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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For
the quarterly period ended
OR
For the transition period from ____________to _______________.
Commission
File Number:
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| 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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Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Smaller
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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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As of May 15, 2023, the registrant’s common stock shares are .
VISLINK TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-Q
For the three months ended March 31, 2023
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 is based on facts and circumstances we currently know. Forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from those discussed in or anticipated by the forward-looking statements. Without limitation, factors that could cause or contribute to such differences in results and outcomes include those discussed in this Report.
We file 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 we electronically file such materials or furnish them to the SEC. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You can obtain additional information about the Public Reference Room’s operation by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site (www.sec.gov) containing reports, proxies, information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements to reflect any event or circumstance that may arise after the date of this Report. We urge 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)
| March, 31 | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Investments held to maturity | ||||||||
| 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 9) | ||||||||
| Series A Preferred stock, $ par value per share: shares authorized on March 31, 2023, and December 31, 2022, respectively; -- and shares issued and outstanding on March 31, 2023, and December 31, 2022, respectively. | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value per share: shares authorized on March 31, 2023, and December 31, 2022, respectively | ||||||||
| Common stock, $ par value per share, shares authorized on March 31, 2023, and December 31, 2022, respectively: Common stock, and were issued, and and were outstanding on March 31, 2023, and December 31, 2022, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock, at cost – shares as of March 31, 2023, and December 31, 2022, respectively | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these 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 | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue, net | $ | $ | ||||||
| Cost of revenue and operating expenses | ||||||||
| Cost of components and personnel | ||||||||
| Inventory valuation adjustments | ||||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Amortization and depreciation | ||||||||
| Total cost of revenue and operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Unrealized loss on investments in debt securities | ( | ) | ||||||
| Other income | ||||||||
| Dividend income | ||||||||
| Interest income, net | ||||||||
| Total other income (expense) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ||||||||
| Deferred tax benefits | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares outstanding: | ||||||||
| Basic and diluted | ||||||||
| Comprehensive loss: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| 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 MONTHS ENDED MARCH 31, 2023, AND 2022
(IN THOUSANDS, EXCEPT SHARE DATA)
Three months ended March 31, 2023:
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Series A | Additional | Other | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid In | Comprehensive | Treasury | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income (Loss) | Stock | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Unrealized gain on currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Elimination of Series A Preferred Stock | ( | ) | — | |||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||||||||||
| Compensation awards for services previously accrued | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Three months ended March 31, 2022:
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Series A | Additional | Other | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid In | Comprehensive | Treasury | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income (Loss) | Stock | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Unrealized loss on currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows used in operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Deferred tax benefits | ( | ) | ( | ) | ||||
| Unrealized loss on fair value of investment in bonds held to maturity | ||||||||
| Accretion of bond discount | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Provision for bad debt | ||||||||
| Recovery of bad debt | ( | ) | ( | ) | ||||
| Inventory valuation adjustments | ||||||||
| Amortization of right of use assets, operating assets | ||||||||
| Depreciation and amortization | ||||||||
| 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 used for investment in securities held to maturity | ( | ) | ||||||
| Cash used for property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided in financing activities | ||||||||
| Principal payments made on notes payable | ( | ) | ( | ) | ||||
| Net used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash information: | ||||||||
| Common stock issued in connection with: | ||||||||
| 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 | ( | ) | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | |||
| Operating lease liabilities recognized | $ | $ | ||||||
| Less: non-cash changes to operating lease liabilities accretion | ( | ) | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
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, entertainment, and news 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 utilizing A.I. (Artificial Intelligence) technologies to provide automated news and sporting events coverage. 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 most 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:
| ● | integrated suites of airborne downlink transmitters, receivers, and antenna systems | |
| ● | data and video connectivity for airborne, marine, and ground assets | |
| ● | UAV video distribution | |
| ● | flexible support for COFDM and bonded cellular/5G Networks | |
| ● | terrestrial point-to-point | |
| ● | tactical mobile command | |
| ● | IP-based, high-end encryption, full-duplex, real-time connectivity at extended operating ranges | |
| ● | high-throughput air/marine/ground-to-anywhere uplink and downlink systems | |
| ● | secure live streaming platforms for use in mobile and fixed assets | |
| ● | personal portable products |
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. These solutions are designed to 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.
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. While we continue offering satellite solutions, we no longer invest in the engineering and product development necessary to stay relevant in the sector. We will continue to market and sell our current solutions but do not anticipate introducing further upgrades or features to our satellite product line.
| 7 |
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 (continues)
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 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, 2022, filed with the United States Securities and Exchange Commission (the “SEC”) on March 31, 2023. 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 March 31, 2023, the results of its operations, and cash flow for the three months ended March 31, 2023, and 2022. Such adjustments are of a routine recurring nature. The results of operations for the three months ended March 31, 2023, 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 at the date of the consolidated financial statements. These estimates also affect the reported revenues and expenses during the reporting periods. 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. Actual results could differ from estimates, and any such differences may be material to our financial statements.
| 8 |
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
Risks and uncertainties include but are not limited to, the following: risks related to an economic downturn or deterioration of general macroeconomic conditions (including recessionary pressures, decreases in consumer spending power or confidence, and significant uncertainty in the global economy and capital markets resulting from rising inflation, volatility in energy and commodity prices, the impact of the Russia-Ukraine war, increasing diplomatic and trade friction between the U.S. and China, and related supply chain issues), risks arising from epidemic diseases or pandemics, potential adverse effects to our and our customers’ liquidity and financial performances from bank failures or other events affecting financial institutions.
To mitigate such possibilities, we may align our product pricing and 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist of unrestricted funds invested in a money market mutual fund. The following table illustrates the Company’s cash and cash equivalents:
| 3/31/23 | 12/31/22 | |||||||
| Cash on hand | $ | $ | ||||||
| Federal-backed mutual funds | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
Allowance for credit losses
Change in accounting principles
In June 2016, the FASB established Topic 326, Financial Instruments—Credit Losses, Measurement of Credit Losses on Financial Instruments (ASU) No. 2016-13, which requires a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates, including accounts receivable.
The standard replaces the existing incurred credit loss model with the Current Expected Credit Losses (“CECL”) model. It is required to measure credit losses based on the Company’s estimate of expected losses rather than incurred losses, which generally results in earlier recognition of allowances for credit losses. Under ASC 326, the Company evaluates specific criteria, including aging and historical write-offs, the current economic condition of particular customers, and future economic conditions of countries utilizing a consumption index to determine the appropriate allowance for credit losses. The Company completed its assessment of the new standard and did not adjust the opening balance of retained earnings relating to its trade receivables. The Company writes off receivables once it is determined that they are no longer collectible, as local laws allow.
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.
| 9 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 customer contracts 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 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.
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 IMT, Vislink, and Mobile Viewpoint Corporate B.V., 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.
| 10 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
There were no capital leases, now titled “finance leases” under ASC 842, in the Company’s lease portfolio as of March 31, 2023. 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.
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 non-employees. The measurement date for equity-classified non-employee 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 non-employee 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 non-employee 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 non-employee awards.
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 non-employee options, the expected term is the entire term. 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.
| 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)
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 attainments 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.
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 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.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Anti-dilutive potential common stock equivalents are excluded from the calculation of loss per share: | ||||||||
| Stock options | ||||||||
| Warrants | ||||||||
Fair Value of Financial Instruments
The authoritative guidance for fair value measurements under topic ASC 820, “Fair Value Measurements and Disclosures,” establishes a three-tier fair value hierarchy, prioritizing the inputs used in measuring fair value. These tiers include:
| ● | Level 1 is observable inputs such as quoted prices in active markets. |
| ● | Level 2 is defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
| ● | Level 3 is defined as unobservable inputs with little or no market data, requiring an entity to develop its assumptions. |
Our financial instruments include cash equivalents, accounts receivable, investments, prepaid expenses and other assets, accounts payable, accrued expenses, and short-term debt. Fair value estimates of these instruments are made at a specific point in time based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, investments, prepaid expenses, and other assets, accounts payable, and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.
| 12 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments (continued)
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. Effective January 1, 2020, the Company adopted the provisions of ASU 2018-13. The adoption did not have a material impact on the Company’s consolidated financial statements or related disclosures. As of March 31, 2023, the Company had level 2 fair value assets (see Note 3).
Foreign Currency and Other Comprehensive (Gains) Loss
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 three months ending March 31, 2023, and 2022, respectively. 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 exchange gains and losses and changes in accumulated comprehensive income approximately as follows:
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| 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 an internet website providing currency conversion, online retail foreign exchange trading, 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 March 31, 2023 – £ | |
| ● | The
average exchange rate for the three months ended March 31, 2023 – £ | |
| ● | As
of March 31, 2022 – £ | |
| ● | The
average exchange rate for the three months ended March 31, 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.
On March 31, 2023, the Company entered into an agreed separation with Michael Bond, the former Chief Financial Officer. Effective April 1, 2023, Paul Norridge became the Company’s new Chief Financial Officer.
| 13 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Principles
Recent Accounting Pronouncements
Other recent accounting standards issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
NOTE 2 — LIQUIDITY AND FINANCIAL CONDITION
The
Company incurred an approximate $
During the first quarter of 2023, the Company invested a portion of its cash reserves of approximately $
Many factors may impact the Company’s liquidity requirements. These may include but are not limited to 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 filing date of these financial statements.
NOTE 3 — INVESTMENTS
During the first quarter of the fiscal year 2023, the Company’s used cash to purchase the following debt instruments :
| ● | On
January 23, 2023, the Company purchased a bond, “HSBC USA INC CP,” with a face value of $ | |
| ● | On
February 1, 2023, the Company purchased a bond, “Federal Home Loan Banks,” with a face value of $ | |
| ● | On
February 28, 2023, the Company purchased a bond, “Federal National Mortgage Association,” with a face and par value of
$ |
The Company identified these transactions as investments in debt security and will apply the guidance under ASC Topic 320, “Investments in debt securities,” and for interest income guidance under ASC Topic 310-20, “Receivables.” As of March 31, 2023, the foregoing investments have a stated maturity of one year or less. Management intends to treat these investments as held to maturity.
| 14 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 — INVESTMENTS (continued)
The Company has determined the fair value of its investments held to maturity based on Level 2 inputs as of March 31, 2023:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Federal Bonds | $ | $ | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The Company’s investments held to maturity are as follows as of March 31, 2023:
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| Federal Bonds | $ | $ | $ | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
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 three months ended on March 31, 2023.
The following table illustrates finite intangible assets as of March 31, 2023:
| 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, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
Proprietary Technology:
The
Company amortizes proprietary technology over
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:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Proprietary Technology | $ | $ | ||||||
| Trade Names and Technology | ||||||||
| Customer Relationships | ||||||||
| $ | $ | |||||||
| 15 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 — INTANGIBLE ASSETS (continued)
The Company has recognized the amortization of intangible assets as follows:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Proprietary Technology | $ | $ | ||||||
| Patents and Licenses | ||||||||
| Trade Names and Technology | ||||||||
| Customer Relationships | ||||||||
| $ | $ | |||||||
The
weighted average remaining life of the amortization of the Company’s intangible assets is approximately
| Period ending March 31, | ||||
| 2024 | $ | 642,000 | ||
| 2025 | 640,000 | |||
| 2026 | 624,000 | |||
| 2027 | 540,000 | |||
| 2028 | 476,000 | |||
| Thereafter | 1,234,000 | |||
| $ | ||||
NOTE 5 — NOTES PAYABLE
The table below represents the Company’s notes payable as of March 31, 2023, and December 31, 2022:
| Principal | ||||||||
| 3/31/23 | 12/31/22 | |||||||
| On
April 5, 2022, the Company renewed its D & O insurance policy at a cost of approximately $ | $ | $ | ||||||
| $ | $ | |||||||
NOTE 6 — LEASES
The Company’s leasing arrangements include office space, deployment sites, and storage warehouses, both domestically and internationally. The operating leases contain various terms and provisions, with lease terms of approximately one to four years remaining as of March 31, 2023. Certain individual leases contain rent escalation clauses and lease concessions that require additional rental payments in the later years of the term. We recognize rent expense for these types of contracts on a straight-line basis over the minimum lease term.
On
March 31, 2023, the Company recorded approximately $
| 16 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 — LEASES (continued)
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. There were no new leases during the three months ending March 31, 2023.
The following table illustrates operating lease data for the three months ending March 31, 2023, and 2022:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Lease cost: | ||||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| 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 March 31, 2023:
| Amount | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 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:
| Location | Square Footage | Lease-End Date | Approximate Future Payments | |||||||||||
| Colchester, U.K. – Waterside House | Dec | $ | ||||||||||||
| Singapore | July | |||||||||||||
| Billerica, MA | Dec | |||||||||||||
| Hemel, UK | Oct | |||||||||||||
| Mount Olive, NJ | Jan | |||||||||||||
| 17 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7— STOCKHOLDERS’ EQUITY
Preferred stock
On
March 22, 2023, the Board of Directors of the Corporation approved a resolution to eliminate the Corporation’s Certificate of Designation,
Preferences, and Rights (the “Certificate of Elimination”) of the Series A Preferred Stock, par value $
Upon the effective filing of this Certificate of Elimination, the shares previously designated under the certificate of designation as Series A Preferred Stock shall resume the status of authorized but unissued shares of preferred stock of the Corporation. As of March 31, 2023, shares are authorized, and no Series A Preferred Stock was issued or outstanding.
Common stock
During the three months that ended March 31, 2023, the Company:
| ● | Issued shares of common stock to specific board members under a commitment agreement valued at $. The common stock’s value was determined on the agreement’s original date. | |
| ● | Recognized approximately $ of stock-based compensation costs associated with outstanding stock options recorded in general and administrative expenses offsetting additional paid-in capital. |
| 18 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Equity Incentive Plans:
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| 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 | $ | $ | ||||||
| Range of exercise prices | $ | to $ | $ | to $.00 | ||||
| Quantity: | ||||||||
| Beginning balance-January 1st, outstanding options | ||||||||
| Stock options forfeited | ( | ) | ( | ) | ||||
| Ending balance-March 31st, outstanding options | ||||||||
| Ending balance-March 31st, exercisable options | ||||||||
| Weighted Averages: | ||||||||
| Beginning balance-January 1st, outstanding options | $ | $ | ||||||
| Stock options forfeited | ( | ) | ( | ) | ||||
| Ending balance-March 31st, outstanding options | $ | $ | ||||||
| Ending balance-March 31st, exercisable options | $ | $ | ||||||
Time-vested stock options:
| 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 | $ | |||||||||||||||||
| 19 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCK-BASED COMPENSATION (continued)
Time-vested stock option (continued):
| Expected term (years) | Expected dividend yield | Risk-free interest rate | Volatility | Exercise Price | ||||||||||||||||
| ● Carleton M. Miller — CEO | % | % | $ | |||||||||||||||||
| ● Michael Bond — CFO | % | % | $ | |||||||||||||||||
Note: no time-vested option awards were granted during the three months ending March 31, 2023. Effective March 31, 2023, the Company entered a separation agreement with Michael Bond, including the acceleration of vested options.
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| 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 | $ | $ | ||||||
| Range of exercise prices | $ | to $ | $ | to $ | ||||
| Quantity: | ||||||||
| Beginning balance-January 1st, outstanding | ||||||||
| Granted, canceled, expired | ||||||||
| Ending balance-March 31st, outstanding | ||||||||
| Ending balance-March 31st, exercisable | ||||||||
| Weighted Averages: | ||||||||
| Beginning balance-January 1st, outstanding | $ | $ | ||||||
| Granted, canceled, expired | $ | |||||||
| Ending balance-March 31st, outstanding | $ | $ | ||||||
| Ending balance-March 31st, exercisable | $ | $ | ||||||
| 20 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCK-BASED COMPENSATION (continued)
Performance-based stock options:
| 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:
| * | |
| ** | |
| *** |
| Expected term (years) | Expected dividend yield | Risk-free interest rate | Volatility | Exercise Price | ||||||||||||||||
| ● Carleton M. Miller — CEO | % | % | $ | |||||||||||||||||
Note: no performance-based stock option awards were granted during the three months ended March 31, 2023.
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| 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 | $ | $ | ||||||
| Range of exercise prices | $ | $ | ||||||
| Quantity: | ||||||||
| Beginning balance-January 1st, outstanding | ||||||||
| Granted, canceled, expired | ||||||||
| Ending balance-March 31st, outstanding | ||||||||
| Ending balance-March 31st, exercisable | ||||||||
| 21 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCK-BASED COMPENSATION (continued)
Performance-based stock options (continued):
The following table illustrates various plan data under performance-based stock option awards (continued):
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Weighted Averages: | ||||||||
| Beginning balance-January 1st, outstanding | $ | $ | ||||||
| Granted, canceled, expired | ||||||||
| Ending balance-March 31st, outstanding | $ | $ | ||||||
| Ending balance-March 31st, exercisable | $ | $ | ||||||
The probability of achieving any required metrics for vesting is inconclusive, and no options are exercisable as of March 31, 2023. 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 any unrecognized costs over the remaining requisite service period of the awards.
Restricted Stock Units
Restricted stock awards — time-based:
| Grant | Initial RSUs Vesting | Remaining RSUs Vesting | ||||||||||||||||||||||
| Recipient | Date | Units | Exercise Price | Date | Units | Units | Terms | |||||||||||||||||
| Carleton M. Miller — CEO | $ | |||||||||||||||||||||||
| Michel Bais — Managing Director | $ | |||||||||||||||||||||||
| Group of 22 Employees | $ | |||||||||||||||||||||||
| Carleton M. Miller — CEO | $ | |||||||||||||||||||||||
| Michael Bond — CFO | $ | |||||||||||||||||||||||
| Group of 6 Employees | $ | |||||||||||||||||||||||
| Group of 11 Employees | $ | |||||||||||||||||||||||
Note: Effective March 31, 2023, the Company entered a separation agreement with Michael Bond, including accelerating time-based restricted stock awards.
| 22 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCK-BASED COMPENSATION (continued)
Restricted Stock Units (continued)
Restricted stock awards — time-based (continued):
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| 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 | years | ||||||
| Intrinsic value per share | $ | $ | ||||||
| Range of exercise prices | $ | to $ | $ | to $ | ||||
| Quantity: | ||||||||
| Beginning balance-January 1st, outstanding | ||||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Ending balance-March 31st, outstanding | ||||||||
| Ending balance-March 31st, exercisable | ||||||||
| Weighted Averages: | ||||||||
| Beginning balance-January 1st, outstanding | $ | $ | ||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Ending balance-March 31st, outstanding | $ | $ | ||||||
| Ending balance-March 31st, exercisable | $ | $ | ||||||
| 23 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCK-BASED COMPENSATION (continued)
Restricted Stock Units (continued)
Restricted stock awards — performance-based:
| 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.
The Company granted the following awards under the amended Plan for restricted stock units (“RSUs”) subject to performance vesting conditions and continued employment:
| Grant | Units Vesting Schedule | |||||||||||||||||||||
| Recipient | Date | Units | Exercise Price | Tranche 1 | Tranche 2 | Tranche 3 | ||||||||||||||||
| Carleton M. Miller — CEO | $ | |||||||||||||||||||||
| Michael Bond — CFO | $ | |||||||||||||||||||||
| * | |
| ** | |
| *** |
Note: no performance-based restricted stock awards were granted during the three months ended March 31, 2023. Effective March 31, 2023, the Company entered a separation agreement with Michael Bond, resulting in the forfeiture of units held under his employment agreement.
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| 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 | years | ||||||
| Intrinsic value per share | $ | $ | ||||||
| Range of exercise prices | $ | $ to $ | ||||||
| 24 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 — STOCK-BASED COMPENSATION (continued)
Restricted Stock Units (continued)
Restricted stock awards — performance-based (continued):
The following table illustrates various plan data under performance-based restricted stock awards (continued):
| Three months ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Quantity: | ||||||||
| Beginning balance-January 1st, outstanding | ||||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Ending balance-March 31st, outstanding | ||||||||
| Ending balance-March 31st, exercisable | ||||||||
| Weighted Averages: | ||||||||
| Beginning balance-January 1st, outstanding | $ | $ | ||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Ending balance-March 31st, outstanding | $ | $ | ||||||
| Ending balance-March 31st, exercisable | $ | $ | ||||||
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, and no awards are exercisable as of March 31, 2023. 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 any unrecognized costs over the remaining requisite service period of the awards.
NOTE 9 — COMMITMENTS AND CONTINGENCIES
Pension:
The Company may make a matching contribution to its employees’ 401(k) plan. 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:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2022 | |||||||
| Company matching contributions - Group Personal Pension Plan, U.K. | $ | $ | ||||||
| 25 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — COMMITMENTS AND CONTINGENCIES (continued)
Nasdaq Compliance:
On May 20, 2022, we received notice from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company of its noncompliance with Bid Price 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. The Company received a grace period of 180 days, or until November 16, 2022, to regain compliance with the minimum bid price requirement.
On November 10, 2022, the Company submitted a request to Nasdaq for an additional 180-day grace period to regain compliance with the minimum bid price requirement. On November 17, 2022, the Company received a letter from Nasdaq advising that the Company had been granted an additional 180-day grace period extension until May 15, 2023, to regain compliance with the minimum bid price requirement and all other applicable requirements for initial listing on the Nasdaq Capital Market except for the minimum bid price requirement.
On
January 11, 2023, the Company held a special meeting of stockholders (the “Special Meeting”) whereby stockholders approved
a proposal to authorize the Board of Directors of the Company (the “Board”), in its discretion but before the one-year anniversary
of the date of the Special Meeting, to implement an amendment to the Company’s certificate of incorporation to effect a reverse
stock split (the “Reverse Stock Split”) of all of the outstanding shares of Common Stock, of the Company, at a ratio in the
range of
On May 1, 2023, the Company effected a 1-for-20 reverse stock split. Upon effectiveness of the reverse stock split, every twenty shares of an outstanding common stock decreased to one share of common stock. We have retroactively applied the reverse split throughout this quarterly report to all periods presented.
NOTE 10 — CONCENTRATIONS
Customer concentration risk
During
the three months ending March 31, 2023, approximately
On
March 31, 2023, approximately
Vendor concentration risk
During the three months ending March 31, 2023, no vendor met the criteria in excess of 10% of the Company’s consolidated inventory purchases. During the three months ending March 31, 2022, no vendor met the criteria in excess of 10% of the Company’s consolidated purchases.
On
March 31, 2023, two vendors represented approximately $ (%) and $ (%) of the Company’s consolidated accounts
payable. On March 31, 2022, approximately 15% of the Company’s consolidated accounts payable was due from one customer for approximately
$
| 26 |
VISLINK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 11 – 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:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Primary geographical markets: | ||||||||
| North America | $ | $ | ||||||
| South America | ||||||||
| Europe | ||||||||
| Asia | ||||||||
| Rest of World | ||||||||
| $ | $ | |||||||
| Primary revenue source: | ||||||||
| Equipment sales | $ | $ | ||||||
| Installation, integration, and repairs | ||||||||
| Warranties | ||||||||
| $ | $ | |||||||
| Long-Lived Assets: | ||||||||
| United States | $ | $ | ||||||
| Netherlands | ||||||||
| United Kingdom | ||||||||
| $ | $ | |||||||
NOTE 12 – OTHER INCOME (REBATES)
The
Company included approximately $
NOTE 13 — RECLASSIFICATION OF PRIOR YEAR PRESENTATION
Specific prior year amounts have been reclassified for consistency with the current year’s presentation. An adjustment has been made to the Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022. We separated tax rebates related to research costs incurred by our U.K. subsidiary to other income from revenue. The reclassification did not affect the reported results of operations.
NOTE 14 — SUBSEQUENT EVENTS
On March 31, 2023, the Company entered into an agreed separation with Michael Bond, the former Chief Financial Officer. Effective April 1, 2023, Paul Norridge became the Company’s new Chief Financial Officer.
Reverse Stock Split
Effective May 1, 2023, the Company effected a one-for-20 reverse stock split of the common stock. All per-share numbers reflect the one-for-20 reverse stock split. We have retroactively applied the reverse split throughout this quarterly report to all periods presented.
| 27 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the accompanying consolidated financial statements and the associated notes thereto of this Quarterly Report, the audited consolidated financial statements and the notes thereto, and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission on March 31, 2023.
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 materially differ from what we expect. You should also review the factors and risks we describe in 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 COVID-19 pandemic has caused and may continue to cause us to modify our business practices (including employee travel and employee work locations), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.
The COVID-19 pandemic and mitigation measures have caused and may continue to drive adverse impacts on global supply chains and economic conditions. These impacts could affect the development, deployment, maintenance, and demand for our products and services.
The extent to which the COVID-19 pandemic impacts our business, results of operations, cash flows, and financial condition will depend on future highly uncertain developments that cannot be predicted, including new information that may emerge concerning other strains of the virus and the actions to contain its impact. The Company will continue to closely monitor the effect of COVID-19 on all aspects of our business and geographies.
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 Russia, the Russian-controlled territories, or Ukraine, 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 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.
| 28 |
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, entertainment, and news 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 utilizing A.I. (Artificial Intelligence) technologies to provide automated news and sporting events coverage. 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 most 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:
| ● | integrated suites of airborne downlink transmitters, receivers, and antenna systems | |
| ● | data and video connectivity for airborne, marine, and ground assets | |
| ● | UAV video distribution | |
| ● | flexible support for COFDM and bonded cellular/5G Networks | |
| ● | terrestrial point-to-point | |
| ● | tactical mobile command | |
| ● | IP-based, high-end encryption, full-duplex, real-time connectivity at extended operating ranges | |
| ● | high-throughput air/marine/ground-to-anywhere uplink and downlink systems | |
| ● | secure live streaming platforms for use in mobile and fixed assets | |
| ● | personal portable products |
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. These solutions are designed to 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.
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. While we continue offering satellite solutions, we no longer invest in the engineering and product development necessary to stay relevant in the sector. We will continue to market and sell our current solutions but do not anticipate introducing further upgrades or features to our satellite product line.
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 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 | ||
| 29 |
Results of Operations
Comparison for the three months ended March 31, 2023, and 2022
Revenues
Revenues for the three months ending March 31, 2023, was $7.2 million compared to $6.9 million for the three months ending March 31, 2022, representing an increase of $0.3 million or 4%. During the third and fourth quarters of 2022, the Company discontinued several product lines due to their lack of performance expectations and appeal to our customer base. The Company altered its product marketing for its customer base in the last quarter of 2022 by providing a simplified approach to accessing products and solutions. The Company contends we are on track to meet our long-term revenue growth goals.
Cost of Revenue and Operating Expenses
Cost of Components and Personnel
The cost of components and personnel for the three months ended March 31, 2023, was $3.3 million compared to $3.4 million for the three months ended March 31, 2022, representing a decrease of $0.1 million or 3%. The reduction is indicative of management’s decision to discontinue several product lines in the third and fourth quarters of 2022.
General and Administrative Expenses
General and administrative expenses are the expenses of operating the business daily and include salary and benefit expenses, including stock-based compensation and payroll taxes, as well as the costs of trade shows, marketing programs, promotional materials, professional services, facilities, general liability insurance, travel and other operating expenses associated with being a public company.
General and administrative expenses for the three months ended March 31, 2023, were $5.0 million compared to $4.9 million for the three months ended March 31, 2022, representing an increase of $0.1 million or 2%. The increase is mainly attributable to an increase of $0.2 million each in stock-based compensation, rent and utilities, offset by a decrease of $0.2 million each in salaries and benefits, freight and postage. Other changes in the administration of a public company are de minimis.
Research and Development Expenses
Research and development expenses consist primarily of salary and benefit expenses, including payroll taxes, prototypes, facilities, and travel costs.
Research and development expenses for the three months ended March 31, 2023, were $0.8 million compared to $1.1 million for the three months ended March 31, 2022, representing a decrease of $0.3 million or 27%. The decline is mainly attributable to a reduction of $0.3 million in miscellaneous research costs.
Amortization and Depreciation
Amortization and depreciation expenses for the three months ended March 31, 2023, were $0.3 million compared to $0.5 million for the three months ended March 31, 2022, representing a decrease of $0.2 million or 40%. The decline is attributable to a lower net book value of intangible assets costs subject to amortization.
Other
Dividend and Interest Income
Dividend and interest income increased by approximately $0.2 million for the three months ended March 31, 2023, compared to $0.0 million for the three months ended March 31, 2022, representing an increase of $0.2 million or 100%. The increase is due to the Company’s investment in government-backed bonds held to maturity and money market funds.
Net Loss
For the three months ended March 31, 2023, the Company had a net loss of $1.8 million, compared to a net loss of $2.8 million for the three months ended March 31, 2022, or a decrease of $1.0 million or 36%. The reduction in net loss is primarily attributable to recognizing additional stock-based compensation, salaries and benefits, offset by a decrease in miscellaneous research costs and amortization and depreciation. Additionally, the Company invested available funds in securities, increasing investment income.
| 30 |
Liquidity and Capital Resources
The Company incurred an approximate $2.3 million loss from operations and $0.6 million of cash used in operating activities for the three months ended March 31, 2023. The Company had $38.2 million in working capital, $301.9 million in accumulated deficits, and $14.0 million of cash and cash equivalents as of March 31, 2023.
During the first quarter of 2023, the Company invested a portion of its cash reserves of approximately $10.8 million in Federal bonds intended to be held to maturity, and $11.3 million in Federally backed money market mutual funds, with the primary purpose of seeking to increase investment income.
Many factors may impact the Company’s liquidity requirements. These may include but are not limited to 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 filing date 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 three months ended March 31, 2023, compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 31, 2023. 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, 2022.
Cash Flows
The following table sets forth the significant components of our cash flows data statements for the periods presented.
For the three months ended
(In Thousands)
| March 31, 2023 | March 31, 2022 | |||||||
| Net cash used in operating activities | $ | (602 | ) | $ | (4,879 | ) | ||
| Net cash used in investing activities | (10,940 | ) | (209 | ) | ||||
| Net cash used in financing activities | (84 | ) | (99 | ) | ||||
| Effect of exchange rate changes on cash | 42 | (21 | ) | |||||
| Net decrease in cash and cash equivalents | $ | (11,584 | ) | $ | (5,208 | ) | ||
Operating Activities
Net cash used in operating activities of approximately $1.0 million during the three months ended March 31, 2023, was principally attributable to a net loss of $1.8 million and $0.9 million in stock-based compensation. Other changes in the net cash used in public company administration are de minimis. Net cash used in operating activities of approximately $4.9 million during the three months ended March 31, 2022, was principally attributable to an increase in — a net loss of $2.8 million, $2.2 million in inventory, $0.7 million in stock-based compensation, a decrease in — $0.5 million in deferred revenue and customer deposits, $0.4 million in prepaid expenses and other current assets, and $0.3 million of accrued expenses and interest expense.
Investing Activities
Net cash used by investing activities for the three months ended March 31, 2023, and 2022 were $10.9 million and $0.2 million, respectively, and principally related to the Company’s investment in government-backed securities and money market funds and capital expenditures for furniture and computer equipment.
Financing Activities
Net cash used in financing activities of approximately $0.1 million during the three months ended March 31, 2023 and 2022, was principally attributable to principal payments made towards D & O policy premiums.
| 31 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of March 31, 2023, 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, 2022, filed with the SEC on March 31, 2023.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial and accounting officer), we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. In their assessment of the effectiveness of internal control over financial reporting as of March 31, 2023, management concluded that such control was ineffective and that there were control deficiencies that constituted material weaknesses because (i) we currently do not employ the appropriate number of accounting personnel to ensure (a) we maintain proper segregation of duties, (b) conduct a tolerable risk assessment, and (ii) we have not adequately documented a complete assessment of the effectiveness of the design and operation of our internal control over financial reporting. Considering these material weaknesses, we performed additional procedures and analyses as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles.
Management has engaged a third-party consultant to identify and document our internal control deficiencies and assess current controls and recommendations regarding remediation efforts to eliminate or mitigate the control deficiencies.
Notwithstanding the material weakness as of March 31, 2023, management, including the Certifying Officers, believe that the condensed consolidated financial statements contained in this Annual Report filing fairly present, in all material respect, our financial condition, results of operations, and cash flows for the fiscal period presented in conformity with GAAP.
Changes to Internal Control Over Financial Reporting
Although we have continued our remediation efforts in connection with identified material weaknesses, the material weakness, as discussed in our Annual Report on Form 10-K for the period ended December 31, 2022, has not been fully remediated. As we continue to remediate the material weakness in our internal controls, we have made changes during our most recently completed fiscal quarter to our internal controls, including changes to enhance the supervisory review of our accounting procedures. Notwithstanding the continuing and un-remediated 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.
| 32 |
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None
| 33 |
Item 6. Exhibits.
In accordance with SEC Release 33-8238, Exhibits 31.1, 31.2, 32.1 and 32.2 are being furnished and not filed.
| * | Filed herewith | |
| (1) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on April 28, 2023. | |
| (2) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on August 20, 2021. | |
| (3)) | Filed as an Exhibit on Form S-1/A with the SEC on May 21, 2013. | |
| (4) | Filed as an Exhibit on Current Report to Form 8-K with the SEC on August 19, 2013. | |
| (5) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on May 13, 2016. | |
| (6) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on February 6, 2017. | |
| (7) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on February 10, 2017. | |
| (8) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on August 16, 2017. | |
| (9) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on May 29, 2018. | |
| (10) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on October 11, 2018. | |
| (11) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on July 16, 2019. | |
| (12) | Filed as an Exhibit on Current Report on Form 8-K with the SEC on March 27, 2023. | |
| (13) | Filed as an Exhibit on Current Report on Form 10-K/A with the SEC on May 1, 2023. |
| 34 |
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: May 15, 2023 | By: | /s/ Carleton Miller |
| Carleton Miller | ||
| Chief Executive Officer | ||
| (Duly Authorized Officer and Principal Executive Officer) | ||
| Date: May 15, 2023 | By: | /s/ Paul Norridge |
| Paul Norridge | ||
| Chief Financial Officer | ||
| (Duly Authorized Officer and Principal Financial Officer) | ||
| 35 |
