Vislink Technologies, Inc 10-Q for FY2022 Q3
Vislink Technologies, Inc. (VISL)
About this 10-Q
Vislink Technologies, Inc filed this 10-Q on November 14, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.11M
- down 36.5% from $11.2M a year earlier
- Net loss
- $2.74M
- compared with net income of $676K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For
the quarterly period ended
OR
For the transition period from ____________to _______________.
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Securities registered pursuant to Section 12(b) of the Act:
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| The
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
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| Smaller
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| Emerging
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If an emerging growth company, indicate by a checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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The number of shares of the registrant’s common stock outstanding as of November 14, 2022, is .
VISLINK TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-Q
For the three and nine months ended September 30, 2022 and 2021
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Index to Condensed Consolidated Financial Statements
| 1 |
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q (including the section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations) (the “Report”) contains forward-looking statements regarding our business, financial condition, results of operations, and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar words and phrases are intended to identify forward-looking statements. However, this is not an all-inclusive list of words or phrases identifying forward-looking statements in this Report. Also, all information concerning future matters is forward-looking statements.
Although forward-looking statements in this Report reflect our management’s good faith judgment, such information can only be based on facts and circumstances currently known by us. Forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those discussed elsewhere in this Report.
The Company files reports with the Securities and Exchange Commission (“SEC”), and those reports are available free of charge on our website (www.vislinktechnologies.com) under “About/Investor Information/SEC Filings.” The reports available include our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, which are available as soon as reasonably practicable after the Company electronically files such materials or furnishes them to the SEC. The SEC also maintains an Internet site (sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
The Company undertakes no obligation to revise or update forward-looking statements to reflect any event or circumstance that may arise after this Report’s date. The Company urges you to carefully review and consider all the disclosures made in this Report
REFERENCES TO VISLINK
In this Quarterly Report, unless otherwise stated or the context otherwise indicates, references to “VISL,” “Vislink,” “the Company,” “we,” “us,” “our,” and similar references refer to Vislink Technologies, Inc., a Delaware corporation.
| 2 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Right of use assets, operating leases | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable | ||||||||
| Operating lease obligations, current | ||||||||
| Customer deposits and deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Operating lease obligations, net of current portion | ||||||||
| Deferred tax liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 10) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock – $ par value per share: shares authorized on September 30, 2022, and December 31, 2021; -- shares issued and outstanding as of September 30, 2022, and December 31, 2021, respectively | ||||||||
| Common stock, – $ par value per share, shares authorized, and shares issued and and outstanding at September 30, 2022, and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Treasury stock, at cost – shares as of September 30, 2022, and December 31, 2021, respectively | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS EXCEPT NET LOSS PER SHARE DATA)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of revenue and operating expenses | ||||||||||||||||
| Cost of components and personnel | ||||||||||||||||
| Inventory valuation adjustments | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Impairment of right-of-use assets | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Total cost of revenue and operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Changes in fair value of derivative liabilities | ||||||||||||||||
| Gain on settlement of debt | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ||||||||||||||||
| Net (loss) income before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income taxes | ||||||||||||||||
| Deferred tax benefits | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Unrealized gain (loss) on currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
(IN THOUSANDS, EXCEPT SHARE DATA)
Three months ending September 30, 2022:
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid In | Comprehensive | Treasury | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Stock | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Unrealized gain on currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||||||||||
| Satisfaction of accounts payable vendor balance | — | |||||||||||||||||||||||||||||||||||
| Satisfaction of withholding tax upon conversion of restricted stock units | — | |||||||||||||||||||||||||||||||||||
| Satisfaction with the conversion of restricted stock units | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Nine months ending September 30, 2022: | ||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Unrealized gain on currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||||||||||
| Satisfaction of accounts payable vendor balance | — | |||||||||||||||||||||||||||||||||||
| Satisfaction of withholding tax upon conversion of restricted stock units | — | |||||||||||||||||||||||||||||||||||
| Satisfaction with the conversion of restricted stock units | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | | ||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
(IN THOUSANDS, EXCEPT SHARE DATA)
For the Three Months Ended September 30, 2021:
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Series D | Additional | Other | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid In | Comprehensive | Treasury | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Stock | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Unrealized loss on currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||||||||||
| Underwriting equity raise, net of offering costs | — | |||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants | — | |||||||||||||||||||||||||||||||||||
| Stock issuance commitments | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
For the Nine Months Ended September 30, 2021:
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Series D | Additional | Other | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid In | Comprehensive | Treasury | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Stock | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Unrealized loss on currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Unrealized gain (loss) on currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||||||||||
| Underwriting equity raise, net of offering costs | — | |||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants | — | |||||||||||||||||||||||||||||||||||
| Exercise of cashless common stock warrants | — | |||||||||||||||||||||||||||||||||||
| Warrants issued in a settlement agreement | ||||||||||||||||||||||||||||||||||||
| Stock issuance commitments | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows used in operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Gain on settlement of debt | ( | ) | ( | ) | ||||
| Deferred tax benefits | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Stock issuance commitments | ||||||||
| Warrants issued in a settlement agreement | ||||||||
| Provision for bad debt | ||||||||
| Recovery of bad debt | ( | ) | ( | ) | ||||
| Inventory valuation adjustments | ||||||||
| Amortization of right-of-use assets, operating assets | ||||||||
| Depreciation and amortization | ||||||||
| Impairment on right-of-use assets | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and interest expense | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Deferred revenue and customer deposits | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows used in investing activities | ||||||||
| Cash acquired from MVP acquisition | ||||||||
| Cash used in the acquisition of 100% of MVP’s outstanding shares | ( | ) | ||||||
| Cash used for property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided in financing activities | ||||||||
| Proceeds received from equity financings | ||||||||
| Costs incurred in connection with equity financing | ( | ) | ||||||
| Proceeds from the exercise of common stock warrants | ||||||||
| Principal payments on D & O notes payable | ( | ) | ( | ) | ||||
| Net cash provided in financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net increase in cash | ( | ) | ||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash information: | ||||||||
| Forgiveness of PPP government grant | $ | $ | ||||||
| Notes payable recognized on D & O insurance policy | $ | $ | ||||||
| Common stock warrants issued in connection with: | ||||||||
| Settlement of amounts due to related parties | $ | $ | ||||||
| Common stock shares issued in connection with: | ||||||||
| Settlement of amounts due accounts payable | $ | $ | ||||||
| Compensation awards previously accrued | $ | $ | ||||||
| ROU assets and operating lease obligations recognized (Note 6): | ||||||||
| Operating lease assets recognized | $ | $ | ||||||
| Less: non-cash changes to operating lease assets | ||||||||
| amortization | ( | ) | ( | ) | ||||
| lease termination | ( | ) | ||||||
impairments | ( | ) | ||||||
| loss on lease impairments | ( | ) | ||||||
| ROU assets and operating lease obligations recognized | $ | ( | ) | $ | ( | ) | ||
| Operating lease liabilities recognized | $ | $ | ||||||
| Less: non-cash changes to lease liabilities | ||||||||
| accretion | ( | ) | ( | ) | ||||
| Operating lease liabilities recognized | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 7 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Vislink, incorporated in Delaware in 2006, is a global technology business specializing in collecting, delivering, and managing high-quality, live video and associated data from the action scene to the viewing screen. Vislink provides solutions for collecting live news, sports, and entertainment events for the broadcast markets. Vislink also furnishes the surveillance and defense markets with real-time video intelligence solutions using various tailored transmission products. The Vislink team also provides professional and technical services utilizing a staff of technology experts with decades of applied knowledge and real-world experience in the terrestrial microwave, satellite, fiber optic, surveillance, and wireless communications systems delivering a broad spectrum of customer solutions.
Live Broadcast:
Vislink delivers an extensive portfolio of solutions for live news, sports, and entertainment industries. These solutions include video collection, transmission, management, and distribution via microwave, satellite, cellular, I.P. (Internet Protocol), MESH, and bonded cellular/5G networks. We also provide solutions that utilize A.I. (Artificial Intelligence) technologies to provide automated coverage of news and sporting events. With over 50 years in operation, Vislink has the expertise and technology portfolio to deliver fully integrated, seamless, end-to-end solutions.
Industry-wide contributors acknowledge Vislink’s live broadcast solutions. The transmission of a vast majority of all outside wireless broadcast video content uses our equipment, with over 200,000 systems installed worldwide. We work closely with the majority of the world’s broadcasters. Vislink wireless cameras and ultra-compact encoders help bring many of the world’s most prestigious sporting and entertainment events to life. Recent examples include globally watched international sporting contests, award shows, racing events, and annual music and cultural events.
Military And Government:
Vislink has developed high-quality solutions to meet surveillance and defense markets’ operational and industry challenges based on our knowledge of live video delivery. Vislink solutions are specifically designed with interagency cooperation, utilizing the internationally-recognized I.P. platform and a web interface for video delivery. Vislink provides comprehensive video, audio, and data communications solutions to law enforcement and the public safety community, including Airborne, Unmanned Systems, Maritime, and Tactical Mobile Command Posts. These solutions may include airborne downlinks, terrestrial point-to-point, tactical mobile command, maritime, UAV, and personal portable products that meet the demands of field operations, command centers, and central receiving sites. Short-range and long-range solutions are available in areas including established infrastructure and exceptionally remote regions, making valuable video intelligence available regardless of location. Vislink public safety and surveillance solutions are deployed worldwide, including throughout the U.S., Europe, and the Middle East, at the local, regional, and federal levels of operation, criminal investigation, crisis management, mobile command posts, and field operations.
Satellite Communications:
Over 30 years of technical expertise support Vislink’s satellite solutions. These solutions ensure robust, secure communications while delivering low transmission costs for any organization that needs high-quality, reliable satellite transmission. We offer turnkey solutions that begin with state-of-the-art coding, compression, and engine modulation and end with our robust, lightweight antenna systems. Vislink Satellite solutions focus heavily on being the smallest, lightest, and most efficient in their categories, making transportation and ease of use a key driver in the customer experience. Vislink offers an extensive range of satellite designs that allow customers to optimize bit rate, size, weight, and total cost. Our satellite systems are used extensively globally, with over 2,000 systems deployed by governments, militaries, and broadcasters.
| 8 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Nature of Operations (continued)
Connected Edge Solutions:
Vislink offers the hardware and software solutions needed to acquire, produce, contribute, and deliver video over all private and public networks with the Mobile Viewpoint acquisition. Connected edge solutions aid the video transport concept of utilizing ubiquitous IP networks and cloud-scale computing across 5G, WiFi6, Mesh, and COFDM-enabled networks. These solutions include:
| ● | Live video encoding, stream adaptation, decoding, and production solutions | ||
| ● | Remote production workflows | ||
| ● | Wireless cameras | ||
| ● | AI-driven automated production | ||
| ● | Ability to contribute video over: | ||
| ○ | Bonded cellular (3G and 4G) | ||
| ○ | Satellite | ||
| ○ | Fiber | ||
| ○ | Emerging networks, including 5G and Starlink | ||
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are prepared under the United States generally accepted accounting principles (“US GAAP”) for interim financial information and following Form 10-Q and Regulation S-X instructions. Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements. Read these financial statements in conjunction with the consolidated financial statements filed on the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the United States Securities and Exchange Commission (the “SEC”) on March 31, 2022. In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present the Company’s consolidated financial position as of September 30, 2022, the results of its operations, and cash flow for the nine months ended September 30, 2022, and 2021. Such adjustments are of a routine recurring nature. The results of operations for the nine months ended September 30, 2022, may not indicate results for an entire year, any other interim period, or any future year period.
Principles of Consolidation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America or (“U.S. GAAP”) as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the US Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. We have eliminated all intercompany accounts and transactions upon consolidating our subsidiaries.
Segment Reporting
The Company identifies operating segments as components of an enterprise about which separate discrete financial information is available for evaluation by the operating decision-makers, or decision-making group, in deciding how to allocate resources and assess performance. The Company’s decision-making group is the senior executive management team. The Company and the decision-making group view the Company’s operations and manage its business as one operating segment with different product offerings. All long-lived assets of the Company reside in the U.S., the U.K., and the Netherlands.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property, plant, and equipment, the useful lives of right-of-use assets, the useful lives of intangible assets, impairment of long-lived assets, allowance for accounts receivable doubtful accounts, allowance for inventory obsolescence reserve, allowance for deferred tax assets, valuation of warranty reserves, contingent consideration liabilities, and the accrual of potential liabilities. These estimates also affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from estimates, and any such differences may be material to our financial statements.
| 9 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Risks and Uncertainties
The future impacts of the Russia-Ukraine war, the novel coronavirus (“COVID-19”) pandemic, and their residual effects include economic uncertainty, an inflationary environment, currency fluctuations, disruption within the global supply chain, and labor markets worldwide industries remain uncertain. These circumstances have created prevalent uncertainty and risk. The impact of these issues on our business will vary by geographic market and discipline. In response to potential reductions in revenue, we may take actions to align our cost structure with changes in customer demand and manage our working capital. However, there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the current and future adverse economic conditions, reductions in client revenue, changes in client creditworthiness, and other developments. We monitor the circumstances mentioned above to assess direct material adverse effects on our business, financial condition, or results of operations. Therefore, these impacts may change accounting estimates and assumptions over time. Interim period results are not necessarily indicative of the expected results for the full fiscal year.
Inventories
Inventories consist of raw materials, work-in-process, and finished goods and are recorded at the lower of cost, on a first-in, first-out basis, or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable completion, disposal, and transportation costs. The Company evaluates inventory balances and either writes down obsolete inventory or records a reserve for slow-moving or excess inventory based on net realizable value analysis.
Revenue Recognition
We account for the Company’s operating results under ASC Topic 606, adopted on January 1, 2019. It is a comprehensive revenue recognition model that requires recognition when the Company transfers control of the promised goods or services to our customers at an amount that reflects the consideration we expect to receive. The application of ASC Topic 606 requires us to use more judgment and make more estimates than under previously issued guidance.
The Company generates all its revenue from contracts with customers. The Company recognizes revenue when we satisfy a performance obligation by transferring control of the promised goods or services to a customer in an amount that reflects the consideration we expect to receive in exchange for those services.
The Company determines revenue recognition through the following steps:
| 1. | Identification of the contract, or contracts, with a customer. | |
| 2. | Identification of the performance obligations in the contract. | |
| 3. | Determination of the transaction price. | |
| 4. | Allocation of the transaction price to the performance obligations in the contract; and | |
| 5. | Recognition of revenue when, or as, we satisfy a performance obligation. |
At contract inception, the Company assesses the goods and services promised in our contracts with customers and identifies a performance obligation for each. To determine the performance obligations, the Company considers all the products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. We measure revenue as the amount of consideration we expect to receive in exchange for transferring goods and services. The value-added sales taxes and other charges we collect concurrent with revenue-producing activities are excluded from income.
Remaining Performance Obligations:
The remaining performance obligations, or backlog, represent the aggregate amount of the transaction price allocated to the remaining obligations that the Company has not performed under its customer contracts. The Company has elected to use the optional exemption in ASC 606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of one year or less.
| 10 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible Assets
Patents and licenses:
Patents
and licenses, measured initially at purchase cost, are included in intangible assets on the Company’s balance sheet and are amortized
on a straight-line basis over their estimated useful lives of
Other intangible assets:
The
Company’s remaining intangible assets include the trade names, technology, and customer lists acquired in its acquisition of IMT,
Vislink, and Mobile Viewpoint Corporate B.V. (“MVP”). A third-party appraiser determined the value of these acquired assets
for these business combinations. Absent an indication of fair value from a potential buyer or similar specific transactions, we have
determined that using the methods employed provided a reasonable estimate in reporting the values assigned. The Company amortizes intangible
asset costs over their useful lives of
Leases
The Company determines if an arrangement is a lease at inception. The Company recognizes lease expense for lease payments on a straight-line basis over the lease term. The Company includes operating leases as “Right of use assets, operating leases” (“ROU”) in the consolidated balance sheets. For lease liabilities, operating lease liabilities are included in “Operating lease obligations, current” and “Operating lease liabilities, net of current portion” in the consolidated balance sheets. The Company recognizes operating lease ROU assets and liabilities on the commencement date based on the present value of lease payments for all leases with a term longer than 12 months. No lease and non-lease components are separated for all our real estate contracts.
The ROU assets and related lease liabilities recorded under ASC 842 are calculated based on the present value of the lease payments using (1) the rate implicit in the lease or (2) the lessee’s incremental borrowing rate (“IBR”), defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a comparable economic environment. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rates based on an analysis of prior collateralized borrowings over similar terms of the lease payments at the commencement date to estimate the IBR under ASC 842. There were no capital leases, which are now titled “finance leases” under ASC 842, in the Company’s lease portfolio as of March 31, 2022.
The Company accounts for stock compensation with persons classified as employees for accounting purposes under ASC 718 “Compensation-Stock Compensation,” which recognizes awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes Option Pricing Model, and the fair value of common stock issued for services is determined based on the Company’s stock price on the issuance date.
The expansion of Topic 718 fell under ASU 2018-07 to include share-based payment transactions for acquiring goods and services from nonemployees. The measurement date for equity-classified nonemployee share-based payment awards is no longer at the earlier date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Instead, the grant date is now considered the measurement date. Under today’s guidance, the measurement of nonemployee share-based payment awards with performance conditions is at the lowest aggregate fair value, often resulting in a zero value. The new ASU aligns the accounting for nonemployee share-based payment awards with performance conditions with accounting for employee share-based payment awards under Topic 718 by requiring entities to consider the probability of satisfying performance conditions. Current guidance requires entities to use the contractual term to measure the nonemployee share-based payment awards. The new ASU allows entities to make an award-by-award election to use the expected duration (consistent with employee share-based payment awards) or the contractual term for nonemployee awards.
| 11 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-Based Compensation (continued)
Stock-Option Awards — Time-based and performance-based:
Under ASC Topic 718, the compensation cost is measured based on an award’s fair value at the grant’s date for the time vested option award using the Black Scholes-Merton formula as a valuation technique. The Company used the U.S. Treasury note’s rate over the expected option term for the risk-free rate. Employees’ expected term represents the period that options granted are expected to be outstanding using the simplified method. The Company’s historical share option exercise experience does not provide a reasonable basis for estimating the expected term. For nonemployee options, the expected term is the entire term of the option. Expected volatility is based on the average weekly share price changes over the shorter expected term or the period from the Nasdaq Capital Markets Exchange placement to the grant’s date. The Company estimates forfeiture and volatility using historical information. The risk-free interest rate is based on the implied yield on U.S. Treasury zero-coupon issues over the options’ equivalent lives.
The Company has not paid dividends on its common stock, and no assumption of dividend payment(s) is made in the model. For employee equity-classified awards, compensation cost is recognized over the employee’s requisite service period with a corresponding credit to additional paid-in capital. The employee’s requisite service period begins at the service inception date and ends when the requisite service has been provided.
Restricted Stock Unit Awards (“RSUs”) — Time Based:
Under ASC 718, the exercise price for RSUs is determined using the fair market value of the Company’s common stock on the grant date. For an award with graded vesting subject only to a service condition (e.g., time-based vesting), ASC 718-10-35-8 provides an accounting policy choice between graded vesting attribution or straight-line attribution. The Company elects the graded vesting method, recognizing compensation expense for only the portion of awards expected to vest. Forfeitures of time-based units and awards are recognized as they occur. Stock-based compensation costs are calculated using the closing stock price on the grant date to estimate the fair value of time-based restricted stock units.
Restricted Stock Unit Awards (“RSUs”) — Performance-Based:
The accruals of compensation cost for an award with a performance condition are related to that performance condition’s probable outcome. Under ASC 718, a “performance condition” is the achievement of a specified target that is defined by referring to the employer’s operations or activities, such as an option that vests if the employer’s growth rate increases by a certain amount or there are the attainment of regulatory approval for a product. There is an accrual of compensation cost upon the likely achievement of the performance condition, and there is no accrual if the accomplishment of the performance condition is not probable. The exercise price for RSUs is determined using the fair market value of the Company’s common stock on the grant date. Stock-based compensation costs are calculated using the closing stock price on the grant date to estimate performance-based restricted stock units’ fair value.
Right-of-use operating lease abandonment
As
part of the Company’s cost savings strategy implemented in the third quarter of the fiscal year 2022, management decided to vacate
the Billerica, MA facility. The economic environment of the location precluded the action of sub-letting and management determined the
(leased facility) to be abandoned as of September 30, 2022. Under ASC 360, leased space abandonment is an impairment indicator, and the
Company assessed the lease right-of-use (“ROU”) assets for impairment. The Company considered approximately $
| 12 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company reports loss per share under ASC Topic 260, “Earnings Per Share,” which establishes standards for computing and presenting earnings per share. The basic loss per share calculation divides the net loss allocable to common stockholders by the weighted-average shares of common stock outstanding during the period without considering common stock equivalents. The diluted loss per share calculation is calculated by adjusting the weighted-average shares of common stock outstanding for the dilutive effect of common stock equivalents, including stock options and warrants, outstanding for the period as determined using the treasury stock method. For the diluted net loss per share calculation, common stock equivalents are excluded from the calculation because their effect would be anti-dilutive. Therefore, basic and diluted net loss per share applicable to common stockholders is the same for periods with a net loss.
SCHEDULE OF ANTI-DILIUTIVE POTENTIAL COMMON STOCK EQUIVALENTS EXCLUDE FROM THE CALCULATION OF LOSS PER SHARE
| Nine months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Anti-dilutive potential common stock equivalents excluded from the calculation of loss per share: | ||||||||
| Stock options | ||||||||
| Warrants | ||||||||
| Anti-dilutive securities | ||||||||
Fair Value of Financial Instruments
GAAP requires disclosing financial instruments’ fair value to the extent practicable for financial instruments recognized or unrecognized in the consolidated balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.
In assessing the fair value of financial instruments, the Company uses various methods and assumptions based on estimates of market conditions and risks existing at the time. For specific instruments, including accounts receivable and accounts payable, the Company estimated that the carrying amount approximated fair value because of these instruments’ short maturities. All debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value.
GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs consist of items that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below. As of March 31, 2022, the Company had no fair valued assets or liabilities classified under Level 1 or Level 2.
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities, | |
| ● | Level 2 – Observable prices based on inputs not quoted on active markets but corroborated by market data, | |
| ● | Level 3 – Unobservable inputs are used when little or no market data is available; the fair value hierarchy gives the lowest priority to Level 3 inputs (see Note 7). |
| 13 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency and Other Comprehensive (Gains) Losses
We record gains or losses resulting from foreign currency transactions in foreign currency income or loss except for the effect of exchange rates on long-term inter-company transactions that are considered long-term investments that are accumulated and credited or charged to other comprehensive income. We have two foreign subsidiaries, one in the United Kingdom and the other in the Netherlands, and their functional currencies are British Pounds and Euros, respectively. The translation from the respective foreign currency to United States Dollars (“US Dollars”) is performed for balance sheet accounts using current exchange rates at the balance sheet date and for income statement accounts using an average exchange rate for the nine months ending September 30, 2022. We included gains or losses from such translation as a separate component of accumulated other comprehensive (loss) income.
Transaction gains and losses are recognized in our operations’ results based on the difference between the foreign exchange rates on the transaction date and the reporting date. The foreign currency exchange gains and losses are a component of general and administrative expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations.
The Company has recognized foreign exchanges gains and losses and changes in accumulated comprehensive income approximately as follows:
SCHEDULE OF FOREIGN EXCHANGE AND CHANGE IN ACCUMULATED COMPREHENSIVE INCOME
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net foreign exchange transactions: | ||||||||||||||||
| (Gains) Losses | $ | $ | $ | $ | ||||||||||||
| Accumulated comprehensive income: | ||||||||||||||||
| Unrealized (gains) losses on currency translation adjustment | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
The exchange rates adopted for the foreign exchange transactions are quoted on OANDA, a Canadian-based foreign exchange company and internet website providing currency conversion, online retail foreign exchange trading, online foreign currency transfers, and forex information. The Company translated amounts from British Pounds into United States Dollars and Euros to British Pounds at the following exchange rates for the respective periods:
| ● | As
of September 30, 2022 – £ | |
| ● | The
average exchange rate for the nine months ended September 30, 2022 – £ |
Subsequent Events
Management has evaluated subsequent events or transactions occurring through the date the consolidated financial statements were issued and determined that no events or transactions are required to be disclosed herein except as disclosed.
Recently Issued Accounting Principles
The Company reviews new accounting standards issued by the Financial Accounting Standards Board, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC. From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on our condensed consolidated financial statements and disclosures.
| 14 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 — LIQUIDITY AND FINANCIAL CONDITION
The
Company incurred an approximate $
The enduring effect of the COVID-19 pandemic, including the advent of successive variants, plus the uncertainty of possible future variants, may subject the Company to particular challenges in its business, financial condition, results of operations, and cash flows. The unpredictability of the pandemic’s scope, severity, duration, and actions implemented to alleviate its direct and indirect economic effects and containment measures provide no assurances that the pandemic will not have material adverse repercussions on the Company’s operations, liquidity, financial condition, and any residual unfavorable consequences to global economics.
The Company bases its evaluation on possibilities that may prove wrong and could exhaust our available capital resources sooner than we expect. Developments may take place, including those beyond our control, that would cause us to consume our available capital more quickly, including but not limited to those relating economic conditions including inflation, foreign exchange, fluctuations, and the markets in which we compete or wish to enter, strategic acquisitions, our market strategy, our research and development activities, regulatory matters, and technology and product innovations. The Company believes it will have sufficient funds to continue its operations for at least twelve months from the date of the filing of these financial statements.
NOTE 3 – ACQUISITION OF MOBILE VIEWPOINT CORPORATE B.V.
On
August 16, 2021, the Company, through a wholly-owned subsidiary, entered into a stock purchase agreement with Triple I.T. Corporate B.V.,
a private company incorporated in the Netherlands, under which the Company acquired
The
Company accounts for the acquisition under the acquisition method under ASC 805 “Business Combinations,” and we elected not
to apply pushdown accounting upon the purchase of MVP. Therefore, we recognized the preliminary historical basis of MVP’s acquired
assets and liabilities. We identified any excess of the consideration paid in excess of the net assets acquired in the table below. In
addition, we recorded approximately $
The Company received a final valuation report from our third-party appraiser regarding allocating the consideration paid in excess of the net assets acquired. Additionally, the Company received an updated list of certain assets and liabilities acquired on August 16, 2021. Under ASC 805, we recorded measurement period adjustments under the previously mentioned revisions
| 15 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – ACQUISITION OF MOBILE VIEWPOINT CORPORATE B.V. (continued)
The following table summarizes the historical value of the assets and liabilities as of the acquisition date, allocation of the consideration paid in excess of net assets acquired, relative useful lives, and amortization method of the listed intangible assets.
SCHEDULE OF IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED
| As
Initially Reported | Measurement Period Adjustments | As Adjusted | ||||||||||
| Fair value of consideration transferred: | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Accounts receivable, net | ||||||||||||
| Inventories, net | ||||||||||||
| Prepaid expenses and other assets | ( | ) | ||||||||||
| Property and equipment, net | ||||||||||||
| Accounts payable | ( | ) | ( | ) | ||||||||
| Accrued expenses | ( | ) | ( | ) | ||||||||
| Customer deposits and deferred revenue | ( | ) | ( | ) | ||||||||
| Deferred tax liabilities | ( | ) | ( | ) | ||||||||
| Total identifiable net assets | $ | $ | $ | |||||||||
| Consideration paid | $ | $ | $ | |||||||||
| Total identifiable assets acquired | ||||||||||||
| Excess of consideration paid over net assets acquired | $ | $ | ( | ) | $ | |||||||
| Preliminary allocation of the consideration paid in excess of the net assets acquired: | ||||||||||||
| Trade name | $ | $ | $ | |||||||||
| Proprietary technology | ||||||||||||
| Customer relationship | ( | ) | ||||||||||
| Goodwill | ||||||||||||
| Total intangible assets acquired | $ | $ | ( | ) | $ | |||||||
As
a result of the updated purchase price allocations for the MVP acquisition on August 16, 2021, specific fair value amounts previously
estimated were adjusted during the measurement period. These measurement period adjustments resulted from our external valuation specialists’
updated valuation reports and appraisals and revisions to internal account classifications. The changes from the final valuation report
included an increase of $
In
the related note 4 of the Company’s Annual Report on Form 10-K for the period ending December 31, 2021, the Company had a typographical
error in the amount indicated on the line item “Deferred tax liabilities,” whereby the amount reported of $
| 16 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – ACQUISITION OF MOBILE VIEWPOINT CORPORATE B.V. (continued)
Intangible assets acquired:
The Purchaser acquired intangible assets from MVP as a result of the Transaction. The Tradename, Proprietary Technology, and Customer Relationships are intangible assets noted to have a finite life, while Goodwill has an indefinite life span. The finite life intangible assets will be amortized using the straight-line method of the respective lives of each asset, while the indefinite life intangible assets will not be amortized.
Based thereon, below are the acquired intangibles with their relative useful lives and method of amortization:
SCHEDULE OF ACQUIRED INTANGIBLE WITH THEIR RELATIVE USEFUL LIVES
| Intangible Asset | Useful Life | Amortization Method | ||
| Tradename | Straight-line | |||
| Proprietary Technology | Straight-line | |||
| Customer Relationships | Straight-line | |||
| Goodwill | N/A |
The following presents the unaudited Pro-forma combined results of operations of Vislink with MVP as if the combination of the entities occurred on January 1, 2021.
SCHEDULE OF UNAUDITED PRO-FORMA COMBINED RESULTS OF OPERATIONS
Three Months Ending September 30, | Nine Months Ending September 30, | |||||||
| 2021 | 2021 | |||||||
| Revenues, net | $ | $ | ||||||
| Net income (loss) allocable to common stockholders | $ | $ | ( | ) | ||||
| Net income (loss) per share | $ | $ | ( | ) | ||||
| Weighted average number of shares outstanding | ||||||||
The unaudited Pro-forma results of operations are presented for information purposes only. The unaudited Pro-forma results are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2021, or to project potential operating results as of any future date or for any future periods.
NOTE 4 — INTANGIBLE ASSETS
The Company continuously monitors operating results, events, and circumstances that may indicate potential impairment of intangible assets. Management concluded that no triggering events occurred during the nine months that ended September 30, 2022.
The following table illustrates finite intangible assets as of September 30, 2022:
SCHEDULE OF INTANGIBLE ASSETS
| Proprietary Technology | Patents and Licenses | Trade Names & Technology | Customer Relationships | |||||||||||||||||||||||||||||||||
| Accumulated | Accumulated | Accumulated | Accumulated | |||||||||||||||||||||||||||||||||
| Cost | Amortization | Cost | Amortization | Cost | Amortization | Cost | Amortization | Net | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
| 17 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 — INTANGIBLE ASSETS (continued)
Proprietary Technology:
The
Company amortizes proprietary technology over its useful lives of
Patents and Licenses:
The
Company amortizes filed patents and licenses over their useful lives, ranging from
Trade Name, Technology, and Customer Relationships:
The
Company amortizes these other intangible assets over their estimated useful lives of
The Company has recognized net capitalized intangible costs as follows:
SCHEDULE OF CAPITALIZED INTANGIBLE COSTS
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Proprietary Technology | $ | $ | ||||||
| Patents and Licenses | ||||||||
| Trade Names and Technology | ||||||||
| Customer Relationships | ||||||||
| Intangible assets | $ | $ | ||||||
The Company has recognized the amortization of intangible assets as follows:
SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Proprietary Technology | $ | $ | $ | $ | ||||||||||||
| Patents and Licenses | ||||||||||||||||
| Trade Names and Technology | ||||||||||||||||
| Customer Relationships | ||||||||||||||||
| Amortization of intangible assets | $ | $ | $ | $ | ||||||||||||
The weighted average
remaining life of the amortization of the Company’s
intangible assets is approximately
SCHEDULE OF ESTIMATED AMORTIZATION EXPENSE FOR INTANGIBLE ASSETS
| Period ending September 30, | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Finite-Lived Intangible Assets, Net, Total | $ |
| 18 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 — NOTES PAYABLE
The table below represents the Company’s notes payable as of September 30, 2022, and December 31, 2021:
SCHEDULE OF NOTES PAYABLE
| Principal | ||||||||
| 9/30/22 | 12/31/21 | |||||||
| On April 5, 2021 | $ | $ | ||||||
| On April 5, 2021, the Company renewed its D & O insurance policy and increased the premium to approximately $ | $ | $ | ||||||
| On April 5, 2022, the Company renewed its D & O insurance policy, with a one-year premium of approximately $ | ||||||||
| $ | $ | |||||||
NOTE 6 — LEASES
The
Company’s leasing arrangements include office space, deployment sites, and storage warehouses domestically and internationally.
The operating leases contain various terms and provisions, with remaining lease terms for the nine months ending September 30, 2021,
ranging from approximately
On
September 30, 2022, the Company recorded approximately $
Adjustments for straight-line rental expense for the respective periods was not material. Most costs recognized are reflected in cash used in operating activities for the respective periods. This expense consisted primarily of payments for base rent on office and warehouse leases. Amounts related to short-term lease costs, taxes, and variable service charges on leased properties were immaterial. Besides, we have the right to renew individual leases for various renewal terms but no obligation.
As
part of the Company’s cost savings strategy implemented in the third quarter of the fiscal year 2022, management decided to vacate
the Billerica, MA facility. The economic environment of the location precluded the action of sub-letting, and management determined the
(leased facility) to be abandoned as of September 30, 2022. For the three and nine months ending September 31, 2022, and 2021, the Company
recognized a loss on impairment of ROU assets of approximately $
On
April 28, 2022,
| 19 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 — LEASES (continued)
The following table illustrates operating lease data for three and nine months ended September 30, 2022, and 2021:
SCHEDULE OF OPERATING LEASE DATA
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three months Ended | Nine months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Lease cost: | ||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Short-term lease cost | ||||||||||||||||
| Sublease income | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
| Cash paid for lease liabilities: | ||||||||||||||||
| Cash flows from operating leases | $ | $ | ||||||||||||||
| Weighted-average remaining lease term—operating leases | ||||||||||||||||
| Weighted-average discount rate—operating leases | % | % | ||||||||||||||
Maturities of operating lease liabilities were as follows as of September 30, 2022:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES
| Amount | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ||||
| Present value of lease liabilities | ||||
| Less: Current lease liabilities | ||||
| Non-current lease liabilities | $ | |||
The table below lists the location and lease expiration date from 2023 through 2027:
SCHEDULE OF LEASE OBLIGATIONS ASSUMED
| Location | Square Footage | Lease-End Date | Approximate Future Payments | |||||||
| Colchester, U.K. – Waterside House | $ | |||||||||
| Singapore | ||||||||||
| Billerica, MA | ||||||||||
| Hemel, UK | ||||||||||
| Mount Olive, NJ | ||||||||||
| 20 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 — DERIVATIVE LIABILITIES
Under the guidance of ASC 815, Accounting for Derivative Instruments and Hedging Activities, the Company, identified common stock warrants in various offerings containing a net cash settlement provision whereby, upon certain fundamental events, the holders could put these warrants back to the Company for cash. We identified and classified the following transactions as derivative liabilities: warrants issued with the May 2016 financing, the July 2016 financing, the August 2017 underwritten offering, and the May 2018 Financing.
The Company records derivative liabilities on its consolidated balance sheet at their fair value on the issuance date. The Company revalues the derivative liabilities on each subsequent balance sheet until exercised or expired, with any changes in the fair value between reporting periods recorded as other income or expense. The Company uses option pricing models and assumptions based on the instruments’ characteristics on the valuation date. We use assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate to estimate fair value.
The following are the key assumptions used in connection with the valuation of the warrants exercisable into common stock on September 30, 2022, and 2021:
SCHEDULE OF VALUATION AND WARRANTS EXERCISABLE
Nine months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Number of shares underlying the warrants | ||||||||
| The fair market value of stock | $ | $ | ||||||
| Exercise price | $ | | $ | | ||||
| Volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividend yield | ||||||||
| Warrant life (years) | ||||||||
Level 3 liabilities are valued using unobservable inputs to the valuation methodology significant in measuring the liabilities’ fair value. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, subject to the approval of the Chief Financial Officer, determines the applicable valuation policies and procedures.
Level 3 Valuation Techniques:
Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities, such that determining fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company deems financial instruments that do not have fixed settlement provisions as derivative instruments. Under US GAAP, the fair value of these warrants is classified as a liability on the Company’s consolidated balance sheets because, according to the terms of the warrants, a fundamental transaction could give rise to an obligation of the Company to pay cash to its warrant holders. Such instruments do not have fixed settlement provisions and have also been recorded as derivative liabilities. Corresponding changes in the fair value of the derivative liabilities are recognized in earnings on the Company’s consolidated operations statements in each subsequent period. To calculate fair value, the Company uses a binomial model style simulation, as the standard Black-Scholes model would not capture the value of certain features of the warrant derivative liabilities.
The following table sets forth a summary of the changes in the fair value of Level 3 financial liabilities that are measured at fair value on a recurring basis:
SCHEDULE OF CHANGES IN FAIR VALUE OF LEVEL 3 FINANCIAL LIABILITIES
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three months Ended | Nine months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Change in fair value of derivative liabilities | ( |
) | ( |
) | ||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||
| 21 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCKHOLDERS’ EQUITY
Common stock issuances
During the nine months ended September 30, 2022, the Company:
| ● | Issued shares of common stock as payment of the minimum withholding tax obligation due upon the vesting of shares restricted stock units. | |
| ● | Issued shares of common stock, net of shares attributable to withholding tax, upon the exercise of restricted stock units under the Company’s various stock compensation plans. | |
| ● | Under
the terms of an $ | |
| ● | Recognized approximately $ of stock-based compensation costs associated with outstanding stock options recorded in general and administrative expenses offsetting additional paid-in capital. |
Common stock warrants
During the nine months ended September 30, 2022, warrants expired. As of September 30, 2022, these outstanding warrants contained no intrinsic value. The weighted average exercise price of warrants outstanding on September 30, 2022, is $, with a weighted average remaining contractual life of years.
The following table sets forth common stock purchase warrants outstanding as of September 30, 2022:
SCHEDULE OF WARRANT OUTSTANDING
Number of Warrants (in shares) | Weighted Average Exercise Price | |||||||
| Outstanding, December 31, 2021 | $ | |||||||
| Warrants expired | ( | ) | $ | ( | ) | |||
| Outstanding, September 30, 2022 | $ | |||||||
| Exercisable, September 30, 2022 | $ | |||||||
Delisting Notice
On May 20, 2022, Vislink Technologies, Inc. (the “Company”) received notice from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company of its non-compliance with Nasdaq Listing Rule 5550(a)(2) (the “Rule”) by failing to maintain a minimum bid price for its common stock on the Nasdaq Capital Market of at least $ per share for 30 consecutive business days.
According to the Nasdaq notice, the Company has a 180-calendar day grace period to regain compliance with the Rule (the “Grace Period”), subject to a potential 180 calendar day extension, as described below. To regain compliance, the Company’s common stock must have a minimum closing bid price on the Nasdaq Capital Market of at least $ per share for at least ten consecutive business days within the Grace Period.
If the Company does not regain compliance by November 16, 2022, the end of the Grace Period, the Company may be eligible for an additional 180-calendar day grace period to regain compliance. To qualify for the supplemental grace period, the Company will be required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the bid price requirement. We have provided written notice to the Staff of our intention to cure the deficiency during the second grace period by effecting a reverse stock split, if necessary, and intend to hold a special meeting of our stockholders seeking approval of a reverse split in January 2023. However, if it appears to Nasdaq at the end of the Grace Period that the Company will be unable to cure the deficiency, or if the Company is not otherwise eligible for the additional cure period, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. If the Company receives notice that its common stock is being delisted, Nasdaq listing rules permit the Company to appeal the delisting determination by the Staff to a Nasdaq hearings panel.
| 22 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCKHOLDERS’ EQUITY (continued)
Delisting Notice (continued)
During the defined term grace period and any supplemental grace period, the Company’s common stock will continue to be listed and traded on The Nasdaq Capital Market under the symbol “VISL,” subject to the Company’s compliance with the other continued listing requirements of The Nasdaq Capital Market.
The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Rule, including potentiall seeking stockholder approval to save the Company the option of amending its Certificate of Incorporation to effect a reverse stock split. There can be no assurance that the Company will be able to regain compliance with the Rule or otherwise be in compliance with other Nasdaq Listing Rules.
Stock Options
Equity Incentive Plans:
SCHEDULE OF STOCK OPTION PLANS
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| Remaining expense of stock-based compensation | $ | $ | ||||||||||||||
| Remaining amortization period | ||||||||||||||||
| Weighted average remaining contractual life – options outstanding and exercisable | years | years | ||||||||||||||
| Intrinsic value per share | $ | $ | ||||||||||||||
The table below summarizes the status of the Plan’s stock option awards:
| September 30, 2022 | ||||||||
| Number of Options (in shares) | Weighted Average (Exercise Price) | |||||||
| Beginning balance - January 1, 2022, quantity of outstanding options | $ | |||||||
| Stock options granted, canceled, expired | ( | ) | ( | ) | ||||
| Ending balance - September 30, 2022, quantity of outstanding and exercisable options | $ | |||||||
| Range of exercise prices | $ to $ | |||||||
| 23 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — STOCK-BASED COMPENSATION (continued)
Time-vested stock options:
SCHEDULE OF NON-STATUTORY PERFORMANCE-BASED STOCK OPTION ACTIVITY
| Recipient | Date of Grant | Options Granted | Exercise Price | Vesting Commencement Date | Expiration Date | 25% Vesting | 75% Remaining Vesting | ||||||||||||||||
| ● | Carleton M. Miller — CEO | $ | |||||||||||||||||||||
| ● | Michael Bond — CFO | $ | |||||||||||||||||||||
SCHEDULE OF SHARE-BASED PAYMENT AWARD STOCK OPTIONS
| Expected term (years) | Expected dividend yield | Risk-free interest rate | Volatility | Exercise Price | |||||||||||||||||
| ● | Carleton M. Miller — CEO | % | % | $ | |||||||||||||||||
| ● | Michael Bond — CFO | % | % | $ | |||||||||||||||||
SCHEDULE OF STOCK OPTION PLANS
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| Remaining expense of stock-based compensation | $ | $ | ||||||||||||||
| Remaining amortization period | ||||||||||||||||
| Weighted average remaining contractual life – options outstanding and exercisable | years | years | ||||||||||||||
| Intrinsic value per share | $ | $ | ||||||||||||||
The table below summarizes the status of the time-based stock option awards:
| September 30, 2022 | ||||||||||||||||
| Outstanding | Exercisable | |||||||||||||||
Quantity of RSUs | Weighted Average Exercise Price | Quantity of RSUs | Weighted Average Exercise Price | |||||||||||||
| Beginning balance, outstanding on January 1, 2022 | $ | $ | ||||||||||||||
| Stock option award units vested | — | — | ||||||||||||||
| Ending balances, outstanding on September 30, 2022 | $ | $ | ||||||||||||||
| Range of exercise prices | $ to $ | |||||||||||||||
| 24 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — STOCK-BASED COMPENSATION (continued)
Performance-based stock options:
In connection with their employment agreement, the Company granted the following ten-year, non-statutory performance-based stock option inducement award under the NASDAQ Listing Rule 5653(c)(4) outside of the Company’s existing equity compensation plans that will vest in upon attainment of applicable performance conditions for each tranche (all subject to continued employment):
| Options Vesting Dates | Options Vesting Schedule | |||||||||||||||||||||||||||||
| Recipient | Date of Grant | Options Granted | Exercise Price | Commencement | Expiration | Tranche 1 | Tranche 2 | Tranche 3 | ||||||||||||||||||||||
| Carleton M. Miller — CEO | $ | * | ** | *** | ||||||||||||||||||||||||||
| Applicable performance conditions: | |
| * | |
| ** | |
| *** | |
SCHEDULE OF SHARE-BASED PAYMENT AWARD, STOCK OPTIONS, VALUATION ASSUMPTIONS
| Expected term (years) | Expected dividend yield | Risk-free interest rate | Volatility | Exercise Price | |||||||||||||||||
| ● | Carleton M. Miller — CEO | % | % | $ | |||||||||||||||||
SCHEDULE OF STOCK OPTION PLANS
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| Remaining expense of stock-based compensation | $ | $ | ||||||||||||||
| Remaining amortization period | ||||||||||||||||
| Weighted average remaining contractual life – options outstanding | years | years | ||||||||||||||
| Intrinsic value per share | $ | $ | ||||||||||||||
The table below summarizes the status of the performance-based stock option awards:
| September 30, 2022 | ||||||||
Number of Options (in shares) | Weighted Average (Exercise Price) | |||||||
| Beginning balance — January 1, 2022, quantity of outstanding options | $ | |||||||
| Performance-based stock option awards granted, canceled, expired | ||||||||
| Ending balance — September 30, 2022, quantity of outstanding options | $ | |||||||
| Ending balance — September 30, 2022, quantity of exercisable options | $ | |||||||
| Range of exercise prices | $ | |||||||
The probability of achieving any required metrics for vesting is inconclusive, and no options are exercisable as of September 30, 2022. When the Company determines that the remaining performance metrics’ achievement becomes probable, the Company will record a cumulative catch-up stock-based compensation amount. We will record unrecognized costs over the remaining requisite service period of the awards.
| 25 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — STOCK-BASED COMPENSATION (continued)
Restricted Stock Units
Restricted stock awards — time-based:
The Company granted the following awards under the amended Plan for restricted stock units (“RSUs”) subject to continued employment:
SUMMARY OF GRANTS UNDER AMENDED PLAN
| Grant | Initial RSUs Vesting | Remaining RSUs Vesting | ||||||||||||||||||||||
| Recipient | Date | Units | Exercise Price | Date | Units | Units | Terms | |||||||||||||||||
| Carleton M. Miller — CEO | $ | |||||||||||||||||||||||
| Michel Bais — Managing Director | $ | |||||||||||||||||||||||
| Ronnie Hamilton — VP Global Operations | $ | |||||||||||||||||||||||
| Group of 22 Employees | $ | |||||||||||||||||||||||
| Carleton M. Miller — CEO | $ | |||||||||||||||||||||||
| Mike Bond — CFO | $ | |||||||||||||||||||||||
SCHEDULE OF STOCK OPTION PLANS
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| Remaining expense of stock-based compensation | $ | $ | ||||||||||||||
| Remaining amortization period | ||||||||||||||||
| Weighted average remaining contractual life – options outstanding | years | years | ||||||||||||||
| Weighted average remaining contractual life – options exercisable | years | — | ||||||||||||||
| Intrinsic value per share | $ | $ | ||||||||||||||
The table below summarizes the status of the time-based restricted stock awards:
| September 30, 2022 | ||||||||||||||||
| Outstanding | Exercisable | |||||||||||||||
Quantity of RSUs | Weighted Average Exercise Price | Quantity of RSUs | Weighted Average Exercise Price | |||||||||||||
| Beginning balance, on January 1, 2022 | $ | $ | ||||||||||||||
| Restricted stock units granted | — | — | ||||||||||||||
| Restricted stock units vested | ( | ) | ( | ) | ||||||||||||
| Ending balances, September 30, 2022 | $ | $ | ||||||||||||||
| Range of exercise prices | $ to $ | |||||||||||||||
| 26 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — STOCK-BASED COMPENSATION (continued)
Restricted stock awards — performance-based:
The Company granted the following awards under the amended Plan for restricted stock units (“RSUs”) subject to performance vesting conditions and continued employment:
SUMMARY OF GRANTS UNDER AMENDED PLAN
| Grant | Units Vesting Schedule | |||||||||||||||||||||||
| Recipient | Date | Units | Exercise Price | Tranche 1 | Tranche 2 | Tranche 3 | ||||||||||||||||||
| Carleton M. Miller — CEO | $ | |||||||||||||||||||||||
| Michael Bond — CFO | $ | |||||||||||||||||||||||
Note: The above performance-based restricted stock units met all three revenue thresholds in the last quarter of 2021, and the Company recognized stock-based compensation expense accordingly for the year ending December 31, 2021.
| Grant | Units Vesting Schedule | |||||||||||||||||||||||
| Recipient | Date | Units | Exercise Price | Tranche 1 | Tranche 2 | Tranche 3 | ||||||||||||||||||
| Carleton M. Miller — CEO | $ | * | ** | *** | ||||||||||||||||||||
| Michael Bond — CFO | $ | * | ** | *** | ||||||||||||||||||||
| * | |
| ** | |
| *** |
Note: the determination of revenue for any fiscal period shall be made based on the Company’s revenues on a consolidated basis for each such fiscal period if the employee remains in continuous employment with the Company through the date the Compensation Committee certifies the revenue for such fiscal period and authorizes the issuance of the underlying shares of common stock to the employee according to his award agreement. Except as provided in each employment agreement, if an individual ceases to be an employee of the Company before any vesting date, the remaining portion of the total number of shares unvested is forfeited. The probability of achieving any required metrics for vesting is inconclusive as of September 30, 2022. When the Company determines that the remaining performance metrics’ achievement becomes probable, the Company will record a cumulative catch-up stock-based compensation amount. We will record unrecognized costs over the remaining requisite service period of the awards.
| 27 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — STOCK-BASED COMPENSATION (continued)
Restricted stock awards — performance-based (continued):
SCHEDULE OF STOCK OPTION PLANS
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| Remaining expense of stock-based compensation | $ | $ | ||||||||||||||
| Remaining amortization period | ||||||||||||||||
| Weighted average remaining contractual life – options outstanding | years | years | ||||||||||||||
| Intrinsic value per share | $ | $ | ||||||||||||||
The table below summarizes the status of the time-based restricted stock awards:
| September 30, 2022 | ||||||||||||||||
| Outstanding | Exercisable | |||||||||||||||
Quantity of RSUs | Weighted Average Exercise Price | Quantity of RSUs | Weighted Average Exercise Price | |||||||||||||
| Beginning balance, outstanding on January 1, 2022 | $ | $ | ||||||||||||||
| Restricted stock units granted | — | — | ||||||||||||||
| Restricted stock units exercised | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Ending balances, September 30, 2022 | $ | $ | ||||||||||||||
| Range of exercise prices | $ | |||||||||||||||
NOTE 10 — COMMITMENTS AND CONTINGENCIES
Pension:
The Company may make a matching contribution to the 401(k) plan in which its employees participate. Vislink also has a Group Personal Plan in our U.K. Subsidiary, investing funds with Royal London. U.K. employees are entitled to join the Plan to which the Company contributes varying amounts subject to status. Additionally, the Company operates a stakeholder pension scheme in the U.K.
The table below represents the Company’s matching contributions as follows:
SCHEDULE OF MATCHING CONTRIBUTIONS
| Three months Ended | Nine months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Company matching contributions - Group Personal Pension Plan, U.K. | $ | $ | $ | $ | ||||||||||||
| 28 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 11 — CONCENTRATIONS
Customer concentration risk
During
the three and nine months that ended September 30, 2022, no customers accounted for more than 10% of the Company’s total consolidated
sales. During the three months ending September 30, 2021,
On
September 30, 2022, approximately
Vendor concentration risk
During the three months ending September 30, 2022, % of the Company’s total consolidated purchases attributable to one vendor of approximately $ million. During the nine months that ended September 30, 2022, no purchases were made by individual vendors above 10% of the Company’s total consolidated purchases.
During the three months ending September 30, 2021, no vendor accounted for more than % of the Company’s quarterly-only consolidated purchases. During the nine months ending September 30, 2021, % and% of the Company’s total consolidated purchases attributable to two vendors of approximately $ million and $ million, respectively.
On September 30, 2022, no individual vendors accounted for more than % of the Company’s total accounts payable. On September 30, 2021, two vendors represented approximately $ million (%) and $ million (%), respectively, of the Company’s consolidated accounts payable, accounting for more than 10% of the Company’s total accounts payable.
NOTE 12 – REVENUE
The Company has one operating segment, and the decision-making group is the senior executive management team. The Company disaggregated revenue by primary geographical markets and revenue sources in the following tables:
SCHEDULE OF DISAGGREGATION OF REVENUE
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Three months Ended | Nine months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Primary geographical markets: | ||||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| South America | ||||||||||||||||
| Europe | ||||||||||||||||
| Asia | ||||||||||||||||
| Rest of World | ||||||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Primary revenue source: | ||||||||||||||||
| Equipment sales | $ | $ | $ | $ | ||||||||||||
| Installation, integration, and repairs | ||||||||||||||||
| Warranties | ||||||||||||||||
| Other (See Note 13) | **( | ) | *( | ) | ||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Long-Lived Assets: | ||||||||||||||||
| United States | $ | $ | ||||||||||||||
| Netherlands | ||||||||||||||||
| United Kingdom | ||||||||||||||||
| $ | $ | |||||||||||||||
| ** | |
| * |
NOTE 13 — REBATES
The amounts generated in Note 12 as part of the Primary revenue source “other” resulted from rebates issued to the Company’s filing appropriate governmental forms related to the research costs incurred by our U.K. subsidiary in prior fiscal years. The Company expects to continue filing applicable rebate forms for the 2022 fiscal year but cannot guarantee that such rebates will be available in future financial periods at similar levels or at all.
NOTE 14 — SUBSEQUENT EVENTS
Series A preferred stock dividends
Effective as of November 9, 2022, the Board of Directors
(the “Board”) of the Company declared a dividend of one one-thousandth of a share of Series A Preferred Stock, par value $
All shares of Series A Preferred Stock that are not present in person or by proxy at the Special Meeting held to vote on the reverse stock split as of immediately prior to the opening of the polls at such meeting will automatically be redeemed by the Company. Any outstanding shares of Series A Preferred Stock that have not been so redeemed will be redeemed if such redemption is ordered by the Board or automatically upon the approval by the Company’s stockholders of an amendment to the Company’s certificate of incorporation affecting the reverse stock split at such meeting.
The Series A Preferred Stock will be uncertificated, and no shares of Series A Preferred Stock will be transferable by any holder thereof except in connection with a transfer by such holder of any shares of the Company’s common stock held by such holder. In that case, a number of one one-thousandths of a share of Series A Preferred Stock equal to the number of shares of the Company’s common stock to be transferred by such holder would be transferred to the transferee of such shares of common stock.
The preceding description of the terms of the Series A Preferred Stock does not purport to be complete and is incorporated by reference to the related Certificate of Designation, which, is filed as Exhibit 3.1(i)(d) to this Quarterly Report on Form 10-Q, and which is incorporated into this Note 14 by reference.
| 29 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of the financial condition and results of operations of Vislink Technologies, Inc. for the three and nine-month period ended September 30, 2022. Unless otherwise specified herein, references to the “Company,” “Arcturus,” “we,” “our” and “us” mean Arcturus Therapeutics Holdings Inc. and its consolidated subsidiaries. You should read the following discussion and analysis together with the interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 10 K for the year ended December 31, 2021 (the “2021 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 31, 2022, as amended on May 2, 2022 and September 21, 2022. Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2021 Annual Report.
Cautionary Note About Forward-Looking Statements
This report includes forward-looking statements that, although based on assumptions that we consider reasonable, are subject to risks and uncertainties, which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements. You should read this report and the documents we reference in this report and have filed as exhibits to this report entirely and understand that our actual future results may be materially different from what we expect. You should also review the factors we describe in the reports we will file or submit from time to time with the SEC after this report’s date. We qualify all of our forward-looking statements by these cautionary statements.
Overview of COVID-19 Effects
The ongoing global health crisis (including resurgences) resulting from the pandemic has and continues to disrupt the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or voluntarily. In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic, and worldwide governmental authorities have taken extraordinary steps to contain and combat the impact of the coronavirus. While the outbreak recently appeared to be trending downward, notably as vaccination rates increased, new variants of COVID-19 continue emerging, including the Delta variant and the newly-discovered highly transmissible Omicron variant (currently a “variant of concern”), spreading throughout the United States and globally and causing significant uncertainty.
The global economy, our markets, and our business have been and may continue to be materially and adversely affected by COVID-19. Mounting omicron infections have forced firms to scramble, threatening economic recovery, and many employers vow to stay open but struggle as employees fall sick or quarantined. Major airlines have canceled thousands of flights, while New York and Washington public transit systems curtailed service because of staffing shortages. Professional sports schedules were upended, and corporations such as American Express, Goldman Sachs, and The Washington Post have shelved their return-to-office plans. The recovery remains vulnerable to the coronavirus’s unpredictable trajectory.
The COVID-19 pandemic in generating cases worldwide affects air and sea cargo shippers, factory shutdowns, and closures, creating global supply-chain bottlenecks, shortages of components, and surging prices of critical raw materials, squeezing manufacturers globally. We cannot foresee if worldwide governments can effectively contain the outbreak of COVID-19 on a sustained basis, nor can we predict the severity and duration of its impact. We cannot predict the effect of the Delta or Omicron variant or other new, more contagious, or lethal variants that may emerge, the effectiveness of COVID-19 vaccines against the Delta or Omicron variant or such different variants, and the related responses by governments, including reinstated government-imposed lockdowns or other measures.
The Company closely monitors the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it will impact business partners. The Company continues to experience supply chain shortages and delays in obtaining specific inventory items. The Company’s operations team is mitigating the risk by increasing inventory levels in its purchase management of these components. The execution of this policy has improved our ability to ship products. It is unclear how such restrictions will contribute to a general slowdown in the global economy, and it is difficult to isolate the impact of the pandemic on our business, the results of operations, financial condition, and our future strategic plans. Further, while many companies have survived the past year, and some have thrived, as the pandemic endures, we cannot predict how the global economy will respond to the return to normalcy or whether it will continue to sustain steadily.
In addition, the Company is uncertain of the total effect the pandemic will have on it in the long term since the scope and duration of the pandemic is unknown. The protocol followed in distributing effective vaccines across the world, and the extent of any resurgences of the virus or emergence of new variants of the virus, such as the Delta, Omicron, and other variants, will impact the stability of economic recovery and growth. The extent to which the operations of the Company, and the operations of its customers and supply chain, may be adversely impacted by the COVID-19 pandemic will depend mainly on these future developments. The Company may experience long-term disruptions to its operations resulting from government policy or guidance; quarantines of employees, customers, and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business or supply chains. The Company is actively monitoring and will continue to monitor the pandemic and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.
| 30 |
Ukraine/Russian Conflict
The war increasingly affects economic and global financial markets and exacerbates ongoing economic challenges, including rising inflation and global supply-chain disruption. The degree to which entities are or will be mainly affected depends on the nature and duration of uncertain and unpredictable events, such as further military action, additional sanctions, and reactions to ongoing developments by global financial markets. Because of its broader impact on these macroeconomic conditions, many companies globally may need to consider the war’s effect on specific accounting and financial reporting matters.
The Company does not generate revenue from the Russian or Ukrainian countries, nor do we have a physical presence, employees, or contractors in these areas. The Russian government’s invasion of Ukraine and the resultant sanctions imposed by the U.S. and other governments—designed to inflict severe consequences on the Russian economy—are impacting business continuity, liquidity, and asset values in Ukraine and Russia, agitating markets worldwide. It is difficult to estimate the impact of the ongoing invasion on the global economy, including increased inflation and higher energy and transportation costs; the invasion of Ukraine could adversely impact our financial results. Although we do not presently foresee risks that may affect our Company’s liquidity, operating results, and financial reporting, we monitor developments in Ukraine to assess direct material adverse effects on our business, financial condition, or results of operations.
Climate Change-Related Effects
Climate change is an important global issue that presents opportunities and challenges for our Company, partners, and communities. Climate change matters for our Company are likely to be driven by changes in physical climate parameters, regulations and/or public policy, and changes in technology and product demand.
While we seek to mitigate the risks associated with climate change, we recognize inherent climate-related risks regardless of where we conduct our businesses. Any of our locations may be vulnerable to the adverse effects of climate change. Climate-related events can potentially disrupt our business, including our customers, and cause us to experience higher attrition, losses, and additional costs to resume operations. Access to clean water and reliable energy in the communities where we operate our Company is a priority.
Overview
Vislink, incorporated in Delaware in 2006, is a global technology business specializing in collecting, delivering, and managing high-quality, live video and associated data from the action scene to the viewing screen. Vislink provides solutions for collecting live news, sports, and entertainment events for the broadcast markets. Vislink also furnishes the surveillance and defense markets with real-time video intelligence solutions using various tailored transmission products. The Vislink team also provides professional and technical services utilizing a staff of technology experts with decades of applied knowledge and real-world experience in the terrestrial microwave, satellite, fiber optic, surveillance, and wireless communications systems delivering a broad spectrum of customer solutions.
Live Broadcast:
Vislink delivers an extensive portfolio of solutions for live news, sports, and entertainment industries. These solutions include video collection, transmission, management, and distribution via microwave, satellite, cellular, I.P. (Internet Protocol), MESH, and bonded cellular/5G networks. We also provide solutions that utilize A.I. (Artificial Intelligence) technologies to provide automated coverage of news and sporting events. With over 50 years in operation, Vislink has the expertise and technology portfolio to deliver fully integrated, seamless, end-to-end solutions.
Industry-wide contributors acknowledge Vislink’s live broadcast solutions. The transmission of a vast majority of all outside wireless broadcast video content uses our equipment, with over 200,000 systems installed worldwide. We work closely with the majority of the world’s broadcasters. Vislink wireless cameras and ultra-compact encoders help bring many of the world’s most prestigious sporting and entertainment events to life. Recent examples include globally watched international sporting contests, award shows, racing events, and annual music and cultural events.
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Military And Government:
Vislink has developed high-quality solutions to meet surveillance and defense markets’ operational and industry challenges based on our knowledge of live video delivery. Vislink solutions are specifically designed with interagency cooperation, utilizing the internationally-recognized I.P. platform and a web interface for video delivery. Vislink provides comprehensive video, audio, and data communications solutions to law enforcement and the public safety community, including Airborne, Unmanned Systems, Maritime, and Tactical Mobile Command Posts. These solutions may include airborne downlinks, terrestrial point-to-point, tactical mobile command, maritime, UAV, and personal portable products that meet the demands of field operations, command centers, and central receiving sites. Short-range and long-range solutions are available in areas including established infrastructure and exceptionally remote regions, making valuable video intelligence available regardless of location. Vislink public safety and surveillance solutions are deployed worldwide, including throughout the U.S., Europe, and the Middle East, at the local, regional, and federal levels of operation, criminal investigation, crisis management, mobile command posts, and field operations.
Satellite Communications:
Over 30 years of technical expertise support Vislink’s satellite solutions. These solutions ensure robust, secure communications while delivering low transmission costs for any organization that needs high-quality, reliable satellite transmission. We offer turnkey solutions that begin with state-of-the-art coding, compression, and engine modulation and end with our robust, lightweight antenna systems. Vislink Satellite solutions focus heavily on being the smallest, lightest, and most efficient in their categories, making transportation and ease of use a key driver in the customer experience. Vislink offers an extensive range of satellite designs that allow customers to optimize bit rate, size, weight, and total cost. Our satellite systems are used extensively globally, with over 2,000 systems deployed by governments, militaries, and broadcasters.
Connected Edge Solutions:
Vislink offers the hardware and software solutions needed to acquire, produce, contribute, and deliver video overall private and public networks with the Mobile Viewpoint acquisition. Connected edge solutions aid the video transport concept of utilizing ubiquitous IP networks and cloud-scale computing across 5G, WiFi6, Mesh, and COFDM-enabled networks. These solutions include:
| ● | Live video encoding, stream adaptation, decoding, and production solutions | |||
| ● | Remote production workflows | |||
| ● | Wireless cameras | |||
| ● | AI-driven automated production | |||
| ● | Ability to contribute video over: | |||
| ○ | Bonded cellular (3G and 4G) | |||
| ○ | Satellite | |||
| ○ | Fiber | |||
| ○ | Emerging networks, including 5G and Starlink | |||
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Results of Operations
Comparison for the three and nine months ended September 30, 2022, and 2021
Revenues
In the three months ended September 30, 2022, the revenue was $7.1 million compared to $11.2 million for the three months ended September 30, 2021, representing a decrease of $4.1 million or 37%. In the nine months ended September 30, 2022, the revenue was $21.1 million compared to $22.8 million for the nine months ended September 30, 2021, representing a decrease of $1.7 million or 7%.
The decline in quarterly and year to date revenue was primarily attributable to a delay of several large government contracts. This was due to longer than expected sales cycles and reductions and delays in Government funding due to “Defund the Police” efforts.
Cost of Revenue and Operating Expenses
Cost of Components and Personnel
In the three months ended September 30, 2022, the cost of components and personnel was $3.6 million compared to $4.2 million for the three months ended September 30, 2021, representing a decrease of $0.6 million or 14%. In the nine months ended September 30, 2022, the cost of components and personnel was $10.2 million compared to $9.9 million for the nine months ended September 30, 2021, representing an increase of $0.3 million or 3%.
The decrease in the cost of components and personnel directly reflects the recognition of the Company’s cost savings strategy implemented in the third quarter of the fiscal year 2022, offset by a slight cost increase associated with delayed sales orders, new product line sales, and raw material contract requirements of the U.S. Department of Defense contract.
General and Administrative Expenses
General and administrative expenses are costs incurred in the operation of the day-to-day business, including salaries and benefits, stock-based compensation, payroll taxes, trade shows, marketing programs, promotional materials, professional services, facilities upkeep, general liability insurance, travel, other operating expenses associated with an established public entity.
In the three months ended September 30, 2022, the general and administrative expenses were $4.7 million compared to $6.0 million for the three months ended September 30, 2021, representing a decrease of $1.3 million or 22%. In the nine months ended September 30, 2022, the general and administrative expenses were $14.0 million compared to $13.4 million for the nine months ended September 30, 2021, representing an increase of $0.6 million or 4%.
The three-month decrease of $1.3 million is primarily attributable to a decrease of $1.6 million in acquisition costs, $0.7 million in salaries and benefits, and $0.3 in commissions. The decrease was primarily offset by an increase of $0.3 million each in consulting fees and stock-based compensation and $0.2 million each in consulting, employee benefits, and freight and postage.
The nine-month increase of $0.6 million is primarily attributable to an increase of $1.2 million in stock-based compensation and $0.8 million in advertising. The increase was offset mainly by a decrease of $1.6 million in acquisition costs.
Research and Development Expenses
Research and development expenses consist primarily of salary and benefit expenses, including stock-based compensation, payroll taxes, prototypes, facilities, and travel costs.
In the three months ended September 30, 2022, research and development expenses were $0.9 million compared to $0.8 million for the three months ended September 30, 2021, representing an increase of $0.1 million or 13%. In the nine months ended September 30, 2022, research and development expenses were $3.2 million compared to $2.2 million for the nine months ended September 30, 2021, representing an increase of $1.0 million or 45%.
The three-month increase of $0.1 million is primarily attributable to an increase of $0.2 million in salaries and benefits offset by a decrease of $0.1 in miscellaneous research costs. The nine-month increase of $1.0 million is mainly attributable to an increase of $0.8 million in wages and benefits and $0.2 million in miscellaneous research costs.
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Amortization and Depreciation
In the three months ended September 30, 2022, amortization and depreciation expenses were $0.5 million compared to $0.3 million for the three months ended September 30, 2021, representing an increase of $0.2 million or 67%. In the nine months ended September 30, 2022, amortization and depreciation expenses were $1.4 million compared to $0.9 million for the nine months ended September 30, 2021, representing a decrease of $0.5 million or 56%.
The increases are primarily attributable to the additional recognition of depreciation of property and equipment along with the amortization of intangible assets recognized in the acquisition of MVP
Other
Gain on settlement of debt
No material transactions occurred in the three months ended September 30, 2022, and 2021. In the nine months ended September 30, 2022, gain on settlement of debt were none compared to $1.4 million for the nine months ended September 30, 2021, representing a decrease of $1.4 million or 100%.
Net Loss
In the three months ended September 30, 2022, the Company had a net loss of $2.8 million compared to a net income of $0.7 million for the three months ended September 30, 2021, or an increase of $3.7 million or 529%. In the nine months ended September 30, 2022, the Company had a net loss of $8.2 million compared to a net loss of $2.8 million for the nine months ended September 30, 2021, or an increase of $5.4 million or 193%.
The increases are primarily attributable to a decrease in revenue accompanied by increases in stock-based compensation, advertising costs , and consulting fees, offset by a decrease in acquisition costs, salaries, and benefits.
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Liquidity and Capital Resources
The Company incurred an approximate $8.2 million loss from operations and $11.8 million of cash used in operating activities for the nine months ending September 30, 2022. The Company had $42.9 million in working capital, $294.6 million in accumulated deficits, and $24.5 million of cash on hand as of September 30, 2022.
The enduring effect of the COVID-19 pandemic, including the advent of successive variants, plus the uncertainty of possible future variants, may subject the Company to particular challenges in its business, financial condition, results of operations, and cash flows. The unpredictability of the pandemic’s scope, severity, duration, and actions implemented to alleviate its direct and indirect economic effects and containment measures provide no assurances that the pandemic will not have material adverse repercussions on the Company’s operations, liquidity, financial condition, and any residual unfavorable consequences to global economics.
The Company bases its evaluation on possibilities that may prove wrong and could exhaust our available capital resources sooner than we expect. Developments may take place, including those beyond our control, that would cause us to consume our available capital more quickly, including but not limited to those relating economic conditions including inflation, foreign exchange, fluctuations, and the markets in which we compete or wish to enter, strategic acquisitions, our market strategy, our research and development activities, regulatory matters, and technology and product innovations. The Company believes it will have sufficient funds to continue its operations for at least twelve months from the date of the filing of these financial statements.
Critical Accounting Policies
As of the date of the filing of this quarterly report, we believe there have been no material changes to our critical accounting policies during the nine months ended September 30, 2022, compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 31, 2022. The location of additional information about these critical accounting policies is in the “Management’s Discussion & Analysis of Financial Condition and Results of Operations” section included in our Annual Report on Form 10-K for the fiscal year ending December 31, 2021.
Cash Flows
The following table sets forth the significant components of our cash flow data statements for the periods presented.
For the Nine Months Ended
(In Thousands)
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (11,767 | ) | $ | (8,229 | ) | ||
| Net cash used in investing activities | (352 | ) | (17,504 | ) | ||||
| Net cash (used) provided by financing activities | (791 | ) | 58,605 | |||||
| Effect of exchange rate changes on cash | 1,155 | (5 | ) | |||||
| Net (decrease) increase in cash | $ | (11,755 | ) | $ | 32,867 | |||
Operating Activities
Net cash used in operating activities of approximately $11.8 million during the nine months ended September 30, 2022, was principally attributable to a net loss of $8.0 million and an increase in $6.0 million in inventory, $0.8 million in accounts receivable, and $1.3 million in stock-based compensation; a decrease in $1.7 million in prepaid expenses and other current assets, and $1.6 million of accrued expenses and interest expense.
Net cash used in operating activities of approximately $8.3 million during the nine months ended September 30, 2021, was principally attributable to an increase in inventory of $4.8 million, an increase in gain on settlement of debt of $1.4 million, an increase in net income of $2.8 million, a decrease in accounts payable of $1.9 million. The increases were predominantly offset by an increase in deferred revenue and customer deposits of $0.3 million, $0.9 of amortization and depreciation, $0.5 million of inventory valuation adjustments, and $0.2 million of bad debt.
Investing Activities
Net cash used by investing activities for the nine months ended September 30, 2022, and 2021 were $.4 million and $17.5 million, respectively, and principally related to the capital expenditures for furniture and computer equipment and the 2021 acquisition of MVP.
Financing Activities
Net cash used in and provided financing activities of approximately $0.8 million during the nine months ended September 30, 2022, was principally attributable to principal payments made towards D & O policy premiums. Net cash provided by financing activities of approximately $58.61 million during the nine months ended September 30, 2021, was principally attributable to net proceeds from equity raises and common stock warrants’ exercise.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of September 30, 2022, there have been no material changes to the information related to quantitative and qualitative disclosures about the market risk provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”) evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon their evaluation, our Certifying Officers concluded that our disclosure controls and procedures (as defined in Rules 13a -15(e) and I5d-15(e) under the Exchange Act) were not effective at the reasonable assurance level, as of September 30, 2022, due to the previously reported material weakness in our internal control over financial reporting. We identified the material weakness and discussed it in our amended annual report for the year ended December 31, 2021 filed, on Form 10-K/A on September 21, 2022 (the “Annual Report”).
b) Changes in Internal Controls over Financial Reporting
As required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, our Certifying Officers evaluated the internal control over financial reporting to determine whether any changes occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. Although we have continued our remediation efforts in connection with identified material weaknesses, as discussed in the Annual Report, the material weakness discussed in the Annual Report have not been fully remediated. Accordingly, we continue to pursue the remediation of the material weakness in our internal controls. Notwithstanding the continuing and unremediated material weakness, management, including the Certifying Officers, believes that the condensed consolidated financial statements contained in this Quarterly Report fairly present, in all material respects, our financial condition, results of operations, and cash flows for the fiscal periods presented in this Quarterly Report in conformity with GAAP.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
You should carefully consider the risk factors included in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. In addition, you should carefully consider the other information in this report on Form 10-Q, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in our risk factors and the risks described elsewhere in this report on Form 10-Q occur, our business, operating results, and financial condition could be seriously harmed. Accordingly, this report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Therefore, our actual results could differ materially from those anticipated in the forward-looking statements due to our risk factors and risks elsewhere in this report or otherwise.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On May 4, 2022, as part of a consulting agreement, the Company issued 38,703 shares of common stock to North Equities Corp. pursuant to the exemption available under Section 4(a)(2) of the Act for marketing consulting services, valued at $31,349. The value of the common stock issued was based on the stock’s fair value at the issuance time.
On July 19, 2022, as part of a consulting agreement, the Company issued 38,703 shares of common stock to North Equities Corp. pursuant to the exemption available under Section 4(a)(2) of the Act for marketing consulting services, valued at $22,835. The value of the common stock issued was based on the fair value of the stock at the time of the issuance.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None
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Item 6. Exhibits.
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
| * | Filed herewith | |
| (1) | Filed as an Exhibit on Form S-1 with the SEC on October 23, 2013. | |
| (2) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on June 13, 2014. | |
| (3) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on July 20, 2015. | |
| (4) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on June 20, 2016. | |
| (5) | Filed as an Exhibit on Current Report to Form 8-K with the SEC on August 20, 2021. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| VISLINK TECHNOLOGIES, INC. | ||
| Date: November 14, 2022 | By: | /s/ Carleton Miller |
| Carleton Miller | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 14, 2022 | By: | /s/ Michael Bond |
| Michael Bond | ||
| Chief Financial Officer | ||
| (Principal Accounting and Financial Officer) | ||
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Exhibit 31.1
CERTIFICATION PURSUANT TO 18 USC. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Carleton M. Miller, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Vislink Technologies, Inc. (the “registrant”):
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 14, 2022 | /s/ Carleton M. Miller |
| Carleton M. Miller | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Michael Bond, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Vislink Technologies, Inc. (the “registrant”):
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 14, 2022 | /s/ Michael Bond |
| Michael Bond | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vislink Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022 (the “Report”), I, Carleton M. Miller, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: November 14, 2022 | /s/ Carleton M. Miller |
| Carleton M. Miller | |
| Chief Executive Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION
OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vislink Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022 (the “Report”), I, Michael Bond, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: November 14, 2022 | /s/ Michael Bond |
| Michael Bond | |
| Chief Financial Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.