NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Operations
Vislink,
incorporated in Delaware in 2006, is a global technology business specializing in collecting, delivering, and managing high-quality,
live video and associated data from the action scene to the viewing screen. Vislink provides solutions for collecting live news, sports,
and entertainment events for the broadcast markets. Vislink also furnishes the surveillance and defense markets with real-time video
intelligence solutions using various tailored transmission products. The Vislink team also provides professional and technical services
utilizing a staff of technology experts with decades of applied knowledge and real-world experience in the terrestrial microwave, satellite,
fiber optic, surveillance, and wireless communications systems delivering a broad spectrum of customer solutions.
Live
Broadcast:
Vislink
delivers an extensive portfolio of solutions for live news, sports, and entertainment industries. These solutions include video collection,
transmission, management, and distribution via microwave, satellite, cellular, I.P. (Internet Protocol), MESH, and bonded cellular/5G
networks. We also provide solutions that utilize A.I. (Artificial Intelligence) technologies to provide automated coverage of news and
sporting events. With over 50 years in operation, Vislink has the expertise and technology portfolio to deliver fully integrated, seamless,
end-to-end solutions.
Industry-wide
contributors acknowledge Vislink’s live broadcast solutions. The transmission of a vast majority of all outside wireless broadcast
video content uses our equipment, with over 200,000 systems installed worldwide. We work closely with the majority of the world’s
broadcasters. Vislink wireless cameras and ultra-compact encoders help bring many of the world’s most prestigious sporting and
entertainment events to life. Recent examples include globally watched international sporting contests, award shows, racing events, and
annual music and cultural events.
Military
And Government:
Vislink
has developed high-quality solutions to meet surveillance and defense markets’ operational and industry challenges based on our
knowledge of live video delivery. Vislink solutions are specifically designed with interagency cooperation, utilizing the internationally-recognized
I.P. platform and a web interface for video delivery. Vislink provides comprehensive video, audio, and data communications solutions
to law enforcement and the public safety community, including Airborne, Unmanned Systems, Maritime, and Tactical Mobile Command Posts.
These solutions may include airborne downlinks, terrestrial point-to-point, tactical mobile command, maritime, UAV, and personal portable
products that meet the demands of field operations, command centers, and central receiving sites. Short-range and long-range solutions
are available in areas including established infrastructure and exceptionally remote regions, making valuable video intelligence available
regardless of location. Vislink public safety and surveillance solutions are deployed worldwide, including throughout the U.S., Europe,
and the Middle East, at the local, regional, and federal levels of operation, criminal investigation, crisis management, mobile command
posts, and field operations.
Satellite
Communications:
Over
30 years of technical expertise support Vislink’s satellite solutions. These solutions ensure robust, secure communications while
delivering low transmission costs for any organization that needs high-quality, reliable satellite transmission. We offer turnkey solutions
that begin with state-of-the-art coding, compression, and engine modulation and end with our robust, lightweight antenna systems. Vislink
Satellite solutions focus heavily on being the smallest, lightest, and most efficient in their categories, making transportation and
ease of use a key driver in the customer experience. Vislink offers an extensive range of satellite designs that allow customers to optimize
bit rate, size, weight, and total cost. Our satellite systems are used extensively globally, with over 2,000 systems deployed by governments,
militaries, and broadcasters.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Nature
of Operations (continued)
Connected
Edge Solutions:
Vislink
offers the hardware and software solutions needed to acquire, produce, contribute, and deliver video over all private and public networks
with the Mobile Viewpoint acquisition. Connected edge solutions aid the video transport concept of utilizing ubiquitous IP networks and
cloud-scale computing across 5G, WiFi6, Mesh, and COFDM-enabled networks. These solutions include:
|
● |
Live
video encoding, stream adaptation, decoding, and production solutions |
|
● |
Remote
production workflows |
|
● |
Wireless
cameras |
|
● |
AI-driven
automated production |
|
● |
Ability
to contribute video over: |
|
|
○ |
Bonded
cellular (3G and 4G) |
|
|
○ |
Satellite |
|
|
○ |
Fiber |
|
|
○ |
Emerging
networks, including 5G and Starlink |
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements are prepared under the United States generally accepted accounting
principles (“US GAAP”) for interim financial information and following Form 10-Q and Regulation S-X instructions. Accordingly,
these financial statements do not include all information or notes required by GAAP for annual financial statements. Read these financial
statements in conjunction with the consolidated financial statements filed on the Company’s Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the United States Securities and Exchange Commission (the “SEC”) on March 31, 2022.
In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary
to present the Company’s consolidated financial position as of September 30, 2022, the results of its operations, and cash flow
for the nine months ended September 30, 2022, and 2021. Such adjustments are of a routine recurring nature. The results of operations
for the nine months ended September 30, 2022, may not indicate results for an entire year, any other interim period, or any future year
period.
Principles
of Consolidation
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States
of America or (“U.S. GAAP”) as found in the Accounting Standards Codification (“ASC”), the Accounting Standards
Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the US Securities
and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. We have eliminated all intercompany accounts and transactions upon consolidating our subsidiaries.
Segment
Reporting
The
Company identifies operating segments as components of an enterprise about which separate discrete financial information is available
for evaluation by the operating decision-makers, or decision-making group, in deciding how to allocate resources and assess performance.
The Company’s decision-making group is the senior executive management team. The Company and the decision-making group view the
Company’s operations and manage its business as one operating segment with different product offerings. All long-lived assets of
the Company reside in the U.S., the U.K., and the Netherlands.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and
assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements. Significant accounting
estimates reflected in the Company’s consolidated financial statements include the useful lives of property, plant, and equipment,
the useful lives of right-of-use assets, the useful lives of intangible assets, impairment of long-lived assets, allowance for accounts
receivable doubtful accounts, allowance for inventory obsolescence reserve, allowance for deferred tax assets, valuation of warranty
reserves, contingent consideration liabilities, and the accrual of potential liabilities. These estimates also affect the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from estimates, and any such differences may be material
to our financial statements.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Risks
and Uncertainties
The
future impacts of the Russia-Ukraine war, the novel coronavirus (“COVID-19”) pandemic, and their residual effects include
economic uncertainty, an inflationary environment, currency fluctuations, disruption within the global supply chain, and labor markets
worldwide industries remain uncertain. These circumstances have created prevalent uncertainty and risk. The impact of these issues on
our business will vary by geographic market and discipline. In response to potential reductions in revenue, we may take actions to align
our cost structure with changes in customer demand and manage our working capital. However, there can be no assurance as to the effectiveness
of our efforts to mitigate any impact of the current and future adverse economic conditions, reductions in client revenue, changes in
client creditworthiness, and other developments. We monitor the circumstances mentioned above to assess direct material adverse effects
on our business, financial condition, or results of operations. Therefore, these impacts may change accounting estimates and assumptions
over time. Interim period results are not necessarily indicative of the expected results for the full fiscal year.
Inventories
Inventories
consist of raw materials, work-in-process, and finished goods and are recorded at the lower of cost, on a first-in, first-out basis,
or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable
completion, disposal, and transportation costs. The Company evaluates inventory balances and either writes down obsolete inventory or
records a reserve for slow-moving or excess inventory based on net realizable value analysis.
Revenue
Recognition
We
account for the Company’s operating results under ASC Topic 606, adopted on January 1, 2019. It is a comprehensive revenue recognition
model that requires recognition when the Company transfers control of the promised goods or services to our customers at an amount that
reflects the consideration we expect to receive. The application of ASC Topic 606 requires us to use more judgment and make more estimates
than under previously issued guidance.
The
Company generates all its revenue from contracts with customers. The Company recognizes revenue when we satisfy a performance obligation
by transferring control of the promised goods or services to a customer in an amount that reflects the consideration we expect to receive
in exchange for those services.
The
Company determines revenue recognition through the following steps:
|
1. |
Identification
of the contract, or contracts, with a customer. |
|
2. |
Identification
of the performance obligations in the contract. |
|
3. |
Determination
of the transaction price. |
|
4. |
Allocation
of the transaction price to the performance obligations in the contract; and |
|
5. |
Recognition
of revenue when, or as, we satisfy a performance obligation. |
At
contract inception, the Company assesses the goods and services promised in our contracts with customers and identifies a performance
obligation for each. To determine the performance obligations, the Company considers all the products and services promised in the contract
regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance
obligation is not subject to significant judgment. We measure revenue as the amount of consideration we expect to receive in exchange
for transferring goods and services. The value-added sales taxes and other charges we collect concurrent with revenue-producing activities
are excluded from income.
Remaining
Performance Obligations:
The
remaining performance obligations, or backlog, represent the aggregate amount of the transaction price allocated to the remaining obligations
that the Company has not performed under its customer contracts. The Company has elected to use the optional exemption in ASC 606-10-50-14,
which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of
one year or less.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible
Assets
Patents
and licenses:
Patents
and licenses, measured initially at purchase cost, are included in intangible assets on the Company’s balance sheet and are amortized
on a straight-line basis over their estimated useful lives of 18.5 to 20 years.
Other
intangible assets:
The
Company’s remaining intangible assets include the trade names, technology, and customer lists acquired in its acquisition of IMT,
Vislink, and Mobile Viewpoint Corporate B.V. (“MVP”). A third-party appraiser determined the value of these acquired assets
for these business combinations. Absent an indication of fair value from a potential buyer or similar specific transactions, we have
determined that using the methods employed provided a reasonable estimate in reporting the values assigned. The Company amortizes intangible
asset costs over their useful lives of 3 to 15 years with its net book value reported on the balance sheet.
Leases
The
Company determines if an arrangement is a lease at inception. The Company recognizes lease expense for lease payments on a straight-line
basis over the lease term. The Company includes operating leases as “Right of use assets, operating leases” (“ROU”)
in the consolidated balance sheets. For lease liabilities, operating lease liabilities are included in “Operating lease obligations,
current” and “Operating lease liabilities, net of current portion” in the consolidated balance sheets. The Company
recognizes operating lease ROU assets and liabilities on the commencement date based on the present value of lease payments for all leases
with a term longer than 12 months. No lease and non-lease components are separated for all our real estate contracts.
The
ROU assets and related lease liabilities recorded under ASC 842 are calculated based on the present value of the lease payments using
(1) the rate implicit in the lease or (2) the lessee’s incremental borrowing rate (“IBR”), defined as the rate of interest
that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a comparable
economic environment. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rates based on
an analysis of prior collateralized borrowings over similar terms of the lease payments at the commencement date to estimate the IBR
under ASC 842. There were no capital leases, which are now titled “finance leases” under ASC 842, in the Company’s
lease portfolio as of March 31, 2022.
Stock-Based
Compensation
The
Company accounts for stock compensation with persons classified as employees for accounting purposes under ASC 718 “Compensation-Stock
Compensation,” which recognizes awards at fair value on the date of grant and recognition of compensation over the service period
for awards expected to vest. The fair value of stock options is determined using the Black-Scholes Option Pricing Model, and the fair
value of common stock issued for services is determined based on the Company’s stock price on the issuance date.
The
expansion of Topic 718 fell under ASU 2018-07 to include share-based payment transactions for acquiring goods and services from nonemployees.
The measurement date for equity-classified nonemployee share-based payment awards is no longer at the earlier date at which a commitment
for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Instead, the grant
date is now considered the measurement date. Under today’s guidance, the measurement of nonemployee share-based payment awards
with performance conditions is at the lowest aggregate fair value, often resulting in a zero value. The new ASU aligns the accounting
for nonemployee share-based payment awards with performance conditions with accounting for employee share-based payment awards under
Topic 718 by requiring entities to consider the probability of satisfying performance conditions. Current guidance requires entities
to use the contractual term to measure the nonemployee share-based payment awards. The new ASU allows entities to make an award-by-award
election to use the expected duration (consistent with employee share-based payment awards) or the contractual term for nonemployee awards.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-Based
Compensation (continued)
Stock-Option
Awards — Time-based and performance-based:
Under
ASC Topic 718, the compensation cost is measured based on an award’s fair value at the grant’s date for the time vested option
award using the Black Scholes-Merton formula as a valuation technique. The Company used the U.S. Treasury note’s rate over the
expected option term for the risk-free rate. Employees’ expected term represents the period that options granted are expected to
be outstanding using the simplified method. The Company’s historical share option exercise experience does not provide a reasonable
basis for estimating the expected term. For nonemployee options, the expected term is the entire term of the option. Expected volatility
is based on the average weekly share price changes over the shorter expected term or the period from the Nasdaq Capital Markets Exchange
placement to the grant’s date. The Company estimates forfeiture and volatility using historical information. The risk-free interest
rate is based on the implied yield on U.S. Treasury zero-coupon issues over the options’ equivalent lives.
The
Company has not paid dividends on its common stock, and no assumption of dividend payment(s) is made in the model. For employee equity-classified
awards, compensation cost is recognized over the employee’s requisite service period with a corresponding credit to additional
paid-in capital. The employee’s requisite service period begins at the service inception date and ends when the requisite service
has been provided.
Restricted
Stock Unit Awards (“RSUs”) — Time Based:
Under
ASC 718, the exercise price for RSUs is determined using the fair market value of the Company’s common stock on the grant date.
For an award with graded vesting subject only to a service condition (e.g., time-based vesting), ASC 718-10-35-8 provides an accounting
policy choice between graded vesting attribution or straight-line attribution. The Company elects the graded vesting method, recognizing
compensation expense for only the portion of awards expected to vest. Forfeitures of time-based units and awards are recognized as they
occur. Stock-based compensation costs are calculated using the closing stock price on the grant date to estimate the fair value of time-based
restricted stock units.
Restricted
Stock Unit Awards (“RSUs”) — Performance-Based:
The
accruals of compensation cost for an award with a performance condition are related to that performance condition’s probable outcome.
Under ASC 718, a “performance condition” is the achievement of a specified target that is defined by referring to the employer’s
operations or activities, such as an option that vests if the employer’s growth rate increases by a certain amount or there are
the attainment of regulatory approval for a product. There is an accrual of compensation cost upon the likely achievement of the performance
condition, and there is no accrual if the accomplishment of the performance condition is not probable. The exercise price for RSUs is
determined using the fair market value of the Company’s common stock on the grant date. Stock-based compensation costs are calculated
using the closing stock price on the grant date to estimate performance-based restricted stock units’ fair value.
Right-of-use
operating lease abandonment
As
part of the Company’s cost savings strategy implemented in the third quarter of the fiscal year 2022, management decided to vacate
the Billerica, MA facility. The economic environment of the location precluded the action of sub-letting and management determined the
(leased facility) to be abandoned as of September 30, 2022. Under ASC 360, leased space abandonment is an impairment indicator, and the
Company assessed the lease right-of-use (“ROU”) assets for impairment. The Company considered approximately $131,000 of right-of-use
operating assets impaired, and for the three and nine months ending September 31, 2022, and 2021, the Company recognized a loss on impairment
of ROU assets of approximately $88,000 and $-0-, respectively.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loss
Per Share
The
Company reports loss per share under ASC Topic 260, “Earnings Per Share,” which establishes standards for computing and presenting
earnings per share. The basic loss per share calculation divides the net loss allocable to common stockholders by the weighted-average
shares of common stock outstanding during the period without considering common stock equivalents. The diluted loss per share calculation
is calculated by adjusting the weighted-average shares of common stock outstanding for the dilutive effect of common stock equivalents,
including stock options and warrants, outstanding for the period as determined using the treasury stock method. For the diluted net loss
per share calculation, common stock equivalents are excluded from the calculation because their effect would be anti-dilutive. Therefore,
basic and diluted net loss per share applicable to common stockholders is the same for periods with a net loss.
The
following table illustrates the anti-dilutive potential common stock equivalents excluded from the calculation of loss per share (in
thousands):
SCHEDULE
OF ANTI-DILIUTIVE POTENTIAL COMMON STOCK EQUIVALENTS EXCLUDE FROM THE CALCULATION OF LOSS PER SHARE
| |
| | | |
| | |
| |
Nine months Ended | |
| |
September 30, | |
| |
2022 | | |
2021 | |
Anti-dilutive potential common stock equivalents excluded from the calculation of loss per share: | |
| | | |
| | |
Stock options | |
| 698 | | |
| 166 | |
Warrants | |
| 9,175 | | |
| 9,297 | |
Anti-dilutive securities | |
| 9,873 | | |
| 9,463 | |
Fair
Value of Financial Instruments
GAAP
requires disclosing financial instruments’ fair value to the extent practicable for financial instruments recognized or unrecognized
in the consolidated balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of
the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.
In
assessing the fair value of financial instruments, the Company uses various methods and assumptions based on estimates of market conditions
and risks existing at the time. For specific instruments, including accounts receivable and accounts payable, the Company estimated that
the carrying amount approximated fair value because of these instruments’ short maturities. All debt is based on current rates
at which the Company could borrow funds with similar remaining maturities and approximates fair value.
GAAP
establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs consist of items that market
participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
Unobservable inputs reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset
or liability developed based on the best information available in the circumstances. The hierarchy is described below. As of March 31,
2022, the Company had no fair valued assets or liabilities classified under Level 1 or Level 2.
|
● |
Level
1 – Quoted prices in active markets for identical assets or liabilities, |
|
● |
Level
2 – Observable prices based on inputs not quoted on active markets but corroborated by market data, |
|
● |
Level
3 – Unobservable inputs are used when little or no market data is available; the fair value hierarchy gives the lowest priority
to Level 3 inputs (see Note 7). |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign
Currency and Other Comprehensive (Gains) Losses
We
record gains or losses resulting from foreign currency transactions in foreign currency income or loss except for the effect of exchange
rates on long-term inter-company transactions that are considered long-term investments that are accumulated and credited or charged
to other comprehensive income. We have two foreign subsidiaries, one in the United Kingdom and the other in the Netherlands, and their
functional currencies are British Pounds and Euros, respectively. The translation from the respective foreign currency to United States
Dollars (“US Dollars”) is performed for balance sheet accounts using current exchange rates at the balance sheet date and
for income statement accounts using an average exchange rate for the nine months ending September 30, 2022. We included gains or losses
from such translation as a separate component of accumulated other comprehensive (loss) income.
Transaction
gains and losses are recognized in our operations’ results based on the difference between the foreign exchange rates on the transaction
date and the reporting date. The foreign currency exchange gains and losses are a component of general and administrative expenses in
the accompanying Unaudited Condensed Consolidated Statements of Operations.
The
Company has recognized foreign exchanges gains and losses and changes in accumulated comprehensive income approximately as follows:
SCHEDULE
OF FOREIGN EXCHANGE AND CHANGE IN ACCUMULATED COMPREHENSIVE INCOME
| |
| | | |
| | | |
| | | |
| | |
| |
For the three months ended | | |
For the nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Net foreign exchange transactions: | |
| | | |
| | | |
| | | |
| | |
(Gains) Losses | |
$ | 52,000 | | |
$ | 23,000 | | |
$ | 47,000 | | |
$ | 86,000 | |
| |
| | | |
| | | |
| | | |
| | |
Accumulated comprehensive income: | |
| | | |
| | | |
| | | |
| | |
Unrealized (gains) losses on currency translation adjustment | |
$ | (746,000 | ) | |
$ | 394,000 | | |
$ | (1,885,000 | ) | |
$ | 408,000 | |
The
exchange rates adopted for the foreign exchange transactions are quoted on OANDA, a Canadian-based foreign exchange company and internet
website providing currency conversion, online retail foreign exchange trading, online foreign currency transfers, and forex information.
The Company translated amounts from British Pounds into United States Dollars and Euros to British Pounds at the following exchange rates
for the respective periods:
|
● |
As
of September 30, 2022 – £1.1132910000 to $1.00; €0.9797440000 to $1.00 |
|
|
|
|
● |
The
average exchange rate for the nine months ended September 30, 2022 – £1.2578587969 to $1.00; €1.0628459141 to $1.00 |
Subsequent
Events
Management
has evaluated subsequent events or transactions occurring through the date the consolidated financial statements were issued and determined
that no events or transactions are required to be disclosed herein except as disclosed.
Recently
Issued Accounting Principles
The
Company reviews new accounting standards issued by the Financial Accounting Standards Board, including its Emerging Issues Task Force,
the American Institute of Certified Public Accountants, and the SEC. From time to time, new accounting pronouncements are issued by the
FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the
Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on our condensed
consolidated financial statements and disclosures.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 — LIQUIDITY AND FINANCIAL CONDITION
The
Company incurred an approximate $8.2 million loss from operations and $11.8 million of cash used in operating activities for the nine
months ending September 30, 2022. The Company had $42.9 million in working capital, $294.6 million in accumulated deficits, and $24.5
million of cash on hand as of September 30, 2022.
The
enduring effect of the COVID-19 pandemic, including the advent of successive variants, plus the uncertainty of possible future variants,
may subject the Company to particular challenges in its business, financial condition, results of operations, and cash flows. The unpredictability
of the pandemic’s scope, severity, duration, and actions implemented to alleviate its direct and indirect economic effects and
containment measures provide no assurances that the pandemic will not have material adverse repercussions on the Company’s operations,
liquidity, financial condition, and any residual unfavorable consequences to global economics.
The
Company bases its evaluation on possibilities that may prove wrong and could exhaust our available capital resources sooner than we expect.
Developments may take place, including those beyond our control, that would cause us to consume our available capital more quickly, including
but not limited to those relating economic conditions including inflation, foreign exchange, fluctuations, and the markets in which we
compete or wish to enter, strategic acquisitions, our market strategy, our research and development activities, regulatory matters, and
technology and product innovations. The Company believes it will have sufficient funds to continue its operations for at least twelve
months from the date of the filing of these financial statements.
NOTE
3 – ACQUISITION OF MOBILE VIEWPOINT CORPORATE B.V.
On
August 16, 2021, the Company, through a wholly-owned subsidiary, entered into a stock purchase agreement with Triple I.T. Corporate B.V.,
a private company incorporated in the Netherlands, under which the Company acquired 100% of the outstanding capital of MVP for an aggregate
purchase price of €14,824,278 (or approximately $17.5 million based on a USD to EUR exchange rate of 0.85 as of August 13, 2021)
plus the assumption and payment of €717,785 of intercompany indebtedness, all paid by the Company in cash, subject to certain routine
closing adjustments in respect of working capital and net indebtedness (“The Transaction”). The Transaction was closed on
August 16, 2021.
The
Company accounts for the acquisition under the acquisition method under ASC 805 “Business Combinations,” and we elected not
to apply pushdown accounting upon the purchase of MVP. Therefore, we recognized the preliminary historical basis of MVP’s acquired
assets and liabilities. We identified any excess of the consideration paid in excess of the net assets acquired in the table below. In
addition, we recorded approximately $1.6 million of preliminary acquisition-related transaction costs (e.g., legal, due diligence, valuation,
and other professional fees) not included as a component of consideration transferred but are required to be expensed as incurred and
included in our consolidated statement of operations. Future transaction costs are indeterminable as the Company progresses to the finalization
of the Transaction.
The
Company received a final valuation report from our third-party appraiser regarding allocating the consideration paid in excess of the
net assets acquired. Additionally, the Company received an updated list of certain assets and liabilities acquired on August 16, 2021.
Under ASC 805, we recorded measurement period adjustments under the previously mentioned revisions
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
3 – ACQUISITION OF MOBILE VIEWPOINT CORPORATE B.V. (continued)
The
following table summarizes the historical value of the assets and liabilities as of the acquisition date, allocation of the consideration
paid in excess of net assets acquired, relative useful lives, and amortization method of the listed intangible assets.
SCHEDULE
OF IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED
| |
As
Initially Reported | | |
Measurement
Period Adjustments | | |
As
Adjusted | |
Fair value of consideration
transferred: | |
| | | |
| | | |
| | |
Cash | |
$ | 18,311,000 | | |
$ | — | | |
$ | 18,311,000 | |
| |
| | | |
| | | |
| | |
Recognized amounts of identifiable
assets acquired and liabilities assumed: | |
| | | |
| | | |
| | |
Cash | |
$ | 965,000 | | |
$ | — | | |
$ | 965,000 | |
Accounts receivable, net | |
| 911,000 | | |
| — | | |
| 911,000 | |
Inventories, net | |
| 2,534,000 | | |
| 1,231,000 | | |
| 3,765,000 | |
Prepaid expenses and other
assets | |
| 625,000 | | |
| (112,000 | ) | |
| 513,000 | |
Property and equipment, net | |
| 149,000 | | |
| — | | |
| 149,000 | |
Accounts payable | |
| (507,000 | ) | |
| — | | |
| (507,000 | ) |
Accrued expenses | |
| (551,000 | ) | |
| — | | |
| (551,000 | ) |
Customer deposits and deferred
revenue | |
| (293,000 | ) | |
| — | | |
| (293,000 | ) |
Deferred
tax liabilities | |
| — | | |
| (978,000 | ) | |
| (978,000 | ) |
Total
identifiable net assets | |
$ | 3,833,000 | | |
$ | 141,000 | | |
$ | 3,974,000 | |
| |
| | | |
| | | |
| | |
Consideration paid | |
$ | 18,311,000 | | |
$ | — | | |
$ | 18,311,000 | |
Total
identifiable assets acquired | |
| 3,833,000 | | |
| 141,000 | | |
| 3,974,000 | |
Excess
of consideration paid over net assets acquired | |
$ | 14,478,000 | | |
$ | (141,000 | ) | |
$ | 14,337,000 | |
| |
| | | |
| | | |
| | |
Preliminary allocation of
the consideration paid in excess of the net assets acquired: | |
| | | |
| | | |
| | |
Trade name | |
$ | 730,000 | | |
$ | 70,688 | | |
$ | 800,688 | |
Proprietary technology | |
| 1,850,000 | | |
| 282,749 | | |
| 2,132,749 | |
Customer relationship | |
| 3,723,000 | | |
| (1,508,003 | ) | |
| 2,214,997 | |
Goodwill | |
| 8,175,000 | | |
| 1,013,566 | | |
| 9,188,856 | |
Total
intangible assets acquired | |
$ | 14,478,000 | | |
$ | (141,000 | ) | |
$ | 14,337,000 | |
As
a result of the updated purchase price allocations for the MVP acquisition on August 16, 2021, specific fair value amounts previously
estimated were adjusted during the measurement period. These measurement period adjustments resulted from our external valuation specialists’
updated valuation reports and appraisals and revisions to internal account classifications. The changes from the final valuation report
included an increase of $1.23 million in inventory, $0.07 million in the trade name, $.028 million in proprietary technology, and $0.04
million in goodwill, offset by a reduction of $1.51 million in customer relationships. The revision in internal account classification
resulted in a decrease of $0.11 million in prepaid expenses and other current assets with a reciprocal increase of $0.11 million in inventory.
In
the related note 4 of the Company’s Annual Report on Form 10-K for the period ending December 31, 2021, the Company had a typographical
error in the amount indicated on the line item “Deferred tax liabilities,” whereby the amount reported of $978,000 should
have been reported as ($978,000), which error has been corrected above. The error did not impact the calculation of goodwill or the allocation
or adjustment of the other intangible assets. The error had no impact on the company’s audited financial statements as of and for
the period ending December 31, 2021, included in Company’s Annual Report on Form 10-K for the period ending December 31, 2021.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
3 – ACQUISITION OF MOBILE VIEWPOINT CORPORATE B.V. (continued)
Intangible
assets acquired:
The
Purchaser acquired intangible assets from MVP as a result of the Transaction. The Tradename, Proprietary Technology, and Customer Relationships
are intangible assets noted to have a finite life, while Goodwill has an indefinite life span. The finite life intangible assets will
be amortized using the straight-line method of the respective lives of each asset, while the indefinite life intangible assets will not
be amortized.
Based
thereon, below are the acquired intangibles with their relative useful lives and method of amortization:
SCHEDULE
OF ACQUIRED INTANGIBLE WITH THEIR RELATIVE USEFUL LIVES
Intangible
Asset |
|
Useful
Life |
|
Amortization
Method |
|
|
|
|
|
Tradename |
|
15
Years |
|
Straight-line |
Proprietary
Technology |
|
5
Years |
|
Straight-line |
Customer
Relationships |
|
10
Years |
|
Straight-line |
Goodwill |
|
Indefinite |
|
N/A |
The
following presents the unaudited Pro-forma combined results of operations of Vislink with MVP as if the combination of the entities occurred
on January 1, 2021.
SCHEDULE
OF UNAUDITED PRO-FORMA COMBINED RESULTS OF OPERATIONS
| |
Three Months
Ending September 30, | | |
Nine
Months
Ending September 30, | |
| |
2021 | | |
2021 | |
Revenues, net | |
$ | 11,997 | | |
$ | 26,028 | |
| |
| | | |
| | |
Net income (loss) allocable to common stockholders | |
$ | 735 | | |
$ | (2,589 | ) |
| |
| | | |
| | |
Net income (loss) per share | |
$ | 0.02 | | |
$ | (0.06 | ) |
| |
| | | |
| | |
Weighted average number of shares outstanding | |
| 45,748 | | |
| 42,696 | |
The
unaudited Pro-forma results of operations are presented for information purposes only. The unaudited Pro-forma results are not intended
to present actual results that would have been attained had the acquisition been completed as of January 1, 2021, or to project potential
operating results as of any future date or for any future periods.
NOTE
4 — INTANGIBLE ASSETS
The
Company continuously monitors operating results, events, and circumstances that may indicate potential impairment of intangible assets.
Management concluded that no triggering events occurred during the nine months that ended September 30, 2022.
The
following table illustrates finite intangible assets as of September 30, 2022:
SCHEDULE
OF INTANGIBLE ASSETS
| |
Proprietary Technology | | |
Patents and Licenses | | |
Trade Names & Technology | | |
Customer Relationships | | |
| |
| |
| | |
Accumulated | | |
| | |
Accumulated | | |
| | |
Accumulated | | |
| | |
Accumulated | | |
| |
| |
Cost | | |
Amortization | | |
Cost | | |
Amortization | | |
Cost | | |
Amortization | | |
Cost | | |
Amortization | | |
Net | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2021 | |
$ | 2,132,000 | | |
$ | (223,000 | ) | |
$ | 12,378,000 | | |
$ | (11,843,000 | ) | |
$ | 2,251,000 | | |
$ | (1,052,000 | ) | |
$ | 5,095,000 | | |
$ | (2,817,000 | ) | |
$ | 5,921,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Amortization | |
| — | | |
| (442,000 | ) | |
| — | | |
| (535,000 | ) | |
| — | | |
| (104,000 | ) | |
| — | | |
| (192,000 | ) | |
| (1,273,000 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, September 30, 2022 | |
$ | 2,132,000 | | |
$ | (665,000 | ) | |
$ | 12,378,000 | | |
$ | (12,378,000 | ) | |
$ | 2,251,000 | | |
$ | (1,156,000 | ) | |
$ | 5,095,000 | | |
$ | (3,009,000 | ) | |
$ | 4,648,000 | |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
4 — INTANGIBLE ASSETS (continued)
Proprietary
Technology:
The
Company amortizes proprietary technology over its useful lives of 3 to 5 years. The proprietary technology consists of wireless multiplex
transmitters and artificial intelligence developed and used by MVP internally to produce and sell products or services to the end-user
or customer.
Patents
and Licenses:
The
Company amortizes filed patents and licenses over their useful lives, ranging from 18.5 to 20 years. The amortization of the costs incurred
by processing provisional patents and pending applications begins after successful review and filing.
Trade
Name, Technology, and Customer Relationships:
The
Company amortizes these other intangible assets over their estimated useful lives of 3 to 15 years. Prior acquisitions of the Company’s
subsidiaries, IMT, Vislink, and MVP, created these intangible assets of trade names, technology, and customer lists.
The
Company has recognized net capitalized intangible costs as follows:
SCHEDULE
OF CAPITALIZED INTANGIBLE COSTS
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Proprietary Technology | |
$ | 1,468,000 | | |
$ | 1,910,000 | |
Patents and Licenses | |
| — | | |
| 535,000 | |
Trade Names and Technology | |
| 1,094,000 | | |
| 1,198,000 | |
Customer Relationships | |
| 2,086,000 | | |
| 2,278,000 | |
Intangible assets | |
$ | 4,648,000 | | |
$ | 5,921,000 | |
The
Company has recognized the amortization of intangible assets as follows:
SCHEDULE
OF AMORTIZATION OF INTANGIBLE ASSETS
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three Months Ended | | |
Nine Months Ended | |
| |
September 30 | | |
September 30 | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Proprietary Technology | |
$ | 149,000 | | |
$ | 45,000 | | |
$ | 442,000 | | |
$ | 45,000 | |
| |
| | | |
| | | |
| | | |
| | |
Patents and Licenses | |
| 204,000 | | |
| 168,000 | | |
| 535,000 | | |
| 500,000 | |
| |
| | | |
| | | |
| | | |
| | |
Trade Names and Technology | |
| 35,000 | | |
| 33,000 | | |
| 104,000 | | |
| 96,000 | |
| |
| | | |
| | | |
| | | |
| | |
Customer Relationships | |
| 65,000 | | |
| 55,000 | | |
| 192,000 | | |
| 73,000 | |
| |
| | | |
| | | |
| | | |
| | |
Amortization
of intangible assets | |
$ | 453,000 | | |
$ | 301,000 | | |
$ | 1,273,000 | | |
$ | 714,000 | |
The weighted average
remaining life of the amortization of the Company’s
intangible assets is approximately 5.4 years. The following table represents the estimated amortization expense for total intangible assets
for the succeeding five years:
SCHEDULE
OF ESTIMATED AMORTIZATION EXPENSE FOR INTANGIBLE ASSETS
Period ending September 30, | |
| | |
2023 | |
$ | 650,000 | |
2024 | |
| 649,000 | |
2025 | |
| 649,000 | |
2026 | |
| 585,000 | |
2027 | |
| 544,000 | |
Thereafter | |
| 1,571,000 | |
Finite-Lived Intangible
Assets, Net, Total | |
$ | 4,648,000 | |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
5 — NOTES PAYABLE
The
table below represents the Company’s notes payable as of September 30, 2022, and December 31, 2021:
SCHEDULE
OF NOTES PAYABLE
| |
Principal | |
| |
9/30/22 | | |
12/31/21 | |
| |
| | |
| |
| |
| | | |
| | |
On April 5, 2021 | |
$ | — | | |
$ | 99,000 | |
On April 5, 2021, the Company renewed its D & O insurance policy and increased the premium to approximately $1,098,000, less a down payment of $225,000, financing the remaining balance of approximately $872,000. The loan’s terms are nine months at a 5.25% annual interest rate and a monthly principal and interest payment of approximately $99,000. As of March 31, 2022, the loan is paid in full. For three and nine months ending September 30, 2022, the Company recorded no interest expense. For three and nine months ending September 30, 2021, the Company recorded approximately $8,000 and $15,000, respectively. | |
$ | — | | |
$ | 99,000 | |
| |
| | | |
| | |
On April 5, 2022, the Company renewed its D & O insurance policy, with a one-year premium of approximately $1,037,000, less a down payment of $194,000, financing the remaining balance of approximately $943,000. The loan’s terms are nine months at a 2.09% annual interest rate and a monthly principal and interest payment of approximately $84,000. For three and nine months ending September 30, 2022, the Company recorded approximately $4,000 and $6,000 of interest expense, respectively. | |
| 251,000 | | |
| — | |
| |
$ | 251,000 | | |
$ | 99,000 | |
NOTE
6 — LEASES
The
Company’s leasing arrangements include office space, deployment sites, and storage warehouses domestically and internationally.
The operating leases contain various terms and provisions, with remaining lease terms for the nine months ending September 30, 2021,
ranging from approximately one to four years, and maturity dates ranging from July 2023 to December 2026. The weighted-average discount
rate was 9.4% on September 30, 2022. Certain individual leases contain rent escalation clauses and lease concessions that require additional
rental payments later in the term. The Company recognizes rent expense for these contracts on a straight-line basis over the minimum
lease term.
On
September 30, 2022, the Company recorded approximately $1.12 million of ROU assets net of $1.14 million accumulated amortization on the
balance sheet. Additionally, the Company recorded relatively $1.6 million of operating lease liabilities, of which $0.45 million is current
and $1.15 million is non-current, as reported on the balance sheet. The weighted-average remaining term for lease contracts was 3.7 years
on September 30, 2022, with maturity dates from July 2023 to January 2027.
Adjustments
for straight-line rental expense for the respective periods was not material. Most costs recognized are reflected in cash used in operating
activities for the respective periods. This expense consisted primarily of payments for base rent on office and warehouse leases. Amounts
related to short-term lease costs, taxes, and variable service charges on leased properties were immaterial. Besides, we have the right
to renew individual leases for various renewal terms but no obligation.
As
part of the Company’s cost savings strategy implemented in the third quarter of the fiscal year 2022, management decided to vacate
the Billerica, MA facility. The economic environment of the location precluded the action of sub-letting, and management determined the
(leased facility) to be abandoned as of September 30, 2022. For the three and nine months ending September 31, 2022, and 2021, the Company
recognized a loss on impairment of ROU assets of approximately $88,000 and $-0-, respectively.
On
April 28, 2022, the Company entered a one-year lease for 600 square feet of administrative office space in Lutton, UK, commencing on
May 3, 2022, and terminating on May 31, 2023, for £1,320 monthly or approximately $1,800 per month. The Company renewed its lease
for 976 square feet of administrative office space commencing on July 3, 2022, and terminating on July 2, 2023, in Dubai Studio City,
UAE, for AED 5,995 or approximately US$ 1,632 monthly.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
6 — LEASES (continued)
The
following table illustrates operating lease data for three and nine months ended September 30, 2022, and 2021:
SCHEDULE
OF OPERATING LEASE DATA
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three months Ended | | |
Nine months Ended | |
| |
September 30, | | |
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Lease cost: | |
| | | |
| | | |
| | | |
| | |
Operating lease cost | |
$ | 105,000 | | |
$ | 128,000 | | |
$ | 338,000 | | |
$ | 343,000 | |
Short-term lease cost | |
| 10,000 | | |
| 80,000 | | |
| 84,000 | | |
| 317,000 | |
Sublease income | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Total lease cost | |
$ | 115,000 | | |
$ | 208,000 | | |
$ | 422,000 | | |
$ | 660,000 | |
| |
| | | |
| | | |
| | | |
| | |
Cash paid for lease liabilities: | |
| | | |
| | | |
| | | |
| | |
Cash flows from operating leases | |
| | | |
| | | |
$ | 380,000 | | |
$ | 482,000 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted-average remaining lease term—operating leases | |
| | | |
| | | |
| 3.7 years | | |
| 3.6 years | |
| |
| | | |
| | | |
| | | |
| | |
Weighted-average discount rate—operating leases | |
| | | |
| | | |
| 9.4 | % | |
| 9.2 | % |
Maturities
of operating lease liabilities were as follows as of September 30, 2022:
SCHEDULE
OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES
| |
Amount | |
| |
| |
2023 | |
$ | 604,000 | |
2024 | |
| 436,000 | |
2025 | |
| 442,000 | |
2026 | |
| 281,000 | |
2027 | |
| 122,000 | |
Thereafter | |
| — | |
Total lease payments | |
| 1,885,000 | |
Less: imputed interest | |
| 282,000 | |
Present value of lease liabilities | |
| 1,603,000 | |
Less: Current lease liabilities | |
| 451,000 | |
Non-current lease liabilities | |
$ | 1,152,000 | |
The
table below lists the location and lease expiration date from 2023 through 2027:
SCHEDULE
OF LEASE OBLIGATIONS ASSUMED
Location | |
Square Footage | | |
Lease-End Date | |
Approximate Future Payments | |
Colchester, U.K. – Waterside House | |
| 16,000 | | |
Dec 2025 | |
$ | 639,000 | |
Singapore | |
| 950 | | |
July 2023 | |
| 25,000 | |
Billerica, MA | |
| 2,000 | | |
Dec 2026 | |
| 440,000 | |
Hemel, UK | |
| 12,870 | | |
Oct 2023 | |
| 151,000 | |
Mount Olive, NJ | |
| 7,979 | | |
Jan 2027 | |
| 630,000 | |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
7 — DERIVATIVE LIABILITIES
Under
the guidance of ASC 815, Accounting for Derivative Instruments and Hedging Activities, the Company, identified common stock warrants
in various offerings containing a net cash settlement provision whereby, upon certain fundamental events, the holders could put these
warrants back to the Company for cash. We identified and classified the following transactions as derivative liabilities: warrants issued
with the May 2016 financing, the July 2016 financing, the August 2017 underwritten offering, and the May 2018 Financing.
The
Company records derivative liabilities on its consolidated balance sheet at their fair value on the issuance date. The Company revalues
the derivative liabilities on each subsequent balance sheet until exercised or expired, with any changes in the fair value between reporting
periods recorded as other income or expense. The Company uses option pricing models and assumptions based on the instruments’ characteristics
on the valuation date. We use assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate
to estimate fair value.
The
following are the key assumptions used in connection with the valuation of the warrants exercisable into common stock on September 30,
2022, and 2021:
SCHEDULE OF VALUATION AND WARRANTS EXERCISABLE
| |
Nine months Ended
September 30, | |
| |
2022 | | |
2021 | |
Number of shares underlying the warrants | |
| 53,333 | | |
| |
The fair market value of stock | |
$ | 0.42 | | |
$ | 1.81 | |
Exercise price | |
$ | 0.00 to $ 60.00 | | |
$ | 60.00 to $ 150.00 | |
Volatility | |
| 0%
to 62 | % | |
| 129% to 159 | % |
Risk-free interest rate | |
| 0% to 3.77 | % | |
| 0.09% to 0.28 | % |
Expected dividend yield | |
| — | | |
| — | |
Warrant life (years) | |
| 0.0 to 0.7 | | |
| 0.9 to 1.7 | |
Level
3 liabilities are valued using unobservable inputs to the valuation methodology significant in measuring the liabilities’ fair
value. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance
department, subject to the approval of the Chief Financial Officer, determines the applicable valuation policies and procedures.
Level
3 Valuation Techniques:
Level
3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities, such that determining
fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value
hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company deems financial
instruments that do not have fixed settlement provisions as derivative instruments. Under US GAAP, the fair value of these warrants is
classified as a liability on the Company’s consolidated balance sheets because, according to the terms of the warrants, a fundamental
transaction could give rise to an obligation of the Company to pay cash to its warrant holders. Such instruments do not have fixed settlement
provisions and have also been recorded as derivative liabilities. Corresponding changes in the fair value of the derivative liabilities
are recognized in earnings on the Company’s consolidated operations statements in each subsequent period. To calculate fair value,
the Company uses a binomial model style simulation, as the standard Black-Scholes model would not capture the value of certain features
of the warrant derivative liabilities.
The
following table sets forth a summary of the changes in the fair value of Level 3 financial liabilities that are measured at fair value
on a recurring basis:
SCHEDULE OF CHANGES IN FAIR VALUE OF LEVEL 3 FINANCIAL LIABILITIES
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
|
|
Three
months Ended |
|
|
Nine
months Ended |
|
|
|
September
30, |
|
|
September
30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance |
|
$ |
— |
|
|
$ |
39,000 |
|
|
$ |
— |
|
|
$ |
22,000 |
|
Change
in fair value of derivative liabilities |
|
|
— |
|
|
|
(25,000 |
) |
|
|
— |
|
|
|
(8,000 |
) |
Ending
balance |
|
$ |
— |
|
|
$ |
14,000 |
|
|
$ |
— |
|
|
$ |
14,000 |
|
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
8 — STOCKHOLDERS’ EQUITY
Common
stock issuances
During
the nine months ended September 30, 2022, the Company:
|
● |
Issued
357,778 shares of common stock as payment of the minimum withholding tax obligation due upon the vesting of shares restricted stock
units. |
|
|
|
|
● |
Issued
1,159,044 shares of common stock, net of 357,778 shares attributable to withholding tax, upon the exercise of restricted stock units
under the Company’s various stock compensation plans. |
|
|
|
|
● |
Under
the terms of an $80,000 consulting agreement: on May 4, 2022, issued 38,703 shares of common stock were valued at $0.81 per share
on the issuance date with a total value of $31,349 in satisfaction of $40,000. On July 19, 2022, 38,703 shares of common stock were
valued at $0.59 per share on the issuance date, with a total value of $22,835 in satisfaction of the remaining balance of $40,000.
The Company recognized a total gain on debt settlement in the amount of $25,816. The value of the common stock issued was based on
the fair value of the stock at the time of the issuance. |
|
|
|
|
● |
Recognized
approximately $1,270,000 of stock-based compensation costs associated with outstanding stock options recorded in general and administrative
expenses offsetting additional paid-in capital. |
Common
stock warrants
During
the nine months ended September 30, 2022, 34,885 warrants expired. As of September 30, 2022, these outstanding warrants contained no
intrinsic value. The weighted average exercise price of warrants outstanding on September 30, 2022, is $3.60, with a weighted average
remaining contractual life of 3.3 years.
The
following table sets forth common stock purchase warrants outstanding as of September 30, 2022:
SCHEDULE OF WARRANT OUTSTANDING
| |
Number
of Warrants (in
shares) | | |
Weighted Average Exercise Price | |
| |
| | |
| |
Outstanding,
December 31, 2021 | |
| 9,209,811 | | |
$ | 4.10 | |
Warrants
expired | |
| (34,885 | ) | |
$ | (131.20 | ) |
Outstanding,
September 30, 2022 | |
| 9,174,926 | | |
$ | 3.60 | |
Exercisable,
September 30, 2022 | |
| 9,174,926 | | |
$ | 3.60 | |
Delisting
Notice
On
May 20, 2022, Vislink Technologies, Inc. (the “Company”) received notice from the Nasdaq Listing Qualifications Department
(the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company of its non-compliance with Nasdaq
Listing Rule 5550(a)(2) (the “Rule”) by failing to maintain a minimum bid price for its common stock on the Nasdaq Capital
Market of at least $1.00 per share for 30 consecutive business days.
According
to the Nasdaq notice, the Company has a 180-calendar day grace period to regain compliance with the Rule (the “Grace Period”),
subject to a potential 180 calendar day extension, as described below. To regain compliance, the Company’s common stock must have
a minimum closing bid price on the Nasdaq Capital Market of at least $1.00 per share for at least ten consecutive business days within
the Grace Period.
If
the Company does not regain compliance by November 16, 2022, the end of the Grace Period, the Company may be eligible for an additional
180-calendar day grace period to regain compliance. To qualify for the supplemental grace period, the Company will be required to meet
the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for The Nasdaq
Capital Market, except for the bid price requirement. We have provided written notice to the Staff of our intention to cure the deficiency during the second grace period by effecting a reverse
stock split, if necessary, and intend to hold a special meeting of our stockholders seeking approval of a reverse split in January 2023. However, if it appears to Nasdaq at the end
of the Grace Period that the Company will be unable to cure the deficiency, or if the Company is not otherwise eligible for the additional
cure period, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. If the Company receives notice
that its common stock is being delisted, Nasdaq listing rules permit the Company to appeal the delisting determination by the Staff to
a Nasdaq hearings panel.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
8 — STOCKHOLDERS’ EQUITY (continued)
Delisting
Notice (continued)
During
the defined term grace period and any supplemental grace period, the Company’s common stock will continue to be listed and traded
on The Nasdaq Capital Market under the symbol “VISL,” subject to the Company’s compliance with the other continued
listing requirements of The Nasdaq Capital Market.
The
Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance
with the Rule, including potentiall seeking stockholder approval to save the Company the option of amending its Certificate of Incorporation
to effect a reverse stock split. There can be no assurance that the Company will be able to regain compliance with the Rule or otherwise
be in compliance with other Nasdaq Listing Rules.
NOTE
9 — STOCK-BASED COMPENSATION
Stock
Options
Equity
Incentive Plans:
The
following table illustrates various plan data under the amended Long-Term Stock Incentive Plan (the “Plan”) for the three
and nine months ended September 30, 2022, and 2021:
SCHEDULE OF STOCK OPTION PLANS
| |
Three
months ended | | |
Nine
months ended | |
| |
September
30, | | |
September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock-based
compensation expense | |
$ | — | | |
$ | 19,000 | | |
$ | 1,000 | | |
$ | 22,000 | |
| |
| | | |
| | | |
| | | |
| | |
Remaining
expense of stock-based compensation | |
| | | |
| | | |
$ | — | | |
$ | 7,000 | |
| |
| | | |
| | | |
| | | |
| | |
Remaining amortization
period | |
| | | |
| | | |
| 0.0
years | | |
| 0.6
years | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average remaining contractual life – options outstanding and exercisable | |
| | | |
| | | |
| 4.8
years | | |
| 5.8
years | |
| |
| | | |
| | | |
| | | |
| | |
Intrinsic value per share | |
| | | |
| | | |
$ | — | | |
$ | — | |
The
table below summarizes the status of the Plan’s stock option awards:
| |
September
30, 2022 | |
| |
Number
of Options (in shares) | | |
Weighted
Average (Exercise Price) | |
Beginning balance
- January 1, 2022, quantity of outstanding options | |
| 49,925 | | |
$ | 89.79 | |
| |
| | | |
| | |
Stock
options granted, canceled, expired | |
| (4,333 | ) | |
| (96.54 | ) |
| |
| | | |
| | |
Ending
balance - September 30, 2022, quantity of outstanding and exercisable options | |
| 45,592 | | |
$ | 87.50 | |
| |
| | | |
| | |
Range of exercise prices | |
| $6.96 to $ 1,173.60 | |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 — STOCK-BASED COMPENSATION (continued)
Time-vested
stock options:
In
connection with their employment agreement(s), the Company granted the following ten-year, non-statutory time-vested option inducement
awards under the NASDAQ Listing Rule 5653(c)(4) outside of the Company’s existing equity compensation plans (all subject to continued
employment):
SCHEDULE
OF NON-STATUTORY PERFORMANCE-BASED STOCK OPTION ACTIVITY
Recipient | |
Date
of Grant | | |
Options
Granted | | |
Exercise
Price | | |
Vesting
Commencement Date | |
Expiration
Date | |
25%
Vesting | | |
75%
Remaining Vesting |
● |
Carleton M. Miller
— CEO | |
| 1/22/20 | | |
| 359,247 | | |
$ | 1.71 | | |
1/22/20 | |
1/22/30 | |
| 1/22/21 | | |
36 equal monthly
periods |
|
| |
| | | |
| | | |
| | | |
| |
| |
| | | |
|
● |
Michael Bond — CFO | |
| 2/27/20 | | |
| 135,168 | | |
$ | 0.96 | | |
4/1/20 | |
4/1/30 | |
| 4/1/21 | | |
36 equal monthly periods |
In
determining the time-vested options award’s grant-date fair value, the following assumptions were used:
SCHEDULE OF SHARE-BASED PAYMENT AWARD STOCK OPTIONS
|
| |
Expected
term (years) | | |
Expected
dividend yield | | |
Risk-free
interest rate | | |
Volatility | | |
Exercise
Price | |
● |
Carleton M. Miller
— CEO | |
| 6.5 | | |
| — | | |
| 1.57 | % | |
| 153.0 | % | |
$ | 1.71 | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
● |
Michael Bond — CFO | |
| 6.3 | | |
| — | | |
| 0.62 | % | |
| 155.0 | % | |
$ | 0.96 | |
The
following table illustrates various plan data under time-based stock option awards for the three and nine months ended September 30,
2022, and 2021:
SCHEDULE
OF STOCK OPTION PLANS
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three
months ended | | |
Nine
months ended | |
| |
September
30, | | |
September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock-based
compensation expense | |
$ | 33,000 | | |
$ | 29,000 | | |
$ | 89,000 | | |
$ | 86,000 | |
| |
| | | |
| | | |
| | | |
| | |
Remaining
expense of stock-based compensation | |
| | | |
| | | |
$ | 408,000 | | |
$ | 526,000 | |
| |
| | | |
| | | |
| | | |
| | |
Remaining amortization
period | |
| | | |
| | | |
| 1.4
years | | |
| 3.5
years | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average remaining contractual life – options outstanding and exercisable | |
| | | |
| | | |
| 7.4
years | | |
| 8.4
years | |
| |
| | | |
| | | |
| | | |
| | |
Intrinsic value per share | |
| | | |
| | | |
$ | — | | |
$ | 0.41 | |
The
table below summarizes the status of the time-based stock option awards:
| |
September
30, 2022 | |
| |
Outstanding | | |
Exercisable | |
| |
Quantity of RSUs | | |
Weighted Average Exercise
Price | | |
Quantity
of RSUs | | |
Weighted Average Exercise
Price | |
Beginning balance,
outstanding on January 1, 2022 | |
| 494,415 | | |
$ | 1.01 | | |
| 236,915 | | |
$ | 1.40 | |
| |
| | | |
| | | |
| | | |
| | |
Stock option award units vested | |
| — | | |
| — | | |
| 61,785 | | |
| 1.40 | |
| |
| | | |
| | | |
| | | |
| | |
Ending balances, outstanding
on September 30, 2022 | |
| 494,415 | | |
$ | 0.80 | | |
| 298,700 | | |
$ | 1.40 | |
| |
| | | |
| | | |
| | | |
| | |
Range of exercise prices | |
| $0.96
to $1.71 | |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 — STOCK-BASED COMPENSATION (continued)
Performance-based
stock options:
In
connection with their employment agreement, the Company granted the following ten-year, non-statutory performance-based stock option
inducement award under the NASDAQ Listing Rule 5653(c)(4) outside of the Company’s existing equity compensation plans that will
vest in three equal tranches upon attainment of applicable performance conditions for each tranche (all subject to continued employment):
SCHEDULE
OF NON-STATUTORY PERFORMANCE-BASED STOCK OPTION ACTIVITY
| |
| | |
| | |
| | |
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 | |
| 1/22/20 | | |
| 250,000 | | |
$ | 1.71 | | |
1/22/20 | |
| 1/22/30 | | |
| *83,334 | | |
| **83,333 | | |
| ***83,333 | |
Applicable
performance conditions: |
|
* |
Shares
will vest upon the Company’s attainment, on or before the fifth (5th) anniversary of the Vesting Commencement Date, of Cumulative
EBITDA of more than $6,000,000 accumulated over four consecutive fiscal quarters. |
** |
Shares
will vest upon the Company’s attainment, on or before the fifth (5th) anniversary of the Vesting Commencement Date, of Cumulative
EBITDA of more than $15,000,000 accumulated over four consecutive fiscal quarters. |
*** |
Shares
will vest upon the Company’s attainment, on or before the fifth (5th) anniversary of the Vesting Commencement Date, of Cumulative
EBITDA of more than $23,000,000 accumulated over four consecutive fiscal quarters. |
In
determining the performance-based options award’s grant-date fair value, the following assumptions were used:
SCHEDULE OF SHARE-BASED PAYMENT AWARD, STOCK OPTIONS, VALUATION ASSUMPTIONS
|
| |
Expected
term (years) | | |
Expected
dividend yield | | |
Risk-free
interest rate | | |
Volatility | | |
Exercise
Price | |
● |
Carleton M.
Miller — CEO | |
| 6.5 | | |
| — | | |
| 1.57 | % | |
| 153.0 | % | |
$ | 1.71 | |
The
following table illustrates various plan data under time-based restricted stock awards for the three and nine months ended September
30, 2022, and 2021:
SCHEDULE OF STOCK OPTION PLANS
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three
months ended | | |
Six
months ended | |
| |
September
30, | | |
September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock-based
compensation expense | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Remaining
expense of stock-based compensation | |
| | | |
| | | |
$ | 414,000 | | |
$ | 414,000 | |
| |
| | | |
| | | |
| | | |
| | |
Remaining amortization
period | |
| | | |
| | | |
| 2.3
years | | |
| 3.3
years | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average remaining contractual life – options outstanding | |
| | | |
| | | |
| 7.3
years | | |
| 8.3
years | |
| |
| | | |
| | | |
| | | |
| | |
Intrinsic value per share | |
| | | |
| | | |
$ | — | | |
$ | 0.11 | |
The
table below summarizes the status of the performance-based stock option awards:
| |
September
30, 2022 | |
| |
Number
of Options (in
shares) | | |
Weighted Average (Exercise
Price) | |
| |
| | |
| |
Beginning balance
— January 1, 2022, quantity of outstanding options | |
| 250,000 | | |
$ | 1.70 | |
| |
| | | |
| | |
Performance-based
stock option awards granted, canceled, expired | |
| — | | |
| — | |
| |
| | | |
| | |
Ending balance —
September 30, 2022, quantity of outstanding options | |
| 250,000 | | |
$ | 1.70 | |
| |
| | | |
| | |
Ending balance —
September 30, 2022, quantity of exercisable options | |
| — | | |
$ | — | |
| |
| | | |
| | |
Range of exercise prices | |
| $1.71 | |
The
probability of achieving any required metrics for vesting is inconclusive, and no options are exercisable as of September 30, 2022. When
the Company determines that the remaining performance metrics’ achievement becomes probable, the Company will record a cumulative
catch-up stock-based compensation amount. We will record unrecognized costs over the remaining requisite service period of the awards.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 — STOCK-BASED COMPENSATION (continued)
Restricted
Stock Units
Restricted
stock awards — time-based:
The
Company granted the following awards under the amended Plan for restricted stock units (“RSUs”) subject to continued employment:
SUMMARY
OF GRANTS UNDER AMENDED PLAN
| |
Grant | | |
| | |
Initial
RSUs Vesting | |
Remaining
RSUs Vesting |
Recipient | |
Date | | |
Units | | |
Exercise Price | | |
Date | |
Units | | |
Units | | |
Terms |
| |
| | |
| | |
| | |
| |
| | |
| | |
|
Carleton M. Miller
— CEO | |
| 3/3/21 | | |
| 598,665 | | |
$ | 3.60 | | |
3/3/22 | |
| 199,555 | | |
| 399,110 | | |
24 equal monthly
periods |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
|
Michel Bais — Managing
Director | |
| 8/17/21 | | |
| 200,000 | | |
$ | 1.89 | | |
8/17/22 | |
| 50,000 | | |
| 150,000 | | |
36 equal monthly periods |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
|
Ronnie Hamilton — VP
Global Operations | |
| 1/12/22 | | |
| 200,000 | | |
$ | 1.10 | | |
1/12/23 | |
| 66,000 | | |
| 134,000 | | |
24 equal monthly periods |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
|
Group of 22 Employees | |
| 2/17/22 | | |
| 515,000 | | |
$ | 0.98 | | |
2/17/23 | |
| 169,950 | | |
| 345,050 | | |
24 equal monthly periods |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
|
Carleton M. Miller —
CEO | |
| 2/16/22 | | |
| 1,033,076 | | |
$ | 1.05 | | |
2/16/23 | |
| 258,269 | | |
| 774,807 | | |
36 equal monthly periods |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
|
Mike Bond — CFO | |
| 2/16/22 | | |
| 392,985 | | |
$ | 1.05 | | |
2/16/23 | |
| 98,246 | | |
| 294,739 | | |
36 equal monthly periods |
The
following table illustrates various plan data under time-based restricted stock awards for the three and nine months ended September
30, 2022, and 2021:
SCHEDULE OF STOCK OPTION PLANS
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three
months ended | | |
Six
months ended | |
| |
September
30, | | |
September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock-based
compensation expense | |
$ | 282,000 | | |
$ | — | | |
$ | 1,180,000 | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Remaining
expense of stock-based compensation | |
| | | |
| | | |
$ | 3,576,000 | | |
$ | 2,533,000 | |
| |
| | | |
| | | |
| | | |
| | |
Remaining amortization
period | |
| | | |
| | | |
| 2.5
years | | |
| 3.5
years | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average remaining contractual life – options outstanding | |
| | | |
| | | |
| 2.7
years | | |
| 2.8
years | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average remaining contractual life – options exercisable | |
| | | |
| | | |
| 1.6
years | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Intrinsic value per share | |
| | | |
| | | |
$ | — | | |
$ | — | |
The
table below summarizes the status of the time-based restricted stock awards:
| |
September
30, 2022 | |
| |
Outstanding | | |
Exercisable | |
| |
Quantity of RSUs | | |
Weighted Average Exercise
Price | | |
Quantity
of RSUs | | |
Weighted Average Exercise
Price | |
Beginning balance, on January 1,
2022 | |
| 798,655 | | |
$ | 3.17 | | |
| — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Restricted stock units granted | |
| 2,141,061 | | |
| 1.04 | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Restricted stock units vested | |
| (353,500 | ) | |
| (3.30 | ) | |
| 353,500 | | |
| 3.30 | |
| |
| | | |
| | | |
| | | |
| | |
Ending balances, September
30, 2022 | |
| 2,586,226 | | |
$ | 1.40 | | |
| 353,500 | | |
$ | 3.30 | |
| |
| | | |
| | | |
| | | |
| | |
Range of exercise prices | |
| $0.98
to $3.60 | |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 — STOCK-BASED COMPENSATION (continued)
Restricted
stock awards — performance-based:
The
Company granted the following awards under the amended Plan for restricted stock units (“RSUs”) subject to performance vesting
conditions and continued employment:
SUMMARY
OF GRANTS UNDER AMENDED PLAN
| |
Grant | | |
| | |
Units
Vesting Schedule | |
Recipient | |
Date | | |
Units | | |
Exercise
Price | | |
Tranche
1 | | |
Tranche
2 | | |
Tranche
3 | |
Carleton M. Miller
— CEO | |
| 3/3/21 | | |
| 896,665 | | |
$ | 3.60 | | |
| 298,888 | | |
| 298,888 | | |
| 298,889 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Michael Bond — CFO | |
| 12/31/20 | | |
| 368,715 | | |
$ | 1.32 | | |
| 122,905 | | |
| 122,905 | | |
| 122,905 | |
Note:
The above performance-based restricted stock units met all three revenue thresholds in the last quarter of 2021, and the Company recognized
stock-based compensation expense accordingly for the year ending December 31, 2021.
| |
Grant | | |
| | |
Units
Vesting Schedule |
Recipient | |
Date | | |
Units | | |
Exercise
Price | | |
Tranche
1 | | |
Tranche
2 | | |
Tranche
3 | |
Carleton M. Miller
— CEO | |
| 2/16/22 | | |
| 1,033,076 | | |
$ | 1.05 | | |
| *344,359 | | |
| **344,359 | | |
| ***344,358 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Michael Bond — CFO | |
| 2/16/22 | | |
| 392,985 | | |
$ | 1.05 | | |
| *130,995 | | |
| **130,995 | | |
| ***130,995 | |
* |
RSUs
will vest upon the Company’s attainment, on or before December 31, 2026, of revenue of more than $35,575,000 accumulated over
four consecutive fiscal quarters. |
** |
RSUs
will vest upon the Company’s attainment, on or before December 31, 2026, of revenue of more than $37,353,000 accumulated over
four consecutive fiscal quarters. |
*** |
RSUs
will vest upon the Company’s attainment, on or before December 31, 2026, of revenue of more than $39,220,000 accumulated over
four consecutive fiscal quarters. |
Note:
the determination of revenue for any fiscal period shall be made based on the Company’s revenues on a consolidated basis for each
such fiscal period if the employee remains in continuous employment with the Company through the date the Compensation Committee certifies
the revenue for such fiscal period and authorizes the issuance of the underlying shares of common stock to the employee according to
his award agreement. Except as provided in each employment agreement, if an individual ceases to be an employee of the Company before
any vesting date, the remaining portion of the total number of shares unvested is forfeited. The probability of achieving any required
metrics for vesting is inconclusive as of September 30, 2022. When the Company determines that the remaining performance metrics’
achievement becomes probable, the Company will record a cumulative catch-up stock-based compensation amount. We will record unrecognized
costs over the remaining requisite service period of the awards.
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 — STOCK-BASED COMPENSATION (continued)
Restricted
stock awards — performance-based (continued):
The
following table illustrates various plan data under time-based restricted stock awards for the three and nine months ended September
30, 2022, and 2021:
SCHEDULE OF STOCK OPTION PLANS
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three
months ended | | |
Six
months ended | |
| |
September
30, | | |
September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock-based
compensation expense | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Remaining
expense of stock-based compensation | |
| | | |
| | | |
$ | 1,498,000 | | |
$ | 3,722,000 | |
| |
| | | |
| | | |
| | | |
| | |
Remaining amortization
period | |
| | | |
| | | |
| 3.3
years | | |
| 4.3
years | |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average remaining contractual life – options outstanding | |
| | | |
| | | |
| 3.3
years | | |
| 4.3
years | |
| |
| | | |
| | | |
| | | |
| | |
Intrinsic value per share | |
| | | |
| | | |
$ | — | | |
$ | — | |
The
table below summarizes the status of the time-based restricted stock awards:
| |
September
30, 2022 | |
| |
Outstanding | | |
Exercisable | |
| |
Quantity of RSUs | | |
Weighted Average Exercise
Price | | |
Quantity
of RSUs | | |
Weighted Average Exercise
Price | |
Beginning balance,
outstanding on January 1, 2022 | |
| 1,267,380 | | |
$ | 2.94 | | |
| 1,267,380 | | |
$ | 2.90 | |
| |
| | | |
| | | |
| | | |
| | |
Restricted stock units granted | |
| 1,426,062 | | |
| 1.05 | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Restricted stock units exercised | |
| (1,267,380 | ) | |
| (2.94 | ) | |
| (1,267,380 | ) | |
| (2.90 | ) |
| |
| | | |
| | | |
| | | |
| | |
Ending balances, September
30, 2022 | |
| 1,426,062 | | |
$ | 1.10 | | |
| — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Range of exercise prices | |
| $1.05 |
NOTE
10 — COMMITMENTS AND CONTINGENCIES
Pension:
The
Company may make a matching contribution to the 401(k) plan in which its employees participate. Vislink also has a Group Personal Plan
in our U.K. Subsidiary, investing funds with Royal London. U.K. employees are entitled to join the Plan to which the Company contributes
varying amounts subject to status. Additionally, the Company operates a stakeholder pension scheme in the U.K.
The
table below represents the Company’s matching contributions as follows:
SCHEDULE OF MATCHING CONTRIBUTIONS
| |
Three
months Ended | | |
Nine
months Ended | |
| |
September
30, | | |
September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Company
matching contributions - Group Personal Pension Plan, U.K. | |
$ | 51,000 | | |
$ | 43,000 | | |
$ | 148,000 | | |
$ | 126,000 | |
VISLINK
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
11 — CONCENTRATIONS
Customer
concentration risk
During
the three and nine months that ended September 30, 2022, no customers accounted for more than 10% of the Company’s total consolidated
sales. During the three months ending September 30, 2021, 38% and 14% of the Company’s revenue came from two customers of approximately
$4.3 million and $1.6 million, respectively. During the nine months ending September 30, 2021, 9% of the Company’s revenue came
from a single customer, approximately $4.3 million.
On
September 30, 2022, approximately 45% of the Company’s consolidated net accounts receivable was due from one customer for approximately
$4,204,000. On September 30, 2021, approximately $1.8 million (33%) attributable to one customer accounting for more than 10% of the
Company’s total consolidated accounts receivable.
Vendor
concentration risk
During
the three months ending September 30, 2022, 12% of the Company’s total consolidated purchases attributable to one vendor of approximately
$0.5 million. During the nine months that ended September 30, 2022, no purchases were made by individual vendors above 10% of the Company’s
total consolidated purchases.
During
the three months ending September 30, 2021, no vendor accounted for more than 10% of the Company’s quarterly-only consolidated
purchases. During the nine months ending September 30, 2021, 11% and 10% of the Company’s total consolidated purchases attributable
to two vendors of approximately $1.8 million and $1.7 million, respectively.
On
September 30, 2022, no individual vendors accounted for more than 10% of the Company’s total accounts payable. On September 30,
2021, two vendors represented approximately $0.33 million (13%) and $0.29 million (11%), respectively, of the Company’s consolidated
accounts payable, accounting for more than 10% of the Company’s total accounts payable.
NOTE
12 – REVENUE
The
Company has one operating segment, and the decision-making group is the senior executive management team. The Company disaggregated revenue
by primary geographical markets and revenue sources in the following tables:
SCHEDULE OF DISAGGREGATION OF REVENUE
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three
months Ended | | |
Nine
months Ended | |
| |
September
30, | | |
September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Primary geographical markets: | |
| | | |
| | | |
| | | |
| | |
North America | |
$ | 4,394,000 | | |
$ | 6,071,000 | | |
$ | 10,294,000 | | |
$ | 11,941,000 | |
South America | |
| 70,000 | | |
| 65,000 | | |
| 169,000 | | |
| 327,000 | |
Europe | |
| 2,052,000 | | |
| 4,131,000 | | |
| 6,630,000 | | |
| 8,079,000 | |
Asia | |
| 64,000 | | |
| 224,000 | | |
| 1,436,000 | | |
| 950,000 | |
Rest
of World | |
| 534,000 | | |
| 709,000 | | |
| 2,495,000 | | |
| 1,543,000 | |
Revenue,
net | |
$ | 7,114,000 | | |
$ | 11,200,000 | | |
$ | 21,024,000 | | |
$ | 22,840,000 | |
Primary revenue source: | |
| | | |
| | | |
| | | |
| | |
Equipment sales | |
$ | 6,061,000 | | |
$ | 10,581,000 | | |
$ | 18,533,000 | | |
$ | 21,045,000 | |
Installation, integration,
and repairs | |
| 687,000 | | |
| 366,000 | | |
| 1,260,000 | | |
| 897,000 | |
Warranties | |
| 375,000 | | |
| 365,000 | | |
| 956,000 | | |
| 573,000 | |
Other
(See Note 13) | |
| **(9,000** | ) | |
| *(2,000* | ) | |
| 275,000 | | |
| 325,000 | |
Revenue,
net | |
$ | 7,114,000 | | |
$ | 11,200,000 | | |
$ | 21,024,000 | | |
$ | 22,840,000 | |
Long-Lived Assets: | |
| | | |
| | | |
| | | |
| | |
United States | |
| | | |
| | | |
$ | 1,922,000 | | |
$ | 2,070,000 | |
Netherlands | |
| | | |
| | | |
| 20,000 | | |
| — | |
United
Kingdom | |
| | | |
| | | |
| 5,191,000 | | |
| 16,292,000 | |
| |
| | | |
| | | |
$ | 7,133,000 | | |
$ | 18,362,000 | |
** |
This
$9,000 decrease represents the weakening in the translation rate from British Pounds to U.S. dollars and a loss from the recognition
of $284,000 in the second quarter of fiscal 2022. |
* |
This
$2,000 decrease represents the weakening in the translation rate from British Pounds to U.S.
dollars and a loss from the original recognition of $327,000 in the second quarter of fiscal
2021. |
NOTE
13 — REBATES
The
amounts generated in Note 12 as part of the Primary revenue source “other” resulted from rebates issued to the Company’s
filing appropriate governmental forms related to the research costs incurred by our U.K. subsidiary in prior fiscal years. The Company
expects to continue filing applicable rebate forms for the 2022 fiscal year but cannot guarantee that such rebates will be available
in future financial periods at similar levels or at all.
NOTE
14 — SUBSEQUENT EVENTS
Series A preferred stock dividends
Effective as of November 9, 2022, the Board of Directors
(the “Board”) of the Company declared a dividend of one one-thousandth of a share of Series A Preferred Stock, par value $0.00001
per share (“Series A Preferred Stock”), for each outstanding share of the Company’s common stock, par value $0.00001
per share (“Common Stock”), which dividend would be issuable to stockholders of record at 5:00 p.m. Eastern Time on November
21, 2022 (the “Record Date”). The outstanding shares of Series A Preferred Stock will vote together with the outstanding shares
of the Company’s common stock as a single class, exclusively concerning a reverse stock split proposal at a special meeting of stockholders
expected to be held on January 11, 2023 (“Special Meeting”) and will not be entitled to vote on any other matter, except to
the extent required under the Delaware General Corporation Law. Subject to certain limitations, each outstanding share of Series A Preferred
Stock will have 1,000,000 votes per share (or 1,000 votes per one one-thousandth of a share of Series A Preferred Stock).
All shares of Series A Preferred Stock that are not
present in person or by proxy at the Special Meeting held to vote on the reverse stock split as of immediately prior to the opening of
the polls at such meeting will automatically be redeemed by the Company. Any outstanding shares of Series A Preferred Stock that have
not been so redeemed will be redeemed if such redemption is ordered by the Board or automatically upon the approval by the Company’s
stockholders of an amendment to the Company’s certificate of incorporation affecting the reverse stock split at such meeting.
The Series A Preferred Stock will be uncertificated,
and no shares of Series A Preferred Stock will be transferable by any holder thereof except in connection with a transfer by such holder
of any shares of the Company’s common stock held by such holder. In that case, a number of one one-thousandths of a share of Series
A Preferred Stock equal to the number of shares of the Company’s common stock to be transferred by such holder would be transferred
to the transferee of such shares of common stock.
The preceding description of the terms of the Series A Preferred Stock does not purport to be complete and is incorporated by reference
to the related Certificate of Designation, which, is filed as Exhibit 3.1(i)(d) to this Quarterly Report on Form 10-Q, and which is incorporated
into this Note 14 by reference.