EDGAR 10-K Filing

Company CIK: 1565228
Filing Year: 2023
Filename: 1565228_10-K_2023_0001493152-23-010183.json

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ITEM 1. BUSINESS
Item 1. Business
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
Our Strategy
Our participation in the Live Production, Mil/Gov, and Satellite sectors allows us to offer various end-to-end, high-reliability, high-data-rate, long-range wireless video transmission solutions.
We use our solutions for applications in growing market segments, including in-game sports, mobile video feeds, real-time capture and display footage from drones and other aerial platforms, and rapid-response electronic newsgathering operations.
The acquisition of Mobile Viewpoint (“MVP”) in August 2021 is a component of our strategy to provide an industry-leading portfolio of live video acquisition, contribution, and distribution solutions that meet the demanding needs of media, enterprise, defense, and government organizations. Vislink and its customers will benefit from the ability to address the most transformative trends in today’s live video market, such as:
● Live internet video traffic is growing fast: from 2016 to 2021, there was a 15-fold increase in live video internet traffic (71.9% CAGR);
● The acceleration towards cloud-based remote production;
● The increasing demand for enhanced video content formats such as 4K, 8K, and 360-degree video; and
● The proliferation of new video transport capable networks such as 5G and Starlink.
The acquisition will permit the Company to expand its offerings, which serve the most of these transformative live video trends and bring high-quality live production economically to the previously challenging presentation of historical events involving amateur and semi-pro athletics. MVP’s technology enhances our go-to-market strategy as we seek to take advantage of new technologies such as 5G and other new networks and machine learning, which we believe are revolutionizing how video is generated and transported.
Market
Our services and product offerings broadly address Live Production, Mil/Gov, and Satellite markets.
Among the new subsections of the sports and entertainment market, the Company has identified the burgeoning e-sports live-streaming applications markets as those where our solutions have applicability. The Live Production market is focused on applying more agile wireless video systems for live production and broadcast of sports, entertainment, and news events. Drivers in this market include small, lightweight, easy-to-use equipment, low-latency video systems, reliability of the wireless links, and the ability to use licensed and unlicensed bands. Current trends within the market reduce the size of these products further and improve the wireless video systems’ agility as users demand higher link reliabilities at longer ranges. There is also an increased desire to provide audiences with new views and camera angles to enhance the viewing experience. We address this need by incorporating 4K, HDR, and other emerging video technologies.
The Live Production market’s broadcast news sector looks to improve operational efficiencies in gathering, producing, and transmitting wireless content. Recent trends in the market include a movement towards I.P. connectivity over point-to-point links for infrastructure, high-definition upgrades of remote newsgathering vehicles, and continued pressure to reduce expenses by improving operational efficiencies. Vislink focuses on the specific ways these customers create and gather content wirelessly. As the wireless communications industry begins transitioning to fifth-generation (5G) networks, the speed increases they will usher in expect to augment the availability of on-demand live streaming, where Vislink equipment is already in use.
The Mil/Gov market comprises vital segments, including state and local law enforcement agencies, federal agencies, and military system integrators. The market looks to improve video content’s reliability and quality without adding complexity and omitting technical intervention while operating video systems. State and local agencies benefit from the Department of Homeland Security grant programs to improve overall security. Recent trends within these segments include improved interoperability within agencies and demand for fully integrated systems, including robust microwave combined with ubiquitous I.P. networks; as the wireless video systems become more reliable and straightforward to deploy, the wireless systems’ option rate increases. Customers within this market include state police forces, sheriff’s departments, fire departments, first responders, the Department of Justice, and Homeland Security.
The drive to experience more and better visual communication systems impacts the Satellite market. Live T.V. broadcasting over satellite, and other connectivity types continues to be driven by cost-per-bit economics. Uplink operators are keen to reduce their OPEX costs by investing in greater transmission efficiency via compression and modulation approaches. There is also an interest in high-rate I.P. connectivity products and the desire for fully integrated solutions that enable remote live content capture, production, broadcast, and distribution. 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.
Our Products and Solutions: Overview
We offer a full spectrum of wireless video products built around providing complete solutions. We have traditionally focused on developing core product technologies in final assembled products that cross-market segments. Such technology focus areas include R.F., Live Streaming, and microwave component development spanning the frequency range from D.C. to 18GHz, waveform modulation, advanced video encoding (HEVC) and decoding, 4K UHD (Ultra High Definition) camera systems, and digital signal processing. Through these products, we are positioned with significant technology I.P. and an established reputation for rapidly and economically delivering complex, bespoke engineering products and solutions to customers that are expertly managed to tight deadlines. Production of these products can quickly be scaled to respond to changes in market demand.
Live Production Products and Solutions
Vislink Live Production Solutions include high-definition communication links that reliably capture, transmit and manage live event footage. We offer a line of high-margin wireless camera transmitter and receiver products that may be interconnected over I.P. networks, expanding and simplifying their widespread use and significantly reducing deployment costs. HCAM is a 4K Ultra HD-capable on-camera wireless system designed to cover significant events among our transmitter products. Our flagship receiver product is the Quantum Receiver. The Quantum is an ultra-low latency, waveform agnostic central receiver representing the Vislink premier receiver in all market verticals, including MilGov. Features include HEVC quad signal decode, seamless geographical coverage, and an I.P. stream engine with cloud integration possibilities, OTT, and social media platforms. IP Link 3.0 is a studio-transmitter link system that enables broadcasting service platforms to access new monetization opportunities. Other essential receiver products include the ViewBack, CRx6, and CIRAS-X6. ViewBack is a lightweight, low-power, low latency, dual-channel diversity receiver-decoder that enables quicker production, more efficient editing, and more effective collaboration between camera operators and studio teams. We also offer ultra-compact onboard solutions integrating our MDR (Multi-Channel Diversity Receive System) technology with ruggedized support components designed to capture video from high-speed motorsports.
As a result of our acquisition of Mobile Viewpoint, we also offer a portfolio of products that includes the WMT line of mobile encoders and TerraLink rack encoders for live streaming over 4G and 5G, and systems developed using AI technologies for the automated coverage of news and sports productions., The TrolleyLive RemotePro is an all-in-one production unit for remote live broadcasts. LinkMatrix is a central platform for managing all devices and synchronizing all data sources.
Quantum
IP Link 3.0
WMT BaseLink Encoder
TerraLink 4CM Rack Encoder
TrolleyLive Remote Pro
Mil/Gov Products and Solutions
In the Mil/Gov sector, Vislink has focused on supplying miniature transmitters and handheld receivers for tactical surveillance and benefits from limited competition in this area. The HHT3 and Mobil Commanders are handheld receivers/monitors designed for tactical situations.
The Airborne Video Downlink System (AVDS) is a comprehensive aerial-based video transmission solution that delivers real-time surveillance to enhance law enforcement, emergency, and critical infrastructure operations. It includes an integrated suite of downlink transmitters, receivers, and antennas that capture real-time, reliable high-definition video from drones, helicopters, and other aircraft for display at command centers, mobile units, and video management systems. AVDS allows an unlimited number of observers to view the video over any network connection, including wired Ethernet, Wi-Fi, I.P. satellite, and I.P. cellular. AeroLink is an aircraft-based transmitter unit that provides bi-directional data transmission and is tightly integrated with other elements of the Vislink AVDS, including the Quantum and other Vislink central receivers. In addition to supporting Mil/Gov applications, AeroLink supports broadcast/ENG applications for transmitting air-based feeds from breaking news and sporting events.
HHT3
Mobil Commander
AeroLink
Satellite Products and Solutions
Our top satellite product has historically been MSAT, a highly portable tri-band satellite antenna system designed for rapid deployment in challenging environments. The Vislink Satellite product line features terminals ranging from 65cm man-portable systems to 2.4m flyaway and driveaway systems, all available in multiple satellite band configurations. Other Vislink Satellite products include the DVE6100 encoder and IRD6200 decoder electronics units complementing our satellite terminals. They support 4k UHD transmissions and deliver significant bandwidth efficiencies to satellite communications.
MSAT
DVE6100
Competition and Competitive Positioning
Vislink believes its primary competitors are Domo Tactical Communications (formerly a division of Cobham), Silvus Technologies, Persistent Systems, Troll Systems, and several smaller market-specific businesses.
We believe that Vislink represents one of the market share leaders in the professional broadcast and media video transmission sector. We have successfully leveraged our history of broadcast industry leadership, reputation for advanced technology, and the ability to provide end-to-end solutions to maintain and increase our customer base and continue delivering highly competitive offerings. Our products solve a growing market need for regular, high-definition, wireless video communications. Many of our product offerings address applications in growing market segments, including in-game sports-video mobile feeds, real-time capture and display footage from drones and other aerial platforms, and rapid-response electronic newsgathering operations.
Since completing the global rebranding of our solutions under the single Vislink entity in 2018 and the acquisition of MVP in 2021, we believe we can now offer an expanded range of product offerings, additional services, and enhanced capabilities. We believe this expansion of product offerings will position us for continued growth in Live Production and Mil/Gov markets. We continue to market and sell satellite solutions but do not anticipate investing in the engineering and development necessary to offer additional upgrades or features to our current products. We seek to improve margins and control product quality and competitive agility as we refine our production processes.
Sales and Marketing
Our sales team comprises sales managers responsible for defined regional areas, inside sales personnel, and business development representatives focused on targeted sectors and regions, supported by solution engineers trained in technical sales with a given market focus. The sales team focuses on helping current customers and nurturing relationships with prospective customers in key domestic and international markets. We employ a combination of sales channels, including direct-to-end customer sales, network group sales, reseller/integrators, and Original Equipment Manufacturer (“OEM”) sales channels to use the most efficient means of reaching customers depending on the market segment. Marketing and public relations activities, digital and print marketing initiatives, the creation of support materials, trade shows, and other event appearances support our sales efforts.
As of December 31, 2022, our business development, sales, and marketing team comprised 22 full-time employees and 4 contractors.
Customers
Vislink has developed a significant following based on our product offerings’ reputation for performance, reliability, and advanced technology use. We believe we have developed a diverse and stable customer base among blue-chip, tier-1 clients in Live Production markets and high-profile agencies and organizations in Mil/Gov and Satellite markets.
Manufacturing and Suppliers
We utilize a combination of external contract manufacturers and internal resources to manufacture, test, assure the quality of, and ship our products, allowing us to develop optimal supply chains tailored to our needs on a per-product and per-solution basis. As we advance, we anticipate focusing on our core strengths: innovation and technology design and developing, creating, and exploiting our intellectual property.
We may continue to rely upon third-party components and technology to build our products, particularly in the short term, as we procure components, subassemblies, and products necessary to manufacture our products based on our design, development, and production needs. While parts and supplies are generally available from various sources, we currently depend on a single or limited number of suppliers for several components for our products. We rely on purchase orders rather than long-term contracts with our suppliers. A delay in production could result if a supply disruption of critical components required us to re-engineer our products to incorporate alternate features.
Intellectual Property
We have developed a broad intellectual property portfolio covering wired and wireless communications systems. As of December 31, 2022, we have 17 patents granted in the United States, no patent applications pending, no provisional applications pending, and one disclosure. Internationally, we have two patents granted, no patent applications pending, and no Patent Cooperation Treaty (PCT) applications.
Areas of our development activities that have culminated in filings and/or awarded patents include:
● Self-Organizing Networks;
● R.F. Modulation;
● Compression (protocols, payload, signaling, etc.);
● Modulators/Demodulators;
● Antennas/Shielding;
● Wired and Wireless Networks;
● Media Access Control Protocols; and
● Interference Mitigation.
We protect our intellectual property rights by relying on federal, state, and common law rights and contractual restrictions. We control access to our proprietary technology by entering confidentiality and invention assignment agreements with our employees and contractors and confidentiality agreements with third parties. We also actively monitor activities concerning infringing uses of our intellectual property by third parties.
In addition to these contractual arrangements, we rely on a combination of the trade secret, copyright, trademark, trade dress, domain name, and patents to protect our products and other intellectual property. We own a substantial portion of the copyright interests in the software code used in connection with our products and the brand or title name trademark under our marketed products. We pursue our domain names, trademarks, and service marks in the United States and locations outside the United States. Our registered trademarks in the United States include “xG,” “IMT,” “Vislink,” “Mobile Viewpoint,” and the names of our products, among others.
Circumstances outside our control could pose a threat to our intellectual property rights. For example, adequate intellectual property protection may not be available in the United States or other countries where our products are sold or distributed. Also, our efforts to protect our proprietary rights may not be adequate. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and time-consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business, harming our operating results.
Mobile wireless communications technology and other industries may own many patents, copyrights, and trademarks. They may frequently request license agreements, threaten litigation, or file a suit against us based on infringement allegations or other violations of intellectual property rights. We may face third-party claims that our competitors and non-practicing entities infringe on their trademarks, copyrights, patents, and other intellectual property rights. As our business grows, we might face more claims of infringement.
Company Information
Effective February 11, 2019, xG Technology, Inc. changed its name to Vislink Technologies, Inc. Our predecessor company was initially incorporated in Delaware in 2006. Our executive offices are at 350 Clark Dr., Suite 125, Mt. Olive, NJ 07828, and (908) 852-3700 is the telephone number. Our website address is www.vislink.com. Our website’s information is not part of the report and is only for informational purposes.
Human Capital
Overall
Our business results depend partly on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent. As of December 31, 2022, we employed 109 full-time employees and 4 independent contractors, including 23 in development, two officers, 13 in general and administrative, one in business development, 44 in operations, and 22 in sales and marketing. As a global industrial technology company, many of our employees are engineers or trained trade or technical workers focusing on advanced manufacturing, and many possess advanced college degrees. No labor union represented our employees at any of our worldwide facilities as of December 31, 2022.
The Company emphasizes several measures and objectives in managing its human capital assets, including, among others, employee safety and wellness, talent acquisition and retention, employee engagement, development and training, diversity and inclusion, and compensation. These targeted ideals vary by country/region and may include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare, and insurance benefits, health savings and flexible spending accounts, paid time off, family leaves, family care resources, employee assistance programs, and tuition assistance. We also provide our employees access to various innovative, flexible, and convenient health and wellness programs. We designed these programs to support employees’ physical and mental health by providing tools and resources to improve or maintain their health status and encourage engagement in healthy behaviors. We consider our employee relations generally to be good.
Covid-19
During the COVID-19 pandemic, our employees’ safety remained vital to us. Our response to the global pandemic efforts included implementing health-related protocols that we consider prudent. The Company continues to maintain policies relating to housekeeping, [visitation restrictions, social distancing], sanitization, hygiene, and respiratory etiquette. We retain employee leave policies and accommodations, remote working opportunities and infrastructure, and protocols for not reporting to work and/or when to return to work upon potential and/or confirmed COVID-19 exposure or infection. The use of personal protective equipment is an employee choice and optional for visitors to Company facilities. We support employees’ physical and mental health by providing tools and resources to improve or maintain their health status and encourage engagement in healthy behaviors.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
In addition to the other information in this Form 10-K, readers should consider the following essential factors carefully. These factors, among others, in some cases, have affected, and in the future could affect, our financial condition and results of operations and could cause our future results to differ materially from those expressed or implied in any forward-looking statements that appear in this Form 10-K or that we have made or will make elsewhere.
Risk Factor Summary
The following summarizes certain factors that may make our company’s investment speculative or risky. You should carefully consider the entire risk factor disclosure outlined in this Annual Report, in addition to the other information herein, including the section of this Report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes.
● We have incurred losses in the past and may be unable to achieve or sustain profitability in the future.
● We may need to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations.
● If we cannot regain or maintain compliance with Nasdaq’s applicable continued listing requirements or standards, Nasdaq could delist our Common Stock.
● We face risks related to COVID-19, which could significantly disrupt our operations and adversely impact us and our business.
● We may require additional capital to develop and market new products. If we do not obtain additional financing, our business prospects, financial condition, and results of operations will be adversely affected if required.
● Our industry is highly competitive, and we may not compete effectively.
● Defects or errors in our products and services or products made by our suppliers could harm our brand and relations with our customers and expose us to liability. If we experience product recalls, we may incur significant expenses and experience decreased demand for our products.
● We acknowledge material weaknesses in the controls and procedures of our financial reporting. In the future, we may identify additional material weaknesses that may cause us to fail to meet our reporting obligations, including timeliness, or result in material misstatements of our financial statements.
● We rely on key executive officers, and their knowledge of our business and technical expertise would be difficult to replace.
● We purchase some components, subassemblies, and products from a limited number of suppliers. The loss of these suppliers may substantially disrupt our ability to obtain orders and fulfill sales as we design and qualify new components.
● Our intellectual property protections may be insufficient to safeguard our technology adequately.
● We may be subject to claims of intellectual property infringement or invalidity. Expenses incurred for monitoring, protecting, and defending our intellectual property rights could adversely affect our business.
● Enforcement of our intellectual property rights abroad, particularly in China, is limited, and it is often difficult to protect and enforce such rights.
● The intellectual property rights of others may prevent us from developing new products or entering new markets.
● We may be subject to infringement claims in the future.
● If our technology did not work as planned or was unsuccessful in developing and selling new products or penetrating new markets, our business and operating results would suffer.
● Demand for our defense-related products and products for emergency response services depends on government spending.
● Regulation of the telecommunications industry could harm our operating results and prospects.
● New regulations or standards or changes in existing laws or standards in the United States or internationally related to our products may result in unanticipated costs or liabilities, which could have a material adverse effect on our business, results of operations, and future sales, and could place additional burdens on the operations of our business.
● Our industry is subject to rapid technological change, and we must make substantial investments in new products, services, and technologies to compete successfully.
● At several of our annual stockholder meetings, including our 2019 Annual Meeting of Stockholders, we failed to obtain ratification by our stockholders of specific proposals submitted for approval of our stockholders at prior annual meetings, which could be deemed defective corporate acts.
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic has unfavorably affected the Company’s business, financial condition, and operating results and could affect the Company’s liquidity. We cannot predict, with any certainty, how future events may affect our operations in the near and long-term in the COVID-19 pandemic environment.
The COVID-19 pandemic and the continued measures to reduce its spread have negatively impacted the global economy, disrupted consumer/customer demand and supply chains, and created significant volatility and financial market disruption. These measures and the continued volatility of the worldwide economy adversely affected our results of operations for 2022.
The extent to which COVID-19 will impact our business remains uncertain and will depend on various changing factors on a day-to-day basis. We may not be able to predict such items accurately as:
● the duration and scope of the pandemic,
● the disruption of the national and global economy,
● the span of the economic downturn,
● the laws, programs, actions, and vaccine mandates that federal, state, and local governments will enact or take,
● the possibility to which our clients’ businesses contract or fail,
● the applicability to which new regulations intended to help small and medium-sized businesses,
● the extent to which our operations are impacted by facility closures, remote work, and/or infections,
● and how quickly and to what time normal economic and operating conditions can resume.
These factors could exacerbate the risks and uncertainties related to the COVID-19 pandemic.
Risks Related to the Company and Our Business
We have incurred losses in the past and may be unable to achieve or sustain profitability in the future.
We have incurred net losses since inception, including net losses of $13.6 million and $16.4 million for the years ended December 31, 2022, and 2021, respectively. As a result of ongoing losses, as of December 31, 2022, we had an accumulated deficit of $300.1 million and $25.6 million of cash. We expect to continue to incur significant sales and marketing, product development, regulatory and other expenses as we seek to expand existing relationships with our customers, obtain new customers, reach new markets, and develop new products or add new features to our existing products. Our net income (loss) may fluctuate significantly from fiscal period to period. We will need to generate significant additional revenues and/or cost-cutting to achieve and sustain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
We may need to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations.
Suppose our available cash balances, potential borrowing capacity, and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our products, whether as a result of the risks described in this Annual Report on Form 10-K or otherwise, we may seek to sell common or preferred equity or debt securities, other forms of third-party funding or seek debt financing. Our current and future funding requirements will depend on many different factors, including:
our ability to achieve revenue growth and improve operating margin;
● the cost of expanding our operations and offerings, including our sales and marketing efforts;
● our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products and maintaining or improving our sales to our current customers;
● the cost of research and development activities, including research and development relating to new products and technologies or features for existing products;
● the effect of competing technological and market developments;
● costs related to international expansion; and
● the potential cost and delays resulting from regulatory oversight of our business and products.
We may also consider raising additional capital in the future to expand our business, pursue strategic investments, take advantage of financing opportunities, or for other reasons, including:
● expand our sales and marketing efforts to increase market adoption of our products and address competitive developments;
● fund development and marketing efforts of any future products or additional features to then-current products;
● acquire, license, or invest in new technologies;
● provide for supply and inventory costs associated with plans to accommodate potential increases in demand for our products;
● acquire or invest in complementary businesses or assets; and
● finance capital expenditures and general and administrative expenses.
Additional capital may not be available to us at such times or in needed amounts. Even if capital is available, it might be available only on unfavorable terms. Any issuance of additional equity or equity-linked securities could be dilutive to our existing stockholders, and any new equity securities could have rights, preferences, and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt, pay dividends, repurchase our stock, make investments, and engage in merger, consolidation, or asset sale transactions. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish or license some rights to our technologies or products on terms that are not favorable to us. If access to sufficient capital is not available as and when needed, our business will be materially impaired, and we may be required to cease operations, curtail one or more product development or expansion programs, significantly reduce expenses, sell assets, seek a merger or joint venture partner, file for protection from creditors or liquidate all our assets.
We face risks related to COVID-19, which could significantly disrupt our operations and adversely impact us and our business.
The enduring effect of the COVID-19 pandemic, including the advent of Delta and Omicron 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 timing and efficacy of the vaccination programs in the jurisdictions in which the Company operates and the actions implemented to contain the impact of COVID-19 by Federal and local governments limit determining the foreseeable resulting economic effects with any level of predictability.
We may require additional capital to develop and market new products. If we do not obtain additional financing, our business prospects, financial condition, and results of operations will be adversely affected if required.
We may require additional capital to develop new products in the future, and we may not be able to secure adequate additional financing when needed on acceptable terms or at all. To execute our business strategy, we may issue additional equity securities in public or private offerings, potentially at discounts to the current or future market price of our Common Stock. If we cannot secure additional funding, we may be forced to forego strategic opportunities or delay, scale back, and eliminate future product development.
Our industry is highly competitive, and we may not compete effectively.
The communications industry is highly competitive, rapidly evolving, and constantly technological change. We expect that new competitors are likely to join existing competitors. Many of our competitors may be larger and have more excellent financial, technical, operational, marketing, and other resources and experience than we do. If a competitor expends significant resources, we may not compete successfully. Also, the pace of technological change makes it impossible for us to predict whether we will face new competitors using different technologies to provide products. If our competitors were to offer better and more cost-effective products than our products, we might not be able to capture any significant market share.
Defects or errors in our products and services or products made by our suppliers could harm our brand and relations with our customers and expose us to liability. If we experience product recalls, we may incur significant expenses and experience decreased demand for our products.
Our products are inherently complex and may contain defects and errors that are only detectable when the products are in use. Because our products are used for personal and business purposes, such faults or errors could severely impact our end customers, damaging our reputation and customer relationships and exposing us to liability. Defects or impurities in our components, materials, or software, equipment failures, or other difficulties could adversely affect our customers’ ability to ship products on a timely basis and customer or licensee demand for our products. Any shipment delays or declines in demand could reduce our revenues and harm our ability to achieve or sustain desired levels of profitability. Our customers may also experience component or software failures or defects requiring significant product recalls, rework, and/or repairs not covered by warranty reserves.
We acknowledge material weaknesses in the controls and procedures of our financial reporting. In the future, we may identify additional material weaknesses that may cause us to fail to meet our reporting obligations, including timeliness, or result in material misstatements of our financial statements. If we continue to remediate our material weaknesses or implement effective controls and procedures for our financial reporting, our ability to accurately and timely report our financial results could be adversely affected, which would likely adversely affect the value of our Common Stock.
The Company’s management is responsible for establishing and maintaining internal controls over financial reporting. Internal Control Over Financial Reporting is a process designed by and under the supervision of the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s Board, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes under generally accepted accounting principles and includes those policies and procedures that:
● Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements following generally accepted accounting principles and that receipts and expenditures of the Company are being made only by authorizations of its management and Board; and
● Provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected. Also, projections of any effectiveness evaluation to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). In their assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, 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.
We are designing and implementing measures to improve our internal control over financial reporting to remediate the material weaknesses related to our financial reporting as of December 31, 2022. Management has engaged a third-party consultant to identify and document our internal control deficiencies and provide an assessment of current controls and recommendations regarding remediation efforts to eliminate or mitigate the control deficiencies. Until we can remediate this situation, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements, which could lead to a restatement of those financial statements.
The Company is in the process of affecting the following:
● additional review procedures within our accounting and finance department,
● Implement application controls in our accounting system, and
● Implementing suitable accounting controls and processes.
If we cannot conclude on an ongoing basis that we have effective internal control over financial reporting under Section 404 of the Sarbanes Oxley Act of 2002, in that case, our independent registered public accounting firm may not issue an unqualified opinion or cause us to be untimely concerning our reporting obligations. If we cannot conclude that we have effective internal control over financial reporting, investors could lose confidence in our reported financial information, which could have a material adverse effect on the trading price of our common stock. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. We will not fully correct the identified material weaknesses until the ongoing steps described above are effectively attained and operating efficiently for an appropriate time.
Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and reduce our Common Stock’s market price.
Our amended and restated certificate of incorporation (“Certificate of Incorporation”) and our Bylaws contain provisions that could delay or prevent a change in our Company’s control. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:
● authorizing the Board to issue, without stockholder approval, preferred stock with rights senior to those of our Common Stock;
● limiting the persons who may call special meetings of stockholders; and
● they require advance notification of stockholder nominations and proposals.
Also, the provisions of Section 203 of the DGCL govern us. These provisions may prohibit large stockholders, particularly those owning 15% or more of our outstanding voting stock, from merging or combining with us for a specific time without our Board’s consent. These and other provisions in our Certificate of Incorporation and our Bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our Common Stock and result in the market price of our Common Stock being lower than it would be without these provisions.
Although our products may not cause users technical issues, our business and reputation may be harmed if users perceive our solutions to cause a slow or unreliable network connection or a high-profile network failure.
We expect our products to be in many different locations and user environments and can provide transmission of video, mobile broadband connectivity, and interference mitigation, among other applications. Our products’ ability to operate effectively can be negatively impacted by many different elements unrelated to our products. Although our products may not cause technical issues, users often may perceive the underlying cause of our technology’s poor performance. This perception, even if incorrect, could harm our business and reputation. Similarly, a high-profile network failure may be caused by improper operation or failure of a network component we did not supply. Still, other service providers may perceive that our products were implicated, which, even if incorrect, could harm our business, operating results, and financial condition.
Our ability to sell our products will be highly dependent on the quality of our support and service offerings, and our failure to offer high-quality support and services would adversely affect our sales and the results of operations.
Once our products are deployed, our channel partners and end customers will depend on our support organization to resolve any issues relating to our products. A high level of support will be necessary for our products’ successful marketing and sale. In many cases, our channel partners will likely provide support directly to our end customers, and we will not have complete control over the quality of the support supplied by our channel partners. These channel partners may also support other third-party products, potentially distracting resources from support for our products. Suppose our channel partners do not effectively assist our end customers in deploying our products, succeed in helping our end customers quickly, resolve post-deployment issues, or provide adequate ongoing support. In that case, our ability to sell our products to existing end customers could be adversely affected, and our reputation with potential end customers could be harmed. We sometimes guarantee a certain performance level to our channel partners and end customers, which could prove resource-intensive and expensive if unforeseen technical problems arise.
We are subject to increasing operating costs and inflation risks, which may adversely affect our performance.
While we attempt to offset increases in operating costs through various measures focused on increasing revenues, there is no assurance that we will do so. Therefore, operating expenses may rise faster than associated revenues resulting in a material adverse impact on our cash flow and margins.
We are also impacted by inflationary increases in wages and benefits, whether driven by competition for talent or ordinary course pay increases and other rising costs. Increases in the rate of inflation could also significantly impact our cost base. In all countries in which we operate, wage inflation, whether driven by competition for talent or ordinary course pay increases, may also increase our cost of providing services and reduce our profitability if we are not able to pass those costs on to our clients or charge premium prices when justified by market demand.
We are subject to increasing operating costs and inflation risks, which may adversely affect our performance.
While we attempt to offset increases in operating costs through various measures focused on increasing revenues, there is no assurance that we will do so. Therefore, operating expenses may rise faster than associated revenues resulting in a material adverse impact on our cash flow and margins.
We are also impacted by inflationary increases in wages and benefits, whether driven by competition for talent or ordinary course pay increases and other rising costs. Increases in the rate of inflation could also significantly impact our cost base. In all countries in which we operate, wage inflation, whether driven by competition for talent or ordinary course pay increases, may also increase our cost of providing services and reduce our profitability if we are not able to pass those costs on to our clients or charge premium prices when justified by market demand.
We may fail to recruit and retain qualified personnel.
We expect to rapidly expand our operations and grow our sales, development, and administrative functions. This expansion is expected to significantly strain our management and require hiring a considerable quantity of qualified personnel. Accordingly, recruiting and retaining such personnel in the future will be critical to our success. There is intense competition from other companies for qualified personnel in our activities. Suppose we fail to identify, attract, retain, and motivate this highly skilled personnel. In that case, we may be unable to continue our marketing and development activities, which could adversely affect our business, financial condition, results of operations, and prospects.
We rely on key executive officers, and their knowledge of our business and technical expertise would be difficult to replace.
We depend highly on our executive officers because of their expertise and experience in the telecommunications industry. We have agreements with our executive officers containing customary non-disclosure, non-compete, confidentiality, and assignment of inventions provisions. Our officers do not have “key person” life insurance policies. The loss of our key personnel’s technical knowledge, management, and industry expertise could result in delays in product development, loss of customers and sales, and diversion of management resources, adversely affecting our operating results.
We purchase some components, subassemblies, and products from a limited number of suppliers. The loss of these suppliers may substantially disrupt our ability to obtain orders and fulfill sales as we design and qualify new components.
We sometimes rely on third-party components and technology to build and operate our products, and until full integration with IMT and VCS, we may rely on our contract manufacturers to obtain the parts, subassemblies, and products necessary for the manufacture of our products. Shortages in components we use in our products are possible, and our ability to predict such components’ availability is limited. While parts and supplies are generally available from various sources, our contract manufacturers currently depend on a single or limited number of suppliers for several of our products. If our suppliers of these components or technology were to enter into exclusive relationships with other providers of wireless networking equipment or were to discontinue providing such components and technology to us, and we could not replace them cost-effectively or at all, our ability to provide our products would be impaired. Our contract manufacturers generally rely on purchase orders rather than long-term contracts with these suppliers.
Specific supply chains disruptions, such as the armed conflict between Russia and Ukraine, trade sanctions, and similar events, may also arise. It may be difficult for us to assess the ability of our suppliers to timely meet our demand in the future based on past performance. As a result, even if available, our contract manufacturers and we may not secure sufficient components at reasonable prices or acceptable quality to build our products on time. Therefore, we may be unable to meet customer demand for our products, adversely affecting our business, operating results, and financial condition.
We do not have long-term contracts with our existing contract manufacturers. The loss of any of our current contract manufacturers could adversely affect our business, operating results, and financial condition.
We do not have long-term contracts with our existing contract manufacturers. If any of our current contract manufacturers are unable or unwilling to manufacture our products in the future, the loss of such contract manufacturers could adversely affect our business, operating results, and financial condition.
Our intellectual property protections may be insufficient to safeguard our technology adequately.
Given the rapid pace of innovation and technological change within the wireless and broadband industries, our personnel, consultants, and contractors’ technical and creative skill and ability to develop, enhance, and market new products and upgrades to existing products are critical to continued success. Our success and ability to compete effectively depend on the proprietary technology we have developed internally. We rely primarily on patent laws to protect our proprietary rights. As of December 31, 2021, in the United States, we have 17 patents granted, no patent applications pending, and no provisional applications pending. Internationally, we have 2 patents granted and no patent applications pending. There can be no assurance that patents awaiting or future patent applications will be issued or that we would have the resources to protect any such issued patent from infringement if issued.
Further, we cannot patent much critical technology to our business. To date, we have relied on copyright, trademark, and trade secret laws, as well as confidentiality procedures, non-compete and/or work-for-hire invention assignment agreements, and licensing arrangements with our employees, consultants, contractors, customers, and vendors, to establish and protect our rights to this technology and, to the best extent possible, control the access to and distribution of our technology, software, documentation, and other proprietary information. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use this technology without authorization. Policing unauthorized use of this technology is challenging. There can be no assurance that our steps will prevent the misappropriation of or prevent unauthorized third parties from obtaining or using the technology we rely on. Also, adequate protection may be unavailable or limited in some jurisdictions. Litigation may be necessary in the future to enforce or protect our rights.
We may be subject to claims of intellectual property infringement or invalidity. Expenses incurred for monitoring, protecting, and defending our intellectual property rights could adversely affect our business.
Competitors and others may infringe on our intellectual property rights or allege we have violated theirs. If we are found to infringe on others’ rights, we could be required to discontinue offering certain products or systems, pay damages, or purchase a license to use the intellectual property in question from its owner. Monitoring infringement and misappropriation of intellectual property can be difficult and expensive, and we may be unable to detect infringement or misappropriation of our proprietary rights. We may also incur significant litigation expenses in protecting our intellectual property or defending our use of intellectual property, reducing our ability to fund product initiatives. These expenses could hurt our future cash flows and the results of operations. Litigation can also distract management from the day-to-day operations of the business.
Enforcement of our intellectual property rights abroad, particularly in China, is limited, and it is often difficult to protect and enforce such rights.
Many companies have encountered substantial intellectual property infringement in countries where we sell, or intend to sell, products or have our products manufactured. Patent protection outside the United States is generally not as comprehensive as in the United States and may not protect our intellectual property in some countries where our products are sold or may be sold in the future. Even if patents are granted outside the United States, effective enforcement may not be available in those countries.
In particular, the legal regime relating to China’s intellectual property rights is limited, and it is often difficult to protect and enforce such rights. The regulatory scheme for implementing China’s intellectual property laws may not be as developed as other countries’ regulatory schemes. Any advancement of an intellectual property enforcement claim through China’s regulatory system may require extensive time, allowing intellectual property infringers to continue mostly unimpeded, to our commercial detriment in the Chinese and other export markets. Also, rules of evidence may be unclear, inconsistent, or difficult to comply with, making it difficult to prove infringement of our intellectual property rights. As a result, enforcement cases involving technology, such as copyright infringement of software code or unauthorized manufacture or sale of products containing patented inventions, may be difficult or impossible to sustain.
These factors may make it increasingly complicated for us to enforce our intellectual property rights against parties misappropriating or copying our technology or products without our authorization, allowing competing enterprises to harm our business in the Chinese or other export markets by affecting the pricing for our products, reducing our sales and diluting our brand or product quality reputation.
The intellectual property rights of others may prevent us from developing new products or entering new markets.
The telecommunications industry is characterized by the rapid development of new technologies, which requires us to continuously introduce new products and expand into new markets that may be created. Therefore, our success depends on adapting our products and systems, incorporating new technologies, and growing into markets that new technologies may design. If technologies are protected by others’ intellectual property rights, including our competitors, we may be prevented from introducing new products or expanding into new markets created by these technologies. If others’ intellectual property rights prevent us from using innovative technologies, our financial condition, operating results, or prospects may be harmed.
We may be subject to infringement claims in the future.
We may be unaware of filed patent applications and issued patents that could include claims covering our products. Parties making claims of infringement may be able to obtain injunctive or other equitable relief that could effectively block our ability to sell or supply our products or license our technology and cause us to pay substantial royalties, licensing fees, or damages. The defense of any lawsuit could divert management’s efforts and attention from ordinary business operations and result in time-consuming and expensive litigation, regardless of the merits of such claims. These outcomes may (i) require us to stop selling products or using technology that contains the allegedly infringing intellectual property; (ii) need us to redesign those products that have the allegedly infringing intellectual property; (iii) require us to pay substantial damages to the party whose intellectual property rights we may be found to be infringing; (iv) result in the loss of existing customers or prohibit the acquisition of new customers; (v) cause us to attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all; (vi) materially and adversely affect our brand in the market place and cause a substantial loss of goodwill; (vii) cause our stock price to decline significantly; (viii) materially and adversely affect our liquidity, including our ability to pay debts and other obligations as they become due; or (ix) lead to our bankruptcy or liquidation.
We rely on the availability of third-party licenses. If these licenses are available only on less favorable terms or not in the future, our business and operating results will be harmed.
We have incorporated third-party licensed technology into our products. It may be necessary to renew licenses relating to these products or seek additional licenses for existing or new products. There can be no assurance that the required licenses will be available on acceptable terms or at all. The inability to obtain specific licenses or other rights, or to obtain those licenses or rights on favorable terms, or the need to engage in litigation regarding these matters could result in delays in product releases until such time, if ever, as equivalent technology could be identified, licensed or developed and integrated into our products and might have a material adverse effect on our business, operating results and financial condition. Moreover, the inclusion in our products of intellectual property licensed from third parties on a nonexclusive basis could limit our ability to protect our proprietary rights.
We expect to base our inventory purchasing decisions on our forecasts of customers’ demand, and if our forecasts are inaccurate, our operating results could be materially harmed.
As our customer base increases, we expect to place orders based on customer demand forecasts with our contract manufacturers. Our forecasts will be based on multiple assumptions, each of which may cause our estimates to be inaccurate, affecting our ability to provide products to our customers. When demand for our products increases significantly, we may not be able to meet demand on a timely basis, and we may need to expend a significant amount of time working with our customers to allocate limited supply and maintain positive customer relations, or we may incur additional costs to rush the manufacture and delivery of other products. If we underestimate customers’ demand, we may forego revenue opportunities, lose market share, and damage customer relationships. Conversely, if we overestimate customer demand, we may purchase more inventory than we can sell at any given time or at all. Also, we grant our distributors stock rotation rights, which require us to accept stock back from a distributor’s inventory, including obsolete inventory. As a result of our failure to correctly estimate the demand for our products, we could have excess or obsolete inventory, resulting in a decline in our inventory value, which would increase our costs of revenues and reduce our liquidity. Our failure to accurately manage inventory relative to demand would adversely affect our operating results.
If our technology did not work as planned or was unsuccessful in developing and selling new products or penetrating new markets, our business and operating results would suffer.
Our ability to compete successfully depends on our ability to design, develop, manufacture, assemble, test, market, and support new products and enhancements on a timely and cost-effective basis to keep pace with market needs and satisfy customers’ demands. Our success and ability to compete depend on the technology we have developed or may develop in the future. There is a risk that the technology we have developed or may develop may not work as intended or that the technology marketing may not be as successful as anticipated. Further, the markets in which our customers and we compete or plan to compete are characterized by regularly and rapidly changing technologies and technological obsolescence. A fundamental technological shift in our target markets could harm our competitive position. Our failure to anticipate these shifts, develop new technologies, or react to changes in existing technologies could materially delay our development of new products, resulting in product obsolescence, decreased revenue, and a loss of customer wins to our competitors. New technologies and products require substantial investment and long development and testing periods before being commercially viable. We intend to continue to make significant investments in developing new technologies and products, and it is possible that we may not successfully be able to build or acquire new products or product enhancements that compete effectively within our target markets or differentiate our products based on functionality, performance or cost and that our latest technologies and products will not result in meaningful revenue. Any delays in developing and releasing new or enhanced products could cause us to lose revenue opportunities and customers. Any technical flaws in product releases could diminish our products’ innovative impact and harm customer adoption and reputation. If we fail to introduce new products that meet our customers’ demands or target markets, do not achieve market acceptance, or fail to penetrate new markets, our revenue will not increase over time, and our operating results and competitive position will suffer.
We rely extensively on information technology systems and could face cybersecurity risks.
We rely extensively and increasingly on information technologies and infrastructure to manage our business, including developing new business opportunities and digital streaming products and services. Our business operations depend on secure transmission and other data and video processing over the internet and interconnected systems. Malicious technology-related events, such as cyberattacks, computer hacking, computer viruses, ransomware, worms, and other destructive or disruptive software and other attempts to gain access to confidential or personal data, denial of service attacks, and other malicious activities are becoming increasingly diverse and sophisticated, and the incidence of these events is on the rise worldwide and highlights the need for continual and effective cybersecurity awareness and education. Our business, which involves the collection, use, transmission, and other distribution of data and video, may make us and our clients and business partners attractive targets of hackers, denial of service attacks, malicious code, phishing attacks, ransomware attacks, and other threat actors, including malicious insiders (such as employees and prior employees), which may result in security incidents, including the unauthorized access, misuse, loss, corruption, inaccessibility, or destruction of this data (including personal, confidential and sensitive information), unavailability of services, or other adverse events. We have in the past faced cyber-attacks of this nature, and we expect to continue to face such attacks in the future. Some of these attacks have been successful, although none to date have been material. We cannot guarantee that our defensive measures will prevent such attacks in the future. These types of cyber-attacks and incidents can give rise to various losses and costs, including legal exposure and regulatory fines, damages to reputation, and others. If successful, these incidents could also materially disrupt operational systems and result in the loss of intellectual property, trade secrets, other proprietary or competitively sensitive information, and general data (including personal information).
Data breaches and improper use of social media by employees and others may risk sensitive data, such as personal information, strategic plans, and trade secrets, being exposed to third parties or the general public. Any such breaches or breakdowns could expose us to legal liability, be expensive to remedy, result in a loss of our or our clients’ or vendors’ proprietary information, and damage our reputation. Efforts to develop, implement and maintain security measures are costly, may not successfully prevent these events from occurring, and may require ongoing monitoring and updating as technologies and cyberattack techniques change frequently or are not recognized until successful.
Furthermore, computer malware, viruses, hacking, and phishing attacks have become more prevalent in our industry and may occur in future systems. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security, and availability of our products and technical infrastructure to the satisfaction of our users may harm our reputation and our ability to attract and retain customers.
Regulation of the telecommunications industry could harm our operating results and prospects.
The traditional telecommunications industry is highly regulated, and our business and financial condition could be adversely affected by changes in regulations relating to the Internet telecommunications industry. Currently, few laws or regulations apply directly to access to or commerce on intellectual property networks, but future regulations could include sales taxes and tariffs in previously unregulated areas and provider access charges. We could be adversely affected by the regulation of intellectual property networks and commerce in any country where we market equipment and services to service or content providers. Rules governing the range of services and business models that service providers or content providers can offer could adversely affect those customers’ needs for products designed to enable a wide range of such services or business models. For instance, the U.S. Federal Communications Commission (“FCC”) has issued regulations governing aspects of fixed broadband networks and wireless networks. These regulations might impact service provider and content provider business models and providers’ needs for Internet telecommunications equipment and services. Also, many jurisdictions are evaluating or implementing cybersecurity, privacy, and data protection regulations, which could affect the market and networking and security equipment requirements.
Environmental regulations concerning electronic equipment manufacturing or operations may adversely impact our business and financial condition. For instance, the European Union has adopted electronic waste, e-waste, e-scrap, or electrical and electronic equipment waste, Restriction of the Use of Certain Hazardous Substances, Registration, Evaluation, Authorization, and Restriction of Chemicals. Furthermore, some governments have regulations prohibiting government entities from purchasing security products that do not meet specified indigenous certification criteria, even though those criteria may conflict with accepted international standards. Similar regulations are in effect or under consideration in several jurisdictions where we do business.
Adopting and implementing such regulations could decrease demand for our products, increase the cost of building and selling our products, impact our ability to ship products into affected areas, and recognize revenue on time. Any of these impacts could have a material adverse effect on our business, financial condition, and the results of operations.
At several of our annual stockholder meetings, including our 2019 Annual Meeting of Stockholders, we failed to obtain ratification by our stockholders of specific proposals submitted for approval of our stockholders at prior annual meetings, which could be deemed defective corporate acts.
At our 2015 Annual Meeting of Stockholders, our Board submitted to our stockholders for their approval (i) a proposal to approve our 2015 Employee Stock Purchase Plan and (ii) a proposal to approve our 2015 Incentive Compensation Plan. At our 2016 Annual Meeting of Stockholders, our Board submitted to our stockholders for their approval (i) a proposal to approve our 2016 Employee Stock Purchase Plan and (ii) a proposal to approve our 2016 Incentive Compensation Plan. At our 2017 Annual Meeting of Stockholders, our Board submitted to our stockholders, for their approval, (i) a proposal to approve an amendment to our 2016 Employee Stock Purchase Plan to increase the number of shares of Common Stock available for sale under such plan; (ii) a proposal to approve an amendment to our 2016 Incentive Compensation Plan to increase the number of shares of Common Stock available for sale under such plan; and (iii) a proposal to approve our 2017 Incentive Compensation Plan.
At each of these annual meetings, our inspector of elections determined that the applicable proposal received the requisite stockholder approval under our amended and restated bylaws (“Bylaws”) and certified that the proposal passed, which was subsequently disclosed in an applicable Current Report on Form 8-K. Questions have been raised about whether the votes on such proposals were tabulated following our Bylaws’ provisions and whether the requisite votes were obtained to approve each of these proposals.
According to the provisions of Section 204 of the General Corporation Law of the State of Delaware (“DGCL”) and to continue to remain in compliance with Nasdaq’s Listing Rules, we submitted all of these proposals, again, to our stockholders at our 2019 Annual Meeting of Stockholders for ratification to resolve any defects in the corporate acts relating to the approval of these proposals by our stockholders at the prior meetings. We could not obtain ratification by our stockholders for any proposals submitted to them at the 2019 Annual Meeting of Stockholders. Although we intend to resubmit these proposals to our stockholders for ratification, there can be no assurance that any of these proposals will be ratified. Suppose we cannot secure such ratifications or are deemed inadequate, among other consequences. In that case, this could result in a determination that none of the shares issued by us under these plans were duly authorized and validly issued, which could create accounting issues, affect our liquidity and capital structure, and expose us to claims from recipients of any stock awards granted according to such plans, any of which could have a material adverse effect on our business and results of operations.
Demand for our military and government-related products and products for emergency response services depends on government spending.
A portion of our business is derived from military and government markets. The military and government market largely depends on government budgets and is subject to governmental appropriations. Although multi-year contracts may be authorized with major procurements, funds are generally appropriated on a fiscal-year basis, even though a program may be expected to continue for several years. Consequently, programs are often only partially funded, and additional funds are committed if further appropriations are made. We cannot assure you that maintenance of or increases in military and government spending will be allocated to programs that would benefit our business. A decrease in levels of military and government spending or the government’s termination of, or failure to fully fund, one or more of the contracts for the programs in which we participate could have a material adverse effect on our financial position and the results of operations. Moreover, we cannot assure you that the new military and government-related communication and broadcasting programs we participate in will enter full-scale production as expected.
Our potential customers for our communication, surveillance and satellite products and solutions will likely include U.S. Government or Government-related entities that are subject to appropriations by Congress. Reduced funding for military and government procurement and research and development programs would likely adversely impact our ability to generate revenues.
We anticipate that a portion of our revenue will be derived from our communication, surveillance, and satellite products and solutions, at least in the foreseeable future, from U.S. Government and Government-related entities, including the U.S. Department of Defense and other departments and agencies. Government programs in which we may seek to participate, and contracts for our products, must compete with other programs for consideration during Congress’ budget and appropriations hearings and may be affected by changes in political power and appointments and general economic conditions, and other factors beyond our control. A government closure based on a failure of Congress to agree on federal appropriations or the uncertainty surrounding a continuing resolution may result in the termination or delay of federal funding opportunities we are pursuing. Reductions, extensions, or terminations in a program in which we seek to participate, or overall defense or another spending could adversely affect our ability to generate revenues and realize profits. We cannot predict whether potential changes in security, military, communications, and intelligence priorities will afford opportunities for our business regarding research and development or product contracts. Still, a possible reduction in government spending on such programs could negatively impact our ability to generate revenues. In addition, our ability to participate in U.S. Government programs may be affected by the adoption of new laws or regulations relating to government contracting or changes in existing laws or regulations, changes in political or public support for security, military and government programs, and uncertainties associated with the current global threat environment and other geo-political matters.
Contracting with government entities can be complex, expensive, and time-consuming.
The procurement process for government entities is, in many ways, more challenging than contracting in the private sector. We must comply with laws and regulations relating to the formation, administration, performance, and pricing of contracts with government entities, including U.S. federal, state, and local governmental bodies.
Government entities often require highly specialized contract terms that may differ from our standard arrangements. Government entities often impose complicated compliance requirements, require preferential pricing or “most favored nation” terms and conditions, or are otherwise time-consuming and expensive. Compliance with these exceptional standards or satisfaction with such requirements could complicate our efforts to obtain business or increase costs. Even if we meet these particular standards or conditions, the increased costs of providing our solutions to government customers could harm our margins.
Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition, or results of operations.
Events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, transactional counterparties, or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Most recently, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as a receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations and product development could be significantly impaired by factors that affect us, the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit, or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to develop and commercialize new products and meet our operating expenses and financial obligations or fulfill our other commitments, resulting in breaches of our contractual obligations or result in violations of federal or state wage and hour laws. In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any of these impacts, or any other consequences resulting from the factors described above or other related or similar factors not described above, could have material adverse effects on our liquidity and our business, financial condition, or results of operations.
Risks Related to Our Industry and its Regulatory Context
Our industry is subject to rapid technological change, and we must make substantial investments in new products, services, and technologies to compete successfully.
New technological innovations generally require a substantial investment before they are commercially viable. We intend to continue to make significant investments in developing new products and technologies, and it is possible that our development efforts will not be successful and that our new technologies will not result in meaningful revenues. Our future success will depend on our ability to quickly develop and introduce new products, technologies, and enhancements. Our future success will also depend on our ability to keep pace with technological developments, protect our intellectual property, satisfy customer requirements, meet customer expectations, price our products and services competitively, and achieve market acceptance. The introduction of products embodying new technologies and the emergence of new industry standards could render our existing products and technologies and products and technologies currently under development obsolete and unmarketable. If we fail to anticipate or respond adequately to technological developments or customer requirements or experience any significant delays in the development, introduction, or shipment of our products and technologies in commercial quantities, demand for our products and our customers’ and licensees’ products that use our technologies could decrease, and our competitive position could be damaged.
New regulations or standards or changes in existing laws or standards in the United States or internationally related to our products may result in unanticipated costs or liabilities, which could have a material adverse effect on our business, results of operations, and future sales, and could place additional burdens on the operations of our business.
Our products may be subject to governmental regulations in a variety of jurisdictions. Our technology and products must comply with these regulations and many industry standards to achieve and maintain market acceptance. In the United States, our technology and products must comply with various FCC rules and others. We may also have to comply with similar international regulations. For example, our wireless communication products operate through the transmission of radio signals, and radio emissions are subject to regulation in the United States and other countries in which we intend to do business. In the United States, various federal agencies, including the Center for Devices and Radiological Health of the Food and Drug Administration, the FCC, the Occupational Safety and Health Administration, and various state agencies, have promulgated regulations that concern the use of radio/electromagnetic emissions standards. Member countries of the European Union have enacted similar standards relating to electrical safety, electromagnetic compatibility and emissions, and chemical substances and use standards.
As these regulations and standards evolve, and if new rules or standards are implemented, we may be required to modify our technology or products or develop and support new versions. Our compliance with these regulations and standards may become more burdensome. The failure of technology or our products to comply, or delays in compliance with the various existing and evolving industry regulations and standards, could prevent or delay the introduction of our technology or products, harming our business. End-customer uncertainty regarding future policies may also affect demand for communications products, including our products. Moreover, channel partners or end-customers may require us, or we may otherwise deem it necessary or advisable, to alter our technology or products to address actual or anticipated changes in the regulatory environment. Our inability to change our technology or products to address these requirements and any regulatory changes may adversely affect our business, operating results, and financial condition.
Compliance with environmental, health, and safety laws and regulations, including new regulations requiring higher standards, may increase costs, limit our ability to utilize supply chains, and force product design changes.
Our operations are subject to various environmental, health, and safety laws and regulations and equivalent local, state, and regulatory agencies in each jurisdiction we operate or may operate in the future. Our products manufacturing uses substances regulated under various federal, state, and local laws governing the environment and worker health and safety. If we, including any contract manufacturers that we may employ, do not comply with these laws, including any new regulations, such non-compliance could reduce our products’ net realizable value, resulting in an immediate charge to our income statements. Our non-compliance with such laws could also negatively impact our operations and financial position as a result of fines and penalties that may be imposed on us and increase the cost of mandated remediation or delays to any contract manufacturers we may utilize; thus, we may suffer a loss of revenues, be unable to sell our products in specific markets and/or countries, be subject to penalties and enforced fees and/or suffer a competitive disadvantage. If applicable, costs to comply with current laws and regulations and/or similar future laws and regulations could include costs associated with modifying our products, recycling and other waste processing costs, legal and regulatory costs, and insurance costs. We cannot assure you that the costs to comply with these new laws or current and future environmental and worker health and safety laws will not adversely affect our business, operating results, and financial condition.
Governmental regulations affecting the import or export of products or affecting products containing encryption capabilities could negatively affect our revenues.
The United States and various foreign governments have imposed controls, export license requirements, and restrictions on importing or exporting some technologies, especially encryption technology. Also, governmental agencies have occasionally proposed additional regulation of encryption technology, such as requiring certification, notifications, review of source code, or the escrow and governmental recovery of private encryption keys. For example, Russia and China recently have implemented new requirements for encryption products, and India has imposed certain warranties and other obligations associated with critical technology. Governmental regulation of encryption or IP networking technology and regulation of imports or exports, or our failure to obtain required import or export approval for our products, could harm our international and domestic sales prospects and adversely affect our revenue expectations. In addition, the U.S. and other international organizations have imposed numerous sanctions and restrictions, such as the EU, on exporting specific goods and services to Russia due to the armed conflict with Ukraine. Failure to comply with such regulations could result in penalties, costs, and restrictions on import or export privileges or adversely affect sales to government agencies or government-funded projects.
If wireless devices pose safety risks, we may be subject to new regulations, and demand for our products, licensees, and customers may decrease.
In recent years, the FCC and foreign regulatory agencies have updated the guidelines and methods for evaluating radiofrequency emissions from radio equipment, including wireless phones and other wireless devices. Even if unfounded, concerns over the effects of radiofrequency emissions may discourage the use of wireless devices, decreasing demand for our products and those of our licensees and customers. Interest groups have also requested that the FCC investigate claims that wireless communication technologies pose health concerns and cause interference with airbags, hearing aids, and medical devices. Concerns have also been expressed over the possibility of safety risks due to a lack of attention associated with wireless devices while driving. Any legislation adopted in response to these expressions of concern could reduce demand for our products and those of our licensees and customers in the United States and foreign countries.
Risks Related to Our Common Stock
Our stock price may be volatile, and you may not be able to resell shares of our Common Stock at or above the price you paid.
Our Common Stock trading price could be highly volatile and subject to wide fluctuations in response to various factors, including factors beyond our control. These factors include those discussed in the other “Risk Factors” section of this Report on Form 10-K.
Also, the stock markets in general and the markets for telecommunication stocks have experienced volatility. These broad market fluctuations may adversely affect the trading price or liquidity of our Common Stock. In the past, when the market price has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the case, and our management’s attention would be diverted from the operation of our business, which could seriously harm our financial position. Any adverse determination in litigation could also subject us to significant liabilities.
If we cannot regain or maintain compliance with Nasdaq’s applicable continued listing requirements or standards, Nasdaq could delist our Common Stock.
We currently list our Common Stock on the Nasdaq Capital Market. To maintain such a listing, we must satisfy minimum financial and other continued listing requirements and standards, including director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and specific corporate governance requirements. According to Nasdaq Rule 5550(a)(2), we must maintain a minimum bid price for our common stock, par value of $0.00001 per share (“Common Stock”), of at least $1.00 per share (the “Bid Price Rule”). If our Common Stock stayed consistently traded below $1.00 per share, our common stock would be at risk of delisting from the Nasdaq Capital Market. As previously reported, 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 $1.00 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 1-for-2 to 1-for-50. 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 Bid Price Rule, including initiating the Reverse Stock Split.
There can be no assurance that a Reverse Stock Split will result in a sustained increase in the per share market price for the Common Stock for the minimum period necessary to permit the Company to timely regain compliance with the Bid Price Rule. There can be no assurance that the Company will be able to regain compliance with the Bid Price Rule or otherwise comply with other Nasdaq Listing Rules during or following the 180-day extension period ending May 15, 2023. If the Company does not regain compliance within the allotted compliance period, Nasdaq will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel.
If the Company timely appeals, the 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 during the pendency of the appeals process.
Any Nasdaq action relating to a delisting could have a negative effect on the price of our Common Stock, impair the ability to sell or purchase our common Stock when persons wish to do so, and any such delisting action may materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from the Nasdaq Capital Market could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities.
If our Common Stock is delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our Common Stock because they may be considered penny stocks and thus be subject to the penny stock rules.
The SEC has adopted several rules to regulate “penny stock” that restrict transactions involving stock deemed penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on Nasdaq if the exchange or system provides current price and volume information concerning transactions in such securities). Our shares of Common Stock have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage them from effecting transactions in shares of our Common Stock, which could severely limit the market liquidity of such shares of Common Stock and impede their sale in the secondary market.
A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with a net worth above $1,000,000 or an annual income exceeding $200,000 or $300,000 together with their spouse) must make a unique suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction before a sale unless the broker-dealer or the transaction is otherwise exempt. Also, the “penny stock” regulations require the U.S. broker-dealer to deliver, before any transaction involving a “penny stock,” a disclosure schedule prepared under SEC standards relating to the “penny stock” market unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer must also disclose commissions payable to the U.S. broker-dealer, the registered representative, and current quotations for the securities. Finally, a U.S. broker-dealer must submit monthly statements disclosing recent price information concerning the “penny stock” held in a customer’s account and information for the limited market in “penny stocks.”
According to the SEC, stockholders should know that the “penny stocks” market has suffered from fraud and abuse patterns in recent years. Such practices include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to the desired level, resulting in investor losses. Our management is aware of the abuses historically in the penny stock market. Although we do not expect to dictate the market’s behavior or broker-dealers who participate, management will strive within the confines of practical limitations to prevent the described patterns from being established concerning our securities.
General Risk Factors
We may fail to meet publicly announced financial guidance or other expectations about our business, which would cause our Common Stock to decline in value.
We provide preliminary financial results or forward-looking financial guidance to our investors from time to time. Such statements are based on our current views, expectations, and assumptions, and they involve unknown risks and uncertainties that may cause actual results, performance, achievements, or share prices to materially differ from future performance, achievements, or share prices expressed or implied by such statements. Such risks and uncertainties include, among others, changes to the assumptions used to forecast or calculate such guidance or expectations or the occurrence of risks related to our performance and business, including those discussed in these risk factors. Failure to meet financial guidance or expectations regarding our future performance could harm our reputation and cause our stock price to decline.
The requirements of being a U.S. public company may strain our resources and divert management’s attention.
As a U.S. public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of Nasdaq, and other applicable securities rules and regulations. The Exchange Act requires, among other things, that we file annual and current reports concerning our business and operating results. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand for our systems and resources.
As a result of the disclosure of information filing, our business and financial condition is more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to fix them, could divert resources from our management and harm our business and operating results.
SEC regulations limit the funds we can raise during 12 months under our shelf registration statement on Form S-3.
As of March 16, 2023, our public float was approximately $18.8 million, based on 47,619,317 shares of outstanding common stock held by non-affiliates and at $0.39 per share, which was the last reported sale price of our common stock on the Nasdaq Capital Market on March 16, 2023. SEC regulations limit the amount companies with a public float of less than $75 million may raise during 12 months under a shelf registration statement on Form S-3. We are subject to General Instruction I.B.6, Form S-3, or the Baby Shelf Rule. As of the filing of this Annual Report on Form 10-K, we are subject to the Baby Shelf Rule. Under the Baby Shelf Rule, the amount of funds we can raise through primary public securities offerings in any 12 months using a registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates of the Company. Therefore, we will be limited in the proceeds we can raise by selling shares of our common stock using our Form S-3 until our public float exceeds $75 million. Before our public float exceeds $75 million, if our public float decreases, the number of securities we may sell under our Form S-3 shelf registration statement will also decrease. Even if sufficient funding is available, there can be no assurance that it will be available on terms acceptable to our stockholders or us. Furthermore, if we are required or choose to file a new registration statement on a form other than Form S-3, we may incur additional costs and be subject to delays due to review by the SEC staff.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our Common Stock adversely, our share price and trading volume could decline.
The trading market for our shares of Common Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If any analysts who may cover us change their recommendation regarding our Common Stock adversely or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which could cause our Common Stock price or trading volume to decline.
Future impairment charges could have a material adverse effect on our financial condition and the results of operations.
We must test our finite-lived intangible assets for impairment if events occur or circumstances change that would indicate that the remaining net book value of the intangible assets might not be recoverable. These events or circumstances could include a significant change in the business climate, including a significant, sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a considerable portion of our business, potential government actions, and other factors. If our finite-lived intangible assets’ fair value is less than their book value in the future, we could be required to record impairment charges. The amount of any future impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken.
If our estimates relating to our critical accounting policies are based on assumptions or judgments that change or prove incorrect, our operating results could fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.
Preparing financial statements conforming with U.S. generally accepted accounting principles requires our management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of financial analysts and investors, resulting in a decline in our stock price. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories, the recoverability of long-lived assets, the valuation allowance relating to the Company’s deferred tax assets, valuation of equity and derivative instruments, and debt discounts, and the valuation of the assets and liabilities acquired by us.
Future sales and issuances of our Common Stock or rights to purchase our Common Stock, stock incentive plans, and upon the exercise of outstanding securities exercisable for shares of our Common Stock could result in substantial additional dilution of our stockholders, cause our stock price to fall and adversely affect our ability to raise capital.
We will require additional capital to continue to execute our business plan and advance our research and development efforts. If we raise additional capital by issuing additional equity securities and exercising outstanding warrants, our stockholders may experience substantial dilution. We may sell shares of preferred stock or Common Stock in one or more transactions at prices that may be at a discount to the then-current market value of our Common Stock and on such other terms and conditions as we determine from time to time. Any such transaction could result in substantial dilution of our existing stockholders. If we sell shares of our Common Stock in more than one transaction, stockholders who purchase our Common Stock may be materially diluted by subsequent sales. Such sales could also cause a drop in the market price of our Common Stock. The issuance of shares of our Common Stock in connection with public or private financing, in connection with our compensation programs, and upon exercise of outstanding warrants will have a dilutive impact on our other stockholders, and the issuance, or even potential issuance, of such shares, could hurt the market price of our Common Stock.
The exercise of stock options, warrants, and other securities could cause our stockholders to experience substantial dilution. In addition to warrants issued in 2018, 2019, and 2020, in February 2021, we issued warrants to purchase up to 9,090,910 shares of our common stock. Moreover, holders of our stock options and warrants are likely to exercise them, if ever, when we otherwise could obtain a price for the sale of our securities that is higher than the exercise price per security of the options or warrants. Such exercises, or the possibility of such exercises, may impede our efforts to obtain additional financing by selling additional securities or making such financing more costly. It may also reduce the price of our Common Stock.
Risks Relating to Acquisitions
Our acquisition strategy involves several risks.
As we engage in the acquisition discussion with other companies anticipating potential acquisition opportunities, including those that would be material or could involve businesses with operating characteristics that differ from our existing business operations, it may become available shortly. We intend to pursue them actively if appropriate acquisition opportunities are available. Acquisitions involve several unique risks, including:
● Failure of the acquired business to achieve expected results, as well as the potential impairment of the acquired assets if operating results decline after acquisition;
● diversion of management’s attention;
● additional financing, if necessary and available, which could increase leverage and costs, dilute equity, or both;
● the potential adverse effect on our financial statements from the increase in goodwill and other intangibles;
● difficulties in integrating the operations, systems, technologies, products, and personnel of acquired companies;
● initial dependence on unfamiliar supply chains or relatively small supply partners;
● the potential loss of key employees, customers, distributors, vendors, and other business partners of the companies we acquire after the acquisition;
● the high cost and expenses of identifying, negotiating, and completing acquisitions;
● the integration of acquisitions requires significant time and resources; and
● risks associated with unanticipated events or liabilities.
These risks could adversely affect our business, the results of operations, and our financial condition. Furthermore, the inability to effectively manage the integration of acquisitions could reduce our focus on subsequent acquisitions and current operations, which, in turn, could negatively impact our earnings and growth.
We have faced intense competition for acquisition candidates and expect to continue to meet them, limiting our ability to make acquisitions and leading to higher acquisition prices. We cannot assure you that we will be able to identify, acquire or manage other businesses profitably or successfully integrate any acquired businesses into our existing business without substantial costs, delays, or other operational or financial difficulties. In future acquisitions, we could incur additional indebtedness or pay consideration above fair value, which could have a material adverse effect on our business, results of operations, and financial condition.
Any impairment of goodwill, other intangible assets, or long-lived assets could negatively impact our results of operations.
Our goodwill, other intangible assets, and long-lived assets are subject to an impairment test annually and tested whenever events and circumstances indicate that goodwill, intangible assets, and/or long-lived assets may be impaired. Any excess goodwill resulting from the impairment test is written off in the determination period. Intangible assets (other than goodwill and indefinite-lived intangible assets) and other long-lived assets are generally amortized or depreciated over the useful life of such assets. From time to time, we may acquire or invest in a business that will require us to record goodwill based on the purchase price and the value of the acquired tangible and intangible assets. We may subsequently experience unforeseen issues with the businesses we acquire, which may adversely affect the company’s anticipated returns or value of the intangible assets and trigger an evaluation of the recoverability of the recorded goodwill and intangible assets. Future determinations of significant write-offs of goodwill, intangible assets, or other long-lived assets due to an impairment test or any accelerated amortization or depreciation of other intangible or long-lived assets could have a material adverse impact on our results of operations and financial condition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
Mount Olive, NJ
On November 1, 2021, the Company entered into a lease agreement with a non-affiliated third party (the “Landlord”) to rent approximately 7,979 square feet of commercial space for general business offices, light manufacturing, operating of a testing laboratory, assembly, and inventory storage in Mount Olive, NJ. The lease commencement date was November 1, 2021, and the expiration date is January 31, 2027. The initial monthly obligation is $10,869, with annual rent increases of 3.0% until the lease expires. The Company relocated its corporate facilities from Hackettstown, NJ, in connection to Mount Olive, NJ, with the lease commencement date of March 1, 2022.
Lutton, UK
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
Dubai, UAE
On June 9, 2022, 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 approximately $1,632 monthly.
Billerica, MA
On January 20, 2020, the Company terminated its former lease agreement. On January 24, 2020, the Company negotiated a new lease agreement with the landlord at our Billerica location, decreasing the required square footage to 8,204 from 39,327 square feet or approximately 79%. The new lease agreement’s effective date is March 24, 2020, expiring December 31, 2026. The total annual rent under this lease is approximately $95,000. During the third quarter of the fiscal year 2022, management vacated the Billerica property. Under ASC 360, leased space abandonment is an impairment indicator, and the Company assessed the lease ROU assets for impairment, and we recognized a loss on impairment of right-of-use assets of approximately $88,000 for the year ended December 31, 2022.
Singapore
On July 3, 2020, the Company negotiated a new lease agreement with the landlord, maintaining 950 square feet of administrative office space. The new lease agreement’s effective date is August 10, 2020, expiring on August 9, 2023. The total annual rent under this lease is approximately $30,500.
Hemel, United Kingdom
Under the original lease agreement dated April 28, 2017, a “break clause” signifying a “break date” of October 28, 2020, sighted the following: the Company may terminate this lease on the “break date” by giving the landlord such notice within six months of the “break date.” At the lease’s commencement, it was not reasonably sure if the Company would exercise its right by the break clause’s date. These measures upheld the determination of the lease’s noncancellable period for adopting ASC 842 on January 1, 2019. The lease term of 22 months as of January 1, 2019, helped calculate the remaining lease payments’ net present value assigned to the right-of-use asset and operating lease liability upon the adoption date. Neither party exercised their unilateral termination rights by the “break date,” triggering a lease extension. Both parties’ inaction creates new enforceable rights and obligations in the extended period, such that ending the lease agreement terminates on October 27, 2023. The total annual rent under this lease is approximately $175,000, covering 12,870 square feet of manufacturing and administrative office space.
Colchester, UK
On February 2, 2017, the original lease agreement was for 16,000 square feet, with the initial lease commencing on March 25, 2007, and expiring on March 24, 2025. The total annual rent under this lease is approximately $275,000, covering 16,000 square feet of manufacturing and administrative office space.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
The nature of our business and activities are such that we may faces frequent claims and litigation, including securities litigation, claims regarding patent and other intellectual property rights, and other liability claims. As a result, we may be involved in various legal proceedings from time to time. We are not currently a party to any material litigation, nor are we aware of any pending or threatened litigation against us that we believe, if adversely determined against us, would materially affect our business, operating results, financial condition, or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock shares are listed on the Nasdaq Capital Market under the symbol “VISL.”
Holders
As of March 16, 2023, 47,619,317 shares of common stock were outstanding, together with approximately 30 shareholders of record.
The Company’s transfer agent and registrar are Continental Stock Transfer & Trust Company, 17 Battery Place, 8th Floor, New York, New York 10004.
Dividend Policy
We have never declared or paid any cash dividend on our common stock. We intend to retain any future earnings and do not expect to pay any cash dividends in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
Reference is made to “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters-Securities Authorized for Issuance under Equity Compensation Plans” for the information required by this item.
Recent Sales of Unregistered Securities
None

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements based on current plans, expectations, and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements due to various factors, including the impact of the COVID-19 pandemic and those other factors discussed in the “Risk Factors” section and other parts of this Annual Report on Form 10-K. Our fiscal year-end is December 31.
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
COVID-19 Update
The Company closely monitors the continued impact of the ongoing COVID-19 pandemic on all aspects of our business and geographies, including how it will impact business partners. The Company continues to experience supply chain shortages and delays in obtaining specific inventory items. The Company’s operations team is mitigating the risk by increasing inventory levels in its purchase management of these components. The execution of this policy has improved our ability to ship products. It is unclear how such restrictions will contribute to a general slowdown in the global economy, and it is difficult to isolate the impact of the pandemic on our business, the results of operations, our financial condition, and our future strategic plans. Further, while many companies have survived the past year, and some have thrived, as the pandemic endures, we cannot predict how the global economy will respond to the return to normalcy or whether it will continue to sustain steadily.
In addition, the Company is uncertain of the total effect the pandemic will have on it in the long term since the scope and duration of the pandemic is unknown. The protocol followed in distributing effective vaccines worldwide, and the extent of any resurgences of the virus or emergence of new variants, such as the Delta, Omicron, and others, will impact the stability of economic recovery and growth. The extent to which the operations of the Company, and the operations of its customers and supply chain, may be adversely impacted by the COVID-19 pandemic will depend mainly on these future developments. The Company may experience long-term disruptions to its operations resulting from government policy or guidance; quarantines of employees, customers, and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business or supply chains. The Company is actively monitoring and will continue monitoring the pandemic and its potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.
For further discussion of the challenges and risks related to the COVID-19 pandemic, please refer to Part I, Item 1A “Risk Factors” of this Annual Report on Form 10-K.
We face various challenges and risks that we will need to address and manage as we pursue our strategies, including our ability to develop and deliver high-quality live video products and video transmission solutions.
Because of the numerous risks and uncertainties associated with our commercialization efforts and research and development activities, we cannot predict the timing or amount of increased expenses or when, if ever, we will be able to achieve or maintain profitability. Even if we can increase sales of our products, we may not become profitable. If we fail to become profitable or sustain profitability, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
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 or Ukraine, nor do we have a physical presence, employees, or contractors in these countries. The Russian government’s invasion of Ukraine and the resultant sanctions imposed by the U.S., EU, and other governments and international organizations-designed to inflict severe consequences on the Russian economy-are impacting business continuity, liquidity, and asset values in Ukraine and Russia. It is difficult to estimate the impact of the ongoing invasion on the global economy, including increased inflation and higher energy and transportation costs. As a result, 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 continue to 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.
The lack of empirical data surrounding the credit and other financial risks posed by climate change renders it impossible to predict how specifically climate change may impact our financial condition and results of operations; however, the physical effects of climate change may also directly affect us. The global business community has increased its political and social awareness surrounding the issue, and the United States has entered into international agreements to reduce global temperatures, such as reentering the Paris Agreement. Further, the U.S. Congress, state legislatures, and federal and state regulatory agencies continue to propose numerous initiatives to supplement the global effort to combat climate change.
Further, the effects of climate change may negatively impact regional and local economic activity, which could adversely affect our customers and the communities in which we operate. In addition, there is a growing concern from advocacy groups and the general public that the emissions of greenhouse gases and other human activities have caused, or will cause, significant changes in weather patterns and temperatures and the frequency and severity of natural disasters.
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.
Results of Operations
The following table sets forth the items in the consolidated statements of operations of the financial statements included herewith for the fiscal years ended December 31, 2022, and 2021 (in thousands).
For the Years Ended
December 31,
Revenue, net $ 28,402 $ 33,882
Cost of revenue and operating expenses
Cost of components and personnel 15,204 15,164
Inventory valuation adjustments 2,930
General and administrative expenses 18,195 22,039
Research and development 4,058 3,051
Impairment of right-of-use assets -
Impairment of goodwill - 9,189
Amortization and depreciation 1,722 1,343
Total cost of revenue and operating expenses 42,197 51,629
Loss from operations (13,795 ) (17,747 )
Other income (expenses)
Changes in fair value of derivative liabilities -
Gain on settlement of debt 1,362
Other income -
Interest expense, net (38 ) (29 )
Total other income 1,355
Net loss before income taxes $ (13,755 ) $ (16,392 )
Revenue
The revenues for the year ended December 31, 2022, and 2021 were $28.4 million and $33.9 million, respectively, representing a decrease of $5.5 million or 16%. The revenue drop experienced a decline geographically of $6.0 million in North America, and $2.2 million in Europe, offset by an increase in sales of $3.0 million in the rest of the world.
The decrease in revenue is primarily due to: (1) a delay in the completion of several large government contracts and (2) management’s decision to reevaluate and discontinue several product lines due to their decline in performance expectations and lack of appeal to our customer base.
Cost of Revenue and Operating Expenses
Cost of Components and Personnel
The cost of components and personnel is $15.2 million for each year ending December 31, 2022, and 2021, respectively. The Company attributes maintaining this cost to (1) adopting a cost-savings plan in the third quarter of 2022, including a partial workforce reduction, and (2) eliminating specific product lines.
Inventory Valuation Adjustments
Inventory valuation adjustments are tools used to determine inventory measurement at lower-of-cost-or-market or lower-of-cost and net realizable value. For the years ended December 31, 2022, and 2021 inventory valuation adjustments amounted to $2.9 million and $0.9 million, representing an increase of $2.0 million or 222%. The cause of the increase is twofold: (1) the identifying of items of inventory considered obsolete, and (2) the observation of a decline in the profitability and consumer demand of specific product lines prompting the write down in the value of certain inventory items acknowledging a shift in market trends.
General and Administrative Expenses
General and administrative expenses are costs incurred in 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 expenses associated with being a public company.
For the years ended December 31, 2022, and 2021, general and administrative expenses were $18.2 million and $22.0 million, respectively, representing a decrease of $3.8 million or 17%.
The decrease is principally connected with the reduction of $2.8 million in acquisition costs, $2.3 million in stock-based compensation, and $1.4 million in salaries and benefits. It was offset by an increase of $0.9 million in advertising, $0.5 million in legal fees, and $0.3 million in warranty costs and consulting fees.
Research and Development
Research and development expenses consist primarily of salary and benefit expenses, including stock-based compensation, payroll taxes, prototypes, facilities, and travel costs. For the years ended December 31, 2022, and 2021, research and development expenses were $4.1 million and $3.1 million, respectively, representing an increase of $1.0 million or 32%. The increase is primarily attributable to $0.8 million in salaries and miscellaneous research and consulting fees of $0.2 million.
Impairment of right-of-use assets
The Company recorded impairments related to the right-of-use assets operating leases for the years ended December 31, 2022, and 2021 totaling $0.88 million and $-0- million, respectively. The increase is due to the Company abandoning its leased facility in Billerica, Massachusetts.
Amortization and Depreciation
Amortization and depreciation expenses for the years ended December 31, 2022, and 2021 were $1.7 million and $1.3 million, respectively, representing an increase of $0.4 million or 31%. The increase is attributable to the recognition of a full year of amortization of intangible assets created by the acquisition of MVP.
Gain on settlement of debt
For the years ended December 31, 2022, and 2021, the Company recognized a gain on the settlement of debt amounting to $0.1 million and $1.4 million, respectively, a decrease of $1.3 million or 93%. The decline is predominantly attributable to the forgiveness in July 2021 of the U.S. government Payroll Protection Program grant procured by the Company in 2020.
Net Loss
Net losses for the years ended December 31, 2022, and 2021 were $13.8 million and $16.4 million, respectively, representing a decrease of $2.6 million or 16%.
The Company experienced significant decreases in costs attributable to acquisition expenditures, stock-based compensation, salaries, and benefits, offset by the recognition of inventory impairment and a decline in revenue.
Liquidity and Capital Resources
The Company incurred an approximate $13.8 million loss from operations and $9.2 million of cash used in operating activities for the year ended December 31, 2022. The Company had $38.6 million in working capital, $300.1 million in accumulated deficits, and $25.6 million cash on hand as of December 31, 2022.
During the year ended December 31, 2021, the Company issued 6,163,198 shares of common stock for net proceeds of $12,600,000 under its at-the-market facility with Alliance Global Partners (the “ATM”). As of March 31, 2022, approximately $4,500,000 of capacity remains under the ATM. On February 8, 2021, the Company completed an underwritten public offering for net proceeds of $46,820,000. The Company issued 18,181,820 shares of common stock, supplemented by 9,090,910 five-year warrants with an exercise price of $3.25 per share exercisable for one share.
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.
Developments, including those beyond our control, may cause us to consume our available capital more quickly. The Company bases its evaluation on possibilities that may prove wrong and could exhaust our available capital resources sooner than we expect. 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.
Our operations primarily have been funded through cash generated by debt and equity financing. Cash consists of cash on hand and demand deposits. Our cash balances were as follows (in thousands):
Year Ended
December 31, 2022 Year Ended
December 31, 2021
Cash $ 25,627 $ 36,231
Cash Flows
The following table sets forth the major components of our consolidated statements of cash flows data for the periods presented (in thousands).
Year Ended
December 31, 2022 Year Ended
December 31, 2021
Net cash used in operating activities $ (9,226 ) $ (9,601 )
Net cash used in investment activities (466 ) (17,547 )
Net cash provided by financing activities (958 ) 58,312
Effect of exchange rate changes on cash (123 )
Net (decrease) increase in cash $ (10,604 ) $ 31,041
Operating Activities
Net cash used in operating activities of approximately $9.2 million during the year ended December 31, 2022, was principally attributable to a decrease of $3.2 million in accounts receivable, $2.1 million in prepaid expenses and other current assets, $1.8 million in accrued expenses and interest expense, offset by an increase of $3.7 million in inventory. Additionally, the Company experienced a net loss of $13.5 million, $1.8 million in inventory impairment, $1.7 million of depreciation and amortization, and $1.1 million in inventory valuation adjustments.
Net cash used in operating activities of approximately $9.6 million during the year ended December 31, 2021, was principally attributable to a decrease of $1.4 million in accounts payable, a decrease of $0.5 million in operating lease liabilities, offset by an increase of $3.6 million in accounts receivable, $3.2 million of inventory, and $0.9 million of deferred revenue and customer deposits. Additionally, the Company experienced a net loss of $7.2 million, a $1.4 million gain on debt settlement, offset by an impairment in goodwill of $8.2 million, $3.9 million in stock-based compensation, $1.3 million in depreciation and amortization, and $0.8 million of an inventory valuation adjustment.
Investing Activities
Net cash in investing activities of $0.5 million during the year ended December 31, 2022, was principally related to the cash used to acquire furniture and computer equipment. Net cash used in investing activities of $17.5 million during the year ended December 31, 2021, was principally related to the cash used in the acquisition of 100% of MVP’s outstanding shares, cash acquired from the MVP acquisition, offset by a decrease in capital expenditures for furniture and computer equipment.
Financing Activities
Net cash used in financing activities of $0.96 million during the year ended December 31, 2022, was principally attributable to the principal payment of $1.0 million for the Company D & O insurance policy.Net cash provided by financing activities of $58.3 million during the year ended December 31, 2021, was principally attributable to net proceeds from equity raises and common stock warrants’ exercise offset by the principal payment of $1.0 million for the Company D & O insurance policy.
Nasdaq Compliance
As previously reported, on May 20, 2022, the Company received notice from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company of its noncompliance 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. 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 Rule. 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 Rule and all other applicable requirements for initial listing on the Nasdaq Capital Market except for the minimum bid price requirement of the Rule.
On January 11, 2023, the Company held a special meeting of stockholders (the “Special Meeting”) whereby stockholders voted and 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, par value $0.00001 per share (“Common Stock”), of the Company, at a ratio in the range of 1-for-2 to 1-for-50. 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 initiating a Reverse Stock Split.
There can be no assurance that the Reverse Stock Split will result in a sustained increase in the per share market price for the Common Stock for the minimum period necessary to permit the Company to regain compliance with the Rule timely. There can be no assurance that the Company will be able to regain compliance with the Rule or other Nasdaq Listing Rules during the 180-day extension period ending May 15, 2023. If the Company does not regain compliance within the allotted compliance period, Nasdaq will provide notice that the common stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel; if the Company timely appeals, 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 pending the outcome of the appeal process.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements for December 31, 2022, and 2021.
Critical Accounting Policies, Estimates, and Judgments
Our consolidated financial statements are prepared under the United States’ generally accepted accounting principles (“U.S. GAAP”), which require us to make estimates and assumptions. Critical accounting policies affect the more significant accounts, particularly judgments, assessments, and assumptions used to prepare our consolidated financial statements. Our management has determined the development and selection of these critical accounting policies. We have reviewed our critical accounting policies and estimates with the audit committee of our board of directors. Due to the significant judgment involved in selecting certain assumptions used in these policies, other parties may choose different assumptions and reach different conclusions. We consider our policies relating to the following matters to be critical accounting policies.
Business Combinations
The Company accounts for acquisitions that qualify as business combinations by applying the acquisition method according to Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). Transaction costs related to the acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquired entity, net of the fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions.
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.
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.
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.
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.
Critical Accounting Policies, Estimates, and Judgments (continued)
Accounts Receivable and Allowance for Doubtful Accounts
The Company extends credit to its customers in the ordinary course of business. Further, the Company regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customer’s ability to make required payments, prevailing economic conditions, previous experience, and other factors. As these factors’ financial situation changes, circumstances develop, or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company maintains reserves for credit losses, and losses have been within its expectations.
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.
Property and Equipment
Property and equipment are presented at cost at the date of acquisition, less depreciation. Depreciation is computed using the straight-line method over estimated useful asset lives, ranging from 1 to 14 years. The costs of the day-to-day servicing of property and equipment and repairs and maintenance are recognized in expenses as incurred.
Goodwill
Goodwill represents the excess cost of an acquired business over the fair value of the identifiable tangible, and intangible assets acquired and liabilities assumed in a business combination under the acquisition method of accounting under ASC 805 “Business Combinations” (see Note 4). Goodwill is not amortized but, per ASC 350, is tested for impairment annually. Goodwill is also tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Judgment determines if an indicator of impairment has occurred during a year. When testing goodwill for impairment, we may assess qualitative factors for some or all of our reporting units to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. Alternatively, we may bypass this qualitative assessment for some or all of our reporting units and perform step 1 of the two-step goodwill impairment test. If we perform step 1 and the reporting unit’s carrying amount exceeds its fair value, we will perform step 2 to measure such impairment. We have completed our annual impairment test and recorded $-0- and $9,189,000 in goodwill impairment charges for the year ended December 31, 2022, and 2021, respectively.
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. Amortization totaled $535,000 and $668,000 for the years ended December 31, 2022, and 2021, respectively.
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.
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. Amortization totaled approximately $986,000 and $480,000 for the years ended December 31, 2022, and 2021, respectively
Revenue Recognition
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 five (5) steps identified in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.
Critical Accounting Policies, Estimates, and Judgments (continued)
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.
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 either 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 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.
Critical Accounting Policies, Estimates, and Judgments (continued)
Impairment of long-lived assets
Management reviews long-lived assets, including property, plant, equipment, other intangible assets with definite lives, and right-of-use operating lease assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. We conduct the Company’s long-lived asset impairment analyses under ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. The contemplation of measuring an impairment charge occurs if the undiscounted cash flows do not indicate the asset’s carrying amount is recoverable, by which the asset group’s carrying amount exceeds its fair value based on discounted cash flow analysis appraisals. Under Topic 360, consideration is given to asset impairment, for intangible assets with definite lives continue to be amortized over their estimated useful lives and are subject to impairment testing as part of their asset group if and when events or changes in circumstances indicate. In performing the impairment tests, management utilizes considerable judgment and assumptions.
Right-of-use operating lease abandonment
Management decided to vacate the Billerica, MA facility as part of the Company’s cost savings strategy implemented in the third quarter of the fiscal year 2022. The economic environment of the location precluded the action of sub-letting, and management determined the (leased facility) to be abandoned. 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 years ending December 31, 2022, and 2021, we recognized a loss on impairment of right-of-use assets of approximately $88,000 and $-0-.
Common Stock Purchase Warrants and Other Derivative Financial Instruments
The Company assesses the classification of its freestanding derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company classifies common stock purchase warrants and other freestanding financial instruments as equity if the contracts (i) require physical settlement or net-share settlement in common stock or (ii) give the Company a choice of net-cash settlement or settlement in common stock (physical settlement or net-share settlement). The Company classifies the following contracts as either an asset or a liability: contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in common stock (physical settlement or net-share settlement) or (iii) contain reset provisions.
Commitments and Contingencies
Unless otherwise disclosed in this Report, we have no material commitments or contingent liabilities.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Standards Adopted and Not Yet Adopted
Adopted on January 1, 2023
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 no adjustment will be made to its opening balance of retained earnings relating to its trade receivables. The Company writes off receivables once it is determined that the receivables are no longer collectible and as allowed by local laws.
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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
There is no requirement to include the disclosures required under Item 7A as a smaller reporting company under SEC rules.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The Company’s audited financial statements and notes appear in this report beginning on page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that the disclosure of required information in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information requiring disclosure in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), to allow timely decisions regarding required disclosure.
Management’s assessment of the Company’s design and operation of disclosure controls is ongoing. Based on the evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2022, our Certifying Officers have concluded that, as of December 31, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level, due to material weaknesses in internal control over financial reporting, as described below.
(b) Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Certifying Officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes under generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance (a) that transactions are recorded as necessary to permit preparation of financial statements under generally accepted accounting principles, (b) that our receipts and expenditures are being made only following authorizations of our management and directors; and (3) provide reasonable assurance regarding the prevention or timely detection of the unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any effectiveness evaluation in future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
As required by Rule 13a-15(c) under the Exchange Act, our Certifying Officers evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). In their assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, 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.
Management has engaged a third-party consultant to identify and document our internal control deficiencies and provide an assessment of current controls and recommendations regarding remediation efforts to eliminate or mitigate the control deficiencies.
Notwithstanding the identified material weakness as of December 31, 2022, 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.
c) Changes in Internal Controls over Financial Reporting
Our remediation efforts specifically targeted the supervisory review of our accounting procedures. Additionally, these efforts have included integrating the August 16, 2021, acquisition of Mobile Viewpoint Corporate B.V. (“MVP”). Our assessment of the effectiveness of internal controls over financial reporting concerning MVP runs similar to the Company’s conclusion above of the material weaknesses identified in our annual report for December 31, 2022. See Note 3 of “Notes to The Condensed Consolidated Financial Statements.”
d) Auditor’s Report on Internal Control over Financial Reporting
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. According to SEC rules, management’s report was not subject to attestation by the Company’s registered public accounting firm, which permits us to provide only management’s report on internal control over financial reporting in this annual report on Form 10-K.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers, and Corporate Governance
The information required by this Item 10 is incorporated into this Report by reference to the information that will be contained in our proxy statement related to the 2023 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this Item 10 is incorporated into this Report by reference to the information that will be contained in our proxy statement related to the 2023 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated into this Report by reference to the information that will be contained in our proxy statement related to the 2023 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is incorporated into this Report by reference to the information that will be contained in our proxy statement related to the 2023 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 is incorporated into this Report by reference to the information that will be contained in our proxy statement related to the 2023 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Report:
(1) Financial Statements:
The audited consolidated balance sheets of the Company as of December 31, 2022, and 2021, the related statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, the footnotes thereto, and the report of Marcum LLP, independent registered public accountants, are filed herewith.
(2) Financial Schedules:
None.
Financial statement schedules have been omitted because they are either not applicable or the required information is included in the financial statements or notes thereto.
(3) Exhibits:
The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report.
(b) The following are exhibits to this Report, and, if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.
Certain agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements made solely for the agreement’s benefit. These representations and warranties:
● may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;
● may apply standards of materiality that differ from those of a reasonable investor; and
● were made only as specified dates in the agreements and subject to subsequent developments and changed circumstances.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
Exhibit
Number
Description of Exhibit
1.1
Sales Agreement, dated May 5, 2020, by and between Vislink Technologies, Inc. and A.G.P./Alliance Global Partners(1)
3.1(i)
Amended & Restated Certificate of Incorporation (2)
3.1(i)(a)
Amendment to Certificate of Incorporation filed June 11, 2014 (3)
3.1 (i)(b)
Amendment to Certificate of Incorporation filed July 10, 2015 (4)
3.1(i)(c)
Amended and Restated Certificate of Designation of Series B Convertible Preferred Stock (5)
3.1(i)(d)
Certificate of Designation of Series C Convertible Preferred Stock (6)
3.1(i)(e)
Certificate of Designation of Series D Convertible Preferred Stock (7)
3.1(i)(f)
Certificate of Designation of Series E Convertible Preferred Stock (9)
3.1(i)(g)
Certificate of Designation of the Series A Preferred Stock of the Company, dated November 9, 2022(12)
3.1(i)(h)
Certificate of Elimination for Series C Convertible Preferred Stock (5)
3.1(i)(i)
Certificate of Elimination for Series B Convertible Preferred Stock (8)
3.1(i)(j)
Certificate of Elimination for Series D Preferred Stock of the Company, dated November 9, 2022(12)
3.1(i)(k)
Certificate of Elimination for Series E Preferred Stock of the Company, dated November 9, 2022(12)
3.1(i)(l)
Certificate of Elimination for Series A Preferred Stock of the Company, dated March 24, 2023(32)
3.1(i)(m)
Amendment to Certificate of Incorporation filed June 10, 2016 (31)
3.1(i)(n)
Certificate of Amendment to Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on February 11, 2019(10)
3.1(i)(o)
Certificate of Amendment to the Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on July 31, 2020(11)
3.1(ii)
Third Amended & Restated Bylaws (13)
4.1
Form of Common Stock Certificate of the Registrant (14)
4.2
Form of Warrant Agreement by and between the Registrant and Continental Stock Transfer & Trust Company and Form of Warrant Certificate for the offering closed July 24, 2013, and August 19, 2013 (15)
4.3
Form of Warrant (16)
4.4
Form of Vislink Promissory Note (17)
4.5
Form of Underwriters’ Warrant for February 2017 Offering (18)
4.6
Form of Warrant for August 2017 Offering (19)
4.7
Form of 6% Senior Secured Convertible Debenture(20)
4.8
Form of Common Stock Purchase Warrant(20)
4.9
Form of Amended and Restated 6% Senior Secured Debenture(21)
4.10
Warrant Agreement, including Form of Common Warrant and Form of Pre-Funded Warrant from July 2019 Offering(22)
4.11*
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
10.1
Long Term Incentive Plan (23)
10.2
Amendment No.1 to 2013 Long Term Incentive Plan (24)
10.3
Forms of Agreement Under 2013 Long Term Incentive Plan (23)
Exhibit
Number
Description of Exhibit
10.4
Employment Agreement by and between the Company and Carleton Miller, dated as of January 22, 2020 (25)
10.5
Notice of Grant of Stock Option for Time-Vested Options and Stock Option Agreement by and between the Company and Carleton Miller, dated as of January 22, 2020 (25)
10.6
Notice of Grant of Stock Option for Performance-Vested Options and Stock Option Agreement by and between the Company and Carleton Miller, dated as of January 22, 2020 (25)
10.7
Employment Agreement by and between the Company and Michael Bond, dated as of February 27, 2020 (26)
10.8
Form of Indemnification Agreement by and between the Company and its officers and directors (26)
10.9
Non-Employee Director Compensation Policy (27)
10.10
Form of Non-Employee Director Restricted Shares Agreement (27)
14.1
Code of Ethics (28)
21.1
Subsidiaries of the Registrant (29)
23.1*
Consent of Marcum LLP
31.1*
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Schema
101.CAL
Inline XBRL Taxonomy Calculation Linkbase
101.DEF
Inline XBRL Taxonomy Definition Linkbase
101.LAB
Inline XBRL Taxonomy Label Linkbase
101.PRE
Inline XBRL Taxonomy Presentation Linkbase
Cover Page Interactive Data File (embedded within the Inline XBRL document)
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
* Filed herewith
(1) Filed as an Exhibit on Current Report on Form 8-K with the SEC on May 5, 2020.
(2) Filed as an Exhibit on Form S-1 with the SEC on October 23, 2013.
(3) Filed as an Exhibit on Current Report on Form 8-K with the SEC on June 13, 2014.
(4) Filed as an Exhibit on Current Report on Form 8-K with the SEC on July 20, 2015.
(5) Filed as an Exhibit on Current Report on Form 8-K with the SEC on February 10, 2016.
(6) Filed as an Exhibit on Current Report on Form 8-K with the SEC on February 26, 2015.
(7) Filed as an Exhibit on Current Report on Form 8-K with the SEC on April 27, 2016
(8) Filed as an Exhibit on Current Report on Form 8-K with the SEC on December 7, 2016.
(9) Filed as an Exhibit on Current Report on Form 8-K with the SEC on December 27, 2016.
(10) Filed an Exhibit on Current Report on Form 8-K with the SEC on February 26, 2019.
(11) Filed as an Exhibit on Current Report on Form 8-K with the SEC on August 5, 2020.
(12) Filed as an Exhibit on Current Report on Form 8-K with the SEC on November 9, 2022.
(13) Filed as an Exhibit on Current Report on Form 8-K with the SEC on August 20, 2021.
(14) Filed as an Exhibit on Form S-1/A with the SEC on May 21, 2013.
(15) Filed as an Exhibit on Current Report to Form 8-K with the SEC on August 19, 2013.
(16) Filed as an Exhibit on Current Report on Form 8-K with the SEC on May 13, 2016.
(17) Filed as an Exhibit on Current Report on Form 8-K with the SEC on February 6, 2017.
(18) Filed as an Exhibit on Current Report on Form 8-K with the SEC on February 10, 2017.
(19) Filed as an Exhibit on Current Report on Form 8-K with the SEC on August 16, 2017.
(20) Filed as an Exhibit on Current Report on Form 8-K with the SEC on May 29, 2018.
(21) Filed as an Exhibit on Current Report on Form 8-K with the SEC on October 11, 2018.
(22) Filed as an Exhibit on Current Report on Form 8-K with the SEC on July 16, 2019.
(23) Filed as an Exhibit on Form S-1 with the SEC on March 7, 2013.
(24) Filed as an Exhibit on Current Report on Form 8-K with the SEC on January 7, 2021.
(25) Filed as an Exhibit on Current Report on Form 8-K/A with the SEC on January 24, 2020.
(26) Filed as an Exhibit on Annual Report on Form 10-K with the SEC on April 1, 2020.
(27) Filed as an Exhibit on Quarterly Report on Form 10-Q with the SEC on November 12, 2020.
(28) Filed as an Exhibit on Annual Report on Form 10-K with the SEC on March 6, 2014.
(29) Filed as an Exhibit on Form S-1/A with the SEC on October 30, 2019.
(30) Filed as an Exhibit on Current Report on Form 8-K with the SEC on March 26, 2023.
(31) Filed as an Exhibit on Current Report on Form 8-K with the SEC on June 20, 2016.