or unable to continue processing payments on behalf of our affiliates or partners, it would have to find alternative methods of collecting payments, which could adversely impact user acquisition and retention.

We may not be able to collect amounts owed to us. As part of our regular business operations, we will facilitate and fulfill orders/purchases on a credit or invoice basis. The customers receiving these effective advances may not meet financing criteria for conventional lending from institutional lenders. As a result, these advances and loans are generally riskier and carry a high credit risk. Failure to receive, or requirement to collect, the amounts owed to us thereunder may result in financial losses and expenses which would adversely affect our returns and operations.

The Company has never paid a dividend nor made a distribution on any of our securities. Further, the Company may never achieve a level of profitability that would permit payment of dividends or other forms of distribution to its stockholders. Given the stage of the Company’s business, it will likely be a long period before the Company could be in a position to declare dividends or make distributions to its stockholders. The payment of any future dividends by the Company will be at the sole discretion of the Company’s management. Holders of eligible shares will be entitled to receive dividends only when, as, and if declared by the Company’s Board.

Delays and cost over-runs may occur each time we enter into production for a new model, as well as in the setup, upgrade, and construction of our facilities to meet our assembly and production requirements. Several factors which could cause such delays or cost over-runs include, without limitation, permitting delays, construction pricing escalation, changing engineering and design requirements, the performance of contractors, labor disruptions, adverse weather conditions, and the availability of financing. Even when complete, a production and assembly plant may not operate as planned due to design or manufacturing flaws, which may not all be covered by warranty.

Our growth in part depends on our ability to develop and market new products and improvements to our existing products that appeal to consumer preferences. The success of our innovation and product development efforts is affected by our ability to anticipate changes in consumer preferences, the technical capability of our research and development team in developing and testing product prototypes, including complying with applicable governmental regulations, the success of our management and sales and marketing team in introducing and marketing new products and positive acceptance by consumers. Failure to develop and successfully market and sell new products, including the products we are currently working to develop, may inhibit our growth, sales, and profitability.

We are exposed to risks from loss of information and data breaches. Through the use of our applications and software we gather certain non-identifiable user information. As such, we are exposed to the legal and reputational risk of the loss, misuse, or theft of any such information. Cybersecurity has become an increasingly problematic issue for businesses in the United States, UK and around the world. A cyber-attack could compromise confidential information and result in negative consequences, including remediation costs, loss of revenue, regulatory scrutiny, litigation, and

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reputational damage. As a result, we continually monitor for malicious threats and adapt accordingly to ensure we follow industry best practices and maintain high privacy and security standards.

There could be an anti-spam legislation risk. The Company may employ a direct marketing strategy using email communication. It may acquire email addresses through consumer sign-ups, the purchase of email distribution lists, organic growth, events, or other means. Emails sent by Boxabl are subject to the regulation and anti-spam legislation or similar legislation in other jurisdictions that it may be operating in. Violation of these or other similar legislation may result in legal, regulatory and/or financial action taken against the Company that could have an adverse impact on its operations, financial results or reputation.

We include a discussion of our future plans and goals that rely on the occurrence of certain assumptions, and should those assumptions not be correct or not occur, then the timing of our plans may change or not occur at all. We discuss plans for the Company’s business development based on certain assumptions. Our plans will only be achieved if the assumptions they are based on are correct. There are many reasons why the assumptions could be inaccurate, including customer acceptance, competition, general economic conditions and our own inability to execute our plans. If our assumptions are inaccurate or otherwise incorrect, we may have to change our business development plans, which may have an adverse impact on the Company and its financial condition.

Our stockholders do not have significant influence on the management of the Company. The day-to-day management, as well as big-picture decisions, are made exclusively by our executive officers and directors. Our stockholders have a very limited ability, if any, to vote on issues of Company management and do not have the right or power to take part in the management of the Company and will not be represented on the board of directors of the Company. See Description of the Registrant’s Securities Being Registered – Third Amended and Restated Stockholders Agreement for more information.

The holders of our classes of Preferred Stock have liquidation preferences in the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company. In the event the Company should liquidate, dissolve or wind up its business, after payment to all of the Company’s creditors, the remaining assets would be available for distribution to holders of the Company’s capital stock. The Preferred Stockholders take priority over the holders of the Company’s Common Stock. The following table summarizes the liquidation preferences as of December 31, 2022 in order of liquidation:

Should there be insufficient assets to pay all the holders of all classes of Preferred Stock the full amount to which they shall be entitled, then the available assets will be distributed pro rata. In that event, holders of the Company’s Common Stock would not receive any distributions until the liquidation preferences due to holders of the Company’s` Preferred Stock have been paid in full.

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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 Forward-Looking Statements and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these 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 our initial manufacturing facility, which we took possession of in May 2021, we expanded our production capacity by signing a lease for a second manufacturing facility in June 2022 and a third manufacturing facility in June 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 Casitas more quickly, and, in doing so generate more revenue in the future.

On June 15, 2023, the Company engaged in an all-stock merger transaction with 500 Group, Inc., a Nevada corporation owned by the Company’s CEO, that is parent to Build IP. As a result of this merger agreement, 500 Group and Build IP will be wholly owned by Boxabl, including the intellectual property held by Build IP. Furthermore, the agreement between Boxabl and Build IP under which Boxabl pays Build IP a license fee equivalent to 1% of the net selling price generated by the sale of Casitas, is now void. For details, see Item 7. Certain Relationships and Related Transactions and Director Independence.

Conversion of Convertible Promissory Notes Recorded as Extinguishment of Debt

On April 1, 2022, the Company’s Convertible Promissory Notes converted into 779,483,823 shares of Non-Voting Series A-1 Preferred Stock representing the principal amount due of $44,800,271 plus $2,044,430 of accrued interest. Purchasers of Convertible Promissory Notes were entitled to different conversion terms such that larger investments received more shares per dollar upon conversion resulting in the enacted conversion terms differing from those stated in the Convertible Promissory Notes. Accordingly, the conversion has been recorded at fair market value and accounted as an extinguishment of debt in the amount of $577,325,408 for the fiscal year ended December 31, 2022 (“FYE 2022”). The Company also recorded interest expense of $910,635 for FYE 2022 related to the accrual of interest. As a result, we incurred a net loss of $610,748,564 in FYE 2022 compared to a net loss of $13,584,157 for the fiscal year ended December 31, 2021 (“FYE 2021”). The extinguishment of debt also impacted our balance sheet such that the Company has an accumulated deficit of $626,313,828 at FYE 2022 compared to $15,565,264 for FYE 2021. Additionally, our income statement includes a net loss of $610,748,564 for FYE 2022, of which $577,325,408 represents the extinguishment of debt through the conversion of our Convertible Promissory Notes.

Restatement of Financial Statement for fiscal year ended December 31, 2021 

The Company has elected to adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases, effective January 1, 2021. This has resulted in the Company adopting the modified retrospective approach under which it has recorded a “right of use” asset and liability of $5,189,897 as of May 1, 2021, the earliest comparative period and the date of the qualifying lease. Consequently, the Company’s financial statements for FYE 2021 have been restated to reflect the adoption of this standard. The impact of this restatement was an increase in right-of-use assets and liabilities on our balance sheet at FYE 2021 and our cash flow statement for FYE 2021.

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Results of Operations

Our FYE 2022 gross revenues were $10,867,746 compared to FYE 2021 gross revenues of $1,955,795. Revenue in 2022 was generated by sales of our Casitas, including recognizing 124 units delivered to ADS, Inc. and 60 units delivered to other customers. We are continuing to work to scale to meet demand through the development of our factories and manufacturing processes. Revenue in FYE 2021 resulted from recognition of revenue received under the Company’s contract for delivery of Casitas to ADS, Inc. Overall, we incurred a net loss of $610,748,564 in FYE 2022 compared to a net loss of $13,854,157 in FYE 2021. The primary reason for the significant change in net loss between FYE 2022 and 2021 was due to the recording of $577,325,408 as an extinguishment of debt due to the conversion of our Convertible Promissory Notes. For details, see above Overview – Conversion of Convertible Promissory Notes Recorded as Extinguishment of Debt.

Cost of Goods Sold

During 2022 the Company started developing and implementing strategic cost-saving initiatives to reduce the cost of goods sold. In particular:

1.Direct raw materials cost per unit decreased from more than $50,000 at the start of 2022 to less than $33,000 in May 2023. The cost reductions were achieved by implementing multiple design engineering changes of the Boxabl Casita, vertical integration of EPS foam production, and supplier negotiations. The Company also implemented an ERP system to better manage warehousing operations and the overall supply chain to reduce freight cost and optimize inventory levels to meet production demand. 

2.Direct labor cost per unit decreased by 32% to $10,739 per unit. The cost reductions were achieved by implementing the manufacturing strategy particularly:  

a.Developing standard work and standard headcount for all operations 

b.Ongoing root cause analysis of production and quality issues 

c.Implementing a MES (manufacturing execution system) to gather process data and drive improvements. 

d.Implementing a layered shop floor management system, management GEMBA walks, and fostering employee engagement. 

e.Implementing standard job and wage classifications 

The current manufacturing concept has reached its limitations as the process is very manual and labor intensive. During the second half of 2023 the Company intends to completely upgrade the manufacturing concept and install more automated equipment to produce its next design generation. We believe this will allow the Company to ramp up production and reduce the cost per unit further significantly. However, there is no certainty that we will be able to realize any gains from efficiencies.

For 2021 and 2022, our costs of goods sold included 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

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technology necessary to produce and deliver our Boxes. Going forward, the Company will no longer pay royalties to Build IP.  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. For details, see Item 7. Certain Relationships and Related Transactions, and Director Independence.

Operating Expenses 

In FYE 2022, we also saw a significant increase in operating expenses to $20,291,140 compared to $8,900,992 in FYE 2021 reflecting a significant increase in operating activity. In FYE 2022, our operating expenses were $10,390,540 for general and administrative expenses, $6,523,339 for sales and marketing, and $3,377,261 for research and development. In FYE 2021 increased operating expenses were related to increased payroll costs resulting from hiring key positions on the factory floor and for company administration, in addition to marketing efforts related to an offering of securities under Regulation D, which all contributed to the total general and administrative expense of $5,497,972 in 2021. We anticipate that general and administrative expenses will continue to increase as we undertake activities to begin production of our Casita Boxes. We also recorded $3,377,261 and $2,631,752 in research and development expenses for FYE 2022 and FYE 2021, respectively, resulting from advancing, developing, and testing our products, and the flow of production. As we continue to ramp up operations, we expect incremental increases in line with increased production for shop supplies, equipment, utilities, raw materials and payroll expenses.

Advertising and marketing are very important for 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 crowdfund campaigns under Regulation Crowdfunding and Regulation A. In addition to our investor marketing, advertising the Company has resulted in indications of interest to purchase a Boxabl unit from 170,000 people. Our marketing has also resulted in more than 270 million social media impressions, which has also generated interest in the Company from prospective employees, potential partners and suppliers. We also recorded close to six million visits from unique users to our website in 2022.

Research and Development is essential to test and develop the Boxabl product further. The main cost drivers in 2022 were:

1.Conducting major research used to develop and upgrade panels manufactured in our factory in order to obtain certifications from various domestic and international construction trade organizations, as well as local and state agencies in anticipation of sales of our product to individual consumers; 

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.Testing alternative materials and procedures not only to increase the safety and attractiveness of the products but also cost saving; 

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. Refining and developing plans to stack and connect our units to be used for the construction of apartment buildings; 

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 

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8.Continuing to develop and redesign sub-products such as cabinets, showers 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. The RSUs granted by the Board vest depending upon future events and so have not been recorded as compensation expense. As of December 31, 2022 and 2021, there were 17,857,140 and 17,857,140 RSUs outstanding, none of which have vested. As of December 31, 2022, the future expected compensation expense to be recorded is approximately $1.3 million. Subsequent to December 31, 2022, the Company authorized the issuance of RSUs for 36,642,958 shares of the Company’s Common Stock to employees and directors. For details regarding Stock Options and Restricted Stock Units granted under the Plan, see Item 6. Executive Compensation – Equity Incentive Plan.

Critical Accounting Estimates

Restatement of Financial Statements for FYE 2021  

On December 29, 2020, the Company entered into a lease agreement for a factory, which commenced in May 2021. The Company has elected to adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases, effective January 1, 2021. This has resulted in the Company adopting the modified retrospective approach under which it has recorded a “right of use” asset and liability of $5,189,897 as of May 1, 2021, the earliest comparative period and the date of the qualifying lease. Consequently, the Company’s financial statements for the year ended December 31, 2021 have been restated to reflect the adoption of this standard. The impact of this restatement was an increase in right-of-use assets and liabilities on our balance sheet as of December 31, 2021 and a concurrent impact on our cash flow statement for the year ended December 31, 2021.

Revenue Recognition 

The Company recognizes revenue when its performance obligations have been satisfied through the transfer of our Casita(s) to the Company’s customers. Transfers are deemed to have taken place upon shipment of the Casita and when the title has passed to our customer, including transfer of legal title, physical possession, the risk and rewards of ownership and customer acceptance.

Deposits for Casitas are treated as a liability until the criteria for revenue recognition has been met, at which time the deposit will be treated as revenue. The customer can request a refund of the deposit until a sale agreement has been executed, and therefore is reflected on our consolidated financial statements as a deposit as opposed to a sales contract.

Right of Use Leases 

As of December 31, 2022, the future annual maturities of the Company’s operating lease liabilities are as follows:

As of December 31, 2022, the weighted average remaining lease term is 3.75 years. The weighted average incremental borrowing rate is 3.00%. Subsequent to FYE 2022, the Company entered into an amended lease agreement which is described below in “Commitments and Obligations.”

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Liquidity and Capital Resources

As of December 31, 2022, the Company held $9,024,802 in cash and cash equivalents and $74,384,612  in investments as a result of our exempt offerings under Regulation A and Rule 506(c) of Regulation D, a significant increase from $21,415,506 in cash and cash equivalents as of December 31, 2021. Our physical assets increased significantly in 2022 as well, with inventory of $8,242,947 as of December 31, 2022 compared to $4,916,235 as of December 31, 2021. We also saw an increase in property and equipment to $7,738,093 at December 31, 2022 from $5,109,604 at December 31, 2021. Furthermore, the Company received deposits from customers in the amount of $4,257,424 for over 7,700 Casitas as of December 31, 2022, an increase from $1,767,424 for 3,360 Casitas as of December 31, 2021. As a result, we had total current assets of $92,155,850 as of December 31, 2022 compared to $28,318,881 as of December 31, 2021.

Sources of Liquidity

To date, our operations have been financed by our exempt offerings of securities made in reliance on Regulation A, Regulation C and both Rule 506(c) and Rule 506(b) of Regulation D.

Convertible Promissory Notes 

Between November 17, 2020, and April 1, 2022, the Company sold $44,800,271 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 779,483,823 shares of Non-Voting Series A-1 Preferred Stock representing the principal amount due plus $2,044,430 of accrued interest. As discussed above, our income statement includes a net loss of $610,748,564 for FYE 2022, of which $577,325,408 represents the extinguishment of debt through the conversion of our Convertible Promissory Notes. For details, see above Overview – Conversion of Convertible Promissory Notes Recorded as Extinguishment of Debt.

Sales of Capital Stock 

Between May 3, 2021 and November 13, 2021, the Company undertook an offering under Regulation Crowdfunding (the “2021 Regulation Crowdfunding Offering”) to at-first raise an additional $3.93 million under that exemption following amendments to Regulation Crowdfunding that went effective on March 15, 2021. This offering was amended to raise up to $5 million after 12 months had passed from the close of the Company’s previous Regulation Crowdfunding offering in 2020. Under our 2021 Regulation Crowdfunding Offering, the Company sold 68,097,240 shares (post-split) of Series A-1 Preferred Stock for net proceeds of $4,498,515.

Beginning November 23, 2021, we commenced an offering under Rule 506(c) of Regulation D under which the Company is selling up to $500,000,000 of the Company’s Non-Voting Series A-2 Preferred Stock at a per share price of $0.80 with pricing tiers to incentive larger investments. As of December 31, 2022, the Company sold 36,364,500 shares of Non-Voting Series A-2 Preferred Stock for net proceeds of $27,343,408. Between January and June of 2023, the Company sold 5,397,500 shares of Non-Voting Series A-2 Preferred Stock for net proceeds of $4,046,312.

On March 31, 2022, the Company’s offering under Regulation A was qualified and we commenced sales of our Non-Voting Series A Preferred Stock, Non-Voting Series A-1 Preferred Stock and Non-Voting Series A-2 Preferred Stock and the underlying Common Stock into which they convert, plus sales by our CEO and Director of Marketing, both of whom serve as directors on our Board (the “Selling Shareholders”), of their Common Stock. The Regulation A offering closed on January 12, 2023, and the Company sold 5,913,600 shares of Non-Voting Series A Preferred Stock, 741,700 shares of Non-Voting Series A-1 Preferred Stock and 81,064,147 shares of Non-Voting Series A-2 Preferred Stock for net proceeds of $64,991,646. The Selling Shareholders sold 12,488,400 shares of Common Stock for net proceeds of $9,990,720.

Between August 25, 2022 and January 26, 2023, the Company sold 5,913,887 shares of Non-Voting Series A-2 Preferred Stock under Regulation Crowdfunding raising net proceeds of $4,896,378.

The Company also anticipates seeking an additional $500,000,000 in debt financing to advance its business objectives.

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Commitments and Obligations

Customer Deposits 

As part of our waitlist program for the Casita, we have allowed for potential customers to reserve a place in line, or make small deposits towards the purchase of a Casita. As of December 31, 2022 and 2021, the Company had recorded $4,257,424 and $1,767,424 in customer deposits as a liability to the Company. 

Deferred Revenue  

As of December 31, 2022, our balance sheet carried $1,505,491 deferred revenue related to the Purchase Agreement with Pronghorn Services LLC (included as Exhibit 10.9¸ however, 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 above), deferred revenue reflects the amount that had not yet been delivered as of the date of the consolidated financial statements. As of December 31, 2021, our balance sheet reflected the amount received on the contract with ADS, Inc. that had not yet been delivered as deferred revenue of $5,467,332. We completed delivery of this order in 2022.

Expense Commitments  

Beginning May 1, 2021, we entered into a sixty-five-month lease for a site which currently serves as our manufacturing facility (“Initial Manufacturing Facility”). The initial monthly base rent was $87,728.60 per month for the first 12 months, a security deposit of $525,000 and our share of operating expenses for the property prior to taking possession of the facility for a total amount of $631,837.80. Under the terms of the agreement, the Company’s monthly lease payments increased to $90,360.46 per month on May 1, 2022.

On June 13, 2022, we entered into a seventy-three-month lease for additional industrial space which will support and enhance our operations at our initial manufacturing facility (“Second Manufacturing Facility”). The initial monthly base rent is $103,708.80 per month for the first 12 months. We have paid a security deposit of $611,616. Our estimated monthly operating expenses were $18,614.40.

As of December 31, 2022, we reported current lease liabilities of $1,000,225 compared to $938,933 as of December 31, 2021. Our long-term lease liability decreased to $3,090,823 as of December 31, 2022 from $4,090,895 as of December 31, 2021.

Subsequent to December 31, 2022, we amended the lease agreement for the Initial Manufacturing Facility to expand the space leased by the Company for purposes of establishing our third manufacturing facility. The amended lease provides for an initial monthly rent of $115,759.13 for the first twelve months and a letter of credit in the amount of $3,714,190. For the duration of the forty-eight-month lease, the Company will also be responsible for monthly operating expenses estimated to be $39,812.  For more details, see Item 3. Properties.

Promissory Note Held by Boxabl’s CEO 

The Company issued a promissory note to its majority shareholder and CEO subsequent to the year ended December 31, 2020, to formalize terms of loans which were previously made subject to verbal agreements. The promissory note was paid in full in August 2021 in the amount of $563,268. For details regarding the terms of the note, see Item 7. Certain Relationships and Related Transactions and Director Independence.

The proceeds of the note were received in 2020. As of December 31, 2020, the loan amount was $563,911 and was due on demand. The principal balance outstanding bears a simple interest rate at the annual “prime rate” published by the Wall Street Journal (3.25% at December 31, 2020) plus one percent (1.0%). Interest began accruing on the entire principal sum of this promissory note beginning January 1, 2021. This loan was repaid in August 2021.

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PPP Loan 

In March 2021, the Company obtained a PPP loan in the amount of $49,166. The loan was forgiven during the year ended December 31, 2022.

Cash Flows

At December 2022, 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. We believe that our current liquidity together with cash generated from sales of additional securities will be sufficient to meet our immediate cash needs for at least near future. This assumption may prove to be incorrect and our liquidity could be exhausted much sooner.

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 and convertible promissory notes.

Planned Timeline 

With the success of our initial fundraising through our offerings under Regulation Crowdfunding, Regulation D, and Regulation A, we have continued to advance our planned timeline beyond initial delivery orders and developing our second production facility. As of June 21, 2023, we see our next 12-month timeline as follows:

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On the regulatory side of our business, we are working to achieve Generation 1.0 state modular approvals required for our Casitas in California, Arizona, and Nevada by Q4 2023. We anticipate achieving Generation 2.0 state modular approvals for our Casitas and our 2-bedroom units in California, Arizona, Nevada in Q1 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.

Unit Economics and Potential Impact of Inflation

As we continue to improve our process, design, equipment and manufacturing techniques we expect our unit costs to continue to come down. As of January 2023, the cost to produce the Casita is down 32% for direct labor and 24% for materials from a year before. We were able to achieve these cost-per-unit efficiencies through improvements in our production procedures that reduced direct labor cost and reduced scrap costs. This does not include improvements coming from our next generation design and automated manufacturing equipment expected later this year. In May 2023, the price to produce a Casita was approximately $32,532 for direct material and $10,739 direct labor cost.

As a result of inflation and increases to the prices of materials, we have determined that our per unit selling price for the Casitas will be increased from $50,000 to $60,000. This price will not include shipping, which will be the responsibility of the customer. See also Item 1A. Risk Factors – The Company has incurred much higher production costs during 2022, and those costs may continue. Inflation pressures have already had an impact on the housing market throughout 2022 and early into 2023. If inflationary pressures remain consistent or increase, we believe the future demand for housing may be further impacted, including the demand for our Casitas.

Trend Information

In total, we have received interest from more than 170,000 potential customers wishing to reserve their place in line for when production of the Casita begins for retail sales. Each of these potential customers have agreed to our Room Module Order Agreement. Of that number, we currently have deposits from over 8,300 potential customers ranging from $100, $200, $1,200 or $5,000 for over 15,000 Casitas. The purchase of the reserved Casitas by each of those potential customers who have placed deposits represents potential revenue of $900 million, and potential revenue of over $10 billion if all potential customers, including those who have not placed deposits, were to order one Casita. While we are not guaranteed to receive binding orders or revenue from them, we believe they demonstrate significant interest in our product that requires us to continue focusing on scaling up our production capacity.

We worked with industry-leading consultants to develop a plan for maximizing production efforts through automation, process efficiency, and supply chain considerations.  We believe our second production facility, when integrated with our initial facility, will allow for even greater production efficiencies. One of the current uses for the second facility is for cutting EPS foam. By being able to cut our own EPS foam to suit rather than ordering in cut sizes, we have been able to achieve cost efficiencies in our materials.

With the success of our fundraising, and apparent demand for our Casitas, we leased a third manufacturing facility in May 2023. We anticipate commencing operations in this facility in August 2023. We are also exploring the use of financing options in addition to equity raises.

As identified in Note 2 to our consolidated financial statements, from the last quarter of 2021 through December 2022, we incurred higher production costs due to various factors. However, we expect to see the benefits of greater efficiencies as we expand our manufacturing capacity and streamline our manufacturing processes. In that regard, we are engaged in major research and development to streamline production, substitute new material, and upgrade our equipment for the purpose of automating our production. During 2022, our average production of units was 22 per month and our direct labor cost per unit was $20,121. In May of 2023, we produced 28 units at an average cost of $10,739 per unit.

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To date in 2023, we have manufactured 173 Casitas, but have not made any deliveries to customers. Various permits from state and local governments are required in order to sell and install the Casitas. Delays in the permitting process or inability to obtain a permit have delayed or prohibited the delivery of the product in Arizona, and have affected the timing or amount of the Company’s revenues. See Item 8. Legal Proceedings – Arizona Department of Housing Settlement. Currently, the Company is in the process of obtaining various permits related to the Casitas, including modular certification in other states as well. Since the Arizona order has been postponed until further notice due to modular certification requirements, the units that were previously reserved for that project can now be sold for other projects. 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. Accordingly, Boxabl plans to resume sales to customers in states where there is no state modular program as well as for projects that are under a different classification such as park model RVs or government projects. We currently have purchase orders for Casitas to be placed in Oklahoma. 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.

In addition to production changes, we have seen increased stability in terms of employee turnover. As of June 2023, our turnover has fallen to approximately 1.75%, which assists productivity because we need to spend less time training new employees in our manufacturing process. However, there is no guarantee that our efforts will resolve all of the challenges we face in ramping up production of Casitas sufficient to meet demand. For more details, see Item 1A Risk Factors – The Company has incurred much higher production costs during 2022, and those costs may continue.

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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

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.

Material Lease Terms 

Second Manufacturing Facility

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.

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Material Lease Terms 

Third Manufacturing Facility

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 anticipate beginning operations in this facility in August 2023. The address of the warehouse is 5445 East North Belt Road, North Las Vegas, NV 89115.

Material Lease Terms 

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(1) C/O Boxabl Inc., 5345 E. No. Belt Rd., North Las Vegas, NV, 89115. 

(2) Includes 1,087,800,000 shares of Common Stock owned by the Paolo Tiramani 2020 Family Gift Trust.

(3) Includes 397,800,000 shares of Common Stock owned by the Galiano Tiramani 2020 Family Gift Trust.

(4) Does not include 10,000 shares of Common Stock underlying Restricted Stock Units that vested for each of the five new directors on July 1, 2023, amounting to a total of 50,000 shares of Common Stock. For details regarding vesting terms, see Item 6. Executive Compensation – Compensation of Directors.

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In connection with a 2023 exercise to improve the Company’s corporate governance standards and apply additional independent oversight of the Company’s policies and operations, five directors have been duly appointed to serve a one-year term as of June 16, 2023 until June 15, 2024.  The Company has charged the directors with adopting governance policies to comply with the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), and Securities and Exchange Commission (“SEC”) rules relating to Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and other corporate governance matters as described more fully in Item 7 below.

As of June 16, 2023, our directors, executive officers and significant employees were as follows:

* Hamid Firooznia served as a Director to the Company from June 2020 until his removal from the Board on January 17, 2023. On that same date, Stan Leopard was appointed to the Board, but then resigned due to health reasons on February 16, 2023.

Directors, Officers and Significant Employees

Paolo Tiramani, Founder and Chief Executive Officer, Director

An industrial designer and mechanical engineer, Paolo has over 150 patent filings which have generated more than $1 billion in retail sales. Paolo founded Boxabl in 2017 and has funded Boxabl to date through his intellectual property investment company 500 Group Inc., which has been in operation since 1986. Paolo also founded Supercar System in 2014. Paolo moved operations to Las Vegas, Nevada five years ago for its strategic location, business and tax climate to develop the Boxabl project into an operating company. Paolo and Galiano Tiramani are father and son.

Galiano Tiramani, Founder and Director of Marketing, Director 

Galiano is a serial entrepreneur who has founded several successful startups. Notably, a cryptocurrency exchange and bitcoin ATM network that was founded in 2014 and later sold. He also founded and operated a large green farming and processing facility in Northern California before moving to Las Vegas to pursue Boxabl full time. Galiano holds a bachelor’s degree in business. Paolo and Galiano Tiramani are father and son.

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David Cooper, Director

David is a self-styled “super connector” in the global industrialized construction sector who has built a multimedia highway of case studies featuring industry leaders who drive business forward. He has spent the last four years touring smart cities, net zero master planned communities, manufacturing facilities, skills training academies, job sites and more seeking out emerging building products, technology and advanced building processes across the United States, Europe and the United Kingdom. Since February 2020, David has served as host of Dave Cooper Live, LLC, an online talk show about technology, innovation and evolution of construction business. From November 2010 to October 2020, David was Managing Director at Connecticut Valley Homes, a New England based builder using volumetric modular construction for custom homes and commercial projects. David believes that changes for the greater good of the building manufacturing industry and those working in it will have a significant impact on our environment and people everywhere.

Veronica Nkwodimmah Stanaway, Director

Veronica is a financial professional with a solid track record in accounting, finance, and tax. She is an innovative thinker with strong leadership skills, excellent communication skills and a history of working with all organizational levels to implement change and improve operational performance and company value. Since February 2023, Veronica has served as Interim CFO with Oakcliff Capital Partners LP, an investment management fund that invests in publicly traded securities, where she managed all financial accounts and operations of the fund. Veronica shifted focus to family and social causes beginning in 2014 and has volunteered her time, raising funds, and providing other services with the following organizations: Bronxworks from 2016 to present; Croton PTA, Schools and Community Organizations from September 2019 to present, Harry Chapin Memorial Run Against Hunger volunteer and Board Member from March 2022 to present. Veronica also has depth of leadership experience based on her service as Senior Manager of Financial Services in Ernst & Young’s Bangalore offices between January 2010 and July 2012, during which time she managed a staff of over 250; conducted recruitment, training, yearly budget and staffing projections, review of compensation, and was recognized for “Exceptional Client Service” in her first year of leading the India practice.

Gregory Ugalde, Director

Gregory is the President and Chief Legal Officer of T&M Building Co, Inc., based out of Torrington, CT, where he is responsible for company operations related to home building and land development, a role he has held since April 1994. He has specific experience with legal issues associated with home building and the formation of community developments. His prior experience includes founding legal practices associated with all aspects of land use and development. Gregory is also founder and owner of GFU Investments, LLC, a multifaceted builder and developer of minority-owned businesses concentrating on urban development and affordable housing in Connecticut’s cities. In addition to service as Chairman of the National Association of Home Builders (“NAHB”) in 2019, he has served the NAHB in numerous capacities, including NAHB Immediate Past Chairman 2020-2021, NAHB Board of Directors since 2003, Legal Action Committee and Legal Action Network for Development Strategies from 2000 - 2020, Green Building Task Force 2010-2013, and NAHB Budget and Finance Committee Chair and Vice Chair during 2017 chairman and 2014, respectively.

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Christopher Valasek, Director

Chris currently serves as Senior Director of Product Security at Cruise LLC, an American self-driving car company headquartered in San Francisco, CA, a position he commenced in March 2023. Prior to that, Chris served at Cruise as Director of Product Security between October 2020 and March 2023; Director of Security, Autonomous Vehicle, between July 2020 and October 2020; and Principal Autonomous Vehicle Security Architect/Engineering Manager between August 2017 and July 2020. Chris is best known for his automotive security research, including a critically acclaimed remote attack of a well-known vehicle brand via its “UConnect” media system. He has also publicly demonstrated many security vulnerabilities in various applications, with a particular focus on Microsoft Windows heap exploitation.  Mr. Valasek has experience in all aspects of technical security involving information technology. He was adjunct faculty between January 2013 and June 2020 at Carnegie Mellon University in the Heinz College of Information Systems and Public Policy.

Zvi Yemini, Director

Zvi is an entrepreneur, industrialist, inventor and community activist from Israel, and the founder of The ZAG Industries, Ltd., Hydro Industry and Polymer Logistics. Zvi has experience with many public companies, including as chairperson of TechCare Ltd, a company formerly listed on the New York Stock Exchange, between September 2021 to the present. He also began serving on the board of Skenkar Design College beginning in January 2012, and served as chairperson between September 2014-September 2017, as well as on the board of YMY Industries Ltd. on December 1998. Zvi also served as a director of The Peres Center for Peace from September 2000-September 2017. He also has served on the board of Nanomedic Technology Ltd. since November 2018. He serves as partner and investor to several additional companies that are involved in innovative developments in the fields of medicine, electronics, nanoparticles and ignition.

Kyle Denman, Founder and Senior Engineer

Kyle is the senior engineer spearheading development of the Boxabl technology, and joined Boxabl in 2017 following first working with Paolo at Supercar System, where he started in 2016.  A graduate in Mechanical Engineering from Stonybrook University, he holds over 20 civil engineering and automotive mechanical patents.  Kyle has been swinging a hammer since he was 12 years old for his family-owned construction company and brings a deep understanding of all field issues with the industry combined with substantial engineering skills.

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The following discussion and analysis of compensation arrangements should be read with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current plans and expectations regarding future compensation programs. The actual compensation programs that we adopt may differ materially from the programs summarized in this discussion.

(1)Constitutes 17,857,140 Restricted Stock Units (“RSUs”) granted under the Company’s Equity Incentive Plan on October 4, 2021. The RSUs vest upon the first trading day on or after the expiration of the “lock up” period after the effective date of the initial underwritten sale of the Company’s equity securities to the public on an established securities market, or upon a change of control of the Company. As of July 11, 2023, none of the RSUs have vested. 

(2)Constitutes 17,544 Stock Options granted on July 12, 2022, exercisable at $0.57 per share, that vest twenty-eight (28) months after the date of grant (November 12, 2024), and expire on July 12, 2032. Also includes 1,605,630 Stock Options granted on October 4, 2021, exercisable at $0.071 per share, fully vested on the date of grant and expire on October 4, 2031. 

(3)Excludes all amounts paid by the Company to Build IP, LLC as part of its licensing agreement. 

(4)Reflects expense related to the cost of the vehicle, including sales tax. 

Principal Elements of Compensation

The compensation of the Company’s executive officers comprises of the following major elements: (a) base salary; (b) an annual, discretionary cash bonus; (c) long-term equity incentives, consisting of stock options, restricted stock awards, performance compensation awards and/or other applicable awards granted under the Company’s equity incentive plan (the “Equity Incentive Plan”) and any other equity plan that may be approved by the Board from time to time, and (d) perquisites. These principal elements of compensation are described below.

Base Salaries

Base salary is provided as a fixed source of compensation for our executive officers. Adjustments to base salaries will be reviewed annually and as warranted throughout the year to reflect promotions or other changes in the scope of breadth of an executive officer’s role or responsibilities, as well as to maintain market competitiveness.

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Annual Bonuses

Annual bonuses may be awarded based on qualitative and quantitative performance standards and will reward performance of our executive officers individually. The determination of an executive officer’s performance may vary from year to year depending on economic conditions and conditions in the housing industry and may be based on measures such as stock price performance, the meeting of financial targets against budget, the meeting of acquisition objectives and balance sheet performance.

Perquisites

In approving perquisites to our executive officers, the Board considers a number of factors, including the use of the perquisite in connection with the Company’s marketing efforts via social media in addition to the executive officer’s personal use.

Employment Agreements with Key Executives

Effective January 1, 2023, the Company entered into employment agreements with our CEO, Paolo Tiramani, and Director of Marketing, Galiano Tiramani. Under the terms of the agreements, each will receive an annual base salary of $595,000, which may be modified at the discretion of the Board. They will both be eligible for an annual bonus determined in the sole discretion of the Board and based, in part, on the performance of the executive and of the Company during the calendar year. The bonus is not earned until paid, and if terminated prior to payment will not be pro-rated. The agreements also provide for vacation at the discretion of the executive subject to the Company’s demands, reimbursement of business expenses, and use of Company employees for tasks outside the course and scope of that employee’s employment with a provision for reimbursement of the Company at the employee’s current hourly rate. Other benefits include personal security services, including assignment of security personnel, for the executives and their immediate families, and an automobile for the executive’s personal and business use with maintenance, insurance and gas paid for by the Company. The agreements also provide for the executives to field test Company products and product components in their personal homes. The agreements provide for at-will employments and will terminate upon death or upon fourteen days written notice from the Company in the event of disability.

Equity Incentive Plan

On October 4, 2021, the board authorized, and the stockholders approved, the Company’s 2021 Stock Incentive Plan (the “Plan”), which allows for the award of Options to purchase Common Stock, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units (“RSUs”), and Stock Grants. Pursuant to a 10-for-1 stock split in November 2021, the Plan had 150 million shares available for issuance. During the years ended December 31, 2022 and 2021, the Board had granted 17,429,934 and 63,077,310 stock options to purchase shares of Common Stock, respectively, of which 938,600 and 26,228,110, respectively, vested immediately upon issuance. The remainder vest over periods ranging from 28 to 36 months and expire ten years from the date of grant.

During the years ended December 31, 2022 and 2021, the Board granted 0 and 18,138,830 RSUs, respectively. The RSUs vest depending upon future events and so have not been recorded as compensation expense. As of December 31, 2022 and 2021, there were 17,857,140 and 17,857,140 RSUs outstanding, none of which have vested. As of December 31, 2022, the future expected compensation expense to be recorded is approximately $1.3 million. Subsequent to December 31, 2022, the Company authorized the issuance of RSUs for 36,642,958 shares of the Company’s Common Stock to employees and directors.  

As of June 21, 2023, 35,001,223 shares remain available for issuance under the Plan.

The Plan provides continual motivation for our officers, employees, consultants and directors (the “Participants”) to achieve our business and financial objectives and align their interests with the long-term interests of our shareholders. The Plan also provides an incentive to attract, retain and reward certain employees, non-employee directors, and consultants to the Company or an Affiliate. The Plan is administered by the Board of Directors, and awards are made by the Board in its sole discretion.

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Stock option grants will have an exercise price equal to the fair market value of the Common Stock on the date of grant and expire ten years from the grant date unless an earlier time is set in the award agreement. The Board also has discretion to set terms for vesting, performance goals or other conditions precedent to the exercise of the stock option. If the Participant’s employment or services is terminated for cause all unexercised stock options immediately lapse even if vested; otherwise, participants have three months following termination of employment to exercise vested options. Holders of 10% or more of the Company’s combined voting power of all classes of the Company’s securities will have an exercise price not less than 110% of the fair market value on the date of grant and shall be exercisable for no more than five years from the date of grant.

Compensation of Directors

For the fiscal year ended December 31, 2022, the Company compensated our directors for their board service as follows:

(1)Non-Qualified Stock Options granted under the Company’s 2021 Stock Incentive Plan on July 12, 2022, with an exercise price of $0.57. The Stock Options vest twenty-eight (28) months from the date of grant (November 12, 2024) and expire on July 12, 2032. 

In June 2023, five new, independent directors were elected by the majority stockholders. During the remainder of fiscal year 2023 and through June 2024, we expect our directors to receive the following compensation under the terms of their board participation agreements:

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Summary Director Compensation for June 2023 through June 2024

(1)This is an annual fee payable in increments of $10,000 per quarter. 

(2)Represents initial grants of Restricted Stock Units under the Company’s 2021 Stock Incentive Plan that vest at a rate of 25% per quarter, starting on July 1, 2023. 

Under the terms of the directors’ participation agreements, awards of Restricted Stock Units will be revisited as terms of service mature. Each non-employee director is entitled to reimbursement for reasonable expenses relating to his or her service on the Board and any committee, including travel, meals, and other related expenses.

Compensation Committee Interlocks and Insider Participation

During 2022, the Company did not have a compensation committee or any other committee performing equivalent functions of a compensation committee. Paolo Tiramani, our Chief Executive Officer, and Galiano Tiramani, Director of Marketing, each in his capacity as a Director serving on the Board, participated in deliberations of the Board concerning executive officer compensation and were employed by the Company. Hamid Firooznia in his capacity as a Director serving on the Board also participated in executive compensation deliberations, and was providing consulting services to the Company. He continues to provide consulting services to Boxabl, although he no longer serves on the Board.

Outstanding Equity Awards at Fiscal Year-End

The executive officers identified in the compensation table do not have any vested or unvested stock, stock options or other equity incentive plan awards outstanding as of December 31, 2022.

Long-Term Incentive Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits.

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Related Party Transactions

The following transactions were approved by the full Board of Directors that were serving at the time of approval. The Board is aware of the other commitments and interests of its members when determining whether to approve of any related party transaction.

On June 16, 2020, and subsequently amended in November 2021, Boxabl entered into an exclusive license agreement with Build IP, a subsidiary of 500 Group, which is controlled by Boxabl’s founder and CEO, Paolo Tiramani. Pursuant to the license agreement, Boxabl will pay a license fee of 1% of the net selling price generated from the sale of its Casitas to Build IP. As of December 31, 2022 and 2021, $110,177 and $19,558 were recorded as royalty expense in Boxabl’s consolidated financial statements accompanying this registration statement. On June 15, 2023, the Company engaged in an all-stock statutory merger with 500 Group in which the Company exchanged 37,500,000 shares of its Non-Voting Series A-2 Preferred Stock for 500 Group’s 100 outstanding shares of Common Stock in a transaction valued at $30,000,000. As a result of this merger, 500 Group and Build IP are wholly owned by Boxabl, and their assets, including the intellectual property held by Build IP, are now owned by Boxabl. Accordingly, license agreement between Boxabl and Build IP is now void. For details, see Exhibit 10.8 to this registration statement.

Supercar System, Inc. Services Agreement

Effective as of January 1, 2023, the Company and Supercar System entered into a services agreement under which the Company will provide, or will cause third parties to provide, employee services in connection with Supercar System’s business. Supercar System will be required to reimburse the Company for the value of the time spent by a Boxabl employee rendering services to Supercar System based on that employee’s wages at the Company. The Company can decline requests by Supercar System for any good faith reason. Supercar System is controlled by the Company’s CEO, Paolo Tiramani. For more details, see also Exhibit 10.15 filed with this registration statement. As of June 21, 2023, Supercar System does not have any amounts due to Boxabl.

Supercar System, Inc. Lease Agreement 

Pursuant to an agreement dated April 12, 2023, but effective as of January 1, 2023, the Company will lease to Supercar System 11,970 square feet located in the Company’s main property located at 5435 E. N. Belt Road, Las Vegas, Nevada for $7,409.23 per month. The agreement terminates December 31, 2026 unless otherwise amended in writing by the parties, and the Company retains the right to unilaterally terminate the agreement upon thirty days written notice. Supercar System is controlled by the Company’s CEO, Paolo Tiramani. See Exhibit 10.16.

Lease Agreement for Casitas

Pursuant to a lease agreement dated March 12, 2023, Galiano Tiramani, who is the Director of Marketing and currently serves on the Company’s Board, will lease three Casitas for his personal use for a period of twenty-four months. The consideration for the lease constitutes written and/or verbal feedback to the Company regarding the livability, comfort, amenities, and any suggestions for improvement to the Casitas. For more details, see also Exhibit 10.14 to this registration statement.

Related Party Loans

The Company issued a promissory note to its majority shareholder and CEO subsequent to the year ended December 31, 2020, to formalize terms of loans which were previously made subject to verbal agreements. The proceeds of the note were received in 2020. As of December 31, 2020, the loan amount is $563,911, plus accrued, and unpaid interest thereon and is due on demand. The principal balance outstanding bears a simple interest rate at the annual “prime rate” published by the Wall Street Journal (3.25% at December 31, 2020) plus one percent (1.0%). Interest accrues on the entire principal sum of this promissory note beginning January 1, 2021. This loan was repaid in August 2021.

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Consulting Agreement with a Member of the Board of Directors

The Company’s former director, Hamid Firooznia, provided consulting services to the Company during the fiscal year ended December 31, 2022. There was no written agreement for the services provided in 2022. Mr. Firooznia was compensated in the amount of $210,000 for those consulting services.

Director Independence and Corporate Governance

On June 16, 2023, the Company’s controlling stockholders elected five new and independent members to the Board of Directors, each identified in our table of executive officers and directors in Item 5 (above). The Board is now comprised of a majority of independent directors as determined under the listing standards of the New York Stock Exchange (“NYSE”) Section 303A. As described in more detail below, our independent directors will also serve on the Company’s Audit, Compensation and Nominating and Corporate Governance Committees. Over the coming term, the Board will adopt governing principles which contain a number of corporate governance initiatives designed to comply with SEC, Sarbanes-Oxley and Dodd-Frank rules:

·Creating and maintaining a corporate governance manual and website; 

·Establishing majority vote standards and resignation policy; 

·Establishing procedures for nominating or recommending for nomination candidates for director; 

·Ensuring a majority of the Board of Directors is comprised of independent directors; 

·Creating an independent Audit Committee with a Financial Literacy and Audit Committee Financial Expert; 

·Creating an independent Compensation Committee;  

·Creating a Nominating and Governance Committee; and 

·Adopting appropriate Codes of Business Conduct and Ethics, as well as overseeing policies designed to create robust accounting, internal control, auditing and financial matters. 

In consideration of the foregoing, the Board has created the following committees, which charges and responsibilities are as described below:

Nominating and Corporate Governance Committee 

Our Nominating and Corporate Governance Committee is comprised of Paolo Tiramani, Galiano Tiramani, Zvi Yemini, and Gregory Ugalde. The Nominating and Corporate Governance Committee is responsible for, among other things:

·Identifying individuals qualified to become directors consistent with criteria approved by the Board and recommend to the Board the qualified candidates for directorships to be filled by the Board or by the stockholders; 

·Overseeing the evaluation of the Board and key management; 

·Developing and recommending to the Board a set of corporate governance principles applicable to the Company; 

·Oversight of the Company’s practices and strategy as it pertains to the following (each of which may be considered an ESG mandate: 

oWorkforce health and safety; 

oHuman capital management; 

oEnergy efficiency and the environmental impact of the Company’s homebuilding process; 

oHome affordability, business ethics and compliance; and 

oData privacy and protection. 

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Compensation Committee

Our Compensation Committee is comprised of David Cooper, Veronica Nkwodimmah Stanaway, Gregory Ugalde, Christopher Valasek, and Zvi Yemini. The Compensation Committee is responsible for, among other things:

·Determining corporate goals and objectives relevant to the non-independent directors and other executive officers; 

·Determining the compensation of all executive officers and non-independent directors based upon their performance relative to the established goals and objectives; 

·Monitoring incentive and equity-based compensation plans; and 

·Preparation of any required annual report on executive compensation. 

Audit Committee

Our Audit Committee is comprised of David Cooper, Veronica Nkwodimmah Stanaway, and Gregory Ugalde. The Audit Committee is responsible for, among other things:

·Assisting the Board in fulfilling its oversight responsibilities relating to: 

oThe integrity of the Company’s consolidated financial statements; 

oThe Company’s compliance with legal and regulatory requirements; 

oThe qualifications and independence of the Company’s Independent Auditor; and 

oThe performance of the Company’s internal audit function and independent auditor; and 

·Preparation of any required annual report of the Audit Committee. 

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Item 8. Legal Proceedings.

Arizona Department of Housing Settlement

On January 23, 2023, the Department of Housing in and for the State of Arizona (the “Arizona Department of Housing”) sent a citation and complaint claiming that Boxabl was in violation of several Arizona laws and codes related to delivery of Casitas for which we understood the specific codes did not apply. These violations included failure to obtain necessary permits, not submitting compliance assurance documents, lack of proper certification for the manufacturing facility, and knowingly violating laws and rules. On February 28, 2023, the Arizona Housing Department issued the Company with an administrative fine of $48,000, and ordered us not to ship further Casitas into Arizona until we have obtained the necessary certifications. On April 21, 2023, the Company entered into a settlement agreement with the Arizona Department of Housing under which it agreed to work with its customers, Pronghorn Services, LLC (“Pronghorn”) and Freeport McMoRan Inc. (“Freeport”) (together with the Company, the “Parties”), to undertake an evaluation of the Casitas delivered to determine whether the Casitas can be reconstructed as required for compliance with Arizona laws and the requirements of the Arizona Department of Housing. Under the settlement, Freeport is facilitating the establishment of an engineering plan and mutually agreed upon schedule for reconstruction as determined with the Arizona Department of Housing. In the event the reconstruction plan is not timely submitted, or the Arizona Department of Housing does not approve the reconstruction plan, or Freeport elects not to commit to the reconstruction plan, then the Parties shall be jointly and severally liable and responsible for removal of the units within 45 days.

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 $1,000,000. The Company will also incur 50% of shipping costs in the event the contract is canceled and the Casitas removed. The Company accrued a $570,000 warranty for such costs and any costs related to the 10-year limited warranty offering to Pronghorn.

Litigation Against Former Employees

On June 13, 2023, the Company filed three lawsuits against former employees alleging 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. Management does not anticipate these matters will have a material impact on the Company’s results of operations or financial condition. See also Item 1A. Risk Factors – As we grow our business, we may not be able to manage our growth successfully, including development of our internal controls.

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.  

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. See also Item 1A. Risk Factors – Public perception is important as a public company engaged in equity crowdfunding, potentially making Boxabl susceptible to negative postings, and false allegations about the Company and its products.

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.

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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.

Market Information

There is no established public trading market for any class of the Company’s capital stock, including its Common Stock. As of June 30, 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 June 30, 2023, there were 3,000,000,000 shares of Common Stock, which were held by approximately 4,632 shareholders of record. In addition, there were 194,422,430 shares of our Non-Voting Series A Preferred Stock outstanding, which shares were held by 755 shareholders of record, there were 848,322,763 shares of our Non-Voting Series A-1 Preferred Stock outstanding, which shares were held by 4,055 shareholders of record and there were 128,231,634 shares of our Non-Voting Series A-2 Preferred Stock outstanding, which shares were held by 32,020 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

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Item 10. Recent Sales of Unregistered Securities.

* All classes of Preferred Stock convert into Common Stock upon the Company undertaking a firm underwriting registered offering (an “IPO”) or an offering under Regulation A.

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As of June 30, 2023, our authorized capital stock consists of 10,000,000,000 shares. Of that amount, 6,600,000,000 shares are designated as Common Stock, with 3,000,000,000 outstanding as of June 30, 2023. 3,400,000,000 shares are designated as Preferred Stock, and as of June 30, 2023:

·250,000,000 are designated as Non-Voting Series A Preferred Stock, and 194,422,430 shares are outstanding; 

·1,100,000,000 are designated as Non-Voting Series A-1 Preferred Stock, and 848,322,763 shares are outstanding; and 

·1,150,000,000 are designated as Non-Voting Series A-2 Preferred Stock, and 128,231,634 shares are outstanding. 

The outstanding shares reflect the Company’s 10-for-1 forward split, which was effective on November 23, 2021.

Non-Voting Series A-2, A-1 and Non-Voting Series A Preferred Stock

Voting Rights

Holders of Non-Voting Series A, Non-Voting Series A-1, and Non-Voting Series A-2 Preferred Stock (together, the “Preferred Stock”) will have no voting rights on matters put to the stockholders for a vote.

Dividends

Other than dividends on shares of the Company’s Common Stock payable in shares of Common Stock, the holders of the then outstanding Preferred Stock shall first receive, or simultaneously receive, a dividend in an amount equal to the dividend payable to holders of our Common Stock.

Right to Receive Liquidation Distributions

In any event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after payment to all creditors of the Company, the remaining assets of the Company available for distribution to its stockholders will be distributed first among the holders of Non-Voting Series A, Non-Voting Series A-1 and Non-Voting Series A-2 Preferred Stock together, and then to the holders of Common Stock. The Non-Voting Series A Preferred Stock issued in our concurrent offerings under Regulation Crowdfunding and Regulation D include a preferred liquidation preference in an amount equal to $0.017 per share held (the “Preferred Payment” following the 10-for-1 forward split). This Preferred Payment represents a bonus to those holders, as they paid the equivalent of $0.014 per share and are eligible for a Preferred Payment of $0.017 per share. The Preferred Payment for the Non-Voting Series A-1 Preferred Stock is $0.079 per share. The Preferred Payment for the Non-Voting Series A-2 Preferred Stock is $0.80 per share, which is equal to the per share price in the Company’s Regulation A offering. Investors who received their shares of Non-Voting Series A-1 Preferred Stock in the Company’s offering under Regulation Crowdfunding at $0.071 per share will have the same Preferred Payment of $0.079 per share, representing a bonus to those holders as well. 

If there are insufficient assets for the Preferred Payment, then the holders of the Non-Voting Series A-2, A-1 and Non-Voting Series A Preferred Stock will receive their pro rata share of available assets upon liquidation of the Company. By way of example, if in the event of liquidation the Company were only to have distributable assets of $0.50 for every dollar invested by the preferred stockholders, each holder of Non-Voting Series A Preferred Stock would receive $0.0085 per share held, the Non-Voting Series A-1 Preferred Stock holders would receive $0.0395 per share held, the Non-Voting Series A-2 Preferred Stock holders would receive $0.40 per share held, and the holders of Common Stock would receive nothing. 

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Conversion Rights 

Upon the occurrence of firm underwriting registered offering (an “IPO”), the Non-Voting Series A-2, A-1 and Series A Preferred Stock will automatically convert into voting Common Stock of the Company.

Rights and Preferences

Holders of the company's Non-Voting Series A-2, A-1 and Series A Preferred Stock have no preemptive, conversion, or other rights, and there are no redemptive or sinking fund provisions applicable to the Company's Non-Voting Series A-1 and Non-Voting Series A Preferred Stock.

Common Stock

Voting Rights

Holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of the Stockholders and written actions in lieu of meetings, including the election of directors. There is no cumulative voting.

Dividends

The dividend rights of holders of our Common Stock are subject to, and qualified by, the dividend rights of our Preferred Stock.

Right to Receive Liquidation Distributions

Subject to any rights of the holders of the Non-Voting Preferred Stock, in any event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after payment to all creditors of the Company, the remaining assets of the Company available for distribution to its stockholders will be distributed among the holders of Common Stock on a pro-rata basis by the number of shares held by each holder.

Rights and Preferences

Holders of the Company's Common Stock have no preemptive, conversion, or other rights, and there are no redemptive or sinking fund provisions applicable to the Company's Common Stock.

Third Amended and Restated Stockholders Agreement

All holders of the Company’s Common Stock and Non-Voting Series A-2, A-1 and Series A Preferred Stock will be subject to our Stockholders Agreement. The following summary is qualified in its entirety by the terms and conditions of the Stockholders Agreement itself. Certain provisions described below may have the effect of delaying, deferring or preventing a change in control of the Company. For details, please see the Stockholders Agreement filed as Exhibit 4.1 to this registration statement.

Directors and Management of the Company 

The Stockholders Agreement provides for control of the Board of Directors of the Company by Paolo Tiramani and Galiano Tiramani.

Supermajority Approval

The Stockholder Agreement further provides for supermajority approval of the voting holders of Common Stock of the Company for the Company to undertake specified actions, including, but not limited to, amending the Articles of Incorporation or Bylaws, appointing or removing the Company’s independent accountant or changing accounting methods or policies other than as required by GAAP, and effectuating a change of control of the Company.

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Holders of the Common Stock and Non-Voting Series A-2, A-1 and Series A Preferred Stock are restricted from transferring their shares acquired, except under limited circumstances following approval of the Board of Directors of the Company. The purpose of this provision is to grant a measure of control to the Board of Director to ensure that any transfer does not result in ownership interests by competitors of the Company, or would create significant burdens or obligations for the Company to comply with federal or state laws. For any transfer approved by the Board of Directors, the transferee will be required to become party to the Stockholders Agreement as well.

Release of Obligations Upon Transfer 

As the Stockholders Agreement applies to senior management of the Company as well as investors in this offering, it includes obligations that may not be applicable to all investors because of their circumstances. For instance, the Stockholders Agreement includes a requirement to maintain the confidentiality of non-public information about the Company. However, an investor who does not serve the Company in the capacity of an employee, executive officer or director would likely only have access to public information, and never encounter an instance in which the investor would incur any liability to the Company for sharing of such information. Other provisions, like the representation about the capacity or authority to enter into the Stockholders Agreement, if breached by the investor, may require corrective actions to be taken, which create liability to the Company by the investor. Further, as noted above, the Stockholders Agreement includes certain restrictions on transfer which must be complied with, otherwise corrective actions would need to be taken, creating a liability to the Company by the investor. 

That said, investors will only be subject to the provisions of the Stockholders Agreement while holding the shares of the Company. Should an investor transfer of all the shares held by the investor, in compliance with the Stockholders Agreement, the investor will have no further obligations under the Stockholders Agreement and not be liable to the Company for any action that may be considered a breach of the Stockholders Agreement. 

Drag-Along Provision

In the event one or more stockholders intend to sell in the aggregate more than 50% of the Company’s total outstanding shares to a third party, and the third party conditions such sale on the third party’s ability to purchase all of the Company issued and outstanding share, then the selling stockholders have the right to require each of the other stockholders to sell all of their shares to the third party purchaser on the same terms and conditions.

Termination of Stockholders Agreement 

The Stockholders Agreement will terminate upon the earliest of (1) the consummation of an IPO pursuant to an effective registration statement; (2) a merger or business combination resulting in the Company being traded on a national securities exchange; (3) the date that there are no holders of the Company’s equity securities; (4) dissolution or winding up of the Company; or (5) by unanimous agreement of the stockholders of the Company.

Forum Selection Provision

The Stockholders Agreement requires that any suit or action based on contract or tort, or otherwise to enforce any provision of the Stockholders Agreement be brought in the Eighth Judicial District Court of Clark County, Nevada. If the Eighth Judicial District Court of Clark County does not have jurisdiction, then the matter may be adjudicated in another state district court in the State of Nevada, or in federal court located within the State of Nevada. Although we believe the provision benefits us by providing increased consistency in the application of Nevada law in the types of lawsuits that may be brought to enforce contractual rights and obligations under the Stockholders Agreement and in limiting our litigation costs, to the extent it is enforceable, the forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The Company has adopted the provision to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time traveling to any particular forum so they may continue to focus on operations of the Company. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. We

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believe that the exclusive forum provision applies to claims arising under the Securities Act, but there is uncertainty as to whether a court would enforce such a provision in this context. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.  As a result, the exclusive forum provision may not be used to bring actions in state courts for suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.  Investors will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations thereunder.

Jury Trial Waiver

The Stockholders Agreement also provides that investors waive the right to a jury trial of any claim they may have against us arising out of or relating to the Stockholders Agreement, including any claim under federal securities laws.  By investing in this offering, the investor knowingly and voluntarily waives his or her jury trial rights. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. In addition, by agreeing to the provision, investors will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder.

Spousal Consent 

The Company requires that a married investor provide a spousal consent to the Stockholders Agreement. A spousal consent is important to the Company because in the event of dissolution of a marriage, or death of the investor with the spouse inheriting the securities in this offering, the spouse taking possession of the shares will be bound by the terms of the Stockholders Agreement, providing certainty to the Company for the enforcement of the agreement. The Company requires that the spousal consent be provided to the Company within 15 days of confirmation of an investment in the Company. While non-receipt of a spousal consent when necessary may result in equitable remedies pursuant to the Stockholders Agreement, it is not a condition of the investment or being a stockholder of the Company.

Our Fourth Amended and Restated Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted by the Nevada Revised Statutes (the “NRS”). Our Articles of Incorporation state that a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. Pursuant to Section 6.1 of the Bylaws, the Company must indemnify to the maximum extent permitted by Nevada law its officers and directors in any civil, criminal, administrative or investigative proceeding except an action by or in the right of the Company, including attorneys’ fees, judgments, fines and amounts paid in settlement provide he or she acted in good faith and in a manner that he or she reasonably believed to be in, and not opposed to, the Company’s best interests. Pursuant to NRS 78.138, no indemnification is required if it is proven that the officer or director breached his or her fiduciary duties and that breach involved intentional misconduct, fraud or a knowing violation of law. The termination of any such proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere shall not by itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in the Company’s best interests and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. Under Section 6.2 of the Bylaws, the Company must indemnify officers and directors who are party or are threatened to be made a party to any action or lawsuit by or in the right of the Company to the maximum extent permitted by the NRS, including attorneys’ fees, unless it is proven his or her act, or failure to act, was a breach of fiduciary duty involving intentional misconduct, fraud, or a knowing violation of law rendering him or her liable under NRS 78.138, unless he or she acted in good faith and in a manner he or she reasonably believed to be in, and not opposed to, the Company’s best interests. Additionally, Section 6.3 of the Bylaws gives the Board of Directors sole discretion to indemnify the Company’s employees and agents to the extent not prohibited by the NRS or other applicable law. Section 6.5 of the Bylaws permits the Company to advance the costs of defense to persons involved in legal proceedings at the discretion of the Board of Directors upon receipt of an undertaking by or on behalf of such person to repay such amount unless it is determined that he or she is entitled to indemnification by the Company under Article VI of the Bylaws or the NRS.  

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Item 13. Financial Statements and Supplementary Data.

The consolidated financial statements of the Company appear at the end of this report beginning on page F-1.

Item 15. Financial Statements and Exhibits.

Our audited consolidated financial statements for the years ended December 31, 2022 and 2021 appear at the end of this Registration Statement on pages F-1 through F-19.

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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 subsidiary (the “Company”) as of December 31, 2022 and 2021, 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, 2022 and 2021, 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 audits. 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 audits 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.

Prior Year Restatement

As discussed in Note 2 to the financial statements, the Company has elected to change the adoption date of Accounting Standards Codification 842 Leases to the earliest period presented within the financial statements.

dbbmckennon

PCAOB #3501

We have served as the Company's auditor since 2020.

San Diego, California

August 9, 2023

F-1

F-2

F-3